Facility Contracting & The ARMS Program Demonstrated Success through Innovative Techniques

1. Facility Contracting &The ARMS ProgramDemonstrated Success through Innovative Techniques Douglas Borgeson BEM Lighthouse Development DBorgeson.@qwest.net 563-355-4406

2. What is ARMS? Armament Retooling & Manufacturing Support Initiative • Provide for commercial use of Army facilities and equipment to sustain Army manufacturing capability • Offset Army costs for facility operations and maintenance and maintains manufacturing capability for Armed Services national security requirements • Accelerate growth of business and jobs in the private sector • Utilize Facility Use Contracting to execute the above

3. ARMS/Facility Contracting –A Demonstrated Success • Companies on Board . . . . . .125-150 • Jobs Generated. . . . . . . . . . 3,500+ • Government Investment to Date: • $265 Million • Private Investment to Date: • $210+ Million • Savings Received by the Army, to Date: • $335 Million Source: IBM Consulting Report

4. Award-Winning Performance The Program has been honored with a number of achievement awards: • The National Council for Public-Private Partnerships 1998 award for developing and implementing an innovative program for reusing National Defense facilities • David Packard 2003 Award for Excellence in Acquisitionfor demonstrated superior accomplishments significantly contributing to Defense acquisition reform initiatives and acquisition programs • National Association of Installation Developers (NAID) 1998 and 2003 awards for creative promotion of business attraction to their facilities • 2003 CoreNet Global Innovators Award recognizing new entrants in the corporate real estate industry that develop and apply innovative ideas and practices and make good use of leading-edge technologies and practices.

5. Program Goals • Recognize idle facilities as assets • Allow and encourage use of local market to establish competitive rates • Allow continued operation at reduced cost to the Army and taxpayer • Develop economically “smart” exit strategies

6. What is Facility Use Contracting? • An Army contractor acts as landlord. • Facility Use Contractors encourage commercial applications at selected facilities, via: • Facility Contractor use of facilities • Subcontract usage of selected parts of facilities • Quick turnaround of facility use / tenant placement requests • Incorporating favorable cost structures into tenant use negotiations • Ensuring compliance with commercial regulations / laws • Ensuring compliance with Environmental and State Historical Preservation Office (SHPO) mandates

7. What is Facility Use Contracting?(Cont’d) • The contractor maintains buildings & equipment used. • The Government approves facility / equipment use. • Facility contractor shares value created by tailored performance incentives.. • Facility use contracting is operational at 10 plants.

8. Success Required Innovations • Introduce new / flexible contracting methods • Apply economic / financial incentives • Encourage partnerships with: • Industry • Local communities • State and city governments • Deploy new / diverse marketing tools

9. TENANTS NEGOTIATIONS FACILITY CONTRACTOR ARMS TEAM Contracting Innovations • The Government has No Privity of Contract with Subcontractor / Tenants. • The Facility Use Contractor negotiates with tenants for: • Applicable facilities usage rates • Site improvements to facilitate tenant operations • Application of appropriate financial incentives • Terms of tenant facility usage

10. Contracting Innovations (Cont’d) • The Facility Contractor then negotiates with the Contracting Team. • The Contracting Team emphasizes quick response to Facility Contractor tenant placement requests. • If incentives are available (federal, state, city) they are factored into the transaction.

11. Contracting Innovations (Cont’d) • 25-Year contracts with Facility Use Contractors and tenants are available. • Further investment is thereby encouraged. • Stakeholder interests are nurtured. • Environmental indemnification for pre-existing conditions applies to each tenant use agreement. • ARMS investments in marketplace forces are made through the Facility Use Contractors. • Property / services are made available at competitive rates.

12. Encourages Community Partnerships • Business development centers / regional incubators have been established at 3 different sites. • Utility and service partnerships are available. • Government assets can thereby support local community needs for: • Potable water • Wastewater treatment • Electric power • Gas supply • Fire prevention / emergency response services • Strong partnerships leveraging available state & regional economic development programs which create maximum value for tenant and stakeholders

13. Marketing the Facilities with Creative Tools • Individual plant marketing is supplemented and amplified through an ARMS national marketing cooperative • “Operation Enterprise” national cooperative tools include • Internet web page: www.openterprise.com • Campaigns to advertise available facilities • Hard-copy marketing materials • Brochures, CDs, videos • Hard-copy and electronic newsletters • Direct mailing initiatives • Targeted marketing campaigns • Active / ongoing participation in CoreNet Global activities / summits / exhibits

14. Industry Diversity is Encouraged • Glycol Recycling • Hardwood Products • Hydraulic Systems • Machine Shops • Pallets • Pet Food • Plastic Containers • Plastic Molding • Rail Car Storage & Modifications • Steel Cabinet • Trailer Storage • Wood Paneling • Wood Recycling • Weld Testing • Administrative Offices • Business Development Centers • Cardboard Paper Recycling • Coal Receiving & Storage • Commercial Laundry • Computer Applications/Software • Computer Recycling • Defense Contractors • Explosive Products • Fireworks • Fishing Line • Flares • Flexible Tank

15. A Successful Model for Wider Application Facility Contracting techniques are used or being considered for use as models adaptable to other locations: • Army Aviation and Missile Command • Army Manufacturing Arsenals • Watervliet • Rock Island • Pine Bluff • Other Government Agencies • NASA • Dept of Energy

16. Conclusions • Creative contracting techniques helped accomplish the Army goals • These techniques merged with a novel incentive program to attract commercial users to Army facilities • Partnering with State and local economic development groups leveraged the program • Facility Contracting Model is used by others to attract commercial users to Gov’t facilities • The Program markets a diverse set of assets at multiple locations using innovative methods to deliver value to multiple stakeholders • The Facility Contracting Model has proven useful to Industry / Communities / Government alike

17. Summary • Facility Contracting Model fosters/permits commercial use of idle government facilities • Provides single focal point for both commercial world and government • Concept and contract models lend themselves for use at all levels of government, federal, state, city Governments benefit with revenue streams from idle facilities, Industry benefits with streamlined easy access to facilities, Communities benefit from increased area jobs.