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TITLE VIII--ACQUISITION POLICY, ACQUISITION MANAGEMENT, AND RELATED MATTERS

Subtitle G Governmentwide Acquisition Improvements

DHNDAA Section

Senate Armed Services Report 110-335

SEC. 2805. IMPROVED OVERSIGHT AND ACCOUNTABILITY FOR MILITARY HOUSING PRIVATIZATION INITIATIVE PROJECTS.

(a) Oversight and Accountability-

(1) IN GENERAL- Subchapter IV of chapter 169 of title 10, United States Code, is amended by adding at the end the following new section:

`Sec. 2885. Oversight and accountability for privatization projects

`(a) Oversight and Accountability Measures- Each Secretary concerned shall prescribe regulations to effectively oversee and manage military housing privatization projects carried out under this subchapter. The regulations shall include the following requirements for each privatization project:

`(1) The installation asset manager shall conduct monthly site visits and provide quarterly reports on the progress of the construction or renovation of the housing units. The reports shall be submitted quarterly to the assistant secretary for installations and environment of the respective military department.

`(2) The installation asset manager, and, as applicable, the resident construction manager, privatization asset manager, bondholder representative, project owner, developer, general contractor, and construction consultant for the project shall conduct meetings to ensure that the construction or renovation of the units meets performance and schedule requirements and that appropriate operating and ground lease agreements are in place and adhered to.

`(3) If a project is 90 days or more behind schedule or otherwise appears to be substantially failing to adhere to the obligations or milestones under the contract, the assistant secretary for installations and environment of the respective military department shall submit a notice of deficiency to the Deputy Under Secretary of Defense (Installations and Environment), the Secretary concerned, the managing member, and the trustee for the project.

`(4)(A) Not later than 15 days after the submittal of a notice of deficiency under paragraph (3), the Secretary concerned or designated representative shall submit to the project owner, developer, or general contractor responsible for the project a summary of deficiencies related to the project.

`(B) If the project owner, developer, or general contractor responsible for the privatization project is unable, within 60 days after receiving a notice of deficiency under subparagraph (A), to make progress on the issues outlined in such notice, the Secretary concerned shall notify the congressional defense committees of the status of the project, and shall provide a recommended course of action to correct the problems.

`(b) Required Qualifications- The Secretary concerned or designated representative shall ensure that the project owner, developer, or general contractor that is selected for each military housing privatization initiative project has construction experience commensurate with that required to complete the project.

`(c) Bonding Levels- The Secretary concerned shall ensure that the project owner, developer, or general contractor responsible for a military housing privatization initiative project has sufficient payment and performance bonds or suitable instruments in place for each phase of a construction or renovation portion of the project to ensure successful completion of the work in amounts as agreed to in the project's legal documents, but in no case less than 50 percent of the total value of the active phases of the project, prior to the commencement of work for that phase.

`(d) Reporting of Efforts To Select Successor in Event of Default- In the event a military housing privatization initiative project enters into default, the assistant secretary for installations and environment of the respective military department shall submit a report to the congressional defense committees every 90 days detailing the status of negotiations to award the project to a new project owner, developer, or general contractor.

`(e) Effect of Notices of Deficiency on Contractors and Affiliated Entities- (1) The Secretary concerned shall keep a record of all plans of action or notices of deficiency issued to a project owner, developer, or general contractor under subsection (a)(4), including the identity of each parent, subsidiary, affiliate, or other controlling entity of such owner, developer, or contractor.

`(2) Each military department shall consult all records maintained under paragraph (1) when reviewing the past performance of owners, developers, and contractors in the bidding process for a contract or other agreement for a military housing privatization initiative project.'.

(2) CLERICAL AMENDMENT- The table of sections at the beginning of such subchapter is amended by adding at the end the following new item:

`2885. Oversight and accountability for privatization projects.'.

(b) Report for Identifying and Communicating Best Practices for Transactions- Section 2884(b) of such title is amended by adding at the end the following new paragraph:

`(7) A report on best practices for the execution of housing privatization initiatives, including--

`(A) effective means to track and verify proper performance, schedule, and cash flow;

`(B) means of overseeing the actions of bondholders to properly monitor construction progress and construction draws;

`(C) effective structuring of transactions to ensure the United States Government has adequate abilities to oversee project owner performance;

`(D) ensuring that notices to proceed on new work are not issued until proper bonding is in place; and

`(E) such other topics that are identified as pertinent by the Department of Defense.'.

(c) Partnership With Eligible Entity Required- Section 2871(5) of title 10, United States Code, is amended by inserting before the period at the end the following: `that is prepared to enter into a contract as a partner with the Secretary concerned for the construction of military housing units and ancillary supporting facilities'.

(d) Competitive Process for Conveyance or Lease of Property- Section 2878 of such title is amended--

(1) by redesignating subsections (c) and (d) as subsections (d) and (e); respectively; and

(2) by inserting after subsection (b) the following new subsection:

`(c) Competitive Process- The Secretary concerned shall ensure that the time, method, and terms and conditions of the reconveyance or lease of property or facilities under this section from the eligible entity permit full and free competition consistent with the value and nature of the property or facilities involved.'.

(e) Treatment of Acquired or Constructed Housing Units-

(1) REPEAL OF SEPARATE ASSIGNMENT AUTHORITY- Section 2882 of such title is amended to read as follows:

-`Sec. 2882. Effect of assignment of members to housing units acquired or constructed under alternative authority

`(a) Treatment as Quarters of the United States- Except as provided in subsection (b), housing units acquired or constructed under this subchapter shall be considered as quarters of the United States or a housing facility under the jurisdiction of a uniformed service for purposes of section 403 of title 37.

`(b) Availability of Basic Allowance for Housing- A member of the armed forces who is assigned to a housing unit acquired or constructed under this subchapter that is not owned or leased by the United States shall be entitled to a basic allowance for housing under section 403 of title 37.

`(c) Lease Payments Through Pay Allotments- The Secretary concerned may require members of the armed forces who lease housing in housing units acquired or constructed under this subchapter to make lease payments for such housing pursuant to allotments of the pay of such members under section 701 of title 37.'.

(2) CLERICAL AMENDMENT- The table of sections at the beginning of subchapter IV of chapter 169 of such title is amended by striking the item relating to section 2882 and inserting the following new item:

`2882. Effect of assignment of members to housing units acquired or constructed under alternative authority.'.

(f) Annual Report on Maintenance and Repair to Privatized General and Flag Officer Quarters- Section 2884(b) of such title, as amended by subsection (b), is further amended by adding at the end the following new paragraph:

`(8) A report identifying each family housing unit acquired or constructed under this subchapter that is used, or intended to be used, as quarters for a general officer or flag officer and for which the total operation, maintenance, and repair costs for the unit exceeded $50,000. For each housing unit so identified, the report shall also include the total of such operation, maintenance, and repair costs.'.

Improved oversight and accountability for military housing privatization initiative projects (sec. 2803)

The committee recommends a provision that would require enhanced oversight of, and reporting on, housing privatization projects. The provision would require greater interaction among the government and private entities involved in these projects, establish minimum bonding levels, specify procedures to be used in the case of significant schedule or performance deficiencies, ensure that the Department of Defense maintains a database of entities that achieve unsatisfactory performance ratings on such projects, and require the Department to identify and establish regulations to implement best practices for monitoring the progress and performance of housing privatization projects.

The committee has long supported, and continues to support, the military housing privatization program. The committee is disappointed that privatization projects at Air Force installations in Arkansas, Georgia, Florida, and Massachusetts failed to meet schedule and other performance standards. However, the committee notes that the problems with these projects, all of which involved a single developer, do not and should not overshadow the enormous successes achieved by the military housing privatization initiative across the United States and across all the military departments over the past decade.

Intrinsic to the very idea of privatization is a more `hands off' approach by Congress and, to a lesser degree, by the Department of Defense, than is normally the case with acquisition or construction programs. The committee seeks to find an appropriate balance that will enhance oversight of this program and reduce the chance of the damaging failure of these projects being repeated, while still preserving the essential structure and benefits of the existing privatization program.

 

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