Transcript IpF Presentation

New Opportunities for P3s on Military
Installations
Barry Scribner
Co-President, Public Institutions
JLL
NCPPP Conference
July 2014
Context of the Current Environment
• Significant funding reductions
• Demands for efficiency
• Post-9/11 security requirements
• Force reductions = excess
infrastructure
• Public Private Partnerships
• Future BRAC ???
• Infrastructure optimization
• Multiple directives for energy
efficiencies and energy security
• Enhanced Use Leasing
• Sharing services with local
communities
• Privatization
• Innovative Financing
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Military Installations: A SWOT Analysis
External
Internal
Helpful to the Mission
Harmful to the Mission
Strengths
 People – strong leaders and experienced
workforce
 Ownership of an enormous and valuable
portfolio
 Massive recent recapitalization of
infrastructure portfolio
Weaknesses
 Sub-optimized stationing footprint across the
enterprise
 Sub-optimized footprints on individual
installations
 Limited expertise in understanding and working
with capital markets (“deal making skills”)
 Institutional aversion to risk; not entrepreneurial
Opportunities
Threats
 Create optimum mission-based arrangement  Historically inadequate funding
 Mothball energy inefficient facilities
 No legislative support for a new BRAC process
 Make unused/non-excess facilities available  Reduction in Basic Allowance for Housing (BAH)
for uses that complement the mission
 Unpredictable national-level capital budgeting
 Partnering on large-scale renewable energy
process
 Energy Savings Performance Contracting
 Vulnerable power grid
 Share redundant services across installation  Vulnerable cyber infrastructure
boundaries
 Incomplete / constraining suite of authorities
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Mutual Benefits from Partnerships
Benefits to the DoD
• Leap-ahead innovation (best
practices)
• Innovative financing from capital
markets
• Benefit from industry’s efficiencies
• Benefit from industry’s deal
making skills
• Industry has other skills and
experience not resident in the
federal workforce
• Reduce overhead costs
• Reduce long-term personnel costs
• Create a surge capacity
Benefits to
Industry/Communities
• Competitive business
environment drives efficiencies
• Government is a good credit
risk?????
• Federal business can be
counter-cyclical to national
economic trends
• Potentially large untapped
market
• Creates great opportunities for
small business
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Potential Partnership Opportunities
Services
Facilities/Infrastructure
• Base Operations Support
• Barracks Modernization
• Information Technology
• Office Space
• Security
• Finance and Accounting
• US Army Corps of Engineers Civil Works
Infrastructure
• Morale, Welfare, Recreation
• Divesting of Unused Assets
• Medical Services
• Enhanced Use Leases
• Transportation Services
Utilities
• Library Services
• Water Supply
• Vehicle & Aviation Maintenance
• Wastewater Treatment
• Training and Education
• Energy Security
• Lodging
• Renewable Energy
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Challenges to Partnering
Organizational
• Identifying predictable
revenue stream
• “Inherently Governmental”
• Aversion to Risk
• Lack of trust between
government and industry
• Memories of the A-76
process
• Resistance to change
• Least cost mentality vs. best
lifecycle value
– Asset Management is critical
Human Capital
• Training in private sector
finance and capital markets
• Threat to job security
• Trending losses of experienced
personnel (retirements, etc).
• Limited deal making skills
• Mismatch of skills and emerging
requirements
Legislative/Policy
• Authorities
• Budget Scoring
• Policy
• Federal procurement process
Elements of a Successful Partnership
Market Demand
(Programs/Cash Flow/Savings Opportunities)
Technical and
Financial
Expertise
(Skills)
Investment
(Money)
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Competing Interests within a Partnership
Capital
Private Sector Interests
 Quick financial return
 Building to commercial standards
 Discipline of market forces
Programmatic and
Quality Control
Government Interests
 Patience, long-term view
 Building to institutional standards
 “No fail” reliable operations
 Operate in incremental funding
environment
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Conclusion
Process
• We need to remove obstacles to creating partnerships (the Army, Navy, Air Force, Marines,
Industry, and National Policy Makers)
• Invest in advanced Asset Management capability to maximize efficiency
People
• Identify senior champions for every partnership
• Be aware of potential pending “brain drain”
• Retain the best deal structuring expertise available
Profit
• In a partnership, profits are shared
• Seek maximum opportunities within the DoD environment
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