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Alternative Finance Lessons Learned. Cynthia Woodward. Asset Acquisition and Disposition Subgroup. Infrastructure Management Working Group 2006 Fall Meeting, Oak Ridge National Lab. Planning Stage. Develop Support for Alternate Finance Project Key Stakeholders Government DOE / NNSA
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Alternative FinanceLessonsLearned Cynthia Woodward Asset Acquisition and Disposition Subgroup Infrastructure Management Working Group 2006 Fall Meeting, Oak Ridge National Lab
Planning Stage • Develop Support for Alternate Finance Project • Key Stakeholders • Government • DOE / NNSA • M&O management • Local government • Private sector • Public • Mission Need • Develop clear need / vision for project • Secure agreement facility is needed • Business Case • Strong financial analysis
Planning Stage • Communication is “Key” • Over communicate (within M&O and DOE) • Understand concerns / requirements of all parties • “Road Blocks” – try to keep to a minimum • Understanding of site budget impact • Project will result in long term lease funded out of site M&O overhead budget • Paradigm change • Private property • Project is a commercial project • DOE rules apply only through approval process
Planning Stage • Establish Focused “Core” Execution Team • Small team dedicated to AF project • Discipline execution / document each step • Team Make-up • Architecture / engineering • Legal – strong legal support paramount • Environmental • Financial • Focus on performance requirements – not solutions • Avoid prescriptive specifications • Keep facility requirements “general” in nature • Approval process dictates that facility is multi-purpose
Planning Stage • Identify Industry Participants Early • Developer, contractor, A/E, financial • Issue “Expressions of Interest” • “Invitational” bid • Hold “informal” meetings • Ensure industry participants have a successful track record • Solicit multiple bids and perform “discipline” evaluation • Document selection – this is a competitive selection
Project Approval Stage • Focus on “Business Case” • DOE Order 413 applies during approval stage • Business Case is of greater importance than technical submittal • ROI • Risk issues • Life cycle cost analysis • Development of all alternatives • Utilize outside consultants to give business case credibility
Project Approval Stage • Identify Key Participants in DOE Review • DOE Site Office • DOE Program Office • OECM • CFO • OGC • OMB • Communication During Approval Stage • Encourage upfront communication with DOE prior to submittal of project for approval • Pre-review presentation to key reviewers • Encourage comment resolution meeting during review process
Project Approval Stage • Involvement of Industry Team During Approval • Keep Industry Team informed • May be “at risk” during this period • Try to “bound” business case to compensate for project impacts (cost, lease terms, etc.) during potential extended review
Project Implementation • Interactions with Industry Team • Preferred construction contract mechanism – Design / Build • Establish incentivized contract for Industry Partners • Commercial practice controls • Less M&O / DOE oversight • Allow Industry Partners to resolve problems using standard commercial approach • Time is money – “real time” decisions critical
Project Implementation • Interactions with Industry Team (continued) • Fixed budget • Establishment of Guaranteed Maximum Price • Must deliver project within budget • Limit scope creep • Traffic cop mentality – restrict site involvement • M&O / DOE primary focus – project site interface requirements • Utility connections • Telecommunications • Security
Project Implementation • Key considerations for delivery of end product • Clearly define infrastructure tie-in responsibilities • MOA • Scope Responsibilities (M&O or Developer) • Outfitting facility • Facility renovation • Delay renovations (tenant improvements) until building has been occupied for a minimum of one year
Summary • Tried to capture Lessons Learned from actual alternate finance projects • Progress has been made, but we still have areas of improvement • DOE / Contractor interactions and implementation of DOE recently released alternate finance project guidelines* • Learn from other government agency use of alternative financed projects (DOD, GSA, etc.) * “Policy and Process for Evaluating Contractor Proposals Using Alternative Finance to Obtain the Use of Real Property”