Armament Retooling and Manufacturing Support (ARMS) …

1 JMC JMC On the LineOn the LineArmament Retooling and Armament Retooling and Manufacturing Support ( arms ) Manufacturing Support ( arms ) arms 101 / OverviewARMS 101 / Overview13 Aug 200813 Aug 2008 Fritz LarsenJM&L LCMC (JMC) arms Team(309) Views Current Views --Time for a Paradigm ShiftTime for a Paradigm ShiftThe unutilized organic baseis valuableWhat an opportunity asset How much ($$) can I make?ArmyPrivateSectorARMS - Creates Assets and Capitalizes on Their ValueARMS - Creates Assets and Capitalizes on Their ValueThe unutilized organicbase has no valueWhat a headache liability What will it cost to dispose of it?

2 2 of 29 Facility Use ContractingFacility Use ContractingWhat Is It?What Is It?9 Contractor markets facilities on behalf of the Army9 Encourages commercial applications by allowing: Facility contractor use of facility Subcontracting of unused parts of facility Quick turnaround of facility use requests Providing favorable cost structures Ensuring compliance with commercial regulations and laws Ensuring Environmental and State Historical Preservation Office (SHPO) compliances9 Facility contractor maintains buildings and equipment used3 of 29 Facility Use ContractingFacility Use ContractingWhat Is It?What Is It?9 Army approves proposed facility/equipment use9 Facility contractor and tenants share risk of performance9 These procedures are now operational at 10 Army plants and 1 Army depot4 of 29 Strategic LocationsStrategic LocationsThe arms Program is for commercial use of selected Government-owned, Contractor-operated AAP*Riverbank, CALone Star AAP*Texarkana, TXLake City AAPI ndependence, MOMilan AAPM ilan, TNIowa AAPM iddletown, IAMississippi AAP*Stennis Space CenterScranton AAPS cranton, PAHolston AAPK ingsport, TNRadford AAPR adford, VA*BRAC d SitesKansas AAP*Parsons, KSHawthorne ADHawthorne.

3 NV5 of 29 What is the arms Initiative?Congressionally established in 1993 Uses Acquisition Reform and seed money to entice commercial industry onto Government-owned, Contractor-operated (GOCO) Ammunition Plants and depotTransforming Army Industrial Installationsfrom Liabilities to Assets!Transforming Army Industrial Installationsfrom Liabilities to Assets!6 of 29 What is arms ?What is arms ?9 Armament Retooling & Manufacturing Support Initiative: Congressionally established in 1993 ( arms Act of 1992), codified in 2000 (10 434) and HWAD became eligible in 2006 Uses Acquisition Reform and seed money to entice commercial industry onto Government-owned, Contractor operated (GOCO) Ammunition Plants Offsets Army costs for operations and maintenance and maintains Manufacturing capability to sustain National Security requirements for the Armed Services Accelerates growth of business and jobs in the private sector7 of 29 What arms Is NotWhat arms Is Not9A determination of Army mission-required facilities.

4 9A giveaway program for the private sector. 9A competitive business advantage. 9A program to provide property to communities. 9A guarantee of facility contractor success. 9An addition to Army scope of work or contract cost. 9 arms does not purchase equipment. 8 of 29 arms Act arms Act --PurposesPurposes9 Encourage commercial use of Army Ammo Plants9 Incentivize Army facility reuse by small and disadvantaged businesses9 Reduce the adverse effects of defense draw-downs9 Create jobs and reemployment opportunities 9 Foster economic stability9 Maintain readiness and a skilled workforce for Army and National security requirements9 Serve as a model defense conversion program9 Promote free market competition9 Relocate offshore production9 of 29 arms Program GoalsARMS Program Goals9 Recognize unused Army facilities as assets.

5 Not as liabilities9 Allow the marketplace to work in those facilities9 Make Army facilities self-sustaining9 Reduce Army product/operating costs9 Reduce Army ownership costs9 Develop economical exit strategies for the Army9 Serve as an alternative to base closure/BRAC10 of 29 Diverse Types of IndustriesDiverse Types of IndustriesAdministrative OfficesAmmo Demil R3 Business Development CentersCardboard Paper RecyclingClothing Store ProductsCoal Receiving & StorageCommercial LaundryComputer Applications / SoftwareComputer RecyclingExplosive ProductsFireworksFishing Line Flares Flexible TankGlycol RecyclingHardwood ProductsHydraulic SystemsMachine Shops PalletsPet FoodPlastic ContainersPlastic MoldingPlastic RecyclingRail Car Storage & ModificationsSteel Cabinet Trailer StorageWeld TestingWood Recycling11 of 29 HOW DOES IT WORK?

6 HOW DOES IT WORK?Army Incentive Funds for Infrastructure ImprovementsArmy Incentive Funds for Infrastructure ImprovementsMarket Army Idle CapacityMarket Army Idle CapacityCommercial Agreements with TenantsCommercial Agreements with TenantsTenant/PrivateInvestmentsState & LocalFundingState & LocalFundingState & LocalEconomic Dev AgenciesState & LocalEconomic Dev AgenciesOperating ContractorFacility UseAgreementReduced Army Ownership & Production CostsServices & Reduced Overhead12 of 29 New Tenants Proposal New Tenants Proposal Evaluation RequirementsEvaluation Requirements9 Impact upon DoD requirements planning9 Critical

7 Skills/capabilities maintained9 Number of jobs created/anticipated9 Anticipated environmental impacts9 Compliance with arms Act intent9 Return on investment ( arms funds)9 Soundness of business decision13 of 29 Contract Negotiations Contract Negotiations with Tenantswith Tenants9 Strictly between facility contractors & tenants9 Anticipated business returns & technical proposal requirements9 Cost proposals include: Engineering requirements Specific site improvements9 Completed proposals submitted to arms team9 Army funds are used to fund technical proposals9 Contract improvements are accomplished9 Tenant takes possession of location14 of 299 Government has No Privity of Contractwith subcontractor / tenants **BEING RELOOKED**9 Facility Contractor Negotiates with Tenant Rates Improvements Incentives Terms9 Facility Contractor Negotiates with arms Team9 Concept Approval Quick Response9 arms Funding through Facility ContractorContracting InnovationContracting InnovationTENANTSFACILITY CONTRACTORFACILITY CONTRACTORARMS

8 TEAMARMS TEAMNEGOTIATIONSNEGOTIATIONS15 of 29 Rate Development DeterminationsRate Development Determinations9 Size of arms investment9 Commercial value of location9 Charge per price produced9 Overall contract value9 Percentage of sales9 Amount of overhead absorbed9 Utilities consumed16 of 29 Commercial Real Estate DefinitionsCommercial Real Estate Definitions9 Class A office space-Newly constructed in state of the art building9 Class B office space-10 to 25 years old and renovated to high standard9 Class C office space-Buildings 25 years old or more requires substantial renovation9 Climate Controlled storage space-Temperatureand humidity controlled space9 Bulk storage space-Open space unheated, not cooled9 Industrial Property/Buildings-Property constructed for industrial production, new construction normally steel, cranes possible, thick floors and heavy electrical capability.

9 Capable of supporting large production quantities9 Research and Development-Buildings such as Laboratories or small specialized production areas, higher quality than industrial property17 of 29 Sources of DataSources of Data9 Sources - Individuals and Organizations contacted:??? - Chamber of Commerce??? - Grow Greater Ammo Depots and Plants Class A Office Space $ to $ Class B Office Space $ to $ Space (as is) $.50 to $ Climate Controlled Warehouse Space$ to $ Bulk Warehouse space $ to $ Industrial Buildings$ to $ Land in Office Parks $40,000 to $45,000 (purchase price) Raw Industrial Land $25,0009 NAI Global (Hypothetical Site) - Not directly applicable because different market Class A $ to $ ($ ) Class B $ to $ ($ ) Industrial $ to $ ($ ) Warehouse Bulk $ to $ ($ ) R&D Space $ to $ ($ )18 of 29Do Tenants have a free ride?

10 Do Tenants have a free ride?9 BLUF We have not found a situation where tenants do not pay their fair share of costs that they create. We are investigating this issue with each operating contractor this FY: However to date we have found tenants to: Pay for all utilitieszSteamzElectricityzTelephonezWa ter and waste water treatment zGas Pay for services ( maintenance, testing, engineering) they desire Most tenants are on a triple net lease and thus pay for all needs outside of the terms of the lease19 of 29 arms Incentives arms Incentives What Are They?What Are They?9 They are not loans9 They are not negotiated settlements9 Source of funding for required tenant site improvements9 Inducements for tenants to locate to Army facilities9 Inducements for facility contractors to use facilities9 The Army owns all property improvements9 arms allows for no fees/profit on these incentives20 of 29 arms Partners with CommunitiesARMS Partners with Communities9 Business development centers/regional incubators have been established9 Utility and service partnerships Army assets supporting local needs in.