2000 NCPPP Project Award Winner
Project Location: Lackland Air Force Base, Texas
Public Sector Partner: United States Air Force
Contact Name: Captain Kathryn Kolbe, 210.652.4126
Private Sector Partner: Landmark Organization Incorporated
Contact Name: Sam Kumar, 512.652.4000
Originality – Innovative Concept
The Lackland privatized housing project concept developed over a two-year period and centered around several authorities enacted with the 1996 legislation. This project was the first within the Department of Defense to use these authorities successfully to award a housing privatization project and has blazed the path for other military housing privatization partnerships. The Lackland privatization concept is innovative because it minimizes developer risk construction quality risk and operations and maintenance risk, for both partners. A rigorous source selection process was used by the Air Force to select an offer based upon best value, not lowest cost, by considering a favorable business proposal along with the strong financial health of the developer. The source selection process also had numerous checks and balances by senior advisors and expert private sector consultants. In order to minimize construction risk, the Air Force provided minimum standards for evaluation of acceptability of the offeror’s proposal in a Request for Proposal. The ground lease also contains provisions permitting extensive inspection, on behalf of the government, during the construction. The Request for Proposal also specifies that a prototype model home be completed for each type of unit showing the standards of construction to provide benchmarks for future construction. Since this housing development is privately owned, operated and maintained and partially privately financed, maintaining maximum occupancy by offering well-maintained, desirable units to generate cash flow and profit is a strong motivator. The project was structured to help achieve a long-term partnership between the Air Force and the developer emphasizing performance and commitment. The Air Force is applying these same principles to over 20 housing privatization partnerships planned over the next ten years.
Quality – Design Improvements or Superior Products/Services
The overarching benefit of the Lackland Air Force Base privatized housing partnership is that over four hundred top notch quality housing units are being provided to Air Force enlisted personnel years faster and at a fraction of the cost traditional military construction. It is abundantly clear that the newly constructed homes provided by Landmark Organization are a significant improvement to the homes which Air Force members were previously assigned. The Lackland privatized housing has many superior amenities to traditional military housing. For the enjoyment of all of the Frank Tejeda Estates residents, the housing area has an attractive leasing office, which can be used for resident gatherings, a beautiful pool, tot lots, jogging trails and basketball and tennis courts. The individual homes are all equipped with garages, microwaves and ceiling fans, are attractively landscaped and are equivalent in size to what military members can afford in the local market. Landmark Organization also has a dedicated, responsive property management and maintenance staff who have set up a self help program for residents to beautify their homes. Air Force enlisted members are anxious to move into Frank Tejeda Estates and those who live in the establishment are extremely impressed.
Implementation – Efficient and Effective Operation
The innovative partnership between the Air Force and Landmark Organization has been cultivated from the very beginning to ensure the most efficient and effective project operation for both partners. Regular partnering sessions, A Management Review Committee and the development of a post award management infrastructure are all mechanisms in place to facilitate and strengthen this relationship. Construction partnering between the Air Force and Landmark began shortly after project award to create team building relationships and address expectations. A professional facilitator has met with re4presentatives from both parties every two or three months to strengthen associations and address concerns during construction as they arise. Partnering sessions have addressed and resolved far reaching issues such as: Management changes, level of inspection, quality control, property management and scheduling. The Management Review Committee consists of representatives from both Landmark Organization, Air Force leadership at Lackland Air Force Base and military tenants living in the privatized homes and was created to provide a conduit for addressing management issues over the fifty-year life of the project. The Management Review Committee meets on a quarterly basis and has adopted extensive tenant rules and responsibilities acceptable to all parties and regularly addresses concerns of problems raised by any representative. To ensure Frank Tejeda Estates remains a high quality housing establishment for military members over the life of the project, a post award management infrastructure is under development which creates a permanent framework for project oversight and a mutual understanding for measuring project success through quality and financial stability of the development.
Economics – Appreciable Cost Savings or No Additional Cost
In order for the government to become a partner with the private sector, the economics of any such project are evaluated in detail to determine whether or not it is fiscally advantageous to proceed. The two primary considerations for this project were life cycle cost for privatization as compared to traditional methods and the leverage of government funds achieved with privatization. The costs of privatization over the fifty-year life of the project are estimated to be$12M less than the costs of military construction over the same period. Extensive financial analysis considered all aspects of both privatization and military construction options, to include: construction costs, operations and maintenance costs and housing allowance paid to members to name a few. Leverage is another financial metric important to the Air Force because it helps determine the government’s “bang for the buck.” Leverage is defined as the ratio between net present value for government revitalization as compared to the net present value of privatizing the same housing. The Lackland project achieved a leverage ratio greater than 8:1. In other words, the up front costs for privatization were one eighth the investment required for providing the same housing with military construction.