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entitled 'Military Housing: Installations Need to Share Information on 
Their Section 801 On-Base Housing Contracts' which was released on 
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Report to Congressional Committees: 

United States Government Accountability Office: 

GAO: 

October 2010: 

Military Housing: 

Installations Need to Share Information on Their Section 801: 

On-Base Housing Contracts: 

Military Housing: 

GAO-11-60: 

GAO Highlights: 

Highlights of GAO-11-60, a report to congressional committees. 

Why GAO Did This Study: 

In the Military Construction Authorization Act, 1984, Congress 
authorized the Section 801 housing program, which provided a means for 
improving and expanding military family housing through private 
developers’ investment. Under this authority, the Department of Defense 
(DOD) awarded eight contracts for the construction of on-base housing 
that typically consisted of two phases: the in-lease (DOD leases all of 
the units from developers for up to 20 years whether housing is 
occupied or not) and the out-lease (under some contracts, developers 
may rent housing to the general public while leasing the land from DOD 
for up to 30 more years). 

Based on a mandate in the National Defense Authorization Act for Fiscal 
Year 2010 conference report, GAO’s objectives were to assess (1) the 
status of contracts for on-base Section 801 military housing, (2) the 
estimated costs to DOD and local communities that would result from the 
general public occupying this housing, and (3) the extent to which DOD 
and the services share information on modifications to the contracts 
and community interaction experiences. GAO visited five installations 
with on-base Section 801 housing, analyzed housing contracts, and 
interviewed relevant officials. 

What GAO Found: 

The status of contracts for on-base Section 801 military housing varies 
widely, ranging from continuing the in-lease phase of the contracts to 
demolishing unneeded units. Of the eight on-base Section 801 housing 
contracts, four remain in the in-lease phase (when housing is reserved 
for service members and their families), two are in the out-lease phase 
(when, depending on the terms of the contract, the installation may 
allow the developer to rent housing to the general public or reserve 
housing for service members), and two are in contract dispute or 
litigation—Eielson Air Force Base and Naval Weapons Station Earle. For 
the two contracts in the out-lease, Fort Wainwright converted its 
housing units to the general public’s use, while Fort Hood renegotiated 
its contract to retain housing for military or DOD civilians’ use. 

The housing contracts generally require the developer to pay certain 
costs (potentially including roads construction, utilities, and 
demolition costs) to permit the Section 801 housing units’ transition 
to the general public’s use; however, no cost estimates existed during 
GAO’s review. Also, GAO found potential transition costs for DOD and 
the communities linked to three installations: Naval Base Ventura 
County Port Hueneme, Ellsworth Air Force Base, and Hurlburt Field. The 
potential costs relate to security, education, transportation, and 
environmental considerations. GAO did not identify any potential 
benefits that might accrue from converting the leases to the out-lease 
phase because it was outside of the scope of our work. 

GAO found that the services share information regarding their Section 
801 housing contracts with other installations within the service; but 
DOD and the services do not share this information across the services. 
For example, Fort Hood renegotiated its contract to specify additional 
reasons for potential early termination of its lease, and retained 
priority use of the housing units for military personnel or DOD 
civilians; however, Air Force and Navy officials stated they were 
unfamiliar with these contract modifications. Additionally, GAO 
reported that most Section 801 contracts provide that DOD may terminate 
early in the event of national emergency or other limited 
circumstances, but none of the contracts specifically address potential 
liability in instances where DOD might terminate for other reasons such 
as reduced demand for housing or security concerns. GAO found that the 
services and DOD lack a communications process to share information 
from contract negotiations and community interaction—both of which can 
affect the efficient use of military housing resources. According to 
best practices for internal control in the federal government, program 
managers should communicate information within a time frame to 
management and others within the entity to meet goals for effective and 
efficient use of resources. Without a communications process to share 
installations’ experiences with any major housing-contract changes and 
community interaction, DOD and the services cannot ensure that the four 
installations facing potential contract changes will have the timely 
information to better position the installations to negotiate the most 
cost-effective contract terms for the federal government. 

What GAO Recommends: 

GAO recommends that DOD develop a communications process among 
installations with Section 801 housing to share information regarding 
any contract changes. DOD concurred with GAO’s recommendation. 

View [hyperlink, http://www.gao.gov/products/GAO-11-60] or key 
components. For more information, contact Brian Lepore at (202) 512-
4523 or Leporeb@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

The Status of On-Base Section 801 Housing Contracts Varies Widely among 
Military Installations: 

Some DOD Installations or Communities Would Face Transition Costs If 
Housing Units Are Converted to the General Public's Use: 

Contract Changes at Individual Bases Have Potential Application to 
Other Bases Transitioning to the Out-Lease Phase: 

Conclusions: 

Recommendation for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Status of Each Military Installation's Section 801 Housing: 

Appendix II: Comments from the Department of Defense: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Related GAO Products: 

Table: 

Table 1: Status of On-Base Section 801 Military Family Housing 
Contracts by Installation: 

Figures: 

Figure 1: Eielson Air Force Base, Alaska--French Creek and Moose Lake: 

Figure 2: Eielson Air Force Base, Alaska--Sprucewood: 

Figure 3: Ellsworth Air Force Base, South Dakota--Centennial Estates: 

Figure 4: Fort Hood, Texas--Liberty Village: 

Figure 5: Fort Wainwright, Alaska--Birchwood: 

Figure 6: Hurlburt Field, Florida--Commando Village: 

Figure 7: Naval Base Ventura County Port Hueneme, California--Pearl 
Court and Midway Estates: 

Figure 8: Naval Weapons Station Earle, New Jersey--Laurelwood: 

United States Government Accountability Office: 

Washington, DC 20548: 

October 28, 2010: 

Congressional Committees: 

A number of Department of Defense (DOD) installations, starting in 
1984, contracted with developers to privately finance the construction 
of millions of dollars worth of military family housing on base 
property, and obligated DOD for long-term lease payments. The Section 
801 housing program was authorized by the Military Construction 
Authorization Act, 1984.[Footnote 1] Section 801 provided a means for 
improving and expanding military family housing through private 
developers' investment at a time when the federal government wanted to 
refrain from federally financing construction. This program was a 
forerunner to the current Military Housing Privatization 
Initiative.[Footnote 2] 

The Section 801 on-base housing contracts between DOD[Footnote 3] and 
developers generally consist of two phases: an in-lease period during 
which DOD rents all of the units from the developer for a period of up 
to 20 years whether the units are occupied or not by military families 
and an out-lease period during which developers may be permitted to 
lease units to the general public and pay DOD rent for the use of the 
land for a period ranging from 20 to 30 years.[Footnote 4] The 
contracts between developers and the government outline the terms for 
the property status at the expiration of the out-lease. This typically 
involves a provision requiring the developer to remove improvements to 
the property and restore it to its prior condition, which potentially 
requires the developer to demolish the housing. With respect to many of 
the contracts entered into under the Section 801 program, the military 
services face a staggered timetable within the next 1 to 6 years to 
decide to either proceed with the contracts as written, and potentially 
permit developers to lease the housing to the general public, or 
attempt to renegotiate contracts to reflect evolving needs for military 
housing and security. 

There are seven DOD installations that have or have had Section 801 
military family housing units located on-base, including three Air 
Force installations (Eielson Air Force Base, Alaska; Ellsworth Air 
Force Base, South Dakota; and Hurlburt Field, Florida); two Army 
installations (Fort Hood, Texas, and Fort Wainwright, Alaska); and two 
Navy installations (Naval Base Ventura County Port Hueneme, California 
and Naval Weapons Station Earle, New Jersey).[Footnote 5] Eielson Air 
Force Base is the only installation with two separate Section 801 
contracts for military family housing complexes on-base. Following the 
enactment of the National Defense Authorization Act for Fiscal Years 
1992 and 1993, which replaced the Section 801 authority with a similar 
authority under which housing could only be built off-base,[Footnote 6] 
DOD subsequently decided it would not pursue new on-base Section 801 
housing projects starting in fiscal year 1992. 

In the conference report accompanying the National Defense 
Authorization Act for Fiscal Year 2010, GAO was directed to review DOD 
plans for the privately owned rental housing on DOD land and issue a 
report to the congressional defense committees on the cost, potential 
security risks, and other impacts of transitioning use of Section 801 
on-base military family housing to the general public's use.[Footnote 
7] This report focuses only on the on-base housing units and does not 
discuss the numerous housing units built off-base under the Section 801 
program. In response to this direction, we examined (1) the status of 
contracts for on-base Section 801 military housing, including whether 
there is competition between multiple housing developers at a single 
installation and whether there are security risks if housing units are 
leased to the general public; (2) the estimated costs to DOD and local 
communities--including security, education, transportation, and 
environmental considerations--that would result from proposed general 
public occupancy of on-base Section 801 military housing units, and (3) 
the extent to which DOD and the military services are sharing 
information regarding the transition of the housing to the general 
public's use, including details of contract term changes and 
interaction with communities. 

To address the first objective, we obtained and reviewed contracts and 
other relevant documents for the seven installations with on-base 
Section 801 housing to report on the status of those contracts, 
including describing the current transition plans that are in place or 
being considered. We conducted site visits at five of the seven 
installations with on-base Section 801 housing and interviewed 
officials at all seven installations to discuss the current status of 
their on-base Section 801 housing and their plans for potentially 
transitioning the property from military to the general public's use. 
We also discussed with these officials the extent to which competition 
exists where there are multiple housing developers on an installation, 
and the impact the competition has on the occupancy rate of the on-base 
Section 801 housing units. Regarding security risks, we reviewed DOD's 
antiterrorism and force protection standards and discussed with the 
military service officials the extent to which each installation has 
considered and instituted DOD's standards in developing plans for 
providing the general public access to property on military land and 
described the actions taken to minimize or mitigate any related 
security risks or other concerns. 

To address the second objective, we focused our work on the five 
installations with on-base Section 801 military housing that have not 
entered the second phase (out-lease) of their contracts: Eielson Air 
Force Base, Ellsworth Air Force Base, Hurlburt Field, Naval Base 
Ventura County Port Hueneme, and Naval Weapons Station Earle. We 
interviewed community officials on their views about the general public 
potentially leasing housing on these military installations and 
determined any potential cost impacts to the community. We identified 
cost impacts in four areas relating to security, education, 
environment, and transportation that DOD and these communities may 
experience because of the transition of Section 801 housing to the 
general public's use. However, we did not identify any potential 
benefits that might accrue from converting the leases to the out-lease 
phase because it was outside of the scope of our work. 

To address the third objective, we reviewed the initial and subsequent 
Section 801 legislation and installations' contracts to determine the 
contractual obligations once the in-lease has expired, including any 
contract changes or termination liability. We also conducted site 
visits at five of the seven installations with Section 801 housing and 
interviewed officials at all seven installations to discuss the details 
and plans for transitioning from the in-lease to the out-lease phase of 
their on-base Section 801 contracts, including whether any relevant 
contract changes are being shared among the services and installations. 
We analyzed relevant documents--including 2005 Base Realignment and 
Closure legislation, the DOD Community Guide to Base Reuse, and 
Standards for Internal Control in the Federal Government. We also asked 
about whether the installations had developed a communication plan for 
any transition of housing units from government to the general public's 
use and the interaction with the community to ensure a smooth 
transition of the property. 

We conducted this performance audit from January 2010 through October 
2010, 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. 

Background: 

The Military Construction Authorization Act, 1984, established the 
Military Family Housing Leasing Program, commonly referred to as the 
Section 801 housing program.[Footnote 8] This authority provided a 
mechanism for DOD to contract with private developers to build new 
rental housing on or near military installations. The Section 801 
program is also referred to as a build-to-lease program. The program 
permitted contracts entered into under its authority to allocate 
responsibility for operating and maintaining the units to either the 
government or the contractor, and required that units be constructed to 
DOD standards, initial leases be for a period not in excess of 20 years 
(excluding construction), and, upon termination of the lease period, 
that the government have the right of first refusal to acquire the 
facilities constructed and leased under the contract. The Section 801 
program was initially authorized as a pilot program for approximately 
two years, under which the number of housing units to be built could 
not exceed 300 per contract, with a maximum of two contracts per 
military department. Subsequent legislation renewed the program, 
expanded the number of units that could be constructed, and increased 
the number of contracts allowed by each service.[Footnote 9] The 
housing constructed under the Section 801 housing program was available 
to all members of the armed forces who are eligible for assignment to 
military family housing. Between 1985 and 1996, under the Section 801 
program, DOD awarded eight contracts to private developers to construct 
approximately 3,100 military family housing units--a combination of two-
, three-, four-, and five-bedroom units--on seven military 
installations. Also, under the Section 801 authority, DOD built 
numerous housing units off-base, located near approximately 20 military 
installations. 

While the Section 801 program authority allowed for flexibility in 
contracting for operating and maintaining the units, DOD later decided 
that the operations and maintenance responsibilities would reside with 
the services for future projects. Additionally, in the National Defense 
Authorization Act for Fiscal Years 1992 and 1993, Congress replaced the 
Section 801 authority with a similar authority under which housing 
could only be built off-base.[Footnote 10] Finally, according to a DOD 
history of the Section 801 program, changes to federal budgeting and 
spending processes in 1990 resulted in Section 801 projects being less 
advantageous.[Footnote 11] In light of these changes, DOD decided that 
it would no longer pursue new on-base Section 801 housing projects. 

Since the establishment of the Section 801 program, DOD has leveraged 
private capital for developments on military land using several 
authorities approved by Congress. In 1996, Congress created a new 
military family housing program, called the Military Housing 
Privatization Initiative,[Footnote 12] which provides DOD with 
authorities to attract investments from private developers for the 
construction and improvement of military housing. Established by the 
National Defense Authorization Act of Fiscal Year 1996, the Military 
Housing Privatization Initiative provided DOD with a variety of 
authorities--including conveying existing properties to a developer, 
investing limited appropriated funds in a developer, and making direct 
loans to or loan guarantees for the developer for the acquisition or 
construction of housing units--to obtain private sector financing and 
expertise to repair, renovate, and construct military family housing. 
In a typical Military Housing Privatization Initiative project, the 
developer rents directly to the service member and gives the service 
members rental preference unless occupancy falls below a certain 
rate.[Footnote 13] Additionally, unlike the Section 801 program where 
service members and their families forfeit their basic allowance for 
housing when they are assigned to the housing units, under the new 
housing program the service members must use their basic allowances for 
housing to pay, and in some cases, to offset their rent; and they are 
permitted to keep any portion of their basic allowance for housing not 
spent on rent. While the Air Force refers to its program as Military 
Housing Privatization, the Army refers to its program as Residential 
Communities Initiative; the Navy refers to its program as Public-
Private Ventures. 

In 2002, Congress expanded the Military Housing Privatization 
Initiative's authority to include transient housing or lodging 
facilities for military members on temporary duty.[Footnote 14] Similar 
to the original 1996 act, this expanded authority provided DOD with a 
variety of authorities to obtain private sector financing and 
management to construct, operate and repair lodging facilities. In July 
2010, we reported[Footnote 15] that under this expanded authority, the 
Army entered into a lease to privatize its lodging facilities with a 
developer for a 50-year term, during which the Army retains ownership 
of the land but conveys ownership of the structures to the developer. 
At the end of the lease term, the structures, along with any 
improvements, return to the Army. Although the Navy, Marine Corps, and 
Air Force are currently not planning to privatize their lodging 
facilities, officials from these three services said that they are 
observing the Army's efforts and might consider lodging privatization 
in the future. 

Additionally, many land use authorities exist that permit the Secretary 
of Defense, the secretaries of the military departments or both to make 
more efficient use of underutilized real property under their control-
-such as authorities permitting outleasing or conveyance of DOD real 
property or the issuance of licenses, permits, or easements upon DOD 
real property controlled by DOD. In July 2008, we reported[Footnote 16] 
that Section 2667 of Title 10 is the most frequently used land use 
authority throughout DOD for both traditional short-term leases, 
lasting no more than 5 years, as well as longer-term, more financially 
complex enhanced use leases which usually span more than 30 years and 
typically involve in-kind payments not less than the fair market value 
of the lease interest, such as new construction or maintenance of 
existing facilities.[Footnote 17] Leases executed pursuant to this 
authority benefit the installation by leveraging underutilized land in 
exchange for rent money or in-kind consideration, and also benefit the 
developer and the community. According to the Army's draft Enhanced Use 
Leasing Handbook, the longer lease terms are more in line with private 
real estate development standards, and therefore help satisfy financial 
lending requirements and help make the development worthwhile to all 
enhanced use lease project stakeholders. 

The Status of On-Base Section 801 Housing Contracts Varies Widely among 
Military Installations: 

Four Contracts Are Still in Their In-Lease Phase: 

The status of contracts for on-base Section 801 military housing varies 
widely, ranging from continuing the in-lease phase of the contracts to 
demolishing unneeded units. There are eight on-base Section 801 housing 
contracts: four remain in the in-lease phase during which DOD rents all 
of the units from the developer for up to 20 years whether the units 
are occupied or not, two are in the out-lease phase during which 
developers may be permitted to lease units to the general public and 
pay DOD rent for the use of the land for another 20 to 30 years, and 
two are involved in contract disputes or litigation. Three of the four 
in-lease contracts involve Air Force installations--Eielson Air Force 
Base (Moose Lake and French Creek housing units),[Footnote 18] 
Ellsworth Air Force Base, and Hurlburt Field--and the Air Force is 
reviewing options for transitioning all three from in-lease to out-
lease. At the remaining installation in the in-lease phase, Naval Base 
Ventura County Port Hueneme, the Navy is using vacant family housing 
units to accommodate both military families and unaccompanied service 
members, and is conducting a study to evaluate options beyond the 
expiration of the in-lease. Generally, as contracts enter the out-lease 
period, the services must decide to either proceed with the contracts 
as written, and potentially permit developers to lease the housing to 
the general public, or attempt to renegotiate contracts with the 
developer to reflect evolving needs for military housing and security. 
Of the two contracts in the out-lease phase, one (Fort Wainwright) has 
completed its housing transition to the general public's use, while the 
other (Fort Hood) has renegotiated its contract to retain priority use 
of the housing units for military personnel or DOD civilians. 

Finally, the two contracts in dispute or litigation are Eielson Air 
Force Base and Naval Weapons Station Earle. 

* Eielson Air Force Base: Sprucewood--The base is involved in 
litigation with the developer regarding potential rental payments and 
$3.27 million in demolition costs. The Air Force has paid for the 
demolition costs but is seeking reimbursement. The original contract 
included a provision under which the developer was responsible, at the 
expiration of the lease, for vacating the property and restoring the 
land to the order and condition existing at the beginning of the lease 
term. 

* Naval Weapons Station Earle: Laurelwood--The Navy is involved in a 
dispute with a developer about the amount of compensation due to the 
developer as a result of the Navy's decision first to suspend its 
Record of Decision to provide unimpeded access to housing units at 
Naval Weapons Station Earle and later the Navy's decision to terminate 
its housing contract for the units. According to Navy officials, the 
Navy elected to suspend the Record of Decision and terminate the 
contract for the Section 801 housing units because of (1) difficulties 
in obtaining the required state permits for the construction of a new 
road that could have significantly delayed the Navy's ability to 
provide unimpeded access to the units and (2) the challenges of 
resolving the Navy's and the developer's conflicting interpretations of 
their respective obligations under the contract. In April 2010, after 
the Navy suspended the contract, the developer submitted a certified 
claim to the Navy's contracting officer under the Contract Disputes 
Act. At the time of our report, the Navy contracting officer was still 
determining the final resolution on the developer's claim for 
compensation. If the developer disagrees with the decision, the 
developer has the right to appeal. If the developer disagrees with the 
decision, the developer has the right to appeal. 

See Table 1 for the status of all installations. 

Table 1: Status of On-Base Section 801 Military Family Housing 
Contracts by Installation: 

Installation: Eielson Air Force Base, Alaska; 
Housing community (number of units): Sprucewood (300); 
In-lease start: January 1985; 
In-lease end: January 2005; 
Out-lease end: January 2007; 
Contract status: Demolition began June 2010, developer and Air Force 
remain in litigation. 

Installation: Eielson Air Force Base, Alaska; 
Housing community (number of units): Moose Lake and French Creek (366); 
In-lease start: October 1996; 
In-lease end: September 2016; 
Out-lease end: September 2016; 
Contract status: Renegotiated in-lease and out-lease to be complete in 
2016; units will transfer to the Air Force's new Military Housing 
Privatization Initiative program. 

Installation: Ellsworth Air Force Base, South Dakota; 
Housing community (number of units): Centennial Estates (828); 
In-lease start: December 1991; 
In-lease end: July 2011; 
Out-lease end: December 2030; 
Contract status: In-lease, current plans are to transition units to the 
general public's use at the end of the in-lease. 

Installation: Fort Hood, Texas; 
Housing community (number of units): Liberty Village (300); 
In-lease start: August 1988; 
In-lease end: July 2008; 
Out-lease end: May 2029; 
Contract status: Renegotiated out-lease to retain units for military or 
DOD civilian use. 

Installation: Fort Wainwright, Alaska; 
Housing community (number of units): Birchwood (400); 
In-lease start: November 1987; 
In-lease end: May 2007; 
Out-lease end: June 2018; 
Contract status: Out-lease, transitioned to general public use, 
occupied by the general public and military members. 

Installation: Hurlburt Field, Florida; 
Housing community (number of units): Commando Village (300); 
In-lease start: June 1992; 
In-lease end: June 2012; 
Out-lease end: January 2031; 
Contract status: In-lease, current plans are to transition units to the 
general public's use at the end of the in-lease. 

Installation: Naval Base Ventura County Port Hueneme, California; 
Housing community (number of units): Pearl Court and Midway Estates 
(300); 
In-lease start: March 1994; 
In-lease end: February 2014; 
Out-lease end: September 2033; 
Contract status: In-lease, Navy conducting a study of options following 
the end of the in-lease. 

Installation: Naval Weapons Station Earle, New Jersey; 
Housing community (number of units): Laurelwood (300); 
In-lease start: September 1988; 
In-lease end: April 2010; 
Out-lease end: August 2040; 
Contract status: Navy terminated contract; a claim is pending. 

Source: GAO analysis of DOD data. 

[End of table] 

Additionally, while some Section 801 contracts provide that DOD may 
terminate early in the event of a national emergency or other specific 
circumstances, such as when the developer fails to perform or violates 
certain contractual requirements, none of the original contracts 
specifically address potential liability in instances where DOD might 
terminate for reasons such as reduced demand for housing due to base 
realignment and closure, or security concerns with permitting the 
general public to occupy on-base housing.[Footnote 19] According to 
Fort Hood officials, the developer may expect that the government would 
take measures to mitigate the financial impact of such a termination 
decision. The decision to terminate the Section 801 contract for off-
base housing units at March Air Force Base in California, which is now 
closed because of a base realignment and closure action, is an example 
of the potential government liability that can result from early 
termination of a Section 801 housing contract. According to the 
developer who previously owned these off-base housing units, in 1998 
when March Air Force Base closed, the Air Force bought out the 
remaining terms of his contract and issued him a check for $3.5 
million. The developer stated that he unsuccessfully appealed the 
amount of the payment, and eventually accepted the payment. This 
developer is also the owner of the on-base Section 801 housing units on 
Naval Base Ventura County Port Hueneme. For further details on the 
current status and next milestones for each installation, see Appendix 
I. 

Potential Competition Exists among On-Base Housing Programs at Two 
Military Installations: 

Competition can occur at any installation with housing units operated 
by different developers and where there are differences in the age, 
size, or rental rates for housing. However, we only found two 
installations with on-base Section 801 housing--Fort Hood and Naval 
Base Ventura County Port Hueneme--that are experiencing competition. 
These two installations have both an on-base Section 801 housing 
developer and another developer that either constructed new housing or 
renovated existing housing under DOD's Military Housing Privatization 
Initiative. For example, while the potential for competition exists at 
Fort Hood between the Section 801 developer and Residential Communities 
Initiative housing privatization partner, Fort Hood and both developers 
found the competition to be negligible because both programs have an 
insufficient inventory of two-bedroom units to meet the installation's 
demand. By comparison, competition between the on-base Section 801 
housing units and the other privatized housing units at Naval Base 
Ventura County Port Hueneme has resulted in less demand and reduced 
occupancy of the Section 801 housing units because service members are 
choosing to live in other privatized military housing units on or off 
base or to utilize the local rental housing market. The on-base Section 
801 housing at Naval Base Ventura County Port Hueneme had an occupancy 
rate of 16 percent when units were used solely for family housing prior 
to 2009, although the Navy leases all of the units during the in-lease 
phase. In contrast, Naval Base Ventura County Port Hueneme experienced 
a 98 percent occupancy rate for newer family housing units under the 
Navy's Public-Private Ventures housing privatization initiative, where 
the Navy has no lease obligation. Under subsequent legislation in 
2008,[Footnote 20] during the in-lease period, the services were 
authorized to rent the Section 801 units to unaccompanied members in 
addition to military families. At Naval Base Ventura County Port 
Hueneme, the Navy exercised this new authority and increased the 
occupancy rate of its Section 801 housing units to 38 percent. 
According to Naval Base Ventura County Port Hueneme officials, if their 
out-lease with the developer is renegotiated to give the service 
members priority when renting the housing units, as is done under the 
Navy's Public-Private Ventures housing privatization initiative, then 
the developer could adjust the rental rates for the Section 801 housing 
to be more competitive with other housing developments on and off-base, 
thereby increasing the occupancy rate for these units. While the out-
lease, as written, does not preclude the developer from renting units 
directly to service members, it does not provide rental priority to 
them either. 

Potential Need for Additional Security Measures Limited to One 
Installation That May Transition Housing to the General Public's Use: 

We found that DOD, under specific conditions, may need to implement 
security-related measures to comply with DOD's antiterrorism and force 
protection standards[Footnote 21] at one military installation with 
Section 801 housing, Naval Base Ventura County Port Hueneme. The 
conditions involve whether the use of housing units changes from 
military family housing to another purpose, and whether there is an 
increase in the occupancy of those units (i.e. bachelor 
housing,[Footnote 22] the general public's use, or any other use). 
Specifically, Naval Base Ventura County Port Hueneme officials stated 
that they would likely need to take measures--such as stand-off 
distance between fencing and structures--to securely separate the 
housing from the main base in order to avoid potential security risks. 
These standards require a range of 33 feet to 82 feet between the fence 
line and any DOD structures. Ellsworth Air Force Base and Hurlburt 
Field--two other installations that may convert their on-base Section 
801 housing to the general public's use--have no apparent need for 
additional security measures beyond installing a fence around the 
Section 801 housing areas which are located along the periphery of the 
installations. 

The security challenge at Naval Base Ventura County Port Hueneme is 
that the on-base Section 801 housing units are adjacent to mission-
critical or service support facilities, which could require mitigating 
measures to continue meeting antiterrorism and force protection 
standards and to allow access to the facilities. However, this security 
challenge was not a factor at Fort Wainwright because its on-base 
Section 801 housing is located along the installation's periphery and 
was easily separated to meet the anti-terrorism and force protection 
standards. Similarly, the housing at Ellsworth Air Force Base and 
Hurlburt Field is located on each installation's periphery and allows 
easy separation, which, according to Air Force officials, does not 
create additional security concerns. Also, there is no security concern 
at Eielson Air Force Base and Fort Hood because these installations are 
planning to maintain the on-base Section 801 housing as military family 
or DOD civilian housing. Additionally, Fort Hood's Section 801 housing 
units are located along the periphery and, if necessary, can be easily 
separated. 

At another base, Naval Weapons Station Earle, the local community 
expressed concerns regarding security risks associated with the general 
public potentially living on the installation in Section 801 housing. 
Community officials stated that they were concerned that opening the 
housing to the general public would potentially attract high-risk 
residents. Navy officials stated that they disagreed with the 
community's concerns because all anti-terrorism and force protection 
standards would have been met. However, the community's concern was 
eliminated once the Navy decided to suspend and then terminate its 
Section 801 contract, rather than allow the general public to occupy 
its housing because of extensive delays in providing the developer with 
unimpeded access to the units and challenges in resolving conflicting 
interpretations of the Navy's and the developer's obligations under the 
out-lease.[Footnote 23] 

Some DOD Installations or Communities Would Face Transition Costs If 
Housing Units Are Converted to the General Public's Use: 

We found there would be transition costs for DOD and communities at 
three of the four installations remaining in the in-lease phase of 
their contracts--the period in which DOD rents all of the units from 
the developer for a period of up to 20 years whether the units are 
occupied or not--if the on-base Section 801 housing units were to 
transition to the out-lease (the general public's use). The transition 
costs include security, education, transportation and environmental 
considerations. The three affected sites are: Naval Base Ventura County 
Port Hueneme, Ellsworth Air Force Base, and Hurlburt Field. Eielson Air 
Force Base, the fourth installation with a housing contract, is in the 
in-lease phase and is not expected to have any transition costs because 
the contract no longer includes an out-lease phase during which the 
developer may be permitted to lease units to the general public and pay 
DOD rent for the use of the land; also, the Air Force is planning to 
convey the units to its Military Housing Privatization developer to 
meet its housing requirements. At the remaining installations that are 
currently in their out-lease or in contract dispute, we found no likely 
costs for DOD or the communities related to the transition of on-base 
Section 801 housing to the general public's use. For example, at Naval 
Weapon Station Earle, the Navy decided to terminate the out-lease of 
its Section 801 housing contract, so there was no longer a need to 
build a cost estimate for transferring the on-base housing units to the 
general public's use. 

Developers may be required to cover transition costs associated with 
constructing required public access roads, erecting fencing to separate 
the housing from the installation, realigning utility services, 
maintaining the housing units, and demolishing them at the expiration 
of the contract. However, the terms of the Section 801 contracts 
generally determine which party (i.e. the developer, the community or 
DOD) ultimately pays certain transition costs. Education costs are not 
covered within Section 801 contracts, and the community would typically 
be responsible for the entire cost of any new enrollments in the school 
systems as a result of converting the housing to the general public's 
use. According to the education officials we interviewed from the 
various school systems, if the occupancy of these units were to 
increase, they would have the capacity to educate the children who may 
occupy these housing units. Furthermore, according to officials from 
the various school systems, along with representatives from the 
Department of Education's Impact Aid Program, the Impact Aid Program 
provides federal assistance to local educational agencies that are 
financially burdened by federal activities, including basic support 
payments for federally connected children (e.g. children residing on 
federal property). However, according to these education officials, 
this aid could decrease if units were converted from military to the 
general public's use since the civilian children residing on federal 
property would carry less weight in the calculations used to compute 
impact aid. 

Although the developer may be responsible for certain transition costs, 
we found there would be costs for DOD and the communities related to 
security, transportation or environmental considerations at one or more 
installations; however, there were no estimates of most of the expected 
costs before we completed our review in July 2010. Because many of 
these projects are in their preliminary stages, we were not provided 
detailed information in these three areas on the costs and benefits of 
the projects. 

The potential cost areas that we identified: 

* Ellsworth Air Force Base--If the on-base Section 801 housing units 
transition to the general public's use in 2011, the community expects 
to upgrade roadways between the housing and the town of Box Elder, but 
there were no estimated costs at the time of our review. The town of 
Box Elder completed a traffic impact analysis to assess the potential 
traffic impact when the Section 801 housing units transition to the 
general public's use and concluded that more than 300 vehicles per hour 
would use the affected roads. The upgrades--aimed at improving the 
traffic flow--could involve building a two-lane road from the housing 
to existing off-base roads, installing a traffic signal, and posting 
school speed limit signs as needed. Additionally, the community of Box 
Elder is planning to pay for three potential water system projects to 
serve the housing units; according to community officials, cost 
estimates were solicited, and an initial bid was received for $4.3 
million for the three water system projects to benefit the housing 
residents. 

* Naval Base Ventura County Port Hueneme--If the on-base Section 801 
housing units transition to the general public's use in 2014, the 
community expects to incur transportation costs for constructing a road 
to intersect a planned access road to some of the housing units and 
adding traffic signals to reduce congestion on the roadways. Also, the 
Navy may incur costs for building the new intersecting-access road, 
erecting a fence to separate the housing from the Navy base, increasing 
security patrols, relocating adjacent Navy facilities, and demolition 
expenses. The Navy estimates that if demolition is needed to meet DOD 
anti-terrorism standards for open space on both sides of a perimeter 
fence, it may have to demolish 17 of the developer's structures 
including 120 housing units, which would equal 40 percent of the 
developer's inventory. If this occurs, the Navy--depending on the 
outcome of any negotiations--may have to compensate the developer for 
demolishing the units. No cost estimate was available at the time of 
our review. 

* Hurlburt Field--The Section 801 housing units are behind a security 
fence with controlled entry and routine patrols by Air Force security 
forces. If the housing units transition to the general public's use in 
2012, these security services will no longer be available unless the 
developer or the community decides to pay for them. However, if the 
majority of residents remain service members, the base commander may 
decide to continue providing these services. At the time of our review 
there was no final decision on security plans, and no cost estimates 
were available. 

Contract Changes at Individual Bases Have Potential Application to 
Other Bases Transitioning to the Out-Lease Phase: 

Installations Are Not Sharing Information on Contract Changes with All 
Services: 

We found that the Air Force shares information regarding its Section 
801 housing contracts within the service through the Air Force Real 
Property Agency, an office with oversight over all Air Force 
installations with on-base Section 801 housing. To facilitate 
information sharing, this Air Force agency maintains an on-line 
community of practice for its Section 801 program, which includes a 
lessons-learned forum. The Army and Navy do not have a single source 
for obtaining such data, and they share information only on a limited 
basis within each service. However, DOD and the services do not have a 
process for sharing military housing-related information across the 
services to ensure that the three installations that may transition 
their on-base Section 801 units have all available information that 
could assist in planning any lease modifications prior to potential 
general public occupancy of on-base housing or lease terminations. We 
found, for example, that Fort Hood renegotiated its on-base Section 801 
contract to contractually agree to the terms of any potential early 
termination of its lease and retain priority use of the housing units 
for future military or DOD civilians. However, in our interviews with 
housing officials at five installations, Air Force and Navy officials 
stated they were unfamiliar with Fort Hood's Section 801 housing 
contract modifications or any contract changes at other installation 
with Section 801 contracts. These officials stated they were unfamiliar 
with these contract modifications because they did not have a 
communication system for sharing such information as they began 
planning for the transition into the out-lease phase of their 
contracts. After learning of the contract changes at Fort Hood, Naval 
Base Ventura County Port Hueneme officials stated that this information 
would help them broaden their options for negotiating the terms of the 
out-lease with the installation's Section 801 developer. 

According to federal best practices for sharing information to ensure 
efficient use of resources,[Footnote 24] program managers should 
communicate information within a time frame to management and others 
within the entity to meet goals for effective and efficient use of 
resources. The military services and DOD lack a communications process 
that would enable them to share information on Section 801 contract 
changes as installations begin to transition into the out-lease phase 
of their contracts. Specifically, our review found two installations 
completed housing contract negotiations and another installation 
interacted with its local community to discuss upcoming changes in the 
use of on-base housing and the potential impact on the community, and 
these detailed developments were not shared with all installations with 
Section 801 housing. Without a communications process to share 
installations' experiences with any major housing contract changes and 
community interaction, DOD and the services cannot ensure that the four 
installations facing potential contract changes in their out-lease will 
have all timely information to position them to negotiate the most cost-
effective contract terms for the U.S. government. 

In our review, we found a number of bases experienced significant 
changes in demand for their Section 801 military housing--either during 
the in-lease in which DOD pays a developer rent for housing units or 
during the out-lease when a developer pays DOD rent for the use of the 
land while renting the units to either military or general public 
occupants. On-base housing demand can vary if the installation's 
mission is expanded or reduced (e.g., increasing or decreasing the 
number of personnel assigned to that base) or even eliminated. Because 
of changes in installations' operations, the Army and the Air Force 
sought changes in their housing leases. In the previously cited Fort 
Hood example, the Army renegotiated its out-lease to accept several 
changes that could have relevance to other installations facing 
potential changes in their leases, but these lease changes were not 
shared with Air Force or Navy installations with Section 801 housing. 
In one change, the Army renegotiated its out-lease to give rental 
preference to its military and DOD civilian members and their families, 
and agreed to lease to the general public when base operations change 
because of a base closure, low occupancy, or changes in the number of 
on-base military personnel. This option allowed Fort Hood to keep the 
on-base Section 801 housing units within its inventory for service 
member or DOD civilian use and not have to separate the housing units 
from the installation. In addition, we found that Fort Hood's 
renegotiated contract in 2008 expanded the reasons under which the 
federal government may terminate a base's housing contract with a 
developer--from the standard termination clause of "in the event of a 
national emergency" to also include "base closure, deactivation or 
substantial realignment, or in the interest of national defense." In 
today's changing environment, if installations could renegotiate the 
contract terms to include broader reasons for contract terminations, it 
could potentially protect the taxpayers interests in the event of 
unforeseen circumstances that could significantly impact the DOD's 
occupancy of the housing. 

Additionally, DOD's Inspector General recommended in 1991[Footnote 25] 
that the military services include "termination for convenience" 
clauses in future contracts, in order to retain some flexibility in the 
contract terms for early termination. Specifically, the DOD Inspector 
General's report found that most Section 801 housing contracts did not 
contain termination for convenience clauses, as required by the Federal 
Acquisition Regulation in solicitations for award of fixed-price and 
cost-reimbursement contracts, in order to protect the interests of the 
government in the event of unforeseen circumstances.[Footnote 26] The 
report found that the failure to incorporate termination for 
convenience clauses, along with other issues, constituted material 
internal control weaknesses. Included in the DOD Inspector General's 
report was a recommendation that DOD incorporate termination for 
convenience clauses in future Section 801 transactions, especially 
given DOD's efforts to reduce and realign its military forces. However, 
DOD disagreed with this recommendation, stating that the decision 
against including termination for convenience clauses in Section 801 
contracts was a calculated business decision to avoid extra costs for 
bidders to cover the additional financial risk of a termination for 
convenience clause, which could potentially be passed along to the 
government. While the DOD Inspector General's report recognized that 
DOD can always cancel a lease agreement whether or not a termination 
for convenience clause is incorporated into the contracts, the report 
also stated that it was in the government's best economical interest to 
retain its flexibility by incorporating clauses that recognize all 
liabilities for each party in the agreement rather than imply such 
liabilities. Subsequently, between 1992 and 1996, DOD awarded Section 
801 contracts at three installations: Eielson Air Force Base; Hurlburt 
Field; and Naval Base Ventura County Port Hueneme; however, none of 
these contracts included the termination for convenience clause. 

Moreover, we found that at Eielson Air Force Base, which has the Moose 
Lake and French Creek Section 801 housing units, the Air Force 
negotiated changes in its contract in 1996 that may be of interest to 
other Section 801 housing installations facing potential contract 
changes and seeking to reduce their financial liability for any 
unexpected termination of a contract. Specifically, the Air Force in 
1996 renegotiated the out-lease phase of the contract to end on the 
same date as the in-lease--September 2016--and give the government the 
option of purchasing the units at any time during the remainder of the 
contract for the price equal to the indebtedness of the developer, 
including a prepayment premium. In addition, the developer's 
responsibility for removing its improvements and restoring the property 
at the end of the contract was deleted. These renegotiated contract 
terms helped the Air Force avoid any unexpected termination liability 
costs; this information could be of interest to other installations 
seeking best practices for any transition into an out-lease. 

Installations Also Are Not Sharing Community Interaction Experiences 
with All Services: 

We found that any DOD interaction with a community related to housing 
use was tied to whether on-base Section 801 military housing was being 
considered for public use; however, the installation's community 
interaction experience is not shared with all services. In planning for 
occupancy by the general public, the installation, developer, and local 
community are likely to have interactions to address potential impacts 
on school enrollment, road access, utilities, and other services. For 
example, at Fort Wainwright officials met with community 
representatives on potential impacts before converting on-base housing 
to the general public's use. Fort Wainwright officials stated that they 
started conducting meetings with the local Chamber of Commerce, Board 
of Realtors, and community officials approximately 18 months prior to 
the expiration of the in-lease in May 2007. At these meetings, Fort 
Wainwright and the community representatives discussed potential 
community impacts and costs from the transition of the on-base housing 
units, including costs that would be incurred by the Army, community, 
and developer. For example, according to Fort Wainwright officials, in 
preparation for the transition of the units to the general public's 
use, the Army was responsible for erecting a security fence, relocating 
an installation entry gate, and constructing a new entrance from the 
housing to a public road. Additionally, while the community would 
assume the responsibility for patrolling the units and continuing its 
snow removal services for the streets outside of the community, the 
developer would be responsible for snow removal within the community. 
Fort Wainwright officials, however, were uncertain whether the 
developer or the community would be responsible for trash removal. 

Furthermore, Fort Wainwright officials stated that local developers and 
property managers expressed concern about the impact of increasing the 
local rental market's inventory and the potential competition among 
rental housing developments. Moreover, Fort Wainwright officials held 
town hall meetings with service members to discuss time frames and 
service members' options for moving or continuing to live in the units 
with the understanding that in June 2007 the units would no longer be 
base housing. Fort Wainwright officials stated that, as a best 
practice, installations with on-base Section 801 housing should begin 
discussing the potential transition with service members as early as 
possible (even earlier than 18 months) in order to prevent unnecessary 
relocations. This information could be useful to other installations as 
they begin to plan for transitioning into the out-lease phase of their 
contracts. However, during our review of other installations, we found 
that officials at the four installations with contracts in the in-lease 
phase were unaware of the process undertaken by Fort Wainwright as it 
transitioned the housing from military housing to public use. 

Conclusions: 

As the military services continue to adapt to meet their challenges 
around the world, the services' installations can gain or lose 
personnel and experience significant impacts at on-base housing. Faced 
with long-term leases with private developers, some installations with 
on-base Section 801 housing have, over time, sought minor or major 
changes in their housing contracts, including specifying additional 
reasons for potential early termination. However, other than a general 
provision for the resolution of contract disputes, Section 801 
contracts are typically silent regarding potential government liability 
for terminations resulting from reduced demand for housing because of 
base realignment and closure, security concerns, and other reasons. 
Some installations have successfully completed other revisions to their 
contracts, including one developer who gave military personnel priority 
over the general public when the contract advanced beyond the in-lease 
phase. Although this report has identified some contract changes that 
could benefit multiple installations with Section 801 housing, we 
believe there remains the potential for many other experiences and best 
practices to be shared over time as installations transition to the out-
lease phase. While the individual services may have a means for sharing 
information within the service, such as the Air Force's centralized 
office that evaluated out-lease options for its Section 801 housing 
program (a potential best practice), DOD does not have a communications 
process to share this type of information among all services. Also, 
while at least one installation has interacted with the community--
including communicating which entity pays for security, education, 
transportation, and environmental considerations when the general 
public occupy on-base housing--DOD lacks a communications process to 
share any community interaction experiences among all Section 801 
housing installations. Without such a communications process, the 
installations nearing the out-lease phase of their housing contracts 
will not be fully informed about significant contract changes included 
in the renegotiated contracts with private developers and may be 
unaware of the best practices for interacting with communities before 
allowing the general public's use of on-base housing. Finally, unless 
all installations with Section 801 housing communicate their contract 
changes with each other in a timely manner, there is no assurance that 
future contracts will be negotiated with the benefit of best practices 
identified elsewhere to help ensure that resulting Section 801 contract 
changes are in the best financial interest of the federal government. 

Recommendation for Executive Action: 

To ensure that DOD and the military services have all information and 
possible options they need to revise relevant housing contracts in the 
future in the best interests of the federal government, we recommend 
that the Secretary of Defense direct the Under Secretary of Defense 
(Acquisition, Technology and Logistics) to develop a communications 
process so that all Section 801 housing installations may share 
information and best practices for negotiating any revisions to 
military housing contracts and for interacting with communities before 
allowing the general public's use of on-base housing. 

Agency Comments and Our Evaluation: 

In written comments on a draft of this report, DOD concurred with our 
recommendation. Specifically, DOD stated that its Housing Policy Panel 
meetings with the military services will become the venue for sharing 
information and best practices for negotiating revisions to its Section 
801 contracts and interacting with communities before potentially 
opening on-base housing to the public's use. The Housing Policy Panel 
meetings are held quarterly to discuss issues and initiatives about 
government-owned and privatized military housing. We agree that using 
the Housing Policy Panel as a sounding board would be an effective 
first step to ensure that relevant information about on-base Section 
801 housing contracts is communicated in a timely manner to the 
installations that will be entering into their out-leases within the 
next 1 to 6 years. DOD also provided technical comments which have been 
incorporated into our draft as appropriate. DOD's written comments on 
this report are reprinted in their entirety in appendix II. 

We will send copies of this report to the appropriate congressional 
committees. We will also send copies to the Secretary of Defense; the 
Secretaries of the Army, the Navy, and the Air Force; and the Director, 
Office of Management and Budget. The report will be available at no 
charge on GAO's Web site at [hyperlink, 
http://www.gao.gov/products/http://www.gao.gov]. 

If you or your staff have any questions on this report, please contact 
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. GAO staff who made significant contributions to 
this reports are listed in appendix III. 

Signed by: 

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

List of Committees: 

The Honorable Carl Levin: 
Chairman: 
The Honorable John McCain: 
Ranking Member: 
Committee on Armed Services: 
United States Senate: 

The Honorable Daniel K. Inouye: 
Chairman: 
The Honorable Thad Cochran: 
Ranking Member: 
Subcommittee on Defense: 
Committee on Appropriations: 
United States Senate: 

The Honorable Ike Skelton: 
Chairman: 
The Honorable Howard P. "Buck" McKeon: 
Ranking Member: 
Committee on Armed Services: 
House of Representatives: 

The Honorable Norman D. Dicks: 
Chairman: 
The Honorable C.W. Bill Young: 
Ranking Member: 
Subcommittee on Defense: 
Committee on Appropriations: 
House of Representatives: 

[End of section] 

Appendix I: Status of Each Military Installation's Section 801 Housing: 

Figure 1: Eielson Air Force Base, Alaska--French Creek and Moose Lake: 

[Refer to PDF for image: Chart with Image of French Creek and Moose 
Lake Community] 

French Creek and Moose Lake Community: 

Quick Facts: 

Land Lease (includes construction period): Originally 40 years from 
January 1992—January 2032; however, lease renegotiated to end in 
September 2016. 

Structural Lease: 20 years from October 1996—September 2016. 

Number/Type of Units: 366 units (two-, three-, four-, and five-
bedrooms, but predominantly three-bedroom units). 

Occupancy Rate: 95 percent. 

DOD’s Lease Payment: $8,688,150 per year. 

Developer: Originally Eielson Housing Build to Lease (HEBL), but units 
were purchased by CH2M Hill in 2007. 

Current Status: 

DOD is still leasing housing units—Eielson Air Force Base continues 
paying the developer to lease the Moose Lake and French Creek military 
housing units. This in-lease phase expires in September 2016. In 1996, 
the Air Force renegotiated its contract with the developer to reduce 
the out-lease term to end with the in-lease and give the Air Force the 
option to purchase the structures at any time for a price equal to the 
indebtedness of the developer. In addition, the developer’s 
responsibility for removing its improvements and restoring the property 
at the end of the contract was deleted.

Next Milestone: 

New developer to be selected—As of January 2010, Eielson Air Force Base 
became part of the Continental Group for the Air Force’s Military 
Housing Privatization program. After the Continental Group’s project 
developer is selected, the Air Force’s strategy is to transfer DOD’s 
option to purchase to that developer. Therefore, the project developer 
will purchase the units to incorporate into future private developments 
on Eielson Air Force Base. The renegotiated contract states that the 
purchase price is equal to the indebtedness of the current project 
owner as set forth in loan documents.

Potential Cost and Impacts: 

No costs for DOD or community—Because of the terms of the revised lease 
agreement, the military will retain use of the on-base housing. DOD and 
the local community will not incur any transition costs. 

Source: GAO analysis od DOD data; DOD Inspector General (photo). 

[End of figure] 

Figure 2: Eielson Air Force Base, Alaska--Sprucewood: 

[Refer to PDF for image: Chart with Image of Sprucewood Community] 

Sprucewood Community: 

Quick Facts: 

Land Lease (includes construction period): 22 years from January 1985—
January 2008. 

Structural Lease: Originally 20 years from August 1986—August 2006, 
extended one year to August 2007. 

Number/Type of Units: 300 units (two- and three-bedrooms). 

Occupancy Rate: None, demolition has begun. 

DOD’s Lease Payment: $3,600,000 per year (last payment was in August 
2006). 

Developer: Originally Ben Lomond, Inc., but units were transferred to 
Polar Star Alaska Housing Corporation in May 1995. 

Current Status: 

Demolition planned—In 2006, before the end of the in-lease, the Air 
Force offered to purchase the Sprucewood housing units from the Section 
801 developer. The Air Force wanted to convert the duplex units into 
single-family homes; however, the Air Force and developer were unable 
to reach agreement on the purchase price. The Air Force exercised an 
option for a 1-year lease extension to relocate the service members and 
dependents in the housing units. During the lease extension, the Air 
Force maintained the units, but did not pay rent to the developer. 
According to Air Force officials, in July 2006, the Air Force began 
eminent domain action against the extended lease, and the court ruled 
in favor of the Air Force, stating that the Air Force successfully 
renewed its housing lease and the land lease would expire in January 
2008. However, the developer did not remove the units and abandoned 
them. The Air Force contracted for demolition and restoration services, 
which were scheduled to begin in summer 2010. 

Next Milestone: 

Air Force and developer remain at odds—Air Force officials stated that 
since July 2006, the Air Force and the developer have remained in 
litigation. The Air Force continues to seek reimbursement for the cost 
of maintenance during the lease extension and for the cost of 
demolition and restoration services—both of which were the developer’s 
responsibility under the original contracts. However, the developer 
seeks compensation for the rental payments for the lease extension 
period. 

Potential Cost and Impacts: 

Demolition cost alone is $3.27 million—The contract between the Air 
Force and the developer did not include an out-lease phase in which the 
developer had the option to lease the on-base Section 801 housing units 
to the general public. Therefore, there will be no housing transition 
involving the general public and no related cost for the Department of 
Defense and the local community. However, DOD has incurred costs from 
the contract dispute for: maintaining the housing units during the 
lease extension, demolishing the housing units (contracted for $3.27 
million), and continuing litigation with the developer. 

Source: GAO analysis od DOD data; DOD Inspector General (photo). 

[End of figure] 

Figure 3: Ellsworth Air Force Base, South Dakota--Centennial Estates: 

[Refer to PDF for image: Chart with Image of Centennial Estates] 

Centennial Estates Community: 

Quick Facts: 

Land Lease (includes construction period): 40 years from August 1989—
December 2030. 

Structural Lease: 20 years from December 1990—July 2011 (contract 
amended to end when the last unit’s in-lease expires). 

Number/Type of Units: 828 units (two-, three-, and four-bedrooms). 

Occupancy Rate: 66 percent. 

DOD’s Lease Payment: $8,186,000 per year. 

Developer: Hunt Building Corporation. 

Current Status: 

DOD still is leasing housing units—Ellsworth Air Force Base continues 
to pay the developer to lease the Centennial Estates housing units, 
which are located on the perimeter of the installation in the recently 
annexed town of Box Elder. Based on the original contract terms, the 
units were to transfer from in-lease to out-lease status in phases—
December 2010 through July 2011—depending on the date in which the 
units were delivered to the Air Force for occupancy. For security and 
operational reasons, including minimum disruption to the occupants, the 
Air Force and the developer amended the lease so that all the units are 
turned over to the project owner at one time, in July 2011. According 
to Air Force officials, these housing units have had many construction 
quality issues, including limited storage, heating problems and frozen 
pipes, and the units remain in less than desirable conditions despite 
many attempts to correct the deficiencies. For example, during the 
winter, some families have reported being unable to sleep in the 
upstairs bedrooms because of the heating problems and the intense cold 
room temperatures. 

Next Milestone: 

Air Force recommends housing use by civilians—In a January 2010 study 
examining Ellsworth Air Force Base’s out-lease options, the Air Force 
recommended continuing the out-lease phase as written, which allows the 
developer to rent the units to civilians. It further recommended that a 
new, short-term lease (i.e., 3-year term with two 1-year renewal 
options) be negotiated and executed to retain the three senior officer 
quarters until they can be replaced under the newer Military Housing 
Privatization Initiative. Installation officials, the developer, and 
the Box Elder community are working together to meet the July 2011 
transition. The Box Elder planner is also requiring the developer to 
meet any requirements of a new developer. 

Potential Cost and Impacts: 

Community to pay transportation and environmental costs—If housing 
units are converted to civilian use in 2011, the town of Box Elder 
expects to upgrade roadways between the housing and the community, 
including building a two-lane road from the housing to existing roads, 
installing a traffic signal, and posting school speed limit signs as 
needed. The community is also planning three potential water system 
projects to serve the housing units; an initial bid was received for 
$4.3 million for the three projects. No DOD costs are expected. 

Source: GAO analysis od DOD data; DOD Inspector General (photo). 

[End of figure] 

Figure 4: Fort Hood, Texas--Liberty Village: 

[Refer to PDF for image: Chart with Image of Liberty Village Community] 

Liberty Village Community: 

Quick Facts: 

Land Lease (includes construction period): June 1987—May 2019, 
renegotiated extension to May 2029. 

Structural Lease: August 1988—July 2008. 

Number/Type of Units: 300 units (all two-bedrooms). 

Occupancy Rate: approximately 98 percent. 

DOD’s Lease Payment: approximately $2,000,000 (last payment was in July 
2008). 

Developer: Universal Services Fort Hood, Inc. 

Current Status: 

Housing retained for military use—In June 2008, the Army signed a 
revised land lease with the Section 801 developer of Liberty Village. 
The revised lease extended the contract terms, adding 10 years and 
expanding the reasons under which the contract may be terminated, 
including base closure, deactivation or substantial realignment, or in 
the interest of national defense. Also under the revised lease, the 
Army incorporated two characteristics used by Fort Hood’s Residential 
Community Initiative in which the developer rents directly to the 
service member and rental preference is given to active duty service 
members and civilian personnel at Fort Hood. The rental agreement 
allows unaccompanied military personnel, active National Guard and 
Reserve, military retirees, federal government civilians, and 
unaffiliated civilians to rent the housing if occupancy falls below a 
certain rate. 

Next Milestone: 

Contract has been renegotiated—The renegotiated land lease with the 
Section 801 developer expires in May 2029. 

Potential Cost and Impacts: 

No costs for DOD or community—Because of the terms of the revised lease 
agreement, the military will retain use of the on-base housing. The 
Department of Defense (DOD) and the local community will not incur any 
transition costs.

Source: GAO analysis od DOD data; DOD Inspector General (photo). 

[End of figure] 

Figure 5: Fort Wainwright, Alaska--Birchwood: 

[Refer to PDF for image: Chart with Image of Birchwood Community] 

Birchwood Community: 

Quick Facts: 

Land Lease (includes construction period): June 1986—June 2018. 

Structural Lease: November 1987—May 2007. 

Number/Type of Units: 400 units (three-, four-, and five-bedrooms). 

Occupancy Rate: Not applicable; units converted to public use. 

DOD’s Lease Payment: approximately $8,200,000 per year (last payment 
was in May 2007). 

Developer: North Star Alaska Housing Corporation. 

Current Status: 

Housing transitioned to the general public’s use—Fort Wainwright’s in-
lease expired in May 2007. Fort Wainwright separated the Birchwood 
units from the installation and the developer is operating the units as 
private housing. However, approximately 28 percent of the residents are 
service members assigned to Fort Wainwright. Fort Wainwright is the 
only installation with Section 801on-base housing that has converted 
units to the general public’s use under the terms of the out-lease 
phase of the original contract. 

Next Milestone: 

Decide whether to extend developer’s lease—In June 2018, Fort 
Wainwright will complete its Section 801 out-lease. At the expiration 
of the out-lease, the developer is responsible for removing the 
property and restoring the land to its previous condition. However, the 
developer has requested an extension of the out-lease so that he may 
either refinance or sell the housing units. As of July 2010, the Army 
had not made a decision on whether to extend the out-lease. 

Potential Cost and Impacts: 

Some community and DOD costs incurred—According to Fort Wainwright 
officials, the community adjacent to the installation had to assume the 
responsibility for policing and patrolling the units; a service that 
was provided by Ft. Wainwright during the in-lease. DOD paid the costs 
of erecting the security fence, relocating an installation entry gate, 
and constructing a new entrance from the housing to a public road. The 
units already were integrated into the community’s utilities, so there 
were no additional costs to put meters on the units. 

Source: GAO analysis od DOD data; DOD Inspector General (photo). 

[End of figure] 

Figure 6: Hurlburt Field, Florida--Commando Village: 

[Refer to PDF for image: Chart with Image of Commando Village 
Community] 

Commando Village Community: 

Quick Facts: 

Land Lease (includes construction period): 40 years from January 1991—
January 2031. 

Structural Lease: 20 years from June 1992—June 2012. 

Number/Type of Units: 300 units (two-, three-, and four-bedrooms). 

Occupancy Rate: 96 percent. 

DOD’s Lease Payment: $2,030,000 per year. 

Developer: Fort Walton Defense Housing. 

Current Status: 

DOD still is leasing housing units—Hurlburt Field continues to pay a 
developer to lease the Commando Village military housing units and the 
lease is scheduled to expire in June 2012. The units are located 
outside of the mission area and are already separated from other 
federal property by fencing and have unimpeded access to a public road. 
The residents of the units have to pass through a security gate to 
enter the mission area of the base—as would any other service member 
living off-base. According to a February 2010 draft of an Air Force 
study, DOD would have to pay about $5,200,000 for rent and operating 
expenses through the expiration of the lease. 

Next Milestone: 

Air Force recommends housing use by civilians—In a February 2010 draft 
study on out-lease options for Commando Village, the Air Force 
recommended that Hurlburt Field continue with the out-lease provision 
to allow the housing units to be leased to civilians. If this occurs, 
the developer will be responsible for the cost of utilities and paying 
land lease payments to the Air Force totaling 8 percent of gross rental 
income. Also, one out-lease provision states if the developer agrees to 
set a rent ceiling for the units in exchange for nominal rent for the 
federal land, the government will refer personnel and dependents to the 
units and the developer will give priority to these personnel as 
tenants who would pay rent directly to the developer. However, the Air 
Force also is considering entering a bridge lease with the developer 
that would be renewed annually to preserve all the housing for military 
use until its new military housing units are available under its 
Military Housing Privatization Initiative. At the time of our review, 
there was no final decision on the next step for the housing’s use. 

Potential Cost: 

Community may incur security services costs—The housing units are 
behind a security fence with controlled entry and routine patrols by 
the Air Force. If the housing is converted to civilian use in 2012, 
these security services will no longer be available unless the 
developer or the community continues to provide these services. 
However, the base commander may continue providing these services if 
the majority of residents remain servicemembers. Otherwise, DOD is not 
expected to incur any transition costs. 

Source: GAO analysis od DOD data; DOD Inspector General (photo). 

[End of figure] 

Figure 7: Naval Base Ventura County Port Hueneme, California--Pearl 
Court and Midway Estates: 

[Refer to PDF for image: Chart with Image of Pearl Court and Midway 
Estates Community] 

Pearl Court and Midway Estates Community: 

Quick Facts: 

Land Lease (includes construction period): September 1991—September 
2033. 

Structural Lease: March 1994—February 2014. 

Number/Type of Units: 300 two-bedroom units. 

Occupancy Rate: 16 percent as family housing and later 38 percent as 
family and single sailor housing. 

DOD’s Lease Payment: approximately $3,200,000 per year. 

Developer: John E. Sims. 

Current Status: 

DOD still is leasing housing units—Naval Base Ventura County Port 
Hueneme continues paying a developer to lease the Pearl Court and 
Midway Estates housing units. The Navy’s lease is scheduled to expire 
in March 2014. Midway Estates, consisting of 208 units, is located 
along the perimeter of the installation; while Pearl Court, consisting 
of 92 units, is located within the interior of the installation. 
Separating these units from the installation and making them available 
for public use may require the demolition of some of the units because 
of their proximity to a hardened, mission-critical building and other 
base support service buildings.

Next Milestone: 

Study under way on housing’s future use—Naval Base Ventura County Port 
Hueneme is studying options for the Section 801 property. The study 
will include a formal assessment and appraisal of the property and 
outline seven options for the Navy and developer, including alternative 
uses for the structures. For example, several of the options consider 
using the units as family or bachelor housing, military lodging or a 
combination of the three. The study began in early July 2010 and is 
scheduled for completion in November 2010. 

Potential Cost and Impacts: 

Some DOD and community costs are expected—If units are converted to the 
general public’s use in 2014, the community expects to incur 
transportation costs, including constructing a road to intersect an 
expected Navy-built access road and adding traffic signals. In addition 
to building an access road to the housing units, the Navy also would 
incur costs for erecting a fence to separate the housing from the 
installation, increasing security patrols, and relocating adjacent Navy 
facilities. Moreover, the new fence’s boundaries may require the Navy 
to pay for demolition of 17 structures belonging to the Section 801 
developer that includes 120 housing units, which would equal 40 percent 
of the developer’s inventory. 

Source: GAO analysis of DOD data; DOD Inspector General (photo). 

[End of figure] 

Figure 8: Naval Weapons Station Earle, New Jersey--Laurelwood: 

[Refer to PDF for image: Chart with Image of Laurelwood Community] 

Laurelwood Community: 

Quick Facts: 

Land Lease (includes construction period): September 1988—August 2040. 

Structural Lease: May 1990—April 2010. 

Number/Type of Units: 300 units (two-, three-, and four-bedrooms). 

Occupancy Rate: None, contract has been terminated. 

DOD’s Lease Payment: Approximately $3,500,000 per year. 

Developer: Laurelwood Homes, Inc. 

Current Status: DOD is in contract dispute with the developer—In April 
2010, the in-lease expired for Naval Weapons Station Earle’s Section 
801 housing. Earlier, in April 2009, the Navy completed its Final 
Environmental Impact Statement that evaluated options for providing 
unimpeded access between the Laurelwood housing area and an adjacent 
state primary or secondary road so that the housing units could be 
converted to the general public’s use. In May 2009, the Navy issued a 
Record of Decision announcing its decision to provide unimpeded access 
to housing units. As required by its contract, the Navy, with 
assistance from the developer, began obtaining the necessary permits 
and approvals to construct a new access road to the housing units. 
However, legislation was introduced in the New Jersey legislature that 
would have required additional studies about security, transportation, 
and economic impacts to be completed before the permits could be 
granted. Additionally, in September 2009, the community filed suit 
against the Navy, claiming that the decision to lease to civilians--
which required the construction of an access road--would violate the 
National Environmental Policy Act and the Clean Water Act. 

In April 2010, the Navy suspended execution of the Record of Decision, 
because of (1) difficulties in obtaining the required state permits for 
the construction of a new road that could have significantly delayed 
the Navy’s ability to provide unimpeded access to the units and (2) the 
challenges of resolving the Navy’s and the developer’s conflicting 
interpretations of their respective obligations under the contract. 
Also, in April 2010, the developer submitted a certified claim for 
compensation to the Navy under the Contracts Dispute Act. In June 2010, 
the Navy terminated its contract with the developer, and subsequently, 
the community’s complaint against the Navy and developer was dismissed. 

Next Milestone: 

Final decision on contract dispute pending—The Navy notified the 
developer that it would issue a final decision on the certified claim 
for compensation by September 30, 2010; however this date was extended 
so that settlement negotiations could continue. At the time of our 
report, the Navy had not made a decision regarding the claim. 

Potential Cost and Impacts: 

No costs for DOD or community—Because of the termination of the out-
lease, the DOD and the local community will not incur any costs related 
to the transition of the on-base Section 801 housing to the general 
public’s use. However, DOD will incur some lease termination costs. 

Source: GAO analysis of DOD data; DOD Inspector General (photo). 

[End of figure] 

[End of section] 

Appendix II: Comments from the Department of Defense: 

Office Of The Under Secretary Of Defense: 
3010 Defense Pentagon: 
Washington, DC 20301-3010: 

Acquisition, Technology And Logistics: 

October 25, 2010: 

Mr. Brian 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-11-60, "Military Privatization: Installations Need to Share 
Information on Their Section 801 On-Base Housing Contracts," dated 
September 20, 2010 (GAO Code 351432). Specific comments are enclosed. 

Sincerely, 

Signed by: 

Dorothy Robyn: 
Deputy Under Secretary of Defense (Installations and Environment):  

Enclosure: 
As stated: 

GAO Draft Report Dated September 20, 2010 Gao-11-60 (Gao Code 351432):  
"Military Housing Privatization: Installations Need To Share 
Information On Their Section 801 On-Base Housing Contracts": 

Department Of Defense Comments To The Gao Recommendation: 

Recommendation: The GAO recommends that the Secretary of Defense direct 
the Under Secretary of Defense (Acquisition, Technology and Logistics) 
to develop a communications process between all Section 801 housing 
installations that shares information and best practices for 
negotiating with private housing developers, any revisions to military 
housing contracts and for interacting with communities before allowing 
the general public's use of on-base housing. 

DoD Response: DoD concurs. On a quarterly basis, the Department 
convenes meetings of the Housing Policy Panel (HPP) with the Military 
Services to discuss issues and initiatives relative to government-owned 
and privatized military housing. The HPP would be an excellent venue 
for the Military Services to share information and best practices for 
negotiating revisions to 801 contracts and interacting with communities 
before allowing the general public's use of on- base 801 housing.

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

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

Acknowledgments: 

In addition to the contact listed above, key contributors to this 
report include Mark J. Wielgoszynski, Assistant Director; Jennifer 
Echard; Tisha Derricotte; Elizabeth Dunn; Greg Marchand; Jacqueline S. 
McColl; Leonard Ogborn; and Richard Powelson. 

[End of section] 

Related GAO Products: 

Defense Infrastructure: Army's Privatized Lodging Program Could Benefit 
from More Effective Planning. [hyperlink, 
http://www.gao.gov/products/GAO-10-771]. Washington, D.C.: July 30, 
2010. 

Military Housing Privatization: DOD Faces New Challenges Due to 
Significant Growth at Some Locations and Recent Turmoil in the 
Financial Markets. [hyperlink, 
http://www.gao.gov/products/GAO-09-352]. Washington, D.C.: May 15, 
2009. 

Defense Infrastructure: Services' Use of Land Use Planning Authorities. 
[hyperlink, http://www.gao.gov/products/GAO-08-850]. Washington, D.C.: 
July 23, 2008. 

Rental Housing Programs: Excluding Servicemembers' Housing Allowances 
from Income Determinations Would Increase Eligibility, but Other 
Factors May Limit Program Use. [hyperlink, 
http://www.gao.gov/products/GAO-06-784]. Washington, D.C.: July 31, 
2006. 

Defense Infrastructure: Continuing Challenges in Managing DOD Lodging 
Programs as Army Moves to Privatize Its Program. [hyperlink, 
http://www.gao.gov/products/GAO-07-164]. Washington, D.C.: December 15, 
2006. 

Military Housing: Management Issues Require Attention as the 
Privatization Program Matures. [hyperlink, 
http://www.gao.gov/products/GAO-06-438]. Washington, D.C.: April 28, 
2006. 

Military Housing: Further Improvements Needed in Requirements 
Determination and Program Review. [hyperlink, 
http://www.gao.gov/products/GAO-04-556]. Washington, D.C.: May 19, 
2004. 

Military Housing: Better Reporting Needed on the Status of the 
Privatization Program and the Costs of Its Consultants. [hyperlink, 
http://www.gao.gov/products/GAO-04-111]. Washington, D.C.: October 9, 
2003. 

Military Housing: Management Improvements Needed as the Pace of 
Privatization Quickens. [hyperlink, 
http://www.gao.gov/products/GAO-02-624]. Washington, D.C.: June 21, 
2002. 

Military Housing: DOD Needs to Address Long-Standing Requirements 
Determination Problems. [hyperlink, 
http://www.gao.gov/products/GAO-01-889]. Washington, D.C.: August 3, 
2001. 

Military Housing: Continued Concerns in Implementing the Privatization 
Initiative. [hyperlink, http://www.gao.gov/products/GAO/NSIAD-00-71]. 
Washington, D.C.: March 30, 2000. 

Military Housing: Privatization Off to a Slow Start and Continued 
Management Attention Needed. [hyperlink, 
http://www.gao.gov/products/GAO/NSIAD-98-178]. Washington, D.C.: July 
17, 1998. 

[End of section] 

(351432): 

Footnotes: 

[1] Pub. L. No. 98-115, § 801 (1983). 

[2] For more information on DOD's Military Housing Privatization 
Initiative, see GAO, Military Housing Privatization: DOD Faces New 
Challenges Due to Significant Growth at Some Installations and Recent 
Turmoil in the Financial Markets, GAO-09-352 (Washington, D.C.: May 15, 
2009). 

[3] Section 801 provided authority to the "Secretary of a military 
department" to enter into such contracts. For simplicity, we use the 
broader term "DOD" throughout this report, except where we are 
referring to a specific contract involving one of the military 
departments. 

[4] The contracts in question generally cited both section 801 (then 
codified at 10 U.S.C. § 2828(g)) and 10 U.S.C. 2667. We use the term 
"Section 801 program" to refer to the common name for the collective 
exercise of these authorities. 

[5] There are several military installations that have had housing 
units built off-base under the Section 801 program; however our work 
only focuses on the seven installations with on-base Section 801 
housing. 

[6] Unlike Section 801, which authorized housing to be built "on or 
near a military installation," the new authority only authorized 
housing "near a military installation." Pub. L. No. 102-190, § 2806 
(1991) (codified at 10 U.S.C. § 2835). 

[7] H.R. Conf. Rep. No. 2647, at 899 (2009). 

[8] Pub. L. No. 98-115, § 801 (1983). 

[9] In addition, the Secretary of Transportation, with respect to the 
Coast Guard, was also subsequently authorized to enter into Section 801 
contracts, but never exercised the authority. Pub. L. No. 100-180, § 
2306 (1987). 

[10] Pub. L. No. 102-190, § 2806 (1991) (codified at 10 U.S.C. § 2835). 

[11] An Army Corps of Engineers history states that new budget 
"scoring" procedures initiated as a result of the Budget Enforcement 
Act of 1990 required the full cost of a 20-or 25-year lease to be 
"scored", or charged against the federal budget, in the first year, 
instead of being spread over the life of the lease. Dr. William C. 
Baldwin, Office of History, U.S. Army Corps of Engineers, Four Housing 
Privatization Programs: A History of the Wherry, Capehart, Section 801, 
and Section 802 Family Housing Programs in the Army, (October 1996). 

[12] National Defense Authorization Act for Fiscal Year 1996, Pub. L. 
No. 104-106, §§ 2801-2802 (1996) (codified as amended at 10 U.S.C. §§ 
2871-2885). 

[13] DOD has established a tenant "waterfall" that privatization 
projects can use if occupancy falls below a certain rate. Generally, 
after military families are accommodated, the order of the tenant 
waterfall is unaccompanied military personnel, active National Guard 
and Reserve, military retirees, federal government civilians, and 
lastly unaffiliated civilians. 

[14] Bob Stump National Defense Authorization Act for Fiscal Year 2003, 
Pub. L. No. 107-314 §2803 (2002). 

[15] GAO, Defense Infrastructure: Army's Privatized Lodging Program 
Could Benefit from More Effective Planning, [hyperlink, 
http://www.gao.gov/products/GAO-10-771] Washington, D.C.: July 30, 
2010. 

[16] GAO, Defense Infrastructure: Services' Use of Land Use Planning 
Authorities, [hyperlink, http://www.gao.gov/products/GAO-08-850] 
(Washington, D.C.: July 23, 2008). 

[17] Section 2667 of Title 10 does not use the term enhanced-use lease 
to differentiate leases executed pursuant to this authority that are 
longer than 30 years and involve in-kind payments. 

[18] Eielson Air Force Base has two on-base Section 801 housing 
contracts, the contract for the Sprucewood units and the contract for 
the Moose Lake and French Creek units. 

[19] Each contract does, however, include a provision stating that the 
contract is subject to the Contract Disputes Act, and outlines a 
process for resolving disputes arising under the contract. 

[20] Pub. L. No. 110-417, § 2803 (2008) (codified at 10 U.S.C. § 
2835a). Exercising this authority requires a finding by the Secretary 
concerned that the housing in question is not needed to house members 
of the armed forces eligible for assignment to military family housing. 

[21] Unified Facilities Criteria (UFC) 4-010-01, DOD Minimum 
Antiterrorism Standards For Buildings, (October 8, 2003, including 
change 1, January 22, 2007), and DOD Instruction 2000.16, DOD 
Antiterrorism (AT) Standards, (Oct. 2, 2006, incorporating through 
change 2, Dec. 8, 2006). 

[22] According to Navy officials, DOD antiterrorism and force 
protection standards would apply when 11 or more service members are 
housed in a single building, and if the Navy elects to place more than 
one sailor in two-bedroom housing units. However, Naval Base Ventura 
County Port Hueneme officials stated that if they use the Section 801 
units as bachelor housing they intend to place only one sailor in each 
unit--so antiterrorism standards would not apply. 

[23] The Navy's decision to terminate its Section 801contract could 
potentially cause the government to incur contract termination costs. 

[24] GAO, Standards for Internal Control in the Federal Government, 
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] 
(Washington, D.C.: November 1999). 

[25] Department of Defense Inspector General, DOD Leasing of Family 
Leasing, Audit Report Number 92-006 (Arlington, Va.: Oct. 16, 1991). 

[26] Federal Acquisition Regulation, subparts 49.502 and 49.503. 

[End of section] 

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