Alternative Finance Lessons Learned

1. Alternative FinanceLessonsLearned Cynthia Woodward Asset Acquisition and Disposition Subgroup Infrastructure Management Working Group 2006 Fall Meeting, Oak Ridge National Lab

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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”