New Opportunities for P3s on Military Installations
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Transcript of New Opportunities for P3s on Military Installations
New Opportunities for P3s on Military Installations
NCPPP ConferenceJuly 2014
Barry ScribnerCo-President, Public InstitutionsJLL
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Context of the Current Environment
• Significant funding reductions• Demands for efficiency• Post-9/11 security requirements• Force reductions = excess
infrastructure• Future BRAC ???• Multiple directives for energy
efficiencies and energy security
• Public Private Partnerships• Infrastructure optimization• Enhanced Use Leasing• Sharing services with local
communities• Privatization• Innovative Financing
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Military Installations: A SWOT Analysis Helpful to the Mission Harmful to the MissionInternal
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
External
Opportunities Create optimum mission-based arrangement Mothball energy inefficient facilities Make unused/non-excess facilities available
for uses that complement the mission Partnering on large-scale renewable energy Energy Savings Performance Contracting Share redundant services across installation
boundaries
Threats Historically inadequate funding No legislative support for a new BRAC process Reduction in Basic Allowance for Housing (BAH) Unpredictable national-level capital budgeting
process Vulnerable power grid Vulnerable cyber infrastructure 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
Potential Partnership OpportunitiesServices• Base Operations Support
• Information Technology
• Security
• Finance and Accounting
• Morale, Welfare, Recreation
• Medical Services
• Transportation Services
• Library Services
• Vehicle & Aviation Maintenance
• Training and Education
• Lodging
Facilities/Infrastructure• Barracks Modernization
• Office Space
• US Army Corps of Engineers Civil Works Infrastructure
• Divesting of Unused Assets
• Enhanced Use Leases
Utilities• Water Supply
• Wastewater Treatment
• Energy Security
• 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 requirementsLegislative/Policy• Authorities• Budget Scoring• Policy• Federal procurement process
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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 Programmatic and Quality Control
Private Sector Interests Quick financial return Building to commercial standards Discipline of market forces
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