Defense Infrastructure:

Issues Related to the Renovation of General and Flag Officer Quarters

GAO-04-555: Published: May 17, 2004. Publicly Released: May 17, 2004.

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Recent cost increases in renovation projects to general and flag officer quarters raised questions about the services' management of the programs. GAO was asked to determine (1) how actual costs of renovation projects for general and flag officer housing compare to service budget estimates provided to Congress and (2) the primary reasons for any increases and the services' procedures to control cost increases. Additionally, GAO is presenting observations about the services' accountability over gifts provided to help renovate some general and flag officer quarters and the extent to which Department of Defense (DOD) guidance provides visibility and control over costs associated with renovation projects for privatized general and flag officer quarters.

With few exceptions, the services' reported costs for renovation projects for general and flag officer quarters were generally consistent with budget estimates provided to Congress. For fiscal years 1999 to 2003, GAO found that 184, or 93 percent, of the 197 renovation projects over $100,000 cost less than or the same as budget estimates. While the remaining 13 projects--6 Navy and 7 Marine Corps--exceeded cost estimates, 5 Marine Corps projects exceeded their budgets by more than 10 percent. Customer-requested changes and unforeseen repairs were the main reasons for cost increases to renovation projects. For 5 of the 7 projects that exceeded their budgets by over 10 percent, about 45 percent of the increased costs was for customer-driven changes, 53 percent for unforeseen repairs, and 2 percent could not be determined. Though the services have guidance to limit customer-requested changes, the Marine Corps approved many such changes that contributed to project costs exceeding budgets. Customer requests included upgraded kitchen and bathroom renovations or initially unplanned work. Unforeseen repairs, such as for termite damage or unexpected historic preservation requirements, occurred because problems were not identified in the inspections on which the estimates were based. Military services did not properly account for gifts used for general officer quarters in two instances, one involving renovation costs. In that instance, the Marine Corps did not comply with existing regulations to properly accept and account for all gifts used to renovate the Home of the Commandants. The Friends of the Home of the Commandants told GAO it provided about $765,500 in nonmonetary materials and services (e.g., furnishings and construction labor). However, the Marine Corps could list nonmonetary gifts totaling only $492,413 because it did not follow specified gift acceptance and accounting procedures. Navy General Gift Fund records show receipt of an additional $88,300 in monetary gifts from the Friends of the Home of the Commandants. The Marine Corps has receipts for monetary expenditures, but not property records for items purchased with the gift funds. The Navy and Army also accepted gifts to furnish general and flag officer homes. Of those, the Navy did not properly accept and account for about $3,970 in nonmonetary gifts. DOD and the military services could lose visibility over housing renovation costs for privatized general and flag officer homes. DOD does not require review of renovation costs for these quarters, such as costs over $35,000, as required for government-owned quarters. The Navy, Marine Corps, and Air Force are developing guidance to increase visibility and accountability over the spending for these quarters, but the draft guidance is not consistent. Although the services have privatized only 65 of their 784 general and flag officer quarters, they plan to privatize 426 or 54 percent by fiscal year 2008.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In November 2005, the Navy implemented new guidance concerning policies and approval authority for operation, maintenance, repair, and improvement of public quarters assigned to general and flag officers. The guidance stated that all changes, except scope of work changes needed for life/safety or preserving structural integrity, must be endorsed through the chain of command and will not be accomplished without prior approval of the Chief of Naval operations or the Commandant of the Marine Corps.

    Recommendation: The Secretary of Defense should direct the Secretary of the Navy to reemphasize the importance of limiting customer-driven changes to renovation projects for general and flag officer housing.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: According to DOD documentation, housing privatization projects are monitored to protect government interests, including expenditure levels on individual units. The real control on spending is the project cash flows themselves as monitored by the private sector development entity that owns the housing. DOD will rely on private sector mechanisms to control costs but will review standardization of individual unit expenditure levels on a programmatic basis. GAO reported that such action, to the extent it incorporates general and flag officer housing, meets the intent of our recommendation.

    Recommendation: The Secretary of Defense should direct the Under Secretary for Acquisition, Technology, and Logistics to ensure the standardization and periodic review of the expenditure levels for individual privatized units on a programmatic basis, to include general and flag officer quarters, with periodic reports to the office of the Secretary of Defense.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: In November 2005, the Navy issued new guidance concerning the acceptance and control of gifts in conjunction with general and flag officers' quarters. The guidance requires the Navy and Marine Corps to provide an annual report showing the monetary gifts and the estimated dollar value of all non-monetary gifts.

    Recommendation: The Secretary of Defense should direct the Secretary of the Navy to properly account for all gifts accepted and used to help renovate the Home of Commandants of the Marine Corps.

    Agency Affected: Department of Defense

 

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