JOFOC redacted.pdf

JUSTIFICATION FOR OTHER THAN FULL AND OPEN COMPETITION

US Army Corps of Engineers (COE) The Wanamaker Building

100 Penn Square East Philadelphia, Pennsylvania

Lease # LPA02323

PROPOSED ACTION:

To exercise two five (5) year renewal options with partial termination rights at any time upon ninety (90) days written notice, for the US Army Corps of Engineers (COE), located at 100 Penn Square East in Philadelphia, Pennsylvania under Lease Number GS-03B-02323. The first renewal option is anticipated to commence on December 1, 2012.

DESCRIPTION OF REQUIREMENT:

Currently, the US Army Corps of Engineers (COE) occupies 86,600 ANSI/BOMA Office Area square feet (113,446 rentable square feet) at the aforementioned location. This lease is due to expire on November 30, 2012. The current annual rent is $2,168,915.08 or $19.12 per RSF ($5.81/RSF operating + $13.31/RSF shell). This is a fully serviced rate.

This lease contains two five (5) year renewal options. Per the current lease agreement, the space will be re-painted and carpet will be replaced upon commencement of the first renewal option. On the commencement of the second renewal option, the space will be re-painted again.

GSA must provide written notification to the Lessor ninety (90) days before lease expiration if the Government wishes to exercise either option. The first renewal option would be effective December 1, 2012 with a rate of $22 per rentable square foot (RSF), plus accrued operating expenses. The second option would be effective December 1, 2017 with a rate of $25/RSF, plus accrued operating expenses. These rates are fully serviced. The Government has partial termination rights at any time throughout either renewal option; however, GSA must provide written notification at least ninety (90) days prior to termination.

It was determined that the COE has a continuing need for space at this location. COE is overall pleased with their space and is satisfied with the Lessor’s performance. The Lessor responds to issues immediately and consistently keeps COE updated on any building related matters.

The Lessor has proposed that in exchange for exercising the renewal options early, they will reduce their base rate for years 1-5 by $2.50/RSF, reduce their base rate for years 6-10 by $3.50/RSF, renovate the 8 restrooms within the COE space, and pay for the COE electrical work not to exceed the amount of $327,000.00. This electrical work is part of an alterations project in which the COE planned to complete in the upcoming months.

As a result of this reduction in rent, in years 1-5 the Government would save $1,077,737.00 and in years 6-10 the Government would save $1,644,967.00, yielding $2,722,704.00 net savings.

However, this rental savings is only offered to the Government if GSA exercises both renewal options early.

Therefore, by exercising the options now, the Government will receive a rental savings of $2,722,704.00, plus 8 restroom renovations, plus $327,000 for electrical work. Due to this substantial savings, it is in the best interest of the Government to exercise both renewal options now in order to receive these incentives. Furthermore, relocating this agency at the end of the current term would result in costs to the Government that would not be recovered through a competitive action.

IDENTIFICATION OF STATUTORY AUTHORITY: 41 U.S.C. 253 (C) (1)

UNIQUE QUALIFICATIONS OF PROPOSED CONTRACTOR OR NATURE OF

ACQUISITION REQUIRING AUTHORITY CITED:

In accordance with 41 USC 253 (C) (1), the agency’s minimum needs can only be satisfied by one responsible source and no other property will satisfy the needs of the agency adequately.

The Government would not recover move costs or alteration costs through a competitive action.

EFFORTS TO ENSURE SOLICITATION FROM MAXIMUM SOURCES PRACTICAL:

In accordance with GSAM 517.207, an advertisement needs to be posted for this action.

Therefore, an advertisement was placed on May 20, 2010. No responses were received.

DETERMINATION THAT PRICE IS FAIR AND REASONABLE:

Society of Industrial and Office Realtors’ (SIOR) data for 2010 revealed that the rental rates for Class A office space inside the Philadelphia CBD ranged from $23.00 -$38.00 per rentable square foot of office space. See attached market data report for additional information.

The base rental rate of $19.50/RSF* for years 1-5 and $21.50/RSF* for years 6-10 are both well below the market range and SIOR range. Therefore, the renewal option rates are well below market and are considered to be fair and reasonable.

The total contract value as a result of this requirement is estimated to be as follows:

$2,212,197.00 annual cost for years 1-5* $2,439,089.00 annual cost for years 6-10* $23,256,430.00 Total aggregate contract*

*These estimates do not account for accrued operating escalations.

OTHER FACTORS SUPPORTING JUSTIFICATION:

1) The Lessor has performed very well throughout the current lease and the tenant is satisfied with the building and their space.

2) The agency has advised that they do not require any major changes to the existing space since they have recently renovated their space. The difference in rental between the current location and a new location that would require a full build-out is estimated to be about $16.00/RSF for the first 5 years and approximately $7.00/RSF for years 6-10. A total cost savings of $13,449,802.70 by remaining at the current location rather than relocating. See attached cost-benefit analysis.

LISTING SOURCES EXPRESSING INTEREST IN SOLICITATION:

None- as no solicitation was offered.

FUTURE ACTIONS TO OVERCOME BARRIERS TO FULL AND OPEN COMPETITION:

At the expiration of the second renewal option, a competitive lease action will be pursued.

CONCLUSION:

Based upon the above information, it is in the Government's best interest to exercise both five

(5) year renewal options for Lease Number LPA02323 at the earliest possible date.

I hereby certify that the above information is accurate to the best of my knowledge.

Prepared by: _______________________________________________ Jennifer Kauffmann Date Realty Specialist

Concurred by: _______________________________________________ Gary Eberly Date Contracting Officer

Concurred by: _______________________________________________ Gary Eberly Date Realty Supervisor

Concurred by: _______________________________________________ Laurie Ney Date Real Estate Acquisition Branch Chief

Concurred by: _______________________________________________ Dorothy Baratta Date Real Estate Acquisition Division Director

Concurred by: _______________________________________________ Dale Anderson Date Regional Competition Advocate

Approved by: _______________________________________________ Rob Hewell Date Regional Commissioner, PBS