Utility Privatization - Capitol Improvement Projects and the Bona Fide Need Rule

The Bona Fide Needs rule requires funds to be obligated to satisfy a need that arises during the period of availability for obligation for the appropriation involved. Notice that the focus is on when the need arises, not when the procurement is completed. Therefore, it is permissible to obligate annual appropriations for a need arising in the fiscal year for which the funds were appropriated even if the project will not be completed until a later fiscal year.

I have a question though. In my experience with utility privatization contracts, capital improvements usually involve construction projects on a military facility that are funded with MILCON appropriations. If that is the case, why are you using annual appropriations for the capital improvement instead of MILCON?

It was decided by DoD, that the laws (10 USC 169 and 159) that pertain to real property and drive the MILCON requirement were not applicable to utility privatization (UP), because the utility infrastructure has been transferred to the UP provider via a bill of sale and is no longer GOVT property. Based on this, it was determined annual appropriations were permissible for all CIPs.

Where is this determination stated? I know of some privatization contracts where capital improvements are still being funded with MILCON.

You will not find it stated in any official policy or regulation. I cannot speak for the other services, but HQDA and OGC made the determination that the MILCON requirement (along with the requirements for work classification, $750K OMA threshold, etc.) for CIPs under UP do not apply, because the utility infrastructure is no longer real property.

Thanks, however, if it is not stated in any policy or regulation, how do you know such a determination has been made and that it is applicable to all privatization contracts or perhaps only those awarded after a certain date? I hate to be so persistent on this, but the contracts I am speaking about are privatization contracts on Army facilities awarded by the Army not DLA. I am trying to figure out if this "determination" may cause problems down the road. Some of these contracts are over ten years old and have consistently used MILCON to fund capital improvements. Using a different appropriation type to do this after all these years may be a fiscal law issue.