SI_NZP_CPF_-_RFPT1SOL10048_-_Clarification_-_1_(part_2_of_2)_2018-2-06_(002).pdf

Smithsonian National Zoological Park CPF P3 RFP No. T17SOL10048

Requests for Clarifications and Amendment [part 2 of 2]

No.

Document

(RFP, PA,

TR)

Section Question (Legal/Commercial) Response

1. RFP General

Procurement Timeline

Please consider extending the Submission Deadline. The current March timeframe will certainly impact affordability and unlikely to provide best value for money to Smithsonian.

The Submission Deadline set forth in Exhibit A of the RFP has been amended. The new Submission Deadline is May 1 at 2:00 p.m. EDT.

Please refer to the revised timeline set out in Schedule A of the RFP.

2. RFP 6.1.1

Commercial Close

Reaching Execution Date within 30 days is extremely short.

Please consider revising.

As set forth in Section 6.1.2(a) of the RFP, issues relating to the Project Agreement are to be resolved through the RFP Process prior to the Proposal Submission Deadline. Revisions to the Project Agreement after submission are limited to those items specifically identified in Section 6.1.2(b) of the RFP. As such, the current deadline for reaching the Execution Date remains as originally stipulated in the RFP.

3. RFP General

Procurement Process

Under what considerations would the Smithsonian decide not to proceed with this procurement process and/or the anticipated agreement? What protections exist for Bidders if the Smithsonian decides not to proceed with the Project?

The CPF Project is the key to unlocking the NZP Master Plan. The Smithsonian must execute this process and does not have an alternative delivery method available. Short of a Congressional action to stop the Project, the Smithsonian does not envision any circumstance where it would not proceed with the anticipated agreement, assuming proposals meet the requirements set forth in the RFP.

4. RFP 4.5.3

Submission Deadline

Bidder believes a hard submission deadline creates a fair and equitable process.

Section 4.5.3 of the RFP has been amended as follows: “Proposals, modifications and withdrawal requests received after the Submission Deadline will be rejected without consideration or evaluation by the Smithsonian.”

5. RFP 7.1.2(b)

Scope Changes

Can the Smithsonian amend the project scope after submission of a bid? Any changes post submission of the bid must be either subject to the approval of the Developer or otherwise compensated for in full.

As identified in Section 6.1.2(a) of the RFP, issues relating to the Project Agreement are to be resolved through the RFP Process prior to the Proposal Submission Deadline. Revisions to the Project Agreement after submission are limited to those items specifically identified in Section 6.1.2(b) of the RFP. Any changes to the scope after execution of the Project Agreement will be handled in accordance with the terms of the Project Agreement.

(RFP, PA,

TR)

Section Question (Legal/Commercial) Response

6. RFP 4.6

Proposal and Closing Security

The Proposal Security and, more particularly, the Closing Security requirements are excessive compared to the size of the deal.

The amount of the Proposal Security set forth in Section 4.6.1(c) of the RFP remains unchanged; however, the amount of the Closing Security set forth in Section 4.6.2(b) of the RFP has been amended to read “seven million dollars ($7,000,000)”.

7. RFP

3.4.3(d)

3.5(i)(vi)

Confidential Information and Innovation

“The Smithsonian may also create and answer questions independent of the Proposers”. Could the Smithsonian please explain the intent?

“Subject to RFP Section 3.8 (Confidential Information), the Smithsonian reserves the right to disclose to all Proposers any issues raised by Proposers during the One-on-One Meetings, except to the extent that the Smithsonian determines, in its sole discretion, such disclosure would reveal confidential or proprietary information”. The One-on-One Meetings are expected to be confidential in their entirety and thus any technical or financial solutions/concepts/matters discussed during such meetings should be kept confidential.

The Smithsonian reserves the right to clarify issues or provisions relating to this procurement.

One-on-one meetings are indeed intended to be confidential, but should the Smithsonian determine as a result of these meetings that certain provisions of the Agreement, Technical Requirements or RFP need to be clarified or amended, then it reserves the right to do so through the issuance of clarifications to all Proposers.

8.

RFP

PA

3.3.1(e)

3.3.3(c)

13.3

“As Is” / Structural condition of existing GSB structure

Multiple comments regarding concerns over the existing

GSB structure, particularly in relation to the structural integrity needed to withstand the development of the

Project. Multiple requests to appropriately and transparently allocate these risks.

The Smithsonian has amended the Agreement and RFP to clarify the allocation of rights and responsibilities relating to the existing structure.

Please see the Project Agreement amendments relating to “GSB Information,” “GSB Latent Defects,” and other changes relating to allocation of liability with respect to the GSB. Proposers will utilize Disclosed Information as the basis for their cost and construction assumptions for purposes of the Proposal. During the Transition Period a GSB Inspection Report will be undertaken and mutually agreed.

(RFP, PA,

TR)

Section Question (Legal/Commercial) Response

9.

RFP

PA

3.3.3(d)

5.8

Approvals

In accordance with the Project Agreement, the Developer is required to work with, and prepare submissions on behalf of, the Smithsonian in order to secure all necessary third-party approvals for District developments of this nature, including the approvals required by the applicable Governmental Authorities, neighborhood civil associations, and any other applicable entities.

The current regime does not provide adequate protections for the Developer in respect of those approvals that are required to be obtained in the name of Smithsonian.

Per Section 5.8 of the Project Agreement, the Developer is responsible for all submissions to and on behalf of the Smithsonian to secure all necessary third party approvals. Amendments are included within Section 5.8 of the Project Agreement with respect to material changes to design after the preparation of the Final Construction Documents that are as a result of changes required by such third parties.

10. PA 1

Guaranty

The Guaranty in the form of Exhibit K that will be executed by the Guarantor in favor of the Smithsonian in advance of the Effective Date to guarantee the payment by the Developer of the Minimum Annual Concession Fee to the Smithsonian.

This is inconsistent with non-recourse finance. There should be no other financial obligation from the equity investor other than contributing its equity.

Requirements relating to this guaranty have been eliminated.

11. PA 2.6

Conditions Precedent for the benefit of Smithsonian

There are various conditions precedent that are subject to the approval of Smithsonian. Conditions precedent should be objective in nature and should not be subject to the approval of the grantor, in particular where the consequences of not meeting financial close are borne by the Developer.

Please see Project Agreement amendments.

(RFP, PA,

TR)

Section Question (Legal/Commercial) Response

12. PA 3.1

Grant of Concession

The PA is not clear about the nature of the interest that is granted to the Developer; is the intention to couple the grant of the contractual rights with a property interest or right, please confirm. More importantly, the PA does not currently make it clear that the Developer shall not be subject to any taxes or similar charges payable in respect of the asset constructed and provide for an indemnity in case such amounts are required to be paid.

The Smithsonian contemplates that all rights being granted to the Developer are set forth in the Project Agreement. Section 6.23 of the Project Agreement identifies that the Developer is responsible for all taxes, assessments, and similar charges that may be imposed on the Developer or the Project. The Smithsonian is not making any representations with respect to taxes, nor is the Smithsonian willing to provide an indemnity in the event that the Developer’s assumptions with respect to taxes are incorrect. The Developer will need to make the appropriate determination on taxes.

13. PA 11

Default Regime

The current default regime, on the part of Smithsonian, is lacking in terms of appropriate additional events of default on the part of Smithsonian, for example, any taking or confiscation of the project, unavailability of funds or appropriations, etc.

The Project is owned by the Smithsonian, which is a trust instrumentality of the United States. There are no appropriated funds being used by the Smithsonian for this Project, and the funding is generated by parking revenue. Please refer to Section 1.2.3 of the RFP.

14. PA 11.5

Termination

Bidder would like to understand the mechanism behind the different termination scenarios.

Please refer to the amended Article 11 of the Project Agreement.

15. PA

Risk of Loss; Indemnity

The current scope of both the risk of loss regime and the indemnity regime is inappropriate on the Developer side.

Respondent should provide specific requests for changes, if any.

16. PA

8.9.3

8.10.3

11.2.6

11.2.7

Security Package; Account System

Bidder believes that the security package should be determined by the equity sponsors, lenders and rating agencies. Excessive requirements (100% construction period bond, 50% ORA, 50% operating period bonding, HRA, etc.)

will result in additional costs and lower revenues to Smithsonian. In addition, Smithsonian should have no right to draw upon any security prior to terminating the Project Agreement.

The Agreement remains as originally drafted. The security package derives from Federal Acquisition Regulations and is considered standard for federal projects.

(RFP, PA,

TR)

Section Question (Legal/Commercial) Response

17. PA 5

Design and Construction

The current draft of the PA provides for various approval rights to Smithsonian that may permit material changes to be made to the scope of design and construction that could have a material impact on the cost of the project; the same should be eliminated and should reference the objective technical requirements as a measure of compliance.

18. PA

Exhibit I-1

52.246-- S0039

Design Guarantee

Please delete section (a)(2) or exclude design from this provision. Designers cannot guarantee that the design will be “free of omissions” since such a guarantee would void their professional liability insurance. The standard of care in Section 5.21.2 of the Project Agreement is the appropriate way.

Per Section 19.18 of the Project Agreement, in the event of a conflict, the documents control in the following order: (A) Project Agreement,

(B) Exhibit I-1 terms, (C) Exhibit I-2 terms; and (D) other exhibits.

19. PA 5.23

Liquidated Damages

As originally drafted, this amounts to $5,475,000 per annum,

5.5 times the Minimum Annual Concession Payment. In addition, the Constructor will also be responsible for LD to the Developer. Bidder believes that this is excessive.

In addition, the PA should define a Long Stop Date that triggers Smithsonian’s right to terminate. Prior to that date, the developer and lenders should have the possibility to cure the situation and replace the constructor. The 180-day period contemplated above is much shorter than observed in the market and will be a lender issue.

[LDs amended to $8,000 per day in the Project Agreement]

(RFP, PA,

TR)

Section Question (Legal/Commercial) Response

20. PA 5.22

Construction Schedule

The current draft of the PA contemplates that the construction be delivered in accordance with various interim milestones, which is not typical. An event of default should only occur if Substantial Completion is not achieved by a long stop date, which should be at least a year following the scheduled date for Substantial Completion. In addition, the PA should contemplate that the schedule and related milestones will move based on the occurrence of compensation events, delay events and/or relief events.

Please see amendments to the Project Agreement which now includes a Long Stop Date.

21. PA 6.5.2

Penalties

Penalties for Customer Satisfaction Deficiencies. I

Similar to the Liquidated Damages, the dollar amount of penalty in very high. Since it is not an objective metric, a bad day could be disastrous to the project/operator. Bidder would like to propose an objective metric system that aligns interest without being overly punitive.

The agreement has been amended to address concerns relating to the magnitude of the liquidated damages relating to the Customer Satisfaction Survey. Additional language has also been added to the penalty regime.

22. PA 16

Dispute Resolution

The current dispute resolutions mechanism should be enhanced with an independent forum or regime.

Please see amendments to the Project Agreement.

23. PA 7

Concession Payments

Smithsonian should not have the ability to demand payment of concession payments in kind; such option creates both uncertainty and valuation issues that are difficult to reconcile. Changes should be dealt with under the variation regime.

Section 7.7 of the Project Agreement identifies that any in-kind consideration must be agreed upon by both Parties, as evidenced in a supplemental agreement. This is not a unilateral right of the Smithsonian, so the Smithsonian does not agree with the proposed changes.

24. PA 15

Lender Rights

Please enhance lender rights to provide for customary care and substitution rights.

Please see amendments to the Project Agreement.

(RFP, PA,

TR)

Section Question (Legal/Commercial) Response

25. PA Exhibit I

Smithsonian Contract Provisions

Please explain how such provisions, some of which are inconsistent with the terms of the PA, are compatible with the project and the obligations of the parties under the PA.

Respondent should provide specific requests for changes, if any;

however the Smithsonian notes that per Section 19.18 of the Project Agreement, in the event of a conflict, the documents control in the following order: (A) Project Agreement, (B) Exhibit I-1 terms, (C) Exhibit I-2 terms; and (D) other exhibits.

26. RFP Exhibit D-1

Financing

Please confirm what is actually required for purposes of the financial proposal.

Exhibit D sets forth the financial plan submission requirements.

(RFP, PA, TR)

Section Question (Financial) Response

1. RFP 5.3.3

Evaluation

The present value is calculated using the discounted Floating Concession Fee proposed for each year i, expressed as a percentage (%) of Gross Revenues.

Please clarify the intent of setting up the evaluation this way. Bidder suggests that the evaluation will be based on dollar amounts.

Notwithstanding the Minimum Annual Concession Fee threshold amount, revenue risk is being shared between the Developer and Smithsonian. As such, the use of the Floating Concession Fee is an appropriate evaluation parameter. The RFP remains as written.

2. RFP General

Affordability

Setting the Initial Payment and the Minimum Annual Concession Fee at the current high level may impact the viability of the project.

In addition, regulating the parking fees essentially eliminates a most important factor the Proposers could rely on for optimizing revenues (enhancing sources or minimizing losses). Adding a constraint will materially impact the affordability.

In addition, in order to generate meaningful additional revenues Bidder would like Smithsonian to release the naming rights and allow the possibility of installing vending machines.

The RFP and Agreement have been amended with regard to the timing of the Initial Payment; however, the Smithsonian is not amenable to deregulating parking fees for the National Zoo or releasing naming rights.

3. RFP General

Interest Rate Protection

Currently there is no interest rate protection contemplated in the RFP for the senior debt. This is very unusual in the P3 industry. Between Submission Deadline and Financial Close, the Successful Proposer is exposed to high risk of interest rate volatility on the senior debt that it is practically impossible to mitigate without using overly conservative assumptions. This risk is much better managed by Smithsonian as Smithsonian has ultimate decision over the timing of commercial and financial close.

Please see amendments to the Project Agreement.

(RFP, PA, TR)

Section Question (Financial) Response

4. RFP Exhibit D-1.3

Seniority of Payments

The payment of the Annual Concession Fee shall be senior to all other claims and shall be paid in quarterly instalments, without set-off or any other deductions whatsoever.

Please provide lenders with senior rights over the Smithsonian. Also, Bidder expresses preference for revenue sharing on a net, and not on a gross, basis.

The Agreement remains unchanged.

5. PA

6.23

Exhibit I-1

Sales Tax

Section 6.23 of the project agreement (Taxes) states that “Each Party shall have the right…to take such actions as may be necessary and appropriate to assert any exemption which may be available with respect to taxes,” and Exhibit I-1, 52.229-S0043 (Jun 2000) reads that the “Smithsonian Institution will cooperate with the Developer in his application for such tax-exempt certificates.”

Please confirm the permanent construction materials on this project will be exempt from sales and use tax.

The Developer is responsible for determining applicable taxes for the project as the Developer is undertaking the construction of the Project.

The Smithsonian will cooperate with the Developer as it coordinates with the taxing jurisdiction.

(RFP, PA, TR)

Section Question (Technical) Response

1. PA 6.25.2

Operating Standard Changes

Please adjust the test to add an overall aggregate limit of $25,000 (including all other changes that Smithsonian requested).

Section 6.25.2 remains unchanged.

2. PA 6.4.1

Parking Technology

The Developer shall ensure that the Parking Technology remains operational and fully functional during all times that the CPF is open to the public. The Developer shall upgrade, at its sole cost and expense, the Parking Technology no less than every five (5) years, unless the Developer can demonstrate to the Smithsonian’s satisfaction, in its sole discretion, that there are no alternate technologies that would be preferable for use in the CPF, and there are no deficiencies with the current technology. Please remove the five (5) year provision. Will these updates be contemplated as an Operating Standard Changes, as outlined in 6.25.2.?

The Project Agreement has been amended to clarify the scope of this requirement (eliminating the 5-year requirements);

however, the need to regularly update technology is not considered an Operating Standard Change, but a baseline requirement of the Agreement.

3. PA

Exhibit

C.3.3(vi)

Mid-Point Connector Pathway

The Mid-Point Connector Pathway shall establish an open and generous space that can be populated by the Smithsonian at a future date with a full range of visitor amenities and allow for flexible programming including but not limited to; seasonal carts and kiosks for retail, food service and other concessions;

areas for keeper talks, animal demos and other pop-up programming (please refer to OWDG Plazas and Niches for prototypes).

What relief does the Developer get if it impacts commercial revenues?

The Developer will not be providing commercial services on the Mid-Point Connector Pathway and consequently will not be eligible for relief if events impact commercial revenues associated with the referenced visitor amenities.

4. PA 6.25.1

Standards

Please define what Smithsonian means under “standards and practices generally adopted with respect to comparable parking facilities”.

The Agreement has been amended to read “Prudent Industry Standards”