Okaloosa County BOCC — September 1, 2015 — Eglin AFB Utilities Privatization - Update & Authorize Final Proposal — agenda request — reading text

BOARD OF COUNTY COMMISSIONERS AGENDA REQUEST DATE: September 1, 2015 TO: Honorable Chairman and Members of the Board FROM: Jeff Littrell SUBJECT: Eglin AFB Utilities Privatization - Update & Authorize Final Proposal Revision DEPARTMENT: Water and Sewer BCC DISTRICT: All STATEMENT OF ISSUE: Okaloosa County Water & Sewer (OCWS) is providing an update on Eglin AFB Utilities Privatization (UP) and requesting Board of County Commissioners (BCC) approval to authorize staff to continue negotiating and submit the Final Proposal Revision (FPR) to Defense Logistics Agency Energy (DLA), which may result in OCWS bringing a final contract to the BCC in the future for approval and execution. Staff is also requesting BCC approval to authorize the Chairman, or his designee, to sign any and all documents related to the FPR. To summarize, Eglin UP is for the drinking water distribution system and the wastewater collection system. Please note that Eglin UP does not include wastewater treatment & disposal - OCWS has a separate contract for the treatment & disposal of wastewater from Duke Field, Eglin Main Base, and Camp Rudder. BACKGROUND: For an overview of Eglin AFB UP and Defense Logistics Agency Energy's (DLA) Request for Proposal (RFP), see the accompanying PowerPoint slides. The following is a brief summary of past agenda items and BCC action: - On 6/7/2011, the BCC approved the submittal of a Statement of Interest in Eglin UP and authorized Request for Qualifications (RFQs) from engineering firms and contract operations companies. - On 9/6/2011, the BCC approved the selection of Constantine Engineering for program management and professional services. The BCC also approved the selection of Environmental Services Group for contract operations. - On 2/5/2013, the BCC approved the submittal of a proposal to DLA in March 2013. - On 7/1/2014, the BCC authorized staff to negotiate the proposal with DLA. As this is an extremely large proposal and complex process, please review the 2 attached past agenda items for further background and explanation. The proposal on the 50-year contract is currently approximately $11M/year (2014 dollars) for the ownership, operations, maintenance, capital projects (engineering, construction, etc.), management, and financing of UP. Since the 7/1/2014 BCC meeting, the following has occurred: - DLA has issued five (5) Negotiation Messages and the County has responded in writing. The original Negotiation Message was 181 government concerns. Staff and consultants have spent the last year (5 Negotiation Messages) going back and forth over these 181 concerns to ensure that the County and Federal Government are on the same page with regards to technical capabilities, past performance, risk, the socioeconomic plan, price, legalities, and other miscellaneous items. - A face-to-face negotiation meeting occurred on 10/22/2014 with DLA, Eglin AFB staff, County staff, and respective consultants/contractors. - A total of 14 Amendments to the original RFP have been issued by DLA. - On 6/3/2015, DLA published the Government Should Cost Estimate (GSCE) in Negotiation Message #4. The 50-year net present value of water and wastewater combined must be equal to or less than $403,696,786 (in 2016 dollars). - On 8/3/2015, DLA issued the Final Amendment (#14) and the Final Negotiation Message (#5). DLA also sent a letter that day requesting the Final Proposal Revision (FPR) by 9/17/2015. - On 8/19/2015, OCWS conducted a "UP Financial Workshop" with the County's UP Financial Team. Staff is now preparing to submit the FPR by 9/17/2015 for water and wastewater combined. In conversations among OCWS staff and DLA staff, it does not appear reasonable to submit a proposal for water stand-alone or wastewater stand-alone. It makes good economic and practical sense for one entity to be the water and wastewater utility, as both go hand in hand. The water/wastewater combined proposal is approximately 16" thick and contains 4 volumes. From Aug 3 to Sept 17, staff will be updating and finalizing the previous proposal from March 2013. In doing so, the following will occur: 1) updates will be made per the 5 Negotiation Messages and 14 Amendments, 2) pricing will be converted from 2014 dollars to 2016 dollars, and 3) all pricing and narratives will be reviewed, checked, and revised for any other considerations between March 2013 and the present. In pulling together the FPR, much coordination and hard work will occur between staff, the County's consulting engineer/program manager (Constantine Team), contract operations contractor (ESG), rate consultants (Burton & Associates), financial advisor (First Southwest), and legal (Nabors Giblin Nickerson/NGN). Ms. Heather Encinosa of NGN has provided legal review, input, and oversight. She has prior UP experience at other Air Force bases, as do others on the UP Team. In moving forward, staff is requesting that the BCC approve the submittal of the FPR by 9/17/2015, or as otherwise adjusted by DLA. We are also requesting that the BCC authorize the Chairman, or his designee, to sign any and all documents associated with the FPR submission. For example, the Chairman may choose to authorize the County Administrator or Water & Sewer Director to sign. Please understand that by submitting this FRP, the County is not under any contractual obligations. Should Okaloosa County be selected for award and the Air Force makes a decision to convey the utility systems, a Contract will be provided to Okaloosa County for review ahead of the signature request. The Contract will essentially be the original Request for Proposal (RFP) as amended and with the County's cost proposal attached. Should the Air Force decide to award/convey the utility systems to Okaloosa County, a Transition Period would occur, which is expected to be 10 months. During the Transition Period, the system would be inspected and Eglin's operations would be shadowed by the County's consultants, Constantine and ESG. Also during the Transition Period, re-negotiations on the price would occur, depending on the findings of inspections and monitoring. During the final two months, a Bill of Sale on the infrastructure would go to Congress. The 50-year contract would then be signed and is expected to commence at the immediate conclusion of the Transition Period. Please understand that under a best case scenario, the Transition Period could commence in FY2016. Under other scenarios, Eglin UP could be delayed, awarded to another entity, or possibly not happen at all. If OCWS were to be awarded the contract for Eglin UP, this transaction would yield great benefits to OCWS rate payers and to Okaloosa County as a whole. As the system owner, we would enhance our existing relationship with Eglin AFB by establishing a 50-year relationship. We would maintain control of decision making and how to most effectively utilize our resources. The ownership role provides for a greater opportunity to create new sources of positive cash flow, which assists in stabilizing operations, and potentially in mitigating future rates increases. Our expanded operations could also serve to facilitate investigating other consolidation of services opportunities in the local and regional area. OPTIONS: Approve or deny. RECOMMENDATIONS: Staff recommends that the BCC authorize staff to continue negotiating and submit the Final Proposal Revision (FPR) to DLA Energy. The FPR will be the original water and wastewater combined proposal that was submitted to DLA Energy in March 2013 with the following substantive modifications: (1) All costs will be expressed in 2016 dollars; (2) The total 50-year net present value will be equal to or less than $403,696,786 in 2016 dollars; (3) The modifications negotiated with DLA Energy in Negotiation Messages 1-5 will be incorporated; (4) Any additional exceptions to RFP addendums that were issued after March 2013 will be noted; (5) The capital projects identified in DLA Energy’s Revised Technical Library are being re-sequenced to line up with actual expected life expectancy of the infrastructure and to minimize the debt service needed in keeping with DLA Energy’s requirement of fixed annual payments with yearly CPI increases; (6) Prices will include a County management fee to cover administration and overhead; and (7) Other necessary modifications as determined by the County Administrator. Any resulting contracts would be brought back to the BCC in the future for approval and execution. Staff recommends BCC approval to authorize the Chairman, or his designee, to sign any and all documents related to the FPR. RECOMMENDED BY: APPROVED BY: John Hofstad, County Administrator