Description
Organization: NAVFAC
Team Name: NAVFACENGCOM Contracting Team
Related Acquisition Topic(s): Commercial Practices, Partnering, Strategic Sourcing, Total System Performance Responsibility
Description:
On 16 July 1996, the Naval Facilities Engineering Command (NAVFACENGCOM) executed the first Limited Partnership Agreement with the private sector to build 400 units of quality affordable housing for military families near the Naval Station Ingleside, and the Naval Air Station Kingsville, Texas.
The housing projects to be developed mark the first time the Department of Defense used legislation enacted by Congress (Public Law 104-106, Section 2801, "Military Housing Privatization Initiative") which allows the military to enter into limited partnerships with private developers for the construction, operation, and maintenance of family housing.
The private developer instrumental in the success of this initiative is Landmark Organization, Inc. (Landmark) of Austin, Texas. The total development costs of the project are approximately $32 million. The Navy's total equity contribution is $9.5 million. In its role as General Partner, Landmark arranged financing for the remaining balance.
The innovative nature of this acquisition is two fold. First, the Navy has successfully leveraged the private market to create affordable quality housing using only one third of the funds normally required by the traditional military construction method. Second, the time line for the planning and construction of the housing units is approximately one-third of the traditional time frame.
The success of this initiative reflects the commitment and flexibility of the NAVFACENGCOM Contracting Team regarding the non-traditional objective of the acquisition, and the use of the source selection process to manage risk inherent in development projects and make a Best Value determination. The execution of the first limited partnership agreement for military family housing depended upon the contributions of key individuals from the disciplines of contracts, family housing, legal, financial, planning, and engineering.
There were a number of critical contracting decisions which allowed the development community to respond to the Navy's housing requirements in terms of a public-private venture. First, the Navy sought housing from the builder's regular design portfolio, but allowed the developer to enhance its design regarding certain selected military construction standards. Second, a target rental rate for a 3-bedroom unit was identified. The developer then proposed rental rates by bedroom type. Third, the Navy specified a preferred partnership term. The developer decided the partnership period required by its business deal. Fourth, the developer was allowed to determine the amount of limited partner investment it required from the available amount. Finally, the developer selected the project location according to Navy minimum standards regarding proximity to the bases being served by the housing. The result of these decisions was to maximize the number of choices the developer could consider in putting together the best deal it could propose in light of the Navy's desired investment objectives. In its approach, this project will serve as a model in the Department of Defenses privatization initiative.
