20031022J1.doc

Questions On F.E. Warren AFB Solicitation No. F05604-03-R-0011 (Electric Utility) QUESTION 1: Bundled Offers:

On September 15, we submitted a question to the Government about the submission of a bundled offer. In summary, with the issuance of separate solicitations for the water and wastewater utility systems, we believed a bundled offer could only be submitted using an alternate proposal approach. This means, of course, that the base proposal for that solicitation, whether water or wastewater, must stand and thereby, we may receive award for only that system and not the alternate. We acknowledge a similar question from another offeror about bundled offers, but the offeror’s question and the Government’s response (both posted September 16 on FedBizOpps) still leaves us with the impression that we have to submit a bundled offer as an alternate proposal. In a telephone discussion with the Contracting Officer on September 17, I received the understanding that our company could submit a bundled offer as our base proposal provided we referenced both solicitations and responded to the requirements of each solicitation. We request that the Contracting Officer confirm this verbal understanding in writing.

ANSWER: The responses to question regarding “bundled proposals” posted in FedBizOpps for F.E. Warren Air Force Bases (AFB) utilities privatization remains unchanged. For the four F.E. Warren AFB utilities privatization solicitations, the offeror may propose, in accordance with paragraphs B.4 of each of the four solicitations, as follows:

“Offerors interested in submitting individual offers, may create bundles from the contract line items in Schedule B-1 above (if applicable), or may propose both individual offers and bundled offers in the alternative. For bundled offers, the Offeror may choose which of the available systems it desires to include in that bundle. For each created bundle, the Offeror shall offer a separate price schedule for each contract line item, i.e., each utility system. Bundled offers that do not include a separate price for each line item will not be considered for award; this is due to the statutory requirement that the sale of each utility system be individually economical, as opposed to economical only as part of the whole bundle. The proposal for each system will stand on its own merits for purposes of the economic evaluation required by 10 U.S.C. § 2688; however, a bundled proposal will be evaluated as a bundled package for all purposes other than the determination of its compliance with the requirement of 10 U.S.C. § 2688 that it be economical. Offerors who desire to submit proposals for more than one utility distribution system located at F.E. Warren AFB may do so as an alternate proposal in response to any or each respective solicitation for F.E. Warren AFB Utilities Privatization initiatives.”

An example, for CLARIFICATION ONLY, is: An offeror, interested in submitting a proposal for F.E. Warren AFB’s water system and also F.E. Warren AFB’s wastewater system, must decide whether to submit two separate proposals in response to each solicitation, explaining their Mission Capability (technical) approach, and submitting the separate volumes required by the RFP; OR to submit separate RFP proposals to the separate solicitations PLUS a bundled proposal, referencing the two solicitation numbers in the bundled proposal, but including all required data including the separate price for each line item; OR submit only a bundled proposal, referencing the separate solicitation numbers, but providing separate prices for each line item. An offeror who submits only a bundled proposal, in accordance with the terms of the RFP, including paragraph B.4, assumes a risk that one of his bundled utilities will evaluate favorably for award and the other(s) will not, resulting in no award for either utility included in the bundled offer.

QUESTION 2: On Solicitation F05604-03-R-0011, Electric Utility Privatization (F.E. Warren AFB WY): Although the Government invokes the Service Contract Act, the Offeror could not find as an attachment to the solicitation, the corresponding Wage Determination document published by the Department of Labor. Please provide the applicable Wage Determination document.

ANSWER: The Wage Determination was added by Amendment 0005 to the F.E. Warren AFB solicitations on 10 Oct 2003.

QUESTION 3: Paragraph B.4 allows the Offeror to “bundle” Contract Line Item Numbers (CLINs) provided the Offeror separates and completes a Price Schedule for each CLIN. A “bundled” offer can benefit both parties by providing the Government economies of scale and one point sourcing while allowing offerors to propose on smaller systems where they otherwise may elect not to bid. Yet, for F.E. Warren AFB, the Government elected to issue separate solicitations for each utility system, thus precluding the potential benefits described above. Although an offeror can propose a bundled package by submitting an alternate proposal, this Offeror believes the Government would now have to rely heavily on an alternative response to achieve best value. The Offeror therefore recommends that the Government issue one solicitation that encompasses all utility systems (as intended by B.4). To keep the process moving, the Offeror suggests that the Government issue an amendment to each solicitation (four solicitations total) and advise prospective offerors that a solicitation for all utility systems will be forthcoming. This approach may necessitate an extension to the proposal submission date. However, we believe the ability for the offeror to submit a bundled package will be in the best interest of the Government. Please advise (of) the Government’s intended course of action.

ANSWER: The offeror’s assumptions outlined above are incorrect. The four separate solicitations for F.E. Warren AFB remain as written. The solicitations already allow for offerors to submit bundled proposals. Please see the response to earlier questions and the RFP language.

QUESTION 4: Paragraph B.8 states that the Separately Price(d) Option (SPO) to operate and maintain the utility system prior to transfer of ownership will occur during “Transition Period Two.” Conversely, Paragraph H.12 states that the SPO may be exercised to operate and maintain the utility system during the “Transition Period(s).” Please clarify whether the SPO applies to either Transition Period, or to Transition Period Two only.

ANSWER: The RFP was written anticipating the SPO would most likely be exercised during Transition Period Two. However, depending on the manner in which the successful offeror proposes to handle the Transition Periods, the Government reserves the right to exercise the SPO during either of the Transition Periods. Regardless, the Separately Priced Option Item for operation and maintenance of the system, by the contractor, under the Government’s permit during the Transition Period, is to be priced separately under the SPO CLIN.

QUESTION 5: CLIN AF in Schedule B-2 implies that the Offeror must multiply the “Monthly Service Charge” (in this instance, the monthly charge to operate and maintain the utility distribution system during the Transition Period see (Question 7 above) by 12 months to arrive at the “Total Annual Amount.” Should the Government believe that the SPO will last 12 months? Should the Government rely on the number of days proposed by the Offeror in either Sub-CLIN AD or AE (see Question 7 above concerning the SPO and Transition Periods)? Should the Government modify the SPO and Transition Periods? Should the Government modify Schedule B-2 by requesting a Monthly Charge multiplied by the number of transition months proposed by the Offeror? Please clarify.

ANSWER: The CLIN AF and Schedule B-2 remain unchanged as written. Each offeror has the flexibility to propose his approach for the Transition Periods and the Separately Priced Option item for Government evaluation. Offerors should not assume the Separately Priced Option Item is guaranteed for any specified period of time; rather, offerors are referred to paragraphs B.8, C.13, and H.12 of the solicitation.

QUESTION 6: Paragraph G.4 requires the contractor to maintain records of all costs and payments using the National Association of Regulatory Utility Commissioner’s (NARUC) Uniform System of Accounts – USOA, the Federal Energy Regulatory Commission’s (FERC) USOA, or an alternative USOA acceptable to the Government. Usually, the acronym “USOA” refers to a standardized system of accounts for a given industry and is most commonly used in the regulated utility industry (as evidenced by the Government’s reference to NARUC and FERC). Please clarify that the allowance of “an alternative USOA” means that a non-regulated entity can use its standard cost accounting procedures and practices following generally accepted accounting principles, and where applicable, adherence to the Cost Accounting Standards.

ANSWER: The requirement in the RFP Paragraph G.4 remains as written. Please refer to the entire paragraph G.4 wording that states, “…The USOA may be supplemented by the Contractor’s standard accounting procedures and generally recognized accounting practices and principles, as long as such supplemental procedures and practices are consistent with the NARUC (or an accepted alternative) USOA.” It is a business decision as to how offerors propose in response to this solicitation; however, the Government will not pre-evaluate an offeror’s proposal prior to RFP closing.

QUESTION 7: (a) Paragraph L.4 of the RFP states, in part, the following: “This Request for Proposal includes a Right of Way (ROW) document at Attachment J41. Offerors are encouraged to thoroughly review this document prior to submission of offers. If the offeror takes exception to or questions provisions of this ROW, these objections and/or questions should be raised along with the submission of the initial offer.” Conversely, Paragraph L.8.2 states, in part, the following: “Exceptions are not allowed to the Bill of Sale or the applicable real estate document.” In the second citation, what “real estate document” does the Government refer to if not the ROW? Please explain this apparent conflict in instructions as the ROW contains terms that may require further discussion with the Government.

ANSWER: The intent of paragraph L.4 is to make it incumbent upon the offeror to raise questions prior to RFP closing or, as authorized in the RFP, with the submission of the offeror’s initial offer, where the offeror believes an inconsistency or ambiguity may exist in the solicitation. If the offeror does not understand the terms of the ROW, those questions should be forthcoming from the offeror in the referenced timeframes. Paragraph L.4 allows offerors to state exceptions and/or objections for discussions and clarification, whereas, Paragraph L.8.2 states the Bill of Sale and ROW shall not be the subject of an alternate proposal.

(b) Notwithstanding the contents of Paragraph C.1, the offeror is concerned that directives by the Real Estate Contracting Officer will not result in a corresponding fee adjustment and/or performance relief under the Service Contract. For example, Condition 4.3 of the ROW states that the Grantee shall relocate its property should the Government deem the location of the property detrimental to Government activities. At one end of the spectrum, the Government, acting as the Grantor, could require the Grantee to relocate a major component of its utility system property resulting in a major demolition and reconstruction effort and causing significant impacts to operations. Yet, that is what the ROW explicitly requires the Grantee to do, if so requested and such a request takes precedence, in the event of conflict, over the service contract. Although Paragraph C.1 of the service contract states that it is not a conflict that “the contract independently allows recovery of costs or expenses in accordance with its terms that (are) not recoverable under the Right-of-Way,” it is not clear how the contractor would recover excess operations costs and/or performance relief, absent an attempt at such through the formal claims process and attempting to avoid a termination for default for non-performance caused by the property relocation directive. Please clarify for the offeror, how directives under the ROW, with a general absence of the Grantee’s ability to recover costs or expenses there under, becomes a recoverable costs and when applicable, secures performance relief, under the service contract.

ANSWER: The Right of Way and the Bill of Sale are not contractual documents governed by the Federal Acquisition Regulation (FAR) and signed by the Contracting Officer. Instead, the Bill of Sale is the real property transfer document and the Right of Way is a real estate document. Both are signed and executed by senior Air Force leaders authorized to process these documents. Any resulting service contract, for up to 50 years, awarded as a result of this solicitation is governed by the FAR and signed by the Contracting Officer. The deviation of the utilities privatization process from a regular service contract governed by FAR is what prompted the inclusion of the notice to potential offerors to read all of the documents included in the RFP, including the RFP, the Right of Way, and the Bill of Sale. Please read the remainder of paragraph 4.3 of the Right of Way, which states, “…Condition 2.2 notwithstanding, any removal or relocation of Grantee’s property at the direction of the Grantor under this Condition 4.3 shall be at Grantor’s expense. The Right-of-Way in paragraph 2.2 states, in part, “…To the extent such recovery is independent of this Right-of-Way, nothing in this Condition 2.2 abrogates any right to recover costs or expenses that arise pursuant to other contractual relationships between Grantor and Grantee, in their capacities under such independent contractual relationships.” While the ROW is not governed by the FAR, the ROW reference outlined in paragraph 4.3 of the ROW addresses potential compensation.

QUESTION 8:

a. Since the solicitation for utility privatization is negotiated and publicly advertised, with fair and open competition, does the Government intend to negotiate the Purchase Price?

ANSWER: The offeror(s) should propose their purchase price as directed by the RFP. Offerors are caution to read RFP paragraph B.2.5 and the Federal Acquisition Regulation (FAR) clause 52.215-1, Instructions to Offerors—Competitive Acquisition, which also reads, in part, “…(4) The Government intends to evaluate proposals and award a contract without discussions with offerors (except clarifications as described in FAR 15.306(a)). Therefore, the offeror’s initial proposal should contain the offeror’s best terms from a cost or price and technical standpoint…”

b. Based upon the above points relative to valuation of the utility systems at F.E. Warren AFB, how do we value the systems? If the price is negotiated and the Government (IRS) dictates a taxable event, will the Government assume the tax costs and defense?

ANSWER: Please refer to the answer shown above. It is up to the Offeror to propose a fair market value. Please see Paragraphs B.6.2.1, B.6.2.2, H.9, L.9.6.1, M.2, M.4.2.5, M.4.6, and M.4.6.3 of the solicitation. In Schedule B-2, the “c” footnote states, “The Purchase Price (Sub-CLIN AA), Recoverable Portion of the Purchase Price, interest rate and amortization period are proposed by the Offeror. The Recoverable Portion of the Purchase Price cannot exceed the Purchase Price.”

QUESTION 9 “Recoverable Portion of the Purchase Price”:

Guidance for determining the “Recoverable Portion of the Purchase Price” is not provided in Section L.9.6.1. of the RFP.

ANSWER: Please see RFP Paragraph L.9.6.1., Sub-CLIN AA that states, in part, “…The dollar amount shown in this Sub-CLIN is the net difference between the payment for the system and the proposed recovery of a portion of the purchase price paid for the utility system.”

QUESTION 10:

a. Based upon the manner of determining the fair market value of the utility system discussed in Item 1 above, it’s unclear how the Government (IRS) could subsequently determine that the Purchaser gained title to the utility system at less than fair market value.

ANSWER: Please see RFP Paragraph M.2.

b. Would the Purchase Price, absent consideration of the Recoverable Portion of the Purchase Price, constitute the potential CIAC tax liability?

ANSWER: Please see RFP Paragraph M.2 that reads, in part, “…The offeror’s proposal must make an offer to purchase the utility system being sold at its fair market value in conformance with the notices, guidelines, rules, and regulations of the IRS issued for purposes of determining whether a CIAC is assessable. The Government will rely on the accuracy of the offeror’s proposal in this regard and the offeror will assume all liability for any CIAC tax that may become due because of a determination that the fair market value price pursuant to the notices, guidelines, rules, and regulations of the IRS.”

c. Were there a CIAC tax liability, it would represent a significant cost to the Offeror, and this would have to be built into the price in some manner. Such costs have not been allowable under Cost Accounting Standards, even though they are real costs to the Offerors.

ANSWER: Please see the answer to the question above and the RFP Paragraph M.2 regarding associated CIAC tax liability that reads, in part, “…The Government will have no liability for nor will it pay any CIAC tax for which the offeror may become liable because of the offeror’s offer and performance under this contract…”

QUESTION 11. Proposal Evaluation and Federal Taxes: Costs included in the proposal in Schedules B-2, L-1, and L-2, as well as other schedules, represent a component of the Offeror’s “best value” proposal. In addition, these costs are to be subjected to economic analysis to determine if utility privatization is in the Government’s best interests. There is a Federal tax component (“US Federal Taxes included in Monthly Charge”) in Schedule L-3 that is a direct entry by the Offeror. We suggest that it would provide a fairer evaluation if the Government would provide a basis for this tax as a part of proposal instructions.

ANSWER: The taxes envisioned are any Federal taxes paid by the potential owner that are included as part of their charge. As the basis for the Utilities Privatization economic analysis is cost to the Government, the taxes are subtracted from the proposed charges before the comparison with the Government cost is made. The basis for taxation varies widely, therefore, a single basis for the taxes cannot be made.