07-960. Notice of Determination and Findings; Authority To Incorporate a No-Setoff Commitment

Upon the basis of the following findings pursuant to authority of Title 31 U.S.C. Section 3727 and in accordance with the Presidential delegation of authority dated October 3, 1995, as referenced in the Federal Acquisition Regulation 32.803(d) it is hereby determined that the use of a no-setoff provision is appropriate to facilitate the private financing of a steam production facility at NCI-Frederick.

Findings

1. Despite an essentially static space inventory, the cost of steam under NCI-Frederick's interagency agreement with the Fort Detrick U.S. Army Garrison has increased by 70% from 2003 to 2006. In addition, despite numerous energy saving projects accomplished over the past 9 years, quantities of steam billed by the Army to the NCI have remained 20%-30% above amounts estimated/measured through engineering methods.

2. In response to the escalation in steam related energy costs/quantities, a thorough review of steam production alternatives was conducted. Based on this analysis it was concluded that significant energy and cost savings could be achieved through the construction of a new steam production facility and the subsequent severing of ties to the existing Fort Detrick boiler plant.

3. On behalf of Potomac Edison Company, APS Constellation, L.L.C. has proposed a privately financed Energy Savings Performance Contract (ESPC) to construct the new steam facility. Securing the private financing for this project is dependent upon incorporation of a no-setoff provision in the contract.

4. Inclusion of the no-setoff provision will enable the Contractor to secure financing with an interest rate that is lower than the interest rate that would be obtained in the absence of the no-setoff provision. The Government will benefit directly from a lower interest rate in the form of lower interest payments over the 20-year term of the repayment.

5. Incorporating a no-setoff provision will not increase the risk of the Government since the Basic Ordering Agreement requires that the Contractor guarantee that the energy and energy-related cost savings exceed the payments to the Contractor during the performance period following construction of the project. In the event that the savings fall below the level guaranteed by the Contractor, the Contractor will be responsible for crediting the difference to the Government.

6. In accordance with the guidance set forth in FAR 32.803(d), a review of the proposed contractor's financial status revealed no significant indebtedness to the United States.

Determination

Based on the foregoing, I hereby determine that it is the Government's best interests to approve the use of Alternate 1 to the Clause at FAR 52.232-23 which authorizes incorporation of a no-setoff provision.

Dated: February 22, 2007.

Daniel J. Frasier,

Head of the Contracting Activity, Director, OAMP, OA, OM, National Institutes of Health.