PROJECT SUMMARY
In 2007, General Motors completed the construction of a new Desert Proving Ground (“DPGY”) for hot weather vehicle testing. The complex is located on a 2,400 acre parcel of land at the U.S. Army’s Yuma Proving Ground (YPG) near Yuma, Arizona. It is a unique example of an Army Enhanced Use Lease (EUL) project. It represents a public-private partnership that demonstrates economic use of Federal land, infrastructure, and facilities and provides for creative shared-use and joint development of highly-specialized vehicle test facilities.

General Motors was selected by the Army as a result of a competitive solicitation process. Subsequently, a long-term ground lease was executed by GM and the Army in May 2007. Construction of the DPGY was completed on schedule and within budget in April of 2009.

The DPGY replaced GM’s outdated and inefficient test facility in Mesa, Arizona. The project will provide both GM and the Army with benefits that otherwise would not have been realized independently. Also, the project is expected to generate a significant reinvestment in the greater community of Yuma, and open up desired real estate in an area of Mesa, Arizona that is increasingly becoming more urbanized.

A key feature of the EUL is the Army’s use of GM’s tracks for testing over 85% of the Army’s wheeled vehicle fleet at no cost for a specified number of miles annually. The EUL also enables YPG and GM to work together to advance vehicle testing technologies. In addition, GM is providing in-kind services to the Army, featuring the construction of the Army’s Hot Weather Test Complex (HWTC), including a 4.5 mile Oval Track, evasive maneuver area, and a rebuilt Dynamometer Course. The HWTC is needed by the Army to test the Army’s tracked and heavy wheeled vehicles and developmental models, which are beyond the capabilities of the GM test tracks. The EUL is advantageous to GM because the site is a secure location with restricted airspace and is not likely to experience the urban encroachment which was an increasing problem at GM’s Mesa test facility. Also, GM is using YPG’s unpaved vehicle test courses and various YPG test support services for testing GM vehicles.

PROJECT OBJECTIVES
In 1953, GM opened its Desert Proving Ground in Mesa, Arizona. Although the company already had a much larger proving ground in Milford, Michigan, the hot, dry Arizona weather enabled GM to test vehicles in weather and road conditions that were unavailable in southeastern Michigan. In 2000, GM announced that it would be relocating its Mesa testing facility to the U.S. Army’s Yuma Proving Ground (YPG) near Yuma, Arizona.

One major reason GM was interested in building a new facility for testing civilian vehicles was the security provided by the military facility. The military security at YPG would provide the needed privacy to prevent GM’s new models and concepts from being exposed to the public and competitors. The company’s old facilities were both antiquated and situated on real estate that was quickly becoming more suburban and less private. Now it will be located in an area of Arizona where urban encroachment will no longer be a threat.

There were several other benefits to relocating to YPG. In Mesa, the testing facilities were scattered over a dozen different buildings. Now, GM could consolidate into one facility and cut down on maintenance costs. Also, the hot weather testing cycle is longer than the Mesa area, and the Yuma community has proved to be an excellent resource for support capabilities.

The partnership will benefit YPG because it can still use the complex for testing military vehicles and will receive engineering, maintenance, and construction services provided by GM in lieu of rent, which will decrease the federal payroll. Also, YPG was in need of a new testing mechanism for its military transport and wheeled combat vehicles that routinely operate under high weight, temperatures, and speeds. Although YPG was the Army's premiere hot weather test site, it lacked a sufficiently specialized facility to conduct continuous high speed testing on paved roads. Through the partnership, new facilities will be constructed by GM that will allow YPG to conduct these tests.

The partnership will benefit YPG because it can still use the complex for testing military vehicles and will receive engineering, maintenance, and construction services provided by GM in lieu of rent, which will decrease the federal payroll. Also, YPG was in need of a new testing mechanism for its military transport and wheeled combat vehicles that routinely operate under high weight, temperatures, and speeds. Although YPG was the Army's premiere hot weather test site, it lacked a sufficiently specialized facility to conduct continuous high speed testing on paved roads. Through the partnership, new facilities will be constructed by GM that will allow YPG to conduct these tests.

It also should be noted that the city of Yuma and Mesa both benefit from this partnership. Yuma benefits by the increase in economic activity through the influx of high paying jobs created by the new facility. The total onsite workforce will be between 250 and 300 people, consisting of General Motors employees, contractors and tenant activities. Additionally, thousands of visitors will visit Yuma each year for specific tests.

The Greater Yuma Economic Development Corporation estimates that the average annual wage will be in the upper $60,000 range, with total annual payroll of more than $22 million. Much of this money will stay within Yuma County to fuel the local economy on a year round basis. General Motors officials have already been in touch with Arizona Western College and Northern Arizona University officials to discuss the improvement of automotive and engineering courses, and degree programs available in Yuma.

Mesa benefits because the land the old facility was located on can now be developed to meet the community’s growing need for office, retail, housing and entertainment spaces, among others.

PROJECT DESCRIPTION
Partners
At first glance, the Army and GM have little in common. Yet both entities need to test vehicles for reliability in all kinds of conditions. GM wants to provide high-quality automobiles to its consumers, and the Army needs to ensure American soldiers have the most reliable equipment possible in any potential battlefield condition.

The common need of both partners for a specialized hot weather automotive test facility led to the partnership between the Army and General Motors to share a state-of-the-art test complex located at the Yuma Proving Ground located in Southwest Arizona. The 2400-acre complex was dedicated in July of 2009.

Implementation Environment–Legislative and Administrative
The creation of this partnership is rooted in the early 1990s. During the Persian Gulf War, Army official were troubled by a spike in tire blowouts in combat areas overseas caused by high temperatures and driving continuously at high speeds. The Department of Defense recognized the need for such a facility, but the high cost of constructing one was prohibitive at a time when the end of the Cold War and efforts to balance the federal budget combined to squeeze military budgets. In response to these hard facts, a legal device called Enhanced Use Leasing (EUL) was developed to allow the military to lease government property to private sector entities whose business may be relevant to military needs.

Meanwhile, GM was seeking to relocate its decades old hot weather test track in Mesa, Arizona, that was both antiquated and situated on key property in one of the nation's hottest real estate markets. As property values increased, the value of the land where the proving ground was located had become more suitable for development than for testing. Also, GM’s recent move from road testing to lab testing to using math-based tools allowed its testing needs to be met with a more modest sized facility with limited testing roads.

Through a competitive process outlined in a Notice of Opportunity to Lease (NOL), the Army sought private sector collaboration for a hot weather test complex at YPG. GM officials responded to the solicitation letter sent by Army officials seeking a EUL partner for desert testing. GM was one of eight automotive industry companies given tours of the potential site and expressed the most interest of any contender.

The partnership was finalized in May 2007, by which time word of GM's potential relocation to Yuma had been exciting Yuma business leaders for months. The proposed $100 million facility would provide welcome economic growth to the burgeoning county where YPG is already the largest single employer of civilians.

It also faced challenges that were atypical for a corporate construction project. YPG's distant history as a training facility for mechanized troops during World War II meant the possibility of hazards from old land mines or other live shells. A thorough sweep for unexploded ordnance had to be conducted prior to groundbreaking, as did additional environmental assessments. This task was completed in February of 2008 as architects put the finishing touches on the track's design. GM's headquarters approved the design and construction to begin in May of that year.

Financial Agreement
GM leased a portion of the YPG from the government on which several test roads and support facilities have been built. The agreement stipulated an in-kind payment method. GM was granted the lease in return for the construction of a Hot Weather Test Complex (HWTC) that includes a 4.5 mile Oval Track, evasive maneuver area, and a rebuilt Dynamometer Course, as well as other construction and maintenance services. The cost of construction of the HWTC is estimated to be around $100 million.

GM deposited funds into an interest bearing, third-party managed escrow account as part of the consideration for the lease. The new test tracks are needed in order to test the Army’s tracked and heavy wheeled vehicles which are beyond the capabilities of the GM test tracks. Both the Army and GM will now have access to road systems they previously did not have on their property. A win – win for both groups.

Contract Provisions
The contract includes a 50-year lease with options for renewal. GM also will build several new road testing facilities as part of the agreement. The current site consists of approximately 2400-acres and is to be fenced by the developer to ensure the security requirements of both the industry and government are met. Prior to the agreement, the complex consisted of the following:

• 3.5 mile Circle Track (3 lanes)
• 1.4 mile Straight Track (2-3 lanes)
• 3.1 mile Ride Road (2-4 lanes)
• 1,000’ X 1,000’ Dynamics Pad
• Interior Noise Road
• Noise Pass-by Facility
• Misc. Grades
• 72,000 ft² Main Building
• Garage (40 Hoists)
• Office (120 Residents/Visitors)
• Product Electronics/Instrumentation Lab
• Alignment/Tire Facilities
• Transmission Build Room
• Machine/Fab Shop
• Parts Crib
• Warehouse 14,000 ft²
• Sundrella (40 hoists)
• Covered Parking
• Fuel Facility
• Car Wash
• Scale House / Ballast Station

Army testers at YPG have full access to the previously constructed road testing facilities, as well as the new road testing facilities built by GM. The preexisting roadways can accommodate vehicles with axle loads as heavy as 18,000 pounds, which is enough capacity to handle over 80% of all wheeled military vehicles. In addition, a clause in the EUL agreement allows YPG to drive 10,000 miles per year with vehicles having axle loads as heavy as 10 tons, giving testers leeway with vehicles that have upgraded armor. The majority of the tracks can support vehicles with a gross vehicle weight of 80,000 pounds, which is about 20 times heavier than GM’s largest sport utility vehicle. YPG also was granted authority to utilize the track located in GM’s other testing facility in Milford, Michigan.

The Army testers also will have access to a four and a half mile long paved oval and a four mile gravel oval track that can accommodate high-speed testing of both wheeled and tracked vehicles in the Army’s inventory (this includes the vehicles too heavy to be tested at the GM facility). Another performance straightaway specifically designed for precise vehicle performance measurements also will be built and available for use. The paved and gravel ovals are expected to be completed by the spring of 2010.

It is GM’s role to keep the operations and maintenance of the land and facilities within the EUL boundaries to acceptable standards. At the end of the lease term, the GM facilities at the EUL site will revert to the Army.

Implementation Metrics
The goal of the Yuma Desert Proving Grounds is to fully utilize military capacity that is excess of installations needs. The arrangement was made possible through the execution of an Enhanced Use Lease (EUL) between the Army and GM. The EUL is used as a way to allow the military to lease government property to private sector entities whose business may be relevant to military needs.

A development company led the negotiation and development of the EUL, as well as the design and construction of the hot weather test facility. The GM EUL is regarded as "the quintessential" EUL as it is the Army's first totally shared-use EUL. With the completion of the paved and gravel ovals not expected until the spring of 2010, it is still too early to measure the use of each partner and if the contract specifications are accurate estimates.

Commentary
Methods for Overcoming Impediments
This particular partnership faced few impediments to its success. A public-private partnership requires mutual understanding of each partner’s capabilities and limitations, both politically and financially. In this case, both parties had the same goal, and agreed on how to achieve that goal.

Easy communication and operation also are key to overcoming any impediments. The use of the EUL allowed the Army to gain quick access to the private sector, and effectively communicate its needs. To facilitate this process a developer selection team was formed, including subject matter government experts, counsel, real property, contracting, and facilities personnel.

While the intent of the EUL is to fully utilize property which is excess to an installation’s needs, the EUL recently has been thought of as a way to provide new or renovated real property which can be used to accommodate realigned functions, while circumventing the traditional, lengthy Congressional funding process. However, when creating a new EUL, both parties need to take the Congressional perspective into account. Congress might not have a problem if the EUL is simply used to quickly start a project Congress would approve in the future, but conflict may arise if the EUL is used to circumvent Congressional approval to start a project that Congress would not approve. Since Congress has granted the EUL authority to the Department of Defense, it is important that Congressional opinion is still considered when entering into a partnership.

Key Points of Success or Failure
There was a favorable political and social environment throughout the formation of the partnership. There is a strong statutory foundation for the implementation of the partnership with the EUL option already set in place for installations with available land. The introduction of the EUL process coupled with the cooperation of GM leaving the crowded Mesa real estate market created for an environment that benefited all partners.

A detailed business plan with specific uses of the facility outlined in the contract is essential to success. In this example, the contract clearly described the responsibilities of both the public and private partners. Both parties had their objectives met with the agreement. It also is important that the partners have a set plan outlined in the contract for the future. One significant key point of success in this example is the contract specifically states the level of use of the facility by each partner, and what happens if a partner does not abide by those standards.

Guaranteed revenue in the long-term is key to the success of the project. The Army received in-kind payments in the form of infrastructure improvements, and GM can receive potential revenue from military use of facilities extending the agreed level of use specified in the contract. The private partner provided the initial funding for capital improvements, and there is still a means for repayment of this investment over the long-term of the partnership. It is ensured for the life of the partnership that the Army will have access to the facilities as well.

There are more people affected by the partnership than just the two public and private partners. This partnership is successful because it took outsiders into consideration. The city of Mesa, Arizona benefited because it can now use the previously occupied site for development and urban expansion purposes. While some high-paying jobs moved to Yuma, the newly created real estate will allow for economic expansion and job creation. The city of Yuma, Arizona benefits from the influx of job opportunities and employed residents. GM also was very open about its intentions when it gave notice to employees in 2000 of its intention to move the proving ground, which is a lengthy amount of time for employees and the Mesa community to adapt to the change in location.

Finding the “best value” in a partner is critical to the long-term relationship of a successful partnership. The Army solicited eight candidates, and pursued the private sector partner with the most interest. Both get a benefit and are both are incentivized to uphold their end of the contract. Both parties shared in the potential risks and rewards in the partnership.