New Opportunities for P3s on Military Installations

1. New Opportunities for P3s on Military Installations Barry Scribner Co-President, Public Institutions JLL NCPPP Conference July 2014

2. 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

3. Military Installations: A SWOT Analysis

4. 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

5. Potential Partnership Opportunities Services • 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

6. 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

7. Elements of a Successful Partnership Market Demand (Programs/Cash Flow/Savings Opportunities) Technical and Financial Expertise(Skills) Investment(Money)

8. Competing Interests within a Partnership Programmatic and Quality Control Capital • 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

9. 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