Military Housing:

Management Issues Require Attention as the Privatization Program Matures

GAO-06-438: Published: Apr 28, 2006. Publicly Released: Apr 28, 2006.

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The Department of Defense (DOD) intends to privatize about 87 percent of the military-owned housing in the United States by 2010. As of December 2005, it had awarded 52 projects to privatize over 112,000 family housing units and had plans to award 57 more projects to privatize over 76,000 more units over the next 4 years. The program, begun in 1996, has become DOD's primary means to improve family housing and to meet its housing needs when communities near installations do not have enough suitable, affordable housing. Because of expressed interest related to the oversight responsibilities of several committees, GAO assessed (1) whether opportunities exist to improve DOD's oversight of awarded housing privatization projects, and (2) to what extent projects are meeting occupancy expectations.

Although DOD and the individual services have implemented program oversight policies and procedures to monitor the execution and performance of awarded privatized housing projects, GAO identified three opportunities for improvement. First, the Navy's methods for overseeing its awarded projects have not been adequate to identify and address operational concerns in some projects or to ensure accurate reporting of project information. As a result, there is less assurance that Navy management could become aware of project performance issues in a timely manner in order to plan needed actions to mitigate the concerns. For example, contrary to project agreements, funds from one project had not been deposited to a Navy reserve account to provide for future project needs, and the Navy had not been reimbursed for police and fire protection services provided to another project. Compared to the Navy, the Army and Air Force had more robust and comprehensive methods for overseeing awarded projects and GAO did not find similar oversight concerns in the Army and Air Force projects it reviewed. Second, the value of DOD's primary oversight tool--the semiannual privatization program evaluation report--has been limited because the report lacks a focus on key project performance metrics to help highlight any operational or financial concerns, has not been issued in a timely manner, and does not ensure data accuracy by requiring periodic independent verification of key report elements. Third, data collected on servicemember satisfaction with housing, which is important for benchmarking and tracking of satisfaction levels over time as well as for making service-to-service comparisons, are inconsistent and incomplete because DOD has not issued guidance to the services for standardized collection and reporting of satisfaction information for all servicemembers. Sixteen, or 36 percent, of 44 awarded privatization projects had occupancy rates below expectations with rates below 90 percent, as of September 30, 2005. In an attempt to increase occupancy and keep rental revenues up, 20 projects had begun renting housing units to parties other than military families, including 2,077 units rented to single or unaccompanied servicemembers, retired military personnel, civilians and contractors who work for DOD, and civilians from the general public. Still, rental revenues in some projects are not meeting planned levels, resulting in signs of financial stress. If lower than expected occupancy and rental revenues continue in the long term, the result could be significantly reduced funds available to provide for future project needs and renovations or, in the worst case, project financial failures. Factors contributing to occupancy challenges include increased housing allowances, which have made it possible for more military families to live off base thus reducing the need for privatized housing, and the questionable reliability of DOD's housing requirements determination process, which could result in overstating the need for privatized housing. DOD has yet to implement some previous GAO recommendations to improve the reliability of the requirements assessments supporting proposed projects.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: DOD agreed with our recommendation and stated that it intends to closely observe project vacancy rates in view of the increased housing allowance rates. It is issuing a revised housing management manual that addresses the housing requirements issues identified in our report. This action meets the intent of our recommendation.

    Recommendation: The Secretary of Defense should direct the Deputy Under Secretary of Defense (Installations and Environment) to determine how increased housing allowances from the zero-out-of-pocket initiative will most likely impact future family housing requirements and provide guidance on how the impacts should be factored into the services' housing requirements assessments.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: DOD stated that it updated all of its Performance Evaluation Plan (PEP) guidance directing the services to ensure consistent reporting (using a numerical rating system) to rank housing satisfaction information and that the services have already moved to this numerical rating system. In addition, DOD initiated a housing choice study in February 2007 to survey service member housing preferences both on and off base and evaluate how accurate DOD is in determining its housing requirements. DOD stated that the housing choices study was completed in February 2010 and it shows why military families decide to live in the housing they choose and whether they are satisfied with their choice. The information gained from the study and the data collected in the Program Evaluation Plan are important tools in determining housing requirements

    Recommendation: The Secretary of Defense should direct the Deputy Under Secretary of Defense (Installations and Environment) to provide guidance to the services to help ensure consistent collection and reporting of housing satisfaction information from all servicemembers, which would allow for benchmarking and tracking of tenant satisfaction over time as well as for making service-to-service comparisons.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: In commenting on a draft of this report, DOD agreed with our recommendation and stated that steps were already underway to streamline the privatization program evaluation report and improve the report's accuracy. As a result, DOD streamlined its privatization program evaluation plan report, which it recognized as having an overabundance of data. DOD reduced the report from over 300 pages to 19 pages to focus on key project performance metrics. By focusing on key performance metrics, the revised report should be a more valuable tool for overseeing the privatization program.

    Recommendation: The Secretary of Defense should direct the Deputy Under Secretary of Defense (Installations and Environment) to improve the value of DOD's privatization program evaluation report by streamlining the report to focus on key project performance metrics, completing the report on time, and obtaining periodic independent verification of key report elements.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: In comments on a draft of this report, DOD partially agreed with our recommendation. Further, DOD stated that additional guidance was being developed for internal reviews of audits and financial data from general partners to ensure accurate monitoring and oversight of distributions. In March 2008, Navy officials stated that the Navy had taken actions to ensure the accuracy and timeliness of its privatized housing portfolio monitoring and oversight. These actions included (1) a refinement of the roles and responsibilities of program stakeholders, (2) periodic issuance of additional guidance regarding monitoring and oversight, (3) the revision and expansion of data elements included in the standardized monthly reports, and (4) the development of a financial validation tool customized to monitor each project. The Navy also established a cross function team to review critical monitoring and oversight procedures and metrics and recommend best-practice processes. Further, the Navy provided guidance to personnel involved in reporting data for the DOD privatization program evaluation report and identified opportunities for coordinating and validating data for the report.

    Recommendation: The Secretary of Defense should direct the Deputy Under Secretary of Defense (Installations and Environment) to require the Navy to upgrade the monitoring and oversight of its housing privatization program to ensure consistency, completeness, and preparation of appropriate portfolio summary performance reports.

    Agency Affected: Department of Defense

  5. Status: Closed - Implemented

    Comments: In comments on a draft of this report, DOD agreed with our recommendation and commented that it intends to address the recommendation in a revision to the DOD Housing Management Manual, DOD 4165.63-M. In June 2010, DOD stated that the revised manual has been completed, is in final review, and is slated for publication in December 2010. DOD stated that the revised manual includes a chapter on requirements determination that includes guidance designed to improve the reliability of housing requirements assessments and reduce the number of exceptions provided to the use of available community housing from four to three.

    Recommendation: The Secretary of Defense should direct the Deputy Under Secretary of Defense (Installations and Environment) to expedite issuance of the revised DOD housing management manual and ensure that the revision includes guidance to improve the reliability of housing requirements assessments and reduce the scope of the exceptions provided to the use of available community housing.

    Agency Affected: Department of Defense

 

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