Defense Infrastructure
Issues Related to the Renovation of General and Flag Officer Quarters Gao ID: GAO-04-555 May 17, 2004Recent cost increases in renovation projects to general and flag officer quarters raised questions about the services' management of the programs. GAO was asked to determine (1) how actual costs of renovation projects for general and flag officer housing compare to service budget estimates provided to Congress and (2) the primary reasons for any increases and the services' procedures to control cost increases. Additionally, GAO is presenting observations about the services' accountability over gifts provided to help renovate some general and flag officer quarters and the extent to which Department of Defense (DOD) guidance provides visibility and control over costs associated with renovation projects for privatized general and flag officer quarters.
With few exceptions, the services' reported costs for renovation projects for general and flag officer quarters were generally consistent with budget estimates provided to Congress. For fiscal years 1999 to 2003, GAO found that 184, or 93 percent, of the 197 renovation projects over $100,000 cost less than or the same as budget estimates. While the remaining 13 projects--6 Navy and 7 Marine Corps--exceeded cost estimates, 5 Marine Corps projects exceeded their budgets by more than 10 percent. Customer-requested changes and unforeseen repairs were the main reasons for cost increases to renovation projects. For 5 of the 7 projects that exceeded their budgets by over 10 percent, about 45 percent of the increased costs was for customer-driven changes, 53 percent for unforeseen repairs, and 2 percent could not be determined. Though the services have guidance to limit customer-requested changes, the Marine Corps approved many such changes that contributed to project costs exceeding budgets. Customer requests included upgraded kitchen and bathroom renovations or initially unplanned work. Unforeseen repairs, such as for termite damage or unexpected historic preservation requirements, occurred because problems were not identified in the inspections on which the estimates were based. Military services did not properly account for gifts used for general officer quarters in two instances, one involving renovation costs. In that instance, the Marine Corps did not comply with existing regulations to properly accept and account for all gifts used to renovate the Home of the Commandants. The Friends of the Home of the Commandants told GAO it provided about $765,500 in nonmonetary materials and services (e.g., furnishings and construction labor). However, the Marine Corps could list nonmonetary gifts totaling only $492,413 because it did not follow specified gift acceptance and accounting procedures. Navy General Gift Fund records show receipt of an additional $88,300 in monetary gifts from the Friends of the Home of the Commandants. The Marine Corps has receipts for monetary expenditures, but not property records for items purchased with the gift funds. The Navy and Army also accepted gifts to furnish general and flag officer homes. Of those, the Navy did not properly accept and account for about $3,970 in nonmonetary gifts. DOD and the military services could lose visibility over housing renovation costs for privatized general and flag officer homes. DOD does not require review of renovation costs for these quarters, such as costs over $35,000, as required for government-owned quarters. The Navy, Marine Corps, and Air Force are developing guidance to increase visibility and accountability over the spending for these quarters, but the draft guidance is not consistent. Although the services have privatized only 65 of their 784 general and flag officer quarters, they plan to privatize 426 or 54 percent by fiscal year 2008.
RecommendationsOur 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.
Director: Team: Phone:GAO-04-555, Defense Infrastructure: Issues Related to the Renovation of General and Flag Officer Quarters
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Report to the Subcommittee on Military Construction, Committee on
Appropriations, U.S. Senate:
United States General Accounting Office:
GAO:
May 2004:
DEFENSE INFRASTRUCTURE:
Issues Related to the Renovation of General and Flag Officer Quarters:
GAO-04-555:
GAO Highlights:
Highlights of GAO-04-555, a report to Subcommittee on Military
Construction, Committee on Appropriations, U. S. Senate
Why GAO Did This Study:
Recent cost increases in renovation projects to general and flag
officer quarters raised questions about the services‘ management of the
programs. GAO was asked to determine (1) how actual costs of renovation
projects for general and flag officer housing compare to service budget
estimates provided to Congress and (2) the primary reasons for any
increases and the services‘ procedures to control cost increases.
Additionally, GAO is presenting observations about the services‘
accountability over gifts provided to help renovate some general and
flag officer quarters and the extent to which Department of Defense
(DOD) guidance provides visibility and control over costs associated
with renovation projects for privatized general and flag officer
quarters.
What GAO Found:
With few exceptions, the services‘ reported costs for renovation
projects for general and flag officer quarters were generally
consistent with budget estimates provided to Congress. For fiscal years
1999 to 2003, GAO found that 184, or 93 percent, of the 197 renovation
projects over $100,000 cost less than or the same as budget estimates.
While the remaining 13 projects”6 Navy and 7 Marine Corps”exceeded cost
estimates, 5 Marine Corps projects exceeded their budgets by more than
10 percent.
Customer-requested changes and unforeseen repairs were the main reasons
for cost increases to renovation projects. For 5 of the 7 projects that
exceeded their budgets by over 10 percent, about 45 percent of the
increased costs was for customer-driven changes, 53 percent for
unforeseen repairs, and 2 percent could not be determined. Though the
services have guidance to limit customer-requested changes, the Marine
Corps approved many such changes that contributed to project costs
exceeding budgets. Customer requests included upgraded kitchen and
bathroom renovations or initially unplanned work. Unforeseen repairs,
such as for termite damage or unexpected historic preservation
requirements, occurred because problems were not identified in the
inspections on which the estimates were based.
Military services did not properly account for gifts used for general
officer quarters in two instances, one involving renovation costs. In
that instance, the Marine Corps did not comply with existing
regulations to properly accept and account for all gifts used to
renovate the Home of the Commandants. The Friends of the Home of the
Commandants told GAO it provided about $765,500 in nonmonetary
materials and services (e.g., furnishings and construction labor).
However, the Marine Corps could list nonmonetary gifts totaling only
$492,413 because it did not follow specified gift acceptance and
accounting procedures. Navy General Gift Fund records show receipt of
an additional $88,300 in monetary gifts from the Friends of the Home of
the Commandants. The Marine Corps has receipts for monetary
expenditures, but not property records for items purchased with the
gift funds. The Navy and Army also accepted gifts to furnish general
and flag officer homes. Of those, the Navy did not properly accept and
account for about $3,970 in nonmonetary gifts.
DOD and the military services could lose visibility over housing
renovation costs for privatized general and flag officer homes. DOD
does not require review of renovation costs for these quarters, such as
costs over $35,000, as required for government-owned quarters. The
Navy, Marine Corps, and Air Force are developing guidance to increase
visibility and accountability over the spending for these quarters, but
the draft guidance is not consistent. Although the services have
privatized only 65 of their 784 general and flag officer quarters, they
plan to privatize 426 or 54 percent by fiscal year 2008.
What GAO Recommends:
GAO is making several recommendations to the Secretary of Defense to
improve controls over renovations to general and flag officer quarters
and provide increased visibility and control of renovations to
privatized general and flag officer quarters.
In commenting on a draft of this report, DOD concurred with two
recommendations and did not concur with the third, while indicating
actions to be taken to meet the intent of our recommendation.
www.gao.gov/cgi-bin/getrpt?GAO-04-555.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Barry W. Holman at (202)
512-8412 or holmanb@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Actual Renovation Costs Generally Were Consistent with or Less Than
Budget Estimates:
Cost Increases Due to Customer-Requested Changes and Unforeseen
Repairs:
Marine Corps and Navy Did Not Properly Account for Gifts Used to Help
Renovate the Home of the Commandants:
Privatization Could Reduce Oversight of Renovations to General and Flag
Officer Quarters:
Conclusions:
Recommendations:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Concerns about Air Force's General Officer Quarters
Renovation and Replacement Plans:
Appendix III: Comments from the Department of Defense:
Tables:
Table 1. Number of General and Flag Officer Quarters Maintained by the
Military Services as of February 29, 2004:
Table 2: Comparison of Actual Costs to Budget Requests for General and
Flag Officer Quarters with Major Repair Projects of More Than $100,000
(Fiscal Years 1999 through 2003):
Table 3: Reason for Cost Increases for Five Marine Corps Major
Renovation Projects That Exceeded Their Budgets by More Than 10 Percent
(Fiscal Years 1999 through 2003):
Table 4: Navy and Marine Corps Processes for Gift Acceptance and
Accounting:
United States General Accounting Office:
Washington, DC 20548:
May 17, 2004:
The Honorable Kay Bailey Hutchison:
Chairman:
The Honorable Dianne Feinstein:
Ranking Minority Member:
Subcommittee on Military Construction:
Committee on Appropriations:
United States Senate:
Generally, the military services' almost 700 general and flag
officer[Footnote 1] quarters are older and larger than typical housing
in the services' family housing inventories, and many are historic,
with some dating from the early nineteenth century. These factors make
general and flag officer homes costly to maintain, which has been an
ongoing concern to Congress. The services have used both appropriated
funds and gifts to maintain and pay for renovation costs associated
with some of these quarters.[Footnote 2] Recent cost increases for some
major renovation projects at the historic Marine Corps Barracks located
at Eighth and I streets in southeast Washington, D.C., have raised
congressional concern about the services' management of these programs.
Additionally, questions exist regarding the accounting for gifts used
to supplement appropriations for renovation projects.
At your request, we reviewed the services' programs for renovating
general and flag officer housing to determine (1) how the actual costs
of renovation projects for general and flag officer projects compared
to the service budget estimates provided to Congress and (2) the
primary reasons for any cost increases, including the services'
procedures to control cost increases. Additionally, we are providing
observations about the services' accountability over monetary and
nonmonetary gifts provided to help renovate certain general and flag
officer quarters as well as information concerning the extent to which
the Department of Defense (DOD) has issued guidance to provide
visibility and control over costs associated with renovation projects
for privatized general and flag officer quarters.
We focused our review on the services' major renovation projects
budgeted for $100,000 or more during fiscal years 1999 through 2003. To
determine how the reported costs of renovation projects for general and
flag officer quarters compared to the service budget estimates provided
to Congress, we reviewed the services' reported data related to the
cost of a project to the budget estimates. We did not validate service
budget and actual cost data, but we did discuss data reliability with
responsible service officials and obtained information from them on
steps they had taken to ensure the data's reliability. Based on this,
we believe that the data we used was sufficiently reliable for the
purposes of this report. To determine the primary reasons for cost
increases, we reviewed contractual actions, interviewed service
officials, and documented the reasons for increases. Furthermore, to
determine the services' accountability over gifts provided to help
renovate general and flag officer quarters, we reviewed applicable
laws, DOD and service guidance, gift acceptance documentation, and
contract and funding documents and interviewed cognizant officials.
Finally, to determine the extent to which DOD has issued guidance to
provide visibility and control over renovation projects for privatized
general and flag officer quarters, we reviewed and compared DOD and the
services' guidance for government-managed versus privatized general and
flag officer housing.
We conducted our work from October 2003 through March 2004 in
accordance with generally accepted government auditing standards. A
more thorough description of our scope and methodology is presented in
appendix I.
Results in Brief:
With a few exceptions, the services' reported actual costs[Footnote 3]
for renovation projects for general and flag officer quarters were
generally consistent with or less than the budget estimates provided to
Congress.[Footnote 4] During fiscal years 1999 through 2003, we found
that 184, or about 93 percent, of the 197 renovation projects of more
than $100,000 for general and flag officer quarters cost less than or
the same as the estimate included in the service's budget
justification. While the remaining 13 projects--6 Navy and 7 Marine
Corps--exceeded the services' cost estimates, only the Marine Corps
projects exceeded their budgets by more than 10 percent.
Customer requests for changes and unforeseen repairs were the primary
reasons for cost increases to renovation projects.[Footnote 5] The
services have guidance that seeks to limit customer-requested changes
based on personal preferences, but we found numerous Marine Corps
approvals for customer-requested changes for renovations that
contributed to project costs exceeding budget estimates. We found that
for 5 Marine Corps projects that exceeded their budgets by more than 10
percent, about 45 percent of the increased costs associated with the
changes were customer driven, about 53 percent were due to unforeseen
repairs and about 2 percent could not be determined.[Footnote 6] Cost
increases due to customer requests included upgraded kitchen and
bathroom renovations or work that was not included in the original
scope of work and occurred because the customer wanted the change and
the housing manager or higher level official acquiesced. Cost increases
due to unforeseen repairs--such as for termite damage; undetected
structural deficiencies, such as sagging floor supports; and unforeseen
historical restoration costs--occurred because these deficiencies or
requirements were not identified during the inspections upon which the
initial project cost and budget estimates were based.
We found two projects where military services did not properly account
for gifts used for general officer quarters; the gifts for one project
were associated with renovation costs and used to supplement
appropriations for general officer quarters. The Friends of the Home of
the Commandants[Footnote 7] acknowledged providing about $765,500 in
nonmonetary materials and services[Footnote 8] and about $88,300 in
funding to supplement funding for renovation of the Home of the
Commandants. The Marine Corps did not comply with existing guidance to
properly accept and account for all nonmonetary gifts used to help
renovate the home and had difficulty accounting for the gifts at the
time of our review. After some delay, the Marine Corps could provide a
listing of only $492,413 in nonmonetary gifts and had no documentation
to support formal acceptance and recording of these gifts. In addition,
Marine Corps records do not fully account for items bought with the
monetary gifts provided to help renovate the Home of the Commandants,
although Navy General Gift Fund financial records do document the
receipt of $88,300 donated by the Friends of the Home of the
Commandants. The Navy and Army also accepted gifts to furnish general
and flag officer quarters. The gifts were not used for renovation
expenses. Of those, the Navy did not properly accept and account for
about $3,970 in nonmonetary gifts.
DOD could lose visibility over maintenance and repair spending for an
increasing number of general and flag officer housing units because DOD
has no policy requiring the services to review renovation costs on
these homes, such as is done for maintenance and repair projects over
$35,000 for government-owned quarters. By the end of fiscal year 2003,
the services had privatized 65 of their 784 general and flag officer
quarters and planned to privatize 426, or 54 percent, by the end of
fiscal year 2008. The Air Force has developed draft guidance, expected
to be issued in May 2004, which will provide more visibility and
accountability over spending to maintain and repair privatized general
and flag officer housing. The Navy and the Marine Corps have also
developed draft guidance that requires headquarters approval for all
renovation projects over a certain dollar threshold. The Army has no
such guidance.
We are making recommendations to the Secretary of Defense to ensure
that existing guidance regarding customer-driven changes to general and
flag officer housing renovation projects is followed, to properly
account for all gifts used to help renovate the Home of the
Commandants, and to provide for review of renovation projects to ensure
the standardization and periodic review of the expenditure levels for
individual privatized units on a programmatic basis, to include general
and flag officer quarters. In commenting on a draft of this report, DOD
concurred with our first and second recommendations and did not concur
with the third, while indicating actions to be taken that meet the
intent of our recommendation. We refined this third recommendation to
better reflect our intent and stay within the parameters of the
privatization program.
Background:
General and flag officers' quarters are government-provided quarters
for military officers with the rank of brigadier general or rear
admiral (lower half) (O-7) and above. The services have a total of 685
general and flag officer quarters, of which 372, or about 54 percent,
are considered historic as table 1 below shows.[Footnote 9]
Table 1: Number of General and Flag Officer Quarters Maintained by the
Military Services as of February 29, 2004:
Service: Army;
Historic: 125;
Nonhistoric: 114;
Total: 239.
Service: Navy;
Historic: 105;
Nonhistoric: 56;
Total: 161.
Service: Marine Corps;
Historic: 10;
Nonhistoric: 9;
Total: 19.
Service: Air Force;
Historic: 132;
Nonhistoric: 134;
Total: 266.
Service: Total;
Historic: 372;
Nonhistoric: 313;
Total: 685.
Source: GAO analysis of DOD data.
[End of table]
The general policy in the military services is that general and flag
officer housing is to be maintained in an excellent state of repair,
commensurate with the rank of the occupant and the age and historic
significance of the building. Accordingly, general and flag officer
housing is expensive to maintain; and the age, size, and historic
significance of some of these quarters tend to escalate their
operations and maintenance costs as the following examples
show:[Footnote 10]
* Army: The Commandant's home at Carlisle Barracks was built in 1932.
The house is a two-story stone structure with 8,156 square feet of
living space and is currently undergoing a major renovation. The
residence has an average annual maintenance and repair cost of about
$14,000.
* Navy: Tingey House, the home of the Chief of Naval Operations, is
located in the historic Navy Yard, Washington, D.C. Constructed in
1803, the quarters was one of the earliest buildings erected at the
Washington Navy Yard. The home is a 2 1/2-story brick structure
containing 12,304 square feet of space and has an average annual
maintenance and repair cost of about $27,500.
* Marine Corps: The Home of the Commandants--located within the Marine
Corps Barracks at Eighth and I Streets S.E., Washington, D.C. --has
been the home of the Marine Corps Commandants since its completion in
1806. The Marine Corps considers the quarters as much a museum as a
residence. The home is a three-story structure containing approximately
15,605 square feet of space and has an average annual maintenance and
repair cost of about $41,811.[Footnote 11]
* Air Force: Carlton House is the home of the Superintendent of the
U.S. Air Force Academy and was constructed in the 1930s. The home is a
two-story structure with a total of 10,925 square feet of space and has
an average annual maintenance and repair cost of about $21,000.
All of these homes are used extensively for official entertainment
purposes and all but the Commandant's home at Carlisle Barracks are
listed on the National Register of Historic Places. However, the
Commandant's quarters at Carlisle Barracks is considered historic and
is eligible for listing on the National Register of Historic Places.
The services are to follow DOD Financial Management Regulations and
service-specific guidance to prepare budget estimates for major repair
projects to general and flag officer quarters.[Footnote 12] For
example, the Navy and Marine Corps justify projects on the basis of
mission, life-cycle economics, health and safety, environmental
compliance, or quality of life. The services generally hire
architectural and engineering firms to inspect and assess the property
for projects expected to cost more than $50,000 to determine needed
repairs and establish a project cost estimate. Using information
developed during the project justification and cost-estimating process,
the services are to prepare budget estimates that are submitted to
Congress for approval during the annual appropriations cycle.
Congress has acted to control spending associated with maintaining
these homes by establishing expense thresholds and reporting and
notification requirements. For example, the services must include in
their annual family housing budget submitted to Congress detailed
budget justification material explaining the specific maintenance and
repair requirements for those homes expected to exceed an annual
$35,000[Footnote 13] threshold for maintenance and repair
expenses.[Footnote 14]
Section 2601, of Title 10, United States Code authorizes the service
Secretaries to accept, hold, administer, and spend any gift of real or
personal property made on the condition that it is used for the
benefit--or in connection with the establishment, operation, or
maintenance--of an organization under the jurisdiction of their
departments. Monetary gifts are accepted and deposited in the Treasury
in service-designated accounts. In some instances, these funds have
been used to supplement appropriations for renovations to general and
flag officer quarters. The Military Construction Appropriation Act for
fiscal year 2000[Footnote 15] directed that funds, appropriated under
the act, were to be the exclusive source of funds for repair and
maintenance of all military family housing. This excluded the use of
gift funds to repair or maintain general and flag officer quarters. A
year later, however, Congress expressly authorized the use of gift
funds pursuant to Section 2601, of Title 10, United States Code, to
help fund the construction, improvement, repair and maintenance of the
historic residences at the Marine Corps Barracks at Eighth & I Streets
S.E., Washington, D.C.[Footnote 16] DOD guidance[Footnote 17] provides
the services with a framework for property accountability policies,
procedures, and practices.
The 1996 Military Housing Privatization Initiative[Footnote 18] allows
private sector financing, ownership, operation, and maintenance of
military family housing including, in some cases, housing occupied by
general and flag officers. The goal of the initiative is to help the
services remove inadequate housing from their family housing
inventories and improve service-member morale. Under the program, DOD
utilizes various means to encourage private developers to renovate
existing housing or construct new housing on or off military
installations. Service members, in turn, may use their housing
allowance to pay rent and utilities to live in the privatized housing.
The privatization firms use the housing allowances to pay for the
maintenance and repair of the quarters. As of March 2003, the military
services had privatized about 28,000 family housing units, only a small
number of which were general or flag officer quarters. The services
plan to privatize about 183,000 units, or 72 percent of their total
family housing inventory, by fiscal year 2007 and will increasingly
include general or flag officer housing.
Actual Renovation Costs Generally Were Consistent with or Less Than
Budget Estimates:
With a few exceptions, the services' reported actual costs for
renovation projects for general and flag officer quarters were
generally consistent with or less than the budget estimates provided to
Congress. For fiscal years 1999 to 2003, of the 197 projects estimated
to cost more than $100,000, 184 (about 93 percent) were under or met
their budget estimates; and 13 (about 7 percent) exceeded their budget.
While we did not identify any Air Force renovation projects that
exceeded their budgets, we did learn of other concerns about costs
associated with Air Force plans to replace and repair general officer
quarters. See appendix II for further information on this issue.
Table 2 shows a comparison of actual costs to budget requests for the
197 renovation projects of more than $100,000 included in our review.
Table 2: Comparison of Actual Costs to Budget Requests for General and
Flag Officer Quarters with Major Repair Projects of More Than $100,000
(Fiscal Years 1999 through 2003):
Service: Army;
Total projects: 59;
Actual Cost: Same as or less than budget: 59;
Actual Cost: Greater than budget: 0.
Service: Navy;
Total projects: 93;
Actual Cost: Same as or less than budget: 87;
Actual Cost: Greater than budget: 6.
Service: Marine Corps;
Total projects: 10;
Actual Cost: Same as or less than budget: 3;
Actual Cost: Greater than budget: 7.
Service: Air Force;
Total projects: 35;
Actual Cost: Same as or less than budget: 35;
Actual Cost: Greater than budget: 0.
Service: Total;
Total projects: 197;
Actual Cost: Same as or less than budget: 184;
Actual Cost: Greater than budget: 13.
Service: Percent;
Total projects: 100;
Actual Cost: Same as or less than budget: 93;
Actual Cost: Greater than budget: 7.
Source: GAO analysis of DOD data.
[End of table]
Of the 13 over-budget projects, 5 of the 7 Marine Corps projects--4
located at the Marine Corps Barracks at Eighth and I streets,
Washington, D.C., and the other located at Kaneohe, Hawaii--exceeded
their budgets by more than 10 percent. The other 2 Marine Corps
projects exceed their budgets by about 9 percent, and the 6 Navy
projects exceed their budgets by less than 2 percent.
As seen in table 2, the majority of renovation projects stayed within
their budgets. However, some projects cost less than budgeted because
the scope of planned work was revised or canceled for a project. For
example, the Navy identified instances where the scope of work was
reduced or cancelled because a change in occupancy did not occur as
scheduled and planned repair work could not be accomplished. Army
housing officials cited examples where the scope of renovation projects
was reduced because the contractor's final bid for lead-based paint and
asbestos removal exceeded the government's estimate. The projects'
scope had to be reduced or the budgets would be exceeded.
Cost Increases Due to Customer-Requested Changes and Unforeseen
Repairs:
Customer requests for changes and unforeseen repairs were the primary
reasons for cost increases to renovation projects. To help minimize
costs, housing handbooks provided to general and flag officers
occupying government quarters discourage customer-requested changes
based on personal preferences and entrust final approval of such
changes to the discretion of the installation housing officer or the
commanding officer. Although these handbooks seek to limit customer-
requested changes, we found numerous approvals for customer-requested
changes granted for renovations at the Marine Corps' Home of the
Commandants that contributed to project costs exceeding the budget
estimate.
Customer driven requests, such as upgraded kitchen and bathroom
renovations, or work that was not included in the original scope of
work were responsible for about 45 percent of the total cost increase
for the 5 Marine Corps projects that exceeded their budgets by more
than 10 percent. [Footnote 19] Table 3 shows the reasons for changes in
scope for the projects as well as the amount of cost increase and the
percent of the total increase associated with the changes.
Table 3: Reason for Cost Increases for Five Marine Corps Major
Renovation Projects That Exceeded Their Budgets by More Than 10 Percent
(Fiscal Years 1999 through 2003):
Reason: Customer Driven;
Amount[A]: $518,100;
Percent: 45.
Reason: Unforeseen circumstances;
Amount[A]: $607,000;
Percent: 53.
Reason: Undetermined [B];
Amount[A]: $28,300;
Percent: 2.
Reason: Total;
Amount[A]: $1,153,400;
Percent: 100.
Source: GAO analysis of Marine Corps Data.
Note: Four of the five projects are located at Marine Corps Barracks,
Washington, D.C., and one is located at Kaneohe, Hawaii.
[A] The dollar amounts shown for each reason reflect the total of the
differences between each project's actual cost and the initial budget
estimate that was provided to Congress.
[B] The dollar amount shown reflects the difference between the actual
cost and budget estimate, for which we could not conclusively determine
the reason for the cost increase.
[End of table]
Six Navy projects exceeded their budgets by less than 2 percent.
According to the Navy, the overruns were mostly due to planned work
costing more than was originally budgeted--a fairly regular occurrence
since budgets are submitted nearly 18 to 24 months before the work is
accomplished. However, some of the increases occurred due to such
customer requests as additional interior painting and such unforeseen
repairs as the need to replace an old, broken boiler heating system
with a new forced-air system.
Customer-requested changes for the 5 projects that exceeded their
budgets by more than 10 percent occurred because the customer, usually
the quarters' occupants, wanted various changes and the housing
manager, the commanding officer, and at times the service headquarters
acquiesced and approved the changes. For example, at the Marine Corps
Barracks Home of the Commandants, where one project exceeded its budget
by about 52 percent, customer-requested changes resulted in
identifiable cost increases totaling about $338,000. [Footnote 20] The
single largest identifiable increase was due to a customer request for
a major kitchen renovation not included in the original scope of work
and costing more than $197,256. Major cost drivers for the kitchen
renovation included cabinets, granite counter tops, butler pantry, and
flooring that the occupant requested. Other customer-requested changes
included the renovation of attached guest quarters that included the
construction of public, handicap-accessible restrooms and replacement
of a newly installed marble tile floor. Cost increases due to customer
requests for Quarters 1, 2, and 4 included requests for upgraded
kitchen cabinets and counter tops, upgraded bathroom fixtures, and
wall-to-wall carpeting.
To help minimize costs, the services' provide handbooks to general and
flag officers occupying government quarters that address the propriety
of and seek to discourage customer-requested changes based on personal
preferences. The installation housing officer or the commanding officer
has final approval for such changes. However, we found numerous
approvals for customer-requested changes granted for renovations at the
Marine Corps' Home of the Commandants and other quarters at the Marine
Corps Barracks that contributed to project costs exceeding the budget
estimates. Navy and Army housing officials told us that controlling
costs due to customer requests is directly related to a housing
officer's ability to say no to requests that could be perceived as
excessive and draw undue public scrutiny upon the service.
For the 5 projects that exceeded their budgets by more than 10 percent,
cost increases due to such unforeseen repairs as for termite damage or
such undetected structural deficiencies as sagging floor supports
occurred because these deficiencies or requirements were not identified
during initial inspections. For example, at the Home of the
Commandants, identifiable changes due to unforeseen repairs resulted in
cost increases totaling about $559,416. The single largest cost
increase due to unforeseen repairs was for the roof. The initial budget
estimate was around $192,189. However, the architectural and
engineering firm that did the initial inspection upon which the budget
estimate was based did not actually inspect the roof for damage and did
not perform destructive testing to look for structural
deficiencies.[Footnote 21] The current roof estimate is around
$582,730, an increase of more than $390,541 with about 70 percent of
the total increase due to unforeseen deficiencies at the Home of the
Commandants. Another unforeseen repair involved replacing a portion of
the wood flooring on the first floor because of severe termite damage
that was not detected until the old flooring was removed. Again, the
deficiency went undetected because destructive testing was not
performed. According to service officials, destructive testing is often
not accomplished because the quarters' occupants do not want either the
testing to interfere with their entertainment responsibilities or the
inconvenience of having their homes in disrepair.
Additionally, for the Marine Corps project in Kaneohe, Hawaii,
unforeseen historical restoration requirements caused actual
renovation costs to exceed the budget estimate by about $47,600 or
nearly 25 percent. Marine Corps officials stated that the state
historical preservation office wanted the interior walls restored with
the same materials used when the house was originally built in 1941.
The Marine Corps budget estimate did not include this requirement.
Marine Corps and Navy Did Not Properly Account for Gifts Used to Help
Renovate the Home of the Commandants:
The Army, Navy and Marine Corps each received private donations of
cash, property, or services to furnish and renovate general and flag
officer quarters. While the Army and Navy accepted gift funds to
furnish quarters, the Marine Corps accepted and used gift funds to both
furnish and help renovate the Home of the Commandants. Although
guidance exists to ensure such gifts are properly accepted, held, and
used in accordance with the donor's wishes, neither the Navy nor the
Marine Corps followed these procedures for all gifts associated with
furnishing the quarters of the Superintendent of the Naval Academy and
the renovation of the Home of the Commandants.
Section 2601, of Title 10, United States Code, provides gift acceptance
authority to each service Secretary to accept, hold, administer, and
spend any gift of real or personal property made on the condition that
it is used for the benefit--or in connection with the establishment,
operation, or maintenance--of an organization under the jurisdiction of
their departments. In addition to this legislative authority, the
Secretary of the Navy has issued an instruction[Footnote 22] to help
implement and centralize gift acceptance authority. The Marine Corps
implements the Secretary's policy and re-delegates authority to
subordinate commands under its jurisdiction. The following table
summarizes Navy and Marine Corps procedures for accepting gifts.
Table 4: Navy and Marine Corps Processes for Gift Acceptance and
Accounting:
Monetary Gifts:
* Secretary of the Navy formally accepts gift funds; private funds then
become appropriated funds of the Department of the Navy;
* AAUSN[A] deposits funds in the Treasury, Department of the Navy
General Gift Fund;
* AAUSN allots funds to the intended recipient, such as the Marine Corp
Barracks, so the funds may be disbursed;
* Recipient is responsible for managing allotment;
Nonmonetary Gifts:
* Secretary of the Navy formally accepts gifts valued in excess of
$50,000;
* Commandant of the Marine Corps may accept on behalf of Navy Secretary
gifts, other than real property, valued at $50,000,or less;
* Navy or Marine Corps may take temporary custody over gifts pending
formal acceptance;
* Gift is placed on the property account of the recipient when formally
accepted and treated as official U.S. property.
Source: GAO analysis of SECNAVINST 4001.2G CH-2, and MCO P5800.16A.
[A] The Assistant for Administration, Under Secretary of the Navy
(AAUSN) has oversight responsibility for the Navy's space and
facilities, services, Pentagon Renovations, and other "Special
Programs" to include approving authority for the Navy Gift Fund.
[End of table]
Although aware of these procedures, Navy and Marine Corps officials
acknowledge that in two projects, they did not list nonmonetary gifts
on the property accounts and cannot fully account for those gifts made
to furnish and renovate two general and flag officer quarters.
According to Marine Corps officials, they did not follow the prescribed
procedures for accepting and accounting for the estimated $765,500 in
nonmonetary gifts (materials such as kitchen cabinets, furniture, wall
coverings, draperies, and furniture upholstery) from the Friends of the
Home of the Commandants. We contacted the Friends of the Home of the
Commandants, which provided us with a listing of donations and their
value totaling $765,500 provided to the Marine Corps to help renovate
the Home of the Commandants. After some delay, the Marine Corps
provided us with a list of nonmonetary gifts totaling $492,413 from the
Friends of the Home of the Commandants but had no documentation to
support formal acceptance of the gifts and that the gifts were recorded
in property records. According to Marine Corps officials, the Friends
of the Home of the Commandants provided the remaining $273,087 in
nonmonetary gifts directly to the project contractor.[Footnote 23]
However, the Marine Corps also did not document that these gifts were
formally accepted and accounted for in property records. Furthermore,
Navy and Marine Corps financial records document receipt of about
$88,300 donated to the Navy General Gift Fund from the Friends of the
Home of the Commandants during fiscal years 1999 through 2003. The
Marine Corps, after some delay, produced receipts to account for
expenditures using these gift funds to help renovate and furnish the
Home of the Commandants. However, the Marine Corps property records do
not include the items purchased with the gift funds. These gifts were
used to supplement $2,269,000 in appropriations for renovations to the
Home of the Commandants.[Footnote 24]
The Navy and Army also accepted nonmonetary or monetary gifts for
furnishings for flag and general officer quarters. The gifts were not
used for renovations to the quarters. The Navy acknowledges receiving
about $59,780 in nonmonetary gifts provided by various donors as
furnishings to help decorate the home of the Superintendent of the
Naval Academy. However, similar to the Marine Corps, the Navy did not
properly accept and account for about $3,970 of the gifts in the
property records.[Footnote 25] The Army properly accepted $50,000 in
furnishings from the Army War College Foundation for the home of the
Commandant of the Army War College at Carlisle Barracks.[Footnote 26]
Privatization Could Reduce Oversight of Renovations to General and Flag
Officer Quarters:
DOD and the military services could lose visibility over spending to
maintain and repair an increasing number of privatized general and flag
officer housing units because there is no consistent DOD-wide policy
requiring review of maintenance and repair projects over certain dollar
thresholds. By the end of fiscal year 2003, the services had privatized
65 of their 784 general and flag officer quarters and planned to
privatize 426, or 54 percent, by the end of fiscal year 2008. DOD has
no policy requiring the services to review renovation costs on these
homes, such as is done for maintenance and repair projects of more than
$35,000 for government-owned quarters. However, the Air Force has
developed draft guidance, expected to be issued in May 2004, which will
provide more visibility and accountability over spending to operate and
maintain privatized general and flag officer housing. The Navy and the
Marine Corps have also developed draft guidance that requires
headquarters approval for all renovation projects over a certain dollar
threshold. No such policy is under development in the Army.
Currently, all service headquarters are required to review any
renovation project exceeding $35,000 for a government-owned general or
flag officer quarters. However, there is no such requirement to review
renovations projects involving privatized general and flag officer
quarters. Recognizing the need for direction, the Navy, Marine Corps,
and Air Force are developing draft guidance and procedures that will
provide more visibility over the spending to operate and maintain
privatized general and flag officer housing. For example, the Air Force
draft guidance applies the same project approvals for renovations to
privatized general officer homes as currently exist for government-
owned homes, which is all renovation projects over $35,000. [Footnote
27] Likewise, the Navy and the Marine Corps have developed draft
guidance for internally reviewing annual operating budgets for
privatized housing that would require approval by Navy or Marine Corps
headquarters officials for costs that exceed $50,000 in one year for
any house. The Army has no plans to issue additional guidance regarding
costs to maintain and repair privatized housing. According to Army
officials, annual operating budgets for privatized housing are reviewed
by headquarters officials, which they believe will provide adequate
visibility over renovations to privatized housing. We agree that
reviewing annual budgets provides visibility over renovation costs but
question its ability to provide oversight where renovation costs for
selected residences are higher than the norm.
Conclusions:
The services' procedures to develop cost estimates for renovation to
general and flag officer quarters generally produce budget estimates
that are consistent with the projects' actual costs. However, Marine
Corps officials approved costly customer-requested changes based on
personal preferences notwithstanding guidance in handbooks
discouraging the approval of such requests. The Marine Corps failed to
follow established guidance and procedures and properly accept and
account for gifts, especially nonmonetary gifts, used to help renovate
and furnish the Home of the Commandants. Thus, they have no assurance
that the nonmonetary gifts remain in their possession. Finally, DOD and
the military services could lose visibility over renovations to general
and flag office quarters that are privatized. While some services are
taking some steps to ensure that renovation projects over certain
dollar thresholds are reviewed internally, there is no consistent DOD-
wide guidance.
Recommendations:
We recommend that the Secretary of Defense take the following three
actions: Direct the Secretary of the Navy to (1) reemphasize the
importance of limiting customer-driven changes to renovation projects
for general and flag officer housing and (2) properly account for all
gifts accepted and used to help renovate the Home of Commandants of the
Marine Corps. Furthermore, we are recommending the Secretary of Defense
direct the Under Secretary for Acquisition, Technology, and Logistics
to ensure the standardization and periodic review of the expenditure
levels for individual privatized units on a programmatic basis, to
include general and flag officer quarters, with periodic reports to the
office of the Secretary of Defense.
Agency Comments and Our Evaluation:
In commenting on a draft of this report, DOD concurred with our first
and second recommendations and did not concur with the third. With
regard to the first two recommendations, DOD indicated that the Navy
has agreed to reemphasize the importance of limiting customer-driven
changes to renovation projects for general and flag officer housing,
properly accounting for all gifts accepted and used to help renovate
the Home of Commandants of the Marine Corps, and incorporating
accountability measures into revisions of Secretary of the Navy
guidance governing the general and flag officer quarters program.
However, DOD did not provide a time frame for accomplishing these
actions.
Our draft report also contained a third recommendation to the Secretary
of Defense. He was asked to direct the Under Secretary for Acquisition,
Technology, and Logistics to develop departmentwide guidance that
provides similar project review and approval for renovation projects to
privatized general and flag officer housing as required for government-
owned quarters over certain dollar thresholds. However, DOD did not
agree with that recommendation expressing the view that extending the
same government oversight to privatized housing is contrary to the
fundamental tenets of privatization. DOD added that currently projects
are monitored to protect government interests, including expenditure
levels on individual units, but that the monitoring is not linked to a
specific type of housing such as general and flag officer quarters. DOD
indicated that although it intends to continue to rely on private
sector cost-control mechanisms, it would review standardization of
individual unit expenditure levels on a programmatic basis. Such
action, to the extent it incorporates general and flag officer housing,
meets the intent of our recommendation. Accordingly, we refined our
recommendation to better reflect this intent and stay within the
parameters of the privatization program.
Additionally, the Principal Assistant Deputy Under Secretary commented
that our report did not capture the Air Force's response to issues the
DOD Inspector General raised concerning the Air Force's plans to
renovate or replace general officer housing. As we note in appendix II,
the Air Force disagreed with the Inspector General's findings. This
disagreement appears largely based on differences between the Air Force
and the Inspector General concerning individual renovation projects
versus the Air Force's broader strategic plans for addressing general
officer quarters collectively and upgrading the housing to today's
standards, rather than undertaking only immediate repair needs.
Other technical comments are incorporated in the report where
appropriate. The Principal Assistant Deputy Under Secretary's comments
are included in appendix III of this report.
We are sending copies of this report to interested congressional
committees; the Secretaries of Defense, Army, Navy and Air Force; the
Commandant of the Marine Corps; and the Director, Office of Management
and Budget. We will also make copies available to others upon request.
In addition, the report will be available at no charge on GAO's Web
site at http://www.gao.gov.
Please contact me on (202) 512-8412 or Michael Kennedy, Assistant
Director, on (202) 512-8333 if you or your staff have any questions.
Major contributors to this report were Claudia Dickey, Jane Hunt,
Richard Meeks, and Michael Zola.
Signed by:
Barry W. Holman, Director
Defense Capabilities and Management:
[End of section]
Appendix I: Scope and Methodology:
We performed our work at the headquarters offices responsible for
general and flag officer housing at the Army, the Navy, the Marine
Corps, and the Air Force. At each location, we reviewed applicable
policies, procedures, and related documents and interviewed responsible
officials for the family-housing and general and flag officer quarters
program. We also visited and met with officials from several military
installations, including Fort McPherson, Georgia, and Fort McNair, the
Washington Navy Yard, the Marine Corps' Barracks at Eighth and I, and
Bolling Air Force Base, all of which are located in Washington, D.C. At
each of these locations we toured general and flag officer quarters
that were recently renovated, were undergoing renovation, or had not
been renovated. We also discussed our review with officials of Housing
and Competitive Sourcing, Office of the Secretary of Defense, and with
DOD's Office of the Inspector General.
To determine how the actual costs of renovation projects for general
and flag officer quarters compared to the service budget estimates
provided to Congress, we reviewed all renovation projects of more than
$100,000 for fiscal years 1999 through 2003. We obtained the budget
estimate for each of these projects from the service budget submissions
provided to Congress for the fiscal year. We obtained the reported
actual obligations related to the cost for each renovation project from
the military services. We compared this information to determine which
projects were completed for less than or more than budget. We did not
validate service budget and reported obligation data, but we did
discuss data reliability with responsible service officials and
obtained information from them on steps they have taken to ensure the
data's reliability. Based on this, we believe that the data we used
were sufficiently reliable for the purposes of this report.
To identify the primary reasons for any cost increases and the
services' procedures to control cost increases, we held discussions
with responsible service family-housing, engineering, comptroller,
general counsel, and command officials about those renovation projects
that exceeded their service budgets. We also reviewed and analyzed
documentation that supported the reasons for cost increases.
To determine the services' accountability over gifts provided to help
renovate general and flag officer quarters, we reviewed applicable laws
and interviewed cognizant officials to identify those general and flag
officer quarters with major renovations of more than $100,000 during
fiscal years 1999 through 2003 that received gifts used to help with
renovations. We identified one Army, one Navy, and one Marine Corps
quarters that received gifts either monetary or nonmonetary during the
scope of our review. The Army ($50,000 nonmonetary items, such as
furniture and drapery material) and Navy ($51,952 nonmonetary items,
such as rugs, and $7,830 cash) gifts were for furnishings for the
quarters. The Marine Corps used gifts--monetary and nonmonetary--to
help with the renovation of a general officer quarters. To determine
how the services accounted for monetary and nonmonetary gifts, we
reviewed DOD and service gift fund and gift acceptance regulations and
guidance; interviewed cognizant service officials; and reviewed
administrative, contract, funding and accounting documents. Since only
the Marine Corps accepted gifts intended to help with the renovation of
a general officer quarters, we focused additional attention on
determining how the Marine Corps accounted for monetary and nonmonetary
gifts provided to help renovate the Home of the Commandants. We
compared the Marine Corps listing of gifts received with a listing of
gifts provided by the Friends of the Home of the Commandants--the
primary contributor of gifts for the Home of the Commandants during
fiscal years 1999 through 2003. We also asked to review property
records that showed the Marine Corps' receipt of these gifts. The
Marine Corps was unable to provide receipts or produce property records
for the nonmonetary gifts. Further, we compared the Navy Comptroller's
reported balance for the Navy General Gift Fund for the Marine Corps
Barracks at Eighth and I, with the Marine Corps Barracks-reported
expenditures and supporting documentation. The Marine Corps could not
provide documentation to support all Navy General Gift fund
expenditures as reported by the Navy Comptroller. As a result, we were
unable to verify the total amount of gifts, monetary and nonmonetary,
received by the Marine Corps to help renovate the Home of the
Commandants. However, where we could, we reconstructed the flow of
gifts to the Marine Corps and reconciled individual gifts that we could
identify.
To assess the extent to which DOD and the services have issued guidance
to provide visibility and control over costs associated with renovation
projects for privatized general and flag officer quarters, we
interviewed Office of the Secretary of Defense and service officials
responsible for family housing and privatization. Where available, we
also obtained and reviewed service draft guidance regarding review of
renovations to privatized housing.
[End of section]
Appendix II: Concerns about Air Force's General Officer Quarters
Renovation and Replacement Plans:
While we did not identify any Air Force renovation projects that
exceeded their budgets, we did learn of other concerns about costs
associated with Air Force plans to replace and repair general officer
quarters. The DOD Inspector General recently identified issues
concerning the Air Force's plans to renovate or replace general officer
quarters.[Footnote 28] The Inspector General questioned $21.3 million
of the $73.7 million in Air Force General Officer Quarters Master Plan
requirements because its analysis showed the assessment methodology did
not always reflect existing conditions.
The Air Force issued a master plan in August 2002 to identify whole
house investment requirements for their general officer quarters. Part
of the GOQ master plan included a prioritized operations and
maintenance plan for each GOQ to manage and minimize maintenance and
repair expenditures that may become necessary prior to the execution of
a whole-house improvement project. For all 267 general officer
quarters, the Air Force developed an individual facility profile. The
profile consists of a description of the home, a detailed analysis of
existing conditions and functional deficiencies, recommendations for
maintenance and repair, house plan suitability recommendations to
correct functional deficiencies and bring the unit up to Air Force
standards, and the estimated cost to perform a whole-house improvement
project. Incorporated within the profile is a condition assessment
score[Footnote 29] for each of the homes major systems and subsystems
and house plan suitability scores to arrive at an overall composite
score for each general officer quarters. The assessments indicated that
219 or 82 percent of their 267 homes required whole house improvement
projects to resolve deficiencies. Based on this information, the Air
Force developed a plan to renovate 203 homes at a cost of about $52.3
million and replace 64 others at a cost of about $21.4 million, an
overall plan cost of about $73.7 million.[Footnote 30]
In a January 23, 2004, letter to the Air Force Deputy Chief of Staff
for Installations and Logistics, the DOD Inspector General reported
that the Air Force's estimate for renovating and replacing general
officer quarters may be overstated by $21.3 million because the profile
recommendations were not consistent with Air Force assessments of
existing conditions. According to the Inspector General, some of the
homes' systems such as the roof, structural components, or the house
plan met standards or needed only minor maintenance and repair, but the
Air Force recommended them for replacement, relocation, or
reconfiguration. For example, one house at Bolling Air Force Base,
Washington, D.C. had a system[Footnote 31] with a condition rating of
"good," "indicating a fully serviceable condition which met standards,"
but the Air Force master plan included a recommendation to reconfigure
rooms and interior walls in the home at a cost of $190,000. The
Inspector General concluded that the Air Force's condition assessment
matrix tool design might have contributed to the inconsistencies
between existing conditions and maintenance and repair recommendations.
The Inspector General also reported that the inconsistency of Air Force
recommendations with existing condition assessments demonstrated that
the Air Force did not always consider where the home was in its life
cycle.
Additionally, DOD Inspector General officials told us separately of
their concerns about Air Force plans to replace two homes at Bolling
Air Force Base, which under original Air Force plans were to be
renovated. The original fiscal year 2002 project recommended renovating
the homes for an estimated $345,000 per home. However, because the Air
Force designated these two homes as Special Command Position
quarters,[Footnote 32] and these homes have additional space
requirements for an enlisted aide and for added entertainment
requirements, the Air Force now estimates the renovation will cost an
estimated $555,000 per home--an increase of $210,000--that is more than
70 percent of the estimated cost to replace each house.[Footnote 33] As
a result, the Air Force recommended that each house be replaced rather
than renovated as originally planned. Air Force officials stated that
the $210,000 increase in estimated renovation costs was due to
escalation from the 2002 project to the present as well as about
$110,000 for costs associated with structural work to modernize and
expand the kitchen, provide an enlisted aide's office area, and correct
functional deficiencies in the dining room to provide a more usable
space; about $30,000 for a two car garage; and the remaining
approximately $70,000 to address various unforeseen environmental
remediation, force protection, and basement waterproofing
requirements, as well as other electrical, plumbing, floor repair,
cabinets, countertops and appliances not included in the original
estimate. Since the homes are eligible for the National Historic
Register, the Air Force must seek approval for their plans with the
District of Columbia Historic Preservation Office. According to the Air
Force, it initiated contact with the office in October 2002, and is
currently proceeding with the regulatory process to obtain approval for
their plans. The District of Columbia Historic Preservation Office has
not yet approved the Air Force's plans.
The Air Force disagreed with the Inspector General findings.
[End of section]
Appendix III: Comments from the Department of Defense:
ACQUISITION, TECHNOLOGY AND LOGISTICS:
OFFICE OF THE UNDER SECRETARY OF DEFENSE:
3000 DEFENSE PENTAGON
WASHINGTON, DC 20301-3000:
APR 27 2004:
Mr. Barry W. Holman:
Director, Defense Capabilities and Management
United States General Accounting Office
Washington, DC 20548:
Thank you for the opportunity to review the draft GAO draft report,
"DEFENSE INFRASTRUCTURE: Issues Related to the Renovation of General
and Flag Officer Quarters, dated March 30, 2004, (GAO Code 350436/ GAO-
04-555).":
The Department has reviewed the draft report and concurs with
recommendation 1 that the Department of the Navy reemphasize the
importance of limiting customer-driven changes to renovations projects
for general and flag officer (CFO) housing and to properly account for
all gifts accepted and used to help renovate the official quarters of
Commandants of the Marine Corps.
The Department non-concurs with recommendation 2 that Department-wide
guidance be developed that provide similar project review and approval
for renovation projects to privatized GFO housing as required for
government-owned quarters over certain dollar thresholds.
Privatized housing is not owned by the government and extending the
same government oversight to privatized housing units as the Department
would apply to traditional government-owned housing is contrary to the
fundamental tenets of privatization. Housing privatization projects are
monitored to protect government interests, including expenditure levels
on individual units, but this is not limited to any specific type of
housing. The real control on spending is the project cash flows
themselves as monitored by the private sector development entity who
owns the housing. The Department intends to continue to rely on private
sector mechanisms to control costs, but will review standardization of
individual unit expenditure levels on a programmatic basis.
Although the GAO draft report did not identify any Air Force
renovations projects that exceed their budget, the report did include
concerns raised (Appendix II) by the DoD Inspector General (IG) about
the Air Force's plans to renovate or replace GFO housing. However, the
draft report did not capture the Air Force's comments to the IC's
concerns. As stated in a previous DoD response to the IC's concerns, we
believe that the Air Force's condition assessment system is an
excellent model to assist all Services in improving oversight of their
GFO housing programs.
Enclosed are the Department's specific responses to the
recommendations, technical comments, and the Air Force's comments
regarding Appendix II of the draft GAO report. Request that you include
our enclosed comments in your final report.
Sincerely,
Signed by:
Philip W. Grone:
Principal Assistant Deputy Under Secretary of Defense
(Installations and Environment):
Enclosures As stated:
GAO DRAFT REPORT - DATED MARCH 30, 2004 GAO CODE 350436/GAO-04-555:
"DEFENSE INFRASTRUCTURE: Issues Related to the Renovation of General
and Flag Officer Quarters":
DEPARTMENT OF DEFENSE COMMENTS TO THE RECOMMENDATIONS:
RECOMMENDATION 1: The GAO recommends that the Secretary of Defense
direct the Secretary of the Navy to reemphasize the importance of
limiting customer-driven changes to the renovation projects for general
and flag officers housing and to properly account for all gifts
accepted and used to help renovate the official quarters of Commandants
of the Marine Corps. (p. 17/GAO Draft Report):
DOD RESPONSE: The Department concurs with recommendation 1. The Navy
has agreed to incorporate accountability measures into the revision of
the Secretary of the Navy guidance which governs the General and Flag
Officer Quarters program.
RECOMMENDATION 2: The GAO recommends that the Secretary of Defense
direct the Under Secretary of Defense for Acquisition, Technology, and
Logistics to develop department-wide guidance that provides similar
project review and approval for renovation projects to privatize
general and flag officer housing as required for government-owned
quarters over certain dollar thresholds. (p. 17/GAO Draft Report):
DOD RESPONSE: The Department non-concurs with recommendation 2.
Privatized housing is not owned by the government and extending the
same government oversight as applied to government-owned housing to
privatized GOQ housing contradicts the rules of privatization. Projects
are monitored to protect government interests, including expenditure
levels on individual units, but this is not limited to any specific
type of housing. The real control on spending is the project cash flows
themselves as monitored by the private sector development entity who
owns the housing. The Department intends to continue to rely on private
sector mechanisms to control costs, but will review standardization of
individual unit expenditure levels on a programmatic basis.
TECHNICAL COMMENTS
Note: Page numbers in the draft report may differ from those in this
report.
FOOTNOTES
[1] General and flag officers include the Army, Air Force, and Marine
Corps ranks of general, lieutenant general, major general, and
brigadier general and the Navy ranks of admiral, vice admiral, and rear
admiral (upper half and lower half).
[2] Military family housing funds are appropriated through the Military
Construction (MILCON) Appropriation Acts. Other funds are provided
through gifts of cash, materials and services.
[3] For the purpose of this report, we used the obligations reported
for the specific project to report actual costs.
[4] For the purposes of this report, we used obligation estimates
included in budget justifications submitted to Congress as project
budget estimates.
[5] The "customer" is usually the quarter's occupant, but sometimes is
the installation's housing or command officials.
[6] Four of the five projects were located at the Marine Corps Barracks
located at Eighth and I Streets, Washington, D.C., and one at Kaneohe,
Hawaii.
[7] The Friends of the Home of the Commandants (FOTHC) is a nonprofit
organization under section 501(c) (3) of the Internal Revenue Code,
established in 1999 under the auspices of the Community Foundation of
the National Capital Region to receive tax-deductible contributions for
the express purpose of generating privately donated funds to help
renovate the Home of the Commandants.
[8] Nonmonetary material gifts included materials such as kitchen
cabinets, furniture, wall coverings, draperies, and furniture
upholstery. Services included interior design services and construction
labor.
[9] The National Historic Preservation Act (codified at 16 U.S.C. 470
et seq.) outlines the policy for designating a residence "historic."
[10] Average annual maintenance and repair costs shown for the four
examples are the average of reported maintenance and repair costs less
major renovation costs, for fiscal years 1999 through 2003.
[11] The Marine Corps believes that $87,000 for a one-time emergency
repair to termite-damaged basement stairs and floors in fiscal year
1999 should not be included when calculating the average annual
maintenance cost even though it was reported as a cost in fiscal year
1999, and that the true average annual cost for fiscal years 1999
through 2003 should be $14,239
[12] DOD Financial Management Regulation 7000.14R, Volume 6A, Chapter
9, Accounting and Reporting of Operations and Maintenance of the Family
Housing Program, (Feb. 1996). Also, see, for example, DOD Manual
4165.63-M, DOD Housing Management, (Sept. 30, 1993); DOD Directive
4710.1 Archeological and Historic Resource Management, (June 21, 1984);
Army Regulation 210-50, Housing Management, (Feb. 26, 1999); Secretary
of the Navy Instruction SECNAVINST 11101-73A, Approval Authority for
Maintenance and Repair of Flag and General Officers' Quarter, (Oct. 27,
1989); and Air Force Instruction AFI 32-6003, General Officer Quarters,
(Sept. 10, 2003).
[13] The Military Construction Appropriation Act, 2000, Pub. L. No.
106-52, Sec. 128 (1999), provided that "not more than $25,000 per unit
may be spent annually for the maintenance and repair of any general or
flag officer quarters without 30 days advance prior notification of the
appropriate committees of Congress." This reporting threshold was
increased to $35,000 in the Military Construction Appropriations Act,
2003, Pub. L. No. 107-249, Sec. 127 (2002).
[14] Maintenance and repair expenses include recurring work (service
calls, preventive maintenance, and routine work between occupancies) as
well as major repairs.
[15] Pub. L. No. 106-52, Sec. 128 (1999).
[16] Military Construction Appropriations Act, 2001, Pub. L. No. 106-
246, Sec. 135 (2000).
[17] DOD Instruction 5000.64, Defense Property Accountability, (Aug.
13, 2002).
[18] See the National Defense Authorization Act for Fiscal Year 1996
(Pub. L. No. 104-106, Sec. 2801 (1996)).
[19] The Marine Corps Barracks, at Eighth and I streets, Washington,
D.C., established in 1801, contains five historic quarters, four
general officer quarters (Quarters 1, 2, 4, and 6) and one senior
officer quarters (Quarters 3). Quarters 6 has been the Home of the
Commandants since 1806. Renovations at Quarters 1 included three
projects, two over budget and one the same as budget; Quarters 2
included two projects, both over budget; Quarters 4 included two
projects, one over and one under budget; and Quarters 6 included two
projects, one the same as and one over budget.
[20] Conferees approved a $500,000 project for exterior repairs and
roof replacement in Conference Report (H.R. Conf. Rep. No. 106-710, at
93 (2000)) accompanying the fiscal year 2001 military construction
appropriation bill, H.R. 4424 (which became Pub. L. No. 106-246
(2000)). On June 25, 2001, the Deputy Assistant Secretary of the Navy
(Installations and Environment) notified Congress of the Marine Corps'
intent to change the scope of the previously authorized project to
include kitchen renovations and other interior renovations in lieu of
the exterior improvements.
[21] Destructive testing is accomplished by making openings/
perforations in walls, floors, or other structural apparatus in order
to inspect fully for problems, such as termites, sagging support beams,
corroded pipes, or frayed wiring that cannot be detected unless the
openings/perforations are accomplished.
[22] SECNAVINST 4001.2G CH-2, Acceptance of Gifts, (Dec. 7, 1999).
[23] These gifts were also used for interior design services.
[24] When we started our review, the Marine Corps could account for
only about $51,000 in expenditures paid for with Navy General Gift Fund
monies. After some delay, the Marine Corps was able to produce receipts
for expenditures totaling $90,250. The Marine Corps also noted a
discrepancy between the Navy General Gift Fund balance and the balance
reported by the Defense Finance and Accounting Service. The Marine
Corps and Defense Finance and Accounting Service are working to resolve
the discrepancy.
[25] According to the Navy, the DOD Inspector General identified this
discrepancy during a 1999 audit of general and flag officer quarters.
However, according to the Navy, the details concerning the $59,780 in
nonmonetary gifts (reported during fiscal year 1999) were not included
in the final report.
[26] The Secretary of the Army accepted another gift offer on Feb. 19,
2003, which included a donation of real property and an offer to
construct three sets of general officer type quarters (with an
estimated value of $1,000,000) for Redstone Arsenal, Ala., from the
Federal Building Authority and the city of Huntsville, Ala.
[27] Air Force Instruction AFI 32-6007, Privatized Family Housing
(draft).
[28] Memorandum for the Air Force Deputy Chief of Staff, Installations
and Logistics; Inspector General, Department of Defense, Arlington,
Va., Jan. 23, 2004.
[29] Facility systems and subsystems are rated on a 1-to-5 scale (1
being worst, 5 being best) based on appearance, condition,
functionality, expansion capacity, life expectancy, energy, and life/
safety compliance.
[30] The Air Force's about $74 million plan also called for the
renovation of 6 ancillary buildings and the construction of a new
general officers quarters at Peterson AFB, Colo.
[31] The "system" in question was "house plan suitability," which
includes the size, location and layout of rooms as well as the
expansion capacity of the home.
[32] A "Special Command Position" is generally a general or admiral
whose position carries public entertainment responsibilities that
require the incumbent to represent the interest of the United States in
official and social activities involving foreign or domestic
dignitaries.
[33] According to the Air Force General Officer Quarters Master Plan,
if the cost of whole house renovation exceeds 70 percent of the
replacement cost for the home, replacement is recommended unless the
home is listed or eligible to be listed on the National Register of
Historic Places.
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