Military Housing:

Better Reporting Needed on the Status of the Privatization Program and the Costs of Its Consultants

GAO-04-111: Published: Oct 9, 2003. Publicly Released: Oct 9, 2003.

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In 2000, Congress required the Department of Defense (DOD) to report quarterly on the services' expenditures for consultants in support of the military family housing privatization programs. GAO was asked to review the costs of the consultants DOD used to support privatizing housing for servicemembers and their families. This report discusses (1) the number of family housing units the services have privatized, particularly newly constructed or renovated units, and project to be privatized by fiscal year 2005; (2) the portion of privatization support costs used for consultants; (3) the services' consistency in the definition for privatization support and consultant costs; and (4) factors that limit an evaluation of how consultant fees for the military housing initiative compare among the services.

Although DOD reported to Congress that the services plan to privatize most of their family housing by fiscal year 2005, DOD's reports do not provide decision makers with the number of privatized units that have been renovated or newly constructed. As of March 2003, the services had contracts privatizing about 28,000 family housing units and planned to privatize 140,000 units by fiscal year 2005. As a result of this privatization, about 7,600 units had been constructed or renovated. It can take developers several years to renovate existing housing or construct new units after they are privatized. As the program progresses, it will become increasingly important to have complete data on which to determine how quickly the privatization program is creating adequate family housing. Costs for consultants are less than half of the services' privatization support costs. The services anticipate many privatization support and consultant costs to peak in fiscal year 2004 when the need for consultants diminishes once most privatization contracts are signed. Remaining support costs will then focus increasingly on managing the portfolio of the privatized housing. The services are not consistent in their definitions for privatization support and consultant costs. The differences in the services' definitions for privatization support costs result in inconsistent budgeting for these costs. Also, the differences in the services' definitions for consultant costs result in inconsistent reporting of consultant costs in the department's quarterly housing privatization report to Congress. Further, the Office of the Secretary of Defense does not report its own program consultant costs in the quarterly report. Several factors, such as differences in labor categories, hours, and skills mix that each consulting firm can use to accomplish work, limited our evaluation of how consultant fees for the military housing initiative compare among the services. Even though these factors hinder a comparative evaluation of consultant fees, service officials told us they believe that they have contracted with firms that provide the best value to the government based on their needs and that the consultants' fees are fair and reasonable.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To illustrate the number of inadequate housing units eliminated and of new or renovated units brought on line through the military housing privatization program, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology and Logistics to track the supporting data and report the number of privatized units renovated and newly constructed to the Congress on a periodic basis.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: According to DOD, monitoring the progress of GAO's projects is essential. This function is primarily performed at the installation level. In response to GAO's recommendation, the Housing and Competitive Sourcing Office has implemented steps to track and monitor the rate and number of newly constructed and renovated privatized housing units in its semi-annual Program Evaluation Plan report.

    Recommendation: To provide for more consistent and complete data on military housing privatization support costs, the Secretary of Defense should direct the Under Secretary of Defense (Comptroller), in consultation with the Housing and Competitive Sourcing Office, to define privatization support costs for the military services. Specifically, this definition should address the differences in how the services consider the costs of environmental assessments; land boundary surveys; and supervision, inspection, and overhead construction activities associated with the housing privatization program.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: In response to GAO's recommendation, in February 2004, the Defense Comptroller issued to the military services a memorandum updating the DOD Financial Management Regulation that defined privatization support costs and addressed the differences in how the services consider the costs of (1) environmental assessments; (2) land boundary surveys; and (3) supervision, inspection, and overhead construction activities associated with the housing privatization program.

    Recommendation: To provide for more consistent and complete data on privatization consultant costs, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology, and Logistics, in consultation with the Under Secretary of Defense (Comptroller), to (1) define consultant costs, including a determination of the inclusion of portfolio management costs, for the military services; and (2) include OSD's own program consultant costs associated with its efforts to privatize military housing in the department's quarterly housing privatization report to Congress.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: In 2004, the Office of the Under Secretary of Defense (Comptroller) defined privatization support costs in a memo to all the services' comptrollers. The memo stated that these costs are to include all administrative, planning, development, solicitation, award, transition, construction oversight, and portfolio management activities associated with military housing privatization. Also, the Office of the Secretary of Defense (OSD) reported since 2004 its own program consultant costs (and the military services and OSD's post award consultant costs) associated with its efforts to privatize military housing in the department's quarterly housing privatization reports to the Congress.

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