23R1318-Note2.pdf

DEPARTMENT OF THE NAVY

NAVAL FACILITIES ENGINEERING SYSTEMS COMMAND PACIFIC

258 MAKALAPA DR STE 100

PEARL HARBOR HI 96860-3134

RFP N62742-23-R-1318

Notice No. 2

21 June 2023

PRE-PROPOSAL QUESTIONS & ANSWERS

FY22 MCAF PROJECT PAF160700 SQUADRON OPERATIONS FACILITY,

ROYAL AUSTRALIAN AIR FORCE BASE DARWIN, AUSTRALIA

NOTE: The following questions and answers are provided for INFORMATION ONLY. The RFP remains unchanged unless it is amended in writing on a Standard Form 30.

Subject: NAVFAC Pacific RFPs supporting US Force Posture Initiative in Australia and Clarity Around Bilateral Agreements:

1. N62742-23-R-1315, FY22 MCAF PAF 180400, AIRCRAFT MAINTENANCE

SUPPORT FACILITY ROYAL AUSTRALIAN AIR FORCE BASE TINDAL,

AUSTRALIA, kylee.k.chun.civ@us.navy.mil

2. N62742-23-R-1316, FY22 MCAF PAF180700, SQUADRON OPERATIONS

FACILITY ROYAL AUSTRALIAN AIR FORCE BASE TINDAL, AUSTRALIA,

kylee.k.chun.civ@us.navy.mil

3. N6274223R1318, FY22 MCAF PROJECT PAF160700 SQUADRON

OPERATIONS FACILITY, ROYAL AUSTRALIAN AIR FORCE BASE DARWIN,

AUSTRALIA, chelan.n.crane.civ@us.navy.mil

4. N62742-23-R-1302, FY24 MCAF PAF180500 BOMBER APRON, ROYAL

AUSTRALIAN AIR FORCE BASE TINDAL, AUSTRALIA,

adele.m.murakami.civ@us.navy.mil

5. RFP# TBD, FY23 and 24, Upcoming Apron, Hangars at Royal Australia Air Force Base Darwin

NAVFAC Team:

[Contractor] attended the Industry Day in Darwin, Australia April 20 and on May 11 the slides were posted to the Australia Department of Defence site. The NAVFAC slides and conversations with INDOPACOM identified three relevant bilateral agreements between the US and Australia.

Yet there is confusion among industry and perhaps within the USG with respect to language in the Australia RFPs in contrast with three bilateral agreements – specifically the 1963 Status of Forces Agreement, the 2010 Acquisition and Cross-Servicing Agreement, and the 2014 The Force Posture Agreement between the Government of Australia and the Government of the United States of America, detailed below.

Problem Statement: SOFA/VAT/GST

DoD via NAVFAC Pacific is implementing the Pacific Deterrence Initiative in INDOPACOM to blunt our pacing threat and is projecting to spend $26 billion in infrastructure. The Philippines levies a 12% Value Added Tax (VAT) on a planned $500M PDI investment. Australia levies a 10% Goods and Services Tax (GST) on planned $1.5B PDI investment. Just these two countries, US taxpayers would pay $210M unnecessarily when Status of Forces Agreements explicitly exempt these “taxes” [these funds could be used to acquire other projects throughout INDOPACOM]. Other planned investments in FSM and Palau are an additional $1.7 billion (which have a SOFA/COFA). Furthermore, business licensing requirements are also exempt and requiring US contractors to be licensed in contravention of the SOFA/COFA disadvantages US contractors, clearly not the intent of the negotiated SOFA and similar bilateral agreements. Seeking clarity reduces risks for the contractor and more accurately attains realistic pricing.

Per DoD Instruction 5100.64 Foreign Tax Relief and DAU VAT materials (attached), “It is DoD policy to secure, to the maximum extent practicable, effective relief from all foreign taxes” (DoD Instruction 5100.64). If a large portion of the $26 billion PDI has VAT assessed, it could easily exceed $1 billion...far from de minimis. Imagine how many additional projects could be funded from this tax leakage.

PDI Schedule and Above the Threshold Reprogramming impacts: We have reviewed many PDI 1391 and have never seen a GST/VAT or other tax line item in the government estimate. By not accounting for VAT/GST cost in a MILCON project-means from the start the appropriated funds are 10-12% low. This underfunding of the 1391 in combination with inflationary pressures creates and even lower and unrealistic 1391 and that assumes the estimate basis was very recent and accurate. As evidenced by prior PDI projects in Australia, Tinian and Palau this delays the award and Initial Operating Capability of critical PDI infrastructure by requiring Above the Threshold Reprogramming which can delay a MILCON project 6-12 months. When rectified this has a double bottom line benefit, cost savings and schedule enhancement.

(1) Agreement between the Commonwealth of Australia and the Government of the United States of America Concerning the Status of United States Forces in Australia, and Protocol, done at Canberra on May 9, 1963, (the SOFA) Article 9 “Equipment, materials, supplies and other property imported into or acquired in Australia by or on behalf of the United States Government for the official use of the United States Forces and not for resale shall be free of all Australian duties and taxes. Except as may be otherwise agreed, title to such equipment, materials, supplies and other property shall remain in the Government of the United States, which may remove them from Australia at any time, free from export duties and related charges and restrictions.”

(2) ACQUISITION AND CROSS-SERVICING AGREEMENT BETWEEN THE

GOVERNMENT OF AUSTRALIA AND THE GOVERNMENT OF THE UNITED

STATES OF AMERICA Done at Canberra on 27 April 2010

ARTICLE V. REIMBURSEMENT

c. Establishment of Price or Value.

The following pricing mechanisms are provided to clarify application of the reciprocal pricing principles. The price established for inventory stock materiel shall be the Supplying Party's stock list price. The price for new procurement shall be the same price paid to the contractor or vendor by the Supplying Party. The price for services rendered will be the Supplying Party’s standard price, or, if not applicable, the costs directly associated with providing the services.

Prices charged shall exclude all taxes and duties that the Receiving Party is exempted from paying under other agreements that the Governments of the Parties have concluded and costs waived and excluded in accordance with Article VI of this Agreement. Upon request, the Parties agree to provide information sufficient to verify that these reciprocal pricing principles have been followed and that prices do not include waived or excluded costs under Article VI

ARTICLE VI. WAIVED OR EXCLUDED COSTS

Insofar as national laws and regulations permit, the Parties shall ensure that identifiable duties, taxes, and similar charges are not imposed on activities conducted under this Agreement. The Parties shall cooperate to provide proper documentation to maximize tax and customs relief. The provisions of any applicable tax and customs relief agreements also shall apply under this Agreement.

The Parties shall inform each other whether the price charged for Logistic Support, Supplies, and Services includes taxes or duties. In determining whether duties, taxes, or similar charges should be levied, the pricing principles in Article V govern the value of the Logistic Support, Supplies, and Services provided by the Supplying Party

(3) The Force Posture Agreement between the Government of Australia and the Government of the United States of America (Sydney, 12 August 2014)

ARTICLE XI LICENSES AND QUALIFICATIONS

1. Australia shall accept as valid, without a test or fee, current and valid licenses or permits issued by United States authorities to United States Forces when operating vehicles owned by, or on exclusive hire or lease to, the United States.

2. Australia shall assist United States Forces and United States Contractors to obtain, or to obtain the recognition of, driving licenses for the operation of private vehicles.

3. Australia shall accept as valid, without test or charge, current and valid medical and other professional, technical or trade licenses and qualifications issued by the United States, States thereof, or their political subdivisions to members of the United States Forces for carrying out activities under this Agreement.

4. Australia shall assist United States Contractors to obtain, or to obtain the recognition of, all valid professional, technical, or trade licenses and qualifications issued by the United States, States thereof, or their political subdivisions to United States Contractors for carrying out activities under this Agreement.

ARTICLE XVII UNITED STATES CONTRACTORS

1. United States Contractors may enter and exit the territory of Australia in connection with activities under this Agreement. Passports and visas shall be required in accordance with Australian law, and if a visa is required, and requested by a United States Contractor, it shall provide for multiple entries and exits and shall be valid for a period of not less than one year. The appropriate Australian authorities may issue, issue with conditions, or decline to issue such visas expeditiously.

2. United States Forces may solicit, award, and administer contracts, in accordance with the laws and regulations of the United States, for any materiel, supplies, equipment, and services (including construction) to be furnished or undertaken in Australia, with full respect of Australian law, without restriction as to the choice of contractor, supplier, or person who provides such materiel, supplies, equipment, or services. Australia maintains the right to exercise criminal and civil jurisdiction over United States Contractors.

3. Income derived wholly and exclusively from performance in Australia of any contract with the United States in connection with activities under this Agreement by any person (who is not a national of nor ordinarily resident in Australia) or company (other than a company incorporated in Australia) being a United States Contractor, who is in or is carrying on business in Australia solely for the purpose of such performance, shall be deemed not to have been derived in Australia, provided that it is not exempt, and is taxed, under the taxation laws of the United States. Such contractors will not be subject to Australian tax in respect of income derived from sources outside Australia.

4. Where the legal incidence of any form of taxation in Australia depends upon residence or domicile, periods during which such United States Contractors are in Australia solely in connection with activities under this Agreement shall not be considered as periods of residence therein, or as creating a change of residence or domicile, for the purposes of such taxation.

ARTICLE XVIII CUSTOMS AND QUARANTINE PROCEDURES

Australia shall take all appropriate measures to ensure the efficient clearing of imports and exports in connection with this Agreement. Customs inspections under this Agreement shall be carried out in accordance with procedures mutually determined between Australia and the United States. The United States shall promptly inform Australia if activities involving United States

Forces, United States Contractors, dependents, or prepositioned materiel are inconsistent with Australian quarantine laws and regulations.

Clauses in RFPs N62742-23-R-1315 and N62742-23-R-1316 (only released so far) which appear in conflict with the above bilateral agreements.

N62742-23-R-1315, SF 1442 (Continued), Page 5 of 5

7. The total price for CLIN 0001 shall be exclusive of the Australian Goods and Services Tax.

See Section 01 20 00 Price and Payment Procedures, paragraph 1.10 GST, for tax reimbursement procedures.

1. This appears in conflict with Section 01 20 00 Price and Payment Procedures, paragraph

1.10 GST, for tax reimbursement procedures and in conflict with 1.3.4 Taxes “The responsibility for paying applicable taxes rests with the Prime Contractor. State and local taxes to the FF&E line will be included with the subcontractor's quote, if applicable by the state (this language is intended for the US)

1. We request Section 01 20 00 be removed given the unambiguous bilateral agreements and RFP item 7 direction.

ANSWER: Section 01 20 00, paragraph 1.10, GST, will not be removed as it is the process required by the Defence Tax Management Office (DTMO). The contract price is exclusive of GST, therefore, as stated in Section 01 20 00, paragraph 1.10, payments, exclusive of GST, will be made. The DTMO agrees that the US Government is not liable for GST in accordance with the Status of Forces Agreement (SOFA) and on this basis has no obligation to pay GST included in a contractor's invoice. However, it is a requirement of Australian law that contractors include GST in their invoice and pay such amounts to the Australian Government. DTMO will process the GST payment and the contractor will subsequently be reimbursed the GST. Therefore, it is a net $0 GST.

9. CONTRACTOR LICENSING REQUIREMENTS FOR WORK OUTSIDE THE UNITED

STATES, states

“Contractors must be duly authorized to operate and conduct business in any host country and must fully comply with all laws, decrees, labor standards, and regulations of the host country during the performance of the contract. The United States may have a Status of Forces Agreement (SOFA), Force Posture Agreement, and other agreements with some countries and those agreements must be complied with. Unless explicitly provided in the RFP, the U.S.

Government will not offer “United States Official Contractor,” “Technical Representative,” or similar status under any SOFA; nor will the U.S. Government certify any employees of a contractor as “Members of the Civilian Component” under a SOFA. Offerors are expected to familiarize themselves with the laws of host nations whether or not the United States Government provides notice of the existence of such requirements.”

1. There is conflicting direction in this RFP clause. There are SOFA and bilateral agreements which exempt contractors from licensing, taxes, etc. The directive states contractors must comply with, such as, The United States may have a Status of Forces Agreement (SOFA), Force Posture Agreement, and other agreements with some countries and those agreements must be complied with.

2. Australia DoD is not expecting US Contractors to be licensed as that is covered in the

USFPI.

3. The Bilateral Agreements are law and the USG and contractors must comply with them.

Offerors have familiarized themselves with the law (SOFA, Cross Servicing and USFPI) in the host nation. Perhaps the only sentence that is relevant is: “Unless explicitly provided in the RFP, the U.S. Government will not offer “United States Official Contractor,” “Technical Representative,” or similar status under any SOFA; nor will the U.S. Government certify any employees of a contractor as “Members of the Civilian Component” under a SOFA.”

4. We request NAVFAC include PGI 225.3-- CONTRACTS PERFORMED OUTSIDE THE UNITED STATES, https://www.acq.osd.mil/dpap/dars/pgi/pgi_htm/PGI225_3.htm

ANSWER: The RFP does not include conflicting information.

RFP Specs, 1.2 GENERAL REQUIREMENTS

1.3.4 Taxes

Exemptions for certain State or Local taxes may be available to the Prime Contractor or its subcontractors.

The Prime Contractor must take maximum advantage of all exemptions, including obtaining a resale permit, from State and Local taxation authorities whether available directly to the Prime Contractor or based on an exemption afforded the Government. The responsibility for paying applicable taxes rests with the Prime Contractor. State and local taxes to the FF&E line will be included with the subcontractor's quote, if applicable by the state.

1. Recommendation: SOFA Article 9 covers this. We request NAVFAC remove this clause 1.3.4 Taxes and reinforce that prime and subcontractor taxes are to be excluded.

ANSWER: Section 01 30 01.00 20, paragraph 1.3.4, Taxes, will be amended to remove reference to FAR 52.229-3. Payment of taxes may be required depending on where FF&E is purchased.

As prescribed in FAR 29.401-3, the Contract Specialist

1. As prescribed in FAR 29.401-3 will insert FAR clause 52.229-3, Federal, State and Local

Taxes, in the construction contract. In accordance with this clause; (i) the contract price Includes all applicable Federal, State, and local taxes and duties and (ii) the Government will, without liability, furnish evidence appropriate to establish exemption from any Federal, State, or local tax when the Prime Contractor requests such evidence and a reasonable basis exists to sustain the exemption.

FAR clause 52.229-3 states:

1. (g) The Contractor shall promptly notify the Contracting Officer of all matters relating to any Federal excise tax or duty that reasonably may be expected to result in either an increase or decrease in the contract price and shall take appropriate action as the Contracting Officer directs.

2. (h) The Government shall, without liability, furnish evidence appropriate to establish exemption from any Federal, State, or local tax when the Contractor requests such evidence and a reasonable basis exists to sustain the exemption.

1. The USG shall furnish evidence appropriate to establish exemption from any Federal, State, or local tax when the Contractor requests such evidence and a reasonable basis exists to sustain the exemption. Request NAVFAC provide such evidence of exemption.

ANSWER: FAR 52.229-3 is not included in the Australia RFPs. It applies to work wholly or partly in the US or outlying areas.

RFP Specs SECTION 01 11 00 Page 6

1. Recommend the following clauses be removed from the RFP.

ac. GST the tax payable on taxable supplies under the GST Legislation.

1. This is in conflict with the SOFA and bilateral agreement. We request this be removed.

ad. GST Legislation means A New Tax System (Goods and Services Tax) Act 1999 (Cth) and any related Act imposing such tax or legislation that is enacted to validate, recapture or recoup such tax.

1. This is not relevant per the SOFA “Equipment, materials, supplies and other property imported into or acquired in Australia by or on behalf of the United States Government for the official use of the United States Forces and not for resale shall be free of all Australian duties and taxes.

ANSWER: RFP remains unchanged. Section 01 11 00, paragraph 1.7, provides “Definitions” and does not conflict with the SOFA.

SECTION 01 20 00 Page 6

1. Recommendation: Recommend this section be removed.

2. SECTION 01 20 00 Page 6 is unnecessary based upon the SOFA and Bilateral Agreement.

This is not relevant per the SOFA “Equipment, materials, supplies and other property imported into or acquired in Australia by or on behalf of the United States Government for the official use of the United States Forces and not for resale shall be free of all Australian duties and taxes.

1.10 GST

Payments, exclusive of Australian Goods and Services Taxes, will be made on submission of itemized requests by the Contractor which comply with the requirements of this section, and will be subject to reduction for overpayments or increase for underpayments made on previous payments to the Contractor. The Government -U.S. Government will sign and return the "U.S.

Confirmation of Purchase" to the Contractor. For reimbursement of the Australian Goods and Services Tax, the Contractor shall submit on a monthly basis the completed "U.S.

Government - Confirmation of Purchase" together with contact information and banking information to:

Defence Tax Management Office R1-2-B104 PO Box 7909 Russell Offices

CANBERRA BC ACT 2610

The Defence Tax Management Office will process the payment of the GST amount and reimburse the contractor after receiving required banking information and an acceptable "U.S. Government - Confirmation of Purchase" form, generally within 30 days. For audit purposes, the Defence Tax Management Office may request a copy of the supplier's invoice.

Aside from providing a completed "U.S. Government - Confirmation of Purchase" form to the Contractor, the U.S. Government shall not be responsible for the reimbursement of the Australian Goods and Services Tax.

ANSWER: See answer above. Section 01 20 00, paragraph 1.10, GST, will not be removed as it is the process required by the Defence Tax Management Office (DTMO).