dod’s preferred method for upgrading utility systems...dod’s preferred method for upgrading...
TRANSCRIPT
DoD’s Preferred Method for UpgradingDoD’s Preferred Method for UpgradingUtility SystemsUtility Systems
National Defense Industrial Association29th Environmental and Energy
Symposium and Exhibition2003
22
Utilities PrivatizationUtilities Privatization
u
u
u
u
33
State of Utility SystemsState of Utility Systems
u Utility systems have beenunder-funded for years
u Utility system O&M has notconsistently met industrystandards
44
DoD Vision for Utility SystemsDoD Vision for Utility Systems
u Provide adequate funding and managementn Bring all systems up to standards by 2010n A management review is inherent in the
privatization evaluation processu Incorporate private sector innovation and
efficienciesn Utilities Privatization is preferred method to
modernize and sustainn Utilities Services is not a core functionn Complex process, success requires partnership
with utilitiesØ Thorough communicationØ Clear understanding of assumed risks and baseline
of costs
55
UP Status SummaryUP Status Summary
Over 1300EvaluationsRemaining
Ownedby Others
Pending Solicitation, 408
Owned by Others, 750
Privitized without 10 USC 2688 authority, 350
Security or Mission Exempt, 89
Privatized Using 10USC2688
Authority, 43
Economic Exemption, 41
Active Solicitations, 929
DoD Utility SystemsTotal of about 2600 systems
(As of DEC 2002)
$50B Value
66
Performance Risks DuringPerformance Risks DuringUpgrades and AfterUpgrades and After
0 5 10
SystemValue
&AnnualCosts
“As Is”“As Is”ValueValue(FMV)(FMV)
Replacement CostReplacement CostNew New (RCN Modified)
Year
Period
of
High P
erform
ance
R
isk
Period of
Low Performance Risk
Recapitalization
Upgrades
Ops & Sustainment
System Value
77
Should Utility Industry be interested?Should Utility Industry be interested?
u The 1300 DoD systems remaining to beevaluated represent a potential rate baseexpansion of $Billions
n Increased economies of scale
u Utility gains a solid customer for the long term
n Reasonable profit is generated
n Government pays its bills
n Investment should have high rating from financialmarket
88
Industry ConcernsIndustry Concerns
u Inadequate or untimely communicationu Contract Accounting System requirementu Data provided in RFP is not understood
n Risk of performance shortfalls resulting from unforeseenconditionsØ Major inventory discrepancies
u RFP technical requirements overly prescriptiveu Service standards required by RFPu Utilities wary of investing resources to
develop packages and wait years for adetermination
99
Utilities Privatization GuidanceUtilities Privatization Guidance
uNew Utilities Privatization GuidanceuComplete evaluations of all systems by
Sep 05n Interim goals in Sep 03 and Sep 04
uRequires consistent economic analysisuRequires competitionuUtilities Privatization is preferred tooluApproved by Deputy Secretary 9 Oct 02uRequires permanent title transfer
1010
Over 1300EvaluationsRemaining
Ownedby Others
0
100
200
300
400
500
600
700
800
Owned byOthers
Privatized Exempt SSADecisions
MadePending
Notification
RFPsClosed
pendingSSA
Decision
RFPsReleasedpendingClosure
ActivePending
RFP Release
Deferred orOn Hold
USAF
Army
Navy
DLA
Status by ComponentStatus by Component
1111
Summary
u
u
u
u
u
Questions?Questions?
(703)-697-6195(703)[email protected]@osd.mil
www.acq.osd.mil/ie/utilities/privatization.htmwww.acq.osd.mil/ie/utilities/privatization.htm