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entitled 'Defense Infrastructure: Planning Challenges Could Increase 
Risks for DOD in Providing Utility Services When Needed to Support the 
Military Buildup on Guam' which was released on July 30, 2009. 

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Report to Congressional Requesters: 

United States Government Accountability Office: 
GAO: 

June 2009: 

Defense Infrastructure: 

Planning Challenges Could Increase Risks for DOD in Providing Utility 
Services When Needed to Support the Military Buildup on Guam: 

GAO-09-653: 

GAO Highlights: 

Highlights of GAO-09-653, a report to congressional requesters. 

Why GAO Did This Study: 

The Department of Defense’s (DOD) plans to increase the U.S. military 
presence on Guam by more than two-and-a-half times the island’s current 
military population of 15,000 by 2020. To keep pace with this growth, 
DOD has determined that substantial upgrades to the island’s existing 
utilities infrastructure are required for electric power, potable 
water, wastewater treatment, and solid waste disposal to meet future 
utility needs. 

GAO was asked to examine (1) the condition and capacity of the existing 
utilities’ infrastructure on Guam, the military’s estimated utility 
requirements, and potential solutions for meeting the increased demand 
on the island’s utility systems as well as (2) the extent that DOD has 
developed a comprehensive plan to address any challenges it faces in 
its planning for new utility systems. GAO reviewed and analyzed plans 
and studies within DOD, the services, and several stakeholders on 
implementing new utility services associated with the Guam military 
buildup. 

What GAO Found: 

Existing utility systems on Guam are currently near or at their maximum 
capacities and will require significant enhancements to meet 
anticipated demands of the expanding U.S. military population resulting 
from DOD’s planned buildup. Over the past 2 years, the Navy’s Joint 
Guam Program Office, which is leading DOD’s utility planning efforts in 
cooperation with the Naval Facilities Engineering Command, has 
conducted several studies to identify and evaluate possible long-term 
solutions and establish an implementation approach. Currently, DOD is 
determining its preferred solutions that will likely result in 
increasing (1) islandwide electric power generation capacity by 31 
percent, (2) Navy potable water production by 89 percent, and (3) 
wastewater collection and treatment capacity at a Guam Waterworks 
Authority plant by 50 percent. In addition, DOD plans to use the 
government of Guam’s new landfill to dispose of all DOD solid waste, 
which is likely to increase by 230 percent as a result of the buildup. 
DOD also determined that certain operating inefficiencies, outstanding 
deficiencies, and compliance issues with certain environmental 
regulations in the existing infrastructure—especially related to those 
systems operated by Guam utility authorities—would need to be addressed 
to implement some of its potential solutions. 

While the Navy’s Joint Guam Program Office has made progress in 
identifying requirements and solutions to meet future demands, it has 
not developed a comprehensive utility plan, which would be mutually 
developed with the government of Guam. Our prior work has shown that 
use of a comprehensive plan is an important planning tool for an 
organization to increase transparency and improve management of its 
efforts to achieve overall objectives. Such a plan generally would 
include information for stakeholders on schedules, costs, financing, 
goals and objectives, projects and activities, responsibilities, 
potential risks, challenges, and other factors that could affect 
implementation. Several challenges could adversely affect future 
planning efforts. First, the condition of existing Guam utility systems 
can affect implementation of some potential solutions. Second, the 
involvement of a number of diverse stakeholders complicates the 
planning process by requiring continuous coordination and sharing of 
information as plans are developed and implemented. Third, sources of 
funding have not been identified although DOD’s cost estimates indicate 
that the total cost for utilities is likely to exceed the amount of 
utility funding that the government of Japan has agreed to commit. 
Fourth, the use of a special purpose entity (utilities service 
provider) approach to provide new utility services has not been 
previously used by DOD for utility construction, and DOD may currently 
lack the statutory authority to implement certain aspects of this 
approach thus potentially increasing uncertainty about financing, 
stakeholder involvement, and schedules. Lastly, time frames for 
completing the buildup of utilities to meet DOD’s scheduled increase of 
military presence on Guam provide little flexibility to accommodate any 
major adjustments in milestone dates. Without a comprehensive plan, DOD 
lacks an important planning tool to address these challenges and 
provide consistent, detailed information to its stakeholders. 

What GAO Recommends: 

GAO recommends that DOD develop a comprehensive utility plan for Guam, 
in cooperation with the government of Guam, to strengthen DOD’s 
management of its utility planning efforts and provide additional 
transparency among its stakeholders. DOD agreed with our 
recommendation. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.gao.gov/products/GAO-09-653]. For more 
information, contact Brian J. Lepore, 202-512-4523, leporeb@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Guam's Existing Utility Infrastructure Is Not Sufficient to Meet DOD's 
Projected Utility Requirements without Further Upgrades: 

DOD Lacks a Comprehensive Plan for Addressing Several Planning 
Challenges It Faces in Providing New Utility Services for Guam: 

Conclusions: 

Recommendation for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Department of the Navy's Fena Reservoir Water Treatment 
Operations and Rates on Guam: 

Appendix III: Current Sources of Utility Services for Civilian and DOD 
Customers on Guam: 

Appendix IV: Comments from the Department of Defense: 

Appendix V: GAO Contact and Staff Acknowledgments: 

Related GAO Products: 

Tables: 

Table 1: Projected Military Population Growth by Service from 2009 
through 2020: 

Table 2: Key Steps that DOD Plans to Use to Increase Utility 
Infrastructure Capacities on Guam: 

Table 3: Estimated Effect of DOD Growth on Electric Power Utility 
System (As of May 2009): 

Table 4: Estimated Effect of DOD Growth on Potable Water Utility System 
(As of May 2009): 

Table 5: Estimated Effect of DOD Growth on Wastewater Treatment Utility 
System (As of May 2009): 

Table 6: Estimated Effect of DOD Growth on Solid Waste Disposal System 
(As of May 2009): 

Table 7: Actions Needed to Implement the Special Purpose Entity 
Approach for Utilities: 

Table 8: Organizations and Offices Contacted during Our Review: 

Table 9: Current Source of Utilities Services for Guam Civilian and DOD 
Customers by Utility Sector: 

Figure: 

Figure 1: Map of the Territory of Guam and Location of Current and 
Projected U.S. Military Installations: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

June 30, 2009: 

The Honorable Solomon P. Ortiz: 
Chairman, Subcommittee on Readiness: 
Committee on Armed Services: 
House of Representatives: 

The Honorable Madeleine Z. Bordallo: 
House of Representatives: 

The Department of Defense's (DOD) plans to increase the U.S. military 
presence on Guam by more than two-and-a-half times the island's current 
military population by 2020. If implemented as planned, this 
realignment would increase the military population on Guam from about 
15,000 in 2009 to about 29,000 in 2014, and to over 39,000 by 2020. 
This growth will increase the current island population of 178,430 by 
about 14 percent over those years.[Footnote 1] The largest portion of 
the military's population growth is related to the relocation of about 
8,000 Marines and their 9,000 dependents from Okinawa, Japan, to Guam 
as part of an initiative between the United States and government of 
Japan to reduce forces in Japan while maintaining a continuing presence 
of U.S. forces in the region. The populations of each of the other 
military services would also increase as a result of DOD plans to 
expand their operations and presence on Guam. 

To keep pace with the projected growth in the military's population on 
Guam, DOD has determined that substantial upgrades to the island's 
existing utilities infrastructure are required for electric power 
generation, potable water production, wastewater collection and 
treatment, and solid waste collection and disposal to provide the 
additional utility capacities and services. The Navy's Joint Guam 
Program Office, which is leading the planning efforts among DOD 
components and other stakeholders to consolidate, optimize, and 
integrate the existing DOD infrastructure on Guam associated with the 
buildup, in cooperation with the Naval Facilities Engineering Command, 
conducted a number of technical studies and business case analyses to 
evaluate potential solutions for meeting the increased demand for 
utility services. In addition, DOD is awaiting completion of its 
environmental impact statement study and associated record of decision 
before making final decisions on the long-term solutions and its 
implementation approach for developing the new utility services 
[Footnote 2]. These solutions will be developed and possibly 
implemented by a special purpose entity or entities,[Footnote 3] which 
DOD would help to create, to provide the technical expertise in 
constructing and operating the utilities. According to the Joint Guam 
Program Office, DOD plans to complete new utility construction on Guam 
and be operational by November 2014. 

This is one in a series of reports on DOD's plans for increasing its 
presence on Guam.[Footnote 4] At your request, this report reviewed 
DOD's planning approach for improving Guam's utilities' infrastructure 
to meet the increased demand for services resulting from the 
significant growth in the military's population. Specifically, we 
examined (1) the condition and capacity of the existing utilities' 
infrastructure on Guam, the military's estimated utility requirements, 
and potential solutions for meeting the increased demand on the 
island's utility systems, and (2) the extent that DOD has developed a 
comprehensive plan to address any challenges it faces in its planning 
for new utility systems. You also requested that we review issues 
related to rates charged by the Navy for water from its Fena Reservoir 
water treatment operations on Guam, which are discussed in appendix II. 

To determine the current condition and capacity of Guam's existing 
utilities infrastructure, the military's estimated utility 
requirements, and potential solutions for meeting the increased demand 
on the island's utility systems, we obtained and reviewed studies and 
assessments, briefings, annual reports, and other pertinent 
documentation prepared by DOD, government of Guam, and U.S. federal 
departments and agencies. We interviewed and discussed this information 
with officials at the Navy's Joint Guam Program Office, Naval 
Facilities Engineering Command, U.S. Environmental Protection Agency, 
offices and organizations of the government of Guam, including the 
Consolidated Commission on Utilities, Guam Power Authority, Guam 
Waterworks Authority, and Department of Public Works. We also met with 
officials of Gershman, Brickner & Bratton, Inc.--the U.S. District 
Court of Guam appointed receiver for Guam's solid waste operations. We 
analyzed data on the expected number and timing of military personnel 
arriving on Guam and reviewed several technical studies, business case 
analyses, and related studies on the projected utility requirements and 
associated capacities that would be needed to provide sufficient 
utilities services. We discussed DOD's projected requirements and 
potential solutions for providing the needed new utility services with 
the Joint Guam Program Office, Naval Facilities Engineering Command 
headquarters and its Pacific and Marianas component commands, the U.S. 
Pacific Command and its service component commands, and Navy, Marine 
Corps, and Air Force headquarters. To determine the extent that DOD has 
developed a comprehensive plan to address any challenges it faces in 
its planning for new utility systems, we obtained and reviewed studies, 
reports, briefings, and other documentation and discussed this 
information with officials at the Joint Guam Program Office, Naval 
Facilities Engineering Command, U.S. Pacific Command and its service 
components, and other DOD organizations. To determine the key steps 
that DOD plans to use in its planning for the development of new 
utility systems on Guam, we interviewed officials with the Joint Guam 
Program Office, Naval Facilities Engineering Command, and other key 
stakeholder organizations and reviewed reports, studies, briefings, and 
other documentation related to the program. We developed a table of the 
key steps needed to implement utility solutions based on our audit work 
and discussed and reached concurrence with Joint Guam Program Office 
officials on the contents of the table. To establish criteria to use in 
assessing DOD's planning efforts for new utility services on Guam, we 
reviewed our prior reporting and related studies, as well as outside 
studies, to identify best practices and key elements of successful 
planning. We identified a plan as an important element of successful 
planning to increase transparency of an organization's efforts among 
stakeholders and to help improve an organization's overall management 
of its efforts. Such a plan would include information on milestones and 
schedules, costs, financing and budgets, goals and objectives, projects 
and activities, organizational responsibilities, implementation 
strategies, and potential risks, challenges, and other factors that 
could affect implementation. We conducted this performance audit from 
June 2008 through May 2009 in accordance with generally accepted 
government auditing standards. Those standards require that we plan and 
perform the audit to obtain sufficient, appropriate evidence to provide 
a reasonable basis for our findings and conclusions based on our audit 
objectives. We believe that the evidence obtained provides a reasonable 
basis for our findings and conclusions based on our audit objectives. 
See appendix I for more information on our scope and methodology. 

Background: 

Because of Guam's unique strategic location, the United States has long 
maintained a significant military presence on the island to support and 
defend its interests in the western Pacific Ocean region. The small 
remote U.S. territory is located about 1,600 miles east of Manila in 
the Philippines, 1,560 miles south of Tokyo, Japan, and 3,810 miles 
west of Honolulu, Hawaii (see fig. 1). DOD currently controls about 29 
percent of the land, which is about 62 square miles of the island's 
total 212 square miles. The U.S. military presently operates two major 
installations on Guam: the U.S. Naval Base-Guam, located on the 
southwestern side of the island at Apra Harbor, and Andersen Air Force 
Base in the north. 

Figure 1: Map of the Territory of Guam and Location of Current and 
Projected U.S. Military Installations: 

[Refer to PDF for image: map] 

The map of the Territory of Guam and location of current and projected 
U.S. Military Installations also includes an inset map of the Pacific 
Ocean to indicate the location of Guam relative to the entire Pacific 
Rim. 

The following are indicated on the map of Guam: 

Andersen Air Force Base: 
* Aviation operations, U.S. Marine Corps; 
* Intelligence, surveillance, and reconnaissance Strike Force 
initiative, U.S. Air Force. 

Apra Harbor Naval Complex: 
* Embarkation and amphibious training, U.S. Marine Corps; 
* Aircraft carrier transit berth and other waterfront work, U.S. Navy. 

U.S. Naval Computer and Telecommunications Station, Finegayan: 
* Main encampment and family housing, U.S. Marine Corps. 

South Finegayan Housing: 
* Housing, U.S. Marine Corps. 

Andersen South: 

U.S. Naval Computer and Telecommunications Station, Barrigada: 

Naval Ordnance Annex: 

Apra Heights: 

Tenjo Vista Tank Farm: 

Sasa Valley Tank Farm: 

Nimitz Hill: 

Naval Hospital: 

Sources: U.S. Marine Corps, U.S. Navy, U.S. Air Force, U.S. Army, GAO 
and Map Resources. 

Note: The location of the Army's air and missile defense task force on 
Guam has not yet been determined. 

[End of figure] 

To reduce the burden of the U.S. military presence on Japanese 
communities while maintaining a continuing presence of U.S. forces in 
the region, the U.S.-Japan Defense Policy Review Initiative[Footnote 5] 
established a framework for the future of U.S. force structure in 
Japan, including the relocation of American military units in Japan to 
other areas, including Guam. As a part of this initiative, DOD plans to 
move 8,000 Marines and their estimated 9,000 dependents from Okinawa, 
Japan, to Guam by the 2014 goal. Separate from the initiative, the 
United States also plans to expand the capabilities and presence of 
Navy, Air Force, and Army forces on Guam over the next several years. 
As a result of this planned realignment of U.S. forces, the military 
population on Guam is expected to grow by over 160 percent, from its 
current island population of 15,000 to over 39,000 by 2020. As shown in 
table 1, most of the population growth is related to the Marine move. 
It also shows that about 58 percent (about 14,080) of the total planned 
increase of 24,402 in military personnel and dependents from all of the 
military services is expected to be reached by 2014. Most of the 
extensive population growth and development resulting from the buildup 
will occur in the northern half of the island, primarily in the 
northwestern portion where DOD currently plans to construct a new 
Marine Corps base at Finegayan. The populations of each of the other 
military services would also increase as a result of DOD plans to 
expand its operations and presence on Guam. For example, the Navy plans 
to enhance its infrastructure, logistic capabilities, and waterfront 
facilities, including capabilities to support forward-based submarines 
and a transient nuclear aircraft carrier; the Air Force plans to 
develop a global intelligence, surveillance, and reconnaissance strike 
hub at Andersen Air Force Base; and the Army plans to place an Army air 
and missile defense task force on Guam. Joint Guam Program Office 
officials, however, told us that the currently projected schedules and 
levels of population growth and force structure could change as buildup 
plans are further refined and approved. 

Table 1: Projected Military Population Growth by Service from 2009 
through 2020: 

Number of military personnel and dependents by military service[A]: 

Year: 2009; 
Marine Corps: 5; 
Air Force: 5,095; 
Navy: 9,580; 
Army: 80; 
Coast Guard: 320; 
Special Operations Forces: 0; 
Total: 15,080. 

Year: 2014; 
Marine Corps: 10,895; 
Air Force: 7,451; 
Navy: 10,130; 
Army: 130; 
Coast Guard: 504; 
Special Operations Forces: 50; 
Total: 29,160. 

Year: 2020; 
Marine Corps: 17,557; 
Air Force: 7,851; 
Navy: 10,930; 
Army: 1,660; 
Coast Guard: 504; 
Special Operations Forces: 980; 
Total: 39,482. 

Year: Total increase over period 2009-2020; 
Marine Corps: 17,552; 
Air Force: 2,756; 
Navy: 1,350; 
Army: 1,580; 
Coast Guard: 184; 
Special Operations Forces: 980; 
Total: 24,402. 

Source: Joint Guam Program Office. 

Note: According to the Joint Guam Program Office, the projected 
military population shown in this table-which varied somewhat among 
utility studies-was used in developing the utility technical 
feasibility studies conducted by the program office and Naval 
Facilities Engineering Command to estimate utility system demand and 
capacity increase for the military buildup. While the estimated 
population and schedule for growth may change as plans evolve, the 
projected growth in population is considered to be the currently 
accepted estimates for planning purposes by the program office. 

[A] The population growth shown in the table excludes transient 
military personnel that will visit Guam for brief periods. 

[End of table] 

To keep pace with the projected growth in the military's population on 
Guam, DOD has determined that substantial upgrades to the island's 
existing utilities infrastructure are required for electric power 
generation, potable water production, wastewater collection and 
treatment, and solid waste collection and disposal to provide the 
additional utility capacities and services. In August 2006, the Deputy 
Secretary of Defense established the Joint Guam Program Office, within 
the Office of the Assistant Secretary of the Navy for Installations and 
Environment, to lead the coordinated planning efforts among DOD 
components and other stakeholders to consolidate, optimize, and 
integrate the existing DOD infrastructure on Guam to meet requirements 
associated with the relocation of Marine Corps forces from Okinawa, 
Japan, and the department's joint basing initiative.[Footnote 6] The 
Navy's Joint Guam Program Office, in cooperation with the Naval 
Facilities Engineering Command, conducted a number of technical studies 
and business case analyses to evaluate potential solutions for meeting 
the increased demand for utility services. The studies considered a 
range of solutions in each utility sector that would either provide 
dedicated utilities for the new Marine Corps base only, dedicated 
utilities that would service only islandwide DOD demands, or upgrade 
government of Guam systems to meet islandwide DOD demands. The studies 
then ranked the potential solutions to determine the most likely 
solutions in each sector. With the exception of solid waste, DOD 
envisions that the selected solutions would be implemented by a special 
purpose entity or entities, which would participate in a public-private 
venture with private sector owners, developers, and operators and 
public sector stakeholders[Footnote 7] to provide the technical 
expertise in constructing and operating the utility. DOD would then pay 
a negotiated set of rates to this special purpose entity for the 
services its uses.[Footnote 8] However, the exact form of this business 
arrangement and the level of involvement by public sector stakeholders 
have yet to be determined. 

Based on our audit work, we developed table 2, which shows the key 
steps that the Navy's Joint Guam Program Office confirmed for us that 
they plan to follow to identify requirements, examine potential 
solutions, and implement activities to develop and construct the 
utility infrastructure needed by DOD to support the expanding military 
population on Guam. 

Table 2: Key Steps that DOD Plans to Use to Increase Utility 
Infrastructure Capacities on Guam: 

Examine the condition and capacities of the existing Guam utility 
infrastructure; 

Initiate a series of technical studies and business case analyses to 
determine preferred technical alternatives and associated business 
models for meeting future utility requirements, including; 
* breakpoint analysis regarding the capabilities of existing utilities 
on Guam and timeline for exceeding those capacities; 
* examination of interim utility alternatives designed to meet 
construction needs; 
* examination of long-term utility alternative designed to meet the 
needs of relocated Marine Corps forces and associated DOD growth, and; 
* additional studies as required; 

Confer and coordinate with applicable stakeholders, including DOD 
service components, federal regulatory agencies, private entities, the 
government of Japan, the government of Guam, Consolidated Commission on 
Utilities, Guam Power Authority, and Guam Water Authority to gain 
concurrence in concept on proposed interim and long-term solutions and 
proposed business models; 

Complete the environmental impact statement and record of decision, 
required by the National Environmental Policy Act.[A]; 

Identify funding sources and develop procurement strategies to 
implement interim and long-term solutions, including the consideration 
of special purpose entities and other means to meet increased demand; 

Develop plans and schedule for implementation of interim solutions and 
construction of long-term utilities solutions; 

Monitor implementation. 

Source: GAO analysis of data provided by DOD. 

[A] An environmental impact statement must include a purpose and need 
statement, a description of all reasonable project alternatives and 
their associated environmental impacts (including a "no action" 
alternative), a description of the environment of the area to be 
affected or created by the alternatives being considered, and an 
analysis of the environmental impacts of the proposed action and each 
alternative. 40 C.F.R. § 1502.13-1502.16. 

[End of table] 

The program office also works closely with the governments of Japan and 
Guam, federal agencies, and Congress to manage the comprehensive 
buildup development effort. It has additional responsibilities for 
synchronizing funding among DOD components to meet critical timelines 
in development efforts on Guam and for coordinating DOD's conduct of an 
environmental impact statement for moving the Marines to Guam. The 
Joint Guam Program Office also receives assistance from the Naval 
Facilities Engineering Command in conducting analyses, determining 
criteria and requirements, and developing an acquisition strategy in 
planning for infrastructure needed to support DOD's operational 
requirements. 

Additionally, the Naval Facilities Engineering Command, in partnership 
with the program office, the services, and other DOD stakeholders, is 
developing the Guam Joint Military Master Plan that will form the 
baseline for military construction budget planning and facility and 
utility designs and provides a top-level view of the size and type of 
facility requirements, candidate and preferred land sites, and proposed 
use of the land to meet the requirements for new personnel and forces 
planned for Guam. It will also describe the planning efforts for 
construction and development activities related to the buildup to 
ensure that buildings, utilities, roads, and other infrastructure are 
built in a compatible manner. The master plan, however, will not 
include a specific, detailed plan on DOD's utility efforts for Guam. 
The master plan is expected to be completed shortly after a record of 
decision for the environmental impact statement that is currently 
planned to be signed in January 2010, and will be submitted to Congress 
when approved. 

The government of Japan is anticipated to provide $6.09 billion, in 
U.S. fiscal year 2008 dollars, of the estimated $10.27 billion cost of 
developing facilities and infrastructure for the Marine relocation to 
Guam. Of the $6.09 billion, $740 million is anticipated to be provided 
by Japan in recoverable financing for development and construction of 
related utility infrastructure for the Marines.[Footnote 9] However, 
specific allocation of the $740 million among the four utility sectors 
has not yet been worked out between the U.S. and Japanese governments. 

Guam's Existing Utility Infrastructure Is Not Sufficient to Meet DOD's 
Projected Utility Requirements without Further Upgrades: 

Projected requirements for utilities to serve the growing Guam civilian 
and U.S. military population over the next decade exceed available 
capacities of existing DOD and municipal systems, and DOD is evaluating 
possible options for supporting the expansion of these systems to meet 
future needs. While generally meeting current DOD and island 
requirements, existing utility systems--electric power generation, 
potable water production, wastewater collection and treatment, and 
solid waste collection and disposal--are largely operating at or near 
their maximum capacities and have limited reserve capacities to meet a 
significant new growth in demand for services. While DOD systems are 
relatively well-maintained, systems operated by Guam utility 
authorities have experienced a number of operational and regulatory 
compliance issues that could affect plans for increasing their 
capacities. 

Existing Utility Systems Have Limited Spare Capacity and Significant 
New Infrastructure Is Needed to Support Planned DOD Growth: 

The Joint Guam Program Office has determined that significant increases 
to existing utility system capacities in all four sectors will be 
needed to meet the demands of the expanding military population on 
Guam. Utility systems on Guam--operated by either DOD or Guam utility 
authorities--are capacity constrained and limited in their ability to 
satisfy growth in demand for services (see app. III for information on 
the current providers of utility services on Guam). Over the past 2 
years, the Joint Guam Program Office has conducted a series of 
technical studies and business case analyses to identify reasonable 
alternatives and determine best business solutions for expanding each 
of the utility systems to meet interim and long-term demands. However, 
the final long-term solution for some systems will not be known until 
the special purpose entities, which will design, construct, and operate 
the new utility infrastructure, are selected and the precise business 
arrangements are negotiated. Further, depending on the form of business 
arrangement and level of involvement of public and private 
stakeholders, DOD may not possess statutory authority at this time to 
implement certain potential aspects of this plan, such as the authority 
to invest U.S. government resources into a special purpose entity for 
the purpose of improving a utility system outside the jurisdiction of 
the department. DOD officials told us that they are currently working 
with the Office of Management and Budget to formulate a legislative 
proposal that they hope will enable DOD to implement certain potential 
aspects of this special purpose entity construct. Additionally, DOD has 
determined that certain operating inefficiencies, outstanding 
deficiencies, and issues related to compliance with environmental 
regulations in the existing infrastructure--especially related to those 
systems operated by Guam utility authorities--would need to be 
addressed to implement some of its potential solutions. While Guam's 
local utility authorities have taken significant actions to improve 
their systems over the past several years, many improvements and 
corrective actions remain to be taken. 

Electric power generation: 

DOD's power demands are estimated to increase by approximately 233 
percent--from 48 to 160 megawatts peak power. The Guam Power 
Authority's electric power system--which currently serves all DOD 
activities on Guam--is operating at capacity meaning that new 
generating equipment will be needed to satisfy the increased DOD power 
load. In order to reliably satisfy the increased load, an estimated 170 
megawatts of new generation capacity will be needed in addition to the 
550 megawatts of generation capacity currently installed as part of the 
authority's system, which is a 31 percent increase.[Footnote 10] Table 
3 summarizes DOD's current and expected future demand for electric 
power. 

Table 3: Estimated Effect of DOD Growth on Electric Power Utility 
System (As of May 2009): 

Current service provider: Guam Power Authority; 
DOD demand (megawatts): 
Current: 48; 
Future: 160; 
Increase: 112; 
System capacity (megawatts): 
Current: 550; 
Future: 720; 
Increase: 170; 
Comment: According to DOD's analysis, Guam Power Authority needs to 
provide 1.52 megawatt of capacity for every 1.0 megawatt of demand 
load. This means that 170 megawatt of new generation capacity is 
expected to be needed to satisfy DOD's 112 megawatt demand increase. 
Values represent peak power measures. 

Source: GAO analysis of DOD technical study and business case analysis 
for meeting the electrical requirements on Guam. 

Note: The "future" columns represent the total demand load and 
associated system capacity that will be needed by 2020. 

[End of table] 

The Guam Power Authority's electric power system has experienced 
reliability problems over the years such as frequent power outages. A 
May 2008 Guam Chamber of Commerce report indicates that the authority 
has improved the reliability of its system over the past 10 years, in 
part, by entering into public-private partnerships with independent 
power producers to provide new generation facilities. However, the 
study noted that the system is still using obsolete and expensive 
generation that affects the overall reliability of the system. For 
example, DOD's technical study indicates that the generators that 
provide approximately 50 percent of Guam Power Authority's base 
capacity date back to the mid-1970s. In addition, according to the Guam 
Power Authority Generation Resource Handbook, Fiscal Year 2008, the 
authority's existing operations are constrained by the environmental 
operating permits issued for each power plant. Combined, these factors 
result in inefficiencies such as units being out of service for 
extended periods of time or simply unavailable for production. 

DOD's preferred long-term technical solution for meeting the increased 
power demands is to maximize operating efficiencies by expanding Guam 
Power Authority's electric power system capacity from 550 to 720 
megawatts. This solution would involve constructing a separate power 
plant that could supply new power to Guam Power Authority's grid. 
[Footnote 11] Additionally, DOD is examining possible renewable energy 
systems, such as geothermal and solar power systems, to complement 
power provided by its preferred long-term solution and help achieve 
future goals related to renewable energy.[Footnote 12] 

To meet interim needs until the long-term solution is operational, DOD 
is considering options that include a combination of Guam Power 
Authority and DOD assets. By refurbishing idle generators at several 
existing plants on the island, DOD estimates that the authority could 
temporary provide up to 60 megawatts of additional power. In addition, 
DOD estimates that it could provide another 30 megawatts of temporary 
power by upgrading stand-by generators at a DOD-owned plant and using 
mobile generators. 

Potable water production: 

DOD potable water maximum daily demand is expected to increase by 
approximately 100 percent from 14.5 to 29.3 million gallons per day. 
The majority of the demand growth results from the planned 
concentration of Marine Corps personnel around the U.S. Naval Computer 
and Telecommunications Station in northern Guam, where demand is 
expected to grow from 0.4 to 12.1 million gallons per day. In addition, 
DOD growth at Andersen Air Force Base and Apra Harbor is expected to 
result in demand increasing from 3.4 to 5.2 million gallons per day and 
from 10.7 to 12.0 million gallons per day at these respective 
locations. To meet the growth in demand, production from the Navy's 
water system would need to increase from the current level of 18.4 
million gallons per day to 34.6 million gallons per day, an increase of 
88 percent.[Footnote 13] Table 4 summarizes DOD's current and expected 
future demand for potable water on Guam. 

Table 4: Estimated Effect of DOD Growth on Potable Water Utility System 
(As of May 2009): 

Current service provider: Navy-operated system; 
DOD demand (million gallons per day): 
Current: 14.5; 
Future: 29.3; 
Increase: 14.8; 
System capacity (million gallons per day): 
Current: 18.4; 
Future: 34.6; 
Increase: 16.2; 
Comment: Planned 34.6 million gallons of water per day capacity is 
based on expected 29.3 million gallons of water per day demand plus the 
size of the largest well in areas where the supply is from well 
sources. This is a safety factor to ensure that the system will 
continue to meet demand during circumstances where wells are out of 
service due to maintenance or other operational issues. DOD demand 
represents maximum daily values. 

Source: GAO analysis of DOD technical study and business case analysis 
for meeting the potable water requirements on Guam. 

Note: The "future" columns represent the total demand load and 
associated system capacity that will be needed by 2020. 

[End of table] 

DOD's preferred long-term solution for meeting expected growth in 
demand is to increase the production capacity of the Navy-owned water 
system by optimizing use of existing and developing new pumping, 
treatment, storage, and distribution facilities. While obtaining water 
from Guam Waterworks Authority's system was considered by DOD 
consultants, their studies determined that DOD should maintain an 
independent system which can meet DOD needs. However, DOD is working 
with the Guam Waterworks Authority to develop a long-term integrated 
water resource plan for the island. To increase the capacity of and 
operate its water system, DOD officials are considering a solution 
whereby a special purpose entity would implement the utility solutions. 
To meet interim needs until long-term solutions are in place, DOD 
expects to be able to phase in new capacity development to match the 
pace of the expected population growth. 

Wastewater collection and treatment: 

DOD wastewater volume is expected to increase by approximately 275 
percent from average flows of 1.2 to 4.5 million gallons per day. This 
increased wastewater flow will be concentrated in northern Guam--where 
the majority of the new military population is expected to be located-
-and will likely be treated at Guam Waterworks Authority's Northern 
District Wastewater Treatment Plant.[Footnote 14] As the only treatment 
facility in northern Guam, the plant serves both military (Andersen Air 
Force Base and U.S. Naval Computer and Telecommunications Station 
Finegayan) and civilian populations. It is currently designed to 
process 12 million gallons per day on average with a peak capacity of 
27 million gallons per day. Increased wastewater flows resulting from 
both the military buildup and the expected growth in Guam's civilian 
population are expected to result in future total flows to the plant of 
approximately 17.6 million gallons per day on average with a peak of 35 
million gallons per day. Based on the increased flows, the plant's 
treatment capacity would need to be expanded by 50 percent (from 12 to 
18 million gallons per day on average and from 27 to 40.4 million 
gallons per day at peak). Table 5 summarizes the current and projected 
future DOD demand for wastewater treatment on Guam. 

Table 5: Estimated Effect of DOD Growth on Wastewater Treatment Utility 
System (As of May 2009): 

Current service provider: Guam Waterworks Authority; 
DOD demand (million gallons per day): 
Current: 1.2; 
Future: 4.5; 
Increase: 3.3; 
System capacity (million gallons per day): 
Current: 12; (27 peak); 
Future: 18; (40.4 peak); 
Increase: 6; (13.4 peak); 
Comment: Guam Waterworks Authority's Northern District Wastewater 
Treatment Plant currently processes 1.2 million gallons of water per 
day of wastewater generated by military installations in northern Guam. 
This plant--capable of treating 12 million gallons of water per day of 
wastewater--may be expanded to treat the estimated 17.6 million gallons 
of water per day of wastewater that will be generated as a result of 
the military buildup and anticipated growth in Guam's civilian 
population. Values represent average flows unless otherwise indicated. 

Source: GAO analysis of DOD technical study and business case analysis 
for meeting the wastewater treatment requirements on Guam. 

Note: The "future" columns represent the total demand load and 
associated system capacity that will be needed by 2020. 

[End of table] 

The Guam Waterworks Authority's wastewater treatment system continues 
to have a number of deficiencies that result from the effects of 
natural disasters, poor maintenance, and vandalism. The authority is 
currently operating under a stipulated order because of issues related 
to compliance with environmental regulations.[Footnote 15] Under terms 
of the order, the authority is to, among other requirements, submit 
schedules and plans for certain capital improvements to its system. 
However, according to the authority's 2007 Water Resource Master Plan, 
the authority's ability to fund needed capital improvements has been 
hampered by various factors such as uncollected water and sewer bills 
and excessive emergency repair costs resulting from deferred spending 
for facility repairs and failure to maintain stocks of critical repair 
parts. In particular, the master plan notes that the Northern District 
Wastewater Treatment Plant is in severe critical need of upgrading and 
equipment replacement. In addition, the treatment plant may need 
capital improvements that would enable it to become a secondary 
treatment facility.[Footnote 16] According to the Guam Waterworks 
Annual Report for Fiscal Year 2006, in January 2007 the authority 
contracted with a private company--Veolia LLC--to manage and operate 
its wastewater system. 

DOD's preferred long-term technical solution is to have a special 
purpose entity that would expand the Guam Waterworks Authority's 
Northern District Wastewater Treatment Plant, and according to DOD 
officials, upgrade the plant as required by regulatory authorities to 
process the expected increase in wastewater flows. If the option of 
using this plant is not possible, a separate wastewater treatment plant 
may be necessary to meet DOD's needs.[Footnote 17] To meet its interim 
needs until the long-term solution is operational, DOD is working with 
the Guam Waterworks Authority to use the Northern District Wastewater 
Treatment Plant which, according to Joint Guam Program Office 
officials, may include expanding the treatment capacity of the plant. 
In addition, according to the program office, DOD is working with the 
Guam Waterworks Authority to consider ways to process wastewater 
generated by the growing construction workforce which will be on the 
island in advance of the arrivals of DOD personnel and dependents. 

Solid waste collection and disposal: 

Solid waste generation resulting from the increased DOD population on 
Guam is expected to grow by approximately 230 percent from 16,000 to 
53,000 tons per year. Table 6 summarizes the current and projected 
future DOD demand for solid waste disposal on Guam. 

Table 6: Estimated Effect of DOD Growth on Solid Waste Disposal System 
(As of May 2009): 

Current service provider: Navy-operated landfills; 
DOD demand (tons per year): 
Current: 16,000; 
Future: 53,000; 
Increase: 37,000; 
Comment: The Navy currently operates landfills at Apra Harbor Naval 
Base and Andersen Air Force Base. These landfills will be used during 
the initial stages of the military buildup. In 2011, the Navy is 
expected to stop using these landfills and begin disposing of all its 
solid waste at a new landfill being constructed by the government of 
Guam in southern Guam. 

Source: GAO analysis of DOD technical study for meeting the solid waste 
disposal requirements on Guam. 

Note: The "future" column represents the estimated total amount of 
solid waste that will be generated by DOD activities in 2020. 

[End of table] 

To meet the expected solid waste disposal needs, DOD intends to utilize 
the new Guam landfill being constructed on the southern part of the 
island by U.S. District Court of Guam-appointed receiver--Gershman, 
Brickner & Bratton, Inc.--for the Solid Waste Management Division of 
the government of Guam's Department of Public Works.[Footnote 18] The 
new Guam landfill will replace the government of Guam's existing 
landfill that has been operating over-capacity for over 20 years and 
has historically been in noncompliance with environmental regulations. 
According to Joint Guam Program Office officials, DOD is currently in 
the process of developing a letter of intent with the receiver 
concerning an outline of the parameters for a future agreement 
concerning DOD's use of the new landfill. DOD's use of the landfill 
would require DOD entities on Guam to transport their solid waste from 
military installations, which are predominately in the northern section 
of the island, to transfer stations or the new landfill and pay tipping 
fees[Footnote 19] to the landfill operator for solid waste disposal 
services. 

Until the new landfill is operational, DOD will continue to use its 
existing landfills at Apra Harbor, within Naval Base Guam, and Andersen 
Air Force Base, which have very limited remaining service lives. 
According to officials in the Joint Guam Program Office, the Apra 
Harbor and Andersen Air Force Base landfills should be usable through 
2018 and 2010, respectively, if current operating practices are 
followed. In addition, the Air Force is planning an expansion of the 
Andersen Air Force Base landfill to provide 1 to 2 years of additional 
capacity. The government of Guam's new landfill is expected to be 
operational in 2011, which would allow DOD to use this facility before 
exceeding capacities at its own landfill facilities. However, according 
to the program office, options are being considered to extend the life 
of the DOD landfills should the new Guam landfill be delayed. 

DOD Lacks a Comprehensive Plan for Addressing Several Planning 
Challenges It Faces in Providing New Utility Services for Guam: 

Over the past 3 years, the Navy's Joint Guam Program Office has made 
progress in leading DOD utility planning efforts to identify 
requirements and potential solutions to meet future demands, but DOD 
lacks a comprehensive plan for addressing the many challenges it faces 
as it moves forward. These planning challenges include the condition of 
existing Guam utility systems, extent of coordination required among 
stakeholders, sources of funding, approach chosen to implement 
solutions, and the schedule for completing key tasks. While DOD 
recognizes that these challenges could create potential risks for 
meeting the utility needs of Guam's growing military population, it has 
not begun development of a comprehensive plan for utilities that 
provides its stakeholders with specific information on its planning 
efforts, including critical milestones and schedules, interim and long- 
term options under consideration, approach to be used for developing 
and implementing new utility services, costs and financing, and 
potential utility projects. Without a comprehensive plan for utilities, 
DOD lacks an important planning tool to use in managing the several 
challenges it faces and for informing stakeholders, including Congress, 
on the specific details of its utility planning for Guam. 

A Comprehensive Plan is an Important Planning Tool to Increase 
Transparency and Improve Management of Program Efforts: 

The Joint Guam Program Office faces many challenges that could 
adversely affect its planning efforts as it moves forward to meet the 
demands of the expanding military population on Guam; however, it has 
not used a comprehensive plan to help overcome these challenges. Our 
prior work has shown that a comprehensive plan is an important planning 
tool for an organization to increase transparency and improve 
management of its efforts to achieve overall objectives. A 
comprehensive plan would generally provide stakeholders with specific 
information on the organization's program, including milestones and 
schedules, costs, financing and budgets, goals and objectives, projects 
and activities, organizational responsibilities, and potential risks, 
challenges, and other factors that could affect implementation of its 
plans. Such a plan would also generally provide a means to bring 
together all aspects of an organization's plans into one central 
document and a source that updates information on critical milestones 
and schedules, and if these are missed, what accommodations are being 
made. 

DOD Faces Five Planning Challenges in Providing New Utility Services 
for Guam: 

DOD faces five planning challenges that could create risks that would 
adversely affect its efforts to provide new utility services when 
needed to support its growing military population in Guam. These 
challenges are: 

* condition of existing Guam infrastructure affects DOD's selection and 
implementation of possible utility solutions; 

* involvement of a number of stakeholders complicates the DOD's 
planning process for utilities; 

* proposed solutions are likely to require more than one funding 
source; 

* implementation of new approach to upgrade utility services on Guam 
lacks key details; and: 

* tight schedule for meeting buildup requirements increases the 
complexity of utility planning efforts. 

Officials in the Navy's Joint Guam Program Office told us that DOD 
recognizes the potential adverse effect that these challenges could 
have on its utility program and has taken some actions to address them. 
For example, the officials said that the program office developed an 
initial risk-based management approach in 2008 as part of an initiative 
to examine ways to improve its management effectiveness. Although Joint 
Guam Program Office officials told us that the approach still needs 
further refinement, they said the approach is in place and being used 
to access, mitigate, and monitor risks to its goals. 

Condition of Existing Guam Infrastructure Affects Selection and 
Implementation of Possible Solutions: 

Many of the potential solutions that DOD is considering using to 
provide the increased capacities and new utility services on Guam would 
involve either integrating with or using elements of Guam's existing 
utilities infrastructure. In selecting solutions, various upgrades to 
the existing infrastructure may need to be made and a number of 
operating inefficiencies, outstanding deficiencies, and certain 
regulatory compliance issues would need to be resolved in time for 
implementation. 

Prior to DOD's military buildup decision, the Consolidated Commission 
on Utilities, Guam utilities authorities, and the government of Guam 
had done long-term utility planning to upgrade, expand, and repair 
Guam's power, water, and wastewater systems to support a larger 
population, according to the chairman of the Consolidated Commission on 
Utilities. This planning was based on the island's population growing 
by 25 percent by 2025. Under the current military buildup plans, 
however, this same level of growth would be achieved by 2014. As a 
result, some upgrades to its existing infrastructure may need to be 
completed earlier than was originally planned by the Guam utilities 
partly as result of the buildup. For example, on the basis of its Water 
Resources Master Plan projections, the Guam Waterworks Authority did 
not anticipate expanding its Northern District Wastewater Treatment 
Plant, which currently provides wastewater treatment service to both 
the civilian population and the military population at Naval Computer 
and Telecommunications Station Finegayan and Andersen Air Force Base in 
northern Guam, until 2015. Officials in the Joint Guam Program Office 
noted that many of these upgrades and repairs in the near-term are also 
driven by the need to address existing operational and regulatory 
compliance issues in Guam's utilities regardless of the buildup. 
According to the officials, for the infrastructure upgrades related to 
the military buildup, DOD will provide funds through customer fees 
which will support the Guam Power Authority's and Guam Waterworks 
Authority's planned activities. For activities which may be implemented 
earlier than originally planned due to the military buildup, the 
program office officials stated that the Consolidated Commission on 
Utilities will coordinate with DOD and Guam's utilities authorities to 
address such projects. 

Additionally, officials from the Governor of Guam's Civilian-Military 
Task Force[Footnote 20] told us that the influx of a large force of 
about 15,000 temporary workers--most of them from outside Guam-- 
required to construct the military's planned facilities will place 
significant demands on the existing utility infrastructure sooner than 
the arriving new military personnel and dependents. The government of 
Guam, Consolidated Commission on Utilities, Guam Power Authority, and 
Guam Waterworks Authority are in the initial stage of adjusting their 
long-term plans to fund and to make the necessary improvements and 
repairs to their utility systems needed to support DOD's buildup plans. 

Some solutions that DOD is considering would depend on Guam utility 
authorities being able to develop new or upgrade existing systems when 
needed to support military population growth. For example, DOD is 
considering using a new islandwide landfill that the government of 
Guam, through a court-appointed receiver, plans to develop and complete 
by mid-2011. DOD plans to be a customer and officials in the Joint Guam 
Program Office told us that they are in the process of developing a 
letter of intent with the receiver concerning an outline of the 
parameters, such as the tipping fee to use the new landfill, for a 
future agreement. Using the government of Guam's landfill allows DOD to 
forego developing its own new landfill and close its two existing ones 
that are nearing the end of their service lives. However, if the 
completion of the new Guam landfill is delayed, DOD may need to 
consider other alternatives. 

Additionally, selection of some DOD solutions may also depend on 
whether corrective actions can be taken to address a number of 
operating inefficiencies, outstanding deficiencies, and regulatory 
compliance issues with the existing Guam infrastructure in time for 
implementation. DOD is considering a solution, for example, that would 
expand and upgrade the Guam Waterworks Authority's Northern District 
Wastewater Treatment Plant to handle its planned significant increase 
in treatment capacity. However, the U.S. Environmental Protection 
Agency has recently issued a notice of proposed action under the Clean 
Water Act and Environmental Protection Agency regulations containing a 
tentative decision to deny an application for a renewed variance from 
certain secondary treatment requirements[Footnote 21] at the Northern 
District Wastewater Treatment Plant. The agency's tentative decision 
has been made available for public comment, and at the completion of 
the public comment period, the Environmental Protection Agency will 
consider these comments and make a final decision. DOD officials stated 
that the resolution of this waiver issue could be further delayed if 
the agency's final decision is challenged in court by the government of 
Guam. If implemented, Guam Waterworks Authority and Naval Facilities 
Engineering Command officials stated that the costs for upgrading to 
provide secondary treatment could be substantial. Additionally, while 
not necessarily affecting DOD's selection, other solutions would 
benefit from improvements made to existing systems by the Guam utility 
authorities, which are needed independent of the buildup. For example, 
while significant upgrades are needed to improve Guam Power Authority's 
aging transmission and distribution system, making these upgrades would 
also be useful in supporting DOD's future electrical needs. 

Involvement of a Number of Stakeholders Complicates the Planning 
Process: 

Stakeholders, which include DOD components, government of Japan, 
government of Guam, various federal departments and agencies, and 
private companies, require a significant level of communication and 
coordination to share information, resolve issues, reach agreements, 
and make decisions to facilitate effective planning and implementation 
activities. For instance, DOD would need to reach agreement with the 
government of Guam's utility organizations, which currently own and 
operate the utilities, as well as the government of Japan, which is 
expected to contribute funds toward the utilities, as well as other 
public and private stakeholders that may contribute funds and expertise 
to this venture, in order to select and implement utility solutions 
that involve using a special purpose entity to improve existing Guam 
infrastructure. Further, depending on the precise business model that 
is ultimately selected, DOD may not have statutory authority at this 
time to implement certain potential aspects of this plan, such as the 
authority to invest U.S. government resources into a special purpose 
entity for the purposes of improving a utility system outside the 
jurisdiction of the department. DOD officials told us that they are 
currently working with the Office of Management and Budget to formulate 
a legislative proposal that they hope will enable DOD to implement 
certain potential aspects of this special purpose entity construct. DOD 
would also need to later negotiate with the special purpose entity that 
is ultimately selected to determine specific details of its business 
arrangement in designing, constructing, and operating the new utility 
systems. 

The Joint Guam Program Office communicates and coordinates its 
activities with a widerange of public sector entities including the 
government of Japan, government of Guam and its utility organizations, 
other DOD entities, and U.S. federal departments and agencies, such as 
the Environmental Protection Agency, and private sector consultants and 
contractors. The program office, according to officials with the Joint 
Guam Program Office, has established routine conference calls, 
meetings, briefings, E-mail, conferences, and other communication 
methods among the many stakeholders to provide information, discuss 
planning and issues, coordinate actions, and obtain agreement on a 
range of activities. Officials with the program office and the 
government of Japan, for instance, engage in monthly meetings to 
discuss and share information on the progress of plans and associated 
activities. Similarly, program office officials meet weekly with 
various officials in the Naval Facilities Engineering Command, the 
services, and other federal agencies to discuss utility planning 
efforts and resolve issues. The program also holds frequent meetings 
with government of Guam organizations and conducts community meetings 
with the Guam civilian population to discuss concerns and provide 
information. 

However, despite the level of coordination that the Joint Guam Program 
Office has attempted to maintain, program office officials told us that 
it is often difficult to satisfy the immediate information needs of all 
stakeholders. These officials believe this is partly the result of the 
preliminary nature of utility plans for which studies and other 
analyses are still being refined, decisions are yet to be made, and 
funding and specific schedules are still being determined. A 
transportation engineer with the Federal Highway Administration Region 
9 Field Office, who has responsibilities for planning road 
infrastructure improvements in Guam, told us that without knowing the 
specific details of utility solutions under consideration, it is 
difficult coordinating with DOD to identify possible conflicts between 
planned road and utility improvements, such as new power transmission 
lines that may encroach on a road's right-of-way, and scheduling of 
projects. The official also said that the highway administration needs 
to obtain sufficient information from DOD to ensure that its projects 
are funded and completed when needed to support the buildup. Officials 
in the Joint Guam Program Office told us that the program office has 
provided as much information to its stakeholders when available and 
that they recognize the difficulty of stakeholders developing their own 
plans with preliminary data and analyses. 

Additionally, Guam utility officials said that while DOD has provided 
preliminary information on its utility plans, they believe that DOD has 
not provided the level of detail that is needed for the government of 
Guam and its utility organizations to do comprehensive utilities 
planning. The Chairman of the Consolidated Commission on Utilities told 
us that for the government of Guam to adjust its planning for the 
buildup, it needs information, such as the final numbers and arrival 
schedules for DOD personnel and dependents. The Chairman also said that 
there is a need for closer coordination and involvement between the 
government of Guam and the Joint Guam Program Office, DOD, and other 
federal agencies to better integrate their efforts for utilities 
planning and to obtain funding for their planning efforts and to make 
the required improvements. 

Officials in the Joint Guam Program Office told us that DOD has 
provided an unprecedented level of information to the government of 
Guam but many details are still being worked on or pending final 
decisions. The program office officials said that it would not be 
appropriate to release these details since they are likely to change 
during ongoing reviews. In February 2009, the Joint Guam Program Office 
began to provide more specific information on the range of utility 
proposals under consideration and its preferred solutions to the 
government of Guam and its utility organizations. 

Proposed Solutions Are Likely to Require More Than One Funding Source: 

DOD's cost estimates indicate that the total cost for utilities is 
likely to exceed the amount of utility funding that the government of 
Japan is anticipated to provide towards the Marine Corps' move to Guam. 
While the total capital costs of implementing long-term utility 
solutions are not known at this time, cost estimates for various 
solutions being examined by DOD indicate that the total cost of 
implementation could significantly exceed the financing anticipated 
from the government of Japan. As a result, additional funding would 
likely need to be obtained from other public and/or private sources to 
implement its long-term utilities infrastructure plans. Further, DOD 
will not know the ultimate cost of implementing its long-term utility 
solutions until the special purpose entity--essentially a service 
provider of a utility commodity--is established and begins development 
and design work on utility solutions concepts. However, our review of 
preliminary cost estimates that were developed as part of DOD's 
business case studies for each utility sector indicate that 
implementing various combinations of solutions across the utility 
sectors could significantly exceed the $740 million in equity 
investments and loans tentatively committed by the government of Japan 
and thereby require additional sources of financing. For instance, 
while the cost estimates are still preliminary and subject to change as 
the solutions are refined and developed, our analysis shows that the 
total cost of implementing long-term solutions across the four utility 
sectors could range from $1.35 billion to $1.79 billion, which would 
exceed the government of Japan financing by $614 million and $1.05 
billion, respectively. 

Additional funding could come from the United States,[Footnote 22] the 
government of Guam, other public and private sources, or a combination 
of these organizations, but the cost of financing from these sources 
could be higher and more difficult to obtain than the loans provided by 
the government of Japan through its Japan Bank of International 
Cooperation.[Footnote 23] The Joint Guam Program Office, in a written 
response to us, stated it is likely that Japanese funding will offer 
lower cost financing than that obtained through the commercial lending 
market or the business arrangements with special purpose entities. 
While the Guam Power Authority and Guam Waterworks Authority may be 
able to provide financing through their capacity to raise public debt, 
both authorities have had bond ratings that were below investment 
grade.[Footnote 24] In December 2008, the bond rating for the Guam 
Power Authority was upgraded by Standard and Poor's Ratings Services to 
a rating of medium investment grade because of its sustained trend of 
improved operational and financial performance. The Guam Waterworks 
Authority's bond rating was also recently upgraded but still remains 
slightly below investment grade. Even with better bond ratings, the 
authorities may still have some difficulty obtaining favorable rates 
because of the recent downturn in global financial markets. A senior 
official in the Joint Guam Program Office told us that Guam is in the 
process of seeking federal aid through grants, loans, and the normal 
federal budget process to improve its ability to fund its improvements 
and repairs. The official stated that low-cost rural development loans 
from the U.S. Department of Agriculture to the government of Guam are 
being considered as a source of funding to support Guam's utility 
infrastructure improvements.[Footnote 25] Additionally, as part of a 
special purpose entity's proposal, the entity could also include funds 
obtained from loans in the commercial lending market for implementing 
their utility plans. However, it is not clear what type of rates these 
investors may be able to obtain under current financial conditions. 

Implementation of New Approach to Upgrade Utility Services on Guam 
Lacks Key Details: 

With the exception of solid waste collection and disposal, the Naval 
Facilities Engineering Command plans that a special purpose entity 
would develop, construct, and operate the new long-term utility 
infrastructure needed on Guam to meet DOD's future demands for electric 
power, water, and wastewater. Command officials stated that the entity 
would likely be a limited liability company or partnership formed for 
the specific purpose of providing these utility services, which would 
likely participate in a public-private venture with private sector 
owners, developers, operators, and public sector stakeholders. While 
the command, which is responsible for planning and managing 
construction related activities for the buildup, has often used a 
public-private venture approach for developing military housing, it has 
not used this approach before for the development of utilities on the 
scale envisioned for Guam. Further, DOD may not possess statutory 
authority at this time to enable DOD to implement certain proposed 
aspects of this special purpose entity approach, such as the authority 
to invest U.S. government resources into a special purpose entity for 
the purposes of improving a utility system outside the jurisdiction of 
DOD. Additionally, many specific details about the special purpose 
entity, such as the entity's scope, business and financial 
arrangements, utility system cost and rate structure, and specific 
projects have not yet been determined. The entity, or entities, is 
scheduled to complete implementation of the new long-term utility 
systems by November 2014, according to the Joint Guam Program Office. 

Although officials at the Joint Guam Program Office and the Naval 
Facilities Engineering Command agree that the lack of specific details 
at this time about use of the special purpose entity approach creates 
some uncertainty about implementing utility solutions when needed on 
Guam, these officials said that the Naval Facilities Engineering 
Command has gained experience in its public-private ventures for 
housing that will provide the ability to link the interests and the 
needs of the stakeholders and derive the best business arrangement to 
meet DOD's utility needs. The Joint Guam Program Office noted that 
large-scale public-private housing projects also involve the 
construction and privatization of significant utility infrastructure. 
It further stated that developing a revenue-based, commercially 
acceptable financing structure, with the added dimension of public- 
private partnership, is a particular skill that the Naval Facilities 
Engineering Command has gained through its public-private venture 
housing efforts. However, the authorities available under chapter 169 
of Title 10, U.S. Code, are available only for the purposes of the 
Military Housing Privatization Initiative, and as stated above, it is 
unclear to what extent DOD possesses authority to implement certain 
proposed aspects of this special purpose entity approach for utilities 
on Guam. 

Joint Guam Program Office officials told us that, while the technical 
aspects of utility systems and their construction have natural 
differences from military housing public-private efforts, the Naval 
Facilities Engineering Command brings together subject-matter expertise 
from across DOD to address the relevant technical, financing, and 
business management issues that will arise. In addition to in-house 
capabilities, the command plans to use outside consultants that have 
significant experience with public-private efforts. For example, the 
command has contracted with an economics and real estate development 
advisory firm to conduct a study that will enable DOD to better 
understand market conditions affecting potential investments and 
develop the needed business model. The business model will provide a 
notional assessment of how a special purpose entity could be organized 
and operate and would include information on estimated capital costs to 
construct potential utility systems and forecasted utility rates that 
would be assessed to recover capital costs and fund the systems' 
operations and maintenance. The Naval Facilities Engineering Command 
plans to use the model for developing DOD's request for information to 
industry to solicit proposals and for negotiating with the selected 
special purpose entity on the terms and conditions of their utility 
services agreement. 

Tight Schedule for Meeting Buildup Requirements Increases the 
Complexity of Planning Efforts: 

Joint Guam Program Office's utility plans entail meeting a number of 
key milestones and associated events over the next 5 years to complete 
its environmental impact statement process, select a special purpose 
entity to develop and implement its long-term, and possibly its 
interim, solutions, and finish utility construction by November 2014. 
Keeping pace with this tight schedule not only becomes critically 
important to meeting the utility needs of the continuously growing 
military population, but also to the successful execution of schedules 
for major military construction, movement of Marines and other forces, 
and other related buildup activities. While the program office has 
taken some actions to mitigate schedule risks, the schedule for 
utilities provides little flexibility to accommodate any major 
adjustments in milestone dates. 

Environmental impact statement completion: 

Currently the Joint Guam Program Office is working toward completion of 
its environmental impact statement for relocating the Marines to Guam. 
Officials from various offices within DOD, government of Guam, and 
federal agencies told us that the amount of time allotted for 
completing milestones within the study is very compressed when compared 
to other impact studies that are less complex and smaller in scope. The 
Joint Guam Program Office plans to distribute a working draft of the 
environmental impact statement to various cooperating agencies and DOD 
organizations for initial review and plans to release the draft 
environmental impact statement for a 60-day public comment period in 
the final quarter of fiscal year 2009. The office intends to issue a 
record of decision in January 2010 to begin its planned fiscal year 
2010 construction program for the buildup on time. Environmental 
Protection Agency Region 9 officials told us the short period allotted 
for receiving and resolving comments creates possible risks that 
federal agencies, such as the Fish and Wildlife Service, may not be 
able to complete their reviews, and possible environmental challenges 
from public and private interests could delay approval of the study and 
affect the implementation of other buildup events. 

The tight schedule has also affected how long-term utility solutions 
were examined during the conduct of DOD's environmental impact 
statement for the Marine relocation. Because the final size, scale, and 
specific details of potential utility projects needed to implement the 
long-term solutions will not be known until they are developed by the 
selected special purpose entity at a later date, officials from the 
Joint Guam Program Office told us that the long-term solutions for 
utilities will be considered at a high level in the environmental 
impact statement that is planned for completion in 2010. The program 
office stated that a site specific environmental impact statement for 
the long term utility solutions will be conducted at a later date, but 
before DOD enters into any underlying contracts for long term services 
from the special purpose entity. 

Creation of special purpose entity: 

The next series of major milestones relate to the selection of a 
special purpose entity and the creation of a business model whereby the 
entity would develop, implement, and construct the long-term solutions 
for electric power, water, and wastewater utilities. As table 7 shows, 
there are a number of actions that need to be taken to create the 
special purpose entity for utilities, including development and 
approval of a business model for the special purpose entity, the 
evaluation of qualifications and service proposals, the selection and 
creation of the entity, and construction. However, according to the 
Joint Guam Program Office, while the plan is to complete utility 
construction by November 2014, the program office has not yet finished 
its coordination within DOD to determine the intervening dates for 
completing the actions needed to implement the special purpose entity 
approach and begin design and construction of the potential utility 
projects. A Joint Guam Program Office official told us that the program 
office does not believe at this time that the undetermined schedule 
dates will affect its ability to meet its construction completion date. 

Table 7: Actions Needed to Implement the Special Purpose Entity 
Approach for Utilities[A]: 

* Complete preliminary development of business model for the special 
purpose entity. 

* Obtain U.S. government approval of the business model. 

* Obtain government of Japan approval of business model. 

* Advertise Request for Qualifications for prospective special purpose 
entity offerors. 

* Complete evaluation of requests for qualifications from prospective 
offerors[B]. 

* Receive proposals from qualified offerors. 

* Select winning special purpose entity and begin exclusive 
negotiation, design development, and permitting. 

* Execute business and/or real estate documents that formalize the 
agreement between the special purpose entity and the U.S. government 
for the provision of utility services. Items such as service 
availability dates and utility rates would be established in the 
agreement. 

* Special purpose entity completes site permitting and begins 
construction. 

* Special purpose entity completes construction of utilities. 

* Special purpose entity operates the utilities. 

Source: Joint Guam Program Office. 

[A] DOD officials told us that they are currently working with the 
Office of Management and Budget to formulate a legislative proposal 
that would enable DOD to implement certain potential aspects of this 
special purpose entity construct. Thus, obtaining legislative authority 
would be a critical step in DOD's ability to implement several aspects 
of this special purpose entity approach. 

[B] Prospective special purpose entity offerors who meet the 
qualification criteria will be allowed in a future step to submit 
proposals to provide utility services. 

[End of table] 

Addressing capacities gaps: 

The current capacities of existing Guam utility systems will be 
exceeded by the needs of the continuously growing military population 
before the special purpose entities can complete new utility 
construction and be operational by November 2014. The Naval Facilities 
Engineering Command conducted breakpoint studies for each of the 
utility sectors to predict when utility capacities would be exceeded. 
[Footnote 26] Although the predicted breakpoint date varied by utility 
sector, the studies determined that there are potential deficiencies in 
electricity, water, and wastewater about 2 years into the Marine Corps 
relocation effort, which would require interim operating solutions to 
bridge the gaps in needed capacity until the long-term solutions were 
in place. Joint Guam Program Office officials told us that to control 
implementation costs of the utilities, the interim utility solutions 
are planned as a part of the long-term solutions. As part of DOD's 
current environmental impact statement study for the Marine buildup, 
the Naval Facilities Engineering Command stated that they have included 
an evaluation of these interim solutions for possible environmental 
impacts. Although the command at this time expects that DOD will bear 
most of the costs of implementing interim solutions, estimates of these 
costs have not yet been fully developed. Additionally, the role that 
the special purpose entity or entities would have in implementing the 
interim utility solutions has also not been determined. 

DOD Lacks a Comprehensive Plan for Its Utility Efforts on Guam: 

DOD has not developed and communicated a comprehensive plan for its 
utility efforts on Guam to use in managing the several challenges it 
faces and provide its stakeholders, including Congress, with a central 
source for obtaining specific information on its critical milestones 
and schedules, interim and long-term options, approach for utilities 
development, costs and financing for utility projects, and challenges. 
Officials in the Navy's Joint Guam Program Office told us that while 
the program office intends to develop a comprehensive utility plan, the 
pre-decisional nature of the work performed for the environmental 
impact statement, the pending selection of preferred utility solutions, 
uncertainty about costs and financing for utility projects, and 
associated challenges have precluded the plan's development. The Deputy 
Director of the Joint Guam Program Office also told us that while 
meeting DOD's mission requirements would be the ultimate goal of such a 
plan, the program office recognizes that the plan should be developed 
in collaboration with the government of Guam so that Guam's concerns 
are sufficiently addressed, and integrated islandwide utility solutions 
are considered that will benefit Guam residents. 

Nevertheless, without a comprehensive plan for utilities development, 
DOD does not have use of an important tool to address the risks and 
uncertainty posed by several critical challenges--the condition of 
existing Guam utility systems, extent of coordination required among 
stakeholders, sources of funding, approach chosen to implement 
solutions, and the schedule for completing key tasks--it faces in 
carrying out DOD's planning and implementation of utility solutions on 
Guam. Such a plan would also help increase transparency among 
stakeholders and improve DOD's overall management of its efforts by 
providing a central source of consistent, detailed information on 
various aspects of DOD's planning for utility development to meet 
future demands on Guam. An opportunity now exists to begin development 
of a comprehensive plan as DOD completes its environmental impact 
statement effort and the Guam Joint Military Master Plan is finalized. 
It is expected that such a plan would evolve in its content and be 
updated as information is better refined and decisions are made. 

Conclusions: 

Expanding the U.S. military presence on Guam by more than two-and-a- 
half times the current population is expected to put great stress on 
Guam's infrastructure, especially when significant increases are 
expected as soon as 2014 with further increases continuing over the 
next several years to 2020. Although DOD has taken a number of actions 
to identify its requirements and potential solutions for meeting this 
significant demand, it has not begun development of a comprehensive 
utilities plan to use as an important planning tool in managing and 
informing stakeholders, including Congress, on the several challenges 
that pose considerable risk to the success of building up the 
infrastructure to meet the demand and ensure utilities are available 
when needed. Without sufficient utility services, major construction 
projects, movement of Marines and other forces, and other buildup 
activities may fall behind schedule and increase implementation costs 
due to further compression of the timeline near the end of the 
implementation period. Congress would also benefit from having an 
additional source of details on DOD's utility efforts and its progress 
in addressing planning challenges and implementing utility plans to 
better inform its decisions and ensure proper congressional oversight 
of DOD's military buildup on Guam, including the potential need for 
greater levels of appropriations. 

Recommendation for Executive Action: 

Because of the importance that DOD places on developing the utility 
infrastructure needed to support its planned military buildup on Guam, 
we recommend that the Secretary of Defense direct the Secretary of the 
Navy, in consultation with the Joint Guam Program Office and the Naval 
Facilities Engineering Command, to take the following action: 

* Develop a comprehensive plan for DOD's utility development efforts 
that includes specific information on options under consideration; 
projected costs; sources of financing and related budget information; 
schedules with associated critical milestones; the construct for the 
special purpose entity approach or alternative approaches that would be 
used to plan, develop, construct, and operate the new utility 
infrastructure; organizational relationships and associated 
responsibilities; status of government of Guam actions to improve its 
existing infrastructure that may have application to DOD plans; and, 
potential risks, challenges, and other factors affecting implementation 
of DOD's plans. Additionally, this plan should be: 

- developed in cooperation with the government of Guam; 

- prepared in time so that an initial version of the plan can be 
included with DOD's submission of its final comprehensive Guam Joint 
Military Master Plan for the buildup to Congress in 2010; 

- provided to congressional defense committees, with subsequent 
versions of the plan provided as they become available; and: 

- updated, as needed, to adapt to changing circumstances. 

Agency Comments and Our Evaluation: 

In written comments to a draft of this report, the Executive Director 
of the Navy's Joint Guam Program Office agreed with our overall 
assessment of DOD's planning efforts to increase the capacities and 
services on Guam to support the planned U.S. military buildup over the 
next several years and with our recommendation that the Joint Guam 
Program Office, in consultation with the Naval Facilities Engineering 
Command, should develop a comprehensive plan that would provide 
specific information on DOD's utility planning for Guam, information 
such as options under consideration, projected costs, schedules with 
critical milestones, and other factors affecting implementation of 
DOD's plans. The Executive Director also agreed that this plan should 
be prepared in time so that an initial version of the plan could be 
included with the department's submission of its final comprehensive 
Guam Joint Military Master Plan in 2010 and be provided to 
congressional defense committees, with subsequent versions provided as 
they are updated. However, while the Executive Director stated in his 
comments that our recommendation was fair because it focuses on DOD's 
utility development, he suggested we clarify our recommendation so as 
not to create the impression that DOD's development of a comprehensive 
utility plan would account for all utility needs on Guam and would need 
mutual agreement with the government of Guam. While we continue to 
believe that collaboration with the government of Guam is important 
because many of DOD's preferred solutions described in this report 
involve utilization of utilities currently owned and operated by the 
government of Guam, we have clarified our recommendation, as DOD 
suggested, to now state that the comprehensive utility plan for Guam 
should be developed "in cooperation" with the government of Guam rather 
than "in collaboration." Further, the Executive Director stated that 
DOD's span of control and influence to resolve overall utilities 
concerns on Guam is limited. We agree that DOD is limited in its 
ability to resolve overall utilities concerns on Guam, and have 
identified the extent of coordination required among stakeholders as a 
planning challenge throughout this report. 

Additionally, the Executive Director stated in his comments that our 
report was unclear on how a comprehensive plan would increase 
transparency or what such transparency would entail. He therefore 
suggested that we modify or consider deleting references to 
transparency in the report. We have acknowledged in our report that DOD 
has provided, to the extent possible, a significant amount of 
information to its stakeholders, including the government of Guam, to 
provide transparency of its utility efforts. We also stated, however, 
that a comprehensive plan for utilities is another important planning 
tool that DOD can use to improve the management of its efforts and 
provide its stakeholders with detailed, consistent information on its 
utility planning efforts--thereby providing an additional level of 
transparency to its stakeholders. Such a plan would also generally 
provide a means to bring together all aspects of those plans into one 
central document and a source that updates information on critical 
milestones and schedules, and if these are missed what accommodations 
are being made. DOD's preparation of a comprehensive utility plan would 
also mutually reinforce the utility planning being conducted by the 
government of Guam to support both the needs of the military buildup 
and those of the civilian population. As the Executive Director 
suggests in his comments, an example of a more quantitative method of 
achieving transparency could be the inclusion of additional review 
milestones with the government of Guam as the comprehensive plan is 
being developed. Additionally, we believe that another example would be 
for DOD to set review milestones with other stakeholders, such as the 
Environmental Protection Agency and the Federal Highway Administration, 
in preparing its plan. Such additional coordination could help to 
ensure those stakeholders' mutual interests, plans, and budgets, which 
support the needs of the military and island populations, are aligned 
in DOD's plan. For these reasons, we have retained our discussion of 
transparency in the report. 

DOD's comments are reprinted in their entirety in appendix IV. Also, 
DOD provided technical comments on a draft of this report, which we 
incorporated as appropriate. 

As agreed with your office, unless you publicly release the contents of 
this report earlier, we plan no further distribution until 30 days from 
the report date. At that time, we will send copies of this report to 
interested congressional committees, the Secretary of Defense, the 
Secretary of the Navy; and the Governor of Guam. In addition, the 
report will be available at no charge on GAO's Web site at [hyperlink, 
http://www.gao.gov]. 

If you or your staff have any questions about this report, please call 
me at (202) 512-4523 or leporeb@gao.gov. Contact points for our Offices 
of Congressional Relations and Public Affairs may be found on the last 
page of this report. Other major contributors to this report are listed 
in appendix V. 

Signed by: 

Brian J. Lepore, Director: 
Defense Capabilities and Management: 

[End of section] 

Appendix I: Scope and Methodology: 

To determine the current condition and capacity of Guam's existing 
utility infrastructure, the military's estimated utility requirements, 
and potential solutions for meeting the increased demand on the 
island's utility systems, we obtained and reviewed studies and 
assessments, briefings, annual reports, and other pertinent 
documentation prepared by the Department of Defense (DOD), government 
of Guam, U.S. federal departments and agencies, and private companies. 
We interviewed and discussed this information with officials at the 
Department of the Navy's Joint Guam Program Office, Naval Facilities 
Engineering Command, U.S. Environmental Protection Agency, offices and 
organizations of the government of Guam, including the Consolidated 
Commission on Utilities, Guam Power Authority, Guam Waterworks 
Authority, Department of Public Works, Guam Environmental Protection 
Agency, and the Guam Civilian Military Task Force. We also spoke with 
officials of Gershman, Brickner & Bratton, Inc.--the U.S. District 
Court of Guam appointed receiver for Guam's solid waste collection and 
disposal operations--to discuss the status of actions being taken to 
correct outstanding operational deficiencies with solid waste 
operations and the development of a new landfill in Guam. We discussed 
electric power approaches and considerations used in the Hawaiian 
islands with officials at the Hawaiian Electric Company to provide us 
with a comparative basis for power operations in Guam. We analyzed data 
on the expected number and timing of military personnel arriving on 
Guam and reviewed several technical studies, business case analyses, 
and related studies on the projected utility requirements and 
associated capacities that would be needed to provide sufficient 
utility services. We discussed DOD's projected requirements and 
potential solutions for providing the needed new utility services with 
the Joint Guam Program Office, Naval Facilities Engineering Command 
headquarters and its Pacific and Marianas component commands, the U.S. 
Pacific Command and its Navy, Marine Corps, and Air Force component 
commands, and U.S. Navy, U.S. Marine Corps, and U.S. Air Force 
headquarters. We obtained data on the current capacities of Guam's 
existing utility systems from the Naval Facilities Engineering Command. 
These data are of undetermined reliability; they were obtained from 
utility studies that were conducted by the command's contractors who 
worked directly with the government of Guam and its utility 
organizations in establishing current utility system capacities and DOD 
demand and for providing a baseline to determine the extent of 
additional capacities needed to meet future DOD demands. We used these 
data in order to consider the planning required to increase the 
capacities of the existing utilities. Joint Guam Program Office 
officials told us that the Naval Facilities Engineering Command is in 
the process of verifying and validating the data used in its technical 
utility studies. 

To determine the extent that DOD has developed a comprehensive plan to 
address any challenges it faces in its planning for new utility 
systems, we obtained and reviewed studies, analyses, reports, 
briefings, planning documents, and other supporting and relevant 
documentation. We also held discussions with officials at the Joint 
Guam Program Office, Naval Facilities Engineering Command and its 
Pacific and Marianas component commands, U.S. Pacific Command and its 
service component commands, and other DOD organizations and offices. To 
determine the key steps that DOD plans to use in its planning for the 
development of new utility systems on Guam, we interviewed officials 
with the Joint Guam Program Office, Naval Facilities Engineering 
Command, and other key stakeholder organizations and reviewed reports, 
studies, briefings, and other documentation related to the program. We 
developed a table of the key steps needed to implement utility 
solutions based on our audit work and discussed and reached concurrence 
with Joint Guam Program Office officials on the contents of the table. 
To establish criteria to use in assessing DOD's planning efforts for 
new utility services on Guam, we reviewed our prior reporting and 
related studies, as well as outside studies, to identify best practices 
and key elements of successful planning. We identified a plan as an 
important element of successful planning to increase transparency of an 
organization's efforts among stakeholders and to help improve an 
organization's overall management of its efforts. Such a plan would 
include information on milestones and schedules, costs, financing and 
budgets, goals and objectives, projects and activities, organizational 
responsibilities, implementation strategies, and potential risks, 
challenges, and other factors that could affect implementation. We 
reviewed the Joint Guam Program Office sanctioned technical studies and 
business case analyses that were used to develop possible solutions for 
providing increased utility capacities and services to support the 
growth in the military population. From these studies we obtained 
information on potential costs, possible impacts on the existing Guam 
utility infrastructure, and implementation approaches, which we 
discussed with Joint Guam Program Office and Naval Facilities 
Engineering Command officials. To better understand stakeholder 
relationships, we met with officials within the Joint Guam Program 
Office, Naval Facilities Engineering Command, Joint Staff, Office of 
the Secretary of Defense, the Service headquarters, U.S. Pacific 
Command and its service components, the government of Guam, 
particularly its utility authorities, U.S. Environmental Protection 
Agency, and private companies. Regarding the environmental impact 
statement that is being conducted for the Marine Corps move to Guam, we 
reviewed planning documents, status reports, and other documentation, 
which we discussed with officials from DOD organizations, government of 
Guam, U.S. Environmental Agency Region 9, as well as other cognizant 
officials. 

Additionally, we obtained information on the Department of the Navy's 
Fena Reservoir water treatment operations on Guam, the determination 
process used to establish the rates it charges its customers for water, 
and the feasibility of consolidating Fena water operations with the 
Guam Waterworks Authority's water system. We obtained and reviewed 
briefings, studies, reports, official correspondence, and other 
pertinent documentation related to the Navy's Fena Reservoir water 
operations on Guam and the Navy Working Capital Fund, which establishes 
the procedures used by the Navy to manage the costs of its operations 
and provides the process for determining water rates. We also discussed 
this information with appropriate officials at the Naval Facilities 
Engineering Command Marianas, Naval Facilities Engineering Command 
Headquarters, Guam Waterworks Authority, and Guam's Consolidated 
Commission on Utilities. Additionally, we discussed the operational and 
water rate issues with the Department of the Navy's Naval Audit 
Service, which was conducting a review of the process used by the 
Department of the Navy to establish the water rates that it charges the 
Guam Waterworks Authority on Guam. We obtained and reviewed the Naval 
Audit Service's final April 2009 report issued on the results of its 
Guam water rates' review. 

We conducted this performance audit from June 2008 through May 2009 in 
accordance with generally accepted government auditing standards. Those 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. Table 8 shows the 
organizations and offices we contacted during our review. 

Table 8: Organizations and Offices Contacted during Our Review: 

Washington, D.C., area: 

* Joint Guam Program Office, Assistant Secretary of the Navy 
(Installations and Environment). 

* Naval Facilities Engineering Command, Headquarters. 

* Joint Staff, Logistics Engineering Division. 

* Office of the Deputy Under Secretary of Defense, Installations and 
Environment Division. 

* Marine Corps Headquarters, Defense Policy Review Initiative, 
Installations and Implementation Branch. 

* Commander, Navy Installations Command. 

* Air Force Headquarters. 

* Naval Audit Service, Department of the Navy. 

* Gershman, Brickner & Bratton, Inc. 

Oahu, Hawaii, area: 

* U.S. Pacific Command, Headquarters. 

* U.S. Pacific Fleet. 

* U.S. Marine Forces Pacific. 

* U.S. Pacific Air Forces. 

* Naval Facilities Engineering Command, Pacific. 

* U.S. Department of Transportation, Region 9, Federal Highways 
Administration. 

* First Hawaiian Bank. 

* Hawaiian Electric Company. 

Guam: 

* Joint Guam Program Office Forward. 

* Naval Facilities Engineering Command Marianas. 

* Government of Guam. 

* Civilian/Military Task Force, Office of the Governor of Guam. 

* Consolidated Commission on Utilities. 

* Department of Public Works, Solid Waste Division. 

* A.B. Won Pat Guam International Airport Authority. 

* Guam Coastal Management Program. 

* Guam Power Authority. 

* Guam Waterworks Authority. 

* University of Guam, Water and Environmental Research Institute of the 
Western Pacific. 

* Guam Environmental Protection Agency. 

San Francisco, California, area: 

* Environmental Protection Agency, Region 9. 

Source: GAO. 

[End of table] 

[End of section] 

Appendix II: Department of the Navy's Fena Reservoir Water Treatment 
Operations and Rates on Guam: 

During our review we obtained information on the (1) Navy's Fena 
reservoir water treatment operations, (2) process used by the U.S. Navy 
to set rates for its military customers and the Guam Waterworks 
Authority for water obtained and produced from the Navy's Fena 
reservoir water treatment operations, and (3) feasibility of 
consolidating the Fena water operations with the Guam Waterworks 
Authority's water system. 

Navy's Fena Reservoir Water Treatment Operations: 

DOD currently produces and provides potable water to meet all of its 
needs at military installations on Guam. In the northern half of the 
island, its water comes from a network of wells on DOD land that pumps 
fresh water from an underground aquifer. In the south, its water is 
obtained from surface freshwater resources, including the Fena 
Reservoir, which the Navy constructed in 1951, to provide the primary 
source of water to Naval Base Guam operations, military personnel, and 
dependents. Water is pumped from the manmade reservoir and two nearby 
springs to the Navy Fena Water Treatment Plant where raw water is 
treated by coagulation, sedimentation, and filtration to reduce 
turbidity and chlorinated. The plant is the largest and most complex 
water treatment plant on Guam and, according to the Commanding Officer 
of the Naval Facilities Engineering Command Marianas, has complied with 
the Safe Drinking Water Act over the past 5 years, with the exception 
of a few minor monitoring and reporting issues. 

To augment the water supply for civilian residents its serves on Guam, 
the Guam Waterworks Authority[Footnote 27] purchases about 3 million 
gallons of water of the Navy's daily production at its Fena water 
treatment plant. The purchased water serves the authority's customers 
in three villages in close proximity to the reservoir and/or its water 
distribution pipes but can also be conveyed to other customers in its 
water system. The Navy's plant currently turns out about 9 million 
gallons of water each day but is capable of producing upwards of 13.5 
million gallons each day. [Footnote 28] According to the Naval 
Facilities Engineering Command, the Fena water treatment operation on 
Guam is the only Navy water operation that sells water to an off-base 
entity. 

Navy's Process for Determining Water Rates: 

The Navy's water production and distribution systems in Guam are 
operated through the Navy Working Capital Fund, which is a revolving 
fund that relies on sales revenue instead of direct congressional 
appropriations to finance its operations. The fund must recover the 
full cost of its operations, and rates for its products and services 
are set so its operations will break even over time, thereby neither 
making a profit nor incurring a loss.[Footnote 29] The Navy has used 
this financing approach for over 30 years for its water operations and 
as a basis for its water rates for both its military and civilian 
customers in Guam. 

Because gains or losses in revenue may occur as a result of variations 
in operations, the Navy water rates are adjusted each year to recover 
the full costs of operations and break even over time. In accordance 
with normal Navy Working Capital Fund procedures, the Navy's Naval 
Facilities Engineering Command Marianas initially sets a new water rate 
for its Fena reservoir operations through its budget process 2 years 
prior to the fiscal year of execution. The proposed new rate is 
determined from actual and estimated costs available at the time of 
development and knowledge of future costs and sales volume events, such 
as an increase in population or customer base. According to water rate 
historical data provided by the Naval Facilities Engineering Command 
Marianas used in preparing its fiscal year 2009 rate, operation costs 
included direct labor, overhead, material (fuel), depreciation, 
equipment rental, electricity, hazardous waste disposal, water 
laboratory testing, engineering support, and contracts for operations 
and maintenance, minor repairs, ground maintenance, major repairs, data 
collection, management software, and other services. 

The Naval Facilities Engineering Command Marianas reflects the proposed 
new water rate in its supporting budget documentation that it submits 
to the Naval Facilities Engineering Command-Pacific for the associated 
fiscal year budget submission. In turn, the documentation is provided 
to the Naval Facilities Engineering Command Headquarters, which reviews 
the documentation and submits it as part of its consolidated budget to 
the Navy's Office of Budget/Business and Civilian Resources Division. 
Subsequently, the consolidated budget is presented to the Office of the 
Secretary of Defense's Comptroller. After the Office of the Secretary 
of Defense's review, a program budget decision is published 
establishing the new water rate for the associated fiscal year and any 
needed adjustments are made to the Naval Facilities Engineering Command 
Marianas' budget. 

Feasibility of Consolidating Navy and Guam Water Systems: 

In regard to the feasibility of consolidating the Navy's Fena water 
operations with Guam Waterworks Authority's water system, the Naval 
Facilities Engineering Command told us that the command has 
consistently maintained ownership of water rights on Navy land 
throughout the world and the Navy would like to maintain this right for 
its reservoir on Navy land in Guam. Further, the Government of Guam 
recognized the fee simple title and ownership of the United States' 
real and personal property used by the Navy to produce and distribute 
potable water, (which includes the Fena Reservoir) in a 2003 Consent 
Decree.[Footnote 30] The Commanding Officer of the Naval Facilities 
Engineering Command Marianas, in an October 2008 letter to the Chairman 
of Guam's Consolidated Commission on Utilities, stated that the Command 
sees few engineering, operational, or financial benefits that would 
result from consolidation. He stated that while the Guam local water 
system has undergone significant improvements in the quality of its 
drinking water, the system still has a very high loss rate of 
approximately 50 percent and continues to lack adequate water 
transmission and storage infrastructure. In contrast, the Navy water 
system's loss rate is 17 percent, which is close to the industry 
standard of 15 percent or less. The commanding officer also stated that 
the Guam Waterworks Authority's primary water system in northern Guam 
is largely separate and distinct from the Navy's system. Another Naval 
Facilities Engineering Command Marianas official told us that most of 
the authority's water comes from the island's northern aquifer. 
According to the command, while the water is of sufficient quality to 
not require treatment, the authority's rates remain higher than those 
of the Navy, which operates a full water treatment plant. Additionally, 
the officer told us that because the Fena reservoir is located within 
the Naval Base Guam Ordnance Annex,[Footnote 31] there are security, 
liability, and antiterror/force protection concerns that would be 
raised by nonmilitary ownership of the reservoir. 

The Chairman of the Guam's Consolidated Commission on Utilities told us 
it is the long-term goal of the government of Guam to integrate DOD's 
and Guam's water systems under the control of the Guam Waterworks 
Authority. However, the chairman told us that for the time being the 
government of Guam has shifted its focus to planning for the buildup 
and looking for opportunities to collaborate with DOD on developing 
integrated water and wastewater solutions for the buildup. He further 
stated that the government of Guam would revisit the ultimate 
integration of the entire system at a later time. 

[End of section] 

Appendix III: Current Sources of Utility Services for Civilian and DOD 
Customers on Guam: 

DOD current sources of utility services for electric power, potable 
water, wastewater treatment, and solid waste disposal come from both 
military-and government of Guam-owned and operated systems. The Guam 
Power Authority provides DOD with all of its electric power services. 
The Guam Waterworks Authority provides wastewater collection and 
treatment services for all of DOD's installations in northern Guam, 
such as Andersen Air Force Base, but DOD provides its own treatment 
services for the Naval Base Guam in the south. DOD currently produces 
all of its own potable water and handles all of its solid waste 
collection and disposal. Table 9 summarizes the sources of utility 
services for Guam civilian and DOD customers by utility sector. 

Table 9: Current Source of Utilities Services for Guam Civilian and DOD 
Customers by Utility Sector: 

Utility sector: Electric power generation; 
Customer sector: Guam civilian; 
Current source of utility services: 
* Guam Power Authority provides all power services. 

Utility sector: Electric power generation; 
Customer sector: DOD (Navy and Air Force bases)[A]; 
Current source of utility services: 
* Purchases all of its power services though a customer services 
agreement with Guam Power Authority.[B] 

Utility sector: Potable water production; 
Customer sector: Guam civilian; 
Current source of utility services: 
* Guam Waterworks Authority produces most of its own water but 
purchases some water from the Navy's Fena reservoir water operations. 

Utility sector: Potable water production; 
Customer sector: DOD (Navy and Air Force bases); 
Current source of utility services: 
* Navy Base Guam and Andersen Air Force Base produce and provide water 
to all DOD customers. 

Utility sector: Wastewater collection and treatment; 
Customer sector: Guam civilian; 
Current source of utility services: 
* Guam Waterworks Authority operates seven wastewater treatment plants 
and basins that treat wastewater from resident and military 
customers.[C] An estimated 41 percent of island residents use 
individual wastewater disposal systems, such as septic tanks. 

Utility sector: Wastewater collection and treatment; 
Customer sector: DOD (Navy and Air Force bases); 
Current source of utility services: 
* The Navy treats all of its wastewater in southern Guam at its own 
treatment plant at Naval Base Guam; 
* Guam Waterworks Authority handles wastewater from Andersen Air Force 
Base and Navy facilities in northern Guam. 

Utility sector: Solid waste collection and disposal; 
Customer sector: Guam civilian; 
Current source of utility services: 
* Guam Department of Public Works maintains a single landfill and only 
provides solid waste services for civilian customers in Guam.[D] 

Utility sector: Solid waste collection and disposal; 
Customer sector: DOD (Navy and Air Force bases)[A]; 
Current source of utility services: 
* Joint Region Marianas maintains a landfill at both Navy Base Guam and 
Andersen Air Force Base and provides solid waste services for the 
bases. 

Source: DOD and government of Guam. 

[A] Beginning January 31, 2009, the Navy Region Marianas assumed 
responsibly for installation support services, including utilities, on 
all military bases and DOD facilities on Guam under DOD's joint basing 
initiative as recommended by the 2005 Base Realignment and Closure 
Commission, and was designated as Joint Region Marinas, Guam. 

[B] According to information provided by DOD officials, the Guam Power 
Authority supplies power to each DOD facility up to the base 
transformer; from there, each base is responsible for its on-base power 
distribution. According to DOD officials, the customer services 
agreement between the Guam Power Authority and DOD establishes the 
electrical rates paid to the Guam Power Authority and states that DOD 
will be a customer of the authority. It further states that the 
operations and maintenance of the islandwide power system will be the 
responsibility of the authority. DOD plans to renegotiate the 
agreement, which is in force until 2012. 

[C] According to the Guam Waterworks Annual Report, in January 2007 the 
authority contracted with a private company--Veolia LLC--to manage and 
operate its wastewater system. 

[D] In March 2008, the U.S. District Court of Guam appointed Gershman, 
Brickner & Bratton, Inc, as Receiver for Guam's solid waste operations. 

[End of table] 

[End of section] 

Appendix IV: Comments from the Department of Defense: 

Note: Page numbers in the draft report reviewed by agency may differ 
from those in this report. 

Department Of The Navy: 
Office Of The Assistant Secretary: 
Installations And Environment: 
1000 Navy Pentagon: 
Washington, D.C. 20330-1000: 

June 25, 2009: 

Mr. Brian J. Lepore: 
Director, Defense Capabilities and Management: 
U.S. Government Accountability Office: 
441 G Street, N.W. 
Washington, DC 20548: 

Dear Mr. Lepore: 

This is the Department of Defense (DoD) response to the GAO draft 
report, GAO-09-653, "Defense Infrastructure: Planning Challenges Could 
Increase Risks for DoD in Providing Utility Services When Needed to 
Support the Military Buildup on Guam," dated May 29, 2009 (GAO Code 
351225). Detailed comments on the report recommendations are enclosed. 

We agree with recommendations as a whole. There are two significant 
items that we recommend adjusting. 

On page 16, section "Comprehensive plan ... to increase transparency 
and improvement management...". Likewise, on page 26, the last 
paragraph includes reference to "increase transparency." It is not 
clear what such "transparency" would entail, or how DoD/Joint Guam 
Program Office (JGPO) could provide better "transparency." The report 
acknowledges that there has been a significant amount of information 
shared between DOD/JGPO and the government of Guam and that if 
information has not been shared, this is due to the information not 
having been determined yet. We recommend to delete reference to 
"transparency" or lack of transparency be deleted, or perhaps amplify a 
more quantitative method of achieving transparency (i.e. including more 
program review milestones with Government of Guam as the comprehensive 
plan is being developed). 

On page 27, section "Recommendation for Executive Action" indicates 
that a comprehensive plan for DOD's utility development should be 
prepared. This recommendation is fair because it focuses on the DoD 
utility development, however it creates the impression that DoD 
development of such a plan will account for overall utility needs on 
Guam. The "span of control and influence" of DOD to resolve utilities 
concerns on Guam is limited. This plan includes inputs from government 
of Guam utilities as well as from the Government of Japan. Further, the 
reference to "collaboration" in the first sub-bullet as to the 
development of the DOD comprehensive plan implies mutual agreement with 
government of Guam utilities will be necessary. 

DoD recommends to change the wording in the first sub-bullet to read 
"developed in coordination with the government of Guam." 

Thanks for the opportunity to review the draft report. 

Sincerely, 

Signed by: 

David F. Bice: 
Executive Director: 
Joint Guam Program Office: 

Enclosure: As stated: 

[End of letter] 

GAO Draft Report - Dated May 29, 2009: 
GAO Code 351225/GAO-09-653: 

"Defense Infrastructure: Planning Challenges Could Increase Risks for 
DoD in Providing Utility Services When Needed to Support the Military 
Buildup on Guam" 

Department Of Defense Comments To The Recommendation 

Recommendation 1: The GAO recommends that the Secretary of Defense 
direct the Secretary of the Navy, in consultation with the Joint Guam 
Program Office and the Naval Facilities Engineering Command, to develop 
a comprehensive plan for DoD's utility development efforts. The plan 
should include: specific information on options under consideration; 
projected costs; sources of financing and related budget information; 
schedules with associated critical milestones; the construct for the 
special purpose entity approach or alternative approaches that would be 
used to plan, develop, construct, and operate the new utility 
infrastructure; organizational relationships and associated 
responsibilities; status of government of Guam actions to improve its 
existing infrastructure that may have application to DoD plans; and, 
potential risks, challenges, and other factors affecting implementation 
of the DoD's plans. Additionally, this plan should be developed in 
collaboration with the government of Guam; prepared in time so that an 
initial version of the plan can be included with DoD's submission of 
its final comprehensive Guam Joint Military Master Plan for the buildup 
to Congress in 2010; provided to congressional defense committees, with 
subsequent versions of the plan provided as they become available; and 
updated as needed, to adapt to changing circumstances. 

DOD Response: 

DoD concurs with the assessment and recommendation of the GAO. This 
recommendation is fair because it focuses on the DoD utility 
development, however it creates the impression that DoD development of 
such a plan will account for all utility needs on Guam. The "span of 
control and influence" of DOD to resolve overall utilities concerns on 
Guam is limited. This plan includes inputs from government of Guam 
utilities as well as from the Government of Japan. 

[End of section] 

Appendix V: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Brian J. Lepore, (202) 512-4523 or leporeb@gao.gov: 

Acknowledgments: 

In addition to the contact named above, Mark A. Little, Assistant 
Director; Michael W. Armes; Raj C. Chitikila; Grace A. Coleman; 
Katherine S. Lenane; Mahender Dudani; Patrick E. Peterson; and Mark J. 
Wielgoszynski, Analyst-in-Charge, made major contributions to this 
report. 

[End of section] 

Related GAO Products: 

High-Level Leadership Needed to Help Guam Address Challenges Caused by 
DOD-Related Growth, [hyperlink, 
http://www.gao.gov/products/GAO-09-500R], Washington, D.C.: April 9, 
2009. 

Defense Infrastructure: Opportunity to Improve the Timeliness of Future 
Overseas Planning Reports and Factors Affecting the Master Planning 
Effort for the Military Buildup on Guam. [hyperlink, 
http://www.gao.gov/products/GAO-08-1005]. Washington, D.C.: September 
17, 2008. 

Defense Infrastructure: High-Level Leadership Needed to Help 
Communities Address Challenges Caused by DOD-Related Growth. 
[hyperlink, http://www.gao.gov/products/GAO-08-665]. Washington, D.C.: 
June 17, 2008. 

Defense Logistics: Navy Needs to Develop and Implement a Plan to Ensure 
that Voyage Repairs are Available to Ships Operating Near Guam When 
Needed. [hyperlink, http://www.gao.gov/products/GAO-08-427]. 
Washington, D.C.: May 12, 2008. 

Defense Infrastructure: Planning Efforts for the Proposed Military 
Buildup on Guam Are in Their Initial Stages, with Many Challenges Yet 
to Be Addressed. [hyperlink, http://www.gao.gov/products/GAO-08-722T]. 
Washington, D.C.: May 1, 2008. 

Defense Infrastructure: Challenges Increase Risks for Providing Timely 
Infrastructure Support for Army Installations Expecting Substantial 
Personnel Growth. [hyperlink, http://www.gao.gov/products/GAO-07-1007]. 
Washington, D.C.: September 13, 2007. 

Defense Infrastructure: Overseas Master Plans Are Improving, but DOD 
Needs to Provide Congress Additional Information about the Military 
Buildup on Guam. [hyperlink, http://www.gao.gov/products/GAO-07-1015]. 
Washington, D.C.: September 12, 2007. 

U.S. Insular Areas: Economic, Fiscal, and Financial Accountability 
Challenges. [hyperlink, 
http://www.gao.gov/products/GAO-07-119]. Washington, D.C.: December 12, 
2006. 

DOD's Overseas Infrastructure Master Plans Continue to Evolve. 
[hyperlink, http://www.gao.gov/products/GAO-06-913R]. Washington, D.C.: 
August 22, 2006. 

U.S. Insular Areas: Multiple Factors Affect Federal Health Care 
Funding. [hyperlink, http://www.gao.gov/products/GAO-06-75]. 
Washington, D.C.: October 14, 2005. 

Results-Oriented Government: Practices That Can Help Enhance and 
Sustain Collaboration among Federal Agencies. [hyperlink, 
http://www.gao.gov/products/GAO-06-15]. Washington, D.C.: Oct. 21, 
2005. 

Opportunities Exist to Improve Future Comprehensive Master Plans for 
Changing U.S. Defense Infrastructure Overseas. [hyperlink, 
http://www.gao.gov/products/GAO-05-680R]. Washington, D.C.: June 27, 
2005. 

Results-Oriented Government: GPRA Has Established a Solid Foundation 
for Achieving Greater Results. [hyperlink, 
http://www.gao.gov/products/GAO-04-38]. Washington, D.C.: March 10, 
2004. 

Environmental Cleanup: Better Communication Needed for Dealing with 
Formerly Used Defense Sites in Guam. [hyperlink, 
http://www.gao.gov/products/GAO-02-423]. Washington, D.C.: April 11, 
2002. 

Compact of Free Association: Negotiations Should Address Aid 
Effectiveness and Accountability and Migrants' Impact on U.S. Areas. 
[hyperlink, http://www.gao.gov/products/GAO-02-270T]. Washington, D.C.: 
December 6, 2001. 

Foreign Relations: Migration From Micronesian Nations Has Had 
Significant Impact on Guam, Hawaii, and the Commonwealth of the 
Northern Mariana Islands. [hyperlink, 
http://www.gao.gov/products/GAO-02-40]. Washington, D.C.: October 5, 
2001. 

Overseas Presence: Issues Involved in Reducing the Impact of the U.S. 
Military Presence on Okinawa. [hyperlink, 
http://www.gao.gov/products/GAO/NSIAD-98-66]. Washington, D.C.: March 
2, 1998. 

U.S Insular Areas: Development Strategy and Better Coordination Among 
U.S. Agencies Are Needed. [hyperlink, 
http://www.gao.gov/products/GAO/NSIAD-94-62]. Washington, D.C.: 
February 7, 1994. 

[End of section] 

Footnotes: 

[1] A recent report by the government of Guam's Department of Public 
Works projected continued growth in the population of Guam. The report 
estimated that by 2030, the 2008 civilian population of 176,000 would 
grow by 26 percent to 222,000 without the anticipated military buildup; 
with the military buildup, the report estimated the total population 
would increase by 44 percent to 253,000 in 2030 from the current 
population. Government of Guam, Department of Public Works, 2030 Guam 
Transportation Plan (Dec. 19, 2008). The population of Guam is 
estimated to be 178,430 in July 2009, according to the Central 
Intelligence Agency's The World Fact Book, [hyperlink, 
https://www.cia.gov/library/publications/the-world-factbook/] (accessed 
June 2009). 

[2] The National Environmental Policy Act of 1969, codified as amended 
at 42 U.S.C. § 4321-4347, establishes environmental policies and 
procedures that shall be followed by all federal agencies to the 
fullest extent possible. In accordance with these requirements and the 
regulations for implementing the National Environmental Policy Act of 
1969 established by the Council for Environmental Quality, federal 
agencies typically evaluate the likely environmental effects of a 
project they are proposing to undertake using an environmental 
assessment or, if the project constitutes a major federal action 
significantly affecting the quality of the human environment, a more 
detailed environmental impact statement. 

[3] DOD officials said that the special purpose entity would most 
likely be a limited liability company or partnership formed for the 
specific purpose of providing a particular utility service or services 
on Guam. A limited liability company is a company in which the 
liability of each shareholder or member is limited to the amount 
individually invested. A limited partnership is a partnership composed 
of one or more persons who control the business and are personally 
liable for the partnership's debts (called general partners), and one 
or more persons who contribute capital and share profits but who cannot 
manage the business and are liable only for the amount of their 
contribution. 

[4] These reports include GAO, Defense Infrastructure: Overseas Master 
Plans Are Improving, but DOD Needs to Provide Congress Additional 
Information about the Military Buildup on Guam, [hyperlink, 
http://www.gao.gov/products/GAO-07-1015] (Washington, D.C.: Sept. 12, 
2007); Defense Infrastructure: Planning Efforts for the Proposed 
Military Buildup on Guam Are in Their Initial Stages, with Many 
Challenges Yet to Be Addressed, [hyperlink, 
http://www.gao.gov/products/GAO-08-722T] (Washington, D.C.: May 1, 
2008); Defense Infrastructure: Opportunity to Improve the Timeliness of 
Future Overseas Planning Reports and Factors Affecting the Master 
Planning Effort for the Military Buildup on Guam, [hyperlink, 
http://www.gao.gov/products/GAO-08-1005] (Washington, D.C.: Sept. 17, 
2008); and High-Level Leadership Needed to Help Guam Address Challenges 
Caused by DOD-Related Growth, [hyperlink, 
http://www.gao.gov/products/GAO-09-500R] (Washington, D.C.: April 9, 
2009). 

[5] DOD officials refer to the process through which the United States 
and Japan negotiated the initiatives that realign U.S. forces in Japan 
as the Defense Policy Review Initiative. The realignment initiatives 
were the result of Security Consultative Committee meetings in 2005 and 
2006 between U.S. and Japan officials. The Security Consultative 
Committee is made up of the U.S. Secretaries of State and Defense and 
Japan's Minister of Foreign Affairs and Minister of State for Defense. 
The committee sets overall bilateral policy regarding the security 
relationship between the United States and Japan. The results of these 
meetings established a framework for the future U.S. force structure in 
Japan, including the Marine Corps move from Okinawa, Japan, to Guam. 

[6] Joint basing refers to a recommendation from the 2005 Base 
Realignment and Closure process that DOD develop a joint region on Guam 
which will realign installation management functions at Andersen Air 
Force Base to the Commander, U.S. Naval Forces Marianas. The joint 
basing initiative is intended to eliminate duplication in base support 
among installation services capabilities, such as utilities. Joint 
Region Marianas, Guam, was established January 31, 2009. 

[7] According to the Joint Guam Program Office, it is anticipated that 
the special purpose entity will be funded by a mix of public and 
private funding. 

[8] The Duncan Hunter National Defense Authorization Act for Fiscal 
Year 2009 states that it is the sense of Congress that the proposed 
utility infrastructure improvements on Guam should incorporate the 
civilian and military infrastructure into a single grid to realize and 
maximize the effectiveness of the overall utility system, if 
appropriate cost-sharing and quality standards are met. See Pub. L. No. 
110-417 § 2821(c) (2008). DOD has not yet determined whether a single 
entity or multiple special purpose entities would construct and operate 
the new utility systems. 

[9] In addition to the $740 million, the government of Japan is 
anticipated to provide $2.55 billion in financing, of which $2.1 
billion would be recoverable, for the development and construction on 
family housing for Marine Corps families. The government of Japan is 
also expected to provide $2.8 billion for construction of general 
administrative buildings, instruction buildings, barracks, and quality 
of life facilities. 

[10] Although the installed generation capacity in Guam Power 
Authority's plants is approximately 550 megawatts, the current 
available generation capacity is 485 megawatts. This difference is 
largely related to units out service for extended periods of time and 
units not available to be scheduled into the generation capacity. To 
maintain system reliability standards, Guam Power Authority needs to 
provide 1.52 megawatts of capacity for every 1.0 megawatt of demand 
load, according to DOD analysis. The reserve capacity allows for 
generators to be taken out of service for maintenance and provides an 
emergency source of power. Therefore, to meet the expected 112 megawatt 
increase in DOD demand load, 1.52 times this amount, approximately 170 
megawatts, of new generation capacity is needed. 

[11] Options for the separate power plant include configurations 
whereby (1) DOD loads are primarily satisfied by the new plant with 
excess power delivered to the Guam Power Authority grid, (2) power is 
provided primarily to the authority's grid with DOD loads being 
satisfied by the authority, and (3) DOD loads are satisfied by the new 
plant that operates independently of the Guam Power Authority grid. 

[12] For example, section 2911(e) of Title 10, U.S.C., states that it 
shall be DOD's goal to produce or procure not less than 25 percent of 
the total quantity of electric energy it consumes within its facilities 
and in its activities during fiscal year 2025 and each fiscal year 
thereafter from renewable energy sources as defined in section 203(b) 
of the Energy Policy Act of 2005 (42 U.S.C. 15852(b)). 

[13] Prior to consolidating under DOD's joint basing initiative, the 
Navy and Air Force operated separate water systems that served all DOD 
needs on Guam. As a result of the consolidation which placed all base 
operating functions under Navy control, we refer to the water system as 
being Navy-owned. 

[14] The Northern District Wastewater Treatment Plant on the 
northwestern coast of the island was commissioned in 1979 and is the 
largest of the Guam Waterworks Authority's sewage treatment facilities. 
It currently uses only primary treatment (physical removal of floatable 
and settleable solids) and disposes of treated effluent through an 
outfall into the Philippine Sea. 

[15] United States of America v. Guam Waterworks Authority and the 
Government of Guam, No. 02-00035, Stipulated Order for Preliminary 
Relief (D. Guam June 5, 2003). The stipulated order requires the 
authority to, among other matters, develop and submit a water and 
wastewater master plan and to submit schedules and plans for several 
different specified projects. 

[16] According to officials in the Joint Guam Program Office, this may 
be a requirement from the Environmental Protection Agency for the Guam 
Waterworks Authority even without the military buildup. 

[17] Options for the separate wastewater treatment plant include (1) 
constructing a new facility with its own outfall near the proposed DOD 
development and (2) building a new facility at the Northern District 
Wastewater Treatment Plant site to treat DOD wastewater flows only and 
using the existing plant's outfall. 

[18] United States of America v. Government of Guam, No. 02-00022 (D. 
Guam March 17, 2008). 

[19] A tipping fee is the charge levied upon a given quantity of waste 
received at a waste processing facility or landfill. 

[20] According to the Guam Civilian-Military Task Force, the task force 
was created in 2006 by the Governor of Guam's Executive Order 2006-10 
to maximize opportunities for the civilian and military community 
resulting from increases in military presence, and that one of the task 
force's responsibilities is to develop a comprehensive master plan that 
would accommodate the military buildup and relocation of the Marines to 
Guam. 

[21] Secondary treatment is the second step in most waste treatment 
systems during which bacteria consume the organic parts of the wastes. 
This is accomplished by bringing the sewage, bacteria, and oxygen 
together in trickling filters or within an activated sludge process. 
Secondary treatment removes all floating and settling solids and about 
90 percent of the oxygen demand from substances and suspended solids. 
Disinfection by chlorination is the final stage of the secondary 
treatment process. The Environmental Protection Agency establishes 
secondary treatment standards for publicly owned treatment works. 

[22] However, depending on the precise business model that is 
ultimately selected, it is unclear whether statutory authority exists 
at this time to enable DOD to invest U.S. government resources into a 
special purpose entity for the purposes of improving a utility system 
outside the jurisdiction of DOD. DOD officials told us that they are 
currently working with the Office of Management and Budget to formulate 
a legislative proposal that they hope will enable DOD to implement 
certain potential aspects of this special purpose entity construct. 

[23] The Japan Bank for International Cooperation is one of four policy-
based financing institutions that are part of the Japan Finance 
Corporation, which is a public corporation wholly owned by the 
Government of Japan. In conducting its operations to fulfill its 
mission of contributing to the sound development of the Japanese and 
international economy, the bank's role is to complement the financing 
provided by private sector financial institutions. 

[24] When a bond is rated investment grade, its issuer is considered 
able to meet its obligations, exposing bondholders to minimal default 
risk, which makes it easier to attract investors and obtain lower 
interest rates. 

[25] In testimony before the U.S. Senate Committee on Energy and 
Natural Resources on May 1, 2008, the Acting Deputy Assistant Secretary 
of the Interior for Insular Affairs stated that as is typical for 
government loan programs, the rural development loans from the U.S. 
Department of Agriculture require that the government get an 
appropriation only for the risk associated with the loan rather than 
the entire loan amount. Loans where there is a reasonable risk of 
default will have a higher cost than those which typically do not 
default. For instance, the renewable energy guaranteed loan program has 
a 10 percent subsidy rate compared to the hardship electric loan 
program which has a 0.12 percent subsidy rate. Because utilities 
typically have little risk of default, financing of electric loans is 
secure and carries a low up-front financing cost on behalf of the 
federal government. 

[26] Breakpoints were developed by matching the supply of the existing 
utility to the demand from forces (to include service members, 
contractor support and dependents) at their projected arrival on Guam. 

[27] The Guam Waterworks Authority, which is a public corporation 
responsible for the production, treatment, distribution, and sale of 
drinking water, provides water services to the entire civilian 
population of Guam. Most of its water--about 70 percent--comes from 
wells that pump water from the northern aquifer; the remaining 30 
percent comes from surface water sources, including rivers and 
reservoirs (ground level and elevated tanks). 

[28] A memorandum of understanding in 1991 between the U.S. government 
and the government of Guam set the Navy's daily commitment at upwards 
of 4.39 million gallons of water. 

[29] See 10 U.S.C. § 2208; see DOD 7000.14-R, Department of Defense 
Financial Management Regulation, Vol. 2B, Ch. 9, § 09010 (Sept. 2008). 

[30] United States of America v. Government of Guam, No. 99-00102 (D. 
Guam Apr. 24, 2003). 

[31] The Naval Base Guam Ordnance Annex is located approximately 1 mile 
southeast of the main base. It encompasses nearly 18,000 acres and is a 
major storage and supply point for many types of weapons. The annex is 
also the site of the Fena reservoir. 

[End of section] 

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