RETOOLING ARMS
being invested in the program and the declines in both rent revenue and the overall “savings.” Second, while some of the rent was used to support invest- ment
in the facilities, much of and marketing it was
being used to directly offset the program administrative
costs,
offering little in the form of a recurring benefit to the facility or improved mar- ketability of the site.
Te ARMS team evaluated commercial best practices and developed a dynamic business model that was applicable to the uniqueness of the program. Te answer was simple: Transition the program to an incentive-based compensation model.
Under this new model, operating contractors at each GOCO receive a percentage of the rental receipts in lieu of guaranteed marketing payments
to
them that historically have come from appropriated funds. Tis allows the Army to redirect the would-be market- ing funds, along with the government’s share of rental receipts, to additional facility modernization projects, such as infrastructure upgrades, facility and equipment modernization.
Such investments have a compounded benefit
for sustainability through per-
manent cost reductions realized year over year. Te new compensation model is also more closely aligned with com- mercial best practices and the real estate marketing industry standard of “pay for performance,” awarded on a percent- age basis. For the operating contractors, the new ARMS business model has no compensation ceiling, so they have more incentive to attract high-quality tenants. Likewise, the reduction in operating and production costs means the oper- ating contractor is better positioned to compete for commercial ammunition business, thus expanding the base over
126 Army AL&T Magazine
NEW LOGO, NEW STRATEGY
Since its inception, the ARMS program, which operates at all GOCOs, has succeeded in reducing the cost of manufacturing government products at each facility by maximizing the facilities’ use. Now the program is undergoing fundamental changes to improve the facilities’ productivity at a time of fiscal constraints and a continuing decline in ammunition requirements. (Image courtesy of PD JS)
which to absorb overhead and improving the facilities’ sustainability even further.
Operator support requirements for the ARMS program are dictated by
the
respective length of the facility-use contracts in place at each GOCO. Tere- fore, rollout of the new compensation model is taking place incrementally, as current contracts expire and the oppor- tunity arises for contractual negotiations. Tat said, the model to date has been well- received by the operators and is either in place or in the final phases of implemen- tation at nearly all of the active GOCOs.
POSITIONING TO COMPETE To make the facilities more competitive in the marketplace, the Army pursued a prevailing commercial trend: site precer- tification, which is designed to complete much of the site documentation and anal- ysis that typically are completed during a prospective tenant’s due diligence process. Tis approach offers several benefits:
Te cycle time for tenant acquisition and due diligence is reduced by six months or more, compared with cur- rent non-precertified sites.
Precertified sites represent a lower risk for prospective tenants.
An inventory of prequalified land and January–March 2014
facilities is available to prospective ten- ants, along with substantiating data and analysis.
Precertified sites are marketed not only by the local facility operator, but also by state and local economic develop- ment agencies.
Precertification of a site is a fairly extensive process that begins with the development of certification criteria by a state-desig- nated third party site selection consultant and/or engineering firm. Tese criteria ensure that the site has attributes and conditions that will allow it to meet the expected demands of current and future commercial development opportuni- ties, such as property titles and permits; availability and capacity of utilities and logistics infrastructure; and floodplain and environmental assessments. Te availability and specific requirements for certification vary from state to state. State economic development agencies can pro- vide more information on precertification.
PILOTING THE TRANSITION Te
Iowa Army Ammunition Plant
(IAAAP) in Middletown, IA, and Milan Army Ammunition Plant (MLAAP) in Milan, TN, were chosen as pilots for this ARMS initiative. Successful
execution of these pilots required the integrated
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