SPECIAL NOTICE

							                                     SPECIAL NOTICE

              DEFENSE PRODUCTION ACT TITLE III
        ADVANCED DROP-IN BIOFUELS PRODUCTION PROJECT

1. Introduction

This is a Special Notice as defined in the Federal Acquisition regulation (FAR) 5.205 (c) to
notify industry that the Defense Production Act (DPA) Title III Program anticipates possible
issuance of a Broad Agency Announcement (BAA) which would request proposals from
domestic sources to execute an Advanced Drop-In Biofuel Production Project. This project will
use unique authorities of the DPA to achieve the goals of the Department of Defense (DoD).
The BAA will invite domestic sources to propose to address the critical steps involved in the
creation of an economically viable production capacity for advanced drop-in biofuels.

This notice is provided to industry to allow them to quickly respond to a rapid initiation of the
DPA Title III Advanced Drop-In Biofuel Production Project when the BAA is published.
Contractors should be aware that a BAA may be open for no more than 60 days for proposal
submissions. A BAA may be published as early as June 2012.

The Government is aware that many contractors interested in this potential project will be
unaccustomed to participating in competitive solicitations involving DPA Title III projects,
including: cost-share agreements, the necessity for billings to the Government based on incurred
(and documented) costs, various nuances of Title III capital investments (which frequently result
in Government ownership of equipment), and other relevant factors. Interested firms are advised
to review carefully all elements of this announcement and the referenced documents.

2. DPA Title III Program General Overview

The DPA Title III Program is managed within the Office of the Deputy Assistant Secretary of
Defense for Manufacturing and Industrial Base Policy (MIBP) and executed by the Air Force
Executive Agent Program Office, a component of the Manufacturing Technology Division
(AFRL/RXM) of the Materials and Manufacturing Directorate, Air Force Research Laboratory.
As the DoD Executive Agent for the DPA Title III Program, the Air Force is responsible for
executing projects that ensure domestic production capability for technology items that are
essential to national defense.

Title III of the Defense Production Act provides unique authorities, under which the Government
may provide appropriate incentives to create, maintain, protect, expand, or restore the productive
capacities of domestic sources (see below for definition) for critical components, critical
technology items, and industrial resources essential for the execution of the national security
strategy of the United States. The principal objective of all DPA Title III investments is to
strengthen and expand these domestic productive capacities and to ensure Government access to
critical technology items well into the future. Any contract/agreement awarded under the



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contemplated BAA will be awarded under the authority of Title III of the Defense Production
Act of 1950 as amended (50 U.S.C. App. § 2061 et seq.).

DPA Title III projects provide incentives to domestic manufacturers to develop and/or adopt best
business and marketing practices to achieve manufacturing capacity, quality, affordability, and
economic viability requirements.

If a solicitation is issued, it will be restricted to domestic sources as defined in the DPA: “A
business concern that performs in the United States or Canada substantially all of the research
and development, engineering, manufacturing, and production activities required of such
business concern under a contract with the United States relating to a critical component or a
critical technology item; and that procures from business concerns (described as above)
substantially all of any components and assemblies required under a contract with the United
States relating to a critical component or critical technology item.”

3. Project Requirements and Objectives

A preliminary description of the project’s requirements follows. This informationis provided to
allow interested contractors to determine whether or not their capabilities are likely to provide a
proposal capable of meeting all the Government’s requirements.

3.1 Project Requirements

A proposal submitted under the potential BAA must be able to meet all of the following
requirements:

3.1.1 Requirement 1: Biofuels must be produced domestically.

The proposed integrated biorefinery must be located within the United States or Canada and use
a domestically-produced acceptable feedstock. Supply chains that will import feedstock from
outside the United States or Canada will not be considered. This includes sugar used for
microbial conversion processes.

3.1.2 Requirement 2: Biofuels must comply with EISA Section 526.

The biofuels shall comply with Section 526 of the Energy Independence and Security Act
(EISA) of 2007. To comply, the biofuels must have lifecycle greenhouse gas emissions that are
less than or equal to those of conventional petroleum derived fuels, as defined by the 2005
Petroleum baseline. This baseline is described in detail in “Development of Baseline Data and
Analysis of Life Cycle Greenhouse Gas Emissions of Petroleum-Based Fuels,” published by the
National Energy Technology Laboratory. The report is dated November 26, 2008 and can be
downloaded from the following link:

http://www.netl.doe.gov/energy-analyses/pubs/NETL%20LCA%20Petroleum-
Based%20Fuels%20Nov%202008.pdf




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3.1.3 Requirement 3: Biofuels must come from an acceptable feedstock.

For this project, the biofuels must come from an “acceptable feedstock” as defined for this
project. To be an acceptable feedstock, the feedstock must be produced domestically, meaning
in the United States or Canada. To be an acceptable feedstock, a feedstock must also fit at least
one of the following categories:

1)     Meets the definition of “renewable biomass” as defined here:
       a) Materials, pre-commercial thinning, or invasive species from National Forest System
           land and public lands (as defined in section 103 of the Federal Land Policy and
           Management Act of 1976 (43 U.S.C. 1702)) that –
             (1) Are byproducts of preventive treatments that are removed
                  (a) To reduce hazardous fuels;
                  (b) To reduce or contain disease or insect infestation, or
                  (c) To restore ecosystem health
             (2) Would not otherwise be used for higher-value products; and
             (3) Are harvested in accordance with –
                  (a) Applicable law and land management plans; and
                  (b) The requirements for –
                       (i) Old growth maintenance, restoration, and management direction of
                            paragraphs (2), (3), and (4) of subsection (e) of section 102 of the
                            Healthy Forests Restoration Act of 2003 (16 U.S.C. 6512); and
                       (ii) Large-tree retention of subsection (f) of that section; or
       b) Organic matter that is available on a renewable or recurring basis from non-Federal
          land or land belonging to an Indian or Indian tribe that is held in trust by the United
          States or subject to a restriction against alienation imposed by the United States,
          including –
             (1) Renewable plant material, including –
                  (a) Organic material grown for the purposes of being converted to energy; and
                  (b) Algae; and
             (2) Waste material, including –
                  (a) Crop residue (including cobs, stover, bagasse and other residues);
                  (b) Other vegetative waste material (including wood waste and wood
                      residues);
                  (c) Animal waste and byproducts (including fats, oils, greases, and manure);
                      and
                  (d) Food waste and yard waste.

2)     Biomass that is segregated from municipal solid waste (MSW) or municipal sewage
sludge (MSS or “biosolids”) are acceptable feedstocks, so long as appropriate considerations are
made for the costs of segregation, collection, processing, and transportation.

No plant based material that is generally intended for use as food may be employed as a
feedstock. Corn starch and sugars derived from sugarcane or beets and oils derived from soy,
canola, sunflower, peanut, etc., normally recovered using conventional food processing methods,




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are excluded from eligibility for this project. The determining factor will be the typical use of
the material in commerce.

3.1.4 Requirement 4: The biofuels must be suitable for military operational use.

The targeted fuels are for military operational use, and as such, must be either currently
approved/certified or will be approved and certified JP-5, JP-8 and F-76 equivalents by the time
a commercial-scale biorefinery would become operational. The DoD has indicated that it intends
to purchase biofuels that meet approved specifications and are a “drop in fuel” that can utilize
existing infrastructure, are delivered to DoD fully blended with conventional petroleum product
counterparts JP-5, JP-8 and F-76, and are ready for use.


Requirement 5: The proposed Integrated Biorefinery must have a rated capacity of at least
10 million gallons of neat biofuel per year.

The proposed Integrated Biorefinery must be able to produce at least 10 million gallons of neat
biofuel per year. The offeror must have formed (or have credible plans for forming) effective
teaming/business arrangements that encompass all aspects of a fully integrated value chain (from
feedstock to blending to delivery) required to produce this quantity of military fuels.


Requirement 6: The proposal must indicate that the offeror will commit to at least 50%
cost share for both Phase 1 and Phase 2.

The Government anticipates using a Technology Investment Agreement, which requires that the
offeror provide at least 50% cost share. Furthermore, the Government will only consider
proposals from offerors that are willing and able to fund at least 50% of the cost and absorb the
associated risk.


3.2 Project Objectives

The goal of this project is to establish one or more complete value chains capable of producing
the biofuels. This includes feedstock production, conversion and processing, blending,
transportation, and logistics, as well as the design, retrofit, construction, operation, validation,
and qualification of domestic, commercial-scale, integrated biorefineries (IBRs). The
Government intends that the IBR will form business partnerships with suppliers and customers to
establish the complete value chain.

The contemplated effort will include the design, construction and/or retrofit, and operation of a
domestic commercial-scale IBR that meets a minimum annual 10 million gallon neat fuel
production capacity objective. The IBR will be capable of producing drop-in liquid
transportation fuels targeted for military operational use, and as such, must be either currently
approved/certified or will be approved and certified JP-5, JP-8 and F-76 equivalents by the time
the biorefinery becomes operational.



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Additionally, the total enterprise envisioned in this effort is expected to include a capability to
blend the biofuel product with petroleum-based equivalent fuels in order to meet approved
certifications and specifications, which may include blends of up to a maximum 50/50 ratio.
Capabilities and/or facilities to store and transport the resulting product will also be an element
of the project.

Awardees selected for the anticipated project will be required to share at least 50% of the cost.
See the “Cost Share Guidance” attached to this Special Notice for information regarding what
types of expenditures are counted as acceptable cost share.

Proposals may include constructing new facilities or modifications to an existing facility
(including adding equipment or modules) where it is economically and technically advantageous
to do so.

The Government is seeking integrated biorefinery projects that have the necessary technical and
economic performance data to validate their readiness for scale-up to commercial production
quantities. The scale-up factor (the ratio of production capacity for the proposed commercial
scale facility to the production capacity already demonstrated in a demonstration or pilot scale
facility) will be an important proposal evaluation criterion, where lower scale-up factors suggest
higher readiness for scale-up and lower technical risk. In general, “integrated biorefineries”
employ various combinations of feedstocks and conversion technologies to produce a variety of
products, with the main focus on producing biofuels. Co- or by-products can include additional
fuels, chemicals (or other materials), and heat and power. These integrated biorefineries would
produce, as their primary product, liquid transportation biofuels that support the Section 526 of
the Energy Independence and Security Act (EISA) of 2007.

The Government intends to foster regional integrated supply chains. If multiple value chains are
established, each would employ a different combination of feedstocks and mature conversion
technologies to produce a variety of products, with the principal focus on producing and
delivering biofuels. The Government expects to make awards to multiple offerors based on best
value to the Government. The Government values diverse technical approaches with regard to
biomass feedstocks, conversion processes, and geographic locations. The value of investing in a
diverse portfolio of IBRs is that it increases the range of biofuel production capabilities in order
to reduce overall project risk. (Note that the Government is not seeking diversification within
any particular proposal, but rather, between proposals.)

As the objective of this project is to establish a commercial scale IBR; no research and
development activity should be proposed for this project. Note that the technology for producing
heat and power by conventional means (e.g. stoker or fluidized bed boilers, co-firing with coal,
etc.) is an established technology, and the BAA is intended to address converting feedstocks to
liquid transportation biofuels rather than to heat and power. Hence, for the BAA, proposals that
propose biorefineries producing heat and power or products other than liquid transportation
biofuel as the primary product would be considered technically unacceptable and would not be
considered for an award.




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4. Anticipated Phases

The Government anticipates that multiple Phase 1 awards may be made, funded by as much as
$30 million of DPA Title III funds (overall, to be split among multiple awards). Reference
paragraph 3.2 herein for the cost share requirement of at least 50%. Phase 1 will cover project
planning, Architectural/Engineering Design, planning and initiation of regulatory approvals, and
other activities. (See Phase 1 activities detailed below.) As a rule of thumb, an offeror’s cost for
designing a facility (which is the primary expense for Phase 1) should not exceed 7-8% of the
expected facility construction cost (which is the primary expense for Phase 2). Offerors are
advised to consider this rule of thumb when determining the level of funding to propose for
Phase 1.

During or after Phase 1, the Government expects to invite Phase 1 contractors to submit a
comprehensive proposal for a Phase 2 effort. All, some, or none of the selected Phase 1
contractors may be awarded funding to continue into Phase 2. The selection of one or more
Phase 2 contractors for award will be based on an evaluation of each contractor’s Phase 2
proposal (both technical and cost/price aspects) to determine the overall merit of the proposal in
accordance with the evaluation criteria stated in the solicitation.

The anticipated Phase 2 effort is envisioned to include facility modifications, facility
construction, commissioning and performance testing. Assuming the technical evaluation
warrants the decision to proceed with Phase 2, the Government anticipates potential award(s) of
up to $70 million, with additional resources potentially available based on the demonstrated
outcomes of the Phase 1 effort and funding available at that time. (See Phase 2 activities detailed
below.) Reference paragraph 3.2 for the cost share requirement of at least 50%. Title III projects
may require that a contractor purchase manufacturing and test equipment to create or expand the
targeted production capacity. Government appropriated funds may be used to purchase
equipment for use on a Title III project. Title III funds may also be used to purchase and/or
upgrade or expand existing facilities. Title III funds shall not be used to purchase real property
such as land or buildings or the construction of new buildings.

4.1 Phase 1 Activities: Planning, Design, and Regulatory Approvals

The primary activities for Phase 1 are to finalize a Comprehensive Facilitization Plan, update the
Comprehensive Business Plan and complete the IBR design. The contractor will finalize private
financing arrangements and complete any regulatory requirements that should be satisfied prior
to the start of Phase 2.

Examples of activities and deliverables for Phase 1 are the following. Contractors will be
responsible for proposing a Phase 1 Statement of Work that is appropriate for the proposed
effort; what follows is only a guideline.

   Complete and submit a design/drawing package to enable the contractor to build (or modify)
    and equip a fully functional Integrated Biorefinery (IBR). Provide information regarding the
    A/E design work to the Government in a Comprehensive Facilitization Plan.




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   Update the Comprehensive Business Plan that was submitted as part of the Phase 1 proposal.
    Address the key aspects of establishing an economically viable Integrated Biorefinery (IBR).
    Include a Marketing Plan section to assess the market for the IBR’s fuel products and co-
    products, and describe how sales to those markets will be achieved.
   Prepare/provide plans and commitments for private financing of the IBR. Finalize any
    arrangements for project funding from non-government sources, and Federal, State, or Local
    government funding (other than DPA Title III funding) that support the project objectives.
   Develop plans and commitments for off-take agreements from the Defense Logistics Agency
    and any other customers for the specified advanced biofuels or co-products.
   Prepare/provide plans and commitments from feedstock suppliers and any other key
    suppliers in the IBR’s supply chain.
   Prepare/provide plans for certifying fuels to JP-5, JP-8, and F-76 standards and acquiring any
    other relevant certifications for biofuel.
   Prepare/provide documentation of the existing process workflow, performance capability,
    and quality levels. Update the current baseline metrics for all key production processes,
    materials, and products.
   Complete National Environmental Policy Act (NEPA) data collection and documentation and
    obtain NEPA determination and approval. Implement any NEPA mitigation action plan
    requirements. Obtain regulatory permits. Complete a compliance plan for all remaining
    environmental and regulatory requirements.
   Prepare/provide a risk management plan for Government approval. Update the detailed risk
    mitigation plan.
   Continue to refine and finalize the Phase 2 plan, including all efforts necessary to permit,
    build, equip, qualify and operate the facility. Identify all costs, materials, equipment, and
    personnel needed to achieve the proposed production capacity. Include a detailed budget and
    schedule. Prepare and submit a Phase 2 proposal to the Government.
   Cooperate with an independent engineer (hired by the Government) in a third-party
    validation of the demonstration-scale technical data.
   Conduct project management, administration, and reporting.
   Submit other deliverables as required per the negotiated agreement.

4.2 Phase 2 Activities: Construction, Commissioning and Performance Testing

The primary activities for Phase 2 are to implement the Comprehensive Business Plan and the
Comprehensive Facilitization Plan that were developed in Phase 1. Phase 2 contractors will
modify existing facilities, build facilities (with the contractors cost share only), procure and
install production equipment, establish management and quality systems, establish necessary
personnel resources, and test and qualify the production process for biofuels. The
Comprehensive Business Plan finalized in Phase 1 will identify measurable objectives that the
contractor will attain by the conclusion of Phase 2.

Examples of activities and deliverables for Phase 2 are the following. Contractors will be
responsible for drafting a Phase 2 Statement of Work (at the appointed time) that is appropriate
for the proposed effort; what follows is only a guideline.




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   Install, commission, and qualify integrated biofuel production facility equipment. Conduct
    shakedown testing, which will require that the facility operate in continuous mode as
    intended for an agreed upon period of time (typically a few months). Report technical data to
    the Government.
   Initiate biofuel and co-product production.
   Operate the facility for a negotiated number of cumulative run hours or for a specified
    number of months to allow collection of technical and cost information. Report the data to
    the Government. The actual completion criteria will be negotiated.
   Demonstrate compliance with all environmental and regulatory requirements.
   Demonstrate that products meet relevant standards and specifications.
   Deliver samples to customers for evaluation and certification testing.
   Improve and optimize production processes (cost, yield, cycle time, etc.)
   Document the IBR’s quality management system and detail any actions or investments
    needed to achieve ISO-9000 certification or other quality standards or certifications.
   Update and implement the Comprehensive Business Plan as needed.
   Update plans and commitments for private financing of the IBR.
   Update plans and commitments for off-take agreements from the Defense Logistics Agency
    and any other customers for fuel or co-products.
   Update plans and commitments from feedstock suppliers and any other key suppliers in the
    IBR’s supply chain.
   Update plans for certifying fuels to JP-5, JP-8, and F-76 standards and acquiring any other
    relevant certifications for biofuel.
   Update documentation of the existing process workflow, performance capability, and quality
    levels. Update current baseline metrics for all key production processes, materials, and
    products.
   Update risk management plan for Government approval.
   An independent engineer (hired by the Government) will conduct a performance test to
    validate the successful completion of construction, and give the Government a performance
    test report. Phase 2 contractors will be required to provide the data and facilities access for
    the independent engineer to conduct this assessment.
   Conduct project management, administration, and reporting.
   Submit other deliverables as required per the negotiated agreement.
   The contractor’s proposed Preliminary Phase 2 Statement of Work may identify other
    activities it believes are essential to support Phase 2 objectives.

5. Type of Contract/Instrument

The Government intends to award a Department of Defense Grant and Agreement Regulations
(DoDGARS)-based Technology Investment Agreement. Below is a link to documents related to
typical DPA Title III solicitations, contracts, or agreements. Interested offerors are encouraged
to review and understand these documents, as DPA Title III projects generally address different
challenges and objectives than might normally be the case for other Department of Defense or
Government projects. A current DPA Title III solicitation may be reviewed at:




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https://www.fbo.gov/index?s=opportunity&mode=form&id=50767a5728d7fb69e214e96411999
338&tab=core&_cview=0.

If and when a BAA is published for Advanced Drop-In Biofuels Production, it may be
accompanied by samples similar to those in the link for “Certifications,” “Sample Title III
Agreement – Technical Investment Agreement,” and “Proposal Sample” for a Cost Proposal
spreadsheet and “Cost Share” Guidance Spreadsheet which is included with this Notice. (The
remaining files accompanying the linked solicitation may be too different from the Advanced
Drop-In Biofuels Production BAA to use as a guide.)

6. Use of Independent Subject Matter Experts

Prior to making decisions, the Government may, at its discretion, appoint subject matter experts
(who may be non-Government independent consultants) to conduct “due diligence” on the
proposals that are deemed of interest to the Government. This due diligence activity will seek to
confirm, validate, and evaluate the claims made in the proposals, review the scope, schedule and
budget, and advise the Government regarding how reasonable, allowable, and allocable the
proposed costs are, and may include on-site visits to the offerors. Cooperating with this due
diligence process will be a condition for consideration. The due diligence may be used to help
prioritize the proposals and negotiate any subsequent awards. Any non-Government subject
matter experts will be required to sign appropriate Non-Disclosure Agreements to protect each
offeror’s proprietary data.

7. Comments From Industry Are Welcome

The Government welcomes industry comments regarding the information presented in this
Special Notice. Industry comments will be reviewed to assure a quality BAA when/if a BAA is
published. The Government will not respond to questions, or requests for further information
regarding this Special Notice. Comments may be forwarded to TitleIIIBiofuels@wpafb.af.mil.
Comments will be accepted from 2 April 2012 – 31 May 2012.

The Government may publish amendments to this Special Notice that will include additional
guidance in advance of a formal BAA. Interested companies are advised to monitor FedBizOpps
closely for amendments to this Special Notice. Interested firms should recognize that all
information in this Special Notice is preliminary, and subject to change if and when a BAA is
published.

This notification is not a request for proposals. There is no guarantee that an Advanced Drop-In
Biofuels Production Project will become a funded Title III project.

DISCLAIMER

This is a Special Notice as defined in FAR 5.205(c) used as an early announcement of this
procurement matters. This Special Notice captures the technical core of a potential draft BAA,
which will permit industry to gain further insight into the objectives, requirements, and timing
for the Title III Biofuels project for review. It will also permit potential responders to commence



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preparations for the upcoming potential solicitation. It provides industry additional preparation
lead time and should assist with responding within the shortened proposal preparation time that
will be required to meet the demanding potential solicitation, proposal preparation and award
schedule. This Special Notice is not a request for competitive proposals; therefore, responses to
this notice are not requested and cannot be accepted by the Government to form a binding
contract. Companies that provide comments will not be paid for the information.

No telephone calls will be accepted requesting a bid package or solicitation. There is no bid
package or solicitation at this time.

Any comments received shall be safeguarded from unauthorized disclosure. Comments must
be unclassified and contain no proprietary information. Operations Security (OPSEC)
should be observed during any discussions and documentation associated with this Special
Notice. OPSEC requirements are required in an effort to reduce project vulnerability from
successful adversary collection and exploitation of critical information.




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