Defense Infrastructure
Continuing Challenges in Managing DOD Lodging Programs as Army Moves to Privatize Its Program Gao ID: GAO-07-164 December 15, 2006The Department of Defense (DOD) transient lodging programs were established to provide quality temporary facilities for authorized personnel, and reduce travel costs through lower rates than commercial hotels. DOD has approximately 82,000 temporary duty (TDY) and permanent-change-of-station (PCS) rooms worldwide, and reported that it cost about $860 million in appropriated and nonappropriated funds to operate them in fiscal year 2005. While the Army plans to privatize its lodging in the United States, there are concerns as to whether these plans are cost-effective, and how they relate to DOD-wide lodging efforts. GAO was asked to address (1) how each military service and DOD manages, funds, and assesses the performance of its lodging programs to meet short- and long- term needs, and (2) the effect that lodging privatization would have on the costs to the Army and the ability to maintain and recapitalize facilities. GAO is also providing information on DOD's actions to implement prior recommendations regarding the lodging program. GAO obtained data from the Office of the Secretary of Defense, the military services and visited nine military installations.
Each military service takes its own approach to manage and fund its lodging programs, but current DOD lodging guidance does not establish performance measures to assess program effectiveness. The Army and Air Force each manage their TDY and PCS lodging under a single organization, while the Navy and Marine Corps have separate organizations managing TDY and PCS facilities. The Marine Corps manages PCS lodging separately because it operates as a profit-generating morale, welfare, and recreation program. The services' lodging programs are provided varying levels of appropriated and nonappropriated fund support, which correlates with the room rates charged. For example, since the Air Force allocates more appropriated funds for program expenses, it charges less than does the Navy PCS program, which is sustained with the revenues generated from room rates. Determining total program costs across the services is difficult because some of the data reported are estimated or hard to collect. Though DOD has a lodging strategic plan, it has not been updated since 1999. DOD has not established lodging performance measures, and the services vary in their efforts to determine program effectiveness. Performance measures could help in assessing future program plans. The Army believes privatization will provide for faster improvement and long-term sustainment of lodging facilities and avoid costs. GAO recognizes these benefits, but its analysis shows privatization could increase costs through increased room rates and create operating challenges that have implications beyond the Army, such as uneven lodging occupancy and room rates where joint basing is planned. Under privatization, the Army projects that a developer will renovate existing or construct new lodging facilities in 7 years, and provide for their adequate sustainment over the 50-year project life. In contrast, the Army projects it would take over 20 years and cost about $1.1 billion to upgrade all lodging facilities under current plans, which do not provide for adequate long-term sustainment. GAO found that lodging privatization could increase costs to the government by about $75 million per year through increased room rates if all lodging facilities in the U.S. are privatized, with those costs borne by the operations and maintenance and military personnel appropriation accounts. The Army currently estimates it will also incur at least $17.3 million in onetime costs related to severance pay and discontinued service retirement annuities for lodging employees let go because of privatization. Privatization also may affect occupancy levels and exacerbate rate disparities among bases and between official and unofficial travelers, as well as lead to inconsistencies in room rates among services at future joint bases. Complying with relevant housing privatization legislation will allow congressional oversight of the Army's privatization of lodging. On October 6, 2006, DOD provided the military services with revised lodging guidance, but this guidance lacks performance standards and measures, and does not address which office within the Office of the Secretary of Defense is responsible for lodging policy and oversight of privatized lodging facilities.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-07-164, Defense Infrastructure: Continuing Challenges in Managing DOD Lodging Programs as Army Moves to Privatize Its Program
This is the accessible text file for GAO report number GAO-07-164
entitled 'Defense Infrastructure: Continuing Challenges in Managing DOD
Lodging Programs as Army Moves to Privatize Its Program' which was
released on December 15, 2006.
This text file was formatted by the U.S. Government Accountability
Office (GAO) to be accessible to users with visual impairments, as part
of a longer term project to improve GAO products' accessibility. Every
attempt has been made to maintain the structural and data integrity of
the original printed product. Accessibility features, such as text
descriptions of tables, consecutively numbered footnotes placed at the
end of the file, and the text of agency comment letters, are provided
but may not exactly duplicate the presentation or format of the printed
version. The portable document format (PDF) file is an exact electronic
replica of the printed version. We welcome your feedback. Please E-mail
your comments regarding the contents or accessibility features of this
document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
December 2006:
Defense Infrastructure:
Continuing Challenges in Managing DOD Lodging Programs as Army Moves to
Privatize Its Program:
GAO-07-164:
GAO Highlights:
Highlights of GAO-07-164, a report to congressional requesters
Why GAO Did This Study:
The Department of Defense (DOD) transient lodging programs were
established to provide quality temporary facilities for authorized
personnel, and reduce travel costs through lower rates than commercial
hotels. DOD has approximately 82,000 temporary duty (TDY) and permanent-
change-of-station (PCS) rooms worldwide, and reported that it cost
about $860 million in appropriated and nonappropriated funds to operate
them in fiscal year 2005. While the Army plans to privatize its lodging
in the United States, there are concerns as to whether these plans are
cost-effective, and how they relate to DOD-wide lodging efforts.
GAO was asked to address (1) how each military service and DOD manages,
funds, and assesses the performance of its lodging programs to meet
short- and long- term needs, and (2) the effect that lodging
privatization would have on the costs to the Army and the ability to
maintain and recapitalize facilities. GAO is also providing information
on DOD‘s actions to implement prior recommendations regarding the
lodging program. GAO obtained data from the Office of the Secretary of
Defense, the military services and visited nine military installations.
What GAO Found:
Each military service takes its own approach to manage and fund its
lodging programs, but current DOD lodging guidance does not establish
performance measures to assess program effectiveness. The Army and Air
Force each manage their TDY and PCS lodging under a single
organization, while the Navy and Marine Corps have separate
organizations managing TDY and PCS facilities. The Marine Corps manages
PCS lodging separately because it operates as a profit-generating
morale, welfare, and recreation program. The services‘ lodging programs
are provided varying levels of appropriated and nonappropriated fund
support, which correlates with the room rates charged. For example,
since the Air Force allocates more appropriated funds for program
expenses, it charges less than does the Navy PCS program, which is
sustained with the revenues generated from room rates. Determining
total program costs across the services is difficult because some of
the data reported are estimated or hard to collect. Though DOD has a
lodging strategic plan, it has not been updated since 1999. DOD has not
established lodging performance measures, and the services vary in
their efforts to determine program effectiveness. Performance measures
could help in assessing future program plans.
The Army believes privatization will provide for faster improvement and
long-term sustainment of lodging facilities and avoid costs. GAO
recognizes these benefits, but its analysis shows privatization could
increase costs through increased room rates and create operating
challenges that have implications beyond the Army, such as uneven
lodging occupancy and room rates where joint basing is planned. Under
privatization, the Army projects that a developer will renovate
existing or construct new lodging facilities in 7 years, and provide
for their adequate sustainment over the 50-year project life. In
contrast, the Army projects it would take over 20 years and cost about
$1.1 billion to upgrade all lodging facilities under current plans,
which do not provide for adequate long-term sustainment. GAO found that
lodging privatization could increase costs to the government by about
$75 million per year through increased room rates if all lodging
facilities in the U.S. are privatized, with those costs borne by the
operations and maintenance and military personnel appropriation
accounts. The Army currently estimates it will also incur at least
$17.3 million in onetime costs related to severance pay and
discontinued service retirement annuities for lodging employees let go
because of privatization. Privatization also may affect occupancy
levels and exacerbate rate disparities among bases and between official
and unofficial travelers, as well as lead to inconsistencies in room
rates among services at future joint bases. Complying with relevant
reporting requirements contained in housing privatization legislation
will allow congressional oversight of the Army‘s privatization of
lodging.
On October 6, 2006, DOD provided the military services with revised
lodging guidance, but this guidance lacks performance standards and
measures, and does not address which office within the Office of the
Secretary of Defense is responsible for lodging policy and oversight of
privatized lodging facilities.
What GAO Recommends:
GAO is making recommendations to improve DOD‘s oversight of the lodging
program. In commenting on a draft of this report, DOD agreed with the
recommendations.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-164].
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:
Services Use Decentralized Approach to Manage and Fund Lodging
Programs:
Army's Privatization Plans Could Upgrade Facilities Faster but Will
Increase Government Costs and Create Other Challenges:
Revised DOD Lodging Policy Does Not Provide Clear Performance
Standards:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Military Services' Previous Lodging Public-Private
Ventures:
Appendix III: Comments from the Department of Defense:
Appendix IV: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Magnitude of DOD's TDY and PCS Lodging Programs:
Table 2: Lodging Occupancy by Percent of Official and Unofficial
Travelers (Fiscal Year 2005):
Table 3: Comparison of Average Daily Room Rates by Lodging Program for
Fiscal Year 2005:
Table 4: Lodging Capital Expenditures by Military Service for Fiscal
Years 2003 through 2005:
Table 5: Comparison of Alternatives to Improve Army Lodging:
Table 6: Army Comparison of Costs between Government-owned and
Privatized Lodging for Group A Installations:
Table 7: Military Services' Previous Lodging Public-Private Ventures:
Figures:
Figure 1: Appropriated and Nonappropriated Funding for Lodging Programs
by Military Service for Fiscal Years 2003 through 2005:
Figure 2: Lodging Program Expenses per Room for Fiscal Year 2005:
Abbreviations:
DOD: Department of Defense:
DSR: discontinued service retirement:
LCA: Lodging Capital Assessment:
LDMP: lodging development and management plan:
MHPI: Military Housing Privatization Initiative:
MWR: morale, welfare, and recreation:
OMB: Office of Management and Budget:
OSD: Office of the Secretary of Defense:
PAL: Privatization of Army Lodging:
PCS: permanent-change-of-station:
TDY: temporary duty:
U.S.C.: United States Code:
VERA: voluntary early retirement authority:
United States Government Accountability Office:
Washington, DC 20548:
December 15, 2006:
The Honorable Ike Skelton:
Ranking Minority Member:
The Honorable Solomon Ortiz:
Ranking Minority Member:
Subcommittee on Readiness:
The Honorable Vic Snyder:
Ranking Minority Member:
Subcommittee on Military Personnel:
Committee on Armed Services:
House of Representatives:
The Department of Defense (DOD) principally operates two types of
hotels,[Footnote 1] or lodges, to support official travelers. The first
type, called temporary duty (TDY) lodges, primarily supports military
and civilian personnel temporarily traveling on official business. The
second, called permanent-change-of-station (PCS) lodges, primarily
supports military personnel and their families who are moving to new
duty stations. These lodges are intended to provide military travelers
and their families with a clean, affordable place to stay while they
prepare to move and while they wait for permanent quarters at their new
duty stations. According to the 1999 DOD Lodging Strategic Plan, the
program goals are to (1) promote customer satisfaction through
exceptional service, (2) develop a professional management team and
motivated workforce, (3) employ a corporate approach to enhance
business-based methods of operation, (4) develop and manage the lodging
facilities, (5) assure sound financial management and accountability
reflective of the hospitality industry, and (6) pursue efficiencies
through interservice cooperative efforts. In March 2002,[Footnote 2] we
recommended that DOD should provide the military services with a policy
framework, including improved lodging guidance, to help achieve DOD's
lodging program management objectives.
DOD has approximately 82,000 transient lodging rooms. The Army and the
Air Force each manages its TDY and PCS lodging under the same
organization, while the Navy and Marine Corps both opt to have separate
organizations manage TDY lodges and PCS facilities. Over the past
decade the Army, Air Force, and Navy have entered into limited public-
private ventures to construct and operate lodging facilities. Recently,
the Army announced plans to privatize its entire domestic lodging
program utilizing the Alternative Authority for Acquisition and
Improvement of Military Housing legislation, commonly referred to as
Military Housing Privatization Initiative (MHPI) legislation.[Footnote
3]
You requested that we review the services' lodging programs. Our
objectives were to (1) describe how each military service manages,
funds, and assesses the performance of its lodging program to meet
short-and long-term needs; and (2) assess the effect that privatization
of lodging would have on the cost to the Army, and on its capability to
maintain and recapitalize lodging facilities. Additionally, we are
providing information concerning the status of GAO's prior
recommendations regarding DOD lodging programs.
To determine how the military services manage and fund their lodging
programs, we reviewed DOD and military service lodging policies and
regulations and interviewed key officials in the Office of the
Secretary of Defense (OSD) and the military services responsible for
lodging programs. We analyzed the appropriated and nonappropriated fund
support for lodging between fiscal years 2003 and 2005. Furthermore, we
visited eight military installations (two in each military service) to
determine how each of the services manages and supports its lodges and
to observe their physical condition. To identify and assess Army plans
to privatize lodging in the United States, we interviewed officials
within the Office of the Assistant Secretary of the Army (Installations
and Environment) and analyzed documentation used to support its
decision to privatize lodging. We also interviewed service officials
and developers involved in previous lodging public-private ventures to
identify lessons learned from these efforts. Finally, we met officials
in the Office of the Secretary of Defense (Personnel and Readiness) to
determine the status of implementing GAO's prior recommendation to
improve DOD lodging guidance. We conducted our work from December 2005
through October 2006 in accordance with generally accepted government
auditing standards. Further details on our scope and methodology are
described in appendix I.
Results in Brief:
Each military service takes its own approach to manage and fund its
lodging programs, but current DOD lodging guidance does not establish
detailed performance measures needed to assess program effectiveness.
The Army and the Air Force each manages its TDY and PCS lodging under a
single organization, while the Navy and Marine Corps opt to have
separate organizations manage TDY lodges and PCS facilities. The Marine
Corps manages PCS lodging separately because it is operated as a
nonappropriated fund, revenue-generating, morale, welfare, and
recreation (MWR) program, and the Navy manages PCS lodging separately
because it operates it almost exclusively with nonappropriated funds.
The military services' lodging programs receive varying levels of
appropriated and nonappropriated fund support. The level of
appropriated fund support allocated influences the amount the programs
charge for room rates. For example, since the Air Force allocates more
appropriated fund support for program expenses, it charges less than
the Navy PCS program, which is sustained with the revenues generated
from room rates. Determining total program costs across the services is
challenging, as some of the data reported to OSD are estimated and are
difficult to collect. While OSD has established a lodging strategic
plan, it has not established performance measures to assess whether the
plan's goals are being achieved, and the extent to which the military
services have taken the initiative to determine how program
effectiveness varies. For example, Navy PCS lodging is the only program
that, across all installations, collects and analyzes customer
feedback, conducts systematic performance reviews, and compares
performance against industry benchmarks.
The Army believes privatizing its lodging may provide for faster
improvement and long-term sustainment of lodging facilities as well as
achieve savings, but our analysis shows privatization could increase
government costs. Further, privatization could create some operating
challenges that have implications beyond the Army. Under the Army's PAL
(Privatization of Army Lodging) program, the Army projects a developer
will renovate existing or construct new lodging facilities in 7 years
(by 2014), and provide for adequate sustainment of lodging facilities
over the 50-year project life. In contrast, the Army projects it would
take over 20 years and cost about $1.1 billion to upgrade all lodging
facilities under current plans, which do not provide for adequate long-
term sustainment. However, we found that privatization of lodging while
providing faster recapitalization and sustainment of facilities, will
likely increase costs to the government by about $75 million per year
through increased lodging fees if all lodging facilities in the United
States are privatized with those costs borne by the operations and
maintenance and military personnel appropriation accounts. According to
Army officials, the projected increased cost would be offset to some
degree by a reduction in the appropriated funding that currently
supports lodging operations for such items as utilities and police and
fire protection, but the amount of such savings is difficult to gauge.
In addition, the Army currently estimates it will incur a total of
about $17.3 million in onetime costs for severance pay ($12.7 million)
and discontinued service retirement annuities ($4.6 million) for
lodging employees let go because of privatization. Furthermore,
privatization of Army lodging may potentially reduce current occupancy
levels since, once privatized, a facility is no longer considered
government lodging and therefore official travelers will no longer be
required to stay there. Additionally, privatization could create rate
disparities among bases and between official and unofficial travelers,
as well as lead to inconsistencies in room rates among services at
joint bases.
The Office of the Under Secretary of Defense for Personnel and
Readiness issued a revised lodging instruction on October 6, 2006.
However, the instruction lacks detailed performance standards and
measures and does not resolve the question as to which office within
the Office of the Secretary of Defense is responsible for providing
lodging policy and oversight of privatized lodging facilities.
We are making recommendations for executive action designed to help DOD
improve its lodging program management and oversight and to help ensure
the successful implementation of the Army's privatization of lodging.
In commenting on a draft of this report, DOD concurred with both of our
recommendations and indicated planned actions and timeframes for
accomplishing them.
Background:
DOD's lodging programs were established to maintain mission readiness
and improve productivity, and were intended to provide good quality
temporary lodging facilities and service for authorized personnel. They
were also created with the goal of reducing official travel costs for
DOD's mobile military community by charging room rates lower than those
of commercial hotels. Within the Office of the Secretary of Defense,
the Office of the Under Secretary of Defense (Personnel and Readiness)
has issued the majority of guidance governing TDY and PCS lodging
program and resource management, although the Office of the Under
Secretary of Defense (Acquisition, Technology and Logistics) has
established some lodging room quality standards within its housing
management guidance and is responsible for the housing privatization
efforts. Further, while DOD Instruction 1015.11 states that the
Principal Deputy Under Secretary of Defense (Personnel and Readiness)
is to provide lodging oversight, guidance, and procedures to ensure
proper administration and management of DOD lodging programs and
monitor compliance with these procedures and guidance,[Footnote 4] DOD
Directive 4165.63 states that DOD housing (the responsibility for
management of which rests with the Under Secretary of Defense for
Acquisition, Technology, and Logistics) "encompasses housing for
accompanied and unaccompanied personnel and temporary lodging
facilities."[Footnote 5] Each of the services also has policies to
guide the administration of its lodging programs.
In 1999, the Office of the Under Secretary of Defense (Personnel and
Readiness) developed the DOD Lodging Strategic Plan and DOD Lodging
Program Standards, and neither have been revised or updated
subsequently. The program goals established in the lodging strategic
plan are to (1) promote customer satisfaction through exceptional
service, (2) develop a professional management team and motivated
workforce, (3) employ a corporate approach to enhance business-based
methods of operation, (4) develop and manage the lodging facilities,
(5) assure sound financial management and accountability reflective of
the hospitality industry, and (6) pursue efficiencies through
interservice cooperative efforts. The DOD Lodging Program Standards
task the military services with applying these program standards and
developing detailed operating standards as appropriate, so each of the
services also has policies to guide the administration of its lodging
programs.
DOD has approximately 82,000 transient lodging rooms.[Footnote 6] The
major differences between TDY and PCS lodges are the number of rooms in
their inventory and the type of traveler they primarily serve. Table 1
shows the magnitude of DOD's lodging programs.
Table 1: Magnitude of DOD's TDY and PCS Lodging Programs:
Service: Army[B];
Number of rooms[A]: TDY: [Empty];
Number of rooms[A]: PCS: [Empty];
Number of rooms[A]: Total: 19,000.
Service: Air Force;
Number of rooms[A]: TDY: 27,000;
Number of rooms[A]: PCS: 3,000;
Number of rooms[A]: Total: 30,000.
Service: Navy;
Number of rooms[A]: TDY: 26,000;
Number of rooms[A]: PCS: 3,000;
Number of rooms[A]: Total: 29,000.
Service: Marine Corps;
Number of rooms[A]: TDY: 3,000;
Number of rooms[A]: PCS: 900;
Number of rooms[A]: Total: 3,900.
Service: Total;
Number of rooms[A]: TDY: 75,000;
Number of rooms[A]: PCS: 7,000;
Number of rooms[A]: Total: 82,000.
Source: Military services.
[A] Numbers are rounded to nearest thousand except for Marine Corps PCS
number which is rounded to the nearest hundred.
[B] The Army does not distinguish rooms and facilities as TDY or PCS.
Both types of travelers are tracked, however, and there are different
room styles to accommodate their needs.
[End of table]
Transient lodging serves various military and civilian travelers. TDY
lodges serve mainly individual military or civilian travelers who are
temporarily assigned to a duty station other than their home station.
PCS lodges mainly serve military personnel and their families who are
changing permanent duty stations. On a space-available basis, TDY and
PCS lodges can accommodate some kinds of "unofficial travelers," such
as military retirees and relatives and guests of service members
assigned to the installation.
Total occupancy rates vary by program, ranging from 75 to 92 percent
for fiscal year 2005. In addition, lodging occupancy by official and
unofficial travelers varies by service. The Army serves the highest
percentage of official travelers, and the Marine Corps the lowest, as
table 2 shows.
Table 2: Lodging Occupancy by Percent of Official and Unofficial
Travelers (Fiscal Year 2005):
Service: Army;
Percent of official travelers: TDY: 83;
Percent of official travelers: PCS: 8;
Percent of official travelers: Total[A]: 92;
Percent of unofficial travelers: 8.
Service: Air Force;
Percent of official travelers: TDY: 79;
Percent of official travelers: PCS: 9;
Percent of official travelers: Total[A]: 87[A];
Percent of unofficial travelers: 13.
Service: Navy;
Percent of official travelers: TDY: 83;
Percent of official travelers: PCS: 4;
Percent of official travelers: Total[A]: 88[A];
Percent of unofficial travelers: 12.
Service: Marine Corps;
Percent of official travelers: TDY: 64;
Percent of official travelers: PCS: 11;
Percent of official travelers: Total[A]: 75;
Percent of unofficial travelers: 25.
Source: Military services.
[A] Because of rounding, TDY and PCS percentages do not equal "percent
official."
[End of table]
Funds provided for lodging operations originate from two sources:
appropriated funds and nonappropriated funds. DOD Lodging guidance
provides specific guidelines on whether an expense should be paid for
with appropriated or nonappropriated funding.[Footnote 7] DOD
Instruction 1015.12 states that the military services have the
authority to waive the fund source that will create higher
nonappropriated expenses for TDY lodging and PCS lodging not run as an
MWR program. Appropriated funds are typically used for operations and
maintenance expenses, such as laundry services and utilities, and some
kinds of minor construction. Nonappropriated funds are generated from
room rate revenues, and each of the lodging programs sets room rates
according to the amount of revenue needed to pay for expenses not
covered by appropriated funds. Nonappropriated funds are used to pay
for a wide variety of expenses, from some employee wages to certain
kinds of replacement furnishings. Funds generated from room rates at
TDY lodging and PCS lodging not run as an MWR program are considered to
be nonappropriated because the traveler pays for the charge at the time
of his or her stay. Most lodging patrons are on official TDY or PCS
travel, however, and are reimbursed with funds appropriated to the
military services for travel either from operations and maintenance or
military personnel accounts. Thus, the majority of funding originates
from appropriated dollars. However, to distinguish funding streams,
revenues from room sales are referred to as nonappropriated funds.
According to DOD financial data, the total amount of appropriated and
nonappropriated funding support for operating the lodging programs was
about $857million for fiscal year 2005.
Room rates at these lodges are intended to be set at the lowest rate
possible to reduce travel costs, yet generate enough revenue to cover
expenses. Some services have added a surcharge[Footnote 8] to the
nightly room rate, which they accumulate and use for lodge construction
and major renovation. Revenues from TDY lodging must be maintained in a
separate nonappropriated fund account, designated as lodging, or
billeting, fund.[Footnote 9] DOD Instruction 1015.12 permits military
services to operate PCS lodging either (1) through a lodging or
billeting fund, or (2) through an MWR fund. PCS lodging that is built,
maintained, or operated by other than the MWR program or exchange
service must be maintained in a separate fund account, designated as a
lodging, or billeting, fund, and is independent of the single MWR fund.
When PCS needs are met by MWR operating funds, they are part of the
single MWR nonappropriated fund instrumentality and are operated as a
category C revenue generating activity. The Marine Corps operates its
PCS lodging as part of its MWR program, which is operated as a Category
C, revenue generating program. Thus, the lodging revenues are deposited
into the Marine Corps's single MWR nonappropriated fund account, which
can be used to benefit any of the service's MWR programs.
The vast majority of transient lodging facilities are managed and
operated by the military services with civilian workers paid by
nonappropriated funds. Over the past decade, however, the Army, Air
Force, and Navy have entered into limited public-private ventures to
construct and operate lodging facilities on 10 installations with some
degree of risk shared between the government and the private sector.
Appendix II provides additional details concerning the 10 previous
public-private lodging ventures.
Privatization of Army Lodging:
According to the Army, approximately 80 percent of Army lodging
inventory needs replacement or major renovation because of persistent
funding shortfalls and the lack of capital investment. The Army
estimates that, absent privatization, it would cost about $1.1 billion
and would take more than 20 years to renovate or build new lodging
facilities. Given the cost and length of time associated with
revitalization under the Lodging Wellness Plan, the Army considered the
use of commercial loans and enhanced-use leasing, before deciding on
privatization of lodging facilities in the United States. The Army is
using the same legislation that allowed the department to privatize its
family housing for its lodging privatization effort.[Footnote 10]
Congress established the MHPI in the National Defense Authorization Act
for Fiscal Year 1996.[Footnote 11] The MPHI legislation gives the
Secretary of Defense the authority to (with certain restrictions)
provide direct loans, rental guarantees, ground leases, and other
incentives to encourage private developers to construct and renovate
housing. Under the Army's PAL program, the selected developer will
receive a 50-year ground lease and will be responsible for asset,
property, and maintenance management.
The Army placed installations in the United States into one of three
privatization groups. According to the Army, this was done to mitigate
some of the risk associated with privatization, such as the developer
choosing high-value properties over those in greater need of repair.
The Army planned to select a developer for Group A during September
2006, and to transfer the lodging in this group to the developer by
September 2007.[Footnote 12] The Army plans to transfer installations
in Group B by September 2008 and those in Group C by September 2009.
The Army anticipates that all lodging facilities will be renovated or
replaced in 7 years, by 2014. Furthermore, the Army expects the
developers to establish a lodging sustainment and recapitalization fund
to maintain the lodging over the 50-year life of the project.
On September 28, 2006, the Army selected a developer for Group A which
must submit a lodging development and management plan (LDMP). According
to the Army PAL program, after approval of the LDMP business plan by
Headquarters, Department of the Army, OSD, and the Office of Management
and Budget (OMB), Congress will have a 45-day period to review the plan
prior to the Army transferring Group A to the developer.
Services Use Decentralized Approach to Manage and Fund Lodging
Programs:
Each military service takes its own approach to manage and fund its
lodging programs, but current DOD lodging guidance does not establish
performance standards and measures needed to assess program
effectiveness.
Management and Funding Approaches Differ:
Each of the military services uses a different approach to manage and
fund its transient lodging programs. The Army and the Air Force each
manage their TDY and PCS lodging under one organization, while the Navy
and Marine Corps both opt to have one organization manage TDY lodges
and another one for PCS facilities. The Army and Air Force believe
using one management structure to serve both TDY and PCS travelers is
the most efficient approach. Alternatively, the Navy and Marine Corps
believe operating two separate programs, one for TDY travelers and one
for PCS travelers, is the most efficient approach for meeting their
service's needs. Neither of the two military services currently has
plans to merge management of the lodging programs.
The Navy has operated its two programs separately since 1969 when the
Navy PCS lodging program was established to be operated almost entirely
with nonappropriated funds.[Footnote 13] The Marine Corps also operates
its TDY and PCS lodging separately. PCS lodging operates almost
entirely with nonappropriated funds through the Marine Corps's MWR
program and generates a profit, which is not allowed for TDY lodging.
The room revenues from the Marine Corps's PCS lodging are deposited in
the Marine Corps Community Service account, which also contains funds
from other MWR activities and the Marine Corps Exchange Service. In
return, the PCS lodging program receives overhead services, such as
personnel and accounting, and funds for major repairs or new
construction projects. By contrast, all of the other lodging programs
have a separate financial account that must at least "break even" on an
annual basis, receiving and generating just enough revenues to operate
and sustain the program and facilities.
The military services' lodging programs receive varying levels of
appropriated and nonappropriated fund support. The level of
appropriated fund support allocated influences the amount the programs
charge for room rates. Nonappropriated funds are generated through room
sales, and each of the lodging programs sets room rates according to
the amount of revenue needed to pay for expenses not covered by
appropriated funds. For example, the Navy and Marine Corps allocate
very limited amounts of appropriated funding to their PCS lodging, so
the room rates are higher to generate more nonappropriated funds for
program expenses.[Footnote 14] Room rates are also influenced by
surcharges that the Army and Air Force charge to raise revenue for room
and facility improvements. As table 3 illustrates, average daily room
rates vary considerably across the programs, ranging from $14 to $65.
Table 3: Comparison of Average Daily Room Rates by Lodging Program for
Fiscal Year 2005:
Military services' lodging programs: Army;
Room rate includes daily surcharge for adequate rooms[A]: $10;
Total average daily room rate: $37.
Air Force.
Military services' lodging programs: TDY;
Room rate includes daily surcharge for adequate rooms[A]: 7;
Total average daily room rate: 29.
Military services' lodging programs: PCS;
Room rate includes daily surcharge for adequate rooms[A]: 6-8;
Total average daily room rate: 33.
Navy.
Military services' lodging programs: TDY;
Room rate includes daily surcharge for adequate rooms[A]: n.a;
Total average daily room rate: 14.
Military services' lodging programs: PCS;
Room rate includes daily surcharge for adequate rooms[A]: n.a;
Total average daily room rate: 65.
Marine Corps.
Military services' lodging programs: TDY;
Room rate includes daily surcharge for adequate rooms[A]: n.a;
Total average daily room rate: 19.
Military services' lodging programs: PCS;
Room rate includes daily surcharge for adequate rooms[A]: n.a;
Total average daily room rate: 57.
Source: Military services.
Note: n.a.=not applicable; there is no surcharge.
[A] A surcharge is an assessment added to the daily room rate to be
used in the future for capital improvements to lodging facilities. The
Army initiated its surcharge in fiscal year 2000. The Air Force began
applying the assessment for PCS facilities in 1982 and TDY facilities
in 1996.
[End of table]
Navy PCS is the only program that accrues all future capital
expenditures through room revenues, while the other programs benefit
from other sources of support, such as appropriated funds, shared
construction funds, or lodging surcharges. A Navy official explained
that this is one reason why the Navy PCS average daily room rate is
higher than other programs' rates. For fiscal year 2005, five of the
six programs' room rates were lower than the $60 standard per diem
lodging rate, and all were lower than the $89 average per diem lodging
rate for nonstandard areas. The per diem rates are what a traveler
could expect to pay, on average, and subsequently be reimbursed for,
while staying off-base in a commercial hotel. The DOD room rates do not
necessarily include all sources of program support. However, so
comparing room rates to the per diem lodging rates is not an
appropriate measure of cost efficiency or program value.
The amount of appropriated funds and nonappropriated funds the services
reported spending on lodging program expenses for fiscal years 2003
through 2005 varied considerably as seen in figure 1.
Figure 1: Appropriated and Nonappropriated Funding for Lodging Programs
by Military Service for Fiscal Years 2003 through 2005:
[See PDF for image]
Source: GAO analysis of data from the military services.
Note: These data were officially reported to OSD by the military
services via 1015.15 DOD lodging reports. Nonetheless, Navy officials
raised concerns over the consistency of the data being reported across
the services.
[End of figure]
The Air Force, Navy TDY program, and Marine Corps PCS program all
experienced a decrease in appropriated fund support allocated for
lodging program operations between fiscal years 2003 and 2005. The
change in appropriated funds for the Navy's TDY program was
significant, falling from an estimated $48.7 million to $17.8 million,
while nonappropriated funds provided for the program rose from $85.7
million to $109.9 million. Navy officials told us that appropriated
funds allocated to this program decreased due to Navy-wide funding
reductions. According to data from fiscal years 2003 through 2005, the
Air Force allocates the greatest total amount of appropriated fund
support for program operations among the military services, but it also
has the largest number of rooms in its inventory.
Lodging Programs Lack Business-based Performance Standards and Measures
to Assess Program Effectiveness:
Current DOD lodging guidance does not establish detailed performance
standards and measures needed for monitoring and assessing program
effectiveness. The Office of the Under Secretary of Defense (Personnel
and Readiness), in conjunction with the military services, developed
the DOD Lodging Strategic Plan and the DOD Lodging Program Standards in
1999, but these documents have not been updated or revised since then.
The lodging program standards provide minimum requirements for program
services and amenities, but task the military services with developing
detailed operating plans. While the strategic plan establishes a
mission statement and a list of goals for the DOD lodging programs, the
Office of the Under Secretary has not created performance measures to
assess progress in achieving these goals.
DOD lodging officials with work experience in private hotels told us
that it is a common practice in the hospitality industry to use
benchmarks to track progress and determine success. For example, Smith
Travel Research annually publishes the Hotel Operating Statistics
study, which provides an overview of U.S. lodging industry performance,
drawing data from the operating statements of over 5,100 hotels. Some
of the business-based measures reported in the study include room
occupancy, average daily room rate, revenue per available room, and the
number of rooms available and sold, among others. While DOD lodging
programs are collecting and reporting some of these measures, lodging
officials are unclear how the data is being used, since performance
standards have not been established. In addition, some lodging
officials expressed concerns about the reliability and consistency of
the cost and program data, which will be discussed in greater detail
below. Among the various reasons for this, the officials noted that DOD
has not provided common definitions and guidance about how the data
should be collected and reported. For consistent data collection and
reporting, private hotels can use common definitions and calculations
established in the Uniform System of Accounts for the Lodging Industry,
issued by the Educational Institute of the American Hotel and Lodging
Association.
Each fiscal year the military services submit the following reports to
the Under Secretary of Defense (Personnel & Readiness) for each lodging
program:
* a financial report that includes income and expense information;
* a lodging standards status report, which shows the proportion of
facilities and rooms that provide the required services and amenities;
and:
* a program report, which includes descriptive information and some
summary statistics, such as the occupancy rate, average daily room
rate, number of rooms sold, and room revenue.
The data in these reports are primarily descriptive and are not linked
to performance measures of program efficiency and effectiveness, which
limits their utility. In previous work, GAO has found that developing
measurable performance standards coupled with ongoing monitoring and
reporting on program performance can help program managers and Congress
determine whether goals are being achieved. Given the variety of
approaches that the military services have taken to operate the lodging
programs, it is difficult to evaluate and compare their respective
efficiency and effectiveness without commonly defined measures of
success. In the absence of performance measures and reports, we used
our discussions with lodging program officials and available data to
describe the steps that the lodging programs have taken to meet the
program goals and objectives from the DOD Lodging Strategic Plan.
Promoting Customer Satisfaction:
The degree to which the military services' lodging programs solicit
customer feedback is limited. DOD guidance requires that lodging
programs periodically measure customer demand, usage, and satisfaction
and act upon these findings,[Footnote 15] but no other specific
guidance is provided.[Footnote 16] The Navy PCS program provides a
customer satisfaction survey to every guest, and in 2005, an
independent contractor calculated a customer satisfaction rate of 95
percent. By contrast, none of the other lodging programs are
systematically tracking customer satisfaction centrally, though some
installations may be soliciting customer feedback. Annually, the
lodging programs report their overall lodging occupancy rate for the
year, but because no standard way to calculate occupancy has been
defined or used by all of the military services, it is unclear whether
the figures can be compared across programs. For example, some programs
could calculate the figure using total rooms in their inventory, while
other programs could exclude rooms undergoing service or renovation.
Determining Program Costs:
DOD lodging was established with the goal of saving military travel
funds by providing temporary lodging at a lower overall cost than
paying for travelers to stay at commercial hotels. However, neither OSD
nor the military services measure and report on cost effectiveness of
their lodging programs. In addition, the cost data reported by the
military services to OSD annually may not adequately reflect total
lodging program costs, because lodging program officials stated that
determining some appropriated fund support can be difficult. For
example, some support services, such as snow removal, laundry, or fire
and police protection, are paid for by the installation, and costs are
not tracked by program. Therefore, lodging officials must estimate the
value of the portion of the indirect appropriated fund support that was
spent on lodging. For example, the Navy PCS program is the only lodging
program that can determine actual electricity costs, while the other
programs all estimate utilities expenses.
During our review we identified the following issues with the lodging
costs reported by the military services for fiscal year 2005.
* The Army reported a total of $6.2 million in appropriated funds
support for fiscal year 2005 to OSD. However, the Army later collected
data directly from every installation as part its privatization effort
that indicated appropriated fund support for the same time period was
actually about $27.9 million; this included increased costs for
personnel salaries, utilities, repairs, laundry, and supplies. In
addition, while gathering information at the installation level for its
privatization initiative, Army officials found great inconsistencies in
the way that cost data and other information, such as the average daily
room rate, were collected and calculated across installations.
* The Marine Corps PCS program reported total expenses of about $9.6
million for fiscal year 2005, however this figure does not include
support services paid for out of the Marine Corps Community Services
account, which are reported to OSD in aggregate but are not tracked by
program. Marine Corps officials estimate the value of the support
services to the PCS lodging program was about $3.7 million for fiscal
year 2005.
* The Navy's TDY program does not use a consistent approach across
installations to estimate utilities and collect other types of
appropriated fund support, which raises questions about the reliability
of the data. In addition, when following up on what appeared to be an
unusual trend in program funding, we found that the Navy TDY program
mistakenly overreported to OSD the amount of appropriated funds support
the lodging program received in fiscal years 2003 and 2004 by
approximately $120 million total, which it later corrected.
* Similarly, after GAO observed significant increases in the Air
Force's nonappropriated funds expenditures for fiscal year 2005, the
Air Force realized it mistakenly overreported the amount of
nonappropriated fund support by about $120 million. The Air Force
attributed this to a clerical error and corrected the report.
To compare estimated total program costs across the military services'
lodging programs, which vary considerably in size, we standardized
financial data reported to OSD on a per room basis. Daily program
expenses per room varied considerably across programs for fiscal year
2005, ranging from $13 to $47 as seen in figure 2.
Figure 2: Lodging Program Expenses per Room for Fiscal Year 2005:
[See PDF for image]
Source: GAO analysis of data from the military services.
Notes: Reported expenses were paid with both appropriated and
nonappropriated funds. Capital expenditures for the year are excluded
from this chart, as the amounts are large, vary from year to year, and
would skew the program costs when looking at only one fiscal year.
These data were officially reported to OSD by the military services via
1015.15 DOD lodging reports. Nonetheless, Navy officials raised
concerns over the consistency of the data being reported across the
services. This analysis did not include consideration of the military
service's occupancy rates.
[End of figure]
We also included the other estimated program expenditures identified by
the Army and Marine Corps that were not included in the financial
report to OSD, as previously discussed in this section of the report.
Maintaining and Recapitalizing Lodging Facilities:
DOD lodging guidance sets forth basic guidance on quality standards,
such as minimum room size and specific amenities that must be
provided.[Footnote 17] In addition, the military services report
annually how many of their facilities have a furnishing replacement
plan, and a short-and long-term maintenance plan. However, each lodging
program determines its particular strategy for maintaining and
upgrading its rooms, as well as planning for facilities upgrades, such
as major renovations or construction. For example, the Army currently
relies on its Army Lodging Wellness Plan to repair, renovate, and
replace its outdated lodging facilities. According to the Army,
approximately 80 percent of its lodging inventory is currently in need
of replacement or major renovation. The lack of a recapitalization
component for long-term facility sustainment is part of what led the
Army to consider privatization. On the other hand, the Air Force has
developed additional guidance on what amenities facilities and rooms
should include. The Air Force estimates that 9 percent of its rooms are
what it considers to be inadequate, and it has implemented a room
surcharge to save for capital improvements. The Navy and Marine Corps's
TDY programs follow the DOD Lodging Standards, and maintenance and
recapitalization plans are made at the installation level. Neither
program has assessed the adequacy of room quality programwide.
Meanwhile, the Navy and Marine Corps's PCS lodging officials stated
that there are no inadequate rooms in the PCS lodging inventory and all
rooms meet DOD Lodging Standards. The Navy conducts annual inspections
of each PCS facility, evaluating not only the physical condition, but
also service standards, management responsibilities, and financial
procedures. Moreover, an independent company rated the Navy's PCS
lodging the fifth cleanest hotel in the United States in 2005, based on
customer interviews.
Table 4 shows the amount the lodging programs reported spending on
capital expenditures, which includes new construction and major
renovations of facilities and major equipment purchases for fiscal
years 2003 through 2005. These figures exclude operating funds spent on
minor renovations, and repair and maintenance. As the table
illustrates, the services have relied almost entirely on
nonappropriated funds for capital expenses.
Table 4: Lodging Capital Expenditures by Military Service for Fiscal
Years 2003 through 2005:
Dollars in thousands.
Service: Army;
Fiscal year 2003: Nonappropriated: $41,726;
Fiscal year 2003: Appropriated: $0;
Fiscal year 2004: Nonappropriated: $54,067;
Fiscal year 2004: Appropriated: $0;
Fiscal year 2005: Nonappropriated: $37,117;
Fiscal year 2005: Appropriated: $0.
Service: Air Force;
Fiscal year 2003: Nonappropriated: 47,965;
Fiscal year 2003: Appropriated: 18,900;
Fiscal year 2004: Nonappropriated: 102,325;
Fiscal year 2004: Appropriated: 0;
Fiscal year 2005: Nonappropriated: 94,249;
Fiscal year 2005: Appropriated: 0.
Service: Navy: TDY;
Fiscal year 2003: Nonappropriated: 0;
Fiscal year 2003: Appropriated: 0;
Fiscal year 2004: Nonappropriated: 0;
Fiscal year 2004: Appropriated: 0;
Fiscal year 2005: Nonappropriated: 0;
Fiscal year 2005: Appropriated: 49,000.
Service: Navy: PCS;
Fiscal year 2003: Nonappropriated: 22,033;
Fiscal year 2003: Appropriated: 0;
Fiscal year 2004: Nonappropriated: 17,907;
Fiscal year 2004: Appropriated: 0;
Fiscal year 2005: Nonappropriated: 12,946;
Fiscal year 2005: Appropriated: 0.
Service: Marine Corps: TDY;
Fiscal year 2003: Nonappropriated: 218;
Fiscal year 2003: Appropriated: 0;
Fiscal year 2004: Nonappropriated: 851;
Fiscal year 2004: Appropriated: 0;
Fiscal year 2005: Nonappropriated: 1,843;
Fiscal year 2005: Appropriated: 0.
Service: Marine Corps: PCS;
Fiscal year 2003: Nonappropriated: 14,026;
Fiscal year 2003: Appropriated: 0;
Fiscal year 2004: Nonappropriated: 407;
Fiscal year 2004: Appropriated: 0;
Fiscal year 2005: Nonappropriated: 2,380;
Fiscal year 2005: Appropriated: 0.
Source: Military services' data on 1015.15 reports provided to OSD.
Note: The amounts shown include military construction, major
renovations, and equipment purchases; the amounts shown do not include
operating funds spent on minor renovations, repair, and maintenance.
[End of table]
Army's Privatization Plans Could Upgrade Facilities Faster but Will
Increase Government Costs and Create Other Challenges:
The Army believes the lodging developer will renovate existing or
construct new lodging facilities sooner--in 7 years by 2014--than
otherwise planned by the Army, and provide for adequate sustainment of
lodging facilities over the 50-year project life. While this should
result in improved quality of facilities, it will also result in
additional cost to the government through increased lodging fees and
will not produce the savings suggested by earlier Army analysis. Our
analysis indicates that the Army's travel costs could increase by about
$75 million per year if all lodging facilities in the United States are
privatized. In addition, the Army could incur approximately $17.3
million in onetime costs associated with severance pay and discontinued
service retirement annuities for nonappropriated fund lodging employees
who would be let go if lodging is privatized. Furthermore,
privatization of Army lodging may potentially affect occupancy levels
and exacerbate rate disparities among bases and between official and
unofficial travelers, as well as lead to inconsistencies in room rates
among services at joint bases.
Army Expects Privatization to Provide Adequate Facilities Faster with
Long-term Sustainment:
The Army believes that the developer will renovate existing or
construct new lodging facilities in 7 years (by 2014), and will provide
for adequate sustainment of lodging facilities over the 50-year project
life. In contrast, if the Army continues with its current Wellness
Plan, it estimates that it would take until 2026 or later to bring all
rooms up to adequate condition. Additionally, the Wellness Plan does
not generate funds for adequate long-term lodging sustainment.
In November 1999, the Army initiated the Army Lodging Wellness Plan to
renovate and replace inadequate lodging. As part of the Wellness Plan,
the Army collects a surcharge, the Lodging Capital Assessment (LCA),
for each room night in Army lodging.[Footnote 18] The income from the
surcharge collected on each room night is placed in the Army Lodging
Fund and used to revitalize Army lodging facilities worldwide. This
surcharge generated approximately $229 million over the last 6 years
for the Army Lodging Fund. The Army spent about $75 million on lodging
improvements. In addition, the Army used $40 million to reimburse the
Morale, Welfare, and Recreation Fund for guest houses, which were
transferred to the Army lodging inventory when PCS travel was
recognized as official travel and guest houses as official government
lodging facilities.[Footnote 19]
In 2001, in preparation for a study by an independent consulting firm,
the Army estimated that it would cost about $657 million to repair or
renovate Army lodging worldwide. This study was conducted to facilitate
the Army's consideration of a private loan to finance the Army Lodging
Wellness Plan. In 2004, the Army revised its estimate to about $1.1
billion for lodging revitalization in its U.S. facilities. Using the
more recent 2004 estimate, GAO analysis determined that the Lodging
Wellness Program would take approximately 20 years or more to bring all
lodging facilities up to adequate standards.
GAO calculations estimate that the lodging surcharge generates $52.2
million annually in income. Even though the Army Lodging Fund showed a
positive balance of $133.6 million in fiscal year 2005, some of these
funds are already committed to revitalize lodging facilities overseas.
If the amount currently in the Army Lodging Fund is applied entirely to
U.S. facilities, lodging revitalization could take about 17 years to
complete. In either case, it would take at least 20 years to bring
rooms and facilities worldwide up to an acceptable level using the Army
Lodging Wellness approach. Table 5 shows a comparison of alternatives
to improve Army lodging.
Table 5: Comparison of Alternatives to Improve Army Lodging:
Dollars in millions.
Army Lodging Wellness Plan;
Year of estimate: 2001;
Army cost estimate[A]: $657;
Years to complete: 13;
Recapitalization/ sustainment included: No.
Army Lodging Wellness Plan;
Year of estimate: 2004;
Army cost estimate[A]: 1,100;
Years to complete: 20;
Recapitalization/ sustainment included: : No.
Privatization;
Year of estimate: 2006;
Army cost estimate[A]: 1,630;
Years to complete: 7;
Recapitalization/ sustainment included: Yes.
Source: GAO analysis of Army data.
[A] Represents the cost to complete all of the renovation or new
construction needs for all Army lodging facilities in the United States
assuming current demands.
[End of table]
In addition to the ability to revitalize lodging more quickly, the
privatization of Army lodging will provide sustained recapitalization
over the 50-year span of the project. According to the Army, a clause
requiring a recapitalization lock box will be included in the lease
with the private developer, to ensure that funds are available for
recapitalization.
Army Would Incur Increased Travel Costs:
The Army's plan to privatize its lodging would permit it to leverage
the resources of the private sector to recapitalize and replace its
existing lodging facilities. However, this will likely increase costs
to the government through increased lodging fees and it is unclear to
what extent other savings would occur as suggested by earlier Army
analysis.
The Army's initial cost analysis found that, over the 50-year life
cycle of the proposed leasing of Army lodging to a private developer,
the privatization scenario would result in a 16 percent cost savings to
the Army within the 13 installations included in Group A, as shown in
table 6.
Table 6: Army Comparison of Costs between Government-owned and
Privatized Lodging for Group A Installations:
Dollars in millions[A].
Category: Room Rates;
Government lodging: $1,301[B];
Privatized lodging: $1,608[C];
Difference: Amount: [Empty];
Percent: [Empty].
Category: Administrative and general expenses;
Government lodging: 212 [D];
Privatized lodging: 21[E];
Difference: Amount: [Empty];
Percent: [Empty].
Category: Appropriated fund employees;
Government lodging: 12;
Privatized lodging: [Empty];
Difference: Amount: [Empty];
Percent: [Empty].
Category: Capital expenditures (sustainment);
Government lodging: 100;
Privatized lodging: [Empty];
Difference: Amount: [Empty];
Percent: [Empty].
Category: New construction, renovation, and demolition;
Government lodging: 306;
Privatized lodging: [Empty];
Difference: Amount: [Empty];
Percent: [Empty].
Category: Total life-cycle cost;
Government lodging: $1,931;
Privatized lodging: $1,629;
Difference: Amount: $302;
Percent: 16%.
Source: U.S. Army.
[A] The Army used a 3 percent discount rate in the cost comparison.
[B] Represents 57% of per diem.
[C] Represents 75% of per diem.
[D] Includes DPW maintenance, utilities, laundry, Self Service Supply
Center services, fire and police protection, and other miscellaneous
support.
[E] Includes asset management at each installation for first 2-years
and Lodging Development Master Plan consultation.
[End of table]
We found that the Army's savings estimate was based on government
"should costs," which compared predicted costs under the privatization
and the amounts it "should cost" the government to own, operate,
upgrade, sustain, and recapitalize the same lodging assets as the
private developer. According to the Army, the estimate was prepared in
accordance with OMB and DOD guidelines, which required an estimate
based on "should cost." However, we believe, as we have reported in the
past concerning cost estimates for military privatization
projects,[Footnote 20] that it would be more appropriate to compare the
cost of a proposed privatization initiative with the cost of continued
government ownership on the basis of the real planned expenditures and
the timing of these expenditures. The Army acknowledges that, in the
event that lodging is not privatized, the Army would likely not
operate, upgrade, sustain, and recapitalize its lodging operations and
assets as represented in the "should cost" estimate. According to the
Army, it is the lack of upgrades and maintenance to its lodging
facilities that caused it to look to privatization as an option in the
first place. Furthermore, based on its ongoing analysis of lodging
expenses, the Army recently acknowledged that it will cost the Army
more to privatize its lodging than to continue Army ownership. However,
despite the additional cost, the Army believes privatization of lodging
is the best solution because in 7 rather than nearly 20 years, it will
result in better facilities, and have a sustainment and
recapitalization component that is not built into the current rates.
Our analysis indicates that Army travel costs would increase under
lodging privatization, because the average room rate will increase from
the current 57 percent of per diem to 75 percent of per diem. We
estimate that this will result in an annual increase of about $14.4
million for the installations in Group A and $74.5 million if the Army
privatizes all lodging in the United States. The Army agrees that
travel costs will increase, but believes that the increased travel cost
would likely be offset by reductions in other appropriated funding for
lodging, for items such as utilities, laundry, and supplies. The Army
estimated that appropriated fund support for the expenses associated
with these items, across the United States, totaled about $27.9 million
in fiscal year 2005. Utilities accounted for about $15.6 million, or 56
percent of the appropriated fund support, which was calculated based on
national averages for utilities, since individual lodging facilities
are not metered.[Footnote 21] The remainder of the appropriated support
was for such items as laundry, supplies, and salaries. However, during
GAO site visits to Army installations, lodging staff noted that
appropriated funding for these items had diminished in recent years.
For example, the lodging program at Fort Polk, Louisiana, is now
responsible for services such as laundry and supplies, which were
previously paid for by the installation with appropriated funds. At
Fort Sam Houston, Texas, another installation scheduled for the first
round of privatization, staff also stated that nonappropriated funds
were used for things such as repairs, which appropriated funds should
have covered. The Army noted that when the amount of appropriated funds
used to support lodging expenses is reduced, more nonappropriated funds
are needed to pay for the expenses. According to the Army, to generate
more nonappropriated funds, generally room rates must be increased to
cover expenses.
According to Army officials, the Army would also incur a total of about
$17.3 million in onetime costs for severance pay and discontinued
service retirement annuities.[Footnote 22] The Army currently estimates
that severance pay will cost approximately $12.7 million for about
2,000 employees[Footnote 23] (most of whom are paid with
nonappropriated funds) who would be let go if lodging is privatized.
Additionally, the Army estimates that about 59 of the 2,000 employees,
in addition to receiving severance pay, may be eligible for a
discontinued service retirement annuity.[Footnote 24] According to the
Army, the most recent cost estimate for discontinued service retirement
annuities is around $4.6 million. However, the exact amount of
severance pay and discontinued service annuities will not be known
until lodging at each installation is privatized and the Civilian
Personnel Office calculates accurate severance pay, and where
applicable discontinued service annuities, for each individual
employee. According to the Army officials, the severance pay and
discontinued service retirement annuities will be paid with
nonappropriated funds from the centralized Army Lodging Fund.
Other Potential Operating Challenges of Lodging Privatization:
The privatization of Army lodging may potentially affect occupancy
levels and exacerbate rate disparities among bases and between official
and unofficial travelers, as well as promote more notable
inconsistencies in room rates among services at planned joint bases.
If the Army lodging facilities are privatized, the occupancy rates
could decline because official travelers would not be required to stay
in the privatized facilities. Under current regulations, when adequate
quarters are available on the U.S. installation to which a service
member is assigned TDY and the service member uses other lodgings as a
personal choice, lodging reimbursement is limited to government
quarters cost on the U.S. installation to which he was
assigned.[Footnote 25] Army officials acknowledge that initially there
may be a decline in demand for on-base lodging, as it will take some
time for the currently inadequate rooms to be renovated and as some
travelers may want to stay off-base simply because they can. However,
Army officials believe that if a decline in demand does occur it would
not last long, because travelers may have difficulties finding
affordable lodging that is located at a reasonable distance from the
post. Our work on DOD's housing privatization efforts has shown that
occupancy rates are below expectations for some projects. In April 2006
we reported[Footnote 26] that 16, or 36 percent, of 44 awarded housing
privatization projects had occupancy rates below expectations. In an
attempt to increase occupancy and keep rental revenues up, 20 projects
began renting housing units to parties other than military families,
including single or unaccompanied service members, retired military
personnel, civilians and contractors who work for DOD, and civilians
from the general public. Army officials believe that the housing and
lodging markets are sufficiently different that they should not be
compared too closely. For example, they noted that a TDY or PCS
traveler generally stays in lodging for 1 or 2 weeks, while military
housing is usually occupied for 2 or 3 years.
Furthermore, privatization may lead to changes for unofficial
travelers. Unofficial travelers, who account for 7 percent of those
accommodated at Army lodgings, currently pay the same rate as official
travelers. However, with privatization, the private entity managing
Army lodging could charge unofficial travelers the market rate, which
may be higher than the amount official travelers will pay. Army
officials noted that unofficial travelers should pay market rates;
however, the Army has not enforced this because it wants to minimize
the out-of-pocket cost for unofficial travelers such as retirees or
visiting family members.
Privatization of lodging may also create some inconsistencies in
lodging pricing as DOD implements its plans to establish joint bases as
directed by the 2005 base realignment and closure recommendations.
Under the approved recommendations, the management of installation
support services, including lodging, would be consolidated under a
single service at various installations throughout the United
States.[Footnote 27] Two installations in the Army's Group A, Fort Sam
Houston and Fort Myer, are included in this recommendation. While the
Army does not believe that privatization will affect plans for joint
basing, we believe it could lead to inconsistencies in room rates among
services at joint bases. For example, a service member on official
travel to the San Antonio area would pay more for a room at Fort Sam
Houston than at either Lackland or Randolph Air Force Bases. Using
current per diem and the projected privatization pricing
allowance,[Footnote 28] a room at Fort Sam Houston would cost $70 per
night under privatization, while a room at either Lackland or Randolph
Air Force Base would cost $27 per night. Officials in the Office of the
Under Secretary of Defense for Personnel and Readiness and the Air
Force question whether the Army should have included installations in
the joint basing recommendation in their initial group of lodging
facilities to privatize because of the uncertainty about how joint
bases will operate.
Oversight and Accountability for Privatization of Army Lodging Program
Will Follow Military Housing Model:
The Army is using the MHPI legislation as its authority to establish
the lodging privatization program. The Office of the Under Secretary of
Defense for Acquisition, Technology, and Logistics provides oversight
for MHPI-authorized projects and, according to officials from that
office, will provide oversight for lodging privatization similar to
that provided for military housing privatization. The MPHI legislation
has several provisions that direct the Secretary of Defense to notify
Congress of his actions under certain circumstances. For example, the
Secretary of Defense must submit written notification to Congress
before transferring appropriated amounts[Footnote 29] to certain kinds
of funds, as well as submit a report describing the contracts that the
Secretary proposes to solicit under the MPHI legislation at least 30
days before doing so.[Footnote 30] Additionally, OSD and the military
services use the MHPI program evaluation plan to monitor the physical
and financial health of awarded projects, and evaluate the costs and
benefits of privatization.[Footnote 31] The program evaluation plan
requires semiannual reporting to OSD for all awarded MHPI projects.
According to OSD officials, since the Army is using the same MHPI
legislation as authority to privatize its lodging, these reporting
requirements should also be applicable, and would provide the Congress
and OSD with a high-level of oversight as the Army begins to implement
its program. The Army acknowledges that it is aware of the
congressional reporting requirements for MHPI legislation projects and
intends to comply with the requirements as it implements its lodging
privatization plans.
Revised DOD Lodging Policy Does Not Provide Clear Performance
Standards:
On October 6, 2006, DOD provided the military services with revised
lodging guidance, which addressed some issues raised in prior GAO
recommendations but does not provide clear program performance
standards and measures.[Footnote 32] The new guidance requires the
military services to (1) develop and maintain a 5-year recapitalization
plan, (2) base the construction of lodging rooms on historical data and
future mission changes, and (3) construct certain new lodging
facilities to meet the demand of official TDY and PCS travelers. The
revised guidance, however, does not specifically address or strengthen
OSD's ability to determine whether lodging programs use appropriated or
nonappropriated funds to pay for specific program expenses.
Some of the revisions in DOD Instruction 1015.11 improve guidance by
clarifying requirements, but the revisions fall short of developing
clear performance standards and measures. For example, the Instruction
would require that services construct certain new lodging facilities to
meet the demand of customers on official TDY or PCS travel. However,
the customer data needed to justify construction is not sufficiently
defined to ensure consistent collection across programs. Additionally,
though the guidance states that DOD lodging programs should be
professionally managed and business-based, it does not specifically
define such methods or performance measures that could be utilized to
demonstrate the lodging program's efficiency or effectiveness.
Furthermore, the revised lodging guidance does not address the role of
the Office of the Under Secretary of Defense for Acquisition,
Technology, and Logistics regarding privatized lodging. With the Army's
privatization efforts, the office of the Under Secretary of Defense for
Acquisition, Technology, and Logistics has begun to play a more active
role recently in conjunction with the Army's privatization plans, given
the OSD office's experience with housing privatization. Officials from
both offices said they plan to meet to clarify their respective roles
and responsibilities for the Army's privatized lodging facilities.
Conclusions:
Under a decentralized approach to lodging management, the military
services have individual and somewhat dissimilar approaches to the
management and funding of TDY and PCS lodging facilities. While some
reporting to OSD on lodging operations occurs, without standard data
collection and reporting methods and adequate oversight, the
reliability of the data submitted to OSD is unclear. In addition, OSD
and the military services lack information that would enable them to
evaluate the effectiveness of their lodging programs and make
comparisons across programs that would aid in future program management
decisions. We do not see any reason why it would not be possible for
OSD to promote consistent data collection and reporting, without
unnecessarily requiring the military services to run their programs in
exactly the same fashion.
Most importantly, DOD and the military services lack but would benefit
from greater use of performance measures to determine whether goals set
forth in the lodging strategic plan are being achieved, and to provide
adequate oversight of the Army's lodging privatization initiative.
Though one of the DOD lodging strategic goals is to utilize business-
based methods of operation, the military services have not adequately
sought out best practices and management methods commonly used in the
private hotel industry. For example, they have not effectively utilized
tools such as the Uniform System of Accounts for the Lodging Industry
or the Smith Travel Research HOST study. Since DOD has established
goals for its lodging programs that go beyond the private industry goal
of profit generation, however, it would be insufficient to merely adopt
performance standards and measures used by commercial counterparts.
Additionally, as the Army moves forward with its plans to privatize
lodging, it needs to provide the same level of accountability to the
Congress and OSD for program costs and performance as it does for its
housing privatization projects. Furthermore, DOD policy must address
who will provide policy and oversight for privatized lodging.
Recommendations for Executive Action:
We recommend that the Secretary of Defense direct the Under Secretary
of Defense for Personnel and Readiness in consultation with the Under
Secretary of Defense for Acquisition, Technology, and Logistics to (1)
clarify their respective roles for establishing policy and overseeing
the lodging program, and (2) update the DOD lodging program strategic
plan, to include developing performance standards and measures to
ensure that the goals of the lodging program strategic plan and Army
plans to privatize its lodging are being achieved.
Agency Comments and Our Evaluation:
In commenting on a draft of this report, DOD concurred with both of our
recommendations and indicated planned actions and timeframes for
accomplishing them. The department's response indicated that the Army's
analysis shows the life cycle costs are less under privatization than
using the current system to achieve the same results. As we noted in
our draft and this final report, privatization of lodging while
providing faster recapitalization and sustainment of facilities will
likely increase costs to the government by about $75 million per year
through increased lodging fees. The department separately provided
various technical comments which are incorporated where appropriate.
The department's written comments are presented in appendix III.
We are sending copies of this report to the Secretary of Defense; the
Under Secretaries of Defense for Personnel and Readiness, and for
Acquisition, Technology, and Logistics; the Secretaries of the Army,
Navy, and Air Force; and the Director, OMB. We will also make copies
available to others upon request. In addition, the report will be
available at no charge on GAO's Web site at [Hyperlink,
http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me on (202) 512-5581 or holmanb@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. The GAO staff members who made major
contributions to this report are listed in appendix IV.
Signed by:
Barry W. Holman, Director:
Defense Capabilities and Management:
[End of section]
Appendix I: Scope and Methodology:
To determine how the military services' operate and assess their
lodging programs, we reviewed Department of Defense (DOD) and military
service lodging policy, analyzed data regarding program funding, room
rates, and occupancy rates by type of traveler. We interviewed
officials from: the Office of the Under Secretary of Defense for
Acquisition, Technology, and Logistics; Office of the Under Secretary
of Defense for Personnel and Readiness; and the Army, Air Force, Navy,
and Marine Corps offices responsible for managing the temporary duty
(TDY) and permanent-change-of-station (PCS) lodging programs. We
obtained and reviewed financial statements; the military services'
annual reports submitted to the Office of the Secretary of Defense
(Personnel and Readiness); and reports prepared by independent
auditors, the DOD Inspector General, and military audit agencies on DOD
lodging programs. We identified some discrepancies in each of the
military services' data, but we discussed and resolved these
discrepancies. Therefore, we believe the military services' data are
sufficiently reliable for our purposes. We visited selected military
installations to determine how lodges are managed and to observe their
physical condition. Installations were selected to include each of the
six lodging programs and a range of geographical locations.
Specifically, we visited Fort Polk, Louisiana; Fort Sam Houston, Texas;
Lackland Air Force Base, Texas; Randolph Air Force Base, Texas; Naval
Air Station North Island, California; Naval Amphibious Base Coronado,
California; Marine Corps Base Quantico, Virginia; and Marine Corps Air
Station Miramar, California.
To determine the potential effect of the privatization of Army lodging,
we reviewed the Army's life-cycle cost analysis that supported its
decision to privatize lodging. We interviewed officials in the Office
of Management and Budget, Offices of the Under Secretaries of Defense
(Personnel and Readiness) and (Acquisition, Technology, and Logistics),
and the Assistant Secretary of the Army (Installations and Environment)
regarding the Army plans to privatize lodging. To determine the effect
on Army travel costs, we compared the average daily room rate for Army
lodging to the projected room rate under the privatization effort. For
this analysis, we used the fiscal year 2005 occupancy rate for Army
lodging and the Army lodging room rates and per diem rates for fiscal
year 2006. Additionally, we reviewed analysis prepared by
PricewaterhouseCoopers LLP, the Army Community and Family Support
Center, and the Army Privatization Office regarding the projected cost
and time frames for recapitalizing all Army lodging in United States.
We also analyzed the amount of funds accumulated in the Army Lodging
Fund as a result of the lodging surcharge to assess how much is
available for lodging revitalization. Although we did not test
reliability of these data, we did discuss the processes and procedures
used by the Army to assure the reliability of the data they used and
provided for our review. Therefore, we believe the Army's data is
sufficiently reliable for our purposes. Finally, we obtained
information concerning the status of previous Army, Air Force, and Navy
lodging public-private ventures. We interviewed appropriate military
service officials and private developers/managers involved in these
public-private ventures to gain insight into their experience and
potential opportunities or challenges with privatization.
To determine DOD's progress in revising lodging policy guidance, we
reviewed the lodging policy revisions proposed by the Office of the
Under Secretary for Personnel and Readiness and conducted a comparative
analysis to current DOD lodging program policies. We also interviewed
Office of the Secretary of Defense and military service officials to
determine the status of the draft revisions and their perspective on
the proposed changes.
We conducted our work from December 2005 through September 2006 in
accordance with generally accepted government auditing standards.
[End of section]
Appendix II: Military Services' Previous Lodging Public-Private
Ventures:
Between 1987 and 2001, the military services entered into 10 public-
private ventures for lodges; however, only 7 are still operating. In
two cases, at Fort Bliss, Texas, and Fort Drum, New York, the Army
purchased the facilities from the developers. According to the Army
officials, the Army always intended to resume ownership and operation
of the Fort Bliss lodging facility. We were told that the public-
private venture at Fort Drum was not successful because the occupancy
never reached the anticipated levels because of a change in mission.
The Army agreed to buy the facility from the developer and resume
operations.
Private developers, management personnel, and military personnel
associated with these prior public-private ventures believe the
programs are successful if there are well-written contracts that
include specific provisions for rate setting, facility standards,
revenue caps, and renegotiation of these provisions at specified
intervals throughout the life of the lease. All but one noted that a
positive ongoing relationship between the installation commander and
lodging personnel and the developer and his or her management team is
important. Table 7 summarizes the military services' previous public-
private ventures to provide lodging.
Table 7: Military Services' Previous Lodging Public-Private Ventures:
Service: Army;
Location: Fort Drum, NY;
Date: April 1987;
Authority: 10 U.S.C. 2667;
Government risk: Army Morale, Welfare and Recreation Fund underwrote
debt;
Status: Purchased from developer by Army and absorbed into Army
lodging.
Service: Army;
Location: Schofield Barracks, HI;
Date: June 1987;
Authority: 10 U.S.C. 2667;
Government risk: Army Morale, Welfare and Recreation Fund underwrote
debt;
Status: Service: Army is currently in arbitration with developer.
Service: Army;
Location: Fort Bliss, TX;
Date: April 1989;
Authority: 10 U.S.C. 2667;
Government risk: Army Morale, Welfare and Recreation Fund underwrote
debt;
Status: Purchased from developer by Army and absorbed into Army
lodging.
Service: Army;
Location: West Point, NY;
Date: October 1999;
Authority: 10 U.S.C. 2667;
Government risk: Army Morale, Warfare and Recreation Fund underwrote
commercial bond;
Status: Currently operated by developer.
Service: Army;
Location: Hunter Army Airfield, GA; Fort Bragg, NC; Fort Irwin, CA;
Date: January 2001; January 2001; March 2001;
Authority: 10 U.S.C 2667;
Government risk: None identified; Status: ServiceAir Force: Currently
operated by developer.
Service: Air Force;
Location: Wright Patterson Air Force Base, OH;
Date: 1990;
Authority: 10 U.S.C. 2667;
Government risk: None identified;
Status: Currently operated by developer.
Service: Navy;
Location: Naval Station Newport, RI;
Date: July 1992;
Authority: 10 U.S.C. 2809;
Government risk: Navy guaranteed a certain level of occupancy;
Status: Currently operated by management company.
Service: Navy;
Location: Submarine Base New London, CT;
Date: July 1992;
Authority: 10 U.S.C. 2809;
Government risk: Navy guaranteed a certain level of occupancy;
Status: Currently operated by management company.
Source: GAO interviews with OSD and private developers, management
personnel, and military personnel associated with the public-private
ventures.
[End of table]
[End of section]
Appendix III: Comments from the Department of Defense:
Personnel And Readiness:
Office Of The Under Secretary Of Defense:
4000 Defense Pentagon:
Washington, D.C. 20301-4000:
DEC - 4 2006:
Mr. Barry W. Holman:
Director, Defense Capabilities and Management:
U.S. Government Accountability Office:
441 G Street, N. W.
Washington, DC 20548:
Dear Mr. Holman:
This letter is the Department of Defense (DoD) response to the
Government Accountability Office (GAO) draft report, GAO-07-164,
"Defense Infrastructure: Continuing Challenges in Managing DoD Lodging
Programs as Army Moves to Privatize Its Program," dated November 2,
2006 (GAO Code 350788).
While the DoD concurs with the draft report, it should be noted that
even though the report identifies that privatization will increase Army
temporary duty (TDY) costs, it does not emphasize that these costs must
be weighed against the benefits of improved facilities and long-term
sustainment. Indeed, the Army's analysis shows the life cycle costs are
less under privatization than using the current system to achieve the
same results.
DoD response to the report's two recommendations is enclosed. Suggested
technical changes for clarification and accuracy have been provided
separately.
The Department appreciates the opportunity to comment on the draft
report.
Sincerely,
Signed by:
Michael L. Dominguez:
Enclosure:
As stated:
GAO Draft Report --Dated November 2, 2006 GAO Code 350788/GAO-07-164:
"Defense Infrastructure: Continuing Challenges in Managing DoD Lodging
Programs as Army Moves to Privatize Its Program"
Department Of Defense Comments To The GAO Recommendation:
Recommendation 1: The GAO recommended that the Secretary of Defense
direct the Under Secretary of Defense for Personnel and Readiness in
consultation with the Under Secretary of Defense for Acquisition,
Technology, and Logistics to clarify their respective roles for
establishing policy and overseeing the lodging program.
DOD Response: Concur. The DoD will clarify the respective roles of the
Under Secretary of Defense for Personnel and Readiness and the Under
Secretary of Defense for Acquisition, Technology, and Logistics for
establishing policy and overseeing the lodging program. A memorandum of
agreement will be signed by March 31, 2007, and all applicable DoD
Directives and Instructions will be revised.
Recommendation 2: The GAO recommended that the Secretary of Defense
direct the Under Secretary of Defense for Personnel and Readiness in
consultation with the Under Secretary of Defense for Acquisition,
Technology, and Logistics to update the DoD lodging program strategic
plan, to include developing performance standards and measures to
ensure that the goals of the lodging program strategic plan and Army
plans to privatize its lodging are being achieved.
DOD Response: Concur. The DoD agrees to update the DoD lodging program
strategic plan, to include developing performance standards and
measures to ensure that the goals of the lodging program strategic plan
and Army plans to privatize its lodging are being achieved. The DoD
lodging program strategic plan will be updated by January 31, 2008, to
include performance standards and measures. With regard to Army lodging
privatization, the plan is to use performance standards and measures
similar to those that are providing effective oversight of the Army's
housing privatization program. As part of the business agreement with
the lodging privatization developer, oversight procedures will be
negotiated to address key performance metrics such as occupancy
targets, debt servicing, unit costs, recapitalization account balance,
customer satisfaction, and the need for independent verification of
critical data.
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
Barry W. Holman, (202) 512-5581 (holmanb@gao.gov):
Acknowledgments:
In addition to the person named above, Michael Kennedy, Assistant
Director; Claudia Dickey, Kate Lenane, Leslie Sarapu, Julie Silvers,
and Cheryl Weissman also made major contributions to this report.
FOOTNOTES
[1] The services also operate recreational lodging and lodging used by
individuals visiting patients in military treatment facilities, which
are not covered in this report.
[2] GAO, Defense Management: Proposed Lodging Policy May Lead to
Improvements, but More Actions Are Required, GAO-02-351 (Washington,
D.C.: Mar. 18, 2002).
[3] 10 U.S.C. §§ 2871-2885.
[4] Department of Defense Instruction 1015.11, Lodging Resource Policy,
Section 5.1.2 (Oct. 6, 2006).
[5] Department of Defense Directive 4165.63, DOD Housing, Section 2.2
(Jan. 8, 2005).
[6] The term "rooms" refers to a lodging unit available for sale.
Therefore, while the majority of the units in the DOD inventory are
rooms, in some cases the unit sold for temporary lodging is a bed in a
shared space, an apartment, town home, or house.
[7] See, for example, Department of Defense Instruction 1015.12,
Lodging Program Resource Management (Oct. 30, 1996), and Department of
Defense Instruction 1015.10, Programs for Military Morale, Welfare and
Recreation (MWR) (November 1995).
[8] The Army and the Air Force have added surcharges, while the Navy
and the Marine Corps have not.
[9] Department of Defense Instruction 1015.12, Lodging Program Resource
Management, Section 4.3.1 (Oct. 30, 1996).
[10] 10 U.S.C. §§ 2871-2885.
[11] Pub. L. No. 104-106, §§ 2801 (codified as amended at 10 U.S.C. §§
2871-2885).
[12] Group A installations include: Fort Rucker and Redstone Arsenal,
Alabama; Yuma Proving Ground, Arizona; Fort Shafter and Tripler Army
Medical Center, Hawaii; Fort Leavenworth and Fort Riley, Kansas; Fort
Polk, Louisiana; Fort Sill, Oklahoma; Fort Hood and Fort Sam Houston,
Texas; Fort Myer, Virginia; and Fort McNair, Washington, D.C.
[13] The Navy lodges overseas receive appropriated fund support for
utilities.
[14] According to DOD lodging policy, since the Marine Corps's PCS
lodging is a profit-generating MWR program and Category C lodging
program, it is entitled to receive fewer appropriated funds than the
other five lodging programs, which are Category A lodging programs.
[15] Department of Defense Instruction 1015.12, Lodging Program
Resource Management, Section 4.4.2.1 (Oct. 30, 1996).
[16] Department of Defense Instruction 1015.12.
[17] DOD 4165.63-M, DOD Housing Management (September 1993).
[18] This fee, currently set at $11 a night for adequate rooms, began
at $6 per night in 1999 and will cap in 2007 at $12 per room per night.
The Army applies a $0.50 per night surcharge for inadequate rooms and a
$1.20 per night surcharge for foreign students in adequate rooms.
[19] Prior to 2001, the Army operated guest houses as a profit-
generating MWR program to accommodate military personnel making a
permanent change of station.
[20] See GAO-05-433, Defense Infrastructure: Management Issues
Requiring Attention in Utility Privatization (May 2005).
[21] Under the Army's PAL program, the private developer will reimburse
the government for utilities, as well as for all additional support
services provided by the government.
[22] This is the Army's estimate as of Dec. 4, 2006. The estimate was
prepared using the Army's Civilian Human Resources Agency Report dated
Sept. 30, 2006. According to the Army, the estimate is not complete
because it does not include information for 52 employees located at
Fort Hamilton, New York; and Fort Hunter Liggett, Camp Parks, and Fort
BT Collins, California. The estimate also does not include lodging
employees at installations (Fort Monmouth, New Jersey; U.S. Army
Garrison, Selfridge Air National Guard Base, Michigan; Fort Monroe,
Virginia; and Fort McPherson, Georgia) that will be closed because of
Base Realignment and Closure 2005 actions.
[23] This number includes all Army lodging employees in the United
States and Puerto Rico.
[24] The Army's nonappropriated funds retirement plan includes a
voluntary retirement authority and discontinued service retirement
benefit when installations are undergoing a substantial reduction or
when an individual's positions is eliminated due to a business based
action.
[25] The Joint Federal Travel Regulations, Uniformed Services, Volume
1, Chapter 1, Applicability and General Information, Section U1045
(2006).
[26] GAO, Military Housing: Management Issues Require Attention as the
Privatization Program Matures, GAO-06-438 (Washington, D.C.: Apr. 28,
2006).
[27] Department of Defense installations scheduled for joint basing as
part of Base Realignment and Closure 2005 include: Under Army Lead:
Fort Lewis, Fort Myer, Henderson Hall, and McChord Air Force Base;
Under Navy Lead: Anacostia Naval Annex, Anderson Air Force Base,
Bolling Air Force Base, Fort Story, Hickam Air Force Base, Naval
Research Laboratory, Naval Station Norfolk, Naval Station Pear Harbor,
and Navy Base Guam; Under Air Force Lead: Andrews Air Force Base,
Charleston Air Force Base, Elmendorf Air Force Base, Fort Dix, Fort
Eustis, Fort Richardson, Fort Sam Houston, Lackland Air Force Base,
Langley Air Force Base, McGuire Air Force Base, Naval Air Engineering
Station Lakehurst, Naval Air Facility Washington, Naval Weapons Station
Charleston, and Randolph Air Force Base.
[28] Under privatization, the room rate would be limited to 75 percent
of per diem across the installations in Group A.
[29] 10 U.S.C. 2883(f).
[30] 10 U.S.C. 2884.
[31] In a March 2000 report, GAO recommended that DOD create a
privatization evaluation plan to be used consistently by all the
military services, and that the plan should include performance
measures, such as evaluation of each authority, comparison of actual to
estimated costs of projects, assessment of developer performance, and
so forth. See GAO, Military Housing: Continued Concerns in Implementing
the Privatization Initiative, GAO/NSIAD-00-71 (Washington, D.C.: Mar.
30, 2000).
[32] DOD Instruction 1015.11, Lodging Policy (Oct. 6, 2006).
GAO's Mission:
The Government Accountability Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting
its constitutional responsibilities and to help improve the performance
and accountability of the federal government for the American people.
GAO examines the use of public funds; evaluates federal programs and
policies; and provides analyses, recommendations, and other assistance
to help Congress make informed oversight, policy, and funding
decisions. GAO's commitment to good government is reflected in its core
values of accountability, integrity, and reliability.
Obtaining Copies of GAO Reports and Testimony:
The fastest and easiest way to obtain copies of GAO documents at no
cost is through GAO's Web site (www.gao.gov). Each weekday, GAO posts
newly released reports, testimony, and correspondence on its Web site.
To have GAO e-mail you a list of newly posted products every afternoon,
go to www.gao.gov and select "Subscribe to Updates."
Order by Mail or Phone:
The first copy of each printed report is free. Additional copies are $2
each. A check or money order should be made out to the Superintendent
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or
more copies mailed to a single address are discounted 25 percent.
Orders should be sent to:
U.S. Government Accountability Office 441 G Street NW, Room LM
Washington, D.C. 20548:
To order by Phone: Voice: (202) 512-6000 TDD: (202) 512-2537 Fax: (202)
512-6061:
To Report Fraud, Waste, and Abuse in Federal Programs:
Contact:
Web site: www.gao.gov/fraudnet/fraudnet.htm E-mail: fraudnet@gao.gov
Automated answering system: (800) 424-5454 or (202) 512-7470:
Congressional Relations:
Gloria Jarmon, Managing Director, JarmonG@gao.gov (202) 512-4400 U.S.
Government Accountability Office, 441 G Street NW, Room 7125
Washington, D.C. 20548:
Public Affairs:
Paul Anderson, Managing Director, AndersonP1@gao.gov (202) 512-4800
U.S. Government Accountability Office, 441 G Street NW, Room 7149
Washington, D.C. 20548:
