esop advisors, inc. -- employee ownership and government privatization © esop privatization of...

ESOP Advisors, Inc. -- Employee Ownership and Government Privatization ©

ESOP Privatization of Government Operations

ESOP Advisors, Inc.April, 2002


The Private Sector ESOP Track Record

14,000 ESOP Companies in U.S. economy18 Million employees participate in ESOPsHighly successful companies which are employee owned include:

SAICUnited AirlinesDynCorp

ESOP Companies more profitable, more productiveESOPs work well in transitioning Federal workforce


ESOP Advisors, Inc.

Recognized Leader in ESOP PrivatizationPerformed groundbreaking feasibility analysis of OPM Office of Federal InvestigationsPerformed over 30 ESOP Privatization assignments for Federal, State & Local GovernmentsRecently supported Navy in ESOP Privatization of Environmental Detachment

Over 430 employees were successfully outplaced, moved in September, 1999 as a unit to new private sector jobs with comparable salaries and benefits.


ESOP Privatization Process Result

V iab leP riva te S ec to r

C om p etito r

F ed era l O p era tionId en tified as P o ten tia l

E S O P P riva tiza tionC an d id a te


ESOP Privatization Responds To:Management restructuring and Commercial Activities objectivesAcceptable alternative to A-76Ethics/Conflict of Interest ConcernsConcerns of Federal Employees

ParticipationProtection of CompensationProtection of Retirement Benefits


ESOP Privatization AdvantagesInnovative alternative approach to Commercial Activities ProcessCompares favorably with A-76 process in terms of cost and timelinessAchieves seamless operational transition which satisfies concerns of using “outside” contractors

Retains institutional knowledgeMaintains secure structure and integrity

Minimizes adverse impacts on current Federal employeesProvides maximum cost savings while retaining “surge capacity” and quality


Federal Privatization through ESOPs

NPR/OPM Guidance: May 12, 1995ESOPs may be considered as a part of outsourcing strategyThe government may award a service contract to an ESOP and may limit offers to ESOPsESOP service related contracts may be awarded competitively or sole sourceExisting equipment and facilities can be furnished as GFE


ESOP Privatization Successful Strategies

UNC Newark, Inc.

Newark A ir Force BaseAir G uidance & Metro logy C enter

Joint VentureW ith

Private C om pany

USIS , Inc.

OPMO ffice o f Federa l Investigations

Stand A lonePrivate Com pany ESOP

Synectics AMEC, Inc.

A rm y Managem entEngineering College

Strategic Partnership w ithESOP Com pany

EEG, Inc.Em ployee

OwnedCom pany

South CarolinaResearchAuthority

Navy Environm entalDetachm ents

Charleston, SC

Strategic Partnershipw ith

Public Non-Profit Corp.

D ivision:Roy F. W eston, Inc.

(NASDAQ)

Navy Environm entalDetachm entsVallejo, CA

Strategic Partnershipw ith Public Com pany or

ESO P PrivatizationC andidate


Announce Study

Data Collection

PerformanceWork StatementDevelopment:Initial ESOP Involvement

Issue Solicitation(RFP)

Receive Offers

Evaluation and

Negotiation

Select“Challenger”

“True-Up”MEO

MEOPreparation

Certification ofManagement

Plan

PerformCost

Comparison

Transition

BusinessCase

Analysis

MEOwith

Partner

Swaps Franchise ESOPwith

Partners

ESOPStandAlone

TotalPrivatization

SaleSale/LeasebackLease/Purchase

Operating Contract

ESOPs & A-76


Identify & Review Function

Determine if it is stillneeded

In whole or part?

Are any of the CommercialActivities New Requires or

Severable Expansions?Re: Enhanced by CA

ONEliminateActivity

Can another DoD componentor Federal Agency performwork more cost effectively?

Is A-76 Cost Comparison WaiverDesired?

Can Commercial Activitiesbe Privatized?

Can another DoDComponent perform the CA

more cost effectively?

STRATEGIC SOURCING DECISION TREE

Has a qualified NIB/NISH/JWOD Firmoffered to perform the work?

Has an 8(a) Native American owned firmoffered to perform the work?

Is the CA performed by 10 or less DoD civilianemployees and/or any number of military's?

Perform A-76 Cost Comparison -- is PrivateSector/ISSA/ESOP Strategic Partnership

Performance more efficient & cost effective thanin-house MEO?

Convert to Government'sMost Efficient Organization

Update CAMIS & Inherently GovernmentalCommercial Activities Inventory

Convert toContract

ESOPPrivatization of

Current Unit

Convert orRetain

Non-Profit

ESOPPrivatization

Convert to DoD ISSA

ESOPPrivatization

of ISSA

Yes

ESOP

Convert toContract

(If fair &Reasonable

prices can bemaintained)

YES

YES

YES

YES

Convert toISSA

Reengineer orBenchmark Using

ValidatedMethodologies

It is not arequirement to

seek thesesources before

proceeding

An A-76 costcomparison maybe limited to theMEO & the NAO

Firm

An A-76 costcomparison is

optional

ISSA That is anon- DoD

Component

Non ProfitApproach

Yes

No

Yes

Seek LegislativeRelief and if needed

create Source


ESOP Privatization ProcessEducation

Employee BriefingsCivilian/Military Management Briefing

Pre-Feasibility AssessmentFeasibility Analysis

Legal AnalysisBusiness Case Analysis

ImplementationPhase I: Business Plan DevelopmentPhase II: ESOP Implementation by “Employee Representative”


ESOP Privatization TimelineEducation

30 Days

Pre-Feasibility Assessment30 Days

Feasibility Analysis60 Days

ImplementationBusiness Plan

• 60 DaysContract Negotiation & ESOP Start Up

• 120 -180 Days


Contact ESOP Advisors, Inc.Phone: 703-758-8773Fax: 703-860-9144Email: [email protected]: Reston International Center

11800 Sunrise Valley Drive, Suite 322 Reston, VA 20191-5302

Web Page:http://www.esopadvisors.com

ESOP Advisors, Inc. is on the GSA MOBIS Schedule


Informational Web Sites:Copy of OMB Circular on ESOP Privatization; policy guidance

http://www.financenet.gov/financenet/fed/cfo/franchiz/esop1.htm

Web Site for ESOP Advisors, Inc.http://www.esopadvisors.com

Information on USIS, OPM’s successful ESOP Privatizationhttp://www.govexec.com/archdoc/brg97/0497brg3.htm

National Performance Review’s summary of NAVSEA ESOP Privatizationhttp://www.npr.gov/library/announc/navsea.html

Army Small & Disadvantaged Business (SADBU) Sitehttp://www.hqda.army.mil/sadbu/news/ESOP%20Privatization%20Briefing%20color/sld001.htm

General Accounting Office Commercial Activities Panelhttp://www.gao.gov/a76panel/powerpoint/neece/index.htm

Article on Application of 501{c}3 and ESOPs to Privatizationhttp://www.public-private.org/sys-tmpl/nss- older/newsletterfolder/JulAug00abbrev

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