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Report to the Subcommittee on Military Construction, Committee on 
Appropriations, U.S. Senate:

United States General Accounting Office:

GAO:

February 2004:

Defense Infrastructure:

Long-term Challenges in Managing the Military Construction Program:

GAO-04-288:

GAO Highlights:

Highlights of GAO-04-288, a report to the Subcommittee on Military 
Construction, Senate Committee on Appropriations 

Why GAO Did This Study:

The Department of Defenseís (DOD) military construction program 
provides funding for construction projects in the United States and 
overseas, and funds most base realignment and closure costs. Recent 
Office of the Secretary of Defense (OSD) estimates indicate that it 
would cost as much as $164 billion to improve facilities to a level 
that would meet the departmentís goals. GAO was asked to report on the 
(1) steps OSD has taken to enhance program management, (2) process of 
prioritizing and resourcing military construction projects, and (3) 
advantages and disadvantages of increasing the current funding 
thresholds for constructing and repairing facilities.

What GAO Found:

Recognizing the need to halt the degradation of defense facilities, 
OSD took a number of steps to enhance the management of the military 
construction program by providing guidance through a facilities 
strategic plan and by standardizing practices through selected 
management tools. However, some of these tools are not completed, and 
others have weaknesses that further hinder efforts to improve 
facilities. OSDís strategic plan outlines long-term goals but lacks 
comprehensive information on the actions, time frames, 
responsibilities, and resources that are needed to meet DODís vision 
for facilities. OSD has also established key financial objectives for 
the services to improve the condition of their facilities. Given 
competing funding pressures and that the process of realigning and 
closing bases to reduce excess infrastructure will take several years 
to accomplish, improvements in facilities will likely require much 
longer than suggested by OSDís objectives.

DODís process of prioritizing and resourcing military construction 
projects provides an important means of improving whole categories of 
facilities but can repeatedly postpone addressing important projects 
outside of those categories. If left unchecked without periodic 
reassessments, the process can continually defer projects important to 
installationsí ability to accomplish their mission and improve 
servicemembersí quality of life. As much as 77 percent of military 
construction funds appropriated in any one year are distributed among 
specific areas of emphasis, such as housing, leaving a significantly 
smaller portion that is insufficient to repair the remaining 
categories of facilities. Some projects are not submitted for funding 
consideration because they do not fall within the specific areas of 
emphasis and thus are perceived as being highly unlikely to receive 
funding. Also, some high-cost priority projects are postponed for 
future yearsí funding because their addition would exceed the 
servicesí funding level established for that year. Congress may add 
projects during the appropriations process, addressing what it has 
considered as inadequate requests for funding. These projects may 
require adjustments in DODís plans since they may not always align 
with DODís short-term priorities.

Increasing current funding thresholds for unspecified minor military 
construction projects would give DOD installations more flexibility, 
but might need to be balanced against reducing congressional 
oversight. Construction costs have increased as much as 41 percent 
since the thresholds were last adjusted upward. As a result, fewer 
projects that are smaller in scope can now be completed using these 
types of funds. Additionally, installation officials often scale back 
the scope of a project in order to meet the current thresholds, 
compromising design characteristics in the process. However, if the 
thresholds were increased, Congress could lose oversight of the 
additional projects funded under these thresholds because such 
construction projects are not specifically identified in the 
Presidentís budget submissions. Yet, there are alternatives, such as 
coupling the increased thresholds with periodic reports on the usage 
of those funds.

What GAO Recommends:

GAO recommends that OSD (1) complete the management tools for 
standardizing construction practices and costs, (2) reevaluate the 
time frames for completing the key objectives, and (3) develop a 
mechanism for periodically reassessing military construction 
priorities for facility categories that fall outside DODís specific 
areas of emphasis. GAO also suggests that Congress may wish to 
consider the advantages and disadvantages of increasing the funding 
thresholds for minor construction projects. In commenting on a draft 
of this report, DOD agreed or partially agreed with the 
recommendations and indicated that some actions are being taken to 
address them.

www.gao.gov/cgi-bin/getrpt?GAO-04-288.

To view the full product, including the scope and methodology, click 
on the link above. For more information, contact Barry W. Holman at 
(202) 512-8412 or holmanb@gao.gov.

[End of section]

Contents:

Letter:

Results in Brief:

Background:

Strategic Plan and Management Tools Weaknesses Limit Efforts to Improve 
Facilities:

Prioritizing and Resourcing Process Serves an Important Function but 
Has Limitations:

Increasing the Current Funding Thresholds Gives DOD Additional 
Flexibility but Could Lessen Congressional Oversight:

Conclusions:

Recommendations for Executive Action:

Matters for Congressional Consideration:

Agency Comments and Our Evaluation:

Appendix I: Scope and Methodology:

Appendix II: Section 2805 of Title 10, United States Code (2003):

Appendix III: DOD's Prioritization and Resourcing Process for 
Military Construction Projects:

Appendix IV; Services' Plans to Meet OSD's Three Key 
Investment Objectives:

Appendix V: Comments from the Department of Defense:

Tables:

Table 1: Comparison of the Military Services' Priorities for Military 
Construction Projects, Fiscal Year 2004:

Table 2: Comparison of the Military Services' Systems to Prioritize 
Military Construction Projects, Fiscal Year 2004:

Table 3: Planned Status for Achieving OSD's Objective of Fully Funding 
Sustainment by Military Service and DOD-wide, Fiscal Years 2004 through 
2009:

Table 4: Planned Status for Achieving OSD's Objective of Attaining a 
67-Year Recapitalization Rate by Military Service and DOD-wide, Fiscal 
Years 2004 through 2009:

Figures:

Figure 1: Examples of Pre-World War II-Era Facilities:

Figure 2: Examples of Undersized or Inadequate Facilities:

Figure 3: Percent Distribution of Military Construction Funding by 
Specific Area of Emphasis in the Military Construction Appropriation 
Act for Fiscal Year 2004:

Figure 4: Summary of the Military Construction Process, Fiscal Year 
2005:

Figure 5: Military Services' Planned Annual Restoration and 
Modernization Funding, Fiscal Years 2004 through 2009:

Abbreviations:

DOD: Department of Defense:

OSD: Office of the Secretary of Defense:

United States General Accounting Office:

Washington, DC 20548:

February 24, 2004:

The Honorable Kay Bailey Hutchison: 
Chairman: 
The Honorable Dianne Feinstein: 
Ranking Minority Member: 
Subcommittee on Military Construction:  
Committee on Appropriations: 
United States Senate:

The Department of Defense's (DOD) military construction program 
provides funding for construction projects in the United States and 
overseas, and funds most base realignment and closure costs. In recent 
years, military construction funding has averaged $8-10 billion per 
year, but recent estimates from the Office of the Secretary of Defense 
(OSD) indicate that it would cost between $62 billion and $164 billion 
in total to adequately improve facilities to a level that would meet 
the department's facility condition goals. DOD attributes this high 
cost estimate to the fact that many DOD installations and facilities 
have not been sufficiently maintained or renovated for many years. 
Defense facilities include buildings such as barracks, administrative 
space, classrooms, hangars, warehouses, maintenance buildings, 
churches, and child development centers, as well as nonbuildings such 
as runways, roads, railroads, piers, and utility structures and 
systems. Including family housing, DOD's facilities and structures 
number more than 600,000, with a replacement value of about 
$600 billion. In the absence of proper maintenance, referred to as 
"sustainment" by DOD, these facilities deteriorate 
prematurely.[Footnote 1] Without periodic recapitalization, facilities 
can become obsolete and can no longer be cost-effectively renovated and 
must be replaced with new construction.[Footnote 2] Consequently, DOD 
and active military service officials report that some facilities are 
in such a deteriorated condition that they adversely affect missions 
supported by such facilities and negatively affect the quality of life 
of military personnel and their families. DOD and Congress have 
recognized the need to fully fund the maintenance and recapitalization 
of facilities, as well as to reduce DOD's inventory of facilities 
through an upcoming round of domestic base realignments and closures 
authorized for fiscal year 2005.[Footnote 3] DOD is also reexamining 
worldwide basing requirements, which could potentially lead to 
significant changes in facility requirements over a period of years.

Military construction[Footnote 4] funds may be used for the restoration 
and modernization[Footnote 5] of existing facilities or to fund the 
construction of new buildings and other facilities, referred to by DOD 
as "new footprint" projects. Operation and maintenance funds can also 
be used to pay for restoration, modernization, and small construction 
projects. However, operation and maintenance funds are used primarily 
to support sustainment activities, which are designed to keep 
facilities in good working order. Sustainment covers expenses for all 
recurring maintenance costs and contracts, as well as for major repairs 
of nonstructural facility components (e.g., replacing a roof or 
repairing an air-conditioning system) that are expected to occur during 
a facility's life. In 1982 Congress established maximum amounts of 
funds that could be applied to unspecified minor military construction 
projects and upwardly adjusted these amounts, or thresholds, through 
1991 and 2001.[Footnote 6] Currently, an unspecified minor military 
construction project is a military construction project that has an 
approved cost estimate equal to or less than $1.5 million, or equal to 
or less than $3 million if the project is intended solely to correct a 
deficiency that threatens life, health, or safety. In addition to the 
use of military construction funds for unspecified minor construction 
projects, service Secretaries may use operation and maintenance funds 
for such projects with estimated costs of not more than $750,000 for 
any other unspecified minor military construction project or 
$1.5 million to correct deficiencies threatening life, health, or 
safety.

In 2003 we issued two reports on the funding and planning to improve 
the condition of facilities for the active services and reserve 
components.[Footnote 7] In those reports, we focused on issues 
associated with the sustainment of facilities and reported that the 
funding spent on facility sustainment had not been sufficient to halt 
the deterioration of facilities. In response to your request, this 
report discusses (1) the steps that OSD has taken to enhance the 
management of the military construction program, (2) whether the 
process by which military construction projects are prioritized and 
resourced ensures that all categories of facilities that affect the 
services' ability to accomplish their mission and improve quality of 
life are reached, and (3) the advantages and disadvantages of 
increasing the current funding thresholds for constructing and 
repairing facilities. This report focuses on nonhousing issues 
concerning military construction inside the United States and generally 
does not address issues associated with military family housing and 
overseas construction programs.[Footnote 8]

In conducting our review, we interviewed OSD and service officials to 
obtain information related to OSD's roles, policies, directives, 
procedures, and practices for managing the military construction 
program and to assess the military construction prioritization and 
programming process. We also visited 20 military installations and 
eight major commands to observe the condition of the facilities, and to 
discuss their role in the military construction program, the impact of 
projects added by Congress during the appropriation process, and the 
impact of legislative threshold levels for funding military 
construction projects. We conducted our work from February through 
November 2003 in accordance with generally accepted government auditing 
standards. A more thorough description of our scope and methodology is 
presented in appendix I.

Results in Brief:

Recognizing the need to halt the degradation of defense facilities, OSD 
has taken a number of steps to enhance the management of the military 
construction program by providing guidance through a facilities 
strategic plan and by standardizing practices through selected 
management tools. However, some of these tools are not completed, and 
others have weaknesses that hinder DOD's efforts to sustain and 
recapitalize facilities. In the 1990s the services did not allocate 
full funding for their facilities--sustainment averaged about 
75 percent of identified needs, and facilities recapitalization 
averaged about 35 percent of the services' requirements--resulting in 
too many deteriorated and obsolete facilities. Consequently, in recent 
years, OSD has sought to strengthen its role in guiding and overseeing 
facilities improvements. For example, OSD developed an installation 
readiness reporting system in 1999 to provide a top-level assessment of 
the condition of its facilities and to ascertain the effect that 
facility conditions have on readiness. However, the system does not 
provide consistent information between the services on the condition of 
facilities. Another OSD management tool, a defense facilities strategic 
plan,[Footnote 9] outlines long-term strategic goals for installations 
and facilities. Yet, the plan, which is under revision, lacks 
comprehensive information on the specific actions, time frames, 
assigned responsibilities, and resources that are needed to meet DOD's 
vision for facilities. OSD also developed an initial DOD-wide system to 
calculate the recapitalization rate associated with given amounts of 
military construction funding and to generate an annual funding 
requirement for recapitalization.[Footnote 10] DOD plans to upgrade and 
recalibrate this metric in the near future. Additionally, OSD 
established three key objectives for the services to sustain and 
improve the conditions of their facilities in its Defense Planning 
Guidance for fiscal year 2004.[Footnote 11] Currently, these objectives 
are to fully fund sustainment starting in fiscal year 2004, reach a 67-
year average recapitalization rate by fiscal year 2008, and improve the 
condition of facilities so that deficiencies have only a limited effect 
on mission performance by fiscal year 2010.[Footnote 12] However, 
because of competing funding priorities and programs within the defense 
budget, the services do not plan to meet OSD's facility objectives 
within the expected time frames and, in those instances where the 
services do indicate or intend to meet the objectives, their plans are 
based on future funding that requires unrealistically high rates of 
increase when compared with previous funding trends and when considered 
against other defense priorities. Given DOD's competing funding 
pressures and given that (1) the process of realigning and closing 
bases to reduce DOD's excess infrastructure from the 2005 round of 
closures and (2) a reexamination of worldwide basing requirements will 
take several years to accomplish, improvements in facilities will 
likely require much longer to accomplish than suggested by DOD's three 
key objectives.

DOD's process of prioritizing and resourcing military construction 
projects provides an important means of improving whole categories of 
facilities but can repeatedly postpone addressing important projects 
outside of those categories. If left unchecked without periodic 
reassessments, the process can continually defer projects important to 
installations' ability to accomplish their mission and improve 
servicemembers' quality of life. As much as 77 percent of military 
construction funds appropriated in any one year are distributed among 
specific areas of emphasis, including housing, annual unspecified cost 
estimates, and the services' major priorities. For example, OSD has 
made the quality of housing--including military family housing and 
barracks--one of the department's highest priorities, amounting to 
approximately 54 percent of military construction funding appropriated 
in fiscal year 2004. In addition, funding for annual unspecified costs-
-which includes base realignment and closure activities, the North 
Atlantic Treaty Organization facility contribution, and facility 
planning and design--was approximately 9 percent of the military 
construction budget in fiscal year 2004.[Footnote 13] Funding for the 
services' major priorities, such as physical fitness facilities and 
aircraft hangars, was approximately 14 percent in fiscal year 2004. The 
remaining 23 percent of military construction funding for installations 
was insufficient to repair the remaining categories of facilities, 
including those affecting the services' ability to accomplish their 
mission and improve servicemembers' quality of life. For example, even 
though installation and major command officials have a large list of 
military construction projects in backlog, only a small fraction of 
these projects are submitted for consideration each year. In practice, 
installation officials often do not submit projects that do not 
fall into the specific areas of emphasis and sometimes are directed by 
the major commands to limit the number of projects that they can submit 
for consideration. Furthermore, annually, some high-priority, high-
cost projects are postponed to future years because their addition to 
the current year's military construction program causes an increase in 
the total funding that exceeds the services' predetermined military 
construction funding level for that funding year. Often, officials 
would replace these high-cost projects with several lower-priority, 
lower-cost projects to come as close as possible to, but not exceed, 
this established funding level. In recent years, Congress has added 
various military construction projects during the annual appropriations 
process to address what it has considered as inadequate requests for 
military construction funding. Funding of these projects may require 
adjustments in DOD's plans since they may not always align with DOD's 
short-term priorities.

Increasing current funding thresholds for using construction funds and 
operation and maintenance funds for unspecified minor military 
construction projects would give DOD more funding flexibility at the 
installation level but might need to be balanced against reducing 
congressional oversight of funding for the projects affected by these 
thresholds. Construction costs have increased 41 percent since the 
existing $1.5 million threshold for using unspecified minor 
construction funds and 7 percent since the existing $750,000 threshold 
for using operation and maintenance funds were last adjusted 
respectively upward in 1991 and 2001. As a result, fewer projects that 
are smaller in scope can now be completed using unspecified minor 
military construction funds or operation and maintenance funds. 
Additionally, some installation officials often scale back the scope of 
a project in order to meet the current thresholds. In doing so, 
however, they can compromise design characteristics with a facility 
that lacks capacity for future growth, making it potentially inadequate 
in future years. When projects are funded under the statutory 
thresholds, they can be completed during the same year as identified 
without seeking approval through the traditional, multiyear military 
construction prioritization and resourcing process. As a result, 
service and installation officials stated that the thresholds limit 
their ability to quickly respond to unanticipated, urgent construction 
requirements. If the thresholds were increased, Congress could lose 
oversight of the additional projects funded under these thresholds 
because such construction projects are not specifically identified in 
the President's budget submissions. Yet, there are alternatives to 
preserve oversight, such as coupling the increased thresholds with 
periodic reports on the usage of those funds.

We recognize that fully reversing DOD's deteriorating infrastructure 
may take many years to be realized. A key step in the process is 
reducing excess infrastructure--as expected in the upcoming base 
realignment and closure round--which would permit a greater 
concentration of available resources on enduring facilities. Beyond 
that, improvements can be made in various management tools and 
processes for deciding military construction priorities. Accordingly, 
we are making recommendations to (1) complete the management tools, 
including the revision of the defense facilities strategic plan, for 
standardizing military construction and costs and improving facilities; 
(2) reevaluate the time frames for completing the three key objectives 
to reflect that there are competing funding priorities and that the 
process of realigning and closing domestic bases to reduce DOD's excess 
infrastructure and realigning overseas facilities will take several 
years to accomplish and could affect meeting facilities' investment 
goals; and (3) develop a mechanism for periodically reassessing 
military construction priorities for facility categories that fall 
outside the department's specific areas of emphasis to ensure that the 
risk of delaying proposed military construction projects with potential 
operational and quality of life impacts is being given appropriate 
consideration. We are also suggesting that Congress may wish to 
consider the advantages and disadvantages of increasing the funding 
thresholds for unspecified minor construction projects.

In comments on a draft of this report, DOD concurred or partly 
concurred with our recommendations. The department also provided 
technical clarifications, which we incorporated as appropriate.

Background:

DOD manages the world's largest dedicated infrastructure, covering 
more than 46,000 square miles of land and facilities worth more than 
$600 billion. To enhance and maintain this infrastructure, two separate 
defense appropriations are written annually: (1) military construction 
appropriations dedicated to military construction and (2) national 
defense appropriations, including operation and maintenance funding for 
facility sustainment and minor construction.[Footnote 14] There are 
also supplemental appropriations. The military construction 
appropriations fund construction projects and some of the facility 
sustainment, restoration, and modernization of the active Army, Navy 
and Marine Corps, Air Force, and their reserve components;[Footnote 15] 
additional defensewide construction; U.S. contributions to the North 
Atlantic Treaty Organization security investment program;[Footnote 16] 
and military family housing operation and construction. These military 
construction appropriations also provide funding for base realignment 
and closure activities, including the construction of new facilities 
for transferred personnel and functions, and environmental cleanup at 
closing sites. According to DOD, such costs are still being incurred 
from prior base closure rounds and are likely to be significant for the 
2005 round if a large number of closures and realignments are approved. 
However, such costs may be viewed as a necessary upfront investment if 
significant reductions in excess facilities are to be made. Over the 
long term, such reductions could be key to rationalizing DOD's 
facilities infrastructure and permitting a greater concentration of 
available facilities funding to enduring facilities. In addition, 
construction and sustainment of morale, welfare, and recreation-related 
facilities are partially funded through proceeds of commissaries, 
recreation user fees, and other nonappropriated income. At 
installations located overseas, host-nation-funded construction 
programs are often a part of the burden-sharing arrangement between the 
United States and the host country and represent a large source of 
major construction funds for these U.S. installations.[Footnote 17]

Sustainment, Restoration, and Modernization:

Operation and maintenance funds are used mostly to support facility 
sustainment, which covers the day-to-day expenditures associated with 
routine maintenance such as repairing or replacing broken windows, 
doors, or restroom plumbing, as well as larger repair and maintenance 
projects such as installing a new roof or air-conditioning and heating 
systems. Both operation and maintenance funds and military construction 
funds can be used to finance facility restoration and modernization 
activities. Military construction and operation and maintenance funds 
designated for facility restoration are used to repair and replace 
items damaged by inadequate sustainment, excessive age, natural 
disaster, fire, accident, or other nonroutine causes. Funds designated 
for modernization are used to alter or modernize facilities to meet new 
or higher standards, accommodate new functions, or replace structural 
components. In addition, the construction of new facilities is mostly 
funded with the military construction appropriations. Conference 
reports accompanying military construction funding bills specify the 
amounts and the projects for which military construction appropriations 
are to be used.

According to DOD, providing funds for full sustainment is the most 
cost-effective approach to managing facilities because it provides the 
most performance over the longest period for the least investment. 
Without adequate sustainment, the expected life of a facility is 
reduced and facilities must be recapitalized sooner, although, even 
with adequate sustainment, facilities eventually wear out or become 
obsolete over time. An obsolete facility is one that is irrelevant to 
present-day missions regardless of its condition; for example, a 
maintenance shop built in the 1950s may be too narrow and small to 
accommodate large tanks and vehicles. Once a facility reaches the end 
of its expected service life, it must be recapitalized--that is, 
replaced, extensively renovated, or modernized. DOD estimates that an 
average recapitalization rate of 67 years allows fully sustained 
facilities to meet the department's requirements. Recapitalization 
investments can also be made periodically throughout a facility's 
service life, which extends service life and delays the need for 
replacement. Moreover, even after recapitalization investments are 
made, facility performance can rapidly decline in the absence of 
adequate sustainment.

Military Construction Prioritization and Resourcing Process:

The process for identifying construction needs, obtaining military 
construction funds, and completing a project typically lasts from 5 to 
8 years. During this period, OSD and the services review each 
construction project and request individual project funding approval 
from Congress.

The DOD prioritization and resourcing process for military construction 
projects flows from OSD's and the services' guidance. This guidance 
describes OSD's objectives for improving facilities, identifies the 
services' categories of facilities that would receive priority in 
funding military construction projects, and assigns organizational 
responsibilities for the process. On the basis of this guidance, each 
installation identifies needed construction projects and develops the 
description and justification for each project. Installation officials 
are supposed to prioritize their projects and submit their highest 
priorities to their respective major commands. Major commands verify 
the various installation submissions, review and validate the cost 
estimates, compile the installations' lists into one command list, 
prioritize the command's list, and submit that list to the service 
headquarters. In addition, a major command may add its own military 
construction projects to its list.[Footnote 18] Similarly, the service 
headquarters review and validate the cost estimates and compile the 
major commands' lists into one service list. The service identifies 
projects on the list that must be funded in the immediate fiscal year 
and places those projects at the top of its priority list. Next, the 
service assigns a numerical rating to the remaining projects that 
reflects the projects' mission and impact. The projects with the 
highest rating based on this scoring process are combined with the 
"must-fund" projects to form the service's priority list of proposed 
military construction projects. A similar process is used for military 
construction projects planned for installations located overseas.

OSD reviews each of the services' submissions to ensure that the 
projects comply with financial requirements and the department's 
objectives and guidance, such as the 67-year average recapitalization 
rate and the maximum, allowable military construction funding for the 
budget year. The Office of the Under Secretary of Defense 
(Comptroller),[Footnote 19] in conjunction with other OSD offices--such 
as the Office of the Under Secretary of Defense for Acquisition, 
Technology and Logistics[Footnote 20]--reviews proposed construction 
projects to confirm and adjust requirements as necessary. The 
Comptroller issues program budget decisions to the services, which 
communicate his decision on projects. Once OSD has approved the 
projects, it submits a listing of approved projects to the Office of 
Management and Budget, which approves and submits the final 
construction project budgets to Congress as part of DOD's overall 
annual budget submission. The budget request for military construction 
funding each fiscal year includes major construction, project planning 
and design, and unspecified minor construction. Congress annually 
specifies the amounts and the projects for which military construction 
appropriations are to be used. A more thorough description of the 
department's prioritization and resourcing process for military 
construction projects is presented in appendix III.

Prior GAO Reports on DOD's Facilities Management Program:

We have conducted a number of reviews that identified areas in which 
DOD and the services could improve their facilities management program. 
Since 1997 we have identified DOD infrastructure management as a high-
risk area. In September 1999 we reported on the management of DOD's 
facility maintenance and repair programs and recommended that the 
Secretary of Defense (1) develop a way to link the department's needs 
assessment with both resource allocations and tracking systems that 
show whether high-priority needs are receiving funding, (2) establish 
standardized condition assessment criteria, and (3) have the services 
adopt a valid engineering-based assessment system for facilities 
maintenance.[Footnote 21] In 2001 we reported that DOD needed to 
develop a comprehensive long-range plan for its facilities 
infrastructure that addresses facility requirements, recapitalization, 
and maintenance and repair needs.[Footnote 22] In a June 2002 report, 
we examined the condition of barracks used to house military recruits 
in basic training and concluded that, to varying degrees, most barracks 
were in significant need of repair, although some were in better 
condition than others.[Footnote 23] In January 2003 we designated 
federal real property governmentwide as a new high-risk area.[Footnote 
24]

In February 2003 we reported that DOD's three objectives for 
sustainment and improvement of facility conditions may not be 
achievable because services do not propose to fully fund them or have 
developed funding plans that have unrealistically high rates of 
increase in the out-years when compared with previous funding levels 
and against other defense priorities[Footnote 25]. We found that while 
deteriorated facilities are common on many installations, there is a 
lack of consistency in the services' information on facility 
conditions, making it difficult for Congress, DOD, and the services to 
direct funds to facilities where they are most needed and to measure 
progress in improving facilities. In reviewing a draft of this report, 
officials clarified that mission impact, and not facility condition 
alone, drives the allocation of funds to where they are most needed. 
We also found that while the services had originally planned to fund 
sustainment at no less than 78 percent of requirements in fiscal year 
2002, officials determined that these levels of funding could not be 
achieved if needs such as civilian pay, emergency needs, and "must-pay" 
bills were to be funded. In May 2003 we reported that the reserve 
components are unlikely to meet DOD's three objectives as wel[Footnote 
26]l. Some officials acknowledged that even when their components have 
expressed intent to meet DOD's objectives, their funding plans included 
unrealistically high rates of increase during the out-years when 
compared to previous funding trends and against other defense 
priorities. We also concluded that the reserve components face 
challenges in implementing two potential cost-saving initiatives--
joint construction projects and real property exchanges--and that OSD 
has not provided overall direction for the program, thus risking the 
exchange of property that may be needed by other DOD components.

Strategic Plan and Management Tools Weaknesses Limit Efforts to Improve 
Facilities:

Recognizing the need to halt the degradation of defense facilities, OSD 
has taken a number of steps to enhance the management of the military 
construction program by providing guidance through a facilities 
strategic plan and by standardizing practices via a number of selected 
management tools. In the 1990s the services did not allocate full 
funding for their facilities, resulting in too many deteriorated and 
obsolete facilities. However, some of OSD's tools are not completed and 
others have weaknesses that limit efforts to improve facilities. For 
example, the installation readiness reporting system does not have 
consistent information on the condition of facilities, the defense 
facilities strategic plan lacks comprehensive information and is being 
revised, and the recapitalization model to generate an annual 
recapitalization requirement is not yet completed. Furthermore, the 
services do not plan to meet OSD's key objectives for improving 
facilities in the near future because of competing funding priorities 
and programs within the defense budget. In those instances where 
service officials have indicated their intent to meet the objectives in 
future years, their plans are based on future funding that requires 
unrealistically high rates of increase in appropriations when compared 
with previous funding trends and when considered against other defense 
priorities.

Underfunding of Sustainment and Recapitalization Led to Facility 
Deterioration and Obsolescence:

DOD and service officials have said that past underfunding for 
sustainment and recapitalization has led to the deterioration and 
obsolescence of facilities used by the military services. In the 1990s 
the services did not allocate full funding for their facilities--
sustainment averaged about 75 percent, and facilities recapitalization 
averaged about 35 percent of the services' requirements--resulting in 
too many deteriorated and obsolete facilities. For example, Army 
officials have testified that available sustainment funding since the 
early 1990s was approximately 60 percent of what was needed. Air Force 
officials also testified that facility sustainment funding shortfalls 
have hindered the service's efforts to sustain and operate Air Force 
facilities and limited the Air Force to providing day-to-day 
maintenance for facilities. Navy and Marine Corps officials also 
testified that their services have consistently underfunded facility 
sustainment. As a result of this underfunding, the services' repair 
backlogs increased significantly, from $8.9 billion to $14.6 billion 
during fiscal years 1992 through 1998. Also, 68 percent of DOD's 
facility classes--which are groupings of like facilities, such as 
operations and training, mobility, and supply--were rated C-3 
(significant facility deficiencies that prevent it from performing some 
missions) or C-4 (major facility deficiencies that preclude 
satisfactory mission accomplishment) in fiscal year 2001--a slight 
improvement from the 69 percent rate in 2000.

After these years of neglect, some important missions remain in pre-
World War II-era structures that were built for purposes other than 
their current use and require more frequent restoration and 
sustainment. (See fig. 1.) For example, the Army uses horse stables 
constructed in 1934 as a vehicle maintenance shop at Fort Benning, 
Georgia, and the Marine Corps uses deteriorated brick and steel hangars 
constructed in 1935 to house helicopters at Marine Corps Air Station 
Quantico, Virginia.

Figure 1: Examples of Pre-World War II-Era Facilities:

[See PDF for image]

[End of figure]

During our visits to installations, we found that the services also 
sometimes work in maintenance facilities, training facilities, supply 
and storage facilities, airfields, and deployment facilities that are 
deteriorated and/or do not meet standards. Maintenance bays, runway 
aprons, and other facilities are often undersized or inadequate for the 
mission, as illustrated in figure 2.

Figure 2: Examples of Undersized or Inadequate Facilities:

[See PDF for image]

[End of figure]

Military services officials attributed this consistent underfunding to 
constrained defense budgets and competing priorities. They also reflect 
insufficient efforts to reduce excess facilities and concentrate 
resources on enduring facilities. The services have also routinely 
traded off infrastructure and modernization funding to shore up other 
readiness activities. Past sustainment and military construction 
funding levels allowed the services to provide only minimal day-to-day 
critical maintenance of their facilities and infrastructure. While 
installations continue to operate, local personnel and service members 
are increasingly required to develop workarounds--or adjustments to 
normal operating procedures to compensate for deteriorated or 
inadequate facilities--which affected their operational efficiency. 
This underfunding was recognized in the 1997 Quadrennial Defense Review 
report,[Footnote 27] which noted that the department should "program 
more accurately for the costs of operating the defense establishment." 
However, as discussed below, this underfunding continues today.

OSD Took Steps to Provide a More Consistent Approach to Facilities, 
but Some Steps Remain Incomplete:

Recognizing the need to halt the degradation of defense facilities, OSD 
took a number of steps--such as developing an installation readiness 
reporting system, a facilities strategic plan, and other management 
tools--to help standardize the facility sustainment and 
recapitalization process and to plan military construction projects; 
however, some of these management tools are incomplete. Historically, 
each service had established its own criteria for assessing the 
condition of its properties and the urgency for repairs, prioritizing 
maintenance needs, and deciding how much to allocate for maintenance 
and military construction funding. At the same time, each service had 
different standards for sustaining and recapitalizing facilities. As a 
result, the services had created widely varying living and working 
conditions.

In an attempt to provide Congress with a measure of facilities' 
conditions and their ability to support military missions, DOD issued 
its first installations' readiness report in 1999.[Footnote 28] DOD 
developed the report to fulfill its reporting requirement to Congress 
under section 117 of title 10 of the United States Code, which 
specifies that DOD measure the capability of defense installations and 
facilities to provide appropriate support to forces in the conduct of 
their wartime missions. Within the report, each military facility falls 
under one of nine facility classes, which are groupings of like 
facilities, such as operations and training, mobility, and supply. The 
services' major commands assign condition ratings to each facility 
class using a scale of C-1 through C-4: C-1 facilities have only minor 
deficiencies with negligible impact on capability to perform missions; 
C-2 facilities have some deficiencies with limited impact on capability 
to perform missions; C-3 facilities have significant deficiencies that 
prevent performing some missions; and C-4 facilities have major 
deficiencies that preclude satisfactory mission accomplishment. 
According to DOD's guidance, the services were permitted to report 
readiness without modifying their existing assessment processes. As a 
result, all four services are using different systems and criteria to 
assess facility conditions and develop condition ratings. Consequently, 
in February 2003 we reported that the services used different kinds of 
facility raters and procedures, assessment scopes and frequencies, 
appraisal scales, and validation procedures, all of which resulted in 
inconsistencies and a lack of comparability in their ratings.[Footnote 
29] Without a consistent cross-service system for assessing facility 
conditions and developing ratings, DOD and the services cannot be 
assured that their funding decisions effectively target facilities in 
the greatest need and that the reported ratings accurately measured 
progress in facility condition improvements. This system is currently 
under review by the department.

OSD's first defense facilities strategic plan, published in August 
2001,[Footnote 30] was the result of years of work with the services 
and defense agencies to standardize and develop terminology, concepts, 
and models, and to shape the information into an achievable long-range 
plan. The vision set forth in the plan is to have installations and 
facilities available when and where needed to effectively and 
efficiently support missions. To achieve this vision, the strategic 
plan outlines four long-term strategic goals. These strategic goals are 
to (1) locate, size, and configure defense installations and facilities 
to meet the requirements of today's and tomorrow's force structures; 
(2) acquire and sustain defense installations and facilities to provide 
mission-ready installations with quality living and work environments; 
(3) leverage resources--money, people, and equipment--to achieve the 
proper balance between requirements and available funding; and (4) 
improve facility management and planning by embracing best business 
practices and taking advantage of modern asset-management techniques 
and performance-assessment metrics. The plan is intended to provide a 
unifying framework for the department in achieving these strategic 
goals and identifies several key initiatives to achieve OSD's vision of 
modern, cost-efficient installations and facilities supporting 
operational readiness. However, in February 2003 we reported that the 
plan lacked the comprehensive information that makes a strategic plan 
useful and that most strategic plans encompass.[Footnote 31] For 
example, it did not contain detailed information on (1) the specific 
actions that are needed to achieve each of the four goals; (2) the 
methods or processes that would be used to achieve each goal; (3) the 
amount of funding or other resources needed to reach the goals; (4) the 
time frames and milestones; (5) the assignment of responsibilities (in 
other words, the entity accountable for completing each goal); and (6) 
the performance measurement tools to use to determine the progress 
being made toward each goal. At that time, we recommended that OSD 
revise its defense facilities strategic plan to include detailed 
information on specific actions, time frames, responsibilities, and 
funding levels. OSD officials said the plan is being revised and is 
expected to be completed in early 2004.

In 2001 OSD began using its initial facilities recapitalization metric, 
which provides a uniform mechanism for tracking recapitalization 
investments through the military construction accounts, augmented in 
some cases with operation and maintenance funds or working capital 
funds. Before that time, no single tool was employed DOD-wide to 
calculate the recapitalization rate associated with programmed funding 
levels. Each military service used its own metrics and accounting 
constructs to perform these computations. Implementing the Secretary's 
guidance required the development of a standard metric that would be 
relatively transparent within the programming and budgeting process. 
The metric considers the combined effect of construction and other 
investments on the physical plant. The metric is computed by dividing 
the recapitalizable plant replacement value by the total annual 
restoration and modernization investment.[Footnote 32] However, OSD 
officials plan to upgrade and recalibrate this metric and expect the 
upgrade to be completed in late 2004. Once completed, effective use of 
the tool will require a consistent level of funding each year to ensure 
that the projected recapitalization rate is realized.

In addition to its strategic plan and newly developed management tools, 
OSD has taken other steps to improve the management of its facilities, 
enhance accountability, and better measure and track performances, 
including the following:

* Facilities assessment database. In 1997 OSD created an integrated 
facilities assessment database from the services' real property 
database inventories. This database has transitioned into the source 
database for other DOD-wide databases and management tools, including 
the facilities sustainment model discussed below. It tracks key 
facility inventory and cost data, including the quantity, type, 
location, and status of buildings, structures, and all other military 
facility assets. Although the database provides an informative picture 
of the overall installation readiness levels organized by facility 
categories within the major commands and individual installations, it 
does not provide enough detail to determine the individual facility 
deficiencies that generate the readiness ratings.

* Facilities pricing guide. In 1999 OSD issued its first defense 
facilities cost factors handbook, now combined with the DOD Facilities 
Pricing Guide.[Footnote 33] The purpose of the pricing guide is to 
standardize the method by which the services determine the sustainment 
and military construction costs of their facilities. The cost factors 
are intended for macro-level analysis and planning, not for individual 
projects. Where possible, the pricing guide uses commercial benchmark 
costs to determine the annual cost per square foot (or similar unit of 
measure) to sustain and construct each facility type. However, the 
pricing guide does not take into account other factors affecting the 
cost of military construction, such as regional economic conditions 
that can affect construction cost significantly.

* Facilities sustainment model. In 1999 OSD developed the facilities 
sustainment model, which estimates the annual sustainment cost 
requirement, adjusted for area costs, for each service and defense 
agency, on the basis of the number, type, location, and size of its 
total inventory of facilities. The model generates an annual funding 
requirement that would sustain DOD's facilities throughout the budget 
year. As shown in appendix IV, however, the military services do not 
plan to fully fund their sustainment requirements before fiscal year 
2008. In addition, service officials expressed concern that the model 
does not provide accurate sustainment funding at the installation 
level--especially at installations with aging infrastructure that 
require a large amount of sustainment funds to maintain.

* Unified facilities criteria. In 2001 OSD created a series of 
documents, referred to as the "unified facilities criteria," to provide 
facility planning, design, construction, sustainment, restoration, and 
modernization criteria for DOD components. As of December 2003, only 71 
of the required 161 documents had been issued on various construction 
standards, such as energy conservation, structural design, fire 
protection, and seismic design. The building and construction codes and 
guidance established in these documents are designed to standardize and 
streamline the process for developing, maintaining, and disseminating 
criteria in support of the military construction program. For example, 
as part of the unified facilities criteria, DOD Antiterrorism 
Standards, DOD Instruction Number 2000.16, requires DOD components to 
adopt and adhere to common criteria and minimum construction standards 
to mitigate antiterrorism vulnerabilities and terrorist threats. OSD 
plans to complete the unified facilities criteria in fiscal year 2009.

* Improved budgeting methods. In 2002 OSD replaced the operation and 
maintenance-funded real property maintenance program with two distinct 
activities and accounting structures for (1) sustainment and 
(2) restoration and modernization, having already created a separate 
structure for demolition and disposal in fiscal year 1999. By tracking 
each element separately, it is now possible to link programs and 
budgets directly to program objectives and to better track performance 
relative to the objectives.

OSD also developed and implemented the facilities demolition and 
disposal program, by which the military services and defense agencies 
have demolished more than 80 million square feet of excess and obsolete 
facilities during fiscal years 1998 through 2003. The defense drawdown 
had left many military bases with structures that the services no 
longer need, are in poor condition, or have no remaining value. While 
demolishing these structures entails up-front spending, it allows the 
services to avoid sustainment, restoration, and modernization costs for 
these facilities. Estimates by OSD suggest that demolition projects pay 
for themselves in as little as 5 years. Notwithstanding these efforts, 
OSD and service officials maintain that the department's inventory of 
real property will still contain excess structures after the demolition 
program is completed. One previous estimate by the department in 1998 
indicated that it might have 20 to 25 percent excess capacity in 
facilities. By closing some domestic installations and consolidating 
overlapping activities within and across the services, OSD also intends 
to gain efficiencies and further reduce its inventory of facilities 
through the upcoming round of base realignments and closures authorized 
to start in 2005 by Congress.[Footnote 34] The process of realigning 
and closing bases, however, will take some years to accomplish and, 
while it is expected to produce significant long-term savings, it has 
typically required considerable up-front expenses. In addition, OSD and 
the services are reexamining worldwide basing requirements, which could 
potentially lead to significant changes in facility requirements over 
the next several years. Over the long-term, the elimination of excess 
facilities should permit a greater concentration of resources on 
enduring facilities.

Finally, OSD established three key objectives for the services to 
sustain and improve the conditions of their facilities in its Defense 
Planning Guidance for fiscal year 2004. Currently, these objectives are 
to fully fund sustainment starting in 2004, reach a 67-year average 
recapitalization rate by fiscal year 2008, and improve the condition of 
facilities so that deficiencies have only a limited effect on mission 
performance by fiscal year 2010. While OSD has periodically revised 
these investment objectives on the basis of the services' ability to 
meet them, the military services do not plan to fund most objectives in 
the near future because of competition for funds from other defense 
programs and priorities. Also, even when service officials indicate an 
intent to meet the objectives in future years, their funding plans 
suggest that they are unlikely to do so, given their unrealistically 
high rates of increase in the future when compared with previous 
funding trends and when considered against other defense priorities and 
programs, including the Global War on Terrorism, Operation Enduring 
Freedom, and other ongoing efforts such as the Balkans, military 
readiness, weapons procurement, and research and development. In 
addition, earlier this year we reported that the reserve components 
were unlikely to achieve OSD's investment objectives for improving 
facilities.[Footnote 35] At that time, reserve component officials were 
concerned that the components may not receive significant funding 
increases for facility recapitalization activities in the out-years 
because the reserve components are considered a low priority, from past 
experience. They also said that reserve components do not compete well 
with the active services and facilities generally do not compete well 
with other DOD programs and priorities during the budgeting process. 
Given DOD's competing funding pressures and given that the process of 
realigning and closing bases to reduce DOD's infrastructure will take 
several years to accomplish, improvements in meeting facility 
investment goals will likely require much longer than suggested by 
OSD's three key objectives. A more thorough description of the 
services' plans relative to OSD's three key investment objectives is 
presented in appendix IV.

Prioritizing and Resourcing Process Serves an Important Function but 
Has Limitations:

DOD's process of prioritizing and resourcing military construction 
projects provides an important means of improving whole categories of 
facilities but can repeatedly postpone addressing important projects 
outside of those categories. If left unchecked without periodic 
reassessments, the process can continually defer projects important to 
installations' ability to accomplish their mission and improve 
servicemembers' quality of life. As much as 77 percent of military 
construction funds are distributed among specific areas of emphasis, 
leaving a significantly small portion for individual installation 
requirements that affect the services' ability to accomplish their 
mission and improve servicemembers' quality of life. In addition, 
installations and major commands do not submit many restoration and 
modernization projects for funding consideration because the projects 
do not fall within the specific areas of emphasis and thus are 
perceived as being highly unlikely to receive funding. Also, some high-
cost priority projects are postponed for future years' funding because 
their addition would exceed the services' military construction funding 
level established for that budget year. Instead, they are replaced with 
multiple lower-cost projects whose total costs better fit the 
established funding level. Although Congress may add several projects 
during the appropriations process each year, addressing what it has 
considered as inadequate requests for military construction funding, 
the adds may not always reach the services' and installations' highest 
priorities.

Specific Areas of Emphasis Leave Little Funding for Other Facility 
Needs:

Most of the military construction funds appropriated in any one year 
are distributed among specific areas of emphasis, leaving a 
significantly smaller portion for other facility categories--some that 
affect mission operations and quality of life. OSD and the services 
have three specific areas of emphasis: housing, other annual 
unspecified costs, and the services' major priorities. About 
$2.2 billion (23 percent) of the $9.3 billion appropriated in fiscal 
year 2004 remains to fund installations' other military construction 
needs--including some that affect the services' ability to accomplish 
their mission and improve servicemembers' quality of life--after the 
three areas of emphasis are addressed. (See fig. 3.):

Figure 3: Percent Distribution of Military Construction Funding by 
Specific Area of Emphasis in the Military Construction Appropriation 
Act for Fiscal Year 2004:

[See PDF for image]

[End of figure]

Overall funding for housing and barracks in the Military Construction 
Appropriations Act, 2004[Footnote 36] was approximately $5 billion 
(54 percent of the total amount appropriated). In its 2001 defense 
facilities strategic plan, OSD made the quality of housing--military 
family housing and barracks--one of the department's highest 
priorities. At that time, DOD estimated that of the nearly 300,000 
family housing units, two-thirds were in need of significant 
restoration, modernization, or outright replacement. DOD estimated 
that using traditional military construction to complete renovations 
and replacements would cost $20 billion and take approximately 
30 years. Funding for family housing is $3.9 billion in fiscal year 
2004--$1.1 billion for family housing construction and privatization 
and $2.8 billion for family housing operation and maintenance. Funding 
for barracks is $1.2 billion in fiscal year 2004. Barracks are a high 
DOD priority because the department plans to eliminate common bath and 
shower facilities, or gang latrines, in barracks by 2008[Footnote 37]. 
In order to accomplish this objective, the services are not only 
renovating existing barracks but building new ones as well. These 
efforts are intended to improve the quality of life for junior service 
members, which in turn may improve morale, retention, and operational 
readiness.

Estimated funding for other annual unspecified costs--such as facility 
planning and design, base realignment and closure activities, and the 
North Atlantic Treaty Organization's security investment program--in 
the Military Construction Appropriations Act, 2004,[Footnote 38] was 
approximately $833 million (9 percent of the total amount 
appropriated). These annual unspecified costs are not justified on the 
basis of specific projects. For example, planning and design funds can 
be used for future projects that have not yet been appropriated or for 
completing the planning and design phase of appropriated projects. Base 
realignment and closure funds in fiscal year 2004 are mainly to finance 
environmental cleanup, caretaker, and property disposal activity costs. 
Historically, these funds have supported a wide range of requirements, 
ranging from a high of $3.9 billion in fiscal year 1996 to a low of 
$370 million in fiscal year 2004. Minor military construction funds are 
used for projects that fall under specific thresholds and are approved 
internally by OSD and the services. Finally, funds for the North 
Atlantic Treaty Organization's security investment program are for the 
collective defense of the North Atlantic Treaty area.

Funding for the services' major priorities in the Military Construction 
Appropriations Act, 2004,[Footnote 39] was approximately $1.3 billion 
(14 percent of the total amount appropriated). Projects that fit within 
the services' priorities are given a higher ranking and are more likely 
to receive funding. The services' major priorities are unique to the 
objectives of the services. Recently, the Army identified five 
categories of priorities, which include training ranges, mobilization, 
transformation, antiterrorism and force protection, and the Army's 
focus facility strategy to address Army National Guard readiness 
centers, Army Reserve centers, physical fitness facilities, trainee 
barracks or complexes, general instruction classrooms, vehicle 
maintenance and hardstand facilities, and chapels. Funding for these 
projects was $741 million of the military construction funding 
appropriated for fiscal year 2004. Funding for the Navy's major 
priorities, such as piers and hangars, was $266 million of the military 
construction funding appropriated for fiscal year 2004. Funding for the 
Air Force's priorities--consisting of new mission requirements, 
environmental compliance, and fitness centers--was $304 million of the 
military construction funding appropriated for fiscal year 2004. The 
Marine Corps does not have stated priorities for facilities--it is 
small enough to review and prioritize all proposed military 
construction projects submitted by its installations and commands.

While DOD's process of prioritizing and resourcing military 
construction projects provides an important means of improving whole 
categories of facilities, it can repeatedly postpone addressing 
important projects outside of those categories. If left unchecked 
periodically, the process can continually defer projects important to 
installations' ability to accomplish their mission and improve 
servicemembers' quality of life. The following are examples:

* Army officials told us that nearly all garrison projects at Aberdeen 
Proving Ground, Maryland, have not received funding because these 
projects are not considered a high enough priority. As a result, the 
installation rated three of its five facility categories as having 
significant deficiencies that limit it from performing some missions. 
For example, a centralized information science and supercomputing 
facility has been placed in the future years' defense plan and has been 
delayed for 10 years. Currently, computers and personnel are dispersed 
in several buildings, which significantly impairs operations and 
lengthens completion timelines. Officials predict that with the growing 
need for classified computer systems owing to such missions as 
transformation and future combat system development, the current 
facilities will be inadequate.

* A runway at Offutt Air Force Base, Nebraska, originally constructed 
in 1944, has not received funding since fiscal year 2001, even with 
Air Combat Command sponsorship, because it was not considered a high 
enough priority to be included in the budget request. In 1999 a 
recommendation was made to limit the runway to emergency use only. 
Annual maintenance costs amount to over a reported $400,000, and are 
rising. In addition, the Air Force's structural analysis indicates that 
the Offut runway must be replaced in fiscal year 2005 or face a 
significant chance of experiencing catastrophic failure resulting in 
significant damage to aircraft and loss of personnel.

* A bridge on Cheatam Annex, Yorktown Naval Weapons Station, Virginia, 
was found to be structurally unsound by the Navy and could not safely 
support munitions vehicles. The installation has submitted bridge 
replacement projects annually since 1996 but the project has not been 
prioritized high enough to secure funding. In the meantime, munitions 
trucks were required to detour 21 miles. By considering the bridge as 
part of the entire road system, the station received approval to 
finance the project with operation and maintenance funds in fiscal year 
2003.

* Aircraft parking aprons at Langley Air Force Base, Virginia, failed 
several inspections for safety in 1995, 1999, and 2002. Currently, its 
poor condition requires constant foreign object damage inspections and 
maintenance totaling 23,000 hours and at a reported $85,000 annually to 
maintain its limited usability. While the installation has submitted 
projects annually to repair the aprons, these projects have not been 
funded because other projects were considered by the Air Force to be 
higher in priority.

Installations and Major Commands Submit a Small Percentage of the 
Identified Military Construction Projects Each Year:

Every year, the number of military construction projects forwarded by 
installations and major commands to the next higher level for funding 
consideration is a small percentage of their identified requirements--
including those that affect the services' ability to accomplish their 
mission and improve servicemembers' quality of life. Also, even though 
installation officials have dozens of unfunded military construction 
projects in backlog, one as many as 10 years old, they submit only a 
small portion of these projects for funding consideration, knowing that 
only a limited number would get funded. For example, Marine Corps Camp 
Pendleton, California, submitted 5 projects for funding consideration 
in fiscal year 2004 even though it had identified 30 projects for the 
installation. In some instances, the major commands directed 
installations to limit the number of projects submitted for funding 
consideration. For example, Army instructions for submitting 
unspecified minor military construction projects dictate that the 
installation management agency can submit only up to 14 projects. It 
also notes that because of limited funding, only the top-priority 
projects are likely to receive funding. Other requests to limit the 
number of projects submitted for funding consideration appear to be 
based on unwritten guidance, which assumes that there would be only a 
very limited amount of military construction funding available to 
fulfill requirements.

Furthermore, after compiling and prioritizing the installations' lists 
of projects, major commands submit a small percentage of the 
installations' projects to the services. For example, the Air Force's 
Air Combat Command submitted 10 projects for funding consideration in 
fiscal year 2004 even though its subordinate installations had 
submitted 100 projects for funding consideration. Often, it uses a 
rule-of-thumb that about half of its submissions to the Air Force would 
be forwarded to OSD. In practice, DOD and the active services have come 
to rely on additional funding provided by Congress beyond the 
department's budget request to meet reserve component requirements 
while requesting funding for other priorities within DOD's budgetary 
constraints. Reserve component officials said they submit fewer 
military construction projects than their requirements, choosing to 
depend on the congressional adds. However, reserve component officials 
said many of their identified construction projects still go unfunded.

High Cost Projects Are Postponed to Future Years:

Some high-cost, high-priority military construction projects are 
postponed to future years' funding plans because the projects' cost 
would push the cumulative amount of funding over the services' military 
construction funding level established for that budget year. Often, 
officials would replace these high-cost projects with several lower-
priority, lower-cost projects to come as close as possible to, but not 
exceed, the established funding level. For example, at Fort 
Leavenworth, Kansas, a high-priority project to renovate an instruction 
facility was delayed twice in the 2002 and 2003 fiscal year budgets and 
moved to fiscal year 2005 because its estimated cost exceeded the 
Army's military construction funding level established for the earlier 
fiscal years. By delaying the project, the estimated cost for the 
project increased from $75 million to $79 million during this period. 
At the Naval Submarine Base New London, Connecticut, the Navy delayed 
replacing a pier from fiscal year 2004 to fiscal year 2005 because of 
the project's high cost.

Congressional Adds Address Long-term Service Needs but May Require 
Adjustments in DOD Planning:

Congress may add various projects during the appropriations process, 
addressing what it has considered as inadequate requests for military 
construction funding. Funding of these projects generally address long-
term service and installation needs but may require adjustments in 
DOD's plans since they may not always align with DOD's short-term 
priorities.

For example, Congress added 123 and 120 projects in fiscal years 2003 
and 2004, respectively, that were in addition to the 366 and 280 
projects that DOD requested during the same periods. According to DOD 
officials, while projects that are added by Congress during the 
appropriation process may match long-term military construction 
requirements they may not always address the services' highest 
priorities for the affected appropriation year and require adjustments. 
The following examples illustrate this point:

* In fiscal year 2003, Congress moved up and appropriated military 
construction funds for an Army National Guard readiness center 
originally programmed for fiscal year 2007.

* In fiscal year 2003, Congress moved up and appropriated military 
construction funds for a Navy fire station originally planned for 
fiscal year 2007.

* In fiscal year 2004, Congress moved up and appropriated military 
construction funds for a Marine Corps ground combat training range that 
was originally programmed for fiscal year 2009. This project was added 
ahead of some other Marine Corps projects already programmed for 
construction in earlier fiscal years.

* In fiscal year 2002, Congress moved up and appropriated military 
construction funds for an Army maneuver area training equipment site 
that was not in the Army's future years defense plan.

* In fiscal year 2002, Congress added 21 Air Force projects that were 
not in the Air Force's near-term integrated priority list. In addition, 
during fiscal year 2003, Congress added 25 projects that did not appear 
in the Air Force integrated priority list. However, Air Force officials 
indicated that many of the projects were in the Air Force's long-term 
plan.

Increasing the Current Funding Thresholds Gives DOD Additional 
Flexibility but Could Lessen Congressional Oversight:

Increasing current funding thresholds for using construction funds 
and operation and maintenance funds for unspecified minor military 
construction projects would give DOD installation officials more 
funding flexibility but might need to be balanced against reducing 
congressional oversight of projects affected by these thresholds. 
Construction costs have increased 41 percent since the $1.5 million 
threshold for using unspecified minor construction funds was last 
adjusted upward in 1991 and 7 percent since the $750,000 threshold for 
using operation and maintenance funds was last adjusted upward in 2001. 
As a result, fewer projects that are smaller in scope can now be 
completed using these funds. Additionally, installation officials 
sometimes scale back the scope of a project in order to meet the 
current thresholds. In doing so, however, they can compromise the 
design characteristics of a facility that lacks capacity for future 
growth, making the facility potentially inadequate in future years. 
When projects are funded under the statutory thresholds, they can be 
completed during the same year as identified without seeking approval 
through the traditional, multiyear military construction 
prioritization and resourcing process. As a result, service and 
installation officials stated that the thresholds limit their ability 
to quickly respond to unanticipated, urgent requirements. However, 
increasing these thresholds could reduce congressional oversight of the 
projects affected by these thresholds, unless offset by other means, 
such as coupling the increased thresholds with periodic reports on the 
usage of those funds.

Congress established maximum amounts of funds applicable to unspecified 
minor military construction projects in 1982 and upwardly adjusted 
these amounts, or thresholds, through 2001. Currently, an unspecified 
minor military construction project is a military construction project 
that has an approved cost equal to or less than $1.5 million. Such a 
project can have an approved cost equal to or less than $3 million if 
the project is intended solely to correct a deficiency that threatens 
life, health, or safety. Generally, as long as the minor construction 
project's cost estimates are below $750,000, no advance service 
Secretary's approval and congressional notification are required. 
Otherwise, the project may then be carried out only after the end of a 
21-day period after notification is received by Congress. In addition 
to the authorized use of military construction appropriations for 
unspecified minor projects, service Secretaries may use appropriated 
operation and maintenance funds for such projects estimated to cost not 
more than $1.5 million to correct deficiencies threatening life, 
health, or safety and $750,000 for any other unspecified minor military 
construction project.

Existing $1.5 Million Unspecified Minor Construction Fund Threshold 
Limits the Size and Scope of Projects:

The existing $1.5 million and $3 million cost estimate thresholds for 
using unspecified minor construction funds limit the size and scope of 
facilities to be constructed. (See appendix II for section 2805(a)(1) 
of Title 10, United States Code.) When projects are funded with 
unspecified minor military construction funds under these thresholds, 
they can be completed during the same year as identified without 
seeking approval through the traditional, multiyear military 
construction prioritization and resourcing process. However, because of 
the 41 percent increase in construction costs since 1991, when the 
threshold was last changed, fewer projects can now use minor military 
construction funds. Moreover, the scope of the projects that can be 
funded in this way is smaller than in 1991. Increasing the thresholds 
for minor construction projects would allow DOD components to respond 
more quickly to urgent, unanticipated requirements without seeking 
approval through the traditional, multiyear military construction 
prioritization and resourcing process. Depending on the size of an 
increase in the thresholds, OSD officials state that about 20 to 
30 projects could be affected annually and would reduce the number 
of projects requiring approval through the traditional, multiyear 
military process. The number of projects eligible for funding would 
still be contingent upon the total amount of military construction 
funds appropriated by Congress for unspecified minor military 
construction, regardless of the threshold being increased.

Increasing the funding thresholds for using unspecified minor military 
construction funds would help installations quickly respond to a 
greater number of smaller military construction projects that could 
also address priority needs. For example, officials at Fort McPherson, 
Georgia--intending to stay below the $3 million threshold for using 
unspecified minor military construction funds for projects involving 
life-, health-, or safety-threatening deficiencies--estimated the cost 
to construct an installation gate entrance at $2.85 million in fiscal 
year 2003. This project was identified as urgent because of force 
protection reasons, making the higher funding threshold of $3 million 
for unspecified minor military construction funds applicable. However, 
because contractor bids for constructing the project were in excess of 
$3 million, officials could not use unspecified minor construction 
funds. Instead, officials used emergency supplemental funds already 
allocated for another installation gate project. This resulted in 
deferring the other gate project to fiscal year 2004. In another 
example, Naval Station Bremerton, Washington, officials modified part 
of a former coal storage facility to accommodate space suitable for 
housing computer equipment to respond quickly to unanticipated and 
urgent requirements. In an effort to remain under the $1.5 million 
threshold, they incorporated the minimum requirements for the building-
-such as replacing flooring, securing unneeded exterior access, and 
including mechanical and electrical utility service--at a cost of 
$1.49 million. While officials told us the facility meets the bare 
minimum requirements, they stated that had the threshold been higher or 
the budget process faster, the project would have included better 
flooring, better climate control, and better ventilation. As a result, 
the existing facility lacks capacity for future growth, making it 
potentially inadequate in future years. Similarly, at Scott Air Force 
Base, Illinois, officials reduced the scope for a medical supply 
warehouse project from $2 million to $1.5 million by reducing the 
overall facility's square footage from 10,000 to 8,600 feet to meet the 
current $1.5 million threshold for unspecified minor military 
construction.

Unspecified minor military construction projects funded with military 
construction funds are included only in the department's annual review 
process and are not individually submitted to Congress for review and 
funding. Congress provides a lump sum amount for each of the services 
to execute such unspecified minor military construction projects. If 
the thresholds were increased, Congress could lose some oversight of 
those additional projects funded with unspecified minor military 
construction funds. Nevertheless, there are alternative oversight 
measures in addition to the 21-day notification and waiting period that 
could be employed to minimize the loss of oversight, such as a 
requirement for DOD to periodically report on the status of such 
projects.

Existing $750,000 Operation and Maintenance Fund Threshold Also Limits 
Project Size and Scope:

The existing $750,000 and $1.5 million thresholds for using operation 
and maintenance funds limit the size and scope of facilities to be 
constructed with this type of fund. (See appendix II for section 
2805(a)(1) of Title 10, United States Code.) When projects are funded 
with operation and maintenance funds under these thresholds, they can 
be completed during the same year as identified without seeking 
approval through the traditional, multiyear military construction 
prioritization and resourcing process. Military construction costs have 
increased 7 percent since these thresholds were last changed in 2001. 
According to installation officials, very few restoration and 
modernization projects can be completed for less than $750,000. Also, 
OSD reported that an increase in the existing thresholds would allow 
DOD components to respond to unforeseen requirements with more properly 
sized and scoped facilities, reducing the recapitalization rate faster 
by allowing more projects to be funded with operation and maintenance 
funds instead of using the traditional, multiyear military construction 
process. Still, since operation and maintenance funds are limited in 
terms of the amount allocated to each installation, service officials 
would have to weigh the alternatives of using the funds--either for 
minor construction projects, sustainment, or base operations support.

Increasing the funding thresholds for using operation and maintenance 
funds for unspecified minor military construction projects would allow 
installations to respond more effectively to urgent and unforeseen 
minor projects. For example, at Fort Rucker, Alabama, operation and 
maintenance funds were used to build a storage facility to support the 
aviation museum in fiscal year 2002 because the project could not 
compete well with higher-priority operational projects during the 
annual budget process. To accommodate the $750,000 operation and 
maintenance fund threshold, officials downsized the facility from a 
20,000-square-foot requirement to an 8,000-square-foot, bare-minimum 
storage facility with no heating or air conditioning, no finished space 
for offices or storage, no brick exterior, and limited phone service. 
Installation officials stated that the reduction in space requirements 
limits future storage needs but accommodates immediate requirements. In 
another example, Scott Air Force Base, Illinois, officials reduced the 
scope of a communications equipment warehouse project from a cost 
estimate of $1.1 million to $750,000 in order to use operation and 
maintenance funding in fiscal year 2004. To achieve this reduction, 
officials eliminated a paved road to the facility, reduced the 
warehouse space by 12 percent from the initial 5,350 square feet, and 
reduced office space by half. Also at Scott Air Force Base, officials 
reduced the estimated cost for an addition to the Airman Leadership 
School from $1.0 million to $750,000 in order to use operation and 
maintenance funds in fiscal year 2003. To achieve this reduction, 
officials reduced the finished area of the facility and eliminated 
showers in two bathrooms and landscaping. At Langley Air Force Base, 
Virginia, officials decided to reduce facility design requirements for 
an avionics building to stay below the $750,000 threshold for using 
operation and maintenance funds for minor construction. In doing so, 
according to one installation official, interior features were 
eliminated to the point that the structure will be little more than "a 
climate-controlled shell.":

Unspecified minor military construction projects funded with operation 
and maintenance funds can be executed within the year that the project 
is identified without congressional notice or review. Congress 
established a $200,000 threshold for using operation and maintenance 
funding for unspecified minor military construction projects in 1986. 
It increased this threshold to $300,000 in 1991, to $500,000 in 1996, 
and to $750,000 in 2001--the last time the thresholds were changed. If 
the thresholds were increased, Congress might lose some oversight of 
those projects funded with operation and maintenance funds falling 
under the increased thresholds because they are not specifically 
identified in the President's budget submissions. Usually, major 
command and installation officials determine how to use operation and 
maintenance funds for unspecified minor military construction projects, 
which are not individually presented in the President's budget 
submission. Again, however, Congress could restore some oversight by 
using other means of monitoring, such as annual reporting.

Conclusions:

While OSD has sought to adopt various management tools and objectives 
for standardizing military construction and costs and improving 
facilities, some are not completed and others have weaknesses, which if 
improved upon over time could help strengthen the management of DOD 
facilities. However, because of competing priorities, DOD is not likely 
to realize its investment objectives for facilities in the near term. 
More specifically, the services do not propose to fully fund all of 
OSD's objectives for improving facilities or, in some instances, the 
services have developed funding plans that have unrealistically high 
rates of increase in the out-years compared with previous funding 
trends and other defense priorities. The base realignment and closure 
round authorized for fiscal year 2005, while it carries with it a 
significant up-front investment cost to implement realignment and 
closure decisions, offers an important opportunity to reduce excess 
facilities and achieve greater efficiencies in sustaining 
and recapitalizing the remaining facilities if sufficient funding 
levels are maintained into the future. Additionally, DOD is reexamining 
its worldwide basing requirements, which could potentially lead to 
significant changes in facility requirements over the next several 
years. As these decisions are implemented over the next several years, 
this should permit DOD and the services to increasingly concentrate 
future resources on enduring facilities. Because of DOD's approach to 
assigning priority to proposed projects in special areas of emphasis 
and since certain categories of facilities continue to receive little 
or no military construction funding, it is not clear to what extent DOD 
has a mechanism for periodically reassessing military construction 
priorities to ensure that the risk of delaying proposed military 
construction projects that fall outside the specific areas of emphasis 
are being given appropriate consideration. Under the current process of 
prioritizing and resourcing military construction projects, those 
facilities--including both mission performance and quality of life 
facilities--not in the specific areas of emphasis may not always 
receive military construction funding for long periods of time even if 
their deterioration is significant. Unless DOD has a mechanism for 
periodically reassessing military construction priorities for facility 
categories that fall outside the department's specific areas 
of emphasis to ensure that the risk of delaying proposed military 
construction projects is being given appropriate consideration, certain 
categories of deteriorated and inadequate facilities will continue to 
receive no military construction funding year after year. Consequently, 
neglected facilities will continue to deteriorate over time, affecting 
the services' ability to accomplish their mission and improve 
servicemembers' quality of life.

While there are several advantages to increasing the funding thresholds 
for selected minor construction projects, these actions would also have 
to be balanced against the potential for reducing congressional 
oversight of those projects affected by the thresholds. Yet, changing 
the thresholds would increase installations' flexibility to address 
more of their facility problems quicker. The existing thresholds may 
not provide the funding levels needed on the basis of current 
construction costs. Lacking higher thresholds, installations will 
continue to use the multiyear prioritization and resourcing process for 
relatively inexpensive, minor military construction projects. 
Alternatives, such as a reporting requirement, could ensure some 
continued congressional oversight of those projects affected by easing 
the funding thresholds for unspecified minor construction projects.

Recommendations for Executive Action:

To help strengthen OSD's management and improve the condition of DOD 
facilities, we recommend that the Secretary of Defense direct the Under 
Secretary of Defense for Acquisition, Technology, and Logistics to take 
the following three actions:

* complete the department's management tools, including the revision of 
defense facilities strategic plan, to provide a more consistent 
approach to managing facilities and planning construction projects and 
costs;

* reevaluate the time frames for completing the three key objectives to 
reflect that there are competing funding priorities and that the 
process of realigning and closing domestic bases to reduce DOD's excess 
infrastructure and realigning overseas facilities will take several 
years to accomplish and could affect meeting facilities' investment 
goals; and:

* develop a mechanism for periodically reassessing military 
construction priorities for facility categories that fall outside the 
department's specific areas of emphasis to ensure that the risk of 
delaying proposed military construction projects with potential 
operational and quality of life impacts are being given appropriate 
consideration.

Matters for Congressional Consideration:

Congress may wish to consider the advantages and disadvantages of 
increasing the military construction funding thresholds and operation 
and maintenance funding thresholds for unspecified minor military 
construction projects.

Agency Comments and Our Evaluation:

In commenting on a draft of this report, the Principal Assistant Deputy 
Under Secretary of Defense (Installations and Environment) concurred or 
partially concurred with our recommendations and indicated some actions 
that are being taken to address them. DOD's comments are included in 
this report in appendix V. DOD also provided technical changes, which 
we incorporated as appropriate, including adjustments in values 
associated with selected areas of emphasis in military construction.

We are sending copies of this report to the appropriate congressional 
committees, as well as the Secretaries of Defense, the Army, the Navy, 
and the Air Force; the Commandant of the Marine Corps; and the 
Director, Office of Management and Budget. We will also make copies 
available to others upon request. In addition, the report will be 
available at no charge on GAO's Web site at http://www.gao.gov.

Please contact me at (202) 512-8412, or my Assistant Director, Mark 
Little, at (202) 512-4673 if you or your staff have any questions 
regarding this report. Robert B. Brown, Daniel Chen, J. Andrew Walker, 
R.K. Wild, and Jay Willer were major contributors to this report.

Signed by: 

Barry W. Holman, Director: 
Defense Capabilities and Management:

[End of section]

Appendix I: Scope and Methodology:

To assess the steps that the Office of the Secretary of Defense (OSD) 
has taken to enhance the management of the military construction 
program, we met with officials of OSD, military services, National 
Guard and Reserves, the Defense Logistics Agency, Tricare Management 
Activity, Department of Defense Education Activity, Central Command, 
Special Operations Command, Naval Sea Systems Command, Naval Facilities 
Engineering Command, U.S. Army Corps of Engineers, and the U.S. Army 
Installation Management Agency. At each organization, we discussed 
OSD's role in managing elements of the military construction program, 
OSD's management tools to standardize military construction and costs, 
and OSD's objectives for improving facilities. We also examined key 
documents related to OSD's efforts to standardize military construction 
and costs: the defense facilities strategic plan, installation 
readiness reporting system, facilities assessment database, facilities 
pricing guide, facilities sustainment model, recapitalization rate 
process, unified facilities criteria, and improved budgeting methods. 
To view the condition of facilities and new military construction 
projects first hand, we visited and met with officials from 20 
installations across the country: Aberdeen Proving Ground, Maryland; 
Fort Belvoir, Virginia; Fort Benning, Georgia; Fort Lewis, Washington; 
Fort Stewart, Georgia; Naval Air Station Whidbey Island, Washington; 
Naval Shipyard Puget Sound, Washington; Naval Station Coronado, 
California; Naval Station Everett, Washington; Naval Station Bremerton, 
Washington; Naval Station San Diego, California; Naval Station Norfolk, 
Virginia; Naval Submarine Base Bangor, Washington; Naval Weapons 
Station Yorktown, Virginia; Marine Corps Base Quantico, Virginia; 
Marine Corps Base Camp Pendleton, California; Andrews Air Force Base, 
Maryland; MacDill Air Force Base, Florida; Langley Air Force Base, 
Virginia; and McChord Air Force Base, Washington. We selected these 
installations because they represent a range of facility conditions, 
missions, major commands, and geographic locations. During our visits, 
we met with the facilities' occupants and obtained pictures that 
document facility conditions. To assess the likelihood that the 
military services will meet OSD's three objectives for improving 
facilities, we examined the services' current and projected funding 
plans for sustaining, restoring, and modernizing facilities to 
determine whether these plans would allow them to meet OSD's objectives 
by specified deadlines. We also compared the services' prior 
obligations for sustainment, restoration, and modernization with their 
future funding projections designed to reach OSD's objectives to 
determine whether the services' plans to address these issues are 
credible and realistic. We did not validate the services' reported 
sustainment or recapitalization requirements.

To determine whether the process by which military construction 
projects are prioritized and resourced ensures that all categories of 
facilities that affect the services' ability to accomplish their 
mission and improve quality of life are reached, we spoke with 
officials of the military services' headquarters, National Guard and 
Reserves headquarters, the Defense Logistics Agency, Tricare Management 
Activity, Department of Defense Education Activity, Central Command, 
Special Operations Command, Naval Sea Systems Command, Naval Facilities 
Engineering Command, Army Corps of Engineers, the U.S. Army 
Installation Management Agency, and Air Mobility Command, and visited 
Aberdeen Proving Ground, Maryland; Fort Belvoir, Virginia; Fort 
Benning, Georgia; Fort Lewis, Washington; Fort Stewart, Georgia; Naval 
Air Station Whidbey Island, Washington; Naval Shipyard Puget Sound, 
Washington; Naval Station Coronado, California; Naval Station Everett, 
Washington; Naval Station Bremerton, Washington; Naval Station San 
Diego, California; Naval Station Norfolk, Virginia; Naval Submarine 
Base Bangor, Washington; Marine Corps Base Quantico, Virginia; Marine 
Corps Base Camp Pendleton, California; Andrews Air Force Base, 
Maryland; MacDill Air Force Base, Florida; Langley Air Force Base, 
Virginia; and McChord Air Force Base, Washington. At each command or 
installation, we discussed the process by which military construction 
projects are prioritized and resourced and how significant facility 
needs are addressed during the process. Using budget data for fiscal 
years 1995 through 2004, we determined the impact of funding military 
family housing and barracks, annual unspecified cost estimates, and the 
services' major priorities on the amount of military construction funds 
remaining for individual installation needs. To determine whether the 
services' and installations' priority projects receive funding, we 
compared installations' and services' project priority lists for fiscal 
years 2002 and 2003 with the (1) list of projects approved by each 
service, (2) list of projects that accompanied the President's budget 
submission, and (3) list of projects that were approved and funded by 
Congress. During our visits to installations, we identified unfunded 
critical military construction projects, the reasons why they were not 
funded, and the effects of not funding these projects. Finally, we 
identified the number of military construction projects added during 
the annual appropriations process and compared these adds with the 
installations' and services' priorities for military construction.

To assess the advantages and disadvantages of changing existing funding 
and approval thresholds for constructing and repairing facilities, we 
met with officials of OSD and the military services. At each 
organization, we discussed the appropriateness of existing funding 
thresholds for unspecified minor construction projects, the 
effectiveness of the requirement for initiating congressional 
notification for reprogramming military construction funds, and the 
department's legislative proposals to increase the funding and approval 
thresholds and to change the notification requirement. We also reviewed 
the proposed legislative language and justification. To discuss the 
advantages and disadvantages of changing current funding and approval 
thresholds for constructing and repairing facilities at the 
installation level, we visited and met with officials from Aberdeen 
Proving Ground, Maryland; Fort Belvoir, Virginia; Fort Benning, 
Georgia; Fort Lewis, Washington; Fort Stewart, Georgia; Naval Air 
Station Whidbey Island, Washington; Naval Shipyard Puget Sound, 
Washington; Naval Station Coronado, California; Naval Station Everett, 
Washington; Naval Station Bremerton, Washington; Naval Station San 
Diego, California; Naval Station Norfolk, Virginia; Naval Submarine 
Base Bangor, Washington; Marine Corps Base Quantico, Virginia; Marine 
Corps Base Camp Pendleton, California; Andrews Air Force Base, 
Maryland; MacDill Air Force Base, Florida; Langley Air Force Base, 
Virginia; and McChord Air Force Base, Washington. In addition, we 
documented the increase in construction costs since fiscal year 1982 
according to the national income and product account tables for 
military structures, Bureau of Economic Analysis, Department of 
Commerce, and through discussions with OSD, service headquarters, and 
installation officials, and determined the effect of this increase on 
the ability of local and regional facility managers to execute 
unspecified minor construction projects under existing thresholds. We 
also interviewed officials at OSD, the services' headquarters, and 
installations to identify the impact of the waiting period and 
notification requirement for reprogramming military construction funds 
while facility managers wait for congressional approval.

In addition, our review focused on nonhousing issues concerning 
military construction inside the United States and generally did not 
address issues associated with military family housing and overseas 
construction programs. These facilities ranged from administrative 
offices, airfields and terminals, and piers to classrooms and other 
training buildings, water treatment plants, warehouses, barracks, and 
child development centers. Our review covered only those facilities 
funded by operation and maintenance and military construction funds and 
not by other sources, such as revolving and management funds, military 
family housing and overseas facilities funds, and the defense health 
program (hospitals and medical clinics).

In performing this review, we used the same accounting records and 
financial reports that the Department of Defense (DOD) and reserve 
components use to manage and justify budgets for their facilities. 
We did not independently determine the reliability of the reported 
financial information. We conducted our work from February through 
November 2003 in accordance with generally accepted government auditing 
standards.

[End of section]

Appendix II: Section 2805 of Title 10, United States Code (2003):

Section 2805 of Title 10, United States Code (unspecified minor 
construction), states:

"(a)(1) Except as provided in paragraph (2), within an amount equal to 
125 percent of the amount authorized by law for such purpose, the 
Secretary concerned may carry out unspecified minor military 
construction projects not otherwise authorized by law. An unspecified 
minor military construction project is a military construction project 
that has an approved cost equal to or less than $1,500,000. However, if 
the military construction project is intended solely to correct a 
deficiency that is life-threatening, health-threatening, or safety-
threatening, an unspecified minor military construction project may 
have an approved cost equal to or less than $3,000,000.

(2) A Secretary may not use more than $5,000,000 for exercise-related 
unspecified minor military construction projects coordinated or 
directed by the Joint Chiefs of Staff outside the United States during 
any fiscal year.

(b)(1) An unspecified minor military construction project costing more 
than $750,000 may not be carried out under this section unless approved 
in advance by the Secretary concerned. This paragraph shall apply even 
though the project is to be carried out using funds made available to 
enhance the deployment and mobility of military forces and supplies.

(2) When a decision is made to carry out an unspecified minor military 
construction project to which paragraph (1) is applicable, the 
Secretary concerned shall notify in writing the appropriate committees 
of Congress of that decision, of the justification for the project, and 
of the estimated cost of the project. The project may then be carried 
out only after the end of the 21-day period beginning on the date the 
notification is received by the committees.

(c)(1) Except as provided in paragraphs (2) and (3), the Secretary 
concerned may spend from appropriations available for operation and 
maintenance amounts necessary to carry out an unspecified minor 
military construction project costing not more than--:

(A) $1,500,000, in the case of an unspecified minor military 
construction project intended solely to correct a deficiency that is 
life-threatening, health-threatening, or safety-threatening; or:

(B) $750,000, in the case of any other unspecified minor military 
construction project.

(2) The authority provided in paragraph (1) may not be used with 
respect to any exercise-related unspecified minor military 
construction project coordinated or directed by the Joint Chiefs of 
Staff outside the United States.

(3) The limitations specified in paragraph (1) shall not apply to an 
unspecified minor military construction project if the project is to be 
carried out using funds made available to enhance the deployment and 
mobility of military forces and supplies.

(d) Military family housing projects for construction of new housing 
units may not be carried out under the authority of this section.":

[End of section]

Appendix III: DOD's Prioritization and Resourcing Process for 
Military Construction Projects:

Military construction appropriations are one of several annual pieces 
of legislation that provide DOD with funding for national defense. 
Other major appropriations legislation includes the defense 
appropriations bill, which provides funds for all nonconstruction 
military activities of DOD and constitutes more than 90 percent of 
national-security-related spending, and the energy and water 
development appropriations bill, which provides funding for atomic 
energy defense activities of the Department of Energy and for civil 
projects carried out by the U.S. Army Corps of Engineers. Another 
source of military construction funding is supplemental appropriations. 
Military construction appropriations are the major, but not the sole, 
source of funds for facility investments by the military services and 
defense agencies. Defense appropriations provide some funds for 
facility sustainment in operation and maintenance and minor 
construction accounts. In addition, funds for construction and 
maintenance of morale, welfare, and recreation-related facilities are 
partially provided through proceeds of commissaries, recreation user 
fees, and other nonappropriated income. Because of the long-term nature 
of construction projects, military construction funds can generally be 
obligated for up to 5 fiscal years, reflecting the long-term nature of 
capital building programs.

The DOD prioritization and resourcing process for military construction 
projects flows from OSD and service guidance. This guidance describes 
OSD's objectives for improving facilities, identifies the services' 
categories of facilities that will receive priority in funding military 
construction projects, and assigns organizational responsibilities for 
the process. The program also involves a sequence of reviews by 
installations, major commands, the office of the Secretary of the 
military services, OSD, the Office of Management and Budget, and 
Congress. (See fig. 4.) During even years, the services, DOD, and the 
President submit a 2-year military construction budget to Congress. 
Typically, Congress will authorize and appropriate funds for only the 
first year of that budget. To update and adjust the second year's 
budget, as necessary, an amended budget review is conducted in the odd 
year. It is important to note that project identification, master 
planning, and programming activities are not to be paid for with 
military construction funds--these costs are normally met with 
operation and maintenance funds.

Figure 4: Summary of the Military Construction Process, Fiscal Year 
2005:

[See PDF for image]

Note: While the figure indicates that the process takes 5 years, in 
practice it can typically last up to 8 years or more.

[End of figure]

Per the military service and major command instructions, an 
installation will first identify and document its construction needs. 
It will also develop the DD Form 1391 in support of all its projects, 
including tenant-sponsored and centrally managed program projects. DD 
Form 1391 contains four primary categories of information: (1) 
description of the project, (2) construction cost, (3) justification, 
and (4) back-up data. The document must be clear, concise, logical, and 
complete, and must effectively describe, justify, and price the 
project. This responsibility also includes those projects that may be 
developed through support from the U.S. Army Corps of Engineers, Naval 
Facilities Engineering Command, or architect-engineers. The 
installation will then prioritize its projects, and prepare and submit 
completed project documentation on designated projects forward through 
its major command.

The major command (to include the Army's Installation Management Agency 
and the Navy's Commander Navy Installations) will ensure that 
all project documentation, including the DD Forms 1391, is complete and 
properly addresses the requirement. Complete documentation is usually 
a criterion for prioritizing at the service level, and incomplete 
documentation could result in a lower ranking of the project. The 
command will review the documentation of each project to ensure that 
the requirement is valid and conforms to current service objectives, 
policies, and procedures. It will also determine whether a survey of 
the site has been conducted, available records reviewed, and 
appropriate environmental analyses completed, and whether the site is 
free from pollutants, contaminants, and ordnance and explosive waste 
that would affect the start of construction. The command also considers 
whether force protection considerations have been addressed and 
documented properly. Furthermore, the command will certify that all 
planning and related coordination have been accomplished on all budget 
year projects and that there is sufficient information to begin concept 
or parametric design before submission to the service headquarters. In 
addition, a major command may add its own military construction 
projects to the list of projects. Finally, the command will prioritize 
its projects, and prepare and submit the completed documentation on 
designated projects forward through the service headquarters.

The service headquarters will review all submissions for compliance 
with service priorities, policies, procedures, and environmental laws. 
As shown in table 1, priorities vary depending on a services' mission. 
For example, the Army has made transformation a priority in order to 
support brigades that can mobilize in a minimal amount of time. In 
comparison, the Navy has made barracks, piers, and hangars its 
priorities and the Air Force has made facilities that support new 
missions and weapons systems, such as the C-17, its top priority. The 
Marine Corps does not have specific categories but states that it will 
fund its most essential needs.

Table 1: Comparison of the Military Services' Priorities for Military 
Construction Projects, Fiscal Year 2004:

Army: Barracks; 
Navy: Piers; 
Air Force: New mission; 
* Facilities to support new mission requirements.

Army: Transformation; 
* Facilities to support new missions, such as Stryker brigades; 
Navy: Hangars; 
Air Force: Fact of life; 
* Compliance with federal and state environmental laws or regulations.

Army: Training ranges; 
Navy: Barracks; 
Air Force: Corporate adjustments; 
* Projects approved and planned by the Air Force Chief of Staff or 
Secretary of the Air Force. Examples include quality of life projects 
from the dormitory and fitness center master plans.

Army: Army power projection program; 
Facilities to support mobilization; 
Antiterrorism and force protection (considered in all facility 
construction); 
Focus facility strategy; 
* Army National Guard readiness centers; 
* Army Reserve centers; 
* Physical fitness facilities; 
* Trainee barracks; 
* General instruction classrooms; 
* Vehicle maintenance; 
* Chapels. 

Source: Military services.

Note: The Marine Corps does not have specific priorities.

[End of table]

The service identifies projects on the list that must be funded in the 
immediate fiscal year and places those projects at the top of its 
priority list. Next, each service headquarters rates the proposed 
projects in a manner that reflects the projects' mission and impact. 
The Army, Navy, and Air Force assign numerical ratings to the proposed 
projects that reflect the projects' priority in terms of its impact on 
the services' mission. (See table 2.) The Marine Corps also assigns 
priority ratings to its projects but does not utilize a category-driven 
prioritization process like the other services. As illustrated, the 
Army uses a 100-point system to prioritize its projects. A project 
receives up to 50 points, depending on where the project lies within 
the major command's priority list (the number 1 priority automatically 
receives 50 points, and the remaining projects receive fewer points, 
depending on the facility's replacement value and number of projects); 
up to 20 points, depending on the facility condition rating from the 
installation status report (projects that are poor in quality or 
quantity according to the installation status report's rating receive 
more points); up to 20 points, depending on the major command's 
presentation to the annual project review board; and up to 10 points if 
the project follows certain leadership criteria (4 points, depending on 
whether or not the demolition amount is equal to, greater than, or less 
then the facility scope; 2 points if the project is a new or existing 
facility; 2 points for headquarters assessment for facilities not 
covered by the Army's criteria; and 2 points for having a correct DD 
form 1391). Instead of a 100-point system, the Navy uses a more complex 
weighting system without a predetermined maximum number of points. A 
project receives up to 700 points, depending on where the project lies 
within the major command's priority (higher-priority projects receive 
more points); up to 500 points, depending on what function a project 
fulfills (projects that fall in OSD and Navy priorities receive more 
points); and up to 200 points are given to a project, depending on the 
service headquarters' assessment of the project's priority. In 
addition, if a project relates to bachelor quarters, it can receive up 
to an additional 75 points, depending on the number of bachelor 
quarters at the installation, and receives the sum of points on the 
basis of factors--such as demolition, joint use, and political 
interest--that range from 100 to negative 200. For example, projects 
previously approved automatically receive 40 points, projects to reduce 
sustainment automatically receive 35 points, and projects to eliminate 
group latrines in barracks automatically receive 30 points. The Air 
Force uses a 100-point system for projects that do not fall within the 
services' top priorities--overseas projects receive automatically an 
additional 2 points. Projects that support the Air Force's priorities 
listed in table 1 are not ranked in this system because they are 
automatically classified as the top priorities for funding 
considerations. A project receives up to 60 points, depending on where 
the project lies within the major command's priority list (the number 1 
priority automatically receives 60 points, and the remaining projects 
receive fewer points, depending on the total amount of submissions from 
the major command); up to 35 points, depending on the facility's 
mission (core modernization or force structure change, readiness and 
sustainability, people, and infrastructure and other) and how the 
facility deficiency affects the mission (critical, degraded, and 
enhancement); up to 2 points, depending on the Air Force corporate 
panel's opinion on whether a project must, should, or could receive 
funding immediately (a project that must receive funding in the 
immediate year receives 2 points, a project that should receive funding 
receives 1 point, and a project that can be delayed receives no 
points); and up to 3 points for projects that address efficiencies 
(1.25 point), mission timing (1 point), demolition (0.75 point), and 
overseas presence (2 points). Marine Corps officials said that owing to 
its smaller size, the Marine Corps is able to review and prioritize all 
proposed military construction projects submitted by its installations 
and commands. A headquarters staff team personally reviews all the 
proposed projects within the Marine Corps before the first 
prioritization meeting of the facilities program evaluation group. The 
group, representing all major commands and warfare areas within the 
Marine Corps, prioritizes the proposed projects utilizing cost and 
benefit analysis, determining how the projects fulfill requirements 
necessary for the Marine Corps to accomplish its mission and assessing 
the overall impact that each project will have on the Marine Corps as a 
whole.

Table 2: Comparison of the Military Services' Systems to Prioritize 
Military Construction Projects, Fiscal Year 2004:

Army: Major command priority (50 points); 
Navy: Installation management claimant priority (700 points); 
Air Force: Major command priority (60 points).

Army: Installation status report score (20 points); 
Navy: Programmatic categories (500 points); 
Air Force: Matrix model score (35 points).

Army: Project review board score (20 points); 
Navy: Headquarters' assessment (200 points); 
Air Force: Panel points score (2 points).

Army: Leadership criteria (10 points); 
Navy: Barracks (75 points); 
Air Force: Military construction issue process team (3 points).

Navy: Special considerations (The sum of factors that range from 100 
to negative 200 points); 
Air Force: Overseas presence (2 points if applicable).

Source: Military services.

Note: The Marine Corps does not use a numerical weighting system in its 
prioritization process.

[End of table]

After all the projects are identified and prioritized, the service 
headquarters forms its overall priority list to create the service's 
military construction program. The service's budget director, who also 
presents adjustments to the military construction program, then 
verifies the budget estimates on the basis of the priority list. Once 
the proposed adjustments and estimates are approved, the military 
construction program is then submitted to the service Secretary and 
chief of staff. Upon approval, the service Secretary will then submit 
the military construction program with completed project documentation 
forward to OSD. In addition, the service's budget director will send a 
justification book to OSD, which contains a DD Form 1391 for each 
requirement in the military construction program.

The Office of the Under Secretary of Defense (Comptroller), in 
conjunction with other OSD offices--such as the Office of the Under 
Secretary of Defense for Acquisition, Technology, and Logistics--
reviews the services' proposed construction projects to confirm and 
adjust requirements as necessary. Also, members of the defense 
resources board, the Assistant Secretary of Defense program managers, 
or commanders develop program review proposals--each proposal contains 
projects recommended for addition or deletion without changing the 
overall amount of the services' proposed military construction budget. 
In addition, officials of OSD and the Office of Management and Budget 
conduct a joint budget review of the services' military construction 
program, focusing on proper pricing, reasonableness, ability to 
execute, and validity of requirements. Similar to the processes used in 
the services, every project submitted is reviewed, and a decision is 
issued on each. Through program budget decisions, the OSD and Office of 
Management and Budget can choose to approve, disapprove, ask that the 
project be revised, or defer the project to a future year. Before the 
Under Secretary of Defense signs a program budget decision, the service 
can challenge the program budget decision. OSD will then review the 
challenge and with senior-level negotiations, issue a final program 
budget decision on the project. Once signed by the Under Secretary of 
Defense, the program budget decisions are sent to the appropriate 
service official to be incorporated in the services' military 
construction programs to be combined in the President's budget 
submission to Congress. The budget request for military construction 
funding for each fiscal year includes major construction, project 
planning and design, and unspecified minor construction.

[End of section]

Appendix IV: Services' Plans to Meet OSD's Three Key Investment 
Objectives:

While OSD has periodically revised its three key investment objectives 
on the basis of the services' ability to meet them, the services still 
do not plan to meet most of them within the expected time frames and, 
in those instances where the service officials have indicated an intent 
to meet the objectives, their plans are based on future funding that 
requires unrealistically high rates of increase when compared with 
previous funding trends and when considered against other defense 
priorities.

First, the military services do not plan to fully fund their 
sustainment requirements in fiscal year 2004--one of OSD's key 
objectives for improving facilities. (See table 3.) We found that 
sustainment funding must compete with other traditional operation and 
maintenance funding priorities, such as base operations, organizational 
supplies and equipment, environmental concerns, training, and travel. 
Facility sustainment often rates a lower funding priority than other 
operation and maintenance functions because the services have been 
reluctant to fund facilities when they have other unfunded priorities 
and programs. Officials want to do more but are limited by competing 
demands within their respective service. In addition, sustainment 
fundsśeven when appropriately budgetedśare often reallocated, with the 
end result that the programmed sustainment funding never fully reaches 
the intended installations.

Table 3: Planned Status for Achieving OSD's Objective of Fully Funding 
Sustainment by Military Service and DOD-wide, Fiscal Years 2004 through 
2009:

Defense component: Army; 
Fiscal year: 2004: No; 
Fiscal year: 2005: No; 
Fiscal year: 2006: No; 
Fiscal year: 2007: No; 
Fiscal year: 2008: Yes; 
Fiscal year: 2009: Yes.

Defense component: Navy; 
Fiscal year: 2004: No; 
Fiscal year: 2005: No; 
Fiscal year: 2006: No; 
Fiscal year: 2007: No; 
Fiscal year: 2008: Yes; 
Fiscal year: 2009: Yes.

Defense component: Air Force; 
Fiscal year: 2004: No; 
Fiscal year: 2005: No; 
Fiscal year: 2006: No; 
Fiscal year: 2007: No; 
Fiscal year: 2008: Yes; 
Fiscal year: 2009: Yes.

Defense component: Marine Corps; 
Fiscal year: 2004: No; 
Fiscal year: 2005: No; 
Fiscal year: 2006: No; 
Fiscal year: 2007: No; 
Fiscal year: 2008: No; 
Fiscal year: 2009: No.

Defense component: DOD-wide; 
Fiscal year: 2004: No; 
Fiscal year: 2005: No; 
Fiscal year: 2006: No; 
Fiscal year: 2007: No; 
Fiscal year: 2008: Yes; 
Fiscal year: 2009: Yes. 

Source: DOD.

Note: The Marine Corps fully funded sustainment in fiscal year 2003.

[End of table]

Second, as shown in table 4, the military services plan to achieve the 
recapitalization objective beginning in fiscal year 2008, with the 
exception of the Army. According to Army officials, the Army will not 
meet this objective during fiscal years 2004 through 2009 because of 
competing funding priorities, especially force transformation.

Table 4: Planned Status for Achieving OSD's Objective of Attaining a 
67-Year Recapitalization Rate by Military Service and DOD-wide, Fiscal 
Years 2004 through 2009:

Defense component: Army; 
Fiscal year: 2004: No; 
Fiscal year: 2005: No; 
Fiscal year: 2006: No; 
Fiscal year: 2007: No; 
Fiscal year: 2008: No; 
Fiscal year: 2009: No.

Defense component: Navy; 
Fiscal year: 2004: No; 
Fiscal year: 2005: No; 
Fiscal year: 2006: No; 
Fiscal year: 2007: No; 
Fiscal year: 2008: Yes; 
Fiscal year: 2009: Yes.

Defense component: Air Force; 
Fiscal year: 2004: No; 
Fiscal year: 2005: No; 
Fiscal year: 2006: No; 
Fiscal year: 2007: No; 
Fiscal year: 2008: Yes; 
Fiscal year: 2009: Yes.

Defense component: Marine Corps; 
Fiscal year: 2004: No; 
Fiscal year: 2005: No; 
Fiscal year: 2006: No; 
Fiscal year: 2007: No; 
Fiscal year: 2008: Yes; 
Fiscal year: 2009: Yes.

Defense component: DOD-wide; 
Fiscal year: 2004: No; 
Fiscal year: 2005: No; 
Fiscal year: 2006: No; 
Fiscal year: 2007: No; 
Fiscal year: 2008: Yes; 
Fiscal year: 2009: Yes.

Source: DOD.

[End of table]

However, to achieve the 67-year recapitalization rate, all the services 
call for rapid increases in restoration and modernization funding from 
fiscal year 2004 through fiscal year 2009, but this growth appears 
unrealistic when compared with prior funding levels. As shown in figure 
5, using constant fiscal year 2004 dollars, the Army proposes to 
increase its restoration and modernization funding 134 percent from 
$1.14 billion in fiscal year 2004 to $2.67 billion in fiscal year 2009. 
Under its funding proposal, the Navy plans to increase its funding 
227 percent from $750 million to $2.45 billion during the same period. 
More than half of this increase is planned during 3 fiscal years, from 
fiscal year 2007 through fiscal year 2009, when the Navy proposes to 
increase its funding by 87 percent to $2.45 billion from $1.31 billion. 
From a low of $710 million in fiscal year 2004, the Air Force proposes 
to increase its restoration and modernization funding 254 percent to 
$2.51 billion in fiscal year 2009. Most of this increase occurs from 
fiscal year 2005 through fiscal year 2006, when it plans to increase 
its funding $1.04 billion (106 percent). The Marine Corps plans a 
317 percent increase in restoration and modernization funding, from a 
low of $118 million in fiscal year 2006 to $500 million in fiscal year 
2009.

Figure 5: Military Services' Planned Annual Restoration and 
Modernization Funding, Fiscal Years 2004 through 2009:

[See PDF for image]

[End of figure]

The services' rapid increases in restoration and modernization funding 
from fiscal year 2004 through fiscal year 2009 appear uncertain when 
compared with the need for funds for other defense priorities, such as 
the war on terrorism, weapon systems modernization, and force 
transformation. In practice, proposed funding for future years' 
military construction programs are often reduced as the budget year 
approaches. As a result of the war on terrorism, DOD is seeking higher 
than previously planned funding during this period for a number of 
pressing priorities against which facilities restoration and 
modernization must compete, including the Global War on Terrorism, 
Operation Enduring Freedom, the Balkans, military readiness, weapons 
procurement, and research and development. Moreover, some of the 
services have specific funding priorities. For example, Army officials 
told us that funding for transformation is the service's highest 
funding priority. At the Navy, officials said the fleet modernization 
program is the service's highest funding priority. In the case of the 
Air Force, officials said new aircraft procurement and associated 
facilities are the Air Force's funding priorities. The Marine Corps' 
highest funding priority is power projection.

Third, the military services are unlikely to achieve OSD's objective to 
improve the quality of facilities from the current C-4 and C-3 ratings 
to C-2 by the end of 2010. To improve the overall condition of 
facilities, DOD set an objective for the military services to 
concentrate funding in order to eliminate C-3 and C-4 facility ratings, 
bringing them up to a minimal C-2 level by fiscal year 2010. However, 
at the time of our review, service officials said the Navy, the Air 
Force, and the Marine Corps were not planning to meet this objective 
owing to a lack of expected funding. Army officials stated that the 
Army could meet the objective if the required funding were provided. To 
achieve this objective, the Army would have to, at the very minimum, 
fund the rapid increase in restoration and modernization funding shown 
in figure 5. Even this minimum funding level appears unlikely when 
compared with previous funding levels and considering other future Army 
priorities and programs. DOD estimates that it would cost $62 billion 
(or $7 billion annually during fiscal years 2002 through 2010) to 
achieve this objective departmentwide. DOD also estimates that it would 
cost more than $164 billion over the same time period to reach a C-1 
level for all facilities.

[End of section]

Appendix V: Comments from the Department of Defense:

ACQUISITION, TECHNOLOGY AND LOGISTICS:

OFFICE OF THE UNDER SECRETARY OF DEFENSE:

3000 DEFENSE PENTAGON 
WASHINGTON, DC 20301-3000:

09 FEB 2004:

Mr. Barry W. Holman:

Director, Defense Capabilities and Management 
U.S. General Accounting Office:

441 G Street, N.W. 
Washington, D.C. 20548:

Mr. Holman,

Thank you for the opportunity to review the draft GAO report, 'Defense 
Infrastructure: Long-term Challenges in Managing the Military 
Construction Program,' dated December 16, 2003 (GAO Code 350316/GAO-04-
288). We have considered comments from the Services and:

Defense Agencies, and have drafted a consolidated DoD response.

Regarding GAO's first recommendation to "complete the Department's 
management tools, including the revision of defense facilities 
strategic plan," I am pleased to report that the defense installations 
strategic plan, a broader follow-on of the facilities strategic plan, 
is being prepared and expected to be ready in March 2004. With regard 
to the second recommendation to relax facilities goals, the Department 
partially concurred because we regularly review timeframes for 
achieving objectives as a normal course of business, and recent reviews 
have resulted in some adjustments to target dates. For example, the 
Department has accepted modest institutional risk in adjusting the 
goal for a 67-year recapitalization rate from FY07 to FY08. With 
respect to the third recommendation to develop a mechanism to 
assess military construction policies, the Department is developing a 
universal quality rating system to be used in conjunction with the 
facilities recapitalization metric to track progress toward the FY 2010 
C-2 goal for all facility types.

We request that you include our enclosed comments in your final report.

Sincerely, 

Signed for: 

Philip W. Grone: 

Principal Assistant Deputy Under Secretary of Defense (Installations 
and Environment):

ENCLOSURE:

GAO CODE 350316/GAO-04-288:

"DEFENSE INFRASTRUCTURE: LONG-TERM CHALLENGES IN MANAGING THE MILITARY 
CONSTRUCTION PROGRAM":

DEPARTMENT OF DEFENSE COMMENTS TO THE RECOMMENDATIONS:

RECOMMENDATION 1: The GAO recommended that the Secretary of Defense 
direct the Under Secretary of Defense for Acquisition, Technology, and 
Logistics to complete the Department's management tools, including the 
revision of defense facilities strategic plan, to provide a more 
consistent approach to managing facilities and planning construction 
projects. (Page 35/Draft Report):

DoD RESPONSE: Concur.

The defense installations strategic plan, a broader follow-on of the 
facilities strategic plan, is being prepared and expected to be ready 
in March 2004.

RECOMMENDATION 2: The GAO recommended that the Secretary of Defense 
direct the Under Secretary of Defense for Acquisition, Technology, and 
Logistics to reevaluate the time frames for completing the three key 
objectives to reflect that there are competing funding priorities and 
that the process of realigning and closing domestic bases to reduce 
DoD's excess infrastructure and realigning overseas facilities will 
take several years to accomplish and could affect meeting facilities 
investment goals. (Page 35/Draft Report):

DoD RESPONSE: Partially Concur.

DoD regularly reviews timeframes for achieving objectives as a normal 
course of business. Recent reviews have resulted in some adjustments to 
target dates. For example, the Department has accepted modest 
institutional risk in adjusting the goal for a 67-year recapitalization 
rate from FY07 to FY08. However, the effect of restructuring the global 
footprint through BRAG or other means cannot be assessed at this time. 
While restructuring could slow progress toward objectives, it is also 
possible for restructuring to accelerate recapitalization process and 
eliminate a significant portion of the C-3/C-4 backlog. The 
Department's models and metrics are flexible enough to address 
adequately the effects of such restructuring.

RECOMMENDATION 3:

The GAO recommended that the Secretary of Defense direct the Under 
Secretary of Defense for Acquisition, Technology, and Logistics to 
develop a mechanism for periodically reassessing military construction 
priorities for facility categories that fall outside the Department's 
specific areas of emphasis to ensure that the risk of delaying proposed 
military construction projects with potential operational and quality 
of life impacts are being given appropriate consideration. (Pages 
35-36/Draft Report):

DoD RESPONSE: Partially concur.

The Department is developing a universal quality rating system to be 
used in conjunction with the facilities recapitalization metric to 
track progress toward the FY 2010 C-2 goal. This mechanism will allow 
for tracking progress across all facility types.

[End of section]

FOOTNOTES

[1] Sustainment includes the recurring maintenance and repair 
activities necessary to keep an inventory of facilities in good working 
condition.

[2] Recapitalization includes the major renovations or reconstruction 
activities (including facility replacement) needed to keep facilities 
modern and efficient in an environment of changing standards and 
missions.

[3] As authorized by Congress in 2001--the National Defense 
Authorization Act for Fiscal Year 2002 (Pub. L. No. 107-107, sec. 3001 
(Dec. 28, 2001)--DOD intends to reduce its inventory of facilities by 
closing some installations and by consolidating overlapping activities 
within and across the services through a round of base realignments and 
closures in fiscal year 2005. DOD officials have testified that the 
department has from 20 to 25 percent excess capacity in its facilities. 
Accordingly, as a result of the round of base realignments and closures 
anticipated in fiscal year 2005, the military services and defense 
agencies will have to adjust their facility maintenance and 
recapitalization plans.

[4] Military construction, as defined in 10 U.S.C. 2801 (2003) 
"includes any construction, development, conversion, or extension of 
any kind carried out with respect to a military installation." 
Construction projects consist of all types of buildings, roads, 
airfield pavements, and utility systems costing $750,000 or more.

[5] Restoration includes repair and replacement work to restore 
facilities damaged by inadequate sustainment, excessive age, natural 
disaster, fire, accident, or other causes. Modernization includes 
altering or modernizing facilities to meet new or higher standards, 
accommodate new functions, or replace structural components.

[6] See section 2805 of Title 10, United States Code (2003), which is 
reproduced in appendix II.

[7] See U.S. General Accounting Office, Defense Infrastructure: Changes 
in Funding Priorities and Strategic Planning Needed to Improve the 
Condition of Military Facilities, GAO-03-274 (Washington, D.C.: Feb. 
19, 2003) and U.S. General Accounting Office, Defense Infrastructure: 
Changes in Funding Priorities and Management Processes Needed to 
Improve Condition and Reduce Costs of Guard and Reserve Facilities, 
GAO-03-516 (Washington, D.C.: May 15, 2003).

[8] The conference report (H.R. Conf. Rep. No. 108-342 [2003]), 
accompanying H.R. 2559, directed DOD to prepare detailed comprehensive 
master plans starting in 2006 for the changing infrastructure 
requirements for U.S. military facilities within each of its overseas 
regional commands. The Senate Report (S. Rep. No. 108-82 [2003] at p. 
14) directed GAO to monitor the infrastructure master plans being 
developed and implemented for the overseas regional commands and to 
provide the congressional defense committees with a report by May 15 of 
each year giving an assessment of the status of the plans, associated 
costs, burden-sharing implications, and other relevant information 
involving property returns to host nations, restoration issues, and 
residual values.

[9] See U.S. Department of Defense, Defense Installations 2001: The 
Framework for Readiness in the 21st Century (Washington, D.C.: August 
2001).

[10] DOD defines the recapitalization rate as the number of years 
required to replace or renovate facilities at a given level of 
investment. The rate is computed by dividing recapitalizable plant 
replacement value by total restoration and modernization investments. 
The recapitalizable plant replacement value, as defined by DOD, is the 
cost of replacing an existing facility of the same size at the same 
location, using today's building standards.

[11] The Secretary of Defense and his staff prepare the Defense 
Planning Guidance, issue policy, and articulate strategic objectives 
that reflect the national military strategy. The Defense Planning 
Guidance includes the Secretary's force and resource guidance to the 
military departments, other combat support agencies, and the unified 
combatant commands.

[12] DOD has periodically revised the objectives for improving 
facilities on the basis of the services' ability to meet them.

[13] Annual unspecified costs are not justified on the basis of 
specific projects.

[14] The subcommittees of the House and Senate Appropriations 
Committees are Military Construction, which drafts legislation for the 
military construction appropriation, and Defense, which drafts 
legislation for the national defense appropriation. The Subcommittee on 
Readiness of the House Armed Services Committee and the Subcommittee on 
Readiness and Management Support of the Senate Armed Services Committee 
draft legislation to authorize military construction appropriations.

[15] The six military reserve components consist of the Army National 
Guard, Army Reserve, Naval Reserve, Marine Corps Reserve, Air National 
Guard, and Air Force Reserve.

[16] The security investment program is the U.S. contribution to 
alliance funds for the construction of facilities and the procurement 
of equipment essential to the wartime support of operational forces in 
the common defense of the North Atlantic Treaty Organization region. 
Facilities funded by this program include airfields, naval bases, 
communication facilities, pipelines, and radar and missile 
installations.

[17] See U.S. General Accounting Office, Defense Infrastructure: Basing 
Uncertainties Necessitate Reevaluation of U.S. Construction Plans in 
South Korea, GAO-03-643 (Washington, D.C.: July 15, 2003).

[18] The guard and reserve commands, using a similar process, submit 
their military construction requirements separately from the active 
components. Nevertheless, the guard and reserve must compete with their 
active counterparts for the available military construction dollars 
available each year.

[19] The Under Secretary of Defense (Comptroller) is the principal 
advisor to the Secretary of Defense for budgetary and fiscal matters, 
DOD program analysis and evaluation, and general management improvement 
programs.

[20] The Under Secretary of Defense for Acquisition, Technology and 
Logistics is the principal advisor to the Secretary of Defense for all 
matters relating to the DOD acquisition system; research and 
development; advanced technology; developmental test and evaluation; 
production; logistics; installation management; military construction; 
procurement; environment security; and nuclear, chemical, and 
biological matters.

[21] See U.S. General Accounting Office, Military Infrastructure: Real 
Property Management Needs Improvement, GAO/NSIAD-99-100 (Washington, 
D.C.: Sept. 7, 1999).

[22] See U.S. General Accounting Office, High-Risk Series: An Update, 
GAO-01-263 (Washington, D.C.: January 2001).

[23] See U.S. General Accounting Office, Defense Infrastructure: Most 
Recruit Training Barracks Have Significant Deficiencies, GAO-02-786 
(Washington, D.C.: June 13, 2002).

[24] See U.S. General Accounting Office, High-Risk Series: An Update, 
GAO-03-119 (Washington, D.C.: January 2003), and High-Risk Series: 
Federal Real Property, GAO-03-122 (Washington, D.C.: January 2003).

[25] See GAO-03-274.

[26] See GAO-03-516.

[27] See Department of Defense, Report of the Quadrennial Defense 
Review (Washington, D.C.: May 1997).

[28] See Department of Defense, Installations' Readiness Report 
(Washington, D.C.: 1999).

[29] See GAO-03-274.

[30] See Defense Installations 2001: The Framework for Readiness in the 
21st Century.

[31] See GAO-03-274.

[32] DOD defines "recapitalizable plant replacement value" as the cost 
of replacing an existing facility with a facility of the same size at 
the same location using today's building standards, but it does not 
include facilities planned for demolition, disposal by transfer to 
other entities, and one-time use, as well as facilities recapitalized 
by appropriations other than regular military construction or operation 
and maintenance funds (such as military family housing), and facilities 
recapitalized by sources outside DOD (such as facilities in Japan).

[33] See U.S. Department of Defense, DOD Facilities Pricing Guide, 
Version 5, March 2003.

[34] Pub. L. No. 107-107, Sec. 3001, (Dec. 28, 2001).

[35] See GAO-03-516.

[36] Pub. L. No. 108-132 (Nov. 22, 2003).

[37] In November 1995 DOD adopted a new barracks construction standard, 
referred to as the 1+1 design standard, for servicemembers permanently 
assigned to an installation. The standard, which does not apply to 
barracks for members in basic recruit or initial skill training, 
provides each junior enlisted member with a private sleeping room and 
with a kitchenette and bath shared by one other member. The Marine 
Corps has a permanent waiver from the Secretary of the Navy to use a 
different barracks design standard--one sleeping room and bath are 
shared by two junior Marines.

[38] Pub. L. No. 108-132 (Nov. 22, 2003).

[39] Pub. L. No. 108-132 (Nov. 22, 2003).

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