File Number: NPS-AM-05-006

Authors: Joseph G. San Miguel, John K. Shank, and Donald E. Summers

Title: Navy Acquisition via Leasing: Policy, Politics, and Polemics with the Maritime Prepositioned Ships

Published: April 2005

Sponsored by: Acquisition Chair, Naval Postgraduate School

Full Text URL: http://www.acquisitionresearch.net/_files/FY2005/NPS-AM-05-006.pdf

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Abstract:

In recent months, leasing has been prominent in the press in connection with the Air Force’s ill-fated attempt to obtain the use of Boeing re-fueling tankers without buying them.  Gone from memory is the early 1980’s controversial Navy leasing program of Maritime Prepositioned Ships that had a different result.  This paper presents an analysis of the various issues and parties to the very creative and innovative financing on behalf of the Navy’s Military Sealift Command.  Still in existence today, the 1983 contracts for thirteen TAKX ships were valued at approximately $2.6 billion.  While the decision is often framed as a “lease versus purchase” choice, the facts indicate that the option to purchase was not seen as viable at the time. In hindsight, the TAKX leasing program was successful and cost effective, despite the whirlwind of political commentary and intrigue and the dueling quantitative analyses surrounding it. However, as an unintended (or, perhaps, intended) consequence, laws and policies have since been changed so that leasing is no longer viable for financing military assets.  The case presented here considers altering existing laws and regulations to once again permit leasing of military resources.

Keywords: Leasing, Tankers, Financial Analysis, Present Value, Acquisition Alternatives  

About the Authors:

Joseph G. San Miguel, Ph.D. CPA, is Professor of Financial Management, Graduate School of Business & Public Policy, Naval Postgraduate School.  He received his Ph.D. at The University of Texas at Austin.   He has taught at NYU, Harvard, Stanford, and Dartmouth and consulted and taught executive programs for numerous companies.  His interests are strategic resource management, strategic control, and corporate financial reporting. 

Joseph G. San Miguel

Professor

Graduate School of Business and Public Policy

Naval Postgraduate School

Monterey, CA 93943-5197

Tel: (831) 656-2187

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John K. Shank, Ph.D., CPA, passed away on March 30, 2006. John Shank was Visiting Professor of Financial Management, Graduate School of Business & Public Policy, Naval Postgraduate School, and Emeritus Professor Dartmouth College Tuck Graduate School of Business.  He received his Ph.D. at The Ohio State University and taught at Harvard, Ohio State, Babson, and Dartmouth Business Schools.  He consulted and taught executive programs for many companies.  His interests were strategic cost management, financial controls, and finance. The leadership, inspiration, and intellectual guidance provided by our former colleague, Professor John K. Shank, was invaluable.  Until his unexpected passing, Professor Shank was the driving force in this line of research for the past three years.  He was a close friend, leader, and a true professional.  He is greatly missed.

Donald E. Summers, LtCol, USMC (Ret.), CMA, is Lecturer in Financial Management, Graduate School of Business & Public Policy, Naval Postgraduate School.  He received an MS from the Naval Postgraduate School.  Before retiring from the USMC, he was Program Budget Coordinator for the Chief Financial Officer, Headquarters Marine Corps.  He has consulted for numerous companies and has been employed as a financial analyst.  His interests are financial & managerial accounting, federal budgeting and armed forces comptrollership. 

Donald E. Summers

Lecturer

Graduate School of Business and Public Policy

Naval Postgraduate School

Monterey, CA 93943-5197

Tel: (831) 656-3632

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The research presented in this report was supported by the Acquisition Chair of the Graduate School of Business & Public Policy at the Naval Postgraduate School.

To collaborate on Defense Acquisition Research or to become a research sponsor, please contact:

RADM James B. Greene, USN, (Ret), Acquisition Chair
Tel: (831) 656-2092
Fax: (831) 656-2253
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