strategies for acquiring an interest in real property u.s. department of energy laboratory...

STRATEGIES FOR ACQUIRING AN INTEREST IN REAL PROPERTY

U.S. DEPARTMENT OF ENERGY LABORATORY OPERATIONS BOARD

FUTURE LABORATORY INFRASTRUCTURE SUB-GROUP

MARCH 2014

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Challenge

• The Department has the authority to use a wide variety of methods to acquire an interest in real property to fulfill a mission need.

• However, we have not routinely availed ourselves of these flexibilities.

Gaining Interest in Real PropertyMethods available to DOE

1. Line Item Construction 2. General Plant Projects (GPP)3. Institutional General Plant Projects (IGPP)4. Operating Lease 5. Third-Party Financing6. Energy Savings Performance Contracts (ESPC)7. Gift or donation8. Capital Lease9. Purchase of Existing Property10. Transfer from Another Agency/GSA11. Permit from Another Agency12. Mission Repurpose of Existing Facility with Overhead/IGPP13. Exchange of Existing Property14. Exchange for Services15. Grants

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97%

National Laboratories Facility Funding Profile (FY11-FY13)

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Line Item Con-struction / GPP, $2,421M, 72%

IGPP/Overhead, $444M, 13%

Alternative Fi-nanced Facilities,

$135M, 4%

Conventional Leases, $221M,

7%

Energy Services Performance Contracts, $51M, 1%

Other, $85M, 3%

Line Item Construction / GPP IGPP/OverheadAlternative Financed Facilities Conventional LeasesEnergy Services Performance Contracts Other

Total: $3,356M

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Office of Science National Laboratories Facility Funding Profile (FY11-FY13)

Line Item Con-struction / GPP, $1,252M, 67%


Alternative Fi-nanced Facilities,

$135M, 7%


6%


Other, $76M, 4%


Total: $1,883M

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EnergyNational Laboratories Facility Funding Profile (FY11-FY13)

Line Item Con-struction / GPP,

$453M, 81%


Conven-tional

Leases; 41.910132;

7%

Energy Services Performance Contracts; 8.789474; 2% Other; 5.765; 1%


Total: $561M

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NNSANational Laboratories Facility Funding Profile (FY11-FY13)

Line Item Con-struction / GPP,

$708M, 80%


Conventional Leases, $60M , 7%Energy Services Performance Contracts, $5M,

0%


Total: $884M

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Environmental Management National Laboratories Facility Funding Profile (FY11-FY13)

Line Item Construction / GPP, $8M, 29%



7%


Other, $3M, 10%


Total: $28M


1. Line Item Construction:• Appropriation is provided for capital line item construction projects greater than $10M.• Subject to OMB Circular A-11 for establishing agency funding requests.

Examples: • NREL – Energy Systems Integration Facility (ESIF) • SNL/LANL – National Infrastructure Simulation and Analysis Center (NISAC) • BNL – Interdisciplinary Science Building (ISB) • LANL – Radiological Laboratory Utility Office Building (RLUOB) • PNNL – Physical Sciences Facility (PSF) • ORNL – Modernization of Laboratory Facilities

Appropriate Use:• Unique facilities• Long-term mission need

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2. General Plant Projects (GPPs):• GPPs are relatively small new construction projects <$10M.• GPPs may used to design and construct:

• Additions and improvements to land, buildings and utility systems• Small new buildings• Replacements or additions to roads• General area improvements

Example: • SNL – Building 704, Office Building

Appropriate Use:• Various facilities, improvements on established DOE sites

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3. Institutional General Plant Projects (IGPPs):• Class of GPPs for a general site-wide need• Generally funded by overhead (tax on all work performed)• Used for:

• Multi-programmatic/interdisciplinary lab and office space• Institutional training facility• Site-wide maintenance facilities, utilities, new roads• Multi-programmatic “quality of life” facilities

Examples: • PNNL – Systems Engineering Facility• ORNL – Building 4500N Wing 3 Modernization Project

Appropriate Use:• Shared infrastructure, improvements on established DOE multi-program sites

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4. Operating Lease:• Meets OMB A-11 criteria

• Ownership of asset remains with lessor• No bargain-price purchase option• Lease term ≤ 75% of asset’s economic life• Total lease payments ≤ 90% of asset’s market value• General purpose asset, no unique Government specifications• Private-sector market exists for the asset

• Requires obligation of funding for minimum term lease payments & alterationsExamples: • INL – Energy Systems Laboratory (ESL) • PNNL – Systems Engineering Facility (SEF)• ORNL – Carbon Fiber Technology Center

Appropriate Use:• General-purpose facilities on privately-owned property• Short/medium term need for facility

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5. Third Party Finance (Alternative Finance)• Acquiring the use of capital assets through private development capital

under an operating lease• DOE Alternative Financing Guide (DOE G 430.1-7) published 3-12-2012• May be lower cost than a line item over the full lifecycle of a facility

Examples: • ANL – Theory and Computing Sciences Building (TCS) • PNNL – Biological Sciences Facility and Computational Sciences Facility • ORNL – Computational Sciences Building

Appropriate Use:• General purpose facilities on privately-owned land• Short/medium term need • Facility not presently available in local commercial real estate market

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6. Energy Savings Performance Contracts (ESPC)• Contract with an energy service company (ESCO)• ESCO designs and constructs a project to generate energy cost savings to

pay for the project over the term of the contract (up to 25 years).• Normally, no up-front capital costs or Congressional appropriations

Examples: • NREL – Renewable Fuel Heating Plant (RFHP) • FNL – New Boiler at Central Utility Building • ORNL – Power Supply Increase

Appropriate Use:

• Energy-efficiency improvements/modifications to existing facilities• New, efficient, energy and utility infrastructure (including renewable generation)

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UNDER-USED STRATEGIES FOR ACQUIRING AN INTEREST IN REAL PROPERTY

7. Gift or Donation:• Real estate acquisition without compensation to owner or transfer of property

rights (partial or total) to DOE.• Requires approval of Secretary of Energy with concurrence by General

Counsel.• Clean title and appraisal is required or owner must waive right to appraisal in

writing.

Examples:• ANL - Advanced Protein Crystallization Facility (APCF)• FNL - Illinois Accelerator Research Center

Appropriate Use:• Donor with landholdings and public-interest focus (State, University)• Long-term need, partnership with donating entity

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8. Capital Lease:• Requires up-front funding of entire lease termExamples: No recent examples

Appropriate Use:• Asset available by long-term lease, lease-purchase• Funding available up-front

9. Purchase of Existing Property:• Subject to OMB Circular A-11 for establishing Agency funding requests.• Appropriation is provided for sole source or competitive procurement of large

completed facilities and land holdings.• Used primarily to purchase land

Examples: No recent examples Appropriate Use: Existing property meets long-term mission need

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10. Transfer from Another Agency/GSA:• An excess property may be transferred by GSA from one Agency to

another to fulfill a permanent mission need.• Same custody and control as if acquired by purchase• Appropriated funding is required for any alterations and each year to cover

costs of ownership.

Example: • Chesapeake Light Tower transfer from Coast Guard for offshore windmill

testing

Appropriate Use:• Existing, Federally-owned property• Excess to agency currently holding property• Meets DOE mission need

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11. Permit from Another Agency:• An Agency may permit another Agency to occupy an underutilized

facility under an intergovernmental agreement.• Limited interest in property, subject to permitting agency discretion• Appropriated funds may be exchanged for reimbursement of actual

incurred costs.

Examples: • National Training Center located on Kirtland AFB, New Mexico via

permit from USAF

Appropriate Use:• Existing, Federally-owned property• Unutilized or under-utilized by agency currently holding property• Meets DOE mission need

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12. Mission Repurpose of Existing Facility with Overhead/IGPP• Alter or convert facility to meet changed mission• Contractor and lead program agree on scope and funds• Funded within IGPP/contract overhead

Example: • ORNL -- Building 4500N Wing 3 Modernization Project

Appropriate Use:• Established DOE multi-program sites• Property no longer needed for previous mission, or no longer meets mission• Alteration/conversion more cost-effective than demolition/new construction

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13. Exchange of Existing Property• GSA is authorized to enter into contracts for the disposal of surplus

property after public advertising for bids• Used to acquire real estate and interests in real estate through

exchange• Appropriated funds may not be requiredExamples: Not used by DOE. GSA has completed exchanges with other agencies.

Appropriate Use:• DOE excess property that attracts private-sector interest• Existing, privately-owned land, that meets DOE mission need• Similar market values, or ability to fund difference

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14. Exchange for Services• GSA is authorized to exchange real property for in-kind

consideration, including the performance of construction services on another Federal property.

Examples: Not used by DOE. GSA has completed exchanges with other agencies. Appropriate Use:• DOE Excess Property that attracts private-sector interest• Private entity willing to construct facility for DOE• Similar market values, or ability to fund difference

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15. Grants• DOE provides grant funding to construct facility• Private entity owns and operates facility• DOE, and public, can use facility

Example: Facility for Rare Isotope Beams at Mich. St. Univ.

Appropriate Use:• Mission need for facility• No need for DOE ownership/exclusive control• User facility

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Description of Other Potential Methods

Legislative Approaches

1. Enhanced Use Leasing (EUL)• Authorize DOE to retain rental proceeds and accept in-kind consideration for

DOE-controlled, underutilized real property• Proceeds or in-kind consideration could be used for the acquisition of new

facilities and lease of facilities at the site generating the rental• Submitted to OMB in March 2011• OMB rejected in December 2011

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Description of Other Potential Methods (Continued)

2. Public-Private Venture (PPV)• Authorize DOE to enter into a lease-purchase contract to purchase/construct

facilities and accrue equity resulting in: • DOE owning the facility• DOE holding an option to purchase the facility at a price reduced by the

equity accrued• Submitted to OMB in January 2013

• Rejected upon receipt

3. Special Legislation• Authorize specific projects or waive general requirements in specific instances,

for specific parcels/facilities

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OBSERVATIONS

• Shrinking budgets necessitate the greater use of all available financing authorities

• Need a more systematic approach to evaluating financing options

• Need to improve knowledge of all possible strategies• Current strategy of approaching OMB on special

financing for individual projects isn’t working

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IDEAS FOR DISCUSSION

• Enhance the CD-1 process and budget process to systemically consider and identify financing strategies

• Use a portfolio approach to determine the most appropriate approach to finance each project

• Use the FY 2016 budget process to identify test cases (ideally for all or many of the financing strategies) and present a comprehensive package to OMB

• Educate programs and laboratories on the different strategies

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strategies for acquiring an interest in real property u.s. department of energy laboratory...

Documents

existing facility

exchange of existing

purchase of existing

general plant projects

agency funding requests

mission need

capital lease

operating lease