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Rethinking the Buy vs. Lease Decision
MARYLAND UNIV COLLEGE PARK CENTER FOR PUBLIC POLICY AND PRIVATE ENTERPRISE
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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. Twenty-five years ago, when the economy was strong and military spending less constrained, these restrictions may have been less problematic some might even say appropriate. But times have changed. Given current economic conditions, the military is under significant pressure to reduce its costs, and this pressure is unlikely to subside in the near term. At the same time, after two long wars, the need to repair and replace ageing assets and infrastructure has never been greater. Additionally, new threats e.g. cyber-espionage, a rising China, and a chaotic Middle East demand new tactics, better technology, and more resources.
APPROVED FOR PUBLIC RELEASE