Military Base Realignments and Closures

Estimated Costs Have Increased and Estimated Savings Have Decreased Gao ID: GAO-08-341T December 12, 2007

The Department of Defense (DOD) is currently implementing recommendations from the 2005 Base Realignment and Closure (BRAC) round, which is the fifth round undertaken by DOD since 1988. The 2005 round is, by GAO's assessment, the biggest, most complex, and costliest BRAC round ever, in part because, unlike previous rounds, the Secretary of Defense viewed the 2005 round as an opportunity not only to achieve savings but also to assist in transforming the department. GAO's testimony addresses (1) GAO's role in the BRAC process, and (2) how DOD's current cost and savings estimates to implement the 2005 recommendations compare to the 2005 Defense Base Closure and Realignment Commission's (the Commission) cost and savings estimates. This testimony is based primarily on the report GAO issued yesterday (GAO-08-159) on the overall changes to DOD's cost and savings estimates for the 2005 BRAC round. To analyze these changes, GAO compared the Commission's estimates in its 2005 report to DOD's estimates in its fiscal year 2008 BRAC budget submission. This testimony is also based on several reports GAO has issued on the implementation of selected recommendations, and GAO's prior work assessing the 2005 decision-making process. GAO's work was performed in accordance with generally accepted government auditing standards.

GAO has played two long-standing roles in the BRAC process. First, as requested by congressional committees in the 1988 round or mandated by law since 1990, GAO has served as an independent and objective observer of the BRAC process and has assessed and reported on DOD's decision-making processes leading up to proposed realignment and closure recommendations. GAO reported in its assessment of the 2005 round that DOD's decision-making process for developing its recommendations was generally logical, well documented, and reasoned. However, GAO identified some limitations with cost and savings estimates, some BRAC recommendations having lengthy payback periods, and some with limited savings relative to implementation costs. GAO's second role has focused on reviewing the implementation of realignment and closure actions once the BRAC recommendations became effective in November 2005. GAO has issued several reports on DOD's implementation of its 2005 BRAC recommendations. GAO will continue to review the implementation of the 2005 BRAC recommendations, including a final report to be issued within 1 year after the end of the 6-year BRAC implementation period, which ends in September 2011. DOD plans to spend more and save less than originally estimated for the 2005 BRAC round. DOD's cost estimates to implement the 2005 recommendations, as reported in its fiscal year 2008 BRAC budget submission, have increased by 48 percent, from $21 billion to $31 billion, for the 6-year implementation period. Nearly two-thirds of the expected cost increase is due to increased military construction costs. For example, the expected military construction cost to close Fort Monmouth, New Jersey, has increased by more than $550 million, largely because the Army decided to build new facilities instead of renovating existing facilities at one location and share existing facilities at another location. GAO believes there is potential for further cost increases due to uncertainty in whether the Army's new initiative designed to reduce construction costs will achieve the planned results. While projected costs have increased, projected net annual recurring savings have decreased about 5 percent, from $4.2 billion to $4.0 billion annually. DOD attributed the decrease in its savings estimate primarily to changes in initial assumptions or plans. GAO believes that DOD's reported savings estimates may be overstated by $1.85 billion largely because the estimates include savings from military personnel entitlements without a corresponding reduction in end strength. As a result of the increases in costs and decreases in savings, GAO's analysis shows that accumulated savings are projected to offset accumulated costs in 2017 rather than 2013 as projected by the Commission. The time required for accumulated savings to offset accumulated costs would increase to 2025 with the exclusion of the expected savings from military personnel entitlements and Cannon Air Force Base, New Mexico, that GAO questions. While the overall payback period for DOD's BRAC recommendations is less than 20 years, the number of individual recommendations that are not expected to pay back within 20 years has increased from 30, as estimated by the Commission, to 73, based on DOD's fiscal year 2008 budget submission.

GAO-08-341T, Military Base Realignments and Closures: Estimated Costs Have Increased and Estimated Savings Have Decreased This is the accessible text file for GAO report number GAO-08-341T entitled 'Military Base Realignments and Closures: Estimated Costs Have Increased and Estimated Savings Have Decreased' which was released on December 12, 2007. 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. Testimony: Before the Subcommittee on Readiness, Committee on Armed Services, House of Representatives: United States Government Accountability Office: GAO: For Release on Delivery Expected at 10:00 a.m. EST: Wednesday, December 12, 2007: Military Base Realignments and Closures: Estimated Costs Have Increased and Estimated Savings Have Decreased: Statement of Brian J. Lepore: Director Defense Capabilities and Management: GAO-08-341T: GAO Highlights: Highlights of GAO-08-341T, a report to the Subcommittee on Readiness, Committee on Armed Services, House of Representatives. Why GAO Did This Study: The Department of Defense (DOD) is currently implementing recommendations from the 2005 Base Realignment and Closure (BRAC) round, which is the fifth round undertaken by DOD since 1988. The 2005 round is, by GAO‘s assessment, the biggest, most complex, and costliest BRAC round ever, in part because, unlike previous rounds, the Secretary of Defense viewed the 2005 round as an opportunity not only to achieve savings but also to assist in transforming the department. GAO‘s testimony addresses (1) GAO‘s role in the BRAC process, and (2) how DOD‘s current cost and savings estimates to implement the 2005 recommendations compare to the 2005 Defense Base Closure and Realignment Commission‘s (the Commission) cost and savings estimates. This testimony is based primarily on the report GAO issued yesterday (GAO-08-159) on the overall changes to DOD‘s cost and savings estimates for the 2005 BRAC round. To analyze these changes, GAO compared the Commission‘s estimates in its 2005 report to DOD‘s estimates in its fiscal year 2008 BRAC budget submission. This testimony is also based on several reports GAO has issued on the implementation of selected recommendations, and GAO‘s prior work assessing the 2005 decision- making process. GAO‘s work was performed in accordance with generally accepted government auditing standards. What GAO Found: GAO has played two long-standing roles in the BRAC process. First, as requested by congressional committees in the 1988 round or mandated by law since 1990, GAO has served as an independent and objective observer of the BRAC process and has assessed and reported on DOD‘s decision- making processes leading up to proposed realignment and closure recommendations. GAO reported in its assessment of the 2005 round that DOD‘s decision-making process for developing its recommendations was generally logical, well documented, and reasoned. However, GAO identified some limitations with cost and savings estimates, some BRAC recommendations having lengthy payback periods, and some with limited savings relative to implementation costs. GAO‘s second role has focused on reviewing the implementation of realignment and closure actions once the BRAC recommendations became effective in November 2005. GAO has issued several reports on DOD‘s implementation of its 2005 BRAC recommendations. GAO will continue to review the implementation of the 2005 BRAC recommendations, including a final report to be issued within 1 year after the end of the 6-year BRAC implementation period, which ends in September 2011. DOD plans to spend more and save less than originally estimated for the 2005 BRAC round. DOD‘s cost estimates to implement the 2005 recommendations, as reported in its fiscal year 2008 BRAC budget submission, have increased by 48 percent, from $21 billion to $31 billion, for the 6-year implementation period. Nearly two-thirds of the expected cost increase is due to increased military construction costs. For example, the expected military construction cost to close Fort Monmouth, New Jersey, has increased by more than $550 million, largely because the Army decided to build new facilities instead of renovating existing facilities at one location and share existing facilities at another location. GAO believes there is potential for further cost increases due to uncertainty in whether the Army‘s new initiative designed to reduce construction costs will achieve the planned results. While projected costs have increased, projected net annual recurring savings have decreased about 5 percent, from $4.2 billion to $4.0 billion annually. DOD attributed the decrease in its savings estimate primarily to changes in initial assumptions or plans. GAO believes that DOD‘s reported savings estimates may be overstated by $1.85 billion largely because the estimates include savings from military personnel entitlements without a corresponding reduction in end strength. As a result of the increases in costs and decreases in savings, GAO‘s analysis shows that accumulated savings are projected to offset accumulated costs in 2017 rather than 2013 as projected by the Commission. The time required for accumulated savings to offset accumulated costs would increase to 2025 with the exclusion of the expected savings from military personnel entitlements and Cannon Air Force Base, New Mexico, that GAO questions. While the overall payback period for DOD‘s BRAC recommendations is less than 20 years, the number of individual recommendations that are not expected to pay back within 20 years has increased from 30, as estimated by the Commission, to 73, based on DOD‘s fiscal year 2008 budget submission. To view the full product, including the scope and methodology, click on [hyperlink, http://www.GAO-08-341T]. For more information, contact Brian J. Lepore (202) 512-4523 orleporeb@gao.gov. [End of section] Mr. Chairman and Members of the Subcommittee: I appreciate the opportunity to be here today to discuss the projected costs and savings associated with implementing the 2005 Base Realignment and Closure (BRAC) round. The Department of Defense (DOD) is currently implementing recommendations from the 2005 BRAC round, which is the fifth BRAC round undertaken by DOD since 1988. Based on our work to date, the 2005 round is the biggest, most complex, and costliest BRAC round ever, in part because, unlike previous rounds, the Secretary of Defense viewed the 2005 round as an opportunity not only to achieve savings but also to assist in transforming the department. As a result, the 2005 round differs from previous rounds in terms of the number of actions, projected costs to implement the actions, and projected savings. My testimony today addresses (1) GAO's role in the BRAC process and (2) how DOD's cost and savings estimates for the 2005 round, as reported in its fiscal year 2008 BRAC budget submission, compare to the 2005 Defense Base Closure and Realignment Commission's (the Commission) cost and savings estimates. My testimony is based largely on our report reviewing the changes to the overall cost and savings estimates associated with the 2005 recommendations, which we issued yesterday.[Footnote 1] In that report we found that estimated costs to implement the 2005 BRAC round have increased and estimated savings have decreased. To analyze the changes in the estimated costs and savings, we compared the Commission's estimates, as reported in the Commission's 2005 report,[Footnote 2] to DOD's estimates in its fiscal year 2008 BRAC budget submission. Additionally, we reported that DOD's projected net annual recurring savings may be overstated by 46 percent due to the lack of a distinction between savings from transferring military personnel from one location to another, which do not produce tangible savings outside of the military personnel account, and savings from reduced operating costs that will make funds available for other uses. We recommended that DOD better explain its net annual recurring savings; DOD concurred with this recommendation and plans to address it in its next budget submission. I will more fully discuss the findings of our cost and savings report that we released yesterday later in my statement. My testimony is also based on our prior work assessing the 2005 BRAC decision-making process issued in July 2005, as statutorily required, and several reports we have issued over the past year on the implementation of selected recommendations. Our work was performed in accordance with generally accepted government auditing standards. A listing of our related products is at the end of this statement. Summary: GAO has played two long-standing roles in the BRAC process. First, as requested by congressional committees in the 1988 round or mandated by law since 1990, we have served as an independent and objective observer of the BRAC process and have assessed and reported on DOD's decision- making processes leading up to proposed realignment and closure recommendations. In our assessment of the 2005 round, we reported that DOD's decision-making process for developing its recommendations was generally logical, well documented, and reasoned. Our assessment of the process does not constitute endorsement of any recommendations as it was the Commission's responsibility, not ours, to approve DOD's recommendations. We identified some limitations with cost and savings estimates, some recommendations that will take longer than expected to recoup up-front costs, and some with limited savings relative to implementation costs. Our second role has focused on reviewing the implementation of realignment and closure actions once the recommendations became effective, just as we review the effectiveness and efficiency of numerous programs authorized or mandated by Congress. In addition to the report we issued yesterday, we have issued several reports on DOD's implementation of its 2005 BRAC recommendations affecting the Air National Guard, Army Reserve components, and business process reengineering in the Navy and the Defense Logistics Agency. We will continue to review DOD's implementation of the 2005 recommendations, and the House Armed Services Committee directs us to monitor and report annually on DOD's progress with a final report to be issued within 1 year after the end of the 6-year BRAC implementation period, which ends in September 2011.[Footnote 3] DOD plans to spend more and save less than originally estimated for the 2005 BRAC round. Based on DOD's fiscal year 2008 budget submission, DOD's cost estimates to implement the 2005 recommendations have increased by 48 percent through the 6-year implementation period, from $21 billion to $31 billion, compared to the Commission's cost estimates.[Footnote 4] Our analysis indicates that nearly two-thirds of the $10 billion cost increase is due to increased projected military construction costs, while inflation, environmental restoration costs, and other costs, such as operations and maintenance, account for the remaining one-third of the cost increase. Six recommendations account for half of the increase in military construction costs. For example, the military construction cost to relocate the Army's armor school from Fort Knox, Kentucky, to Fort Benning, Georgia, increased by nearly $670 million because the Army identified additional projects that were not included in the original cost estimates.[Footnote 5] Additionally, the projected military construction cost to support the relocation of personnel from Fort Monmouth, New Jersey, has increased by more than $550 million, largely because the Army needed to build new facilities instead of renovating existing facilities at one location and build new facilities instead of sharing existing facilities at another location.[Footnote 6] Overall, we believe there is potential for further increases in construction costs due to uncertainty in whether the Army's new initiative designed to reduce construction costs will achieve the planned results. If the Army is unable to achieve these reduced costs, the effect on BRAC implementation costs could be considerable and costs would rise. While DOD's projected onetime costs have increased, projected net recurring savings as reported in DOD's fiscal year 2008 budget submission have decreased about 5 percent, from $4.2 billion to $4.0 billion annually, compared to the Commission's estimates.[Footnote 7] DOD attributed the decrease in its savings estimates primarily to changes in initial assumptions or plans. Based on our work to date, DOD's annual recurring savings estimate may be overstated by about 46 percent due to the inclusion of $1.85 billion in military personnel entitlements--such as salaries and housing allowances--for military personnel that DOD plans to shift to other positions but does not plan to eliminate. While DOD disagrees with us, we do not believe that transferring personnel to other locations produces tangible dollar savings outside the military personnel accounts that DOD can use to fund other defense priorities since these personnel will continue to receive salaries and benefits. Because DOD's BRAC budget submission does not explain the difference between net annual recurring savings attributable to military personnel entitlements, which personnel would still receive, and net annual recurring savings from reduced operating costs that would make funds available for other uses, DOD could generate a false sense that all of its reported savings could be used to fund other defense priorities. As such, we recommended in the report that we issued yesterday that DOD better explain its net annual recurring savings--a recommendation with which DOD has concurred and plans to address in its next budget submission. Finally, our analysis shows that accumulated savings are projected to offset accumulated costs in 2017--12 years after the beginning of the implementation period for the 2005 round, which is 4 years longer than the Commission's estimate of 2013. This extended payback period includes the savings estimates from military personnel entitlements and Cannon Air Force Base, New Mexico, that we question, which if excluded, would increase the time needed to recoup up-front costs still further to 19 years, or the year 2025. While DOD should reach the overall break-even point for its 2005 recommendations in less than 20 years, the number of individual recommendations that are not expected to break even within 20 years has increased from 30, as estimated by the Commission, to 73, based on DOD's fiscal year 2008 budget submission. Background: DOD has undergone four BRAC rounds since 1988 and is currently implementing its fifth round.[Footnote 8] In May 2005, the Secretary of Defense made public more than 200 recommendations that DOD estimated would generate net annual recurring savings of about $5.5 billion beginning in fiscal year 2012. In making its 2005 realignment and closure proposals, DOD applied legally mandated selection criteria that included military value as the primary consideration, as well as expected costs and savings, economic impact to local communities, community support infrastructure, and environmental impact. Military value, which includes such considerations as an installation's current and future mission capabilities, condition, ability to accommodate future needs, and cost of operations, was the primary consideration for making recommendations as mandated by BRAC law and as reported by both DOD and the Commission. Additionally, the Secretary of Defense established three goals for the 2005 BRAC round: (1) transforming DOD by aligning the infrastructure with the defense strategy, (2) fostering jointness across DOD, and (3) reducing excess infrastructure and producing savings. The 2005 round is unlike previous BRAC rounds due to the Secretary of Defense's emphasis on transformation and jointness, rather than just reducing excess infrastructure. For example, as part of its efforts to transform its forces, the Army included actions to restation forces from Europe and Korea to domestic installations, which were part of its larger review of bases worldwide. The 2005 round also differs from previous BRAC rounds in terms of the number of closure and realignment actions. While the number of major closures and realignments is a little greater than individual previous rounds, the number of minor closures and realignments is significantly greater than those in all previous rounds combined, as shown in table 1.[Footnote 9] DOD plans to execute over 800 closure and realignment actions as part of the 2005 BRAC round, which is more than double the number of actions completed in the prior four rounds combined. The large increase in the number of minor closures and realignments is primarily attributable to the more than 500 actions involving the Army National Guard and Army Reserve, representing over 60 percent of the BRAC actions. Table 1: Comparison of BRAC 2005 with Previous Rounds: Round: 1988; Major closures: 16; Major realignments: 4; Minor closures and realignments: 23; Total actions: 43; Costs through implementation (dollars in billions): $2.7; Net annual recurring savings (dollars in billions): $0.9. Round: 1991; Major closures: 26; Major realignments: 17; Minor closures and realignments: 32; Total actions: 75; Costs through implementation (dollars in billions): 5.2; Net annual recurring savings (dollars in billions): 2.0. Round: 1993; Major closures: 28; Major realignments: 12; Minor closures and realignments: 123; Total actions: 163; Costs through implementation (dollars in billions): 7.6; Net annual recurring savings (dollars in billions): 2.6. Round: 1995; Major closures: 27; Major realignments: 22; Minor closures and realignments: 57; Total actions: 106; Costs through implementation (dollars in billions): 6.5; Net annual recurring savings (dollars in billions): 1.7. Round: Total; Major closures: 97; Major realignments: 55; Minor closures and realignments: 235; Total actions: 387; Costs through implementation (dollars in billions): $22.0; Net annual recurring savings (dollars in billions): $7.2. Round: 2005; Major closures: 22[A]; Major realignments: 33[A]; Minor closures and realignments: 757[B]; Total actions: 812; Costs through implementation (dollars in billions): $31.2[C]; Net annual recurring savings (dollars in billions): $4.0[C]. Source: Defense Base Closure and Realignment Commission, DOD, and GAO analysis of Commission and DOD data. [A] The number of major realignments and closures is as reported by the Commission in 2005. [B] An individual base may be affected by more than 1 realignment. [C] Cost and savings estimates for the 2005 round are DOD's estimates as reported in the fiscal year 2008 BRAC budget submission. [End of table] Also, as shown in table 1, the 2005 round is expected to cost more to implement than all of the previous BRAC rounds combined and save more than any single round. I will discuss the projected costs and savings of the 2005 round later in my statement. As in all previous BRAC rounds, DOD used the Cost of Base Realignment Actions (COBRA) model to provide a standard quantitative approach to compare estimated costs and savings across various proposed recommendations. The COBRA model relies to a large extent on standard factors and averages but is not intended to and consequently does not present budget quality estimates. As a result, COBRA-developed cost and savings estimates cannot be assumed to represent the actual costs that Congress will need to fund through appropriations to complete implementation of BRAC recommendations, nor will they fully reflect the savings intended to be achieved after implementation. In other words, as we reported in our review of the 1995 and 2005 BRAC rounds,[Footnote 10] the costs identified in COBRA are most likely to be different than the costs that DOD will actually incur and Congress will be asked to fund to complete implementation. We have examined COBRA in the past, as well as during our review of the 2005 BRAC round, and, given the quality of the data and assumptions used in the model, found it to be a generally reasonable estimator for comparing potential costs and savings among alternative closure and realignment scenarios with the caveat that the estimates do not represent budget-quality data, as we previously reported in our assessments of the 1995 and 2005 BRAC rounds. In this and previous BRAC rounds, DOD subsequently developed budget-quality estimates after BRAC decisions were made. The Commission was an independent body that reviewed and had the authority to change the Secretary's recommendations if it determined that the Secretary deviated substantially from the legally mandated selection criteria and DOD's force structure plan. After the Commission's review in 2005, it forwarded a list of 182 recommendations for base closures or realignments to the President. The Commission estimated that its recommendations would cost $21 billion and generate net annual recurring savings of $4.2 billion beginning in fiscal year 2012. The Commission's recommendations were accepted in their entirety by the President and Congress,[Footnote 11] and became effective on November 9, 2005. The BRAC legislation requires DOD to complete closure and realignment actions within a 6-year time frame ending September 15, 2011. GAO's Role in the BRAC Process: GAO has two long-standing roles in the BRAC process. First, as requested by congressional committees for the 1988 BRAC round and mandated by law since 1990, we have served as an independent and objective observer of the BRAC process and have assessed and reported on DOD's decision-making processes leading up to proposed realignment and closure recommendations. The law authorizing the 2005 BRAC round required us to independently assess DOD's process and recommendations and to submit a report by July 1, 2005.[Footnote 12] To make an informed and timely assessment, we operated in a real-time setting and had access to significant portions of the process as it evolved, thus affording the department an opportunity to address any concerns we raised in a timely manner. From our vantage point, we were looking to see to what extent DOD followed a logical, well-reasoned, and well- documented process, where we could see a logical flow between DOD's analysis and its proposed recommendations. In our July 2005 report, we stated that DOD's decision-making process for developing its recommendations was generally logical, well documented, and reasoned.[Footnote 13] We also stated that DOD established a structured and largely sequential process for obtaining and analyzing data that provided an informed basis for identifying and evaluating BRAC options. Our conclusion does not constitute endorsement of any recommendation, as it was the Commission's responsibility, not ours, to approve DOD's recommendations. However, we identified some limitations with DOD's cost and savings estimates, some recommendations having lengthy payback periods, and some recommendations with limited savings relative to costs. Once the recommendations become effective, our role is to review DOD's efforts to implement the realignment and closure actions, just as we routinely review the efficiency and effectiveness of congressionally mandated or authorized programs across the government. We generally do our BRAC work under the authority of the Comptroller General to conduct reviews on his own initiative because of the broad congressional interest in the base closure process, which allows us to provide information broadly and generally without restriction.[Footnote 14] Yesterday we issued our most recent report reviewing the changes to the overall cost and savings estimates associated with the 2005 recommendations, which I will discuss later in my statement. We have previously reported on DOD's efforts to implement recommendations affecting the Air National Guard, Army reserve components, business process reengineering efforts in the Navy and Defense Logistics Agency, and environmental restoration costs.[Footnote 15] These reports, as well as the report we issued yesterday, show that although DOD is making progress in implementing BRAC recommendations, it is facing some implementation challenges, such as synchronizing personnel movements with planned infrastructure improvements and the need to coordinate actions among multiple services and agencies. We will continue to review DOD's implementation of the 2005 recommendations,[Footnote 16] and the House Armed Services Committee directs us to monitor and report annually on DOD's progress and issue a final report within 1 year after the end of the 6-year BRAC implementation period, which ends in September 2011.[Footnote 17] Estimated Costs Have Increased and Savings Have Decreased: DOD plans to spend more and save less than originally estimated for the 2005 round, as we discuss in the report we issued yesterday. Based on DOD's fiscal year 2008 BRAC budget submission, estimated onetime costs have increased by 48 percent through the 6-year implementation period compared to the Commission's cost estimates and could continue to increase.[Footnote 18] On the other hand, DOD's projected net savings have decreased about 5 percent compared to the Commission's estimates and may be overstated due to the inclusion of savings for transferring military personnel positions while continuing to pay the same salary and benefits.[Footnote 19] As a result, savings from the 2005 round are projected to offset costs in 2017--4 years longer than the BRAC Commission estimate. If the estimated savings from military personnel entitlements and Cannon Air Force Base, New Mexico, that we question are excluded, the round will not reach the break-even point until the year 2025. Estimated Onetime Costs Have Increased and Could Continue to Increase: Since the BRAC Commission issued its cost and savings projections in 2005, DOD's cost estimates to implement the 2005 recommendations, as reported in DOD's fiscal year 2008 budget submission, have increased by 48 percent, from $21 billion to $31 billion.[Footnote 20] The majority of the projected cost increase is due to increased military construction requirements, as shown in table 2. Table 2: Increases in Onetime Costs: Category: Military construction; Amount (dollars in millions): $6,451; Percentage: 64. Category: Inflation; Amount (dollars in millions): 2,589; Percentage: 25. Category: Environmental cleanup[A]; Amount (dollars in millions): 589; Percentage: 6. Category: Other (including operations and maintenance); Amount (dollars in millions): 506; Percentage: 5. Category: Total; Amount (dollars in millions): $10,135; Percentage: 100. Source: GAO analysis of DOD data. Note: Totals may not sum due to rounding. [A] Additional environmental cleanup costs typically are incurred after the implementation period. [End of table] Two of the cost elements listed in table 2--inflation and environmental cleanup--were intentionally not considered in the initial estimates produced by COBRA. Inflation, which accounts for 25 percent of the increase, was not included in the Commission's analysis because costs were presented in constant dollars.[Footnote 21] Further, expected environmental cleanup cost estimates, which account for about 6 percent of the cost increase, were not included in the Commission's analysis because DOD has had a long-standing policy of not considering environmental cleanup costs in its BRAC decision making. We have agreed with DOD's position that such costs are a liability to DOD regardless of its base closure recommendations. Some environmental restoration may be necessary to protect human health and safety, whether or not a base is closed. While such costs are not included in the COBRA model, they are included in developing BRAC implementation budgets and recorded as a BRAC cost. We reported in January 2007 that environmental cleanup costs are likely to increase and Congress does not have full visibility over the total expected cost of DOD's BRAC-related environmental cleanup efforts.[Footnote 22] A limited number of recommendations account for the majority of the increase in military construction costs. Specifically, six recommendations associated with moving activities from leased space to military installations, closing and realigning Army installations, and realigning medical activities account for half of the increase in military construction costs: * Activities in leased space: The military construction cost for the recommendation to consolidate the National Geospatial-Intelligence Agency at Fort Belvoir, Virginia, has increased by nearly $350 million, in part because the agency identified the need for additional supporting facilities, such as a technology center and additional warehouse space[Footnote 23]. Likewise, the military construction cost for the recommendation to move various DOD activities from leased space to Fort Belvoir and Fort Lee, Virginia more than doubled to nearly $1 billion, an increase of more than $500 million, largely because of changes to facilities at the receiving location[Footnote 24]s. For example, DOD determined a parking garage, rather then a parking lot, was needed to accommodate the increase in personnel at Fort Belvoir, which increased the original estimate of $3 million to $160 million. * Closing and realigning Army installations: The military construction cost for the recommendation to relocate the Army's armor school from Fort Knox, Kentucky, to Fort Benning, Georgia, to support the creation of a maneuver school has increased by nearly $670 million--98 percent of the total increase in onetime costs for this recommendation--largely because the Army identified about $400 million in additional projects that were not originally included in the cost estimates, such as training ranges, medical facilities, and a child development center, as well as $280 million in infrastructure support, such as water, sewer, and gas lines.[Footnote 25] Further, the military construction cost for the recommendation to close Fort Monmouth, New Jersey has more than doubled to almost $1 billion--an increase of more than $550 million-- due to the need to build new facilities rather than renovate existing facilities at Aberdeen Proving Ground, Maryland, ($375 million) and build new facilities rather than share facilities at West Point, New York, to accommodate the U.S. Army Military Academy Preparatory School ($175 million).[Footnote 26] * Realigning medical activities: The military construction cost for the recommendation to realign the Walter Reed Army Medical Center in the District of Columbia and relocate medical care functions to the National Naval Medical Center, Bethesda, Maryland, and Fort Belvoir, Virginia, has increased by almost $440 million to over $1 billion, largely because of additional facilities needs, such as a parking structure and a larger addition to the medical center, that were not included in the original estimate.[Footnote 27] Likewise, the military construction cost for the recommendation to consolidate medical enlisted training and establish the San Antonio Regional Medical Center at Fort Sam Houston, Texas, has increased by almost $540 million, largely because planning officials identified requirements to move inpatient care functions that were not in the original estimate.[Footnote 28] Additionally, DOD determined that more instructional and laboratory space was required to accommodate the increased number of students expected to receive medical training at Fort Sam Houston. The number of students expected to attend the center annually was underestimated by more than 2,700 students, or 44 percent. Based on our analysis, the projected costs for the 2005 round could continue to increase because of uncertainty over U.S. Army Corps of Engineers efforts to reduce construction costs by 15 percent. The Army has already incorporated a 15 percent reduction into a majority of its BRAC construction estimates based on the U.S. Army Corps of Engineers' efforts to reengineer its process to manage and contract for military construction projects and budgeted accordingly. While U.S. Army Corps of Engineers officials expressed optimism that these cost savings will be realized and preliminary results are promising, these results are based on limited experience.[Footnote 29] In September 2007 we reported that the Army could be challenged in realizing the cost savings from this transformation effort.[Footnote 30] If the Army is unable to achieve its projected 15 percent savings overall, the effect on overall BRAC construction costs could be considerable because the Army is expected to incur 60 percent ($12 billion) of the estimated BRAC construction costs. Moreover, BRAC implementing officials expressed concern that construction costs have the potential to increase in areas such as San Antonio, Texas, and the National Capital Region, Washington, D.C., that are already experiencing high commercial construction demands. DOD estimates it will cost about $3.4 billion for BRAC-related construction in the National Capital Region and about $1.3 billion in San Antonio, Texas, alone. U.S. Army Corps of Engineers officials expressed concern about the effect construction demand might have on bid proposals given the sizable amount of construction to take place in a limited amount of time to meet the BRAC statutory completion time frame. The large volume of anticipated BRAC construction combined with ongoing reconstruction due to damage from Hurricane Katrina could also lead to increased construction costs, according to service officials from various installations. Annual Savings Have Decreased and May Be Overstated: After DOD has implemented the 2005 BRAC recommendations, based on estimates in its fiscal year 2008 BRAC budget submission, DOD expects to save about $4.0 billion annually--a 5 percent decrease from the $4.2 billion the Commission estimated.[Footnote 31] DOD attributed the decrease in its savings estimate primarily to changes in initial assumptions or plans. For example: * $80 million decrease in the estimated savings to close three chemical demilitarization depots,[Footnote 32] largely because the Army does not expect to close these facilities within the BRAC statutory implementation time frame because DOD must complete the chemical demilitarization mission first to comply with treaty obligations before these facilities can close and completion necessitates these facilities to remain open after 2011. We raised this issue in our July 2005 assessment of the 2005 round.[Footnote 33] * $70 million decrease in the estimated savings of establishing joint bases at multiple locations, largely because the Army did not include its share of the expected savings due to unresolved issues concerning joint base operations, while the other services included the COBRA- generated savings in DOD's fiscal year 2008 budget submission. * $50 million decrease in the estimated savings for realigning the Defense Logistics Agency's supply, storage, and distribution network, largely because of the need to retain higher inventory levels than anticipated and less personnel elimination. While a better, more precise estimate of net annual recurring savings for the 2005 round may not be known until 2012, based on our work to date we believe that the net annual recurring savings estimates included in DOD's fiscal year 2008 budget submission may be overstated by 46 percent because DOD's estimates include (1) $1.85 billion in estimated savings from military personnel entitlements without a corresponding reduction in end strength, with personnel continuing to receive pay and benefits accounted for as savings, (2) $60 million from closing Cannon Air Force Base, New Mexico, although the base will actually remain open, and (3) erroneously reporting $25 million in onetime savings as annual recurring savings for the recommendation to establish fleet readiness centers. DOD's estimated annual recurring savings resulting from BRAC may be overstated by about 46 percent. About $2.17 billion of DOD's total estimated annual recurring savings of about $4 billion is due to eliminated overhead expenses such as the costs to operate and maintain closed or realigned bases that will no longer be operated or maintained by DOD and reductions in civilian salaries for positions that are eliminated, which will free up funds that DOD can then use for other defense priorities. However, DOD's annual recurring savings estimate also includes $1.85 billion in military personnel entitlements--such as salaries and housing allowances--for military personnel that DOD plans to shift to other positions rather than eliminate. DOD considers these savings because they allow DOD to transfer these military personnel to other positions. We agree that transferring military personnel to other positions may enhance capabilities and allow DOD to redirect freed up resources to another area of need. However, while DOD disagrees with us, we do not believe that such transfers produce a tangible dollar savings that DOD can apply to fund other defense priorities outside the military personnel accounts because these personnel will remain in the end strength and will continue to receive salaries and benefits. Because DOD's BRAC budget submission does not explain the difference between net annual recurring savings attributable to military personnel entitlements for personnel that will continue to receive pay and benefits and net annual recurring savings from no longer operating and maintaining closed bases that will make funds available for other uses, DOD could generate a false sense that all of its reported savings could be used to fund other defense priorities. As such, in the report we issued yesterday, we recommended that DOD explain its estimated savings to Congress, thus providing more transparency over these savings. DOD concurred with our recommendation and has stated that it will take action to address our recommendation in its next BRAC budget submission. Additionally, DOD claimed about $60 million in annual recurring savings for closing Cannon Air Force Base, New Mexico, although the base will actually remain open to support a new mission.[Footnote 34] DOD recommended closing Cannon in its May 2005 submission to the Commission. However, in September 2005, the Commission recommended closing Cannon unless the Secretary of Defense identified a new mission for the base by December 31, 2009, and relocated the base's fighter wing elsewhere. Subsequently, DOD announced in June 2006 that Cannon would remain open and some Air Force Special Operations units would relocate to Cannon. Nevertheless, DOD still reported about $60 million in annual recurring savings for categories such as base operation and facilities maintenance. Officials at the Air Force BRAC office told us that they claimed these savings because they disestablished the fighter wing at Cannon.[Footnote 35] We are currently reviewing the implementation of this recommendation and plan to issue a report in January 2008. Finally, in June 2007 we reported that the Navy erroneously reported $25 million in onetime savings associated with inventory reductions as annual savings in the recommendation to establish fleet readiness centers.[Footnote 36] DOD officials agreed with our analysis and agreed to update their savings estimate. DOD Will Take Longer to Recoup Up-Front Costs: As a result of the increasing costs and decreasing savings for the 2005 BRAC round, our analysis of the Commission's cost and savings estimates and DOD's estimates included in its fiscal year 2008 budget submission shows that the time required to recoup up-front investment costs, also called the payback period, has lengthened from 8 years, initially breaking even in 2013 to 12 years, breaking even in 2017, as shown in figure 1. Figure 1: Comparison of Time to Recoup BRAC Costs Using the Commission's and DOD's Fiscal Year 2008 Budget Estimates: [See PDF for image] Six-year statutory implementation period is from 2006 through 2001. Fiscal Year: 2006; Cumulative net savings based on DOD current estimates: 0.1; Cumulative one-time costs based on DOD current estimates: 1.5; Cumulative net savings based on BRAC Commission estimates: 0.2; Cumulative one-time costs based on BRAC Commission estimates: 3.5. Fiscal Year: 2007; Cumulative net savings based on DOD current estimates: 0.6; Cumulative one-time costs based on DOD current estimates: 6.9; Cumulative net savings based on BRAC Commission estimates: 1.1; Cumulative one-time costs based on BRAC Commission estimates: 11.5. Fiscal Year: 2008; Cumulative net savings based on DOD current estimates: 1.6; Cumulative one-time costs based on DOD current estimates: 14.5; Cumulative net savings based on BRAC Commission estimates: 3.3; Cumulative one-time costs based on BRAC Commission estimates: 16.8. Fiscal Year: 2009; Cumulative net savings based on DOD current estimates: 3.4; Cumulative one-time costs based on DOD current estimates: 21.7; Cumulative net savings based on BRAC Commission estimates: 7.0; Cumulative one-time costs based on BRAC Commission estimates: 19.4. Fiscal Year: 2010: Cumulative net savings based on DOD current estimates: 6.0; Cumulative one-time costs based on DOD current estimates: 26.7; Cumulative net savings based on BRAC Commission estimates: 11.4; Cumulative one-time costs based on BRAC Commission estimates: 20.8. Fiscal Year: 2011; Cumulative net savings based on DOD current estimates: 9.2; Cumulative one-time costs based on DOD current estimates: 28.6; Cumulative net savings based on BRAC Commission estimates: 15.5; Cumulative one-time costs based on BRAC Commission estimates: 21.0. Fiscal Year: 2012; Cumulative net savings based on DOD current estimates: 12.6; Cumulative one-time costs based on DOD current estimates: 28.6; Cumulative net savings based on BRAC Commission estimates: 19.8; Cumulative one-time costs based on BRAC Commission estimates: 21.0. Fiscal Year: 2013: Cumulative net savings based on DOD current estimates: 16.0; Cumulative one-time costs based on DOD current estimates: 28.6; Cumulative net savings based on BRAC Commission estimates: 24.0; Cumulative one-time costs based on BRAC Commission estimates: 21.0. Fiscal Year: 2014; Cumulative net savings based on DOD current estimates: 19.3; Cumulative one-time costs based on DOD current estimates: 28.6; Cumulative net savings based on BRAC Commission estimates: 28.2; Cumulative one-time costs based on BRAC Commission estimates: 21.0. Fiscal Year: 2015; Cumulative net savings based on DOD current estimates: 22.7; Cumulative one-time costs based on DOD current estimates: 28.6; Cumulative net savings based on BRAC Commission estimates: 32.4; Cumulative one-time costs based on BRAC Commission estimates: 21.0. Fiscal Year: 2016; Cumulative net savings based on DOD current estimates: 26.1; Cumulative one-time costs based on DOD current estimates: 28.6; Cumulative net savings based on BRAC Commission estimates: 36.7; Cumulative one-time costs based on BRAC Commission estimates: 21.0. Fiscal Year: 2017; Cumulative net savings based on DOD current estimates: 29.5; Cumulative one-time costs based on DOD current estimates: 28.6; Cumulative net savings based on BRAC Commission estimates: 40.9; Cumulative one-time costs based on BRAC Commission estimates: 21.0. Fiscal Year: 2018; Cumulative net savings based on DOD current estimates: 32.8; Cumulative one-time costs based on DOD current estimates: 28.6; Cumulative net savings based on BRAC Commission estimates: 45.1; Cumulative one-time costs based on BRAC Commission estimates: 21.0. Fiscal Year: 2019; Cumulative net savings based on DOD current estimates: 36.2; Cumulative one-time costs based on DOD current estimates: 28.6; Cumulative net savings based on BRAC Commission estimates: 49.4; Cumulative one-time costs based on BRAC Commission estimates: 21.0. Fiscal Year: 2020; Cumulative net savings based on DOD current estimates: 39.6; Cumulative one-time costs based on DOD current estimates: 28.6; Cumulative net savings based on BRAC Commission estimates: 53.6; Cumulative one-time costs based on BRAC Commission estimates: 21.0. Fiscal Year: 2021; Cumulative net savings based on DOD current estimates: 42.9; Cumulative one-time costs based on DOD current estimates: 28.6; Cumulative net savings based on BRAC Commission estimates: 57.8; Cumulative one-time costs based on BRAC Commission estimates: 21.0. Fiscal Year: 2022; Cumulative net savings based on DOD current estimates: 46.3; Cumulative one-time costs based on DOD current estimates: 28.6; Cumulative net savings based on BRAC Commission estimates: 62.0; Cumulative one-time costs based on BRAC Commission estimates: 21.0. Fiscal Year: 2023; Cumulative net savings based on DOD current estimates: 49.7; Cumulative one-time costs based on DOD current estimates: 28.6; Cumulative net savings based on BRAC Commission estimates: 66.3; Cumulative one-time costs based on BRAC Commission estimates: 21.0. Fiscal Year: 2024; Cumulative net savings based on DOD current estimates: 53.0; Cumulative one-time costs based on DOD current estimates: 28.6; Cumulative net savings based on BRAC Commission estimates: 70.5; Cumulative one-time costs based on BRAC Commission estimates: 21.0. Fiscal Year: 2025; Cumulative net savings based on DOD current estimates: 56.4; Cumulative one-time costs based on DOD current estimates: 28.6; Cumulative net savings based on BRAC Commission estimates: 74.7; Cumulative one-time costs based on BRAC Commission estimates: 21.0. DOD current estimates indicate cumulative savings will exceed cumulative costs in fiscal year 2013. BRAC Commission estimates indicate cumulative savings will exceed cumulative costs in fiscal year 2017. Source: GAO analysis of DOD and BRAC data. [End of table] [End of figure] This extended payback period includes the savings estimates that we question. When the estimated savings from military personnel entitlements and Cannon Air Force Base, New Mexico, are removed, the payback period increases to 19 years, breaking even in 2025. In prior rounds, it has taken DOD about 6� years to recoup up-front costs for implementing BRAC actions. While the overall payback period for DOD's BRAC recommendations is less than 20 years, our analysis showed that, as a result of increasing costs and decreasing savings, the number of recommendations that do not pay back within 20 years increased from 30 recommendations in the Commission's report to 73 recommendations in DOD's fiscal year 2008 budget request. (See app. I for a listing of these recommendations.) About half of these recommendations primarily involve closing or realigning National Guard or Reserve facilities and nearly 20 percent primarily involve closing or realigning active duty Army installations. In our July 2005 report we noted that DOD officials acknowledged that the additional objectives of fostering jointness and transformation had some effect on generating recommendations with longer payback periods.[Footnote 37] Our analysis indicates there were a total of 6 recommendations that did not pay back within 20 years for the three most recent BRAC rounds, in contrast to the 73 that do not pay back in 20 years in the 2005 round. Mr. Chairman, this concludes my statement. I would be pleased to answer any questions you or any members may have at this time. Contact and Acknowledgments: For further information regarding this statement, please contact Brian J. Lepore at (202) 512-4523. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this testimony. GAO staff making major contributions to this testimony are included in appendix II. [End of section] Appendix I: BRAC Recommendations DOD Expects Not to Pay Back over a 20- Year Period (Fiscal Years 2006 through 2025): The 2005 Defense Base Closure and Realignment Commission (the Commission) estimated that 30 recommendations would not pay back-- meaning recoup up-front costs--within 20 years. Our analysis of the Department of Defense's (DOD) fiscal year 2008 Base Realignment and Closure (BRAC) budget submission shows that 73 recommendations will not pay back within 20 years. Table 3 shows a list of these 73 recommendations, the Commission's reported estimates, and DOD's estimates of the 20-year cost. Positive dollar amounts indicate a cost, while negative dollar amounts, shown in parentheses, indicate a savings. Table 3: BRAC Recommendations DOD Expects Not to Pay Back over a 20- Year Period, Fiscal Years 2006 through 2025, (Constant fiscal year 2005 dollars in millions): Recommendation: Realign Operational Army (Integrated Global Presence and Basing Strategy)*; Commission's reported 20-year net present value estimates[A]: $7,846.70; DOD's fiscal year 2008 budget 20-year net present value estimates[A]: $5,833.87. Recommendation: Realign Fort Hood, TX*; Commission's reported 20-year net present value estimates[A]: 980.40; DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 1,671.42. Recommendation: Close National Geospatial-Intelligence Agency leased locations and realign others at Fort Belvoir, VA; Commission's reported 20-year net present value estimates[A]: (535.10); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 1,376.91. Recommendation: Realign Fort Bragg, NC*; Commission's reported 20-year net present value estimates[A]: 639.16; DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 704.00. Recommendation: Realign to establish Joint Strike Fighter initial joint training site at Eglin Air Force Base, FL*; Commission's reported 20-year net present value estimates[A]: 226.30; DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 504.47. Recommendation: Establish San Antonio Regional Medical Center and realign enlisted medical training to Fort Sam Houston, TX; Commission's reported 20-year net present value estimates[A]: (476.20); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 468.00. Recommendation: Realign Martin State Air Guard Station, MD*; Commission's reported 20-year net present value estimates[A]: 353.66; DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 430.00. Recommendation: Co-locate miscellaneous OSD, defense agency, and field activity leased locations; Commission's reported 20-year net present value estimates[A]: (256.41); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 358.51. Recommendation: Co-locate military department investigation agencies with DOD Counterintelligence and Security Agency at Marine Corps Base Quantico, VA; Commission's reported 20-year net present value estimates[A]: (166.36); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 206.82. Recommendation: Consolidate correctional facilities into joint regional correctional facilities; Commission's reported 20-year net present value estimates[A]: (11.22); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 167.36. Recommendation: Co-locate miscellaneous Air Force leased locations and National Guard Headquarters leased locations; Commission's reported 20-year net present value estimates[A]: (308.18); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 162.62. Recommendation: Realign Great Falls International Airport Air Guard Station, MT*; Commission's reported 20-year net present value estimates[A]: 7.23; DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 155.24. Recommendation: Realign Otis Air National Guard Base, MA, and Lambert- St. Louis International Airport Air Guard Station, MO; Commission's reported 20-year net present value estimates[A]: (305.40); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 148.29. Recommendation: Realign to create joint centers of excellence for chemical, biological, and medical research and development and acquisition; Commission's reported 20-year net present value estimates[A]: (39.54); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 138.20. Recommendation: Reserve Component Transformation, NY*; Commission's reported 20-year net present value estimates[A]: 46.50; DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 97.16. Recommendation: Realign March Air Reserve Base, CA; Commission's reported 20-year net present value estimates[A]: (6.10); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 92.88. Recommendation: Co-locate defense and military department adjudication activities; Commission's reported 20-year net present value estimates[A]: (11.30); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 87.88. Recommendation: Reserve Component Transformation, MA*; Commission's reported 20-year net present value estimates[A]: 60.40; DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 80.37. Recommendation: Relocate miscellaneous Department of the Navy leased locations; Commission's reported 20-year net present value estimates[A]: (164.68); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 79.55. Recommendation: Reserve Component Transformation, AR*; Commission's reported 20-year net present value estimates[A]: 38.20; DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 79.15. Recommendation: Realign Nashville International Airport Air Guard Station, TN*; Commission's reported 20-year net present value estimates[A]: 261.30; DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 60.46. Recommendation: Realign to relocate undergraduate pilot and navigator training; Commission's reported 20-year net present value estimates[A]: (174.20); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 50.11. Recommendation: Relocate Army headquarters and field operating activities; Commission's reported 20-year net present value estimates[A]: (122.90); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 48.46. Recommendation: Reserve Component Transformation, OH*; Commission's reported 20-year net present value estimates[A]: 1.30; DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 47.46. Recommendation: Realign Naval Station Newport, RI; Commission's reported 20-year net present value estimates[A]: (2.10); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 43.29. Recommendation: Close Deseret Chemical Depot, UT; Commission's reported 20-year net present value estimates[A]: (407.45); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 39.72. Recommendation: Realign to create an integrated weapons and armaments specialty site for guns and ammunition at Picatinny Arsenal, NJ; Commission's reported 20-year net present value estimates[A]: (51.78); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 38.06. Recommendation: Reserve Component Transformation, TX; Commission's reported 20-year net present value estimates[A]: (133.20); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 37.08. Recommendation: Realign Defense Intelligence Agency functions; Commission's reported 20-year net present value estimates[A]: (52.80); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 35.47. Recommendation: Realign Bradley International Airport Air Guard Station, CT; Commission's reported 20-year net present value estimates[A]: (17.78); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 34.82. Recommendation: Reserve Component Transformation, WY*; Commission's reported 20-year net present value estimates[A]: 9.00; DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 32.71. Recommendation: Reserve Component Transformation, OR*; Commission's reported 20-year net present value estimates[A]: 19.80; DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 31.97. Recommendation: Reserve Component Transformation, VT*; Commission's reported 20-year net present value estimates[A]: 41.70; DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 29.54. Recommendation: Reserve Component Transformation, IN*; Commission's reported 20-year net present value estimates[A]: 6.10; DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 27.20. Recommendation: Consolidate media organizations into a new agency for media and publications at Fort Meade, MD; Commission's reported 20-year net present value estimates[A]: (89.00); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 26.93. Recommendation: Reserve Component Transformation, MN*; Commission's reported 20-year net present value estimates[A]: 17.10; DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 26.93. Recommendation: Reserve Component Transformation, CT*; Commission's reported 20-year net present value estimates[A]: 47.50; DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 26.01. Recommendation: Reserve Component Transformation, IL; Commission's reported 20-year net present value estimates[A]: (6.50); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 24.54. Recommendation: Reserve Component Transformation, OK; Commission's reported 20-year net present value estimates[A]: (63.80); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 22.82. Recommendation: Realign Niagara Falls Air Reserve Station, NY*; Commission's reported 20-year net present value estimates[A]: 1.19; DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 22.65. Recommendation: Realign to relocate Army Prime Power School training at Fort Leonard Wood, MO; Commission's reported 20-year net present value estimates[A]: (0.80); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 22.05. Recommendation: Realign to establish centers for rotary wing air platform Development, and Acquisition, Test and Evaluation Center at Patuxent River, MD and Redstone Arsenal, AL*; Commission's reported 20-year net present value estimates[A]: 11.80; DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 20.53. Recommendation: Realign to establish centers for fixed wing air platform research, development, and acquisition, test and evaluation at Wright Patterson Air Force Base, OH and Naval Air Weapons Station China Lake, CA; Commission's reported 20-year net present value estimates[A]: (17.90); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 17.71. Recommendation: Reserve Component Transformation, PR; Commission's reported 20-year net present value estimates[A]: (8.60); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 15.75. Recommendation: Realign Portland International Airport Air Guard Station, OR*; Commission's reported 20-year net present value estimates[A]: 19.93; DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 14.80. Recommendation: Realign Capital Airport Air Guard Station, IL; Commission's reported 20-year net present value estimates[A]: (1.62); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 14.47. Recommendation: Realign Andrews Air Force Base, MD; Commission's reported 20-year net present value estimates[A]: (69.98); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 13.95. Recommendation: Realign Mansfield-Lahm Air Guard Station, OH; Commission's reported 20-year net present value estimates[A]: (79.57); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 13.57. Recommendation: Realign Naval Shipyard Detachments; Commission's reported 20-year net present value estimates[A]: (20.70); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 11.68. Recommendation: Realign Rock Island Arsenal, IL; Commission's reported 20-year net present value estimates[A]: (13.80); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 11.68. Recommendation: Realign to establish joint center for religious training and education at Fort Jackson, SC; Commission's reported 20-year net present value estimates[A]: (11.90); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 9.63. Recommendation: Realign to consolidate ground vehicle development and acquisition in a joint center at Detroit Arsenal, MI; Commission's reported 20-year net present value estimates[A]: (17.10); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 8.93. Recommendation: Close Umatilla Chemical Depot, OR; Commission's reported 20-year net present value estimates[A]: (347.88); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 8.60. Recommendation: Realign Fairchild Air Force Base, WA; Commission's reported 20-year net present value estimates[A]: (6.74); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 8.56. Recommendation: Realign Hector International Airport Air Guard Station, ND; Commission's reported 20-year net present value estimates[A]: (12.92); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 8.02. Recommendation: Reserve Component Transformation, MT*; Commission's reported 20-year net present value estimates[A]: 4.30; DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 7.87. Recommendation: Relocate Air Force Real Property Agency; Commission's reported 20-year net present value estimates[A]: (7.90); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 7.83. Recommendation: Reserve Component Transformation, ND*; Commission's reported 20-year net present value estimates[A]: 8.00; DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 7.10. Recommendation: Realign Ellington Field Air Guard Station, TX; Commission's reported 20-year net present value estimates[A]: (2.71); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 6.33. Recommendation: Close Navy Supply Corps School Athens, GA*; Commission's reported 20-year net present value estimates[A]: 1.36; DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 5.19. Recommendation: Close W.K. Kellogg Airport Air Guard Station, MI; Commission's reported 20-year net present value estimates[A]: (11.16); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 4.50. Recommendation: Close Newport Chemical Depot, IN; Commission's reported 20-year net present value estimates[A]: (132.61); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 4.10. Recommendation: Realign Ship Intermediate Maintenance Activity Norfolk, VA; Commission's reported 20-year net present value estimates[A]: (104.30); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 3.99. Recommendation: Realign Key Field Air Guard Station, MS; Commission's reported 20-year net present value estimates[A]: (2.56); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 3.92. Recommendation: Reserve Component Transformation, DE*; Commission's reported 20-year net present value estimates[A]: 0.90; DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 3.71. Recommendation: Realign to create an air integrated weapons and armaments research, development, and acquisition, test and evaluation center at Eglin Air Force Base, FL; Commission's reported 20-year net present value estimates[A]: (17.90); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 3.65. Recommendation: Realign Springfield-Beckley Municipal Airport Air Guard Station, OH; Commission's reported 20-year net present value estimates[A]: (5.41); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 2.72. Recommendation: Reserve Component Transformation, CA; Commission's reported 20-year net present value estimates[A]: (46.00); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 2.41. Recommendation: Reserve Component Transformation, TN*; Commission's reported 20-year net present value estimates[A]: 1.10; DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 1.93. Recommendation: Realign Boise Air Terminal Air Guard Station, ID; Commission's reported 20-year net present value estimates[A]: (57.04); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 1.78. Recommendation: Realign to consolidate sea vehicle development and acquisition to Naval Surface Warfare Center Carderock Division, MD, and Naval Sea Systems Command, DC; Commission's reported 20-year net present value estimates[A]: (2.00); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 1.32. Recommendation: Realign Officer Training Command, Naval Air Station Pensacola, FL; Commission's reported 20-year net present value estimates[A]: (7.61); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 0.35. Recommendation: Realign Single Drill Sergeant School to Fort Jackson, SC; Commission's reported 20-year net present value estimates[A]: (31.35); DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 0.12. Source: Commission and DOD data. Note: * indicates recommendations which were estimated by the Commission to not pay back within the 20-year period. In addition to the recommendations included in the table, the Commission reported that the following recommendations would not pay back within the 20-year period: Reserve Component Transformation, NH; Realign Army Reserve Command and Control - Southwest; Realign Fort Smith Municipal Airport Air Guard Station, AR; Realign Beale Air Force Base, CA; and Close Navy Broadway Complex, San Diego, CA. With the exception of the recommendation to close Navy Broadway Complex, which is not included in DOD's fiscal year 2008 BRAC budget submission, DOD estimates that these recommendations will pay back within 20 years in its fiscal year 2008 BRAC budget submission. [A] Positive dollar amounts indicate an estimated cost over the 20-year period. Negative dollar amounts, shown in parentheses, indicate an estimated savings over the 20-year period. [End of table] [End of section] Appendix II GAO Contact and Staff Acknowledgments: GAO Contact: Brian J. Lepore, (202) 512-4523 or leporeb@gao.gov. Acknowledgments: In addition to the individual named above, Hilary Murrish Benedict, Susan Ditto, Mike Kennedy, Tom Mahalek, Julie Matta, Charlie Perdue, Jim Reifsnyder, Laura Talbott, and Ben Thompson made key contributions to this statement. [End of section] Related GAO Products: Military Base Realignments and Closures: Cost Estimates Have Increased and Are Likely to Continue to Evolve. GAO-08-159. Washington, D.C.: December 11, 2007. Military Base Realignments and Closures: Impact of Terminating, Relocating, or Outsourcing the Services of the Armed Forces Institute of Pathology. GAO-08-20. Washington, D.C.: November 9, 2007. Military Base Realignments and Closures: Transfer of Supply, Storage, and Distribution Functions from Military Services to Defense Logistics Agency. GAO-08-121R. Washington, D.C.: October 26, 2007. Defense Infrastructure: Challenges Increase Risks for Providing Timely Infrastructure Support for Army Installations Expecting Substantial Personnel Growth. GAO-07-1007. Washington, D.C.: September 13, 2007. Military Base Realignments and Closures: Plan Needed to Monitor Challenges for Completing More than 100 Armed Forces Reserve Centers. GAO-07-1040. Washington, D.C.: September 13, 2007. Military Base Realignments and Closures: Observations Related to the 2005 Round. GAO-07-1203R. Washington, D.C.: September 6, 2007. Military Base Closures: Projected Savings from Fleet Readiness Centers Are Likely Overstated and Actions Needed to Track Actual Savings and Overcome Certain Challenges. GAO-07-304. Washington, D.C.: June 29, 2007. Military Base Closures: Management Strategy Needed to Mitigate Challenges and Improve Communication to Help Ensure Timely Implementation of Air National Guard Recommendations. GAO-07-641. Washington, D.C.: May 16, 2007. Military Base Closures: Opportunities Exist to Improve Environmental Cleanup Cost Reporting and to Expedite Transfer of Unneeded Property. GAO-07-166. Washington, D.C.: January 30, 2007. Military Bases: Observations on DOD's 2005 Base Realignment and Closure Selection Process and Recommendations. GAO-05-905. Washington, D.C.: July 18, 2005. Military Bases: Analysis of DOD's 2005 Selection Process and Recommendations for Base Closures and Realignments. GAO-05-785. Washington, D.C.: July 1, 2005. Military Base Closures: Observations on Prior and Current BRAC Rounds. GAO-05-614. Washington, D.C.: May 3, 2005. Military Base Closures: Updated Status of Prior Base Realignments and Closures. GAO-05-138. Washington, D.C.: January 13, 2005. Military Base Closures: Assessment of DOD's 2004 Report on the Need for a Base Realignment and Closure Round. GAO-04-760. Washington, D.C.: May 17, 2004. Military Base Closures: Observations on Preparations for the Upcoming Base Realignment and Closure Round. GAO-04-558T. Washington, D.C.: March 25, 2004. [End of section] (351121): Footnotes: [1] GAO, Military Base Realignments and Closures: Cost Estimates Have Increased and Are Likely to Continue to Evolve, GAO-08-159 (Washington, D.C.: Dec. 11, 2007). [2] Defense Base Closure and Realignment Commission, 2005 Base Closure and Realignment Commission Report to the President (Arlington, Va.: Sept. 8, 2005). [3] H.R. Rep. No. 110-146, at 514 (2007). [4] The Commission reported its estimates in constant fiscal year 2005 dollars (i.e., excludes projected inflation), while DOD reported BRAC estimates in the fiscal year 2008 President's budget submission in current dollars (i.e., includes projected inflation). [5] The overall cost of the recommendation to relocate the Army's armor school from Fort Knox, Kentucky, to Fort Benning, Georgia, has increased by more than $680 million. [6] The overall cost of the recommendation to close Fort Monmouth, New Jersey, has increased by almost $678 million. [7] The Commission reported its estimates in constant fiscal year 2005 dollars (i.e., excludes projected inflation), while DOD reported BRAC estimates in the fiscal year 2008 President's budget submission in current dollars (i.e., includes projected inflation). When the effect of inflation is eliminated, DOD's estimated net annual recurring savings decreased by more than $800 million to about $3.4 billion--a 20 percent decrease. [8] The first round in 1988 was authorized by the Defense Authorization Amendments and Base Closure and Realignment Act, as amended (Pub. L. No. 100-526, Title II, (1988)). Subsequently, additional BRAC rounds were completed in 1991, 1993, and 1995 as authorized by the Defense Base Closure and Realignment Act of 1990, as amended (Pub. L. No.101- 510, Title XXIX (1990)). The latest round--BRAC 2005--was authorized by the National Defense Authorization Act for Fiscal Year 2002 (Pub. L. No. 107-107, Title XXX (2001)). [9] DOD defines major closures as installations recommended for closure with plant replacement value exceeding $100 million and major realignments as installations losing more than 400 military and civilian personnel. Minor closures and realignments are those closures and realignments that do not meet the definitions above. [10] GAO, Military Bases: Analysis of DOD's 1995 Process and Recommendations for Closure and Realignment, GAO/NSIAD-95-133 (Washington, D.C.: Apr. 14, 1995) and Military Bases: Analysis of DOD's 2005 Selection Process and Recommendations for Base Closures and Realignments, GAO-05-785 (Washington, D.C.: July 1, 2005). [11] The President was required to approve or disapprove the Commission's recommendations in their entirety by September 23, 2005. After they were approved, the recommendations were forwarded to Congress, which had 45 days or until the adjournment of Congress to disapprove the recommendations on an all-or-none basis; otherwise, the recommendations became binding. [12] Pub. L. No. 107-107, Title XXX (2001). [13] GAO-05-785. [14] 31 U.S.C. � 717. [15] GAO, Military Base Closures: Management Strategy Needed to Mitigate Challenges and Improve Communication to Help Ensure Timely Implementation of Air National Guard Recommendations, GAO-07-641 (Washington, D.C.: May 16, 2007); Military Base Realignments and Closures: Plan Needed to Monitor Challenges for Completing More Than 100 Armed Forces Reserve Centers, GAO-07-1040 (Washington, D.C.: Sept. 13, 2007); Military Base Closures: Projected Savings from Fleet Readiness Centers Likely Overstated and Actions Needed to Track Actual Savings and Overcome Certain Challenges, GAO-07-304 (Washington, D.C.: June 29, 2007); Military Base Realignments and Closures: Transfer of Supply, Storage, and Distribution Functions from Military Services to Defense Logistics Agency, GAO-08-121R (Washington, D.C.: Oct. 26, 2007); and Military Base Closures: Opportunities Exist to Improve Environmental Cleanup Cost Reporting and to Expedite Transfer of Unneeded Property, GAO-07-166 (Washington, D.C.: Jan. 30, 2007). [16] As part of our ongoing reviews of DOD's implementation of the 2005 recommendations, we plan to review the methodology of DOD's forthcoming report addressing human capital issues related to the closure of Fort Monmouth, New Jersey. [17] H.R. Rep. No. 110-146, at 514 (2007). [18] The BRAC Commission reported its estimates in constant fiscal year 2005 dollars (i.e., excludes projected inflation), while DOD reported BRAC estimates in the fiscal year 2008 President's budget submission in current dollars (i.e., includes projected inflation). However, when the effect of inflation is eliminated, projected costs have increased $7.5 billion, or 36 percent. [19] The BRAC Commission reported its estimates in constant fiscal year 2005 dollars (i.e., excludes projected inflation), while DOD reported BRAC estimates in the fiscal year 2008 President's budget submission in current dollars (i.e., includes projected inflation). However, when the effect of inflation is eliminated, projected net annual recurring savings have decreased about $800 million, or 20 percent. [20] The BRAC Commission reported its estimates in constant fiscal year 2005 dollars (i.e., excludes projected inflation), while DOD reported BRAC estimates in the fiscal year 2008 President's budget submission in current dollars (i.e., includes projected inflation). However, when the effect of inflation is eliminated, projected costs have increased $7.5 billion, or 36 percent. [21] The increase in costs due to inflation occurred because the Commission presented its estimates using constant fiscal year 2005 dollars, which does not include the effects of projected inflation, whereas DOD's budgeted estimates were presented in current dollars because budget requests take into consideration projected inflation. [22] GAO-07-166. [23] The overall cost for the recommendation to consolidate the National Geospatial-Intelligence Agency at Fort Belvoir, Virginia, has increased by about $974 million. [24] The overall cost of the recommendation to move various DOD activities from leased space to Fort Belvoir and Fort Lee, Virginia, has increased nearly $600 million. [25] The overall net cost of the recommendation to relocate the Army's armor school from Fort Knox, Kentucky, to Fort Benning, Georgia, has increased by more than $680 million. [26] The overall cost of the recommendation to close Fort Monmouth, New Jersey, has increased by almost $678 million. [27] The overall cost of the recommendation to realign the Walter Reed Army Medical Center in the District of Columbia and relocate medical care functions to the National Naval Medical Center, Bethesda, Maryland, and Fort Belvoir, Virginia, has increased by nearly $700 million. [28] The overall cost for the recommendation to consolidate medical enlisted training and establish the San Antonio Regional Medical Center at Fort Sam Houston, Texas, has increased by about $550 million. [29] The U.S. Army Corps of Engineers initiated five construction projects in 2006, all of which were awarded under its price limit. [30] GAO-07-1040. [31] The BRAC Commission reported its estimates in constant fiscal year 2005 dollars (i.e., excludes projected inflation), while DOD reported BRAC estimates in the fiscal year 2008 President's budget submission in current dollars (i.e., includes projected inflation). However, when the effect of inflation is eliminated, projected net annual recurring savings have decreased about $800 million, or 20 percent. [32] The three chemical demilitarization depots are Deseret Chemical Depot, Utah; Newport Chemical Depot, Indiana; and Umatilla Chemical Depot, Oregon. [33] GAO-05-785. [34] DOD also claimed nearly $200 million in annual savings for military personnel entitlements for closing Cannon Air Force Base, which is included in the $1.85 billion mentioned above. [35] In commenting on a draft of the report we issued yesterday, the Air Force BRAC office stated that it claimed these savings because the decision to reallocate Air Force resources and mission to Cannon was made after the BRAC recommendation was approved and was, therefore, a non-BRAC programmatic decision. [36] GAO-07-304. [37] GAO-05-785. 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. 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