Questions & Answers
Air Force Enhanced Use Lease Program
Program:
Potential Opportunities:
Financial:
AAFES/Services Involvement:
Energy Initiatives:
Other Value Based Transactions:
Program
What is Enhanced Use Lease?
Enhanced use lease, or EUL, is an opportunity for the Air Force to capitalize on underutilized assets, including real property, by leasing them to private entities.
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What parties are involved in an EUL project?
There are three parties that are involved with EUL projects: the Air Force, the private sector, and the local community.The Air Force acts as the landlord for leased assets and manages overall project. The private sector includes developers, consultants, tenants and customers who utilize the leased assets. The local community includes local stakeholders near the leased
assets and can include project benefactors.
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Why is the Air Force interested in EUL?
The Air Force is facing unexpected demands on its resources including budget shortfalls, rising fuel prices, the costs of fighting the global war on terror and restrictions on retiring weapon systems. In response to these issues, the Air Force is transforming itself to guarantee it can continue to accomplish its mission. Part of this transformation is to utilize innovative business practices such as EUL to return value to the American warfighter.
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Why should installations be interested in EUL?
Air Force installations can reap numerous benefits from EUL projects. The main benefit is that the installation will see returns on assets that were formerly underutilized. These returns can be in the form of in-kind considerations such as services, equipment or even buildings. These all go a long way in supporting the service's mission and returning value to the American warfighter .
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Why should communities be interested in EUL?
Communities are stakeholders at Air Force bases and it's in their best interests to support projects that improve the environment at these bases. The community can derive a lot value from EUL projects at Air Force bases from stimulation of the local job market to increased cooperation between the Air Force and the private sector.
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Do other military branches or government agencies run their own EUL projects?
The Army and Navy both manage their own EUL programs. Additionally, the Department of Veterans Affairs manages its own EUL program.
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Everything we are seeing now is top down, is the Air Force interested in bottom-up, taking ideas from the bases?
No. Earlier, the bases brought us opportunities that were not compatible with EUL program goals because they [the bases] did not always understand the economics and broader ramifications of the potential projects.
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Does AFRPA train stakeholder agencies on the EUL program and process - specifically the Civil Engineering chiefs?
The Air Force EUL program is young and growing. AFRPA is endeavoring to codify the program and process, and will then seek to educate stakeholder organizations.
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Does the Air Force recognize the importance of a local champion and the acceptance of the surrounding community in the success of these projects?
A need exists for a communication plan to involve/reach out to the community - this is key to success. Another key component is the Asset Manager at the base level, as they will help opportunities bubble-up from the base level. This results in more community input/partnership.
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The EA/EIS seems to emerge as the most challenging obstacle to the timely completion of the closing of these projects. Would the Air Force consider beginning these studies when the preliminary market studies are performed to expedite the process?
The Air Force assumes the responsibility of performing the EBS. The EA/EIS are considered part of the developer's due diligence, and are typically performed by the HRO upon the initiation of development.
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Must the Air Force apply FAR requirements to the EUL program? Examples include Davis-Bacon.
The EUL program and processes are being revised so that Davis-Bacon and Anti Terrorist/Force-Protection standards apply only to those facilities the will house government employees under certain conditions.
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Is the available version of the EUL handbook accurate in its assumptions of the time frames for the different phases?
The handbook is currently being revised to reflect what experience has shown to be reasonable time frames for the various phases in the process.
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Is there single Website for EULs?
The website www.AirForceEUL.com is in production. Development continues, and additional functionality is forthcoming.
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Does the EUL process have wide acceptance among bases and MAJCOMs?
The EUL process involves the base, MAJCOM, AFRPA and A7C. Some bases and MAJCOMs have more experience with EULs than others. This interaction between the Air Force organizations will not be visible to a developer, who will interface with a designated point-of-contact.
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Potential Opportunities
What are the phases of an EUL project?
Once the Air Force identifies a potential EUL project, it initiates the project in three phases: The first phase, Project Evaluation, determines the feasibility of a proposed EUL project. AFRPA, installation commanders and major commands work together to make this determination. A Concept Opportunity Study is developed to evaluate potential returns and risks associated with the project. Projects with the highest return and lowest risk are then considered by AFRPA. The second phase, Project Validation, focuses on identifying the best use of the underutilized asset. AFRPA leads a 'Deal Team', which produces a Business Case Analysis to ensure the project is viable from an operational, force protection, environmental and financial standpoint as well as identifying the type of consideration (cash or in-kind) that will be sought. This phase ends with the selection of the developer that will undertake the project. In the third phase, Project Commencement, the Air Force engages in lease negotiations with the developer to finalize the arrangements of the lease. The Air Force also notifies the Office of Management and Budget and Congress of the status of the project. This phase ends with the signing of the lease.
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At what point during the development process can the government enter into a lease?
Part of the development team should be out looking for potential tenants during the acquisition phase of the process, but no space leases can be signed until after the ground lease has been executed.
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How long does it take to go from the RFQ solicitation to the selection of the HRO and, ultimately, the signing of a lease?
This varies. Timeframes depend on the complexity of the project, environmental studies, and other factors.
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Is there a threshold for a 'doable' deal?
Yes. Statute requires the Air Force receive in consideration the "Fair Market Value" of the asset, and policy dictates that a 3:1 ratio for consideration versus Air Force deal costs.
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How does Air Force arrive at determination of highest and best use?
The Air Force commissions a Business Case Analysis (BCA), which is similar to a private sector highest and best use analysis but with the additional consideration of Air Force mission compatibility.
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Is the Air Force matching the EUL-available property with their specific needs, i.e. an operations facility or childcare facility. Will it be specified in the RFQ or does the developer need to do the research?
The EUL-available property will be leased to the developer to put to the highest and best use. The Air Force might welcome an operations or childcare facility as in-kind consideration.
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Could a developer build on Air Force land outside the fenceline, and provide in-kind consideration in the form of an on-base building or facility?
Yes. The developer would put cash into an escrow account that would then fund a MILCON construction project. This helps to alleviate MILCON funding shortages.
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How do the developers know what in-kind services the base needs (i.e. wish list)?
The government project manager will communicate the base's needs to the developer.
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Will in-kind requirements be cited in the RFQ or will it be up to the developer to find out what the base might need?
These needs may not be cited in the RFQ. The government project manager will communicate the base's needs to the developer, who can then propose on how best to meet them in their proposal.
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Is the evaluation of the developer's proposal affected by the "wish list" of base requirements?
Proposals are evaluated on several criteria, one of which is total consideration value to the Air Force.
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Will the Air Force require federal/military construction requirements on in-kind consideration construction projects?
When cash deposited into an in-kind consideration account is used to fund a MILCON project, that MILCON project is subject to all applicable standards and requirements.
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How does the Air Force propose to participate in the future gains of the project?
The Air Force wants EUL projects to be successful over time, and wants to share in the success of the project. Profit sharing is one example of how the incentives of both the Air Force and the Developer could be aligned with the success of the project.
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Does the Air Force demand consideration in the form of up-front cash payments? These can developers' flexibility to provide more consideration over time.
The Air Force seeks the highest return on its assets. This includes all consideration: cash up-front, cash over time, and in-kind consideration.
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How many EUL projects has the Air Force completed?
The Air Force has completed five EUL projects at: Kirtland AFB, NM (Kirtland Technology Park), Eglin AFB, FL (Eglin Water Reclamation Facility), Eglin AFB, FL (NW Florida Regional Airport), Hill AFB, UT (Falcon Hill Aerospace Park) and Nellis AFB, NV (Nellis Waste Water Treatment Plant)
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Is there an information portal, or a source of information listing all of the EUL opportunities being considered?
The website www.AirForceEUL.com will be the information portal for the EUL program. It is in production, but further development and functionality is forthcoming.
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What is the volume of potential opportunities?
The entire universe of potential EUL opportunities is not yet known. The EUL program is growing. A program capacity of 10-12 deals per year of various sizes is forecasted.
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Do you have any projects currently that engage Habitat Credits?
Projects involving these credits have been attempted, but have thus far been unsuccessful. Barksdale and McGuire AFBs are being considered for these types of projects.
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Is there a place to go to find a listing of all of the under-utilized property at the different bases?
The entire universe of potential EUL opportunities is not yet known. The website www.AirForceEUL.com will serve as the EUL information portal, and is in production. Development continues, and additional functionality is forthcoming.
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Does the Air Force look at a partnership with two developers acting together and who bring two levels of expertise?
Yes. The Air Force sees this regularly when multiple firms blend skills to produce the best project and expect to see this type of partnership in future proposals.
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Will Headquarters Air Force, major command, or installation be involved in helping the developer select their financial or other partners for this project?
It is the responsibility of the developer to put together a package and to submit what it believes is the strongest team suitable for the project.
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Are EUL projects required to follow military building standards?
All facilities that will be used by the Air Force, either on-base or off-base, must conform to military building standards including the Unified Facilities Criteria (UFC) 4-010-01, 8 October 2003. This includes buildings that will be reclaimed by the Air Force at the end of the lease.
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Is HRO the only entity to negotiate with the Air Force on a deal?
Yes, the HRO will enter exclusive negotiations with the Air Force. Should these negotiations fall through, however, a new HRO will be designated.
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Are there oral presentations?
Yes, similar to HP.
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What is typical timeline [to respond to the RFQ]?
Some industry participants have indicated a preference for 6-10 weeks. This would allow more time for developers to work with the draft RFQ. Potential offerors may request more time, and the Air Force may grant extensions.
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Who comprises the source selection committee?
An EUL deal team may include members from the base, AFRPA, SAF/FMC, ESG, A7, the MAJCOM, and SAF/IEI.
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Are there opportunities for small businesses in the EUL program?
Opportunities abound to partner with the offerors.
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Is there a process for identifying additional opportunities through the RFQ solicitation? Is there a mechanism for gathering feedback from industry?
If you have any ideas or suggestions, let the PRESS contractor or the government project manager know.
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What is Amount of time is allocated for RFQ responses?
Response periods are usually set at 45 calendar days. Lenders need only provide 'soft' commitments so extensive due diligence is not required.
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Does the AF welcome unsolicited proposals? If so, in what format?
The process by which the Air Force will receive unsolicited proposals is still being developed. As this process is instituted, information will be made available through the EUL website, www.AirForceEUL.com.
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For an offeror putting forward an unsolicited proposal, what assurances are there the information will not end up as a competitive RFQ?
If it's truly unique, then it may likely be sole-sourced. If it's something others can do, it will be competed out, so you should make sure your offer is be the best. Manage that risk on your side before you bring it to the Air Force.
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How much flexibility is there in the EUL program for different types of business proposals?
The Air Force seeks the highest and best use for its assets while maintaining compatiblity with mission requirements. Any proposal not in conflict with either of those will be considered. The Air Force wants the project to be successful. If you have an idea, bring it forward and if you have a winning concept and a winning team, you will succeed.
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Financial
What is the OMB?
The Office of Management and Budget (OMB) is the federal agency responsible for evaluating leases done by the government. OMB determines whether the leases are capital (agency would have to obligate entire value of transaction in the year of the lease) or operating (standard lease recognized by all). All lease terms would have to go through the scoring process. Generally, a lease will run 25-50 years.
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Are developers required to submit equity percentages?
We do not require specific equity investments by the developer. The selected developer will bring forward the best deal for the Air Force. This includes putting together the best financing package. Lenders will decide the equity requirements.
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What is government scoring? Will the developer need to be knowledgeable in it? Will this project be scored?
"Budget scoring" refers to the act of measuring Federal spending obligations against the amounts appropriated. Under the Antideficiency Act (31 U.S.C.), no agency can obligate the government to pay more than the amount appropriated to it by Congress. OMB, the House and Senate Budget Committees, and Congressional Budget Office collaborate on the rules that govern this scoring process. OMB guidelines require that obligations be made for the "full economic cost" of an action at the time an transaction is entered into. For leases, actions are divided into "capital leases," which OMB views as equivalent to the purchase of an asset for the purposes of budgeting; and "operating leases," which are leases under which the asset is used for a period of time that does not contain or imply the risks of ownership. When the government purchases a capital asset-defined by OMB as land, structure, equipment, or intellectual property that has an estimated life of two years or more--scorekeeping requires that the government budget for the entire cost of that asset ("asset cost") in the fiscal year in which it is purchased. For operating leases, funds are "scored" (or obligated) in the year in which the budget authority is first made available in the amount necessary to cover the government's legal obligations. The specific capital/operating lease rules are contained in OMB Circular A-11, Appendices A and B, (revised in July 2003) www.whitehouse.gov . If these criteria are not met, then the lease will be scored for budget purposes as a "capital lease" and an amount equal to the "asset cost" (entire cost of the asset) must be budgeted for in the first year (recorded up-front) of the lease. Budgetary scoring impacts two areas of this project. The first is the ground lease itself. There is no scoring associated with a 10 U.S.C.ยง 2667, ground lease, as long as the installation obtains fair market value for the land as in-kind consideration or cash. The second area where scoring applies is if there is any federal leasing of space in the new building(s) constructed on the leased ground. The OMB criteria (see A-11 referenced above) help the government determine whether the project is really just Federal construction in disguise in which case it would be put on the books as a capital lease or whether it really is just an operating expenditure of the Federal government as anything else that it would lease, in which case OMB would account for it as an operating lease.
Are audited financial statements required from a privately held company in this process?
If audited financial statements have been prepared for your corporation or partnership, we do ask that you submit them in your proposal. However, if they are not available, we ask that you submit a complete and current personal financial statement for each of the officers/partners of the significant parties (including contractors, architects and other partners, if applicable) of your development team.
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Is the 5% transaction fee in addition to or part of the total payment?
The 5% is part of the total.
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AAFES/Services Involvement
If fence lines are moved so that a leased parcel falls outside of the fenceline, is it more likely that AAFES/AFSVA will choose to "opt-out" of the deal? Who handles this negotiation?
AAFES/AFSVA is more likely to "opt-out" of an EUL that takes place outside of the fenceline. AFRPA will negotiate with these agencies in these situations.
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In an EUL that AAFES/AFSVA chooses to "opt-in" on, what is the nature of the partnership between them and the developer?
Particularly in retail-based EUL projects, developers benefit from partnering with AAFES/AFSVA to increase the success of the project. AAFES/AFSVA will leverage their history of working with the military to the benefit of the project. They may opt to operate a business that is deemed to compete in their space.
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Are the Burger Kings or McDonalds seen on bases examples of EUL?
No, these are examples of AAFES/AFSVA purchasing a license from a franchise and running the franchise on a military installation.
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Under what circumstances is AAFES/AFSVA likely to "opt-in" or "opt-out" of an EUL business venture?
Typically, if the business operates in the same space as AAFES/AFSVA operations and is inside the fenceline, then it will be viewed as a competitive practice and AAFES/AFSVA will "opt-in". In circumstances where the business does not operate in the same space as AAFES/AFSVA or is outside the fenceline, AAFES/AFSVA will elect to "opt-out".
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When in the EUL process does AAFES/AFSVA decide to "opt-in" or "opt-out"?
Once proposals are evaluated and an HRO is selected, AAFES/AFSVA will examine the business model to determine whether it competes in their space and whether they elect to "opt-in" or "opt-out".
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Does AFSVA plan on doing all lodging on base?
Yes. If it's inside the fence line.
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Can AFSVA give funding to developers to build lodging and then take a percentage of the profits?
That would not be possible because AFSVA is looking for third-party financing, otherwise it would be a typical MILCN project and not EUL.
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If an EUL involves a lodging facility inside the fenceline, will AFSVA typically "opt-in"?
AFSVA will definitely "opt-in" if it is on-base.
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Will DECA (commissaries) be "opting-in" and "opting-out" of EUL deals like AAFES/AFSVA?
AAFES/AFSVA runs stores, retail facilities, etc. AFRPA has not spoken to DECA, who runs the commissaries. Should a proposal surface that operates in this space, DECA will be consulted.
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If a developer proposes to build a restaurant on base, will AAFES/AFSVA choose to participate?
AAFES would choose to "opt-in" because the business would compete with AFSVA business lines.
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Energy
Will you consider ESPCs (Energy Savings Performance Contracts) versus EULs?
These are both arrangements the Air Force enters into. AFRPA is the organization that runs the EUL program, while AFCESA handles ESPCS.
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Are you looking at energy in a more programmatic way, looking at opportunities across bases?
The Air Force does not, at this time, intend to put a multi-base energy EUL together. It does welcome unsolicited proposals of all kinds from developers who have found a way to offer value to the Air Force.
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On bio-fuels, if you are sensitive to bringing things onto the base in light of Air Force position to go green, doesn't it all involve bringing stuff onto the base? Is it limiting?
The Air Force welcomes unsolicited proposals, and is willing to consider varying proposals. Regarding waste there is legislation regarding bringing in/storing hazardous waste, but it is to be determined on a case-by-case basis. Bring the idea and it will be examined. The process by which the Air Force will receive unsolicited proposals is still being developed. As this process is instituted, information will be made available through the EUL website, www.AirForceEUL.com.
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In renewable energy projects, can the provision of energy at a reduced price serve as in-kind consideration?
Yes, as long as the EUL proposal is not dependent on the power-purchase agreement.
What kind feedback has been received on the RFQs for the renewable energy projects?
Various feedback was received from utilities, integrators and financers. The feedback was implemented by the PRESS contractors in an attempt to help the Air Force identify good partners in the energy space.
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Thus far, energy opportunities have been proscriptive - will this continue to be the case? What is the un-solicited proposal process?
Should the Air Force identify potential renewable energy opportunities, they will use the EUL process to explore them. The Air Force welcomes other unsolicited proposals. The process by which the Air Force will receive unsolicited proposals is still being developed. As this process is instituted, information will be made available through the EUL website, www.AirForceEUL.com.
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Is there a formal process for the submission of unsolicited proposals?
The process by which the Air Force will receive unsolicited proposals is still being developed. As this process is instituted, information will be made available through the EUL website, www.AirForceEUL.com.
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If an unsolicited proposal is submitted, will that opportunity be competed out in the standard EUL process by the Air Force?
If you have an idea that is so unique, that only a partnership with your firm can bring it to fruition, it is unlikely that the competitive acquisition process will be followed. For proposals that could be accomplished with other partners, though, the Air Force will follow its competitive
acquisition process.
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For an offeror putting forward an unsolicited proposal, what assurances are there the information will not end up as a competitive RFQ?
If it's truly unique, then it may likely be sole-sourced. If it's something others can do, it will be competed out, so you should make sure your offer is be the best. Manage that risk on your side before you bring it to the Air Force.
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Do energy EULs follow the same process as traditional real estate EULs?
The process is similar, and includes the posting of a statement of need and a site visit. The RFQ language and requirements may, however, be different.
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Has the Air Force attempted to model the energy component of its EUL program in conjunction with the "Utility Corridor" study conducted by DoD?
The Air Force has identified several parcels of underutilitzed land that seem well suited for renewable energy use. It welcomes proposals from developers for projects on these parcels.
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Other Value Based Transactions
How will 2869s be announced?
Notice of these opportunities will be posted on Fed Biz Opps, will also be broadcast through those mediums that will achieve the broadest reach.
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Could you explain difference between EUL and 2869 especially with reporting requirements to Congress?
Key difference is that in a 2869 deal, the developer will own the land. An EUL opportunity is where the developer is a lessee. Regarding Congressional reporting, both have requirements, but 2869 construction must be previously authorized. In an EUL, MILCON requirements do not apply.
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