Rethinking The Buy VS. Lease Decision
By: Jacques Gansler, William Lucyshyn, John Paul Rigilano
In decades past, the Department of Defense (DoD) would lease major equipment from defense firms, including noncombat ships, aircraft, and vehicles in order to acquire needed capabilities quickly and without the upfront expense. Today, however, leasing is seldom used to meet long- term requirements. Over the course of the intervening years, a number of laws and regulations have been implemented that effectively constrain the use of long-term leasing, most notably the 1984 National Defense Authorization Act and, in 1991, Appendix B of Office of Management and Budget (OMB) Circular A-11.
As the largest government entity, the DoD must prioritize short-term affordability with an eye on long-term financial stability. Returning to the long-term lease of capital assets, though by no means a magic bullet, would allow the DoD to access needed capabilities more quickly and affordably, by spreading outlays over the life of the lease, thereby avoiding single-year funding spikes that compromise other programs.