Military Housing

The Defense Department (DOD) estimates that about 200,000 units that house military families are old, lack modern amenities, and need to be renovated or replaced. To improve housing conditions more economically and faster that could be done using traditional military construction funds, DOD began a five-year pilot program in 1996 to allow private sector financing, ownership, and operation of military housing. GAO found that although initial plans for housing privatization were aggressive, actual progress has been slow. Nearly four years after the program was begun, DOD has awarded only two privatization contracts to build or renovate about 3,000 housing units for military families. A GAO review of the two privatization projects already awarded and 12 additional projects approved for solicitation found that the military did not prepare a life-cycle cost analysis for two projects approved for solicitation and that the analyses for the remaining 12 projects were incomplete, inaccurate, or inconsistently prepared. After making adjustments to provide consistency, considering all project costs under both options, and correcting other errors, GAO found that over the life of the projects the privatization option, on average, would be about 11 percent less costly than comparable projects financed with military construction funds. DOD has made progress in coordinating this effort with other housing options, such as housing allowances and military construction, by increasing the use of cross-organizational panels that review and coordinate housing policies and issues. However, it has yet to finalize an overall integrated housing strategy for addressing its housing needs in a timely manner that considers the interrelationships among these options, as directed by Congress and recommended by GAO.

GAO noted that: (1) although initial plans for housing privatization were aggressive, actual progress has been slow; (2) almost 4 years after the program was initiated, DOD has awarded only two privatization contracts to build or renovate 3,083 military family housing units; (3) DOD explains that because this represents a new way of doing business, developing procedures and financial instruments and awarding contracts have taken more time than expected; (4) it appears questionable whether the services will meet a DOD goal to eliminate all inadequate family housing by fiscal year 2010; (5) because no projects under the program have been completed, there is little basis for evaluating the effectiveness of the program in eliminating inadequate housing more economically and faster than could be achieved through traditional military construction financing; (6) until experience is gained in the actual operation of several projects, key questions will remain unanswered, such as whether: (a) the military will need the housing over the 50-year terms of most projects; (b) developers will operate and maintain privatized housing in accordance with contracts; and (c) actual privatization costs and savings will be in line with DOD estimates; (7) DOD has not developed a formal evaluation plan to help answer these questions and assess the overall merits of the initiative as it is implemented; (8) a review of 14 projects found that the services did not prepare a life-cycle cost analysis for 2 projects and that the analyses for the remaining 12 projects were incomplete, primarily because DOD had not issued standardized guidance for preparing the analyses; (9) DOD has made progress in coordinating this initiative with other housing options by increasing use of cross-organizational panels that review and coordinate housing policies and issues; (10) however, it has not finalized an overall integrated housing strategy for addressing its housing needs in a manner that considers the interrelationships among these options; (11) DOD's January 2000 announcement of a new initiative to significantly increase housing allowances over the next 5 years makes a well-developed strategy that balances the various housing options even more important; (12) the services have not improved their housing requirements determination processes to more accurately estimate how much housing the installations must supply and they have not always updated their housing requirements assessments prior to approving privatization projects; and (13) thus, they cannot be assured that they are meeting an adequately documented need.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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