Defense Infrastructure
Planning Challenges Could Increase Risks for DOD in Providing Utility Services When Needed to Support the Military Buildup on Guam Gao ID: GAO-09-653 June 30, 2009The Department of Defense's (DOD) plans to increase the U.S. military presence on Guam by more than two-and-a-half times the island's current military population of 15,000 by 2020. To keep pace with this growth, DOD has determined that substantial upgrades to the island's existing utilities infrastructure are required for electric power, potable water, wastewater treatment, and solid waste disposal to meet future utility needs. GAO was asked to examine (1) the condition and capacity of the existing utilities' infrastructure on Guam, the military's estimated utility requirements, and potential solutions for meeting the increased demand on the island's utility systems as well as (2) the extent that DOD has developed a comprehensive plan to address any challenges it faces in its planning for new utility systems. GAO reviewed and analyzed plans and studies within DOD, the services, and several stakeholders on implementing new utility services associated with the Guam military buildup.
Existing utility systems on Guam are currently near or at their maximum capacities and will require significant enhancements to meet anticipated demands of the expanding U.S. military population resulting from DOD's planned buildup. Over the past 2 years, the Navy's Joint Guam Program Office, which is leading DOD's utility planning efforts in cooperation with the Naval Facilities Engineering Command, has conducted several studies to identify and evaluate possible long-term solutions and establish an implementation approach. Currently, DOD is determining its preferred solutions that will likely result in increasing (1) islandwide electric power generation capacity by 31 percent, (2) Navy potable water production by 89 percent, and (3) wastewater collection and treatment capacity at a Guam Waterworks Authority plant by 50 percent. In addition, DOD plans to use the government of Guam's new landfill to dispose of all DOD solid waste, which is likely to increase by 230 percent as a result of the buildup. DOD also determined that certain operating inefficiencies, outstanding deficiencies, and compliance issues with certain environmental regulations in the existing infrastructure--especially related to those systems operated by Guam utility authorities--would need to be addressed to implement some of its potential solutions. While the Navy's Joint Guam Program Office has made progress in identifying requirements and solutions to meet future demands, it has not developed a comprehensive utility plan, which would be mutually developed with the government of Guam. Our prior work has shown that use of a comprehensive plan is an important planning tool for an organization to increase transparency and improve management of its efforts to achieve overall objectives. Such a plan generally would include information for stakeholders on schedules, costs, financing, goals and objectives, projects and activities, responsibilities, potential risks, challenges, and other factors that could affect implementation. Several challenges could adversely affect future planning efforts. First, the condition of existing Guam utility systems can affect implementation of some potential solutions. Second, the involvement of a number of diverse stakeholders complicates the planning process by requiring continuous coordination and sharing of information as plans are developed and implemented. Third, sources of funding have not been identified although DOD's cost estimates indicate that the total cost for utilities is likely to exceed the amount of utility funding that the government of Japan has agreed to commit. Fourth, the use of a special purpose entity (utilities service provider) approach to provide new utility services has not been previously used by DOD for utility construction, and DOD may currently lack the statutory authority to implement certain aspects of this approach thus potentially increasing uncertainty about financing, stakeholder involvement, and schedules. Lastly, time frames for completing the buildup of utilities to meet DOD's scheduled increase of military presence on Guam provide little flexibility to accommodate any major adjustments in milestone dates. Without a comprehensive plan, DOD lacks an important planning tool to address these challenges and provide consistent, detailed information to its stakeholders.
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-09-653, Defense Infrastructure: Planning Challenges Could Increase Risks for DOD in Providing Utility Services When Needed to Support the Military Buildup on Guam
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Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
June 2009:
Defense Infrastructure:
Planning Challenges Could Increase Risks for DOD in Providing Utility
Services When Needed to Support the Military Buildup on Guam:
GAO-09-653:
GAO Highlights:
Highlights of GAO-09-653, a report to congressional requesters.
Why GAO Did This Study:
The Department of Defense‘s (DOD) plans to increase the U.S. military
presence on Guam by more than two-and-a-half times the island‘s current
military population of 15,000 by 2020. To keep pace with this growth,
DOD has determined that substantial upgrades to the island‘s existing
utilities infrastructure are required for electric power, potable
water, wastewater treatment, and solid waste disposal to meet future
utility needs.
GAO was asked to examine (1) the condition and capacity of the existing
utilities‘ infrastructure on Guam, the military‘s estimated utility
requirements, and potential solutions for meeting the increased demand
on the island‘s utility systems as well as (2) the extent that DOD has
developed a comprehensive plan to address any challenges it faces in
its planning for new utility systems. GAO reviewed and analyzed plans
and studies within DOD, the services, and several stakeholders on
implementing new utility services associated with the Guam military
buildup.
What GAO Found:
Existing utility systems on Guam are currently near or at their maximum
capacities and will require significant enhancements to meet
anticipated demands of the expanding U.S. military population resulting
from DOD‘s planned buildup. Over the past 2 years, the Navy‘s Joint
Guam Program Office, which is leading DOD‘s utility planning efforts in
cooperation with the Naval Facilities Engineering Command, has
conducted several studies to identify and evaluate possible long-term
solutions and establish an implementation approach. Currently, DOD is
determining its preferred solutions that will likely result in
increasing (1) islandwide electric power generation capacity by 31
percent, (2) Navy potable water production by 89 percent, and (3)
wastewater collection and treatment capacity at a Guam Waterworks
Authority plant by 50 percent. In addition, DOD plans to use the
government of Guam‘s new landfill to dispose of all DOD solid waste,
which is likely to increase by 230 percent as a result of the buildup.
DOD also determined that certain operating inefficiencies, outstanding
deficiencies, and compliance issues with certain environmental
regulations in the existing infrastructure”especially related to those
systems operated by Guam utility authorities”would need to be addressed
to implement some of its potential solutions.
While the Navy‘s Joint Guam Program Office has made progress in
identifying requirements and solutions to meet future demands, it has
not developed a comprehensive utility plan, which would be mutually
developed with the government of Guam. Our prior work has shown that
use of a comprehensive plan is an important planning tool for an
organization to increase transparency and improve management of its
efforts to achieve overall objectives. Such a plan generally would
include information for stakeholders on schedules, costs, financing,
goals and objectives, projects and activities, responsibilities,
potential risks, challenges, and other factors that could affect
implementation. Several challenges could adversely affect future
planning efforts. First, the condition of existing Guam utility systems
can affect implementation of some potential solutions. Second, the
involvement of a number of diverse stakeholders complicates the
planning process by requiring continuous coordination and sharing of
information as plans are developed and implemented. Third, sources of
funding have not been identified although DOD‘s cost estimates indicate
that the total cost for utilities is likely to exceed the amount of
utility funding that the government of Japan has agreed to commit.
Fourth, the use of a special purpose entity (utilities service
provider) approach to provide new utility services has not been
previously used by DOD for utility construction, and DOD may currently
lack the statutory authority to implement certain aspects of this
approach thus potentially increasing uncertainty about financing,
stakeholder involvement, and schedules. Lastly, time frames for
completing the buildup of utilities to meet DOD‘s scheduled increase of
military presence on Guam provide little flexibility to accommodate any
major adjustments in milestone dates. Without a comprehensive plan, DOD
lacks an important planning tool to address these challenges and
provide consistent, detailed information to its stakeholders.
What GAO Recommends:
GAO recommends that DOD develop a comprehensive utility plan for Guam,
in cooperation with the government of Guam, to strengthen DOD‘s
management of its utility planning efforts and provide additional
transparency among its stakeholders. DOD agreed with our
recommendation.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.gao.gov/products/GAO-09-653]. For more
information, contact Brian J. Lepore, 202-512-4523, leporeb@gao.gov.
[End of section]
Contents:
Letter:
Background:
Guam's Existing Utility Infrastructure Is Not Sufficient to Meet DOD's
Projected Utility Requirements without Further Upgrades:
DOD Lacks a Comprehensive Plan for Addressing Several Planning
Challenges It Faces in Providing New Utility Services for Guam:
Conclusions:
Recommendation for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Department of the Navy's Fena Reservoir Water Treatment
Operations and Rates on Guam:
Appendix III: Current Sources of Utility Services for Civilian and DOD
Customers on Guam:
Appendix IV: Comments from the Department of Defense:
Appendix V: GAO Contact and Staff Acknowledgments:
Related GAO Products:
Tables:
Table 1: Projected Military Population Growth by Service from 2009
through 2020:
Table 2: Key Steps that DOD Plans to Use to Increase Utility
Infrastructure Capacities on Guam:
Table 3: Estimated Effect of DOD Growth on Electric Power Utility
System (As of May 2009):
Table 4: Estimated Effect of DOD Growth on Potable Water Utility System
(As of May 2009):
Table 5: Estimated Effect of DOD Growth on Wastewater Treatment Utility
System (As of May 2009):
Table 6: Estimated Effect of DOD Growth on Solid Waste Disposal System
(As of May 2009):
Table 7: Actions Needed to Implement the Special Purpose Entity
Approach for Utilities:
Table 8: Organizations and Offices Contacted during Our Review:
Table 9: Current Source of Utilities Services for Guam Civilian and DOD
Customers by Utility Sector:
Figure:
Figure 1: Map of the Territory of Guam and Location of Current and
Projected U.S. Military Installations:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
June 30, 2009:
The Honorable Solomon P. Ortiz:
Chairman, Subcommittee on Readiness:
Committee on Armed Services:
House of Representatives:
The Honorable Madeleine Z. Bordallo:
House of Representatives:
The Department of Defense's (DOD) plans to increase the U.S. military
presence on Guam by more than two-and-a-half times the island's current
military population by 2020. If implemented as planned, this
realignment would increase the military population on Guam from about
15,000 in 2009 to about 29,000 in 2014, and to over 39,000 by 2020.
This growth will increase the current island population of 178,430 by
about 14 percent over those years.[Footnote 1] The largest portion of
the military's population growth is related to the relocation of about
8,000 Marines and their 9,000 dependents from Okinawa, Japan, to Guam
as part of an initiative between the United States and government of
Japan to reduce forces in Japan while maintaining a continuing presence
of U.S. forces in the region. The populations of each of the other
military services would also increase as a result of DOD plans to
expand their operations and presence on Guam.
To keep pace with the projected growth in the military's population on
Guam, DOD has determined that substantial upgrades to the island's
existing utilities infrastructure are required for electric power
generation, potable water production, wastewater collection and
treatment, and solid waste collection and disposal to provide the
additional utility capacities and services. The Navy's Joint Guam
Program Office, which is leading the planning efforts among DOD
components and other stakeholders to consolidate, optimize, and
integrate the existing DOD infrastructure on Guam associated with the
buildup, in cooperation with the Naval Facilities Engineering Command,
conducted a number of technical studies and business case analyses to
evaluate potential solutions for meeting the increased demand for
utility services. In addition, DOD is awaiting completion of its
environmental impact statement study and associated record of decision
before making final decisions on the long-term solutions and its
implementation approach for developing the new utility services
[Footnote 2]. These solutions will be developed and possibly
implemented by a special purpose entity or entities,[Footnote 3] which
DOD would help to create, to provide the technical expertise in
constructing and operating the utilities. According to the Joint Guam
Program Office, DOD plans to complete new utility construction on Guam
and be operational by November 2014.
This is one in a series of reports on DOD's plans for increasing its
presence on Guam.[Footnote 4] At your request, this report reviewed
DOD's planning approach for improving Guam's utilities' infrastructure
to meet the increased demand for services resulting from the
significant growth in the military's population. Specifically, we
examined (1) the condition and capacity of the existing utilities'
infrastructure on Guam, the military's estimated utility requirements,
and potential solutions for meeting the increased demand on the
island's utility systems, and (2) the extent that DOD has developed a
comprehensive plan to address any challenges it faces in its planning
for new utility systems. You also requested that we review issues
related to rates charged by the Navy for water from its Fena Reservoir
water treatment operations on Guam, which are discussed in appendix II.
To determine the current condition and capacity of Guam's existing
utilities infrastructure, the military's estimated utility
requirements, and potential solutions for meeting the increased demand
on the island's utility systems, we obtained and reviewed studies and
assessments, briefings, annual reports, and other pertinent
documentation prepared by DOD, government of Guam, and U.S. federal
departments and agencies. We interviewed and discussed this information
with officials at the Navy's Joint Guam Program Office, Naval
Facilities Engineering Command, U.S. Environmental Protection Agency,
offices and organizations of the government of Guam, including the
Consolidated Commission on Utilities, Guam Power Authority, Guam
Waterworks Authority, and Department of Public Works. We also met with
officials of Gershman, Brickner & Bratton, Inc.--the U.S. District
Court of Guam appointed receiver for Guam's solid waste operations. We
analyzed data on the expected number and timing of military personnel
arriving on Guam and reviewed several technical studies, business case
analyses, and related studies on the projected utility requirements and
associated capacities that would be needed to provide sufficient
utilities services. We discussed DOD's projected requirements and
potential solutions for providing the needed new utility services with
the Joint Guam Program Office, Naval Facilities Engineering Command
headquarters and its Pacific and Marianas component commands, the U.S.
Pacific Command and its service component commands, and Navy, Marine
Corps, and Air Force headquarters. To determine the extent that DOD has
developed a comprehensive plan to address any challenges it faces in
its planning for new utility systems, we obtained and reviewed studies,
reports, briefings, and other documentation and discussed this
information with officials at the Joint Guam Program Office, Naval
Facilities Engineering Command, U.S. Pacific Command and its service
components, and other DOD organizations. To determine the key steps
that DOD plans to use in its planning for the development of new
utility systems on Guam, we interviewed officials with the Joint Guam
Program Office, Naval Facilities Engineering Command, and other key
stakeholder organizations and reviewed reports, studies, briefings, and
other documentation related to the program. We developed a table of the
key steps needed to implement utility solutions based on our audit work
and discussed and reached concurrence with Joint Guam Program Office
officials on the contents of the table. To establish criteria to use in
assessing DOD's planning efforts for new utility services on Guam, we
reviewed our prior reporting and related studies, as well as outside
studies, to identify best practices and key elements of successful
planning. We identified a plan as an important element of successful
planning to increase transparency of an organization's efforts among
stakeholders and to help improve an organization's overall management
of its efforts. Such a plan would include information on milestones and
schedules, costs, financing and budgets, goals and objectives, projects
and activities, organizational responsibilities, implementation
strategies, and potential risks, challenges, and other factors that
could affect implementation. We conducted this performance audit from
June 2008 through May 2009 in accordance with generally accepted
government auditing standards. Those standards require that we plan and
perform the audit to obtain sufficient, appropriate evidence to provide
a reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives.
See appendix I for more information on our scope and methodology.
Background:
Because of Guam's unique strategic location, the United States has long
maintained a significant military presence on the island to support and
defend its interests in the western Pacific Ocean region. The small
remote U.S. territory is located about 1,600 miles east of Manila in
the Philippines, 1,560 miles south of Tokyo, Japan, and 3,810 miles
west of Honolulu, Hawaii (see fig. 1). DOD currently controls about 29
percent of the land, which is about 62 square miles of the island's
total 212 square miles. The U.S. military presently operates two major
installations on Guam: the U.S. Naval Base-Guam, located on the
southwestern side of the island at Apra Harbor, and Andersen Air Force
Base in the north.
Figure 1: Map of the Territory of Guam and Location of Current and
Projected U.S. Military Installations:
[Refer to PDF for image: map]
The map of the Territory of Guam and location of current and projected
U.S. Military Installations also includes an inset map of the Pacific
Ocean to indicate the location of Guam relative to the entire Pacific
Rim.
The following are indicated on the map of Guam:
Andersen Air Force Base:
* Aviation operations, U.S. Marine Corps;
* Intelligence, surveillance, and reconnaissance Strike Force
initiative, U.S. Air Force.
Apra Harbor Naval Complex:
* Embarkation and amphibious training, U.S. Marine Corps;
* Aircraft carrier transit berth and other waterfront work, U.S. Navy.
U.S. Naval Computer and Telecommunications Station, Finegayan:
* Main encampment and family housing, U.S. Marine Corps.
South Finegayan Housing:
* Housing, U.S. Marine Corps.
Andersen South:
U.S. Naval Computer and Telecommunications Station, Barrigada:
Naval Ordnance Annex:
Apra Heights:
Tenjo Vista Tank Farm:
Sasa Valley Tank Farm:
Nimitz Hill:
Naval Hospital:
Sources: U.S. Marine Corps, U.S. Navy, U.S. Air Force, U.S. Army, GAO
and Map Resources.
Note: The location of the Army's air and missile defense task force on
Guam has not yet been determined.
[End of figure]
To reduce the burden of the U.S. military presence on Japanese
communities while maintaining a continuing presence of U.S. forces in
the region, the U.S.-Japan Defense Policy Review Initiative[Footnote 5]
established a framework for the future of U.S. force structure in
Japan, including the relocation of American military units in Japan to
other areas, including Guam. As a part of this initiative, DOD plans to
move 8,000 Marines and their estimated 9,000 dependents from Okinawa,
Japan, to Guam by the 2014 goal. Separate from the initiative, the
United States also plans to expand the capabilities and presence of
Navy, Air Force, and Army forces on Guam over the next several years.
As a result of this planned realignment of U.S. forces, the military
population on Guam is expected to grow by over 160 percent, from its
current island population of 15,000 to over 39,000 by 2020. As shown in
table 1, most of the population growth is related to the Marine move.
It also shows that about 58 percent (about 14,080) of the total planned
increase of 24,402 in military personnel and dependents from all of the
military services is expected to be reached by 2014. Most of the
extensive population growth and development resulting from the buildup
will occur in the northern half of the island, primarily in the
northwestern portion where DOD currently plans to construct a new
Marine Corps base at Finegayan. The populations of each of the other
military services would also increase as a result of DOD plans to
expand its operations and presence on Guam. For example, the Navy plans
to enhance its infrastructure, logistic capabilities, and waterfront
facilities, including capabilities to support forward-based submarines
and a transient nuclear aircraft carrier; the Air Force plans to
develop a global intelligence, surveillance, and reconnaissance strike
hub at Andersen Air Force Base; and the Army plans to place an Army air
and missile defense task force on Guam. Joint Guam Program Office
officials, however, told us that the currently projected schedules and
levels of population growth and force structure could change as buildup
plans are further refined and approved.
Table 1: Projected Military Population Growth by Service from 2009
through 2020:
Number of military personnel and dependents by military service[A]:
Year: 2009;
Marine Corps: 5;
Air Force: 5,095;
Navy: 9,580;
Army: 80;
Coast Guard: 320;
Special Operations Forces: 0;
Total: 15,080.
Year: 2014;
Marine Corps: 10,895;
Air Force: 7,451;
Navy: 10,130;
Army: 130;
Coast Guard: 504;
Special Operations Forces: 50;
Total: 29,160.
Year: 2020;
Marine Corps: 17,557;
Air Force: 7,851;
Navy: 10,930;
Army: 1,660;
Coast Guard: 504;
Special Operations Forces: 980;
Total: 39,482.
Year: Total increase over period 2009-2020;
Marine Corps: 17,552;
Air Force: 2,756;
Navy: 1,350;
Army: 1,580;
Coast Guard: 184;
Special Operations Forces: 980;
Total: 24,402.
Source: Joint Guam Program Office.
Note: According to the Joint Guam Program Office, the projected
military population shown in this table-which varied somewhat among
utility studies-was used in developing the utility technical
feasibility studies conducted by the program office and Naval
Facilities Engineering Command to estimate utility system demand and
capacity increase for the military buildup. While the estimated
population and schedule for growth may change as plans evolve, the
projected growth in population is considered to be the currently
accepted estimates for planning purposes by the program office.
[A] The population growth shown in the table excludes transient
military personnel that will visit Guam for brief periods.
[End of table]
To keep pace with the projected growth in the military's population on
Guam, DOD has determined that substantial upgrades to the island's
existing utilities infrastructure are required for electric power
generation, potable water production, wastewater collection and
treatment, and solid waste collection and disposal to provide the
additional utility capacities and services. In August 2006, the Deputy
Secretary of Defense established the Joint Guam Program Office, within
the Office of the Assistant Secretary of the Navy for Installations and
Environment, to lead the coordinated planning efforts among DOD
components and other stakeholders to consolidate, optimize, and
integrate the existing DOD infrastructure on Guam to meet requirements
associated with the relocation of Marine Corps forces from Okinawa,
Japan, and the department's joint basing initiative.[Footnote 6] The
Navy's Joint Guam Program Office, in cooperation with the Naval
Facilities Engineering Command, conducted a number of technical studies
and business case analyses to evaluate potential solutions for meeting
the increased demand for utility services. The studies considered a
range of solutions in each utility sector that would either provide
dedicated utilities for the new Marine Corps base only, dedicated
utilities that would service only islandwide DOD demands, or upgrade
government of Guam systems to meet islandwide DOD demands. The studies
then ranked the potential solutions to determine the most likely
solutions in each sector. With the exception of solid waste, DOD
envisions that the selected solutions would be implemented by a special
purpose entity or entities, which would participate in a public-private
venture with private sector owners, developers, and operators and
public sector stakeholders[Footnote 7] to provide the technical
expertise in constructing and operating the utility. DOD would then pay
a negotiated set of rates to this special purpose entity for the
services its uses.[Footnote 8] However, the exact form of this business
arrangement and the level of involvement by public sector stakeholders
have yet to be determined.
Based on our audit work, we developed table 2, which shows the key
steps that the Navy's Joint Guam Program Office confirmed for us that
they plan to follow to identify requirements, examine potential
solutions, and implement activities to develop and construct the
utility infrastructure needed by DOD to support the expanding military
population on Guam.
Table 2: Key Steps that DOD Plans to Use to Increase Utility
Infrastructure Capacities on Guam:
Examine the condition and capacities of the existing Guam utility
infrastructure;
Initiate a series of technical studies and business case analyses to
determine preferred technical alternatives and associated business
models for meeting future utility requirements, including;
* breakpoint analysis regarding the capabilities of existing utilities
on Guam and timeline for exceeding those capacities;
* examination of interim utility alternatives designed to meet
construction needs;
* examination of long-term utility alternative designed to meet the
needs of relocated Marine Corps forces and associated DOD growth, and;
* additional studies as required;
Confer and coordinate with applicable stakeholders, including DOD
service components, federal regulatory agencies, private entities, the
government of Japan, the government of Guam, Consolidated Commission on
Utilities, Guam Power Authority, and Guam Water Authority to gain
concurrence in concept on proposed interim and long-term solutions and
proposed business models;
Complete the environmental impact statement and record of decision,
required by the National Environmental Policy Act.[A];
Identify funding sources and develop procurement strategies to
implement interim and long-term solutions, including the consideration
of special purpose entities and other means to meet increased demand;
Develop plans and schedule for implementation of interim solutions and
construction of long-term utilities solutions;
Monitor implementation.
Source: GAO analysis of data provided by DOD.
[A] An environmental impact statement must include a purpose and need
statement, a description of all reasonable project alternatives and
their associated environmental impacts (including a "no action"
alternative), a description of the environment of the area to be
affected or created by the alternatives being considered, and an
analysis of the environmental impacts of the proposed action and each
alternative. 40 C.F.R. § 1502.13-1502.16.
[End of table]
The program office also works closely with the governments of Japan and
Guam, federal agencies, and Congress to manage the comprehensive
buildup development effort. It has additional responsibilities for
synchronizing funding among DOD components to meet critical timelines
in development efforts on Guam and for coordinating DOD's conduct of an
environmental impact statement for moving the Marines to Guam. The
Joint Guam Program Office also receives assistance from the Naval
Facilities Engineering Command in conducting analyses, determining
criteria and requirements, and developing an acquisition strategy in
planning for infrastructure needed to support DOD's operational
requirements.
Additionally, the Naval Facilities Engineering Command, in partnership
with the program office, the services, and other DOD stakeholders, is
developing the Guam Joint Military Master Plan that will form the
baseline for military construction budget planning and facility and
utility designs and provides a top-level view of the size and type of
facility requirements, candidate and preferred land sites, and proposed
use of the land to meet the requirements for new personnel and forces
planned for Guam. It will also describe the planning efforts for
construction and development activities related to the buildup to
ensure that buildings, utilities, roads, and other infrastructure are
built in a compatible manner. The master plan, however, will not
include a specific, detailed plan on DOD's utility efforts for Guam.
The master plan is expected to be completed shortly after a record of
decision for the environmental impact statement that is currently
planned to be signed in January 2010, and will be submitted to Congress
when approved.
The government of Japan is anticipated to provide $6.09 billion, in
U.S. fiscal year 2008 dollars, of the estimated $10.27 billion cost of
developing facilities and infrastructure for the Marine relocation to
Guam. Of the $6.09 billion, $740 million is anticipated to be provided
by Japan in recoverable financing for development and construction of
related utility infrastructure for the Marines.[Footnote 9] However,
specific allocation of the $740 million among the four utility sectors
has not yet been worked out between the U.S. and Japanese governments.
Guam's Existing Utility Infrastructure Is Not Sufficient to Meet DOD's
Projected Utility Requirements without Further Upgrades:
Projected requirements for utilities to serve the growing Guam civilian
and U.S. military population over the next decade exceed available
capacities of existing DOD and municipal systems, and DOD is evaluating
possible options for supporting the expansion of these systems to meet
future needs. While generally meeting current DOD and island
requirements, existing utility systems--electric power generation,
potable water production, wastewater collection and treatment, and
solid waste collection and disposal--are largely operating at or near
their maximum capacities and have limited reserve capacities to meet a
significant new growth in demand for services. While DOD systems are
relatively well-maintained, systems operated by Guam utility
authorities have experienced a number of operational and regulatory
compliance issues that could affect plans for increasing their
capacities.
Existing Utility Systems Have Limited Spare Capacity and Significant
New Infrastructure Is Needed to Support Planned DOD Growth:
The Joint Guam Program Office has determined that significant increases
to existing utility system capacities in all four sectors will be
needed to meet the demands of the expanding military population on
Guam. Utility systems on Guam--operated by either DOD or Guam utility
authorities--are capacity constrained and limited in their ability to
satisfy growth in demand for services (see app. III for information on
the current providers of utility services on Guam). Over the past 2
years, the Joint Guam Program Office has conducted a series of
technical studies and business case analyses to identify reasonable
alternatives and determine best business solutions for expanding each
of the utility systems to meet interim and long-term demands. However,
the final long-term solution for some systems will not be known until
the special purpose entities, which will design, construct, and operate
the new utility infrastructure, are selected and the precise business
arrangements are negotiated. Further, depending on the form of business
arrangement and level of involvement of public and private
stakeholders, DOD may not possess statutory authority at this time to
implement certain potential aspects of this plan, such as the authority
to invest U.S. government resources into a special purpose entity for
the purpose of improving a utility system outside the jurisdiction of
the department. DOD officials told us that they are currently working
with the Office of Management and Budget to formulate a legislative
proposal that they hope will enable DOD to implement certain potential
aspects of this special purpose entity construct. Additionally, DOD has
determined that certain operating inefficiencies, outstanding
deficiencies, and issues related to compliance with environmental
regulations in the existing infrastructure--especially related to those
systems operated by Guam utility authorities--would need to be
addressed to implement some of its potential solutions. While Guam's
local utility authorities have taken significant actions to improve
their systems over the past several years, many improvements and
corrective actions remain to be taken.
Electric power generation:
DOD's power demands are estimated to increase by approximately 233
percent--from 48 to 160 megawatts peak power. The Guam Power
Authority's electric power system--which currently serves all DOD
activities on Guam--is operating at capacity meaning that new
generating equipment will be needed to satisfy the increased DOD power
load. In order to reliably satisfy the increased load, an estimated 170
megawatts of new generation capacity will be needed in addition to the
550 megawatts of generation capacity currently installed as part of the
authority's system, which is a 31 percent increase.[Footnote 10] Table
3 summarizes DOD's current and expected future demand for electric
power.
Table 3: Estimated Effect of DOD Growth on Electric Power Utility
System (As of May 2009):
Current service provider: Guam Power Authority;
DOD demand (megawatts):
Current: 48;
Future: 160;
Increase: 112;
System capacity (megawatts):
Current: 550;
Future: 720;
Increase: 170;
Comment: According to DOD's analysis, Guam Power Authority needs to
provide 1.52 megawatt of capacity for every 1.0 megawatt of demand
load. This means that 170 megawatt of new generation capacity is
expected to be needed to satisfy DOD's 112 megawatt demand increase.
Values represent peak power measures.
Source: GAO analysis of DOD technical study and business case analysis
for meeting the electrical requirements on Guam.
Note: The "future" columns represent the total demand load and
associated system capacity that will be needed by 2020.
[End of table]
The Guam Power Authority's electric power system has experienced
reliability problems over the years such as frequent power outages. A
May 2008 Guam Chamber of Commerce report indicates that the authority
has improved the reliability of its system over the past 10 years, in
part, by entering into public-private partnerships with independent
power producers to provide new generation facilities. However, the
study noted that the system is still using obsolete and expensive
generation that affects the overall reliability of the system. For
example, DOD's technical study indicates that the generators that
provide approximately 50 percent of Guam Power Authority's base
capacity date back to the mid-1970s. In addition, according to the Guam
Power Authority Generation Resource Handbook, Fiscal Year 2008, the
authority's existing operations are constrained by the environmental
operating permits issued for each power plant. Combined, these factors
result in inefficiencies such as units being out of service for
extended periods of time or simply unavailable for production.
DOD's preferred long-term technical solution for meeting the increased
power demands is to maximize operating efficiencies by expanding Guam
Power Authority's electric power system capacity from 550 to 720
megawatts. This solution would involve constructing a separate power
plant that could supply new power to Guam Power Authority's grid.
[Footnote 11] Additionally, DOD is examining possible renewable energy
systems, such as geothermal and solar power systems, to complement
power provided by its preferred long-term solution and help achieve
future goals related to renewable energy.[Footnote 12]
To meet interim needs until the long-term solution is operational, DOD
is considering options that include a combination of Guam Power
Authority and DOD assets. By refurbishing idle generators at several
existing plants on the island, DOD estimates that the authority could
temporary provide up to 60 megawatts of additional power. In addition,
DOD estimates that it could provide another 30 megawatts of temporary
power by upgrading stand-by generators at a DOD-owned plant and using
mobile generators.
Potable water production:
DOD potable water maximum daily demand is expected to increase by
approximately 100 percent from 14.5 to 29.3 million gallons per day.
The majority of the demand growth results from the planned
concentration of Marine Corps personnel around the U.S. Naval Computer
and Telecommunications Station in northern Guam, where demand is
expected to grow from 0.4 to 12.1 million gallons per day. In addition,
DOD growth at Andersen Air Force Base and Apra Harbor is expected to
result in demand increasing from 3.4 to 5.2 million gallons per day and
from 10.7 to 12.0 million gallons per day at these respective
locations. To meet the growth in demand, production from the Navy's
water system would need to increase from the current level of 18.4
million gallons per day to 34.6 million gallons per day, an increase of
88 percent.[Footnote 13] Table 4 summarizes DOD's current and expected
future demand for potable water on Guam.
Table 4: Estimated Effect of DOD Growth on Potable Water Utility System
(As of May 2009):
Current service provider: Navy-operated system;
DOD demand (million gallons per day):
Current: 14.5;
Future: 29.3;
Increase: 14.8;
System capacity (million gallons per day):
Current: 18.4;
Future: 34.6;
Increase: 16.2;
Comment: Planned 34.6 million gallons of water per day capacity is
based on expected 29.3 million gallons of water per day demand plus the
size of the largest well in areas where the supply is from well
sources. This is a safety factor to ensure that the system will
continue to meet demand during circumstances where wells are out of
service due to maintenance or other operational issues. DOD demand
represents maximum daily values.
Source: GAO analysis of DOD technical study and business case analysis
for meeting the potable water requirements on Guam.
Note: The "future" columns represent the total demand load and
associated system capacity that will be needed by 2020.
[End of table]
DOD's preferred long-term solution for meeting expected growth in
demand is to increase the production capacity of the Navy-owned water
system by optimizing use of existing and developing new pumping,
treatment, storage, and distribution facilities. While obtaining water
from Guam Waterworks Authority's system was considered by DOD
consultants, their studies determined that DOD should maintain an
independent system which can meet DOD needs. However, DOD is working
with the Guam Waterworks Authority to develop a long-term integrated
water resource plan for the island. To increase the capacity of and
operate its water system, DOD officials are considering a solution
whereby a special purpose entity would implement the utility solutions.
To meet interim needs until long-term solutions are in place, DOD
expects to be able to phase in new capacity development to match the
pace of the expected population growth.
Wastewater collection and treatment:
DOD wastewater volume is expected to increase by approximately 275
percent from average flows of 1.2 to 4.5 million gallons per day. This
increased wastewater flow will be concentrated in northern Guam--where
the majority of the new military population is expected to be located-
-and will likely be treated at Guam Waterworks Authority's Northern
District Wastewater Treatment Plant.[Footnote 14] As the only treatment
facility in northern Guam, the plant serves both military (Andersen Air
Force Base and U.S. Naval Computer and Telecommunications Station
Finegayan) and civilian populations. It is currently designed to
process 12 million gallons per day on average with a peak capacity of
27 million gallons per day. Increased wastewater flows resulting from
both the military buildup and the expected growth in Guam's civilian
population are expected to result in future total flows to the plant of
approximately 17.6 million gallons per day on average with a peak of 35
million gallons per day. Based on the increased flows, the plant's
treatment capacity would need to be expanded by 50 percent (from 12 to
18 million gallons per day on average and from 27 to 40.4 million
gallons per day at peak). Table 5 summarizes the current and projected
future DOD demand for wastewater treatment on Guam.
Table 5: Estimated Effect of DOD Growth on Wastewater Treatment Utility
System (As of May 2009):
Current service provider: Guam Waterworks Authority;
DOD demand (million gallons per day):
Current: 1.2;
Future: 4.5;
Increase: 3.3;
System capacity (million gallons per day):
Current: 12; (27 peak);
Future: 18; (40.4 peak);
Increase: 6; (13.4 peak);
Comment: Guam Waterworks Authority's Northern District Wastewater
Treatment Plant currently processes 1.2 million gallons of water per
day of wastewater generated by military installations in northern Guam.
This plant--capable of treating 12 million gallons of water per day of
wastewater--may be expanded to treat the estimated 17.6 million gallons
of water per day of wastewater that will be generated as a result of
the military buildup and anticipated growth in Guam's civilian
population. Values represent average flows unless otherwise indicated.
Source: GAO analysis of DOD technical study and business case analysis
for meeting the wastewater treatment requirements on Guam.
Note: The "future" columns represent the total demand load and
associated system capacity that will be needed by 2020.
[End of table]
The Guam Waterworks Authority's wastewater treatment system continues
to have a number of deficiencies that result from the effects of
natural disasters, poor maintenance, and vandalism. The authority is
currently operating under a stipulated order because of issues related
to compliance with environmental regulations.[Footnote 15] Under terms
of the order, the authority is to, among other requirements, submit
schedules and plans for certain capital improvements to its system.
However, according to the authority's 2007 Water Resource Master Plan,
the authority's ability to fund needed capital improvements has been
hampered by various factors such as uncollected water and sewer bills
and excessive emergency repair costs resulting from deferred spending
for facility repairs and failure to maintain stocks of critical repair
parts. In particular, the master plan notes that the Northern District
Wastewater Treatment Plant is in severe critical need of upgrading and
equipment replacement. In addition, the treatment plant may need
capital improvements that would enable it to become a secondary
treatment facility.[Footnote 16] According to the Guam Waterworks
Annual Report for Fiscal Year 2006, in January 2007 the authority
contracted with a private company--Veolia LLC--to manage and operate
its wastewater system.
DOD's preferred long-term technical solution is to have a special
purpose entity that would expand the Guam Waterworks Authority's
Northern District Wastewater Treatment Plant, and according to DOD
officials, upgrade the plant as required by regulatory authorities to
process the expected increase in wastewater flows. If the option of
using this plant is not possible, a separate wastewater treatment plant
may be necessary to meet DOD's needs.[Footnote 17] To meet its interim
needs until the long-term solution is operational, DOD is working with
the Guam Waterworks Authority to use the Northern District Wastewater
Treatment Plant which, according to Joint Guam Program Office
officials, may include expanding the treatment capacity of the plant.
In addition, according to the program office, DOD is working with the
Guam Waterworks Authority to consider ways to process wastewater
generated by the growing construction workforce which will be on the
island in advance of the arrivals of DOD personnel and dependents.
Solid waste collection and disposal:
Solid waste generation resulting from the increased DOD population on
Guam is expected to grow by approximately 230 percent from 16,000 to
53,000 tons per year. Table 6 summarizes the current and projected
future DOD demand for solid waste disposal on Guam.
Table 6: Estimated Effect of DOD Growth on Solid Waste Disposal System
(As of May 2009):
Current service provider: Navy-operated landfills;
DOD demand (tons per year):
Current: 16,000;
Future: 53,000;
Increase: 37,000;
Comment: The Navy currently operates landfills at Apra Harbor Naval
Base and Andersen Air Force Base. These landfills will be used during
the initial stages of the military buildup. In 2011, the Navy is
expected to stop using these landfills and begin disposing of all its
solid waste at a new landfill being constructed by the government of
Guam in southern Guam.
Source: GAO analysis of DOD technical study for meeting the solid waste
disposal requirements on Guam.
Note: The "future" column represents the estimated total amount of
solid waste that will be generated by DOD activities in 2020.
[End of table]
To meet the expected solid waste disposal needs, DOD intends to utilize
the new Guam landfill being constructed on the southern part of the
island by U.S. District Court of Guam-appointed receiver--Gershman,
Brickner & Bratton, Inc.--for the Solid Waste Management Division of
the government of Guam's Department of Public Works.[Footnote 18] The
new Guam landfill will replace the government of Guam's existing
landfill that has been operating over-capacity for over 20 years and
has historically been in noncompliance with environmental regulations.
According to Joint Guam Program Office officials, DOD is currently in
the process of developing a letter of intent with the receiver
concerning an outline of the parameters for a future agreement
concerning DOD's use of the new landfill. DOD's use of the landfill
would require DOD entities on Guam to transport their solid waste from
military installations, which are predominately in the northern section
of the island, to transfer stations or the new landfill and pay tipping
fees[Footnote 19] to the landfill operator for solid waste disposal
services.
Until the new landfill is operational, DOD will continue to use its
existing landfills at Apra Harbor, within Naval Base Guam, and Andersen
Air Force Base, which have very limited remaining service lives.
According to officials in the Joint Guam Program Office, the Apra
Harbor and Andersen Air Force Base landfills should be usable through
2018 and 2010, respectively, if current operating practices are
followed. In addition, the Air Force is planning an expansion of the
Andersen Air Force Base landfill to provide 1 to 2 years of additional
capacity. The government of Guam's new landfill is expected to be
operational in 2011, which would allow DOD to use this facility before
exceeding capacities at its own landfill facilities. However, according
to the program office, options are being considered to extend the life
of the DOD landfills should the new Guam landfill be delayed.
DOD Lacks a Comprehensive Plan for Addressing Several Planning
Challenges It Faces in Providing New Utility Services for Guam:
Over the past 3 years, the Navy's Joint Guam Program Office has made
progress in leading DOD utility planning efforts to identify
requirements and potential solutions to meet future demands, but DOD
lacks a comprehensive plan for addressing the many challenges it faces
as it moves forward. These planning challenges include the condition of
existing Guam utility systems, extent of coordination required among
stakeholders, sources of funding, approach chosen to implement
solutions, and the schedule for completing key tasks. While DOD
recognizes that these challenges could create potential risks for
meeting the utility needs of Guam's growing military population, it has
not begun development of a comprehensive plan for utilities that
provides its stakeholders with specific information on its planning
efforts, including critical milestones and schedules, interim and long-
term options under consideration, approach to be used for developing
and implementing new utility services, costs and financing, and
potential utility projects. Without a comprehensive plan for utilities,
DOD lacks an important planning tool to use in managing the several
challenges it faces and for informing stakeholders, including Congress,
on the specific details of its utility planning for Guam.
A Comprehensive Plan is an Important Planning Tool to Increase
Transparency and Improve Management of Program Efforts:
The Joint Guam Program Office faces many challenges that could
adversely affect its planning efforts as it moves forward to meet the
demands of the expanding military population on Guam; however, it has
not used a comprehensive plan to help overcome these challenges. Our
prior work has shown that a comprehensive plan is an important planning
tool for an organization to increase transparency and improve
management of its efforts to achieve overall objectives. A
comprehensive plan would generally provide stakeholders with specific
information on the organization's program, including milestones and
schedules, costs, financing and budgets, goals and objectives, projects
and activities, organizational responsibilities, and potential risks,
challenges, and other factors that could affect implementation of its
plans. Such a plan would also generally provide a means to bring
together all aspects of an organization's plans into one central
document and a source that updates information on critical milestones
and schedules, and if these are missed, what accommodations are being
made.
DOD Faces Five Planning Challenges in Providing New Utility Services
for Guam:
DOD faces five planning challenges that could create risks that would
adversely affect its efforts to provide new utility services when
needed to support its growing military population in Guam. These
challenges are:
* condition of existing Guam infrastructure affects DOD's selection and
implementation of possible utility solutions;
* involvement of a number of stakeholders complicates the DOD's
planning process for utilities;
* proposed solutions are likely to require more than one funding
source;
* implementation of new approach to upgrade utility services on Guam
lacks key details; and:
* tight schedule for meeting buildup requirements increases the
complexity of utility planning efforts.
Officials in the Navy's Joint Guam Program Office told us that DOD
recognizes the potential adverse effect that these challenges could
have on its utility program and has taken some actions to address them.
For example, the officials said that the program office developed an
initial risk-based management approach in 2008 as part of an initiative
to examine ways to improve its management effectiveness. Although Joint
Guam Program Office officials told us that the approach still needs
further refinement, they said the approach is in place and being used
to access, mitigate, and monitor risks to its goals.
Condition of Existing Guam Infrastructure Affects Selection and
Implementation of Possible Solutions:
Many of the potential solutions that DOD is considering using to
provide the increased capacities and new utility services on Guam would
involve either integrating with or using elements of Guam's existing
utilities infrastructure. In selecting solutions, various upgrades to
the existing infrastructure may need to be made and a number of
operating inefficiencies, outstanding deficiencies, and certain
regulatory compliance issues would need to be resolved in time for
implementation.
Prior to DOD's military buildup decision, the Consolidated Commission
on Utilities, Guam utilities authorities, and the government of Guam
had done long-term utility planning to upgrade, expand, and repair
Guam's power, water, and wastewater systems to support a larger
population, according to the chairman of the Consolidated Commission on
Utilities. This planning was based on the island's population growing
by 25 percent by 2025. Under the current military buildup plans,
however, this same level of growth would be achieved by 2014. As a
result, some upgrades to its existing infrastructure may need to be
completed earlier than was originally planned by the Guam utilities
partly as result of the buildup. For example, on the basis of its Water
Resources Master Plan projections, the Guam Waterworks Authority did
not anticipate expanding its Northern District Wastewater Treatment
Plant, which currently provides wastewater treatment service to both
the civilian population and the military population at Naval Computer
and Telecommunications Station Finegayan and Andersen Air Force Base in
northern Guam, until 2015. Officials in the Joint Guam Program Office
noted that many of these upgrades and repairs in the near-term are also
driven by the need to address existing operational and regulatory
compliance issues in Guam's utilities regardless of the buildup.
According to the officials, for the infrastructure upgrades related to
the military buildup, DOD will provide funds through customer fees
which will support the Guam Power Authority's and Guam Waterworks
Authority's planned activities. For activities which may be implemented
earlier than originally planned due to the military buildup, the
program office officials stated that the Consolidated Commission on
Utilities will coordinate with DOD and Guam's utilities authorities to
address such projects.
Additionally, officials from the Governor of Guam's Civilian-Military
Task Force[Footnote 20] told us that the influx of a large force of
about 15,000 temporary workers--most of them from outside Guam--
required to construct the military's planned facilities will place
significant demands on the existing utility infrastructure sooner than
the arriving new military personnel and dependents. The government of
Guam, Consolidated Commission on Utilities, Guam Power Authority, and
Guam Waterworks Authority are in the initial stage of adjusting their
long-term plans to fund and to make the necessary improvements and
repairs to their utility systems needed to support DOD's buildup plans.
Some solutions that DOD is considering would depend on Guam utility
authorities being able to develop new or upgrade existing systems when
needed to support military population growth. For example, DOD is
considering using a new islandwide landfill that the government of
Guam, through a court-appointed receiver, plans to develop and complete
by mid-2011. DOD plans to be a customer and officials in the Joint Guam
Program Office told us that they are in the process of developing a
letter of intent with the receiver concerning an outline of the
parameters, such as the tipping fee to use the new landfill, for a
future agreement. Using the government of Guam's landfill allows DOD to
forego developing its own new landfill and close its two existing ones
that are nearing the end of their service lives. However, if the
completion of the new Guam landfill is delayed, DOD may need to
consider other alternatives.
Additionally, selection of some DOD solutions may also depend on
whether corrective actions can be taken to address a number of
operating inefficiencies, outstanding deficiencies, and regulatory
compliance issues with the existing Guam infrastructure in time for
implementation. DOD is considering a solution, for example, that would
expand and upgrade the Guam Waterworks Authority's Northern District
Wastewater Treatment Plant to handle its planned significant increase
in treatment capacity. However, the U.S. Environmental Protection
Agency has recently issued a notice of proposed action under the Clean
Water Act and Environmental Protection Agency regulations containing a
tentative decision to deny an application for a renewed variance from
certain secondary treatment requirements[Footnote 21] at the Northern
District Wastewater Treatment Plant. The agency's tentative decision
has been made available for public comment, and at the completion of
the public comment period, the Environmental Protection Agency will
consider these comments and make a final decision. DOD officials stated
that the resolution of this waiver issue could be further delayed if
the agency's final decision is challenged in court by the government of
Guam. If implemented, Guam Waterworks Authority and Naval Facilities
Engineering Command officials stated that the costs for upgrading to
provide secondary treatment could be substantial. Additionally, while
not necessarily affecting DOD's selection, other solutions would
benefit from improvements made to existing systems by the Guam utility
authorities, which are needed independent of the buildup. For example,
while significant upgrades are needed to improve Guam Power Authority's
aging transmission and distribution system, making these upgrades would
also be useful in supporting DOD's future electrical needs.
Involvement of a Number of Stakeholders Complicates the Planning
Process:
Stakeholders, which include DOD components, government of Japan,
government of Guam, various federal departments and agencies, and
private companies, require a significant level of communication and
coordination to share information, resolve issues, reach agreements,
and make decisions to facilitate effective planning and implementation
activities. For instance, DOD would need to reach agreement with the
government of Guam's utility organizations, which currently own and
operate the utilities, as well as the government of Japan, which is
expected to contribute funds toward the utilities, as well as other
public and private stakeholders that may contribute funds and expertise
to this venture, in order to select and implement utility solutions
that involve using a special purpose entity to improve existing Guam
infrastructure. Further, depending on the precise business model that
is ultimately selected, DOD may not have statutory authority at this
time to implement certain potential aspects of this plan, such as the
authority to invest U.S. government resources into a special purpose
entity for the purposes of improving a utility system outside the
jurisdiction of the department. DOD officials told us that they are
currently working with the Office of Management and Budget to formulate
a legislative proposal that they hope will enable DOD to implement
certain potential aspects of this special purpose entity construct. DOD
would also need to later negotiate with the special purpose entity that
is ultimately selected to determine specific details of its business
arrangement in designing, constructing, and operating the new utility
systems.
The Joint Guam Program Office communicates and coordinates its
activities with a widerange of public sector entities including the
government of Japan, government of Guam and its utility organizations,
other DOD entities, and U.S. federal departments and agencies, such as
the Environmental Protection Agency, and private sector consultants and
contractors. The program office, according to officials with the Joint
Guam Program Office, has established routine conference calls,
meetings, briefings, E-mail, conferences, and other communication
methods among the many stakeholders to provide information, discuss
planning and issues, coordinate actions, and obtain agreement on a
range of activities. Officials with the program office and the
government of Japan, for instance, engage in monthly meetings to
discuss and share information on the progress of plans and associated
activities. Similarly, program office officials meet weekly with
various officials in the Naval Facilities Engineering Command, the
services, and other federal agencies to discuss utility planning
efforts and resolve issues. The program also holds frequent meetings
with government of Guam organizations and conducts community meetings
with the Guam civilian population to discuss concerns and provide
information.
However, despite the level of coordination that the Joint Guam Program
Office has attempted to maintain, program office officials told us that
it is often difficult to satisfy the immediate information needs of all
stakeholders. These officials believe this is partly the result of the
preliminary nature of utility plans for which studies and other
analyses are still being refined, decisions are yet to be made, and
funding and specific schedules are still being determined. A
transportation engineer with the Federal Highway Administration Region
9 Field Office, who has responsibilities for planning road
infrastructure improvements in Guam, told us that without knowing the
specific details of utility solutions under consideration, it is
difficult coordinating with DOD to identify possible conflicts between
planned road and utility improvements, such as new power transmission
lines that may encroach on a road's right-of-way, and scheduling of
projects. The official also said that the highway administration needs
to obtain sufficient information from DOD to ensure that its projects
are funded and completed when needed to support the buildup. Officials
in the Joint Guam Program Office told us that the program office has
provided as much information to its stakeholders when available and
that they recognize the difficulty of stakeholders developing their own
plans with preliminary data and analyses.
Additionally, Guam utility officials said that while DOD has provided
preliminary information on its utility plans, they believe that DOD has
not provided the level of detail that is needed for the government of
Guam and its utility organizations to do comprehensive utilities
planning. The Chairman of the Consolidated Commission on Utilities told
us that for the government of Guam to adjust its planning for the
buildup, it needs information, such as the final numbers and arrival
schedules for DOD personnel and dependents. The Chairman also said that
there is a need for closer coordination and involvement between the
government of Guam and the Joint Guam Program Office, DOD, and other
federal agencies to better integrate their efforts for utilities
planning and to obtain funding for their planning efforts and to make
the required improvements.
Officials in the Joint Guam Program Office told us that DOD has
provided an unprecedented level of information to the government of
Guam but many details are still being worked on or pending final
decisions. The program office officials said that it would not be
appropriate to release these details since they are likely to change
during ongoing reviews. In February 2009, the Joint Guam Program Office
began to provide more specific information on the range of utility
proposals under consideration and its preferred solutions to the
government of Guam and its utility organizations.
Proposed Solutions Are Likely to Require More Than One Funding Source:
DOD's cost estimates indicate that the total cost for utilities is
likely to exceed the amount of utility funding that the government of
Japan is anticipated to provide towards the Marine Corps' move to Guam.
While the total capital costs of implementing long-term utility
solutions are not known at this time, cost estimates for various
solutions being examined by DOD indicate that the total cost of
implementation could significantly exceed the financing anticipated
from the government of Japan. As a result, additional funding would
likely need to be obtained from other public and/or private sources to
implement its long-term utilities infrastructure plans. Further, DOD
will not know the ultimate cost of implementing its long-term utility
solutions until the special purpose entity--essentially a service
provider of a utility commodity--is established and begins development
and design work on utility solutions concepts. However, our review of
preliminary cost estimates that were developed as part of DOD's
business case studies for each utility sector indicate that
implementing various combinations of solutions across the utility
sectors could significantly exceed the $740 million in equity
investments and loans tentatively committed by the government of Japan
and thereby require additional sources of financing. For instance,
while the cost estimates are still preliminary and subject to change as
the solutions are refined and developed, our analysis shows that the
total cost of implementing long-term solutions across the four utility
sectors could range from $1.35 billion to $1.79 billion, which would
exceed the government of Japan financing by $614 million and $1.05
billion, respectively.
Additional funding could come from the United States,[Footnote 22] the
government of Guam, other public and private sources, or a combination
of these organizations, but the cost of financing from these sources
could be higher and more difficult to obtain than the loans provided by
the government of Japan through its Japan Bank of International
Cooperation.[Footnote 23] The Joint Guam Program Office, in a written
response to us, stated it is likely that Japanese funding will offer
lower cost financing than that obtained through the commercial lending
market or the business arrangements with special purpose entities.
While the Guam Power Authority and Guam Waterworks Authority may be
able to provide financing through their capacity to raise public debt,
both authorities have had bond ratings that were below investment
grade.[Footnote 24] In December 2008, the bond rating for the Guam
Power Authority was upgraded by Standard and Poor's Ratings Services to
a rating of medium investment grade because of its sustained trend of
improved operational and financial performance. The Guam Waterworks
Authority's bond rating was also recently upgraded but still remains
slightly below investment grade. Even with better bond ratings, the
authorities may still have some difficulty obtaining favorable rates
because of the recent downturn in global financial markets. A senior
official in the Joint Guam Program Office told us that Guam is in the
process of seeking federal aid through grants, loans, and the normal
federal budget process to improve its ability to fund its improvements
and repairs. The official stated that low-cost rural development loans
from the U.S. Department of Agriculture to the government of Guam are
being considered as a source of funding to support Guam's utility
infrastructure improvements.[Footnote 25] Additionally, as part of a
special purpose entity's proposal, the entity could also include funds
obtained from loans in the commercial lending market for implementing
their utility plans. However, it is not clear what type of rates these
investors may be able to obtain under current financial conditions.
Implementation of New Approach to Upgrade Utility Services on Guam
Lacks Key Details:
With the exception of solid waste collection and disposal, the Naval
Facilities Engineering Command plans that a special purpose entity
would develop, construct, and operate the new long-term utility
infrastructure needed on Guam to meet DOD's future demands for electric
power, water, and wastewater. Command officials stated that the entity
would likely be a limited liability company or partnership formed for
the specific purpose of providing these utility services, which would
likely participate in a public-private venture with private sector
owners, developers, operators, and public sector stakeholders. While
the command, which is responsible for planning and managing
construction related activities for the buildup, has often used a
public-private venture approach for developing military housing, it has
not used this approach before for the development of utilities on the
scale envisioned for Guam. Further, DOD may not possess statutory
authority at this time to enable DOD to implement certain proposed
aspects of this special purpose entity approach, such as the authority
to invest U.S. government resources into a special purpose entity for
the purposes of improving a utility system outside the jurisdiction of
DOD. Additionally, many specific details about the special purpose
entity, such as the entity's scope, business and financial
arrangements, utility system cost and rate structure, and specific
projects have not yet been determined. The entity, or entities, is
scheduled to complete implementation of the new long-term utility
systems by November 2014, according to the Joint Guam Program Office.
Although officials at the Joint Guam Program Office and the Naval
Facilities Engineering Command agree that the lack of specific details
at this time about use of the special purpose entity approach creates
some uncertainty about implementing utility solutions when needed on
Guam, these officials said that the Naval Facilities Engineering
Command has gained experience in its public-private ventures for
housing that will provide the ability to link the interests and the
needs of the stakeholders and derive the best business arrangement to
meet DOD's utility needs. The Joint Guam Program Office noted that
large-scale public-private housing projects also involve the
construction and privatization of significant utility infrastructure.
It further stated that developing a revenue-based, commercially
acceptable financing structure, with the added dimension of public-
private partnership, is a particular skill that the Naval Facilities
Engineering Command has gained through its public-private venture
housing efforts. However, the authorities available under chapter 169
of Title 10, U.S. Code, are available only for the purposes of the
Military Housing Privatization Initiative, and as stated above, it is
unclear to what extent DOD possesses authority to implement certain
proposed aspects of this special purpose entity approach for utilities
on Guam.
Joint Guam Program Office officials told us that, while the technical
aspects of utility systems and their construction have natural
differences from military housing public-private efforts, the Naval
Facilities Engineering Command brings together subject-matter expertise
from across DOD to address the relevant technical, financing, and
business management issues that will arise. In addition to in-house
capabilities, the command plans to use outside consultants that have
significant experience with public-private efforts. For example, the
command has contracted with an economics and real estate development
advisory firm to conduct a study that will enable DOD to better
understand market conditions affecting potential investments and
develop the needed business model. The business model will provide a
notional assessment of how a special purpose entity could be organized
and operate and would include information on estimated capital costs to
construct potential utility systems and forecasted utility rates that
would be assessed to recover capital costs and fund the systems'
operations and maintenance. The Naval Facilities Engineering Command
plans to use the model for developing DOD's request for information to
industry to solicit proposals and for negotiating with the selected
special purpose entity on the terms and conditions of their utility
services agreement.
Tight Schedule for Meeting Buildup Requirements Increases the
Complexity of Planning Efforts:
Joint Guam Program Office's utility plans entail meeting a number of
key milestones and associated events over the next 5 years to complete
its environmental impact statement process, select a special purpose
entity to develop and implement its long-term, and possibly its
interim, solutions, and finish utility construction by November 2014.
Keeping pace with this tight schedule not only becomes critically
important to meeting the utility needs of the continuously growing
military population, but also to the successful execution of schedules
for major military construction, movement of Marines and other forces,
and other related buildup activities. While the program office has
taken some actions to mitigate schedule risks, the schedule for
utilities provides little flexibility to accommodate any major
adjustments in milestone dates.
Environmental impact statement completion:
Currently the Joint Guam Program Office is working toward completion of
its environmental impact statement for relocating the Marines to Guam.
Officials from various offices within DOD, government of Guam, and
federal agencies told us that the amount of time allotted for
completing milestones within the study is very compressed when compared
to other impact studies that are less complex and smaller in scope. The
Joint Guam Program Office plans to distribute a working draft of the
environmental impact statement to various cooperating agencies and DOD
organizations for initial review and plans to release the draft
environmental impact statement for a 60-day public comment period in
the final quarter of fiscal year 2009. The office intends to issue a
record of decision in January 2010 to begin its planned fiscal year
2010 construction program for the buildup on time. Environmental
Protection Agency Region 9 officials told us the short period allotted
for receiving and resolving comments creates possible risks that
federal agencies, such as the Fish and Wildlife Service, may not be
able to complete their reviews, and possible environmental challenges
from public and private interests could delay approval of the study and
affect the implementation of other buildup events.
The tight schedule has also affected how long-term utility solutions
were examined during the conduct of DOD's environmental impact
statement for the Marine relocation. Because the final size, scale, and
specific details of potential utility projects needed to implement the
long-term solutions will not be known until they are developed by the
selected special purpose entity at a later date, officials from the
Joint Guam Program Office told us that the long-term solutions for
utilities will be considered at a high level in the environmental
impact statement that is planned for completion in 2010. The program
office stated that a site specific environmental impact statement for
the long term utility solutions will be conducted at a later date, but
before DOD enters into any underlying contracts for long term services
from the special purpose entity.
Creation of special purpose entity:
The next series of major milestones relate to the selection of a
special purpose entity and the creation of a business model whereby the
entity would develop, implement, and construct the long-term solutions
for electric power, water, and wastewater utilities. As table 7 shows,
there are a number of actions that need to be taken to create the
special purpose entity for utilities, including development and
approval of a business model for the special purpose entity, the
evaluation of qualifications and service proposals, the selection and
creation of the entity, and construction. However, according to the
Joint Guam Program Office, while the plan is to complete utility
construction by November 2014, the program office has not yet finished
its coordination within DOD to determine the intervening dates for
completing the actions needed to implement the special purpose entity
approach and begin design and construction of the potential utility
projects. A Joint Guam Program Office official told us that the program
office does not believe at this time that the undetermined schedule
dates will affect its ability to meet its construction completion date.
Table 7: Actions Needed to Implement the Special Purpose Entity
Approach for Utilities[A]:
* Complete preliminary development of business model for the special
purpose entity.
* Obtain U.S. government approval of the business model.
* Obtain government of Japan approval of business model.
* Advertise Request for Qualifications for prospective special purpose
entity offerors.
* Complete evaluation of requests for qualifications from prospective
offerors[B].
* Receive proposals from qualified offerors.
* Select winning special purpose entity and begin exclusive
negotiation, design development, and permitting.
* Execute business and/or real estate documents that formalize the
agreement between the special purpose entity and the U.S. government
for the provision of utility services. Items such as service
availability dates and utility rates would be established in the
agreement.
* Special purpose entity completes site permitting and begins
construction.
* Special purpose entity completes construction of utilities.
* Special purpose entity operates the utilities.
Source: Joint Guam Program Office.
[A] DOD officials told us that they are currently working with the
Office of Management and Budget to formulate a legislative proposal
that would enable DOD to implement certain potential aspects of this
special purpose entity construct. Thus, obtaining legislative authority
would be a critical step in DOD's ability to implement several aspects
of this special purpose entity approach.
[B] Prospective special purpose entity offerors who meet the
qualification criteria will be allowed in a future step to submit
proposals to provide utility services.
[End of table]
Addressing capacities gaps:
The current capacities of existing Guam utility systems will be
exceeded by the needs of the continuously growing military population
before the special purpose entities can complete new utility
construction and be operational by November 2014. The Naval Facilities
Engineering Command conducted breakpoint studies for each of the
utility sectors to predict when utility capacities would be exceeded.
[Footnote 26] Although the predicted breakpoint date varied by utility
sector, the studies determined that there are potential deficiencies in
electricity, water, and wastewater about 2 years into the Marine Corps
relocation effort, which would require interim operating solutions to
bridge the gaps in needed capacity until the long-term solutions were
in place. Joint Guam Program Office officials told us that to control
implementation costs of the utilities, the interim utility solutions
are planned as a part of the long-term solutions. As part of DOD's
current environmental impact statement study for the Marine buildup,
the Naval Facilities Engineering Command stated that they have included
an evaluation of these interim solutions for possible environmental
impacts. Although the command at this time expects that DOD will bear
most of the costs of implementing interim solutions, estimates of these
costs have not yet been fully developed. Additionally, the role that
the special purpose entity or entities would have in implementing the
interim utility solutions has also not been determined.
DOD Lacks a Comprehensive Plan for Its Utility Efforts on Guam:
DOD has not developed and communicated a comprehensive plan for its
utility efforts on Guam to use in managing the several challenges it
faces and provide its stakeholders, including Congress, with a central
source for obtaining specific information on its critical milestones
and schedules, interim and long-term options, approach for utilities
development, costs and financing for utility projects, and challenges.
Officials in the Navy's Joint Guam Program Office told us that while
the program office intends to develop a comprehensive utility plan, the
pre-decisional nature of the work performed for the environmental
impact statement, the pending selection of preferred utility solutions,
uncertainty about costs and financing for utility projects, and
associated challenges have precluded the plan's development. The Deputy
Director of the Joint Guam Program Office also told us that while
meeting DOD's mission requirements would be the ultimate goal of such a
plan, the program office recognizes that the plan should be developed
in collaboration with the government of Guam so that Guam's concerns
are sufficiently addressed, and integrated islandwide utility solutions
are considered that will benefit Guam residents.
Nevertheless, without a comprehensive plan for utilities development,
DOD does not have use of an important tool to address the risks and
uncertainty posed by several critical challenges--the condition of
existing Guam utility systems, extent of coordination required among
stakeholders, sources of funding, approach chosen to implement
solutions, and the schedule for completing key tasks--it faces in
carrying out DOD's planning and implementation of utility solutions on
Guam. Such a plan would also help increase transparency among
stakeholders and improve DOD's overall management of its efforts by
providing a central source of consistent, detailed information on
various aspects of DOD's planning for utility development to meet
future demands on Guam. An opportunity now exists to begin development
of a comprehensive plan as DOD completes its environmental impact
statement effort and the Guam Joint Military Master Plan is finalized.
It is expected that such a plan would evolve in its content and be
updated as information is better refined and decisions are made.
Conclusions:
Expanding the U.S. military presence on Guam by more than two-and-a-
half times the current population is expected to put great stress on
Guam's infrastructure, especially when significant increases are
expected as soon as 2014 with further increases continuing over the
next several years to 2020. Although DOD has taken a number of actions
to identify its requirements and potential solutions for meeting this
significant demand, it has not begun development of a comprehensive
utilities plan to use as an important planning tool in managing and
informing stakeholders, including Congress, on the several challenges
that pose considerable risk to the success of building up the
infrastructure to meet the demand and ensure utilities are available
when needed. Without sufficient utility services, major construction
projects, movement of Marines and other forces, and other buildup
activities may fall behind schedule and increase implementation costs
due to further compression of the timeline near the end of the
implementation period. Congress would also benefit from having an
additional source of details on DOD's utility efforts and its progress
in addressing planning challenges and implementing utility plans to
better inform its decisions and ensure proper congressional oversight
of DOD's military buildup on Guam, including the potential need for
greater levels of appropriations.
Recommendation for Executive Action:
Because of the importance that DOD places on developing the utility
infrastructure needed to support its planned military buildup on Guam,
we recommend that the Secretary of Defense direct the Secretary of the
Navy, in consultation with the Joint Guam Program Office and the Naval
Facilities Engineering Command, to take the following action:
* Develop a comprehensive plan for DOD's utility development efforts
that includes specific information on options under consideration;
projected costs; sources of financing and related budget information;
schedules with associated critical milestones; the construct for the
special purpose entity approach or alternative approaches that would be
used to plan, develop, construct, and operate the new utility
infrastructure; organizational relationships and associated
responsibilities; status of government of Guam actions to improve its
existing infrastructure that may have application to DOD plans; and,
potential risks, challenges, and other factors affecting implementation
of DOD's plans. Additionally, this plan should be:
- developed in cooperation with the government of Guam;
- prepared in time so that an initial version of the plan can be
included with DOD's submission of its final comprehensive Guam Joint
Military Master Plan for the buildup to Congress in 2010;
- provided to congressional defense committees, with subsequent
versions of the plan provided as they become available; and:
- updated, as needed, to adapt to changing circumstances.
Agency Comments and Our Evaluation:
In written comments to a draft of this report, the Executive Director
of the Navy's Joint Guam Program Office agreed with our overall
assessment of DOD's planning efforts to increase the capacities and
services on Guam to support the planned U.S. military buildup over the
next several years and with our recommendation that the Joint Guam
Program Office, in consultation with the Naval Facilities Engineering
Command, should develop a comprehensive plan that would provide
specific information on DOD's utility planning for Guam, information
such as options under consideration, projected costs, schedules with
critical milestones, and other factors affecting implementation of
DOD's plans. The Executive Director also agreed that this plan should
be prepared in time so that an initial version of the plan could be
included with the department's submission of its final comprehensive
Guam Joint Military Master Plan in 2010 and be provided to
congressional defense committees, with subsequent versions provided as
they are updated. However, while the Executive Director stated in his
comments that our recommendation was fair because it focuses on DOD's
utility development, he suggested we clarify our recommendation so as
not to create the impression that DOD's development of a comprehensive
utility plan would account for all utility needs on Guam and would need
mutual agreement with the government of Guam. While we continue to
believe that collaboration with the government of Guam is important
because many of DOD's preferred solutions described in this report
involve utilization of utilities currently owned and operated by the
government of Guam, we have clarified our recommendation, as DOD
suggested, to now state that the comprehensive utility plan for Guam
should be developed "in cooperation" with the government of Guam rather
than "in collaboration." Further, the Executive Director stated that
DOD's span of control and influence to resolve overall utilities
concerns on Guam is limited. We agree that DOD is limited in its
ability to resolve overall utilities concerns on Guam, and have
identified the extent of coordination required among stakeholders as a
planning challenge throughout this report.
Additionally, the Executive Director stated in his comments that our
report was unclear on how a comprehensive plan would increase
transparency or what such transparency would entail. He therefore
suggested that we modify or consider deleting references to
transparency in the report. We have acknowledged in our report that DOD
has provided, to the extent possible, a significant amount of
information to its stakeholders, including the government of Guam, to
provide transparency of its utility efforts. We also stated, however,
that a comprehensive plan for utilities is another important planning
tool that DOD can use to improve the management of its efforts and
provide its stakeholders with detailed, consistent information on its
utility planning efforts--thereby providing an additional level of
transparency to its stakeholders. Such a plan would also generally
provide a means to bring together all aspects of those plans into one
central document and a source that updates information on critical
milestones and schedules, and if these are missed what accommodations
are being made. DOD's preparation of a comprehensive utility plan would
also mutually reinforce the utility planning being conducted by the
government of Guam to support both the needs of the military buildup
and those of the civilian population. As the Executive Director
suggests in his comments, an example of a more quantitative method of
achieving transparency could be the inclusion of additional review
milestones with the government of Guam as the comprehensive plan is
being developed. Additionally, we believe that another example would be
for DOD to set review milestones with other stakeholders, such as the
Environmental Protection Agency and the Federal Highway Administration,
in preparing its plan. Such additional coordination could help to
ensure those stakeholders' mutual interests, plans, and budgets, which
support the needs of the military and island populations, are aligned
in DOD's plan. For these reasons, we have retained our discussion of
transparency in the report.
DOD's comments are reprinted in their entirety in appendix IV. Also,
DOD provided technical comments on a draft of this report, which we
incorporated as appropriate.
As agreed with your office, unless you publicly release the contents of
this report earlier, we plan no further distribution until 30 days from
the report date. At that time, we will send copies of this report to
interested congressional committees, the Secretary of Defense, the
Secretary of the Navy; and the Governor of Guam. 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 call
me at (202) 512-4523 or leporeb@gao.gov. Contact points for our Offices
of Congressional Relations and Public Affairs may be found on the last
page of this report. Other major contributors to this report are listed
in appendix V.
Signed by:
Brian J. Lepore, Director:
Defense Capabilities and Management:
[End of section]
Appendix I: Scope and Methodology:
To determine the current condition and capacity of Guam's existing
utility infrastructure, the military's estimated utility requirements,
and potential solutions for meeting the increased demand on the
island's utility systems, we obtained and reviewed studies and
assessments, briefings, annual reports, and other pertinent
documentation prepared by the Department of Defense (DOD), government
of Guam, U.S. federal departments and agencies, and private companies.
We interviewed and discussed this information with officials at the
Department of the Navy's Joint Guam Program Office, Naval Facilities
Engineering Command, U.S. Environmental Protection Agency, offices and
organizations of the government of Guam, including the Consolidated
Commission on Utilities, Guam Power Authority, Guam Waterworks
Authority, Department of Public Works, Guam Environmental Protection
Agency, and the Guam Civilian Military Task Force. We also spoke with
officials of Gershman, Brickner & Bratton, Inc.--the U.S. District
Court of Guam appointed receiver for Guam's solid waste collection and
disposal operations--to discuss the status of actions being taken to
correct outstanding operational deficiencies with solid waste
operations and the development of a new landfill in Guam. We discussed
electric power approaches and considerations used in the Hawaiian
islands with officials at the Hawaiian Electric Company to provide us
with a comparative basis for power operations in Guam. We analyzed data
on the expected number and timing of military personnel arriving on
Guam and reviewed several technical studies, business case analyses,
and related studies on the projected utility requirements and
associated capacities that would be needed to provide sufficient
utility services. We discussed DOD's projected requirements and
potential solutions for providing the needed new utility services with
the Joint Guam Program Office, Naval Facilities Engineering Command
headquarters and its Pacific and Marianas component commands, the U.S.
Pacific Command and its Navy, Marine Corps, and Air Force component
commands, and U.S. Navy, U.S. Marine Corps, and U.S. Air Force
headquarters. We obtained data on the current capacities of Guam's
existing utility systems from the Naval Facilities Engineering Command.
These data are of undetermined reliability; they were obtained from
utility studies that were conducted by the command's contractors who
worked directly with the government of Guam and its utility
organizations in establishing current utility system capacities and DOD
demand and for providing a baseline to determine the extent of
additional capacities needed to meet future DOD demands. We used these
data in order to consider the planning required to increase the
capacities of the existing utilities. Joint Guam Program Office
officials told us that the Naval Facilities Engineering Command is in
the process of verifying and validating the data used in its technical
utility studies.
To determine the extent that DOD has developed a comprehensive plan to
address any challenges it faces in its planning for new utility
systems, we obtained and reviewed studies, analyses, reports,
briefings, planning documents, and other supporting and relevant
documentation. We also held discussions with officials at the Joint
Guam Program Office, Naval Facilities Engineering Command and its
Pacific and Marianas component commands, U.S. Pacific Command and its
service component commands, and other DOD organizations and offices. To
determine the key steps that DOD plans to use in its planning for the
development of new utility systems on Guam, we interviewed officials
with the Joint Guam Program Office, Naval Facilities Engineering
Command, and other key stakeholder organizations and reviewed reports,
studies, briefings, and other documentation related to the program. We
developed a table of the key steps needed to implement utility
solutions based on our audit work and discussed and reached concurrence
with Joint Guam Program Office officials on the contents of the table.
To establish criteria to use in assessing DOD's planning efforts for
new utility services on Guam, we reviewed our prior reporting and
related studies, as well as outside studies, to identify best practices
and key elements of successful planning. We identified a plan as an
important element of successful planning to increase transparency of an
organization's efforts among stakeholders and to help improve an
organization's overall management of its efforts. Such a plan would
include information on milestones and schedules, costs, financing and
budgets, goals and objectives, projects and activities, organizational
responsibilities, implementation strategies, and potential risks,
challenges, and other factors that could affect implementation. We
reviewed the Joint Guam Program Office sanctioned technical studies and
business case analyses that were used to develop possible solutions for
providing increased utility capacities and services to support the
growth in the military population. From these studies we obtained
information on potential costs, possible impacts on the existing Guam
utility infrastructure, and implementation approaches, which we
discussed with Joint Guam Program Office and Naval Facilities
Engineering Command officials. To better understand stakeholder
relationships, we met with officials within the Joint Guam Program
Office, Naval Facilities Engineering Command, Joint Staff, Office of
the Secretary of Defense, the Service headquarters, U.S. Pacific
Command and its service components, the government of Guam,
particularly its utility authorities, U.S. Environmental Protection
Agency, and private companies. Regarding the environmental impact
statement that is being conducted for the Marine Corps move to Guam, we
reviewed planning documents, status reports, and other documentation,
which we discussed with officials from DOD organizations, government of
Guam, U.S. Environmental Agency Region 9, as well as other cognizant
officials.
Additionally, we obtained information on the Department of the Navy's
Fena Reservoir water treatment operations on Guam, the determination
process used to establish the rates it charges its customers for water,
and the feasibility of consolidating Fena water operations with the
Guam Waterworks Authority's water system. We obtained and reviewed
briefings, studies, reports, official correspondence, and other
pertinent documentation related to the Navy's Fena Reservoir water
operations on Guam and the Navy Working Capital Fund, which establishes
the procedures used by the Navy to manage the costs of its operations
and provides the process for determining water rates. We also discussed
this information with appropriate officials at the Naval Facilities
Engineering Command Marianas, Naval Facilities Engineering Command
Headquarters, Guam Waterworks Authority, and Guam's Consolidated
Commission on Utilities. Additionally, we discussed the operational and
water rate issues with the Department of the Navy's Naval Audit
Service, which was conducting a review of the process used by the
Department of the Navy to establish the water rates that it charges the
Guam Waterworks Authority on Guam. We obtained and reviewed the Naval
Audit Service's final April 2009 report issued on the results of its
Guam water rates' review.
We conducted this performance audit from June 2008 through May 2009 in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives. Table 8 shows the
organizations and offices we contacted during our review.
Table 8: Organizations and Offices Contacted during Our Review:
Washington, D.C., area:
* Joint Guam Program Office, Assistant Secretary of the Navy
(Installations and Environment).
* Naval Facilities Engineering Command, Headquarters.
* Joint Staff, Logistics Engineering Division.
* Office of the Deputy Under Secretary of Defense, Installations and
Environment Division.
* Marine Corps Headquarters, Defense Policy Review Initiative,
Installations and Implementation Branch.
* Commander, Navy Installations Command.
* Air Force Headquarters.
* Naval Audit Service, Department of the Navy.
* Gershman, Brickner & Bratton, Inc.
Oahu, Hawaii, area:
* U.S. Pacific Command, Headquarters.
* U.S. Pacific Fleet.
* U.S. Marine Forces Pacific.
* U.S. Pacific Air Forces.
* Naval Facilities Engineering Command, Pacific.
* U.S. Department of Transportation, Region 9, Federal Highways
Administration.
* First Hawaiian Bank.
* Hawaiian Electric Company.
Guam:
* Joint Guam Program Office Forward.
* Naval Facilities Engineering Command Marianas.
* Government of Guam.
* Civilian/Military Task Force, Office of the Governor of Guam.
* Consolidated Commission on Utilities.
* Department of Public Works, Solid Waste Division.
* A.B. Won Pat Guam International Airport Authority.
* Guam Coastal Management Program.
* Guam Power Authority.
* Guam Waterworks Authority.
* University of Guam, Water and Environmental Research Institute of the
Western Pacific.
* Guam Environmental Protection Agency.
San Francisco, California, area:
* Environmental Protection Agency, Region 9.
Source: GAO.
[End of table]
[End of section]
Appendix II: Department of the Navy's Fena Reservoir Water Treatment
Operations and Rates on Guam:
During our review we obtained information on the (1) Navy's Fena
reservoir water treatment operations, (2) process used by the U.S. Navy
to set rates for its military customers and the Guam Waterworks
Authority for water obtained and produced from the Navy's Fena
reservoir water treatment operations, and (3) feasibility of
consolidating the Fena water operations with the Guam Waterworks
Authority's water system.
Navy's Fena Reservoir Water Treatment Operations:
DOD currently produces and provides potable water to meet all of its
needs at military installations on Guam. In the northern half of the
island, its water comes from a network of wells on DOD land that pumps
fresh water from an underground aquifer. In the south, its water is
obtained from surface freshwater resources, including the Fena
Reservoir, which the Navy constructed in 1951, to provide the primary
source of water to Naval Base Guam operations, military personnel, and
dependents. Water is pumped from the manmade reservoir and two nearby
springs to the Navy Fena Water Treatment Plant where raw water is
treated by coagulation, sedimentation, and filtration to reduce
turbidity and chlorinated. The plant is the largest and most complex
water treatment plant on Guam and, according to the Commanding Officer
of the Naval Facilities Engineering Command Marianas, has complied with
the Safe Drinking Water Act over the past 5 years, with the exception
of a few minor monitoring and reporting issues.
To augment the water supply for civilian residents its serves on Guam,
the Guam Waterworks Authority[Footnote 27] purchases about 3 million
gallons of water of the Navy's daily production at its Fena water
treatment plant. The purchased water serves the authority's customers
in three villages in close proximity to the reservoir and/or its water
distribution pipes but can also be conveyed to other customers in its
water system. The Navy's plant currently turns out about 9 million
gallons of water each day but is capable of producing upwards of 13.5
million gallons each day. [Footnote 28] According to the Naval
Facilities Engineering Command, the Fena water treatment operation on
Guam is the only Navy water operation that sells water to an off-base
entity.
Navy's Process for Determining Water Rates:
The Navy's water production and distribution systems in Guam are
operated through the Navy Working Capital Fund, which is a revolving
fund that relies on sales revenue instead of direct congressional
appropriations to finance its operations. The fund must recover the
full cost of its operations, and rates for its products and services
are set so its operations will break even over time, thereby neither
making a profit nor incurring a loss.[Footnote 29] The Navy has used
this financing approach for over 30 years for its water operations and
as a basis for its water rates for both its military and civilian
customers in Guam.
Because gains or losses in revenue may occur as a result of variations
in operations, the Navy water rates are adjusted each year to recover
the full costs of operations and break even over time. In accordance
with normal Navy Working Capital Fund procedures, the Navy's Naval
Facilities Engineering Command Marianas initially sets a new water rate
for its Fena reservoir operations through its budget process 2 years
prior to the fiscal year of execution. The proposed new rate is
determined from actual and estimated costs available at the time of
development and knowledge of future costs and sales volume events, such
as an increase in population or customer base. According to water rate
historical data provided by the Naval Facilities Engineering Command
Marianas used in preparing its fiscal year 2009 rate, operation costs
included direct labor, overhead, material (fuel), depreciation,
equipment rental, electricity, hazardous waste disposal, water
laboratory testing, engineering support, and contracts for operations
and maintenance, minor repairs, ground maintenance, major repairs, data
collection, management software, and other services.
The Naval Facilities Engineering Command Marianas reflects the proposed
new water rate in its supporting budget documentation that it submits
to the Naval Facilities Engineering Command-Pacific for the associated
fiscal year budget submission. In turn, the documentation is provided
to the Naval Facilities Engineering Command Headquarters, which reviews
the documentation and submits it as part of its consolidated budget to
the Navy's Office of Budget/Business and Civilian Resources Division.
Subsequently, the consolidated budget is presented to the Office of the
Secretary of Defense's Comptroller. After the Office of the Secretary
of Defense's review, a program budget decision is published
establishing the new water rate for the associated fiscal year and any
needed adjustments are made to the Naval Facilities Engineering Command
Marianas' budget.
Feasibility of Consolidating Navy and Guam Water Systems:
In regard to the feasibility of consolidating the Navy's Fena water
operations with Guam Waterworks Authority's water system, the Naval
Facilities Engineering Command told us that the command has
consistently maintained ownership of water rights on Navy land
throughout the world and the Navy would like to maintain this right for
its reservoir on Navy land in Guam. Further, the Government of Guam
recognized the fee simple title and ownership of the United States'
real and personal property used by the Navy to produce and distribute
potable water, (which includes the Fena Reservoir) in a 2003 Consent
Decree.[Footnote 30] The Commanding Officer of the Naval Facilities
Engineering Command Marianas, in an October 2008 letter to the Chairman
of Guam's Consolidated Commission on Utilities, stated that the Command
sees few engineering, operational, or financial benefits that would
result from consolidation. He stated that while the Guam local water
system has undergone significant improvements in the quality of its
drinking water, the system still has a very high loss rate of
approximately 50 percent and continues to lack adequate water
transmission and storage infrastructure. In contrast, the Navy water
system's loss rate is 17 percent, which is close to the industry
standard of 15 percent or less. The commanding officer also stated that
the Guam Waterworks Authority's primary water system in northern Guam
is largely separate and distinct from the Navy's system. Another Naval
Facilities Engineering Command Marianas official told us that most of
the authority's water comes from the island's northern aquifer.
According to the command, while the water is of sufficient quality to
not require treatment, the authority's rates remain higher than those
of the Navy, which operates a full water treatment plant. Additionally,
the officer told us that because the Fena reservoir is located within
the Naval Base Guam Ordnance Annex,[Footnote 31] there are security,
liability, and antiterror/force protection concerns that would be
raised by nonmilitary ownership of the reservoir.
The Chairman of the Guam's Consolidated Commission on Utilities told us
it is the long-term goal of the government of Guam to integrate DOD's
and Guam's water systems under the control of the Guam Waterworks
Authority. However, the chairman told us that for the time being the
government of Guam has shifted its focus to planning for the buildup
and looking for opportunities to collaborate with DOD on developing
integrated water and wastewater solutions for the buildup. He further
stated that the government of Guam would revisit the ultimate
integration of the entire system at a later time.
[End of section]
Appendix III: Current Sources of Utility Services for Civilian and DOD
Customers on Guam:
DOD current sources of utility services for electric power, potable
water, wastewater treatment, and solid waste disposal come from both
military-and government of Guam-owned and operated systems. The Guam
Power Authority provides DOD with all of its electric power services.
The Guam Waterworks Authority provides wastewater collection and
treatment services for all of DOD's installations in northern Guam,
such as Andersen Air Force Base, but DOD provides its own treatment
services for the Naval Base Guam in the south. DOD currently produces
all of its own potable water and handles all of its solid waste
collection and disposal. Table 9 summarizes the sources of utility
services for Guam civilian and DOD customers by utility sector.
Table 9: Current Source of Utilities Services for Guam Civilian and DOD
Customers by Utility Sector:
Utility sector: Electric power generation;
Customer sector: Guam civilian;
Current source of utility services:
* Guam Power Authority provides all power services.
Utility sector: Electric power generation;
Customer sector: DOD (Navy and Air Force bases)[A];
Current source of utility services:
* Purchases all of its power services though a customer services
agreement with Guam Power Authority.[B]
Utility sector: Potable water production;
Customer sector: Guam civilian;
Current source of utility services:
* Guam Waterworks Authority produces most of its own water but
purchases some water from the Navy's Fena reservoir water operations.
Utility sector: Potable water production;
Customer sector: DOD (Navy and Air Force bases);
Current source of utility services:
* Navy Base Guam and Andersen Air Force Base produce and provide water
to all DOD customers.
Utility sector: Wastewater collection and treatment;
Customer sector: Guam civilian;
Current source of utility services:
* Guam Waterworks Authority operates seven wastewater treatment plants
and basins that treat wastewater from resident and military
customers.[C] An estimated 41 percent of island residents use
individual wastewater disposal systems, such as septic tanks.
Utility sector: Wastewater collection and treatment;
Customer sector: DOD (Navy and Air Force bases);
Current source of utility services:
* The Navy treats all of its wastewater in southern Guam at its own
treatment plant at Naval Base Guam;
* Guam Waterworks Authority handles wastewater from Andersen Air Force
Base and Navy facilities in northern Guam.
Utility sector: Solid waste collection and disposal;
Customer sector: Guam civilian;
Current source of utility services:
* Guam Department of Public Works maintains a single landfill and only
provides solid waste services for civilian customers in Guam.[D]
Utility sector: Solid waste collection and disposal;
Customer sector: DOD (Navy and Air Force bases)[A];
Current source of utility services:
* Joint Region Marianas maintains a landfill at both Navy Base Guam and
Andersen Air Force Base and provides solid waste services for the
bases.
Source: DOD and government of Guam.
[A] Beginning January 31, 2009, the Navy Region Marianas assumed
responsibly for installation support services, including utilities, on
all military bases and DOD facilities on Guam under DOD's joint basing
initiative as recommended by the 2005 Base Realignment and Closure
Commission, and was designated as Joint Region Marinas, Guam.
[B] According to information provided by DOD officials, the Guam Power
Authority supplies power to each DOD facility up to the base
transformer; from there, each base is responsible for its on-base power
distribution. According to DOD officials, the customer services
agreement between the Guam Power Authority and DOD establishes the
electrical rates paid to the Guam Power Authority and states that DOD
will be a customer of the authority. It further states that the
operations and maintenance of the islandwide power system will be the
responsibility of the authority. DOD plans to renegotiate the
agreement, which is in force until 2012.
[C] According to the Guam Waterworks Annual Report, in January 2007 the
authority contracted with a private company--Veolia LLC--to manage and
operate its wastewater system.
[D] In March 2008, the U.S. District Court of Guam appointed Gershman,
Brickner & Bratton, Inc, as Receiver for Guam's solid waste operations.
[End of table]
[End of section]
Appendix IV: Comments from the Department of Defense:
Note: Page numbers in the draft report reviewed by agency may differ
from those in this report.
Department Of The Navy:
Office Of The Assistant Secretary:
Installations And Environment:
1000 Navy Pentagon:
Washington, D.C. 20330-1000:
June 25, 2009:
Mr. Brian J. Lepore:
Director, Defense Capabilities and Management:
U.S. Government Accountability Office:
441 G Street, N.W.
Washington, DC 20548:
Dear Mr. Lepore:
This is the Department of Defense (DoD) response to the GAO draft
report, GAO-09-653, "Defense Infrastructure: Planning Challenges Could
Increase Risks for DoD in Providing Utility Services When Needed to
Support the Military Buildup on Guam," dated May 29, 2009 (GAO Code
351225). Detailed comments on the report recommendations are enclosed.
We agree with recommendations as a whole. There are two significant
items that we recommend adjusting.
On page 16, section "Comprehensive plan ... to increase transparency
and improvement management...". Likewise, on page 26, the last
paragraph includes reference to "increase transparency." It is not
clear what such "transparency" would entail, or how DoD/Joint Guam
Program Office (JGPO) could provide better "transparency." The report
acknowledges that there has been a significant amount of information
shared between DOD/JGPO and the government of Guam and that if
information has not been shared, this is due to the information not
having been determined yet. We recommend to delete reference to
"transparency" or lack of transparency be deleted, or perhaps amplify a
more quantitative method of achieving transparency (i.e. including more
program review milestones with Government of Guam as the comprehensive
plan is being developed).
On page 27, section "Recommendation for Executive Action" indicates
that a comprehensive plan for DOD's utility development should be
prepared. This recommendation is fair because it focuses on the DoD
utility development, however it creates the impression that DoD
development of such a plan will account for overall utility needs on
Guam. The "span of control and influence" of DOD to resolve utilities
concerns on Guam is limited. This plan includes inputs from government
of Guam utilities as well as from the Government of Japan. Further, the
reference to "collaboration" in the first sub-bullet as to the
development of the DOD comprehensive plan implies mutual agreement with
government of Guam utilities will be necessary.
DoD recommends to change the wording in the first sub-bullet to read
"developed in coordination with the government of Guam."
Thanks for the opportunity to review the draft report.
Sincerely,
Signed by:
David F. Bice:
Executive Director:
Joint Guam Program Office:
Enclosure: As stated:
[End of letter]
GAO Draft Report - Dated May 29, 2009:
GAO Code 351225/GAO-09-653:
"Defense Infrastructure: Planning Challenges Could Increase Risks for
DoD in Providing Utility Services When Needed to Support the Military
Buildup on Guam"
Department Of Defense Comments To The Recommendation
Recommendation 1: The GAO recommends that the Secretary of Defense
direct the Secretary of the Navy, in consultation with the Joint Guam
Program Office and the Naval Facilities Engineering Command, to develop
a comprehensive plan for DoD's utility development efforts. The plan
should include: specific information on options under consideration;
projected costs; sources of financing and related budget information;
schedules with associated critical milestones; the construct for the
special purpose entity approach or alternative approaches that would be
used to plan, develop, construct, and operate the new utility
infrastructure; organizational relationships and associated
responsibilities; status of government of Guam actions to improve its
existing infrastructure that may have application to DoD plans; and,
potential risks, challenges, and other factors affecting implementation
of the DoD's plans. Additionally, this plan should be developed in
collaboration with the government of Guam; prepared in time so that an
initial version of the plan can be included with DoD's submission of
its final comprehensive Guam Joint Military Master Plan for the buildup
to Congress in 2010; provided to congressional defense committees, with
subsequent versions of the plan provided as they become available; and
updated as needed, to adapt to changing circumstances.
DOD Response:
DoD concurs with the assessment and recommendation of the GAO. This
recommendation is fair because it focuses on the DoD utility
development, however it creates the impression that DoD development of
such a plan will account for all utility needs on Guam. The "span of
control and influence" of DOD to resolve overall utilities concerns on
Guam is limited. This plan includes inputs from government of Guam
utilities as well as from the Government of Japan.
[End of section]
Appendix V: GAO Contact and Staff Acknowledgments:
GAO Contact:
Brian J. Lepore, (202) 512-4523 or leporeb@gao.gov:
Acknowledgments:
In addition to the contact named above, Mark A. Little, Assistant
Director; Michael W. Armes; Raj C. Chitikila; Grace A. Coleman;
Katherine S. Lenane; Mahender Dudani; Patrick E. Peterson; and Mark J.
Wielgoszynski, Analyst-in-Charge, made major contributions to this
report.
[End of section]
Related GAO Products:
High-Level Leadership Needed to Help Guam Address Challenges Caused by
DOD-Related Growth, [hyperlink,
http://www.gao.gov/products/GAO-09-500R], Washington, D.C.: April 9,
2009.
Defense Infrastructure: Opportunity to Improve the Timeliness of Future
Overseas Planning Reports and Factors Affecting the Master Planning
Effort for the Military Buildup on Guam. [hyperlink,
http://www.gao.gov/products/GAO-08-1005]. Washington, D.C.: September
17, 2008.
Defense Infrastructure: High-Level Leadership Needed to Help
Communities Address Challenges Caused by DOD-Related Growth.
[hyperlink, http://www.gao.gov/products/GAO-08-665]. Washington, D.C.:
June 17, 2008.
Defense Logistics: Navy Needs to Develop and Implement a Plan to Ensure
that Voyage Repairs are Available to Ships Operating Near Guam When
Needed. [hyperlink, http://www.gao.gov/products/GAO-08-427].
Washington, D.C.: May 12, 2008.
Defense Infrastructure: Planning Efforts for the Proposed Military
Buildup on Guam Are in Their Initial Stages, with Many Challenges Yet
to Be Addressed. [hyperlink, http://www.gao.gov/products/GAO-08-722T].
Washington, D.C.: May 1, 2008.
Defense Infrastructure: Challenges Increase Risks for Providing Timely
Infrastructure Support for Army Installations Expecting Substantial
Personnel Growth. [hyperlink, http://www.gao.gov/products/GAO-07-1007].
Washington, D.C.: September 13, 2007.
Defense Infrastructure: Overseas Master Plans Are Improving, but DOD
Needs to Provide Congress Additional Information about the Military
Buildup on Guam. [hyperlink, http://www.gao.gov/products/GAO-07-1015].
Washington, D.C.: September 12, 2007.
U.S. Insular Areas: Economic, Fiscal, and Financial Accountability
Challenges. [hyperlink,
http://www.gao.gov/products/GAO-07-119]. Washington, D.C.: December 12,
2006.
DOD's Overseas Infrastructure Master Plans Continue to Evolve.
[hyperlink, http://www.gao.gov/products/GAO-06-913R]. Washington, D.C.:
August 22, 2006.
U.S. Insular Areas: Multiple Factors Affect Federal Health Care
Funding. [hyperlink, http://www.gao.gov/products/GAO-06-75].
Washington, D.C.: October 14, 2005.
Results-Oriented Government: Practices That Can Help Enhance and
Sustain Collaboration among Federal Agencies. [hyperlink,
http://www.gao.gov/products/GAO-06-15]. Washington, D.C.: Oct. 21,
2005.
Opportunities Exist to Improve Future Comprehensive Master Plans for
Changing U.S. Defense Infrastructure Overseas. [hyperlink,
http://www.gao.gov/products/GAO-05-680R]. Washington, D.C.: June 27,
2005.
Results-Oriented Government: GPRA Has Established a Solid Foundation
for Achieving Greater Results. [hyperlink,
http://www.gao.gov/products/GAO-04-38]. Washington, D.C.: March 10,
2004.
Environmental Cleanup: Better Communication Needed for Dealing with
Formerly Used Defense Sites in Guam. [hyperlink,
http://www.gao.gov/products/GAO-02-423]. Washington, D.C.: April 11,
2002.
Compact of Free Association: Negotiations Should Address Aid
Effectiveness and Accountability and Migrants' Impact on U.S. Areas.
[hyperlink, http://www.gao.gov/products/GAO-02-270T]. Washington, D.C.:
December 6, 2001.
Foreign Relations: Migration From Micronesian Nations Has Had
Significant Impact on Guam, Hawaii, and the Commonwealth of the
Northern Mariana Islands. [hyperlink,
http://www.gao.gov/products/GAO-02-40]. Washington, D.C.: October 5,
2001.
Overseas Presence: Issues Involved in Reducing the Impact of the U.S.
Military Presence on Okinawa. [hyperlink,
http://www.gao.gov/products/GAO/NSIAD-98-66]. Washington, D.C.: March
2, 1998.
U.S Insular Areas: Development Strategy and Better Coordination Among
U.S. Agencies Are Needed. [hyperlink,
http://www.gao.gov/products/GAO/NSIAD-94-62]. Washington, D.C.:
February 7, 1994.
[End of section]
Footnotes:
[1] A recent report by the government of Guam's Department of Public
Works projected continued growth in the population of Guam. The report
estimated that by 2030, the 2008 civilian population of 176,000 would
grow by 26 percent to 222,000 without the anticipated military buildup;
with the military buildup, the report estimated the total population
would increase by 44 percent to 253,000 in 2030 from the current
population. Government of Guam, Department of Public Works, 2030 Guam
Transportation Plan (Dec. 19, 2008). The population of Guam is
estimated to be 178,430 in July 2009, according to the Central
Intelligence Agency's The World Fact Book, [hyperlink,
https://www.cia.gov/library/publications/the-world-factbook/] (accessed
June 2009).
[2] The National Environmental Policy Act of 1969, codified as amended
at 42 U.S.C. § 4321-4347, establishes environmental policies and
procedures that shall be followed by all federal agencies to the
fullest extent possible. In accordance with these requirements and the
regulations for implementing the National Environmental Policy Act of
1969 established by the Council for Environmental Quality, federal
agencies typically evaluate the likely environmental effects of a
project they are proposing to undertake using an environmental
assessment or, if the project constitutes a major federal action
significantly affecting the quality of the human environment, a more
detailed environmental impact statement.
[3] DOD officials said that the special purpose entity would most
likely be a limited liability company or partnership formed for the
specific purpose of providing a particular utility service or services
on Guam. A limited liability company is a company in which the
liability of each shareholder or member is limited to the amount
individually invested. A limited partnership is a partnership composed
of one or more persons who control the business and are personally
liable for the partnership's debts (called general partners), and one
or more persons who contribute capital and share profits but who cannot
manage the business and are liable only for the amount of their
contribution.
[4] These reports include GAO, Defense Infrastructure: Overseas Master
Plans Are Improving, but DOD Needs to Provide Congress Additional
Information about the Military Buildup on Guam, [hyperlink,
http://www.gao.gov/products/GAO-07-1015] (Washington, D.C.: Sept. 12,
2007); Defense Infrastructure: Planning Efforts for the Proposed
Military Buildup on Guam Are in Their Initial Stages, with Many
Challenges Yet to Be Addressed, [hyperlink,
http://www.gao.gov/products/GAO-08-722T] (Washington, D.C.: May 1,
2008); Defense Infrastructure: Opportunity to Improve the Timeliness of
Future Overseas Planning Reports and Factors Affecting the Master
Planning Effort for the Military Buildup on Guam, [hyperlink,
http://www.gao.gov/products/GAO-08-1005] (Washington, D.C.: Sept. 17,
2008); and High-Level Leadership Needed to Help Guam Address Challenges
Caused by DOD-Related Growth, [hyperlink,
http://www.gao.gov/products/GAO-09-500R] (Washington, D.C.: April 9,
2009).
[5] DOD officials refer to the process through which the United States
and Japan negotiated the initiatives that realign U.S. forces in Japan
as the Defense Policy Review Initiative. The realignment initiatives
were the result of Security Consultative Committee meetings in 2005 and
2006 between U.S. and Japan officials. The Security Consultative
Committee is made up of the U.S. Secretaries of State and Defense and
Japan's Minister of Foreign Affairs and Minister of State for Defense.
The committee sets overall bilateral policy regarding the security
relationship between the United States and Japan. The results of these
meetings established a framework for the future U.S. force structure in
Japan, including the Marine Corps move from Okinawa, Japan, to Guam.
[6] Joint basing refers to a recommendation from the 2005 Base
Realignment and Closure process that DOD develop a joint region on Guam
which will realign installation management functions at Andersen Air
Force Base to the Commander, U.S. Naval Forces Marianas. The joint
basing initiative is intended to eliminate duplication in base support
among installation services capabilities, such as utilities. Joint
Region Marianas, Guam, was established January 31, 2009.
[7] According to the Joint Guam Program Office, it is anticipated that
the special purpose entity will be funded by a mix of public and
private funding.
[8] The Duncan Hunter National Defense Authorization Act for Fiscal
Year 2009 states that it is the sense of Congress that the proposed
utility infrastructure improvements on Guam should incorporate the
civilian and military infrastructure into a single grid to realize and
maximize the effectiveness of the overall utility system, if
appropriate cost-sharing and quality standards are met. See Pub. L. No.
110-417 § 2821(c) (2008). DOD has not yet determined whether a single
entity or multiple special purpose entities would construct and operate
the new utility systems.
[9] In addition to the $740 million, the government of Japan is
anticipated to provide $2.55 billion in financing, of which $2.1
billion would be recoverable, for the development and construction on
family housing for Marine Corps families. The government of Japan is
also expected to provide $2.8 billion for construction of general
administrative buildings, instruction buildings, barracks, and quality
of life facilities.
[10] Although the installed generation capacity in Guam Power
Authority's plants is approximately 550 megawatts, the current
available generation capacity is 485 megawatts. This difference is
largely related to units out service for extended periods of time and
units not available to be scheduled into the generation capacity. To
maintain system reliability standards, Guam Power Authority needs to
provide 1.52 megawatts of capacity for every 1.0 megawatt of demand
load, according to DOD analysis. The reserve capacity allows for
generators to be taken out of service for maintenance and provides an
emergency source of power. Therefore, to meet the expected 112 megawatt
increase in DOD demand load, 1.52 times this amount, approximately 170
megawatts, of new generation capacity is needed.
[11] Options for the separate power plant include configurations
whereby (1) DOD loads are primarily satisfied by the new plant with
excess power delivered to the Guam Power Authority grid, (2) power is
provided primarily to the authority's grid with DOD loads being
satisfied by the authority, and (3) DOD loads are satisfied by the new
plant that operates independently of the Guam Power Authority grid.
[12] For example, section 2911(e) of Title 10, U.S.C., states that it
shall be DOD's goal to produce or procure not less than 25 percent of
the total quantity of electric energy it consumes within its facilities
and in its activities during fiscal year 2025 and each fiscal year
thereafter from renewable energy sources as defined in section 203(b)
of the Energy Policy Act of 2005 (42 U.S.C. 15852(b)).
[13] Prior to consolidating under DOD's joint basing initiative, the
Navy and Air Force operated separate water systems that served all DOD
needs on Guam. As a result of the consolidation which placed all base
operating functions under Navy control, we refer to the water system as
being Navy-owned.
[14] The Northern District Wastewater Treatment Plant on the
northwestern coast of the island was commissioned in 1979 and is the
largest of the Guam Waterworks Authority's sewage treatment facilities.
It currently uses only primary treatment (physical removal of floatable
and settleable solids) and disposes of treated effluent through an
outfall into the Philippine Sea.
[15] United States of America v. Guam Waterworks Authority and the
Government of Guam, No. 02-00035, Stipulated Order for Preliminary
Relief (D. Guam June 5, 2003). The stipulated order requires the
authority to, among other matters, develop and submit a water and
wastewater master plan and to submit schedules and plans for several
different specified projects.
[16] According to officials in the Joint Guam Program Office, this may
be a requirement from the Environmental Protection Agency for the Guam
Waterworks Authority even without the military buildup.
[17] Options for the separate wastewater treatment plant include (1)
constructing a new facility with its own outfall near the proposed DOD
development and (2) building a new facility at the Northern District
Wastewater Treatment Plant site to treat DOD wastewater flows only and
using the existing plant's outfall.
[18] United States of America v. Government of Guam, No. 02-00022 (D.
Guam March 17, 2008).
[19] A tipping fee is the charge levied upon a given quantity of waste
received at a waste processing facility or landfill.
[20] According to the Guam Civilian-Military Task Force, the task force
was created in 2006 by the Governor of Guam's Executive Order 2006-10
to maximize opportunities for the civilian and military community
resulting from increases in military presence, and that one of the task
force's responsibilities is to develop a comprehensive master plan that
would accommodate the military buildup and relocation of the Marines to
Guam.
[21] Secondary treatment is the second step in most waste treatment
systems during which bacteria consume the organic parts of the wastes.
This is accomplished by bringing the sewage, bacteria, and oxygen
together in trickling filters or within an activated sludge process.
Secondary treatment removes all floating and settling solids and about
90 percent of the oxygen demand from substances and suspended solids.
Disinfection by chlorination is the final stage of the secondary
treatment process. The Environmental Protection Agency establishes
secondary treatment standards for publicly owned treatment works.
[22] However, depending on the precise business model that is
ultimately selected, it is unclear whether statutory authority exists
at this time to enable DOD to invest U.S. government resources into a
special purpose entity for the purposes of improving a utility system
outside the jurisdiction of DOD. DOD officials told us that they are
currently working with the Office of Management and Budget to formulate
a legislative proposal that they hope will enable DOD to implement
certain potential aspects of this special purpose entity construct.
[23] The Japan Bank for International Cooperation is one of four policy-
based financing institutions that are part of the Japan Finance
Corporation, which is a public corporation wholly owned by the
Government of Japan. In conducting its operations to fulfill its
mission of contributing to the sound development of the Japanese and
international economy, the bank's role is to complement the financing
provided by private sector financial institutions.
[24] When a bond is rated investment grade, its issuer is considered
able to meet its obligations, exposing bondholders to minimal default
risk, which makes it easier to attract investors and obtain lower
interest rates.
[25] In testimony before the U.S. Senate Committee on Energy and
Natural Resources on May 1, 2008, the Acting Deputy Assistant Secretary
of the Interior for Insular Affairs stated that as is typical for
government loan programs, the rural development loans from the U.S.
Department of Agriculture require that the government get an
appropriation only for the risk associated with the loan rather than
the entire loan amount. Loans where there is a reasonable risk of
default will have a higher cost than those which typically do not
default. For instance, the renewable energy guaranteed loan program has
a 10 percent subsidy rate compared to the hardship electric loan
program which has a 0.12 percent subsidy rate. Because utilities
typically have little risk of default, financing of electric loans is
secure and carries a low up-front financing cost on behalf of the
federal government.
[26] Breakpoints were developed by matching the supply of the existing
utility to the demand from forces (to include service members,
contractor support and dependents) at their projected arrival on Guam.
[27] The Guam Waterworks Authority, which is a public corporation
responsible for the production, treatment, distribution, and sale of
drinking water, provides water services to the entire civilian
population of Guam. Most of its water--about 70 percent--comes from
wells that pump water from the northern aquifer; the remaining 30
percent comes from surface water sources, including rivers and
reservoirs (ground level and elevated tanks).
[28] A memorandum of understanding in 1991 between the U.S. government
and the government of Guam set the Navy's daily commitment at upwards
of 4.39 million gallons of water.
[29] See 10 U.S.C. § 2208; see DOD 7000.14-R, Department of Defense
Financial Management Regulation, Vol. 2B, Ch. 9, § 09010 (Sept. 2008).
[30] United States of America v. Government of Guam, No. 99-00102 (D.
Guam Apr. 24, 2003).
[31] The Naval Base Guam Ordnance Annex is located approximately 1 mile
southeast of the main base. It encompasses nearly 18,000 acres and is a
major storage and supply point for many types of weapons. The annex is
also the site of the Fena reservoir.
[End of section]
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