Justifaction and Approval for Project 0KY2067

U.S. General Services Administration GSA Region 4 Leasing Division - Branch 4PR1C JUSTIFICATION FOR OTHER THAN FULL AND OPEN COMPETITION LEASE NUMBER: GS-04P-62357 PROJECT NUMBER: 0KY2067 Agency Name: Internal Revenue Service [IRS] 1. IDENTIFICATION AND DESCRIPTION OF ACTION BEING APPROVED. The General Services Administration currently lease 373,029 Rentable Square Feet (RSF) with a Common Area Factor (CAF) of 1.09 yielding 359,745 ANSI BOMA Office Area square feet (ABOA) at Gateway Center Campus located at 333 Scott Street, Covington, Kentucky 41011 for the Internal Revenue Service (IRS), under Lease Numbers GS-04B-31332, GS-04B-61183, GS-04B-61164, and GS-04B-61185. The largest lease (GS-04B-31332) has an expiration date of November 30, 2013. All other remaining leases have an expiration date of August 31, 2016 with termination rights for the Government on August 31, 2013. Approval is being requested to negotiate a lease consolidation of all four leases with the incumbent Lessor without full and open competition for continued occupancy at this leased location, as approved under Prospectus Number PKY-01-C012. 2. DESCRIPTION OF THE SUPPLIES OR SERVICES REQUIRED. The IRS submitted a continuing need request to remain at the Gateway Center Campus because the location currently meets the agency's mission-related needs. To address the requirements of IRS, GSA completed a prospectus package up to 414,000 RSF of space yielding 360,000 ANSI BOMA Office Area square feet (ABOA) for up to 10 years with commence on December 1, 2013 at a rate not to exceed $22.00 PRSF. (This square footage is derived from rounding the current ANSI BOMA office area square footage of 359K to 360K then using 1.15 as CAF to yield 414,000 RSF). GSA approved the IRS Covington Prospectus PKY-01-C012 on December 6, 2011. The IRS Covington Prospectus PKY-01-C012 was approved by U.S. Senate on June 21, 2012 and the U. S. House of Representatives on July 26, 2012. The estimated annual of this ten year lease contract is $9,108,000.00 for the first year, with a total contract value of $90,966,588.92 (not to exceed the prospectus annual cost cap of $22.00 per RSF per year for up to 414,000 RSF). The delineated area is the Central Business District of Covington Kentucky. 3. IDENTIFICATION OF STATUTORY AUTHORITY. 41 U.S.C. 3304: Only one responsible source and no other supplies or services will satisfy agency requirements. 4. DEMONSTRATION THAT THE ACQUISITION REQUIRES THE USE OF THE AUTHORITY CITED. GSAM 570.402-4 allows the Contracting Office to negotiate directly with the incumbent Lessor when no acceptable potential location is found through advertisement or market search. REDACTED The cost of relocating IRS using the market average exceeds the cost of remaining at the Gateway Center Campus location. The savings to the Government is $4,250,715.83. Based on this cost-benefit analysis, the Government cannot expect to recover relocation and duplication costs through competition. Additionally, as no potential alternative locations were found, any alternative would require lease construction. The rates for lease construction are generally much higher than the market average used for this comparison. Accordingly, the actual savings to the Government of remaining in the current location as opposed to seeking a lease construction alternative are likely much greater than the value shown in this analysis. Therefore, the Government intends to negotiate a new replacing lease and remain at its current location. 5. DESCRIPTION OF EFFORTS TO SOLICIT AS MANY OFFERS AS PRACTICAL. Market research using CoStar and Loopnet indicates there are no alternative locations in Covington with the required 360,000 BOMA Office Area square footage required. The largest amount of vacant space available in the market is 282,440 square feet. There is no possibility of locating the required square footage in one location, which the current campus facility offers. Additionally, two advertisements, conforming to GSAM 570.402-2, were placed on Federal Business Opportunities Website (fedbizopps.com) to attempt to locate any potential alternative locations. The first advertisement for this lease requirement was placed 06/23/2012 with a 10 year/ 5 year firm term, and the second advertisement was placed on 01/23/2013 with a 10 year firm term, the maximum allowable under the approved prospectus. There were no responses to either advertisement for either existing locations or lease construction other than the incumbent Lessor. The incumbent Lessor's initial expression of interest indicated that the lease rate would be $21.75 per RSF for a 10 year firm lease to include real estate taxes at $1.33 per RSF; operating cost base at $6.70 per RSF; and a Tenant Improvement Allowance of $3,597,450.00. No other parties provided projected lease rates; however, market rates for office space were determined in GSA's market analysis discussed in Section 6. 6. DESCRIPTION OF MARKET RESEARCH CONDUCTED REDACTED 7. OTHER FACTS SUPPORTING USE OF OTHER THAN FULL AND OPEN COMPETITION. Not applicable. 8. LIST OF SOURCES THAT EXPRESSED INTEREST IN THE ACQUISITION. REDACTED 9. STATEMENT OF ACTIONS TO OVERCOME BARRIERS TO COMPETITION. Not Applicable. 10. TECHNICAL REQUIREMENTS PERSONNEL CERTIFICATION I certify that the supporting space requirements data used to form the basis of this Justification is complete and accurate to the best of my knowledge and belief. 11. CONTRACTING OFFICER CERTIFICATION AND DETERMINATION THAT THE ANTICIPATED COST WILL BE FAIR AND REASONABLE. Recent market research conducted by GSA in the Covington KY area shows the fully serviced office rates ranging $18.46 to $23.13 PRSF with the median of $20.12 PRSF. The initial rental rate quoted to the Government by the current Lessor, at the existing location, is $21.75 PRSF for a fully serviced lease including the required tenant improvement. This initial cost is within the prospectus cap and within the market range. It is anticipated that during negotiations the Government will be able to obtain a rate lower than the Lessor's initial expression of interest. Additionally, the Government anticipates cost savings of approximately $4,250,715.83 by forgoing relocation and duplication costs to move to another facility, which it could not reasonably expect to recover through full and open competition, as demonstrated by the cost benefit analysis in section 4 of this document. Therefore, as the rate quoted by the incumbent Lessor is within the market range found through the market research performed and due to the fact that the Government has no other viable options within the delineated area, the Contracting Officer determines that a anticipated cost to the Government of $21.75 PRSF for the entire requirement is fair and reasonable. Concurrence: Legal Review: Regional Competition Advocate: Head of Contracting Activity: Senior Procurement Executive: ORIGINAL SIGNATURE APPROVAL CAN BE FOUND IN THE ATTACHMENT AND LEASE FILE.