Military Housing
Further Improvement Needed in Requirements Determinations and Program Review
Gao ID: GAO-04-556 May 19, 2004
The Department of Defense (DOD) plans to spend about $9.8 billion in fiscal year 2004 to provide housing for about 711,000 families of activeduty military personnel in the United States. DOD's policy for some time has been to rely on housing in the local communities and provide military-owned or privatized military housing when the communities cannot satisfy requirements. Historically, DOD has viewed private sector housing as more cost-effective. In January 2003, DOD approved a revised housing requirements determination process designed to provide a solid basis for justifying on-base family housing needs. GAO looked at whether (1) reliance on community housing remains costeffective, (2) the revised process has resulted in consistent and reliable needs assessments, and (3) DOD's top-level review of military housing construction proposals could be improved.
DOD's policy of relying primarily on local community housing to meet military family housing needs has been and continues to be cost-effective for the federal government. GAO's analysis of DOD's fiscal year 2004 estimated housing costs showed that the annual costs to provide housing for a typical military family were about $13,600 for local community housing, $16,700 for privatized military housing, and $19,000 for military-owned housing. Although DOD's revised housing requirements determination process represents a significant step in the right direction, the process has not resulted in consistent and reliable estimates of military installation housing needs and does not require the services to maximize reliance on local community housing--the least costly housing option. Because DOD has not provided the services with timely detailed guidance addressing the particulars of performing housing requirements assessments, the services often used inconsistent methodologies, questionable assumptions, and outdated information in performing these assessments. Further, although the use of military-owned or privatized family housing is clearly justified when local community housing is not acceptable or available, or to meet military mission requirements, the process provides the services with several exceptions to community housing use that may allow the services to build or retain more military housing than necessary. It is also unclear whether servicemembers' housing preferences have changed in view of recent changes, such as increases in housing allowances and the increase in the number and length of deployments. DOD could improve the top-level review of proposed military housing construction projects. DOD has different top-level review and approval processes for service proposals for military housing construction and housing privatization projects with the process for privatization proposals including additional steps, for example, a top-level review of the adequacy of the associated housing requirements analyses
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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GAO-04-556, Military Housing: Further Improvement Needed in Requirements Determinations and Program Review
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Report to the Secretary of Defense:
United States General Accounting Office:
GAO:
May 2004:
Military Housing:
Further Improvements Needed in Requirements Determinations and Program
Review:
GAO-04-556:
GAO Highlights:
Highlights of GAO-04-556, a report to the Secretary of Defense
Why GAO Did This Study:
The Department of Defense (DOD) plans to spend about $9.8 billion in
fiscal year 2004 to provide housing for about 711,000 families of
active-duty military personnel in the United States. DOD‘s policy for
some time has been to rely on housing in the local communities and
provide military-owned or privatized military housing when the
communities cannot satisfy requirements. Historically, DOD has viewed
private sector housing as more cost-effective. In January 2003, DOD
approved a revised housing requirements determination process designed
to provide a solid basis for justifying on-base family housing needs.
GAO looked at whether (1) reliance on community housing remains cost-
effective, (2) the revised process has resulted in consistent and
reliable needs assessments, and (3) DOD‘s top-level review of military
housing construction proposals could be improved.
What GAO Found:
DOD‘s policy of relying primarily on local community housing to meet
military family housing needs has been and continues to be cost-
effective for the federal government. GAO‘s analysis of DOD‘s fiscal
year 2004 estimated housing costs showed that the annual costs to
provide housing for a typical military family were about $13,600 for
local community housing, $16,700 for privatized military housing, and
$19,000 for military-owned housing.
Although DOD‘s revised housing requirements determination process
represents a significant step in the right direction, the process has
not resulted in consistent and reliable estimates of military
installation housing needs and does not require the services to
maximize reliance on local community housing”the least costly housing
option. Because DOD has not provided the services with timely detailed
guidance addressing the particulars of performing housing requirements
assessments, the services often used inconsistent methodologies,
questionable assumptions, and outdated information in performing these
assessments. Further, although the use of military-owned or privatized
family housing is clearly justified when local community housing is not
acceptable or available, or to meet military mission requirements, the
process provides the services with several exceptions to community
housing use that may allow the services to build or retain more
military housing than necessary. It is also unclear whether
servicemembers‘ housing preferences have changed in view of recent
changes, such as increases in housing allowances and the increase in
the number and length of deployments.
DOD could improve the top-level review of proposed military housing
construction projects. DOD has different top-level review and approval
processes for service proposals for military housing construction and
housing privatization projects with the process for privatization
proposals including additional steps, for example, a top-level review
of the adequacy of the associated housing requirements analyses.
Privatized Military Family Housing at Fort Hood, Texas, and Elmendorf
Air Force Base, Alaska:
[See PDF for image]
[End of figure]
What GAO Recommends:
GAO recommends that the Secretary of Defense (1) expedite efforts to
provide more detailed guidance on the requirements determination
process, (2) review the rationale for allowed exceptions to using
community housing, (3) update information on servicemember housing
preferences, and (4) apply a more consistent top-level review for
housing construction and privatization proposals. DOD generally agreed
with the recommendations.
www.gao.gov/cgi-bin/getrpt?GAO-04-556.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Barry W. Holman at (202)
512-5581 or holmanb@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Community Housing Remains the Least Costly Option for Meeting Military
Family Needs:
Family Housing Requirements Assessments Are Inconsistent and
Questionable:
DOD's Revised Housing Requirements Determination Process Does Not
Maximize Reliance on Community Housing:
Opportunities Exist to Improve the Top-Level Review of Proposed Housing
Construction Projects:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II Selected Information from Installation Housing Requirements
Analyses:
Appendix III: Comments from the Department of Defense:
Tables:
Table 1: Prior Estimates of Annual Government Costs for Military-Owned
and Community Housing Options:
Table 2: Estimated Annual Government Costs for Housing Options in 2004:
Table 3: Selected Information from Installation Housing Requirements
Determination Analyses:
Abbreviation:
DOD: Department of Defense:
United States General Accounting Office:
Washington, DC 20548:
May 19, 2004:
The Honorable Donald H. Rumsfeld:
Secretary of Defense:
Dear Mr. Secretary:
The Department of Defense (DOD) plans to spend about $9.8 billion in
fiscal year 2004 under various programs to provide housing for about
711,000 families of active-duty military personnel in the United
States. DOD's policy is to rely on private sector housing in the local
communities near military installations as the primary source of family
housing. About two-thirds of all military families in the United States
live in local community housing and receive a cash housing allowance to
help defray the cost of renting or purchasing a home. Until 2001, the
housing allowance covered an average of 81 percent of the typical
housing costs, and servicemembers paid the rest out of pocket. An
initiative started in 2001 has significantly increased housing
allowances and is slated to cover 100 percent of typical housing costs
by 2005. When local community housing is unavailable, unsuitable, or
too expensive, DOD's policy is to provide families with military-owned
or privatized housing.[Footnote 1] Privatized housing, authorized by
legislation in 1996, is housing normally located on military
installations that is owned, operated, and maintained by private
developers.[Footnote 2] Families in privatized housing use their
housing allowance to pay rent and typical utility costs while families
in military housing receive no housing allowance but pay nothing for
housing or utilities. In privatizing housing, DOD expects to leverage
private sector funding to achieve greater gains in housing improvements
than could otherwise be achieved through use of military construction
appropriations. This report is being addressed to you to bring to your
attention opportunities to strengthen program management.
Prior reports from us and others have noted that DOD did not have a
consistent and reliable process to determine family housing
requirements.[Footnote 3] These reports showed that significant
uncertainty existed in both the number and location of housing units
required in the future because DOD often underestimated the ability of
local communities to meet housing needs and thus overestimated the need
for military-owned or privatized housing. In January 2003, DOD approved
a revised housing requirements determination process designed to
provide a solid basis for justifying the number of family housing units
actually needed on each installation, whether financed through use of
military construction funding or through privatization. In implementing
the revised process, DOD reaffirmed its policy of primary reliance on
housing in local communities and stated that the construction,
operation, and maintenance of military-owned housing would be
considered only when local communities could not provide military
families with housing.
In view of DOD's housing policies, the potential impacts from increased
housing allowances, and the importance of having a consistent and
reliable housing requirements determination process to avoid
unnecessary housing investments, this report, undertaken pursuant to
our basic legislative authorities, addresses whether (1) DOD's policy
of primary reliance on local community housing remains cost-effective,
(2) implementation of DOD's revised housing requirements determination
process has resulted in consistent and reliable needs assessments,
(3) DOD's revised housing requirements determination process maximizes
reliance on local community housing, and (4) opportunities exist for
DOD to improve its review of proposed military housing construction
projects.
To address these objectives, we used DOD's budget and program
information to determine and compare the government's costs to provide
housing for a typical military family using each of the three housing
options--local community housing with payment of a housing allowance;
military owned, operated, and maintained housing; and privatized
housing that is owned, operated, and maintained by private developers
under the military housing privatization program. We primarily used
cost data contained in DOD's fiscal year 2004 budget justification
material submitted to the Congress in February 2003 and did not test
the reliability of this data because it represented DOD's official
information used to support the President's budget. We reviewed the
housing requirements determination analyses for 12 installations to
evaluate the basis for the estimates and assumptions used and assess
consistency and compliance with DOD's guidance but did not otherwise
attempt to independently determine housing requirements at the 12
installations. We reviewed and discussed the details of the revised
housing requirements determination process with DOD and service
officials and specifically examined the basis for provisions in the
process that allow exceptions to using local community housing.
Finally, we documented differences in DOD's review and approval
processes for service proposals for military housing construction and
privatization projects and discussed with DOD officials the reasons for
the differences and potential advantages from making the processes more
consistent. We conducted our work from May 2003 through March 2004 in
accordance with generally accepted government auditing standards.
A more detailed description of our scope and methodology is included in
appendix I.
Results in Brief:
DOD's policy of relying primarily on local community housing to meet
military family housing needs has been and continues to be cost-
effective for the federal government. Previous studies by the
Congressional Budget Office[Footnote 4] and DOD showed that compared to
the cost of providing military-owned housing, the government's cost was
significantly less when military families were paid housing allowances
and lived in local community housing. Since these studies were
performed in the mid-1990s, several factors have affected military
housing costs, such as the initiative to increase the amount of the
housing allowance paid to individual servicemembers to eliminate
average out-of-pocket costs and the implementation of a new military
family housing option--privatization of military-owned housing.
Nevertheless, our analysis of fiscal year 2004 estimated housing costs
showed that reliance on local community housing continues to be the
government's least costly option for housing military families.
Specifically, our analysis showed that the government's annual costs to
provide housing for a typical military family were about $13,600 for
local community housing, $16,700 for privatized military housing, and
$19,000 for military-owned housing.[Footnote 5] The cost difference
between local community housing and military privatized housing was
primarily caused by additional federal impact aid paid to local school
districts for children of families living in on-base privatized housing
that is not subject to local property taxes.[Footnote 6] The cost
difference between privatized and military-owned housing, according to
DOD officials, primarily reflected the estimated difference in the
costs of a housing unit constructed, operated, and maintained by the
military and a unit constructed, operated, and maintained by private
developers. Other factors possibly affecting cost differences include
differences in construction specifications and the size of privatized,
military-owned, and community housing units rented by military
families.
Although DOD's revised housing requirements determination process
represents a significant step in the right direction, the process has
not resulted in consistent and reliable assessments of military
installation housing needs and may result in over reliance on more
costly military-owned family housing. Determining an installation's
housing needs requires a complex analysis involving many subjective
factors and assumptions, and DOD did not provide the services with
timely detailed guidance addressing these matters or the level of
oversight needed as the services began to use the process. Thus, it is
not surprising that the services adopted different methods for
determining installation housing needs as they began implementing the
process. For example, the services independently decided how to address
many subjective factors, estimates, assumptions, and methodologies,
including methods and assumptions (1) to determine an installation's
housing requirement considering base population, servicemember rank,
family size, and associated bedroom needs; (2) to project changes in
the supply and availability of local community housing; (3) to estimate
how many military families are home owners and therefore will not need
community rental housing; (4) to identify unsuitable community housing
units that are excluded from consideration for military family use; and
(5) to estimate the competition between civilian and military families
in securing available community housing. Collectively, differences in
these factors result in inconsistent installation housing requirements
analyses and could result in generating higher or lower on-base housing
needs and costs than warranted. Without consistent and reliable housing
requirements assessments, DOD cannot know with assurance how many
housing units it needs, where it needs them, whether its housing
investment decisions are justified, and whether its overall housing
costs are minimized.
In addition, DOD's revised housing requirements determination process
provides the services several exceptions to the policy of maximizing
reliance on local community housing near military installations that
could result in further reliance on on-base housing than necessary.
Although one exception--military mission requirements--appears clearly
justified, the other exceptions do not and could result in the services
identifying more on-base family housing requirements than actually
needed. For example, regardless of the availability of local housing,
the revised process allows installations to maintain an on-base
military housing community that can accommodate up to 10 percent of the
projected number of families at the installations. Applying this
exception, the 12 installation analyses we reviewed determined that
4,576 military family housing units were required regardless of the
ability of local communities to meet these housing needs.[Footnote 7]
The process also permits installations to provide additional on-base
military housing in some cases for servicemembers with lower incomes,
even though housing allowances for these servicemembers are expected to
fully cover the actual cost of local housing by 2005. Application of
the permitted exceptions could decrease reliance on community housing
and increase family housing costs. Also, the services had no analytical
support showing that there would be negative impacts if military
families were housed in suitable, affordable housing in the local
communities rather than on base where some preferred to live. DOD's
1999 survey of active duty personnel showed that 72 percent of
servicemembers preferred local community housing if costs were equal
and that there was no clear link between housing and retention.
However, we cannot be sure to what extent these survey results may
change given other recent changes based on the increase in housing
allowances and the increase in the number and length of troop
deployments.
Opportunities exist for DOD to improve the top-level review of proposed
military housing construction projects to provide additional assurances
that the projects are justified and optimally integrated with the
privatization program. DOD has different review and approval processes
for service proposals for housing construction and housing
privatization projects. The process for reviewing privatization
proposals includes additional steps, such as a briefing from service
officials describing each project and its justification and a top-level
review of the adequacy of the associated housing requirements analysis.
These extra steps provide additional assurances that proposed projects
are adequately justified before approval. Also, DOD's top-level review
of military housing construction proposals normally does not include an
analysis of whether the planned improvements could be more economically
achieved through housing privatization. Our review found that the Army,
the Air Force, and the Marine Corps have recently used, or plan to use,
military construction projects to build replacement military family
housing at installations slated for privatization in the near future.
The Army, for example, has an approved $41 million fiscal year 2004
project at Fort Knox, Kentucky, to replace inadequate housing with 178
new houses. The Army plans to convey the new housing units to a
privatization developer when all Fort Knox family housing is privatized
in 2006. Although military housing construction projects may be
appropriate at installations scheduled for privatization, a top-level
review of such proposals could provide additional assurances that the
alternative used to achieve needed housing improvements is the more
advantageous option for the government--a feature not always present in
the current process.
We are recommending that DOD expedite efforts to provide the military
services with more detailed guidance on implementing the revised
housing requirements determination process to help ensure that housing
investments, whether through military construction or privatization,
are supported by consistent and reliable needs assessments. We are also
recommending that DOD (1) review the rationale supporting each of the
exceptions to using local community housing provided in the revised
process in an effort to reduce or narrow the scope of the exceptions
and minimize family housing costs, (2) survey servicemembers with
dependents to update information on preferences for family housing, and
(3) apply a more consistent top-level review and approval process for
both military housing construction and privatization project proposals
to help ensure that proposed housing construction projects are
adequately justified and appropriate consideration has been given to
privatization options and plans. In commenting on a draft of this
report, DOD generally agreed with our recommendations and indicated
that actions were under way or planned to deal with most of them.
Background:
DOD seeks to provide servicemembers and their families with access to
adequate, affordable housing either by paying a cash allowance to help
cover the costs of renting or purchasing a home or by assigning
families to military-owned or leased housing. In fiscal year 2004, DOD
plans to spend about $7.1 billion for housing allowances for about
527,000 military families living in local community or military
privatized housing and about $1.8 billion to operate and maintain about
169,000 military-owned family housing units in the United States and
lease about 15,000 units. The Congress also authorized DOD to spend
about $908 million in fiscal year 2004 to construct and renovate
military-owned family housing units.
Family Housing Initiatives:
Recognizing that housing is a major component of the military's
compensation package and a key factor affecting quality of life, DOD
has placed priority on improving the family housing program for several
years. Partly due to initiatives to improve the program, DOD's family
housing costs increased by about $2.4 billion, or 37 percent, between
fiscal year 1998 and 2004. For example, DOD began a quality-of-life
initiative in 2001 to increase housing allowances and eliminate average
out-of-pocket costs paid by servicemembers for rent and utilities when
living in community housing. Prior to this initiative, enlisted
servicemembers with families living in community housing received, on
average, an allowance of $681 per month and paid 19 percent more for
housing costs out of pocket. In 2004, enlisted servicemembers will
receive, on average, an allowance of $1,027 per month and pay
3.5 percent more for housing costs out of pocket.[Footnote 8]
Similarly, in 2004, officers will receive, on average, an allowance of
$1,486 per month and pay 3.5 percent more for housing costs out
of pocket. By 2005, DOD plans for the average housing allowance to
fully cover the normal costs of housing and utilities with the typical
servicemember paying no additional out-of-pocket costs.
DOD also started initiatives to improve the condition of military-owned
housing. A DOD official testified in 1998 that the majority of
military-owned housing units were old, had not been adequately
maintained and modernized, and needed to be renovated or replaced. DOD
established a goal to eliminate nearly all inadequate family housing by
2007 using a three-prong approach consisting of increased housing
allowances, privatization, and military construction. First, DOD
expects the housing allowance initiative to reduce the requirement for
military-owned housing because more community housing units should
become affordable to military families. Second, widespread use of
military housing privatization is expected to result in renovating and
replacing inadequate housing units faster than use of traditional
military construction funds. DOD's plans call for privatizing the
majority--about 146,000 units--of the existing military-owned housing
inventory by 2007. Third, DOD plans to use military construction funds
to eliminate inadequate housing at installations where privatization is
not considered to be a viable option. Also, compared to the past, DOD
officials stated that they are providing on-base family housing units
with more bedrooms to meet the needs of larger families.
Housing Requirements Determination Process:
DOD's policy is to rely primarily on local community housing and
provide families with military-owned or privatized housing when local
community housing is unavailable, unsuitable, or too expensive. To help
implement this policy, the military services follow a housing
requirements determination process that includes a periodic analysis at
major installations to estimate housing needs. Each analysis estimates
the number of military families at an installation and their housing
needs, including bedroom requirements, considering family size and
servicemember rank. The analysis compares the housing requirement with
the availability of local community rental housing that meets the
military's criteria for suitability and affordability.[Footnote 9] When
the analyses predict that local communities cannot meet family housing
needs, the services have a basis to justify military-owned or
privatized housing. When the analyses predict that local communities
could meet most or all housing needs, the services may have a basis to
justify elimination of existing military-owned housing units that are
no longer needed.
The housing determination process is complex and involves many
subjective factors, assumptions, estimates, and projections. In the
past, the services used different methods to determine housing
requirements, and DOD was criticized by us and others for not having a
consistent process that produced reliable results.[Footnote 10] To
address this issue, the Deputy Secretary of Defense issued a memorandum
on January 8, 2003, directing the services to begin using a new,
revised process for determining family housing requirements.[Footnote
11] This memorandum confirmed a revised process that the military
services had already agreed to and put into use.
Family Housing Program Management:
Separate DOD organizations manage the two key components of the family
housing program--housing allowances and military housing. Housing
allowances are the responsibility of the Under Secretary of Defense for
Personnel and Readiness and primarily are managed centrally at DOD
headquarters by the organization responsible for all compensation
issues, including basic pay and other types of allowances. Military-
owned and -leased housing and the military housing privatization
program are the responsibility of the Under Secretary of Defense for
Acquisition, Technology and Logistics. Although DOD headquarters
establishes overall policy for military and privatized housing, primary
management responsibility is delegated to the individual services,
their major commands, and individual installations.
Prior GAO Reports on the Military Family Housing Program:
Since 1996, we have issued several reports on DOD's family housing
program that addressed the overall program, housing allowances,
military housing requirements, and the military housing privatization
initiative.
* In September 1996, we reported that the family housing program
allowed significant differences in the housing benefit provided to
servicemembers of the same paygrade depending on whether they lived in
military-owned or community housing because of the differences in out-
of-pocket costs paid for housing.[Footnote 12] DOD's initiative to
reduce out-of-pocket costs to zero by 2005 will eliminate this
inequity.
* In July 1998, we reported on several concerns related to the new
military housing privatization program.[Footnote 13] These concerns
included (1) whether privatization would result in significant cost
savings and whether the long contract terms of many projects might
result in building housing that will not be needed in the future;
(2) whether controls were adequate to protect the government's
interests in the event developers might not operate and maintain the
housing as expected; and (3) whether DOD would face certain problems if
privatized housing units were not fully used by military members and
were subsequently rented to civilians, as the contracts permit.
* In March 2000, we reported that initial implementation progress for
the privatization program was slow, the services' life-cycle cost
analyses provided inaccurate cost comparisons because DOD had not
issued standardized guidance for preparing the analyses, and DOD lacked
a plan for evaluating the effectiveness of the program.[Footnote 14] As
DOD subsequently quickened the pace of family housing privatization, it
issued standard guidance for privatization life-cycle cost analyses and
developed a program evaluation plan.
* In May 2001, we reported on the results of our analysis of selected
results from a broad-based 1999 survey of active duty
personnel.[Footnote 15] We noted that although increasing the housing
allowance to eliminate out-of-pocket costs should help satisfy
servicemember preferences and increase servicemember demand for
community housing, DOD should not expect a substantial increase in
retention to result solely from increasing housing allowances.
* In August 2001, we reported that despite earlier recommendations, DOD
had not implemented a standard process for determining military housing
requirements.[Footnote 16] In that report, we pointed out that the
initiative to increase housing allowances heightened the urgency for a
consistent process, because the initiative could lessen the demand for
military housing by making housing in local communities more
affordable. In January 2003, DOD approved the revised family housing
requirements determination process addressed in this report.
* In June 2002, we reported that by investing about $185 million in the
first 10 family housing privatization projects, DOD should obtain
housing improvements that would have required about $1.19 billion in
military construction funds had only government funds been
used.[Footnote 17] We also noted that privatization projects were
supported by inconsistent and questionable needs assessments and that
the overall requirement for military housing was not well-defined.
Further, although DOD had included provisions in project contracts
designed to protect the government's interests, our report identified
several areas where DOD could further enhance protections to the
government. DOD responded by outlining ongoing and planned management
actions to address the concerns noted in the report.
Community Housing Remains the Least Costly Option for Meeting Military
Family Needs:
Similar to information we previously reported, our analysis of fiscal
year 2004 estimated housing costs showed that the government's most
economical option for meeting military family housing needs continues
to be reliance on local community housing with payment of housing
allowances. Although costs and other factors have changed over the past
10 years, the results of our analysis are consistent with similar
analyses performed in the mid-1990s and show that DOD's policy of
relying primarily on local community housing continues to be cost-
effective. We estimated that the cost difference to the government for
each family that lives in local community housing, instead of
military-owned housing, is about $5,400 less annually. The difference
for each family that lives in local community housing, instead of
military privatized housing, is about $3,100 less annually. The cost
differences are primarily due to three reasons. First, the government
pays significantly less federal impact aid for military dependents
educated in local schools when they live in community housing, which is
subject to local property taxes. Second, according to DOD officials,
the private sector generally can build, operate, and maintain a family
housing unit at less cost than the government. Third, according to DOD
officials, other factors possibly affect cost differences such as
differences in construction specifications and the size of privatized,
military-owned, and community housing units rented by military
families.
Previous Cost Comparisons of Housing Options:
In 1993, the Congressional Budget Office issued a report on military
family housing that included an analysis comparing the average annual
cost of a military-owned housing unit with the cost of a community
housing unit obtained by a military family.[Footnote 18] The comparison
showed that in the long run the government spent $5,500 more annually
when military-owned housing was provided instead of paying an allowance
for a family to live in community housing. In response to the report,
DOD compared the same costs. Because of some differences in the
assumptions and data used for some cost elements, such as long-term
capital investment and federal impact aid costs, DOD's estimates
differed somewhat. Nevertheless, DOD also estimated that the reduced
costs to the government when families used community housing were
significant--about $3,200 per family annually. Details from these
analyses are shown in table 1.
Table 1: Prior Estimates of Annual Government Costs for Military-Owned
and Community Housing Options:
Then-year dollars.
Category: Military-owned housing option;
Operations and maintenance;
1993 Congressional Budget Office study: Cost per family: $6,200;
1994 DOD study: Cost per family: $6,505.
Category: Military-owned housing option;
Capital investment;
1993 Congressional Budget Office study: Cost per family: 4,900;
1994 DOD study: Cost per family: 2,803.
Category: Military-owned housing option;
Federal impact aid;
1993 Congressional Budget Office study: Cost per family: 1,900;
1994 DOD study: Cost per family: 1,478.
Category: Military-owned housing option;
Total;
1993 Congressional Budget Office study: Cost per family: $13,000;
1994 DOD study: Cost per family: $10,786.
Category: Community housing option;
Housing allowance;
1993 Congressional Budget Office study: Cost per family: $7,500;
1994 DOD study: Cost per family: $7,506.
Category: Community housing option;
Federal impact aid;
1993 Congressional Budget Office study: Cost per family: 0;
1994 DOD study: Cost per family: 62.
Category: Community housing option;
DOD housing referral services;
1993 Congressional Budget Office study: Cost per family: 0;
1994 DOD study: Cost per family: 37.
Category: Community housing option;
Total;
1993 Congressional Budget Office study: Cost per family: $7,500;
1994 DOD study: Cost per family: $7,605.
Cost difference;
1993 Congressional Budget Office study: Difference: $5,500;
1994 DOD study: Difference: $3,181.
Sources: Congressional Budget Office, Military Family Housing in the
United States (Washington, D.C.: September 1993) and U.S. General
Accounting Office, Military Family Housing: Opportunities Exist to
Reduce Costs and Mitigate Inequities, GAO/NSIAD-96-203 (Washington,
D.C.: Sept. 13, 1996).
[End of table]
The cost differences in these analyses were primarily caused by
three factors. First, in the mid-1990s, prior to the initiative to
eliminate out-of-pocket costs, military families living in community
housing typically paid about 19 percent of their housing costs out of
pocket because housing allowances covered about 81 percent of average
housing costs. Thus, in comparison to military-owned housing where the
government paid all housing and utility costs and families paid no out-
of-pocket costs, the government's annual cost for families living in
community housing was smaller. Second, the federal impact aid paid by
the Department of Education to local governments to help cover the cost
of educating dependents of military families differed depending on
where families lived. When military families lived in community
housing, a relatively small amount of federal impact aid was paid for
each student because the housing was subject to local property taxes,
which can be used to help pay for schools. When families lived in
military-owned housing, a significantly higher amount of federal impact
aid was typically paid because the property was not subject to local
property taxes. Third, the Congressional Budget Office concluded that
the private sector can build, operate, and maintain housing more
economically than DOD for reasons including DOD's higher project
contracting and oversight costs, higher labor costs, and more detailed
regulations and constraints on housing design and construction.
Relying on Community Housing Continues to Be the Least Costly Option
for Meeting Military Family Housing Needs:
Because DOD had not updated its 1994 study of housing costs, we
reviewed the current costs of each housing option to determine whether
reliance on community housing continues to be the government's most
economical option in view of family housing program changes since the
mid-1990s. As shown in table 2, our review showed that, even though
housing allowances have increased significantly and the new privatized
housing option is less costly than the military-owned housing option,
the community housing option continues to be the federal government's
least costly option for meeting military family housing needs.[Footnote
19] Compared to the cost of military-owned and privatized housing, the
government will typically spend about $5,400 and $3,100 less,
respectively, each year for each family that lives in community
housing.
Table 2: Estimated Annual Government Costs for Housing Options in 2004:
Fiscal year 2004 dollars.
Category: Costs of military-owned housing option;
Operations and maintenance;
Cost per family: $9,006.
Category: Costs of military-owned housing option;
Capital investment;
Cost per family: $6,923.
Category: Costs of military-owned housing option;
Federal impact aid;
Cost per family: $3,106.
Category: Costs of military-owned housing option;
Total;
Cost per family: $19,035.
Category: Costs of military privatized housing option;
Housing allowance;
Cost per family: $13,433.
Category: Costs of military privatized housing option;
Federal impact aid;
Cost per family: $3,106.
Category: Costs of military privatized housing option;
Other net privatization costs;
Cost per family: $165.
Category: Costs of military privatized housing option;
Total;
Cost per family: $16,704.
Difference with military-owned housing option: $2,331.
Category: Costs of community housing option;
Housing allowance;
Cost per family: $13,433.
Category: Costs of community housing option;
Federal impact aid;
Cost per family: $149.
Category: Costs of community housing option;
DOD housing referral services;
Cost per family: $34.
Category: Costs of community housing option;
Total: $13,616.
Difference with privatized housing option: $3,088.
Difference with military-owned housing option: $5,419.
Source: GAO's analysis of DOD data except for federal impact aid.
Note: Federal impact aid estimates were obtained from the Congressional
Research Service's report: Impact Aid for Public K-12 Education:
General Overview and Current Status, RL31885 (Washington, D.C.:
May 6, 2003).
[End of table]
According to DOD officials, the privatization option costs less than
the military-owned housing option primarily because of the efficiencies
gained from the use of private sector housing construction and
management expertise and the use of local building specifications
instead of sometimes more stringent military construction building
specifications. The cost difference between the privatization option
and the community housing option is primarily the result of differences
in federal impact aid costs. According to DOD officials, because most
privatized housing is on military-owned land, which is not subject to
local taxes, federal impact aid is normally paid at the higher rate
when dependents of servicemembers living in this housing are educated
by local public schools. DOD officials also noted that because DOD's
housing standards differ for servicemembers living in privatized and
government-owned housing and for those living in community housing,
cost differences might be affected by differences in the average size
of privatized or military-owned housing units compared to the average
size of community housing units rented by military families.
Specifically, DOD considers family size when determining military
housing requirements and assigning servicemembers to government
housing, but ignores family size when determining housing allowances
for servicemembers living in local communities. As a result,
servicemembers in lower paygrades with larger families are entitled to
a residence with more bedrooms in privatized or military-owned housing
than they are able to afford in the local community on the basis of
their housing allowance. However, detailed data is not available to
determine whether the average size of privatized and military-owned
housing units exceeds the average size of community housing units
rented by military families.
Family Housing Requirements Assessments Are Inconsistent and
Questionable:
Although DOD's revised housing requirements determination process
represents a significant step in the right direction, the process has
yet to achieve one of its key objectives--consistent and reliable
assessments of military family housing needs. Determining an
installation's housing needs requires a complex analysis involving many
subjective factors and assumptions, and DOD did not provide the
services with timely detailed guidance addressing these matters or the
level of oversight needed as the services began to use the revised
requirements process. In the absence of detailed guidance, we found
that the services used inconsistent methods and sometimes questionable
data sources and assumptions when determining family housing needs at
various installations. Collectively, these factors could result in
installation housing requirements analyses generating higher or lower
on-base housing needs than warranted. Without consistent and reliable
housing requirements assessments, DOD cannot know with assurance how
many housing units it needs, where it needs them, whether its housing
investment decisions are justified, and whether its overall housing
costs are minimized.
DOD Has Not Issued Timely Detailed Guidance for Implementing the
Revised Housing Requirements Determination Process:
The January 2003 memorandum that announced the revised housing
requirements determination process directed the Deputy Under Secretary
of Defense (Installations and Environment) to consult with the military
services and prepare necessary guidance to implement the revised
process. Determining an installation's housing requirement involves a
complex analysis of military housing needs and the ability of local
communities to meet those needs, and DOD officials understood that
detailed guidance was needed to help ensure consistency and accuracy as
the services implemented the revised process. However, DOD officials
stated that developing detailed guidance has taken more time and
coordination than expected and that final guidance might not be ready
until 2005.
Without detailed DOD guidance, each service independently decided how
to implement the revised requirements determination process and what
level of oversight would be provided to the process and to the housing
requirements analyses. Thus, the services independently decided how to
address many subjective factors, estimates, assumptions, and
methodologies associated with each housing analysis, including methods
and assumptions (1) to determine an installation's family housing
requirement considering projected base population, servicemember rank,
family size, and associated bedroom needs; (2) to project changes in
the supply and availability of local community housing; (3) to estimate
how many military families are home owners and therefore will not need
community rental housing; (4) to identify unsuitable community housing
units that are excluded from consideration for military family use; and
(5) to estimate the competition between civilian and military families
in securing available community housing. With the services
independently deciding how to address these factors, it is not
surprising that the services adopted different methods for determining
installation housing needs as they began implementing the revised
process.
Housing Requirements Analyses Use Inconsistent Methodologies,
Questionable Assumptions, and Outdated Information:
As illustrated below, our review of the services' housing requirements
analyses for 12 installations found areas of concern, including use of
inconsistent methodologies, questionable assumptions, and outdated
information. Most of the analyses appeared to underestimate the ability
of local communities to meet military family housing needs and thus
overestimate the need for more costly military-owned or privatized
housing.
* Ten of the 12 analyses used outdated information from military
housing expenditure surveys completed from 1994 to 1997 as the basis
for estimating the number of military family home owners.[Footnote 20]
Since 1997, however, several factors have changed to make home
ownership more likely for military families, such as significantly
increased housing allowances, decreased average out-of-pocket housing
costs, and lower mortgage interest rates. Yet, the analyses assumed
that the home ownership rates reported in 1997 would remain constant
through the end of each study period--specifically until 2006 to 2008.
At Shaw Air Force Base, for example, the housing requirements analysis
used 1994 to 1997 data to estimate that 785 of the 3,151 military
families at the installation in 2002 were home owners and that
approximately the same number, 784, would be home owners in 2007.
Because underestimating the number of military family home owners can
result in overestimating the need for more costly military-owned or
privatized housing, accurate estimates are important and the use of
outdated information to make home owner estimates appears unreasonable.
* Eight of the 12 analyses eliminated suitable community rental housing
units from potential use by military families simply because the units'
rental costs were too low. These analyses assumed that servicemembers
would spend at least a stated minimum amount--either their full housing
allowance, an amount based on spending patterns identified from housing
surveys completed in 1997, or an amount determined on another basis--on
housing costs and would not rent suitable local housing that cost less
than this amount. For example, the analysis for Fort Eustis eliminated
from consideration over 3,800 suitable two-, three-, and four-bedroom
community housing units because they rented for less than $600 a month-
-the approximate amount of the housing allowance for servicemembers in
the lowest paygrades at this installation. Also, the analysis for Naval
Station Everett eliminated from consideration over 12,500 suitable two-
, three-, and four-bedroom community housing units because they rented
for less than $800 a month--the minimum rental cost considered
appropriate, which was about 80 percent of the maximum allowable
housing cost for servicemembers in the lowest paygrades at this
installation. Similarly, the analysis for Luke Air Force Base
eliminated from consideration over 23,000 suitable two-, three-, and
four-bedroom community housing units because they rented for less than
about $700 a month--the minimum rental cost considered appropriate in
the housing analysis based on military family spending patterns
identified in 1997 survey data. However, servicemembers are not
required to spend their entire housing allowance on housing, and if
they spend less, they can keep the difference. One of the reasons that
DOD changed the basis for determining housing allowances in 1998 from
servicemember housing expenditures to actual housing costs was that
servicemembers, particularly in high-cost areas, often spent less than
expected on housing. Further, because housing allowances are determined
on the basis of the median rental cost in each geographic area, half of
the rental units in the area will normally rent for less than the
housing allowance amount plus the average out-of-pocket costs. For
these reasons, the methodology used in the 8 analyses appears
questionable and could result in underestimating the ability of the
local communities to meet family housing needs and overestimating the
need for more costly military-owned or privatized housing.
* Although DOD's guidance states that normally no more than 20 percent
of a local community's total rental units would likely be unsuitable
for military families, 3 of the 12 analyses estimated that more than
20 percent were unsuitable.[Footnote 21] Specifically, after
eliminating rental mobile homes, these analyses eliminated from 30 to
50 percent of the local communities' remaining rental units from
consideration for use by military families because the units were
judged to be unsuitable. According to the analyses, the suitability
estimates were primarily based on interviews with local civilian
housing officials, census and similar data, opinions from installation
officials on areas that should be excluded from consideration and
drive-by observations. However, the analyses did not include detailed
information to explain or support their estimates. To illustrate, the
analysis for Fort Sam Houston estimated that 50 percent of the
approximately 205,000 rental units in the local communities surrounding
the installation were unsuitable for use by military families because
of quality or safety concerns. Similarly, the analysis for Dyess Air
Force Base estimated that over 41 percent of the 22,000 local community
rental units were unsuitable for use by military families because of
quality or safety concerns. Because it was beyond the scope of our
review, we did not determine the validity of the suitability estimates.
However, DOD headquarters officials stated that accurate estimates are
critical to the results of the housing requirements process. They also
stated they are suspect of unsuitable estimates that exceed 20 percent.
If more rental units are declared unsuitable than is appropriate,
housing analyses could underestimate the ability of communities to meet
family housing needs and overestimate the need for more costly
military-owned or privatized housing.
* In defining the local community housing market area surrounding each
installation, 9 of the 12 analyses did not use the definition
prescribed in the revised process. The revised process stated that the
services should use the same housing market area to determine housing
requirements as DOD uses to determine housing allowances.[Footnote 22]
The analyses that did not follow this guidance defined the local
housing market area in four different ways. For example, the housing
analysis for Fort Sam Houston defined the market area as the
communities within 20 miles of the installation and the analysis for
Marine Corps Air Station Yuma defined the market area as the
communities within a 1-hour commute of the installation. In neither
case did the market area used match the area used to determine housing
allowance rates. Differences in the way the local housing market is
defined can cause over-or underestimates of a local community's ability
to meet family housing needs.
* Six of the 12 analyses included an assessment of the housing
requirements for single servicemembers who live off base. These
analyses assumed that single servicemembers who live off base competed
with married servicemembers and civilians for available community
housing. The other six analyses assessed only family housing needs and
thus assumed that single servicemembers did not compete with married
servicemembers for community housing. The two approaches were
inconsistent and resulted in different assessments of family housing
needs. Also, the housing analysis for Naval Station Everett included
single servicemembers but inappropriately assumed that single personnel
in paygrade E4 lived off base and that 269 single servicemembers in
paygrade E4 would require either a two-bedroom or a three-bedroom
housing unit in 2008. However, the Navy requires single E4 personnel
with less than 4 years of service to live in military barracks, and the
housing allowance standard for single E4 personnel living off base is a
one-bedroom unit, not a two-or a three-bedroom unit. The faulty
assumptions reduced the number of community rental units considered
available to military families at the installation and increased the
estimated requirement for military-owned or privatized housing.
In combination, the use of inconsistent methodologies, questionable
assumptions, and outdated information has resulted in inconsistent and
questionable estimates of on-base military housing needs, which may
result in under reliance on community housing. The results from our
review also raise questions concerning the adequacy of the services'
reviews of completed analyses for accuracy and compliance with
criteria. Service officials stated that they provide guidance to and
approve the assumptions used by the contractors selected to perform the
analyses. Also, they stated that installation officials review the
initial results of the analysis for their installation prior to the
analysis being finalized. Nevertheless, the use of inconsistent and
questionable data sources, assumptions, and methodologies continues to
exist. See appendix II for additional details on all 12 housing
requirements analyses.
DOD's Revised Housing Requirements Determination Process Does Not
Maximize Reliance on Community Housing:
DOD's revised housing requirements determination process provides the
services several exceptions to the policy of maximizing reliance on
local community housing near military installations that could further
detract from reliance on local housing. The basis for some of these
exceptions was the consensus of DOD and service military housing
officials rather than military mission requirements, results from
analytical studies, or evidence that retention would be negatively
affected if more families lived in local housing. Consequently, the
basis for such judgments was not always clear and thus subject to
question. If achievable, reducing or narrowing the scope of any of the
exceptions could increase reliance on community housing and reduce
family housing costs.
Instances When the Services Are Not Required to Use Available Community
Housing:
The Deputy Secretary of Defense's memorandum that announced the revised
housing requirements determination process emphasized DOD's long-
standing policy requiring primary reliance on the local communities
surrounding installations for housing military families. The memorandum
stated that because housing is not a core defense function and adequate
capability exists in the private sector to perform this function, DOD
will consider the construction, operation, and maintenance of military
housing only when the private sector is not capable of meeting family
housing needs.
However, even in view of these policy statements, the memorandum also
included guidance that provided four instances when the services are
not required to use available, suitable community housing.
Specifically, the guidance stated that notwithstanding the overall
policy to look first to local community housing, the services may
retain or build military housing by applying the following exceptions
to the use of local community housing at each installation.[Footnote
23]
* Exception for key and essential personnel. The services may provide
military family housing for servicemembers identified as key and
essential personnel at each installation.
* Exception to establish a military housing community. The services may
include up to 10 percent of the projected number of military families
in each paygrade as a military housing requirement to establish a
minimum military housing community at each installation.
* Exception to provide targeted economic relief. The services may
include as a military housing requirement housing to accommodate
families when the servicemembers' regular military compensation falls
below 50 percent of the local median income in the community
surrounding an installation.[Footnote 24]
* Exception for historic housing. The services may include as a
military housing requirement any historic family housing units that an
installation is obligated to retain in government ownership by
agreement, regulation, or other requirement.
As discussed below, application of these exceptions individually or
collectively could result in greater reliance on on-base family housing
than is warranted in view of DOD's policy of reliance on local
community housing. According to DOD and service officials, the
exceptions were formulated during the years-long effort to develop a
revised housing requirements determination process. The services
believed that there were legitimate reasons for an installation to
maintain some on-base military family housing regardless of the
availability of community housing, for example, the mission-related
need to house on-base personnel identified as key and essential. To
recognize and address these reasons, DOD and service officials reached
consensus that the four exceptions to the overall policy should be an
essential part of the revised process.
Basis for Three of the Four Exceptions Appears Subject to Question:
Although the justification supporting the exception for key and
essential personnel appears well-founded, the justifications
supporting the other exceptions appear less certain and subject to
question. Service officials stated that the key and essential personnel
exception was provided because of mission requirements. Specifically, a
relatively small number of servicemembers at each installation normally
are designated as key and essential and are required to live on base
regardless of the local communities' ability to meet military housing
needs. At the 12 installations we reviewed, the estimated total number
of military families ranged from 365 to 13,998 and averaged 3,781, and
the number of designated key and essential personnel ranged from 5 to
93 and averaged 24. However, as discussed below, the justifications for
the other allowed exceptions to using available community housing
appear less convincing and subject to question.
Basis for Military Housing Community Exception Appears Subject to
Question:
Each of the 12 installation housing requirements determination analyses
we reviewed applied the military community exception. Each analysis
identified 10 percent of the projected number of military families at
each installation as a military housing requirement and excluded this
number of families from consideration for housing in the local
communities surrounding the installation. In total, the 12 analyses
determined that 4,576 military family housing units were required
regardless of the ability of local communities to meet these housing
needs.[Footnote 25] On an installation basis, with total estimated
families ranging from 365 to 13,998, the identified military housing
community requirement ranged from 37 to about 1,400 housing units.
DOD officials stated that the justification for the military housing
community exception was not founded on mission requirements or the
results from any economic or other analysis. Instead, the exception was
provided on the basis of consensus of DOD and military service housing
officials. Service officials stated that they believed an on-base
military housing community was needed to recognize the value of the
cohesive attributes of a military community to the morale of
servicemembers. The officials said that some families wanted to live on
base because they felt a greater sense of security, received more
support from military family neighbors, and were closer to work and on-
base amenities, such as commissaries and recreation facilities.
While some families may prefer to live on base, DOD's position is that
there is no mission requirement for families to live on base, except
for the families of the servicemembers designated as key and essential.
Also, the services had no analytical support showing that there would
be negative impacts if military families were housed in suitable,
affordable housing in the local communities rather than on base where
some preferred to live. In a May 2001 report on DOD's 1999 survey of
active duty personnel, we noted that the survey showed that
(1) 72 percent of servicemembers preferred local community housing if
costs were equal and (2) there was no clear link between housing and
retention.[Footnote 26] We do not know whether these survey results
have changed given the recent increased housing allowances and the
recent increase in the number and length of troop deployments.
Nevertheless, the services had no analytical support showing that the
optimum on-base housing community should consist of 10 percent of
military families--as opposed to 5 percent, 20 percent, 10 percent plus
some addition for the other exception criteria, or some
other percentage. Also, although the services note the value of a
cohesive military housing community, an installation's military-owned
housing inventory often is not sited in one on-base neighborhood but
instead is sited in several dispersed locations, including, in some
instances, off-base locations several miles from the installation.
Basis for Targeted Economic Relief Exception Appears Subject to
Question:
At 5 of the 12 installations we reviewed, the application of the
economic relief exception increased military housing requirements above
the level established by the military housing community exception.
Application of the economic relief exception at these installations
increased military housing requirements by a total of 414 housing
units. DOD seeks to provide servicemembers with access to adequate and
affordable housing and, according to some service officials, the
economic exception was provided on the basis of consensus of DOD and
service housing officials to recognize the financial strain placed on
married servicemembers in lower paygrades who live in high-cost
communities. Service officials stated that because housing allowances
vary by paygrade, servicemembers in lower paygrades receive lower
allowances and might have more difficulty in renting affordable housing
in high-cost areas. Further, servicemembers living in high-cost areas
normally are faced with higher incidental costs other than housing.
However, the targeted economic relief exception does not appear to
recognize that other measures are in place to help mitigate financial
hardships facing military families living in high-cost areas. In
particular, housing allowances for servicemembers in all paygrades are
based on the actual median cost of local housing in each geographic
area of the country. Thus, housing allowances in high-cost areas
reflect the high cost of community housing in those areas. For example,
the 2004 housing allowance in the San Francisco area is $2,153 a month
for servicemembers with dependents in the lowest paygrades--paygrades
E1 through E4. Also, DOD plans for the housing allowance to fully cover
the average cost of housing and utilities by 2005, with the typical
servicemember in all paygrades paying no out-of-pocket housing costs.
Further, servicemembers living in 53 high-cost areas in the United
States are paid a cost-of-living allowance to recognize the higher
incidental costs of living in these areas.[Footnote 27] For example,
the cost-of-living allowance in the San Francisco area for
servicemembers with dependents in paygrades E1 and E4 is $210 and $230
a month, respectively. Finally, because installation housing
requirements determination analyses consider the availability and
affordability of community housing for servicemembers in each paygrade,
the analyses are designed to identify when military housing is
justified because local housing is too expensive.
Basis for Historic Housing Exception Appears Subject to Question:
At 2 of the 12 installations we reviewed, the requirements analyses
identified 595 historic housing units, applied the historic housing
exception, and increased total military family housing requirements by
186 units above the level established by applying the military housing
community exception. According to service officials, the historic
housing exception was provided on the basis of consensus of DOD and
service housing officials to recognize that some housing units at some
installations have been designated, or are considered, historic in
nature and normally are required to be retained. However, historic
designation of a housing unit does not mean that the unit must be used
to house military families or that it should necessarily increase or
reduce housing requirements beyond those identified for other purposes.
Opportunities Exist to Improve the Top-Level Review of Proposed Housing
Construction Projects:
Opportunities exist for DOD to improve the top-level review given to
service proposals for military housing construction projects.
Currently, DOD's review and approval process for housing construction
proposals lacks certain additional steps included in the review and
approval of privatization project proposals, for example, a top-level
assessment of each project's supporting housing requirements analysis.
Adopting additional review steps for housing construction proposals
could provide additional assurances that the proposals are adequately
justified and that the more cost-effective option, military
construction or privatization, is used to achieve needed housing
improvements when local communities cannot meet needs.
DOD Uses Different Review Processes for Housing Construction and
Privatization Projects:
DOD uses different top-level review and approval processes for proposed
housing construction and privatization projects. DOD officials stated
that the review process for housing construction proposals is rigorous,
well-established, and similar to the process used for other types of
projects financed with military construction funds. First, using the
results from housing requirements analyses and assessments of the
condition of existing on-base housing units, individual installations
identify and justify needed housing construction projects. Project
proposals are then submitted through the chain of command to service
headquarters. During this process, service officials review the
adequacy of project justifications, consider how the projects fit into
the services' housing master plans, and prioritize projects in view of
competing demands and budgetary limitations. Finally, the services
submit their proposals to DOD headquarters for a top-level review and
approval as part of the normal budget process prior to being submitted
to the Congress. DOD housing officials stated that although they might
raise questions concerning particular projects, they primarily rely on
the services to ensure that the need for each project is well-supported
and justified.
DOD headquarters uses a different review and approval process for
privatization proposals. When the military housing privatization
program began in 1996, DOD established a headquarters office to oversee
and facilitate implementation of the program. In addition to creating
the framework for the new program, the headquarters office established
procedures for reviewing privatization proposals and criteria for
approving proposals. Under these procedures, the service that proposes
a project must provide DOD headquarters officials a detailed briefing
that describes the project, its justification, and whether it meets
specific financial criteria. Also, DOD headquarters officials stated
that they review each proposal's supporting housing requirements
analysis. In this review, DOD evaluates the estimates, assumptions, and
methodology used in the analysis for reasonableness and compliance with
guidance. If concerns are identified, DOD asks the service for
additional information before the proposal is approved.
The additional top-level review steps for privatization proposals--and
in particular the review given to the housing requirements analyses
that support the proposals--provide additional assurances that each
proposal is adequately justified before approval. In view of the
concerns we identified in the services' installation housing
requirements analyses, it appears that including additional top-level
review steps for proposed housing construction projects could provide
additional assurances that these projects are adequately justified
before approval. Further, because the initial amount of government
funds needed to construct a military-owned housing project often
exceeds the initial amount of government funds needed to start an
equivalent privatization project, it appears appropriate that the top-
level review provided to housing construction proposals be at least
equivalent to the review provided to privatization proposals.[Footnote
28]
Top-Level Review of Housing Construction Proposals Does Not Normally
Consider Privatization Alternatives:
According to DOD officials, the top-level review of service proposals
for housing construction projects does not normally include an analysis
of whether the improvements planned from the projects could be achieved
more economically through privatization. DOD officials stated that they
assume that the services have considered privatization alternatives to
achieving needed housing improvements and that the use of military
construction funds is appropriate when the services propose this
option. Service officials also stated that prior to submitting a
housing proposal they consider both construction and privatization
alternatives and chose the option that is more appropriate.
During our review, however, we identified some approved housing
construction projects that were being used as an intermediate step to
privatization without a clear analysis of the benefits of one
alternative over the other. Specifically, the Army, the Air Force, and
the Marine Corps have recently used, or plan to use, military housing
construction projects to build replacement housing at installations
where the services plan to privatize all housing in the near future. In
some instances, the construction of the new military-owned houses
apparently will be completed just in time to convey ownership of
the units to a privatization developer who will begin collecting rent
from military occupants of the units. Examples of cases we identified
are shown below.
* The Army's fiscal year 2004 budget included $41 million for a
military construction project at Fort Knox, Kentucky, to replace
inadequate houses with 178 new houses. The new houses will be conveyed
to a privatization developer when all family housing at Fort Knox is
privatized--scheduled for 2006. Army officials stated that the
rationale for the project was to replace inadequate houses with houses
that meet current requirements as quickly as possible and that this
could be achieved by using military construction funding. The officials
also stated that the project should result in reducing the amount of
government funds that will be needed to initiate the privatization
project at Fort Knox.
* The Marine Corps' fiscal year 2004 budget included about $68 million
for two military construction projects at Camp Lejeune, North Carolina,
to replace 519 inadequate family housing units. Also, the Marine Corps'
fiscal year 2003 budget included about $44 million for another military
construction project to replace 317 inadequate family housing units at
the installation. Marine Corps officials stated that the new housing
units will be conveyed to a privatization developer when all family
housing at Camp Lejeune is privatized--scheduled for 2005 or 2006. The
officials also stated that the rationale for the projects was to
improve the quality of life for the occupants of this housing and
reduce the large number of inadequate housing units at Camp Lejeune.
The officials stated that by using military housing construction
projects to reduce the work that would be required by a privatization
developer, the initial amount of government funds required to start the
privatization project might be reduced, making the privatization
project financially more feasible for the Marine Corps.
* The Air Force's fiscal year 2004 budget included about $20 million
for a military construction project to replace 120 inadequate houses
with 112 new houses at Dover Air Force Base, Delaware. Also, the Air
Force's fiscal year 2002 and 2003 budgets included military
construction projects to replace inadequate housing at the
installation--about $18 million for 120 units in fiscal year 2002 and
about $20 million for 112 housing units in fiscal year 2003. Air Force
officials stated that the new housing units will be conveyed to a
privatization developer when all family housing at Dover Air Force Base
is privatized--scheduled for 2005. The officials also stated that at
the time the proposals for the construction projects were prepared, the
Air Force did not consider that housing privatization was financially
feasible at the installation. However, after re-evaluation, the Air
Force concluded that the installation had privatization potential and
added the installation to its privatization schedule. The officials
stated that the Air Force also concluded that there would be less risk
and greater value added by continuing the implementation of the
military construction projects prior to privatization.
Service officials stated that they have used military housing
construction projects at installations slated for future privatization
when justified by various reasons, such as those illustrated in the
examples. We are not saying that use of military construction was not
justified in any of these cases but rather point to opportunities for
DOD to provide a higher level assessment of justifications for such
projects and their privatization potential before the projects are
approved. It is also important to recognize that DOD has pursued
housing privatization because it provides certain advantages over
military construction. DOD officials note that by leveraging government
funds and using private sector capital, the military can stretch its
available funds so that significantly more housing can be improved in
comparison with traditional military construction financing. DOD
officials also note, and our analysis supports, that the privatization
option is a more cost-effective option than the military-owned housing
option when local communities cannot meet family housing needs.
Finally, DOD officials note that in most cases privatization offers
less risk to the government if units are not used by military families
because the privatization developer--not the government--owns and is
responsible for the units. For these reasons, it is important that
DOD's top-level review of housing construction proposals ensures that
the privatization option has been appropriately considered and that the
alternative more advantageous to the government is used to accomplish
needed improvements in every case.
Conclusions:
DOD's stated policy of primary reliance on local community housing for
military families--if implemented to the maximum practical extent--
could help minimize housing costs because the use of local community
housing remains the government's least costly option for meeting
military family housing needs. Closely related to achieving maximum
reliance on local community housing is the need for a process that
consistently and reliably determines housing needs at each
installation. DOD's revised housing requirements process represents a
significant step in this direction. Yet, largely because DOD has not
provided timely detailed guidance to the services on how to implement
and oversee the revised requirements process, installation housing
analyses are inconsistent and questionable. Faulty analyses could lead
DOD to construct military-owned housing or enter into long-term
contracts for privatized housing in areas where local communities might
have provided housing at lower costs. Also, because DOD allows several
exceptions to using community housing, the services might justify more
costly military-owned or privatized housing in some cases when local
community housing might meet the needs. If achievable, reducing or
narrowing the scope of currently allowed exceptions to the use of
community housing could increase reliance on such housing, reduce
costs, and help ensure that military-owned or privatized housing
is provided only when the local communities near military installations
are not capable of fulfilling needs. In addition, considering the
recent increases in housing allowances, increases in the number and
length of troop deployments, and other changes, servicemember housing
preferences also may have changed. Current family housing preference
information is an important consideration as DOD addresses the housing
needs of servicemembers with dependents. Further, in view of the high
cost of providing military-owned housing and to help prevent housing
investments that are not adequately justified, it is important that
service proposals for military housing construction projects receive a
top-level review consistent with the review provided to service
proposals for privatization projects. Without such a top-level review
of military housing construction proposals that also considers
privatization options and plans, DOD has less assurance that the
proposals are well-supported and that the more advantageous option,
military construction or privatization, is used to achieve needed
housing improvements when local communities cannot meet needs.
Recommendations for Executive Action:
We recommend that the Secretary of Defense direct the Under Secretary
of Defense for Acquisition, Technology and Logistics to take the
following four actions:
* Expedite efforts to provide the military services with more detailed
guidance on implementing the revised housing requirements determination
process to help ensure that housing investments, whether through
military construction or privatization, are supported by consistent and
reliable needs assessments. This guidance should include specifics on
(1) the information sources, assumptions, and methodology to be used in
each installation housing requirements determination analysis and
(2) the appropriate service-level oversight of the requirements
determination process to help ensure reliability and compliance with
the guidance.
* Review the rationale supporting each of the exceptions to using local
community housing provided in the revised housing requirements
determination process in an effort to reduce or narrow the scope of the
exceptions and help minimize family housing costs.
* Survey servicemembers with dependents to update information on the
current preferences for family housing given recent changes, such as
the increase in housing allowances and the increase in the number and
length of troop deployments.
* Apply a more consistent top-level review and approval process for
both military housing construction and privatization project proposals
to help ensure that proposed housing construction projects are
adequately justified and appropriate consideration has been given to
privatization options and plans.
Agency Comments and Our Evaluation:
In commenting on a draft of this report, the Principal Assistant Deputy
Under Secretary of Defense (Installations and Environment) fully agreed
with two and partially agreed with two of our recommendations and
indicated that actions were under way or planned to deal with most of
them. DOD stated it will issue detailed guidance on implementing the
revised housing requirements determination process in the DOD Housing
Management Manual, scheduled for issuance in December 2004, and
resurvey the housing preferences of servicemembers with dependents by
the end of 2004.
DOD partially agreed with our recommendations to review the rationale
supporting each of the exceptions to using local community housing
provided in the revised housing requirements determination process and
apply a more consistent top-level review and approval process for both
military housing construction and privatization project proposals.
While DOD indicated it would review the rationale supporting each of
the exceptions to using local community housing, it is not clear to
what extent DOD plans to assess their collective effect on relying on
local community housing to minimize family housing costs. Also,
regarding the recommendation that DOD apply a more consistent top-level
review and approval process for both military housing construction and
privatization project proposals, DOD indicated that it would apply a
top-level review process to the decision on whether to privatize or use
traditional military construction as part of its master planning
process. It did not state to what extent it intended to add a top-level
review of the housing requirements analyses supporting proposed housing
construction projects to help ensure that proposed housing construction
projects are adequately justified. In view of the concerns we
identified in the services' installation housing requirements analyses,
we continue to believe that DOD should perform a top-level review of
the housing requirements analyses supporting each proposed housing
construction project prior to approval.
DOD's comments are reprinted in their entirety in appendix III.
As you know, Section 720, Title 31, United States Code, requires the
head of a federal agency to submit a written statement of the actions
taken on our recommendations to the Senate Committee on Governmental
Affairs and the House Committee on Government Reform not later than 60
days after the date of this report. A written statement must also be
sent to the House and Senate Committees on Appropriations with the
agency's first request for appropriations made more than 60 days after
the date of this report.
We are sending copies of this report to the appropriate congressional
committees, and it will be available at no charge on GAO's Web site at
http://www.gao.gov. If you or your staff have any questions on the
matters discussed in this report, please contact me at (202) 512-8412
or my Assistant Director, Mark Little, at (202) 512-4673. Gary
Phillips, Sharon Reid, and Deborah Owalabi were major contributors to
this report.
Sincerely yours,
Signed by:
Barry W. Holman, Director,
Defense Capabilities and Management:
[End of section]
Appendix I: Scope and Methodology:
To determine whether the Department of Defense's (DOD) policy of
primary reliance on local community housing is cost-effective, we
compared the government's costs to provide housing for a typical
military family using each of the three available housing options.
Specifically, we used DOD and service budget and program information to
determine and compare the government's costs to house a typical
military family in (1) local community housing with payment of a
housing allowance; (2) military owned, operated, and maintained
housing; and (3) housing owned, operated, and maintained by private
developers under the military housing privatization program. We
primarily used cost data contained in DOD's fiscal year 2004 budget
justification material submitted to the Congress in February 2003 and
did not test the reliability of this data because it represented DOD's
official information used to support the President's budget. We
considered the major types of costs in each housing option including
housing allowances; military housing construction, operations, and
maintenance costs; privatization project costs; housing referral
services costs; and costs of federal impact aid paid by the Department
of Education for dependents of military servicemembers attending local
schools. The typical military family was a composite representing
officer and enlisted servicemembers in all paygrades. In addition to
our analysis, we reviewed estimates of military housing costs prepared
in the mid-1990s by DOD and the Congressional Budget Office. Also, we
shared the details of our analyses with DOD and service officials.
To determine whether DOD's revised housing requirements determination
process has resulted in consistent and reliable estimates of
installation housing needs, we selected and reviewed the housing
requirements analyses for 12 installations--3 from each service. We
selected analyses that (1) included statements that they had been
prepared in accordance with the revised process and (2) were for
installations where military housing construction projects and/or
housing privatization projects were recently approved or planned. For
each analysis, we evaluated the stated basis for the estimates and
assumptions used and assessed consistency and compliance with the
January 2003 memorandum that implemented the revised process. We did
not otherwise attempt to independently determine housing requirements
at the 12 installations. We shared the results of our analyses with DOD
and service officials and incorporated their comments as appropriate.
We also discussed with DOD and service officials the procedures they
use to review the adequacy of completed installation housing
requirements analyses.
To determine whether DOD's revised housing requirements determination
process maximizes reliance on local community housing, we interviewed
DOD and service headquarters housing officials, reviewed applicable DOD
and military service policies and procedures, reviewed family housing
improvement plans and initiatives, and visited four military
installations in Virginia--Fort Eustis, Langley Air Force Base, Naval
Station Norfolk, and Marine Corps Base Quantico--to view family housing
conditions and discuss housing options and associated costs. In
reviewing the details of the revised process, we specifically assessed
the basis for the provisions in the process that allow exceptions to
using local community housing. This assessment included a review of the
support for each exception, discussions with DOD and service personnel
on the need for each exception, and consideration of the impact of the
exceptions at 12 installations where we reviewed housing requirements
analyses.
To determine whether opportunities exist for DOD to improve its review
of proposed military housing construction projects, we documented and
compared DOD's review and approval processes for service proposals for
military housing construction projects and military housing
privatization projects. We discussed differences in the processes with
DOD officials to determine the reasons for differences and the
potential advantages of making the review and approval processes more
consistent. We also reviewed the services' military construction
budgets for fiscal years 2002, 2003, and 2004 to identify installations
with approved military housing construction projects. We compared the
installations identified with the list of installations that the
services plan to privatize to identify installations with approved
military housing construction projects that were also slated for future
privatization. We discussed these installations with service officials
to determine reasons for the construction projects in view of
privatization plans.
We conducted our work from May 2003 through March 2004 in accordance
with generally accepted government auditing standards.
[End of section]
Appendix II: Selected Information from Installation Housing
Requirements Analyses:
Table 3 shows selected information from the services' housing
requirements determination analyses for the installations we reviewed.
The information shows inconsistencies in how the analyses were
prepared, ranges of estimates used, and projected results from the
analyses.
Table 3: Selected Information from Installation Housing Requirements
Determination Analyses:
Installation: Shaw Air Force Base, South Carolina;
Used DOD's prescribed definition of local housing market? No;
Considered single servicemembers' housing needs? Yes;
Used survey data from 1997 to estimate home owners? Yes;
Excluded rental housing costing less than housing allowance
or amount based on spending patterns from 1997 survey? No;
Percentage of local community rental housing considered unsuitable,
after eliminating mobile homes: 17.1;
Projected total number of military families: 3,152;
Projected minimum on-base housing requirement allowed by DOD's revised
requirements determination process: 326;
Projected total on-base housing requirement: 1,491.
Installation: Luke Air Force Base, Arizona;
Used DOD's prescribed definition of local housing market? No;
Considered single servicemembers' housing needs? Yes;
Used survey data from 1997 to estimate home owners? Yes;
Excluded rental housing costing less than housing allowance
or amount based on spending patterns from 1997 survey? Yes;
Percentage of local community rental housing considered unsuitable,
after eliminating mobile homes: (see note);
Projected total number of military families: 2,658;
Projected minimum on-base housing requirement allowed by DOD's revised
requirements determination process: 287;
Projected total on-base housing requirement: 426.
Installation: Dyess Air Force Base, Texas;
Used DOD's prescribed definition of local housing market? No;
Considered single servicemembers' housing needs? Yes;
Used survey data from 1997 to estimate home owners? Yes;
Excluded rental housing costing less than housing allowance
or amount based on spending patterns from 1997 survey? Yes;
Percentage of local community rental housing considered unsuitable,
after eliminating mobile homes: 41.2;
Projected total number of military families: 2,920;
Projected minimum on-base housing requirement allowed by DOD's revised
requirements determination process: 299;
Projected total on-base housing requirement: 1,261.
Installation: Fort Eustis, Virginia;
Used DOD's prescribed definition of local housing market? No;
Considered single servicemembers' housing needs? No;
Used survey data from 1997 to estimate home owners? No;
Excluded rental housing costing less than housing allowance
or amount based on spending patterns from 1997 survey? Yes;
Percentage of local community rental housing considered unsuitable,
after eliminating mobile homes: 18.1;
Projected total number of military families: 2,690;
Projected minimum on-base housing requirement allowed by DOD's revised
requirements determination process: 300;
Projected total on-base housing requirement: 874.
Installation: Fort Knox, Kentucky;
Used DOD's prescribed definition of local housing market? No;
Considered single servicemembers' housing needs? No;
Used survey data from 1997 to estimate home owners? Yes;
Excluded rental housing costing less than housing allowance
or amount based on spending patterns from 1997 survey? Yes;
Percentage of local community rental housing considered unsuitable,
after eliminating mobile homes: 10.0;
Projected total number of military families: 3,833;
Projected minimum on-base housing requirement allowed by DOD's revised
requirements determination process: 667;
Projected total on-base housing requirement: 1,192.
Installation: Fort Sam Houston, Texas;
Used DOD's prescribed definition of local housing market? No;
Considered single servicemembers' housing needs? No;
Used survey data from 1997 to estimate home owners? Yes;
Excluded rental housing costing less than housing allowance
or amount based on spending patterns from 1997 survey? Yes;
Percentage of local community rental housing considered unsuitable,
after eliminating mobile homes: 50.0;
Projected total number of military families: 4,625;
Projected minimum on-base housing requirement allowed by DOD's revised
requirements determination process: 621;
Projected total on-base housing requirement: 1,334.
Installation: Naval Station Everett, Washington;
Used DOD's prescribed definition of local housing market? Yes;
Considered single servicemembers' housing needs? Yes;
Used survey data from 1997 to estimate home owners? Yes;
Excluded rental housing costing less than housing allowance
or amount based on spending patterns from 1997 survey? Yes;
Percentage of local community rental housing considered unsuitable,
after eliminating mobile homes: 12.3;
Projected total number of military families: 2,557;
Projected minimum on-base housing requirement allowed by DOD's revised
requirements determination process: 322;
Projected total on-base housing requirement: 434.
Installation: Naval Weapons Station Earle, New Jersey;
Used DOD's prescribed definition of local housing market? Yes;
Considered single servicemembers' housing needs? Yes;
Used survey data from 1997 to estimate home owners? Yes;
Excluded rental housing costing less than housing allowance
or amount based on spending patterns from 1997 survey? Yes;
Percentage of local community rental housing considered unsuitable,
after eliminating mobile homes: 14.0;
Projected total number of military families: 365;
Projected minimum on-base housing requirement allowed by DOD's revised
requirements determination process: 41;
Projected total on-base housing requirement: 85.
Installation: Naval Submarine Base New London, Connecticut;
Used DOD's prescribed definition of local housing market? Yes;
Considered single servicemembers' housing needs? Yes;
Used survey data from 1997 to estimate home owners? Yes;
Excluded rental housing costing less than housing allowance
or amount based on spending patterns from 1997 survey? Yes;
Percentage of local community rental housing considered unsuitable,
after eliminating mobile homes: 30.0;
Projected total number of military families: 3,227;
Projected minimum on-base housing requirement allowed by DOD's revised
requirements determination process: 447;
Projected total on-base housing requirement: 2,099.
Installation: Marine Corps Air Station Yuma, Arizona;
Used DOD's prescribed definition of local housing market? No;
Considered single servicemembers' housing needs? No;
Used survey data from 1997 to estimate home owners? Yes;
Excluded rental housing costing less than housing allowance
or amount based on spending patterns from 1997 survey? Not shown in
analysis;
Percentage of local community rental housing considered unsuitable,
after eliminating mobile homes: 16.2;
Projected total number of military families: 2,147;
Projected minimum on-base housing requirement allowed by DOD's revised
requirements determination process: 217;
Projected total on-base housing requirement: 842.
Installation: Marine Corps Base Camp Lejeune, North Carolina;
Used DOD's prescribed definition of local housing market? No;
Considered single servicemembers' housing needs? No;
Used survey data from 1997 to estimate home owners? No;
Excluded rental housing costing less than housing allowance
or amount based on spending patterns from 1997 survey? Not shown in
analysis;
Percentage of local community rental housing considered unsuitable,
after eliminating mobile homes: 10.3;
Projected total number of military families: 13,998;
Projected minimum on-base housing requirement allowed by DOD's revised
requirements determination process: 1,407;
Projected total on-base housing requirement: 6,373.
Installation: Marine Corps Air Ground Combat Center Twentynine Palms,
California;
Used DOD's prescribed definition of local housing market? No;
Considered single servicemembers' housing needs? No;
Used survey data from 1997 to estimate home owners? Yes;
Excluded rental housing costing less than housing allowance
or amount based on spending patterns from 1997 survey? Not shown in
analysis;
Percentage of local community rental housing considered unsuitable,
after eliminating mobile homes: 11.7;
Projected total number of military families: 3,201;
Projected minimum on-base housing requirement allowed by DOD's revised
requirements determination process: 331;
Projected total on-base housing requirement: 1,989.
Source: DOD information with GAO analysis.
Note: The analysis stated that 21.3 percent of local community rental
housing was unsuitable, including rental mobile homes. However, the
analysis did not state the unsuitable percentage after eliminating
rental mobile homes.
[End of table]
[End of section]
Appendix III: Comments from the Department of Defense:
OFFICE OF THE UNDER SECRETARY OF DEFENSE:
3000 DEFENSE PENTAGON
WASHINGTON, DC 20301-3000:
ACQUISITION, TECHNOLOGY AND LOGISTICS:
MAY 05 2004:
Mr. Barry W. Holman:
Director, Defense Capabilities and Management United States General
Accounting Office Washington, DC 20548:
This is the Department of Defense (DoD) response to the GAO draft
report, "MILITARY HOUSING: Further Improvements Needed in Requirements
Determinations and Program Review," March 31, 2004 (GAO Code 350376/
GAO-04-556).
Enclosed are the Department's specific responses to the recommendations
of the draft GAO report. Thank you for the opportunity to provide
comments. My point of contact for this action is Bob Helwig. He can be
reached at (703) 602-9867.
Sincerely,
Signed by:
Philip W. Grone
Principal Assistant Deputy Under Secretary of Defense
(Installations and Environment):
Enclosure: As stated:
GAO CODE 350376/GAO-04-556:
"MILITARY HOUSING: FURTHER IMPROVEMENTS NEEDED IN REQUIREMENTS
DETERMINATIONS AND PROGRAM REVIEW":
DEPARTMENT OF DEFENSE COMMENTS TO THE RECOMMENDATIONS:
RECOMMENDATION 1: The GAO recommended that the Secretary of Defense
direct the Under Secretary of Defense for Acquisition, Technology and
Logistics to expedite efforts to provide the Military Services with
more detailed guidance on implementing the revised housing requirements
determination process to help ensure that housing investments, whether
through military construction or privatization, are supported by
consistent and reliable needs assessments. This guidance should include
specifics on (1) the information sources, assumptions, and methodology
to be used in each installation housing requirements determination
analysis and (2) the appropriate Service-level oversight of the
requirements determination process to help ensure reliability and
compliance with the guidance. (Page 32/Draft Report):
DoD RESPONSE: Concur. We will issue detailed guidance in the DoD
Housing Management Manual, scheduled for issuance in December 2004. The
guidance will include the recommended specifics. The Department issued
broad housing requirement guidance on January 8, 2003. We deliberately
delayed issuance of detailed, specific guidance to capture lessons
learned from initial application of the new procedures. The resulting
detailed manual will then reflect practical, as well as theoretical,
guidance.
RECOMMENDATION 2: The GAO recommended that the Secretary of Defense
direct the Under Secretary of Defense for Acquisition, Technology and
Logistics to review the rationale supporting each of the exceptions to
using local community housing provided in the revised housing
requirements determination process in an effort to reduce or narrow the
scope of the exceptions and help minimize family housing costs. (Page
32/Draft Report):
DoD RESPONSE: Partially concur. We will review the rationale supporting
each of the exceptions. However, we believe the existing exceptions are
sufficiently narrow and well-founded to support sound determinations of
our housing requirements. The exceptions allow the department to
balance the critical values such as housing key and essential personnel
and historic preservation with the need to minimize family housing
costs.
RECOMMENDATION 3: The GAO recommended that the Secretary of Defense
direct the Under Secretary of Defense for Acquisition, Technology and
Logistics to survey service members with dependents to update
information on the current preferences for family housing given recent
changes, such as the increase in housing allowances and the increase in
the number and length of troop deployments. (Page 32/Draft Report):
DoD RESPONSE: Concur. We will re-survey their housing preferences by
the end of 2004.
RECOMMENDATION 4: The GAO recommended that the Secretary of Defense
direct the Under Secretary of Defense for Acquisition, Technology and
Logistics to apply a more consistent top-level review and approval
process for both military housing construction and privatization
project proposals to help ensure that proposed housing construction
projects are adequately justified and appropriate consideration has
been given to privatization options and plans. (Page 32/Draft Report):
DoD RESPONSE: Partially Concur. We will apply a top-level review and
approval process to the decision on whether to privatize or use
traditional military construction as part of our family housing
masterplan process. Implementation of the new housing requirements
determination process in 2003 delayed the Service's masterplans while
accurate requirements were being calculated. This new review will
require the military services to explain why privatization is not
viable when choosing to use military construction. Military
construction projects approved in the masterplans will then be budgeted
using existing procedures as directed by the DoD Comptroller. We expect
new masterplans in May 2004.
[End of section]
FOOTNOTES
[1] DOD considers local community housing to be unsuitable if it is
structurally unsound; is not well maintained; poses a health, safety,
or fire hazard; does not possess amenities or a size consistent with
housing in the local area, or is located outside of the market area
used to determine local housing allowance rates. The military services
normally consider local community housing to be too expensive if it
costs more than the servicemember's housing allowance plus average out-
of-pocket costs.
[2] Section 2801, National Defense Authorization Act for Fiscal Year
1996 (Pub. L. No. 104-106, Feb. 10, 1996).
[3] U.S. General Accounting Office, Military Housing: Management
Improvements Needed As the Pace of Privatization Quickens, GAO-02-624
(Washington, D.C.: June 21, 2002); U.S. General Accounting Office,
Military Housing: DOD Needs to Address Long-Standing Requirements
Determination Problems, GAO-01-889 (Washington, D.C.: Aug. 3, 2001);
and DOD Family Housing Requirements Determination (Inspector General
Report No. 98-006, Oct. 8, 1997).
[4] Congressional Budget Office, Military Family Housing in the United
States (Washington, D.C.: September 1993).
[5] In determining the costs for the privatization option, we used the
budgetary scored costs of privatization projects as determined by the
Office of Management and Budget. Each privatization contract that DOD
enters into must be scored for budget purposes. Scoring seeks to
determine the cost that should be recognized and recorded as an
obligation of DOD at the time the contract is signed. However, there
are differences between the Office of Management and Budget and the
Congressional Budget Office over budgetary scoring for DOD's military
housing privatization program. In the view of the Congressional Budget
Office, privatization projects should be scored at a higher amount.
[6] Federal impact aid is paid to local governments to help cover the
cost of educating dependents of military servicemembers. The impact aid
for each dependent is significantly higher for students who live with
their families in military-owned or privatized housing located on
military installations because such housing is not normally subject to
local property taxes. When military families live in housing in the
local communities, a much smaller amount is paid for each student
because the housing is subject to local property taxes.
[7] The total on-base military community housing requirement is
overstated by 31 housing units because one analysis made a
computational error.
[8] The amounts shown reflect the average housing allowance for
servicemembers with dependents in all enlisted paygrades in all areas
of the country. Actual housing allowance amounts vary based on the
local cost of housing in about 350 geographic areas in the United
States. Also, housing allowances increase by paygrade except for junior
enlisted servicemembers in paygrades E1 through E4. Servicemembers with
dependents in paygrades E1 through E4 in the same geographic area
receive the same housing allowance amount. Housing allowances do not
vary by family size.
[9] The analyses assume that military families will rent housing when
living in local communities. However, to recognize that some families
purchase homes, installation housing analyses normally estimate the
number of military family home owners, assume that the home owners are
adequately housed, and exclude the home owners from the installations'
rental housing requirements.
[10] See GAO-02-624, GAO-01-889, and Inspector General Report No. 98-
006.
[11] See Memorandum for Secretaries of the Military Departments
Directors of the Defense Agencies, Subject: Housing Requirements
Determination Process Policy Guidance, the Deputy Secretary of Defense
(Washington, D.C.: Jan. 8, 2003).
[12] U.S. General Accounting Office, Military Family Housing:
Opportunities Exist to Reduce Costs and Mitigate Inequities, GAO/NSIAD-
96-203 (Washington, D.C.: Sept. 13, 1996).
[13] U.S. General Accounting Office, Military Housing: Privatization
Off to a Slow Start and Continued Management Attention Needed, GAO/
NSIAD-98-178 (Washington, D.C.: July 17, 1998).
[14] U.S. General Accounting Office, Military Housing: Continued
Concerns in Implementing the Privatization Initiative, GAO/NSIAD-00-71
(Washington, D.C.: Mar. 30, 2000).
[15] U.S. General Accounting Office, Military Personnel: Higher
Allowances Should Increase Use of Civilian Housing, but Not Retention,
GAO-01-684 (Washington, D.C.: May 31, 2001).
[16] See GAO-01-889.
[17] See GAO-02-624.
[18] See Military Family Housing in the United States.
[19] See note 5.
[20] Prior to 1998, DOD conducted an annual survey to collect housing
expenditure information because housing allowances were partially
established on the basis of the amounts servicemembers actually spent
for housing and utilities. Beginning in 1998, the basis for housing
allowances changed to the actual median costs of local housing in
various geographic areas of the country. DOD conducted the last housing
expenditure survey in 1997.
[21] Memorandum for Assistant Secretaries of the Army (Installations
and Environment), Navy (Installations and Environment) and Air Force
(Installations, Environment and Logistics), Subject: Standardization
of Housing Requirements Determination for Housing Privatization
Projects in Hawaii, Principal Assistant Deputy Under Secretary of
Defense (Installations and Environment) (Washington, D.C.: Mar. 27,
2003). The memorandum discussed results from the services' joint effort
to apply the revised process in Hawaii. On the basis of an analysis of
the results of this effort and in an effort to apply lessons learned,
the memorandum noted that future housing requirements assessments
should normally exclude no more than 20 percent of a local community's
total rental units due to unsuitability criteria. DOD officials stated
that the 20 percent criterion is used after rental mobile homes in
local market area have been excluded from consideration.
[22] DOD determines housing allowances based on the local cost of
housing in about 350 geographic areas in the United States. Each
geographic area, termed a military housing area, is defined by a set of
zip codes surrounding an installation or a metropolitan area that
includes housing markets generally within 20 miles or an hour's drive
in rush hour traffic.
[23] The guidance stated that the exceptions may not be used
cumulatively. The services may use the exception that produces the
greatest military housing requirement for each paygrade, but they may
not combine exceptions within paygrades to create a larger military
housing requirement.
[24] Regular military compensation is considered the military
equivalent of civilian salaries and includes servicemembers' basic pay,
allowances for housing and subsistence, and the tax advantage of the
tax-free housing and subsistence allowances.
[25] See note 7.
[26] See GAO-01-684.
[27] According to DOD, cost-of-living allowances affect nearly 85,000
servicemembers in 53 military housing areas and 23 other counties in
the continental United States. The cost-of-living allowance compensates
for a portion of excess costs for non-housing expenses incurred in
areas that exceed costs in an average U. S. military location by more
than 8 percent. Servicemembers must absorb the first 8 percent of
expenses above the national average.
[28] As we reported in 2002, the initial amount of government funds
needed in DOD's first 10 privatization projects averaged about
$18.5 million. Had military construction projects been used to achieve
the same housing improvements, the initial amount of government funds
for the projects would have averaged about $119 million. See U.S.
General Accounting Office, Military Housing: Management Improvements
Needed As the Pace of Privatization Quickens, GAO-02-624 (Washington,
D.C.: June 21, 2002).
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