Army considers leasing vacant facilities to private companies
The Army is interested in the possibility of leasing underutilized government facilities in an effort to help smaller companies start modernization projects, the Army's acquisition chief said last week.
Through conversations with industry partners, Dr. Bruce Jette, assistant secretary of the Army for acquisition, logistics and technology, said he often heard the challenges some companies face in winning government contracts due to their lack of available investment capital.
While a company may have the engineering capacity to turn advanced ideas into reality, it may not have sufficient investor backing necessary to win a contract.
The Army is not likely to award a contract to a company without the facilities to carry out their project.
"It's a chicken-and-egg problem for the smaller yet innovative companies the Army wants to attract and work with," Jette said, May 23, 2019, during the Land Forces Pacific Symposium, hosted by the Association of the U.S. Army.
Bruce Jette, assistant secretary of the Army for acquisition, logistics and technology, gets a briefing on product improvements for cannon systems.
(US Army photo by John Snyder)
The idea of government-owned, contractor-leased operations could help non-traditional defense contractors bring innovative projects to fruition. It could also serve as a motivating factor for the larger defense contractors, he said.
There are government-owned properties at Army depots, arsenals and other installations that now sit idle, but still have lots of capability.
Under the concept, which started being developed a few weeks ago, vacant space could be leased to a company that can confidently show the Army it can complete a project using it.
"We'll lease you the facility, which might be included in the price of your vehicle, and then I can employ unused space, generate income, upgrade the space, and you'll be able to enter the market more easily," he said.
While he does not see the potential construct focused on making money for the government, it will allow an equitable comparison between companies that intend to use their own facilities and those including the government resource in their bids. Additionally, it may allow the Army and a company to share labor expenses at a specific facility.
"I may be able to take people who are currently overhead expenses and put them in a billable form by then making them available for hiring by the offering company," he said. "In one way, I can share excess labor with them."
As the founder of a defense firm after he retired from the Army, Jette also realized it was "extremely difficult" to do business with the government.
Bruce Jette, assistant secretary of the Army for acquisition, logistics and technology, talks to soldiers from the 2nd Cavalry Regiment at Hohenfels, Germany, April 26, 2018.
(US Army photo by Staff Sgt. Kalie Frantz)
"At a certain point, particularly for small companies, from which most innovation comes, they just give up and walk away," he said. "So, one of the things I've done is made an extensive effort to try and lower that barrier."
For instance, he could have put a team together to bid for a next-generation combat vehicle, he said, but could not afford the $200 million investment necessary to have access to facilities that would make him a viable bidder.
"That's the issue. You can put an engineering team together that will make an offer that is really top notch… but they won't have the facility," he said. "I can't accept an offer from somebody who has no ability to show me that they can actually achieve the outcome."
His office has begun to speak with members of Congress to see if the Army now has the authorities to run the program, which he foresees to be in place in a year or so.
"We're not sure if it's going to require new authorities or if current authorities are sufficient," he said. "We are talking to Congress to make sure that they have no specific objections to it."
Some companies have already expressed interest in the program, but Jette said they won't really know how many will take advantage of it until it goes live.
"It really does help us make it easier for companies that can bring competency to the table," he said, "but don't have the resources to compete in more capital-intensive areas."
This article originally appeared on United States Army. Follow @USArmy on Twitter.