Leasing Solutions... How to realise the benefits of Asset Leasing

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1 Leasing Solutions... How to realise the benefits of Asset Leasing

2 NHS Supply Chain s Leasing Solutions team have specialist knowledge to support with procurement of a leasing arrangement Leasing Solutions Having the latest technology and medical equipment is crucial for the NHS to deliver the highest quality patient care. Whilst efficiency savings are a key focus, securing the optimum value from this equipment is vital. Purchasing equipment outright could be the best option, however it is worth considering whether this makes the best use of your trust s capital or whether leasing is a more cost effective way of financing equipment requirements. This document contains general information only. Nothing in this document is intended to constitute, or should be relied upon as being, legal or financial advice. Customers should take specific legal and financial advice before entering any lease.

3 Advantages of leasing: An alternative funding option to up-front capital investment. Facilitates the procurement of new/replacement equipment and the latest technology. Assets can be financed over various lease periods related to the equipment s economical life. Assets can be funded from either the revenue budget (Operating Lease) or capital budget (Finance Lease) dictated by your trusts requirements. Residual Value risk sits with the Lessor therefore outsourcing an element of equipment risk under an Operating Lease. Upon lease epiry, the asset can be returned to the Lessor or the trust may choose to etend the lease arrangement if required. Equipment upgrades can be facilitated and the lease arrangement amended to give equipment a longer life. Lessors on our framework agreement All Lessors on the framework agreement have been commercially evaluated via a competitive OJEU tender process and can provide the most competitive residual value and lease rentals available in the healthcare market: ABN Amro Lease N.V.

4 Benefits of the NHS Supply Chain framework agreement NHS Supply Chain offers Operating and Finance Lease arrangements across a wide range of equipment areas through a nationally negotiated framework agreement. Choice Use our Leasing Solutions framework agreement regardless of the route to purchase the equipment. The trust remains in control of the award decision supported by the Leasing Solutions team. Assets can be funded from either Revenue budget (Operating Lease) or Capital budget (Finance Lease) dictated by the trust requirements. Optimum lease rentals are available through the competitive framework quotation process. Payment profiling can be set up to fit the trust s needs. Freedom to access the framework when required with no requirement to contractually commit to NHS Supply Chain. Opportunities to save Lease versus purchase saving potential is available to the trust. No contractual obligation or retainer fee is required to access the Leasing Solutions framework agreement. Simple and transparent arrangement fee structure, which is capped to ensure it is competitive. Specialist knowledge and support Full support is provided throughout the leasing quotation and award stages with a dedicated team of buyers for Leasing Solutions. Lease epiration options are offered to the trust facilitating the return/replacement of equipment or lease etension. The Leasing Solutions team work alongside the Equipment Buyers, Account Managers and Capital Planning Co-ordinators to ensure the best possible service is delivered to trusts. All lease documentation is controlled by NHS Supply Chain on behalf of the trust through a streamlined process with full instructions provided at every stage. Peace of mind Compliance a public procurement process was followed in relation to the Framework Agreement for Leasing Services, which was advertised in the OJEU. Trusts will receive a lease portfolio report quarterly ensuring that they are in control of all equipment assets under lease. Lease epiration will be notified 12 months in advance allowing the trust to make a measured decision on what action to take in advance of lease epiry.

5 Leasing available via framework Operating Lease Residual Value Most NHS trusts use Operating Leases to ensure off balance sheet treatment for accounting purposes. The risks and rewards of ownership remain with the Lessor (Finance Provider) and the residual value in the equipment taken by the Finance Provider must show true risk transfer. Although no longer a written accounting rule the present value of the rentals must normally be less than 90% of the capital cost of the equipment. The lease may not be longer than 75% of the economic life of the asset, and there must be no option included to purchase at end of lease. Any etension option cannot be based on less than fair market value. An Operating Lease is particularly attractive to trusts that continually update or replace equipment and want to use equipment without ownership but also want to return equipment at lease-end and avoid technological obsolescence. An Operating Lease usually results in the lowest payment of any financing alternative and is an ecellent strategy for bypassing capital budgeting restraints. Finance Lease A Finance Lease is generally a full-pay-out, non-cancellable agreement, in which the lessee is responsible for maintenance, taes and insurance. A Finance Lease will appear as a financial liability on the balance sheet of the trust. The term of a Finance Lease tends to be longer, nearly covering the useful life of the equipment. Finance Leases are most attractive in cases where the lessee wants the ta benefits of ownership or epects the equipment s residual value to be high. Finance Lease No Residual Value A Finance Lease will normally fully pay out the cost of the equipment during the lease period much the same as a loan. At the end of the lease the trust can either be appointed as a sales agent to sell the equipment and retain the majority of the sales proceeds (normally 95-99%). Alternatively the trust can continue to lease the equipment from the finance provider for a nominal rental, normally 1% of the original capital cost per annum. Finance Lease With Residual Value It is possible to have a Finance Lease with a residual value. There are many structures for Finance Leases with residual values subject to trust requirements. At the end of the lease the trust can either be appointed as a sales agent to sell the equipment and retain a share of the proceeds over and above a stipulated amount, or can continue to lease the equipment for rentals that can be pre-agreed prior to the start of the lease. Alternatively the trust can just hand the equipment back in good working order and allow the Lessor to sell the equipment. Sale and Leaseback If an NHS Trust requires the release of funds it is possible to sell eisting equipment that they own and lease it back. The lease can be in Operating or Finance format. If the equipment is less than 4 months old most Lessors will pay the trust the full original cost of the equipment. If the equipment is more than four months old then most Lessors will pay the depreciated value of the equipment as defined in the trust s accounts.

6 Leasing Solutions process: Stage 1 Lease Tender 5-10 days based on project compleity Stage 2 Lease Award 5 days minimum Indicative lease pricing is optional to assist with the decision as to whether to pursue a lease tender. Trust advise NHS Supply Chain Leasing Solutions team of the selected Lessor. Request lease questionnaire, complete and submit with capital quotation and specification to: Leasing@supplychain.nhs.uk Master Lease Agreement (MLA) and lease schedule created and submitted to the trust for review and signature. Lease tender is sent out to market on either a 5, 7 or 10 day tender cycle. Trust signs the MLA and lease schedule and then returns to the Lessor along with a purchase order to the Lessor for the sum of the lease rentals. Bid summary is submitted to the trust for evaluation. Lessor will place a PO for the total equipment value.

7 Stage 3 Equipment Acceptance 3 days minimum Goods are delivered to location. NHS Supply Chain issue the Delivery Acceptance (CRACOE) & Goods Acceptance certficates for trust signature. Upon acceptance of the equipment the final rentals are fied using the industry wide Pre- Inception Variance mechanism. Invoice is paid by the Lessor. The lease rentals commence from the date of the Signed Delivery Acceptance (CRACOE)/Goods acceptance certificate. Stage 4 Lease support NHS Supply Chain create and issue quarterly lease portfolio reports to the trust including advance lease epiry notification for leases epiring within 12 months. In advance of lease epiry the trust can pursue Lease Etension, Equipment Replacement/ Return/Buyout scenarios facilitated by NHS Supply Chain. Lease document archive facility is available. Epiry options Operating - Partial capital value is covered by the lease rentals over the Primary lease term. The Lessor has investment (RV) remaining and needs to sell the equipment if returned or etend the lease. Trust options are as follows: Return the equipment to the Lessor for re-sale and replace with new equipment/technology under either a fresh primary lease term or through Capital Purchase. Etend the lease into a contracted 1/2/3 year Secondary lease term. Terminate the lease upon epiry and return the equipment to the Lessor for re-sale. (The burden of recouping the RV sits with the Lessor). Finance - Full capital value is covered by the lease rentals during the primary lease term. Lessor has covered their initial investment. Trust options are as follows: Continue the lease for a peppercorn rental (title remains with the Lessor and a minimal amount is paid for continued use of the equipment). Purchase title of the equipment from the Lessor. (negotiated between the trust and Lessor at lease epiry point but this would usually equate to 1% of the capital value or a negotiated sum). Sales agency. The trust can sell the equipment on behalf of the Lessor and typically recoup 99% of the sale value. 1% passes to the Lessor for title of the goods.

8 Equipment areas covered by our framework agreement include: CRACOE Medical Equipment (Clinical Radiology and Clinical Oncology Equipment) Non-CRACOE Medical Equipment Decontamination and Sterilisation Equipment Laboratory and Pathology Equipment Ward, Domestic and Estates IT Devices. CRACOE Medical Equipment ABN Amro Lease N.V. UK Branch Angiography Bone Densitometers Contrast Injectors (combined with Cracoe equipment) CT Scanners Digital Mammography Fluoroscopy Lithotripters Mobile Image Intensifiers MRI Scanners Nuclear Medicine Radiotherapy X-Ray Static * Lessor equipment appetite can vary based on their developing portfolio.

9 Non-CRACOE Medical Equipment ABN Amro Lease N.V. UK Branch Anaesthesia Architectural Surgical Medical Systems Bladder Scanners Contrast Injectors Defibrillators Dental Capital Equipment Diathermy ECG Fleible Endoscopy Infusion Pumps Medical Lasers Mobile Image Intensifiers Neonatal Incubators Operating Tables Ophthalmology Patient Monitoring Renal/Haemo Dialysis Rigid Endoscopy Robots Surgical Microscopes Ultrasound Ventilators X-Ray Mobile * Lessor equipment appetite can vary based on their developing portfolio.

10 Decontamination and Sterilisation ABN Amro Lease N.V. UK Branch Decontamination Capital Equipment Dental Capital Equipment * Lessor equipment appetite can vary based on their developing portfolio. IT Devices ABN Amro Lease N.V. UK Branch Client Hardware Enterprise Hardware Network Architecture Security Systems to support Medical Equipment Telecommunications * Lessor equipment appetite can vary based on their developing portfolio.

11 Laboratory and Pathology ABN Amro Lease N.V. UK Branch Laboratory Pathology * Lessor equipment appetite can vary based on their developing portfolio. Ward, Dental, Domestic and Estates ABN Amro Lease N.V. UK Branch Catering Equipment Demountable Car Parks Disposal Domestic Appliances Estates Plant and Machinery Medical Furniture Mental Health Furniture Mobile/Temporary Buildings Pressure Area Care Stretchers and Trolleys Ward and Residential Furniture Washroom Equipment * Lessor equipment appetite can vary based on their developing portfolio.

12 For detailed information about our Leasing Solutions framework: /leasing Contact the Leasing Solutions team: To find out more or call US3159