January 31, 2008

POGO comments concerning the proposed third-party private financing for the new NNSA Weapons Project, otherwise known as the Kansas City Project

From: Lisa C. Driskill
Subj: Kansas City Project- Request for Information
Date: Thu Jan 31, 2008 11:45 pm
To: NNSA-KC@gsa.gov <NNSA-KC@gsa.gov>
cc: Danielle Brian

Mr. Carlos Salazar
U.S. General Services Administration
1500 East Bannister Road, Room 2191 (6PTA)
Kansas City, MO 64131
Via email to NNSA-KC@gsa.gov


Dear Mr. Salazar-

On behalf of the Project on Government Oversight (POGO), I am submitting comments raising our concern about the proposed contract financing for the new NNSA Weapons Project, otherwise known as the Kansas City Project, currently in the request for Information stage.

Based on documents reviewed by POGO, we believe that GSA, on behalf of NNSA and the Kansas City Project, is currently attempting to pursue the building of a new complex to house the government's manufacturing facility for nuclear weapons parts using an operating lease, as defined in the OMB A-11 circular. It is difficult to believe that the facility, as currently envisioned, could qualify for an operating lease, rather than a capital lease. One of the six criteria in meeting the definition of an operating lease, according to the government's own criteria, is that the project be a general purpose asset, rather than a special purpose asset, built to the specification or unique purpose of the government. It is hard to imagine a purpose more governmental than the production of nuclear weapons for our national defense-- the purpose for which this facility will be designed. The A-11 has guidance for determining whether assets are general purpose or special purpose. From the A-11:

"Special Features or enhancements. Assets that have special features or enhancements that were built or added for the Government's unique needs or special purpose need to be evaluated on a case-by-case basis to ascertain whether they can be considered to be general purpose assets. If the asset is considered to be a general purpose asset, then, as a general rule, such special features or enhancements should be financed up-front, separate from the lease."

While the office space expected for the project might be considered general purpose, the manufacturing of parts for nuclear weapons will be built exactly to the specifications of the governments needs for the weapons that it chooses to build. No one other than the government can determine what weapons will be built, and thus, it is difficult to find such a facility "general purpose" rather than a "special feature that should be financed up-front, separate from the lease."

Thus, POGO urges the GSA to consider two items:

1. The KCP is a project unique to the government because it relates to the national defense. Thus it should be considered an asset unique to the government, and not eligible for an operating lease.

2. The use of a third party to finance such a large scale project will inherently cause the project to cost more than if the government chose to fund it directly, because of the inherently higher cost of financing through the private sector. Please consider the cost effectiveness of the project as a lease. Direct funding is likely to be a more cost efficient mechanism for financing this project.

Thank you for your time.


Sincerely,
Lisa Cash Driskill
Project on Government Oversight

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