For Release on Delivery

Expected at 10:00 a.m.

Wednesday,

March 1, 2000

GAO/T-NSIAD-00-111

MILITARY REAL

PROPERTY

MAINTENANCE

Management

Improvements Are Needed

to Ensure Adequate

Facilities

Statement of Kwai-Cheung Chan, Director

Special Studies and Evaluations

National Security and International Affairs Division

Testimony

Before the Subcommittee on Military Readiness,

Committee on Armed Services, House of Representatives

United States General Accounting Office

GAO
Page 1 GAO/T-NSIAD-00-1111

Mr. Chairman and Members of the Subcommittee:

I am pleased to be here today to share the results of our review of the

management of real property assets by the Department of Defense (DOD)

and the military services and of the recent initiatives taken by DOD to

address issues we raised in that report.1

We testified on aspects of this

review on October 26, 1999, before the Senate Armed Services

Subcommittee on Readiness and Management Support.2

Today I will discuss (1) our principal findings on DOD’s strategy for

management of real property and how the services determine and

prioritize maintenance needs and allocate resources to them, (2)

promising practices in facilities maintenance by nonmilitary entities, (3)

some barriers that the services face in implementing such practices, (4)

our recommendations on how DOD could improve its real property

management, and (5) the steps DOD has told us it is taking in response to

our report and testimony.

We focused on the properties that the services maintain and repair using

funds from DOD’s operation and maintenance account. The services’ real

property assets include barracks, administrative space, ports, hangars and

runways, roads and railroad track, and schools and utility systems. Real

property maintenance of these facilities includes daily maintenance, small

repairs, and minor construction. To meet our objectives, we sent

questionnaires to 571 military bases and major commands worldwide; 93

percent of them responded. We visited 35 bases and commands

nationwide to interview experts and DOD maintenance and repair

personnel.

DOD does not have a comprehensive strategy for managing its

maintenance and repair needs. Each service sets its own standards for

maintaining its property, using different methods to assess property

conditions, prioritize repairs, and allocate funds for maintenance and

repairs. Moreover, our questionnaire results show that bases and major

commands within the services sometimes apply their own assessment

criteria inconsistently. In addition, the services have different maintenance

funding goals through 2005, and they plan to fund repairs below the levels

required to keep most facilities at current conditions. Therefore, the

1Military Infrastructure: Real Property Management Needs Improvement (GAO/NSIAD-99-100,

Sept. 7, 1999).

2Military Real Property Maintenance: Improvements are Needed to Ensure that Critical Mission

Facilities Are Adequately Maintained, (GAO/T-NSIAD-00-51, Oct. 26, 1999)

Results in Brief
Page 2 GAO/T-NSIAD-00-111

backlog of repairs, some rated “critical,” will increase. The amount of

backlog varies by service.

We found a number of promising practices in the maintenance area among

nonmilitary entities, such as (1) using a single system for counting the

number and type of facilities and for assessing facility conditions and (2)

ranking budget allocations for all facilities using common criteria,

including physical condition, relevance of facilities to the mission, and lifecycle costing and budgeting. However, adoption of these practices by the

services is hampered by such barriers as (1) the use of real property

maintenance funds for other operations and maintenance purposes and (2)

incomplete and noncomparable data on maintenance and repair, which

prevents DOD and the Congress from making meaningful comparisons of

the services’ requests for funding repairs.

To improve management of military real property maintenance, we

recommended that the Secretary of Defense provide funding for a

comprehensive strategic real property maintenance plan. We also

recommended that DOD develop a cross-service, integrated strategy to

comprehensively address real property maintenance issues. In February

2000, DOD briefed us on the steps it is taking to improve its real property

management. First, DOD has formed an Installations Policy Board to

provide DOD-wide policy and guidance for installations and to advocate

for adequate funding for them. Second, DOD states that it is developing a

comprehensive Facilities Strategic Plan. Third, in January 2000, DOD

officials visited the Lawrence Livermore National Laboratory and the

Capital Needs Analysis Center of the Church of Latter-day Saints

(organizations we had identified as examples of best practices for

managing real property) to determine whether DOD could adopt some of

their practices. Although we have not evaluated the extent to which these

initiatives will be effective in redressing the problems that we identified,

we believe they demonstrate a positive commitment to change.

The military services are collectively responsible for maintaining more real

property than any other entity in the world—more than 320,000 buildings

(with about 2.1 billion square feet), tens of thousands of miles of roads,

and 1.1 million square yards of pavement (such as runways). The

replacement value of this property is more than $500 billion. The annual

maintenance and repair budget for these facilities has averaged about $5

billion for each of the past 4 years (fiscal years 1996-1999). Separate

accounts are used to fund maintenance and repair of family housing, many

industrial-related facilities, and many military medical facilities.

Background
Page 3 GAO/T-NSIAD-00-111

Congressional concerns about DOD’s and the services’ management of

real property maintenance are long-standing, going back to the 1950s. In

the past decade, these concerns have focused in part on the services’

reported repair backlog, which increased 64 percent from 1992 through

1998, despite the Congress’ net addition of more than $800 million to the

services’ maintenance accounts during this period to try to eliminate the

backlog. In addition, to address maintenance issues comprehensively, the

Congress provided DOD $50 million in 1992 to pilot test a common system

to assess the condition of facilities. The system was to use common

standards in order to provide DOD with a single set of measures to assess

and compare the maintenance needs of all service facilities and to make

resource allocations on the basis of those needs. However, the services

rejected the system, citing the estimated cost of implementing it.

Currently, each service independently assesses facility conditions annually

and estimates the costs of required maintenance repairs.

DOD does not have a comprehensive management strategy for maintaining

the services’ real property. Although DOD had funded development of a

strategic maintenance plan in its fiscal year 1999 budget, it shifted the

funding to other priorities in early 1999. Thus, the individual services

continue to set their own standards for maintaining property and to use

different methods to assess property conditions. Even within services, our

questionnaire results showed that application of assessment criteria may

differ among bases and commands. In addition, the services have different

goals for funding maintenance and repairs. Although these goals vary, all

of them are below the level required to prevent increases in the backlog of

repairs.

DOD does not have common criteria by which the services are to rate the

condition of their facilities with the purpose of prioritizing repair needs

and allocating resources. Instead, each service has its own criteria for

assessing the condition of its properties and the urgency of repairs. As a

result of the differences among the services’ systems, a facility rated as

“satisfactory” by one service could be rated as “unsatisfactory” by another,

an inconsistency which makes it difficult for DOD or the Congress to

prioritize requests for maintenance funding among the services. We also

found that bases within the same service sometimes apply their own rating

criteria inconsistently.

In addition, bases lack procedures to ensure that assessments of facility

conditions are valid and reliable; that is, that they actually reflect the

facilities’ physical conditions. Fifty-five percent of responding bases

DOD Lacks a

Comprehensive

Maintenance Strategy

and a Uniform System

for Determining the

Urgency of Repairs

Services Use Different

Rating Systems and Apply

Them Inconsistently
Page 4 GAO/T-NSIAD-00-111

indicated that they had no formal standardized procedures to determine

the reliability of inspectors’ ratings.

DOD’s 1999 planning guidance does not specify any funding level or goals

for the maintenance of property, other than stating that the services are to

fund maintenance at a level they consider adequate to execute missions.

DOD told us that the 1999 language retreats from guidance provided in

1996, which directed the services to provide sufficient funding to reverse

deterioration of facilities and to improve their effectiveness.

As of October 1999, the services were projecting increases in their repair

backlogs because they planned to fund maintenance and repair below

identified needs over the next several years. For example, the Air Force

has planned no money at all for repair projects until fiscal year 2003

(although it plans to spend some funds on emergency minor repairs and

other forms of what it terms preventive maintenance). The total reported

backlog of needed repairs increased from $8.9 to $14.6 billion (64 percent

in nominal terms) from 1992 through 1998.3

The services rate the urgency of their backlogs differently, and in the

absence of a single rating system, it is difficult to determine how urgent

these needs truly are.4

Therefore, simply providing additional funding will

not ensure that the most important deficiencies are funded first or that

buildings with repair needs exceeding a large percentage of their

replacement value are not demolished instead (saving money in the long

run). In the absence of a common rating system, neither DOD nor the

services can meaningfully rank the services’ maintenance and repair

funding requests. Nor can they be assured that if more funds were

provided that they would be targeted to those facilities that are both

needed to carry out critical missions and in greatest need of repair.

3A contributing cause of this increased backlog may be, as we reported in 1997, that total real

property maintenance spending decreased 38 percent during fiscal years 1987-96, while the services

reduced the square footage they maintained only about 10 percent during the same period.

4The Air Force reported a total of $7.4 billion in needed repairs for fiscal year 1998, of which $355

million was rated critical. The Navy reported a total of $6.1 billion in backlog, of which $2.87 billion

was rated critical.

Service Funding Plans May

Lead to Increase in

Backlogged Repairs
Page 5 GAO/T-NSIAD-00-111

In interviews with nonmilitary entities and maintenance experts, we were

told of a number of promising practices in the repair and maintenance

area, including

• using a single system for counting the number and type of facilities;

• having a single, engineering-based system for assessing facility conditions

by adequately trained personnel;

• prioritizing budget allocations based on physical condition, relevance of

facilities to the mission, and life-cycle costing and budgeting;5

• using a single property maintenance budget that is controlled by a central

office with the power to shift resources to facilities in the greatest need;

• creating incentives to demolish or vacate excess space;

• restricting the use of maintenance funds to maintenance purposes; and

• allowing maintenance management offices to charge tenant entities an

annual maintenance fee, based on square feet used, to ensure adequate

funding for facilities and to create an incentive for space conservation.

Two nonmilitary organizations—the Capital Needs Analysis Center of the

Church of Latter-day Saints at Brigham Young University (Provo, Utah)

and Lawrence Livermore National Laboratory (Livermore, California)—

have facility management systems that collectively use all of these

practices. Both report these practices enable them to maintain needed

facilities at agreed upon standard levels, stabilize repair backlogs (with

supplemental funding to fix existing backlogs), accurately predict future

maintenance needs, satisfy customers that maintenance funds are

allocated fairly and based on actual need, and prepare credible budget

requests. Similarly, a military organization—the U.S. Army Health Facility

Planning Agency—is implementing a life-cycle investment strategy that it

expects to reduce major repair costs by 50 percent and to cut

programming time from years to months.

5Life-cycle facility management is a methodology aimed at maximizing cost-effectiveness. As

described by the National Research Council, building “service life can be optimized through adequate

and timely maintenance and repairs.” National Research Council, Stewardship of Federal Facilities

(Washington, D.C.: National Academy Press, Oct. 1998), p. 12.

Promising Practices in

Facilities

Management by

Nonmilitary Entities
Page 6 GAO/T-NSIAD-00-111

Adoption of these promising practices by the services is hampered by

several barriers. First, DOD lacks basic data that would permit it to

compare how much the services spend per square foot on barracks or

other common buildings, such as administrative offices, classrooms, and

warehouses. While the Army annually collects per square foot spending

data for more than 100 types of structures, we did not find comparable

data collected by the other services.

Second, repair and maintenance funds are frequently used for other

purposes, such as unfunded emergency military overseas operations,

which reduces the amount of funding available for maintenance and

creates budgeting and contracting instability.

Third, multiple accounts are used to pay for maintenance and repair: The

Army pays for maintenance from 27 different accounts, and the Center for

Naval Analyses found that the Navy had 110 different accounts for

maintenance use in 1995. As a result, funding for real property

maintenance is fragmented, creating problems in determining how much is

actually being spent.

Fourth, the services have different coding schemes to record the number

and type of their facilities; as a result, this information cannot be

compared across the services. Without valid, reliable data, DOD and the

services cannot adequately evaluate the cost-effectiveness of real property

management or even know how much is being spent on maintenance and

repair.

Fifth, there are no DOD-wide space standards to determine whether a

service is using much more space per worker than other services for

similar functions. Common standards are useful in managing space

utilization and controlling costs, since less space use reduces maintenance

needs. For example, the Army allocates 162 square feet per administrative

worker but the Navy and the Marines allocate 110 to150 square feet,

depending on a worker’s grade level. The Army uses its standards to

determine whether more space than required per worker is being used at

bases, to help set maintenance budgets. Although some facilities will

always be service-unique (e.g., nuclear submarine repair facilities,

intercontinental ballistic missile silos), many (such as barracks, standard

classrooms, administrative space, and family housing) are common across

the services.

Obstacles to Effective

Implementation of

Promising Practices
Page 7 GAO/T-NSIAD-00-111

On the basis of our review, we recommended in our September 1999

report that the Secretary of Defense improve DOD’s management of repair

and maintenance activities. Specifically, we recommended that DOD fund

development of a DOD strategic maintenance plan, as had been originally

provided in 1999. We also recommended that DOD develop a cross-service

integrated strategy (in close coordination and consultation with the heads

of facilities of each service) to comprehensively address repair and

maintenance issues. The strategy should provide, at a minimum, for

• uniform standards that set the minimum condition in which military

facilities are to be maintained and standardized condition assessment

criteria;

• standard criteria by which the services are to allocate space for different

types of facilities (e.g., barracks, classrooms, administrative buildings) and

against which maintenance funding allocations will be measured;

• standard criteria for counting the number and type of facilities;

• computerized, on-line inventory and cost databases that permit meaningful

comparisons, across and within the services, of repair and maintenance

spending by type, size, and location of facility and repair and maintenance

activity, including direct data access by DOD headquarters;

• standard cost accounting methods by which the services will record and

track their maintenance expenditures so that they and DOD know how

much is being spent, where it is being spent, and on what type of facility or

repair activity it is being spent;

• the identification of priorities for the services to use to explicitly link

needs assessments with resource allocations and tracking systems that

show whether or not identified high priority needs are allocated the funds

intended for them by the Congress;

• mandated training standards (curriculum and hours) for all those involved

in condition assessment and ratings of repair urgency; and

• a comprehensive, valid, engineering-based assessment system that

incorporates life-cycle planning into facilities maintenance based on the

well-developed methods already used by nonmilitary entities.

DOD agreed with most of our recommendations. However, DOD disagreed

with the need to establish standard cost accounting methods because it

would impose too great a level of detail, and it disagreed with the need to

develop mandated training standards because DOD is not certain such

Recommendations

Made to Improve Real

Property Management
Page 8 GAO/T-NSIAD-00-111

training is needed. We continue to believe these measures are needed to

provide DOD with adequate oversight and consistency in prioritizing

needs.

As I stated earlier, DOD has begun a number of management initiatives to

better manage real property in response to our findings and

recommendations. The Deputy Under Secretary of Defense (Installations)

briefed us on these on February 7, 2000. Although we have not evaluated

the success of these efforts, which are just beginning, we believe they

demonstrate a commitment to positive change. The Deputy Under

Secretary stated that DOD has undertaken two broad initiatives to address

the lack of an overall management strategy. First, DOD has established an

Installations Policy Board to develop Department-wide guidance and

policy affecting installations as well as to advocate during the budget

process for properly resourcing installations and facilities. Second, DOD

also told us that it is taking steps to develop a Facilities Strategic Plan to

address the need for a comprehensive management strategy. In addition,

in response to our report findings, the Deputy Under Secretary’s staff

made field site visits in January 2000 to the Capital Needs Analysis Center

at Brigham Young University and to the Lawrence Livermore National

Laboratory, which we had cited as examples of best practices in property

management. The object was to learn more about how these entities

manage their property and to determine what could be adopted by the

services and DOD.

DOD also noted that prior to our report, the services and DOD had begun

efforts to develop metrics that tie facility condition and its effect on

mission accomplishment into an installation readiness reporting system.

DOD stated it is developing a facilities sustainment model to more

accurately estimate the effects of funding levels on property condition.

In sum, Mr. Chairman, DOD has undertaken a number of initiatives that

are in direct response to the findings and recommendations we made in

our report and previous testimony. Although we have not evaluated

whether these will be successful, we believe that they show a management

commitment to addressing long-standing problems.

Mr. Chairman, this concludes my statement. I will be happy to answer any

questions you may have.

DOD’s Initiatives in

Response to GAO
Page 9 GAO/T-NSIAD-00-111

For future contacts regarding this testimony, please contact Kwai-Cheung

Chan at (202) 512-3092. Individuals making key contributions to this

testimony included Dr. Jonathan R. Tumin and Dr. Sushil K. Sharma.

(713062)

Contacts and

Acknowledgments
Page 10 GAO/T-NSIAD-00-111

Orders by Internet

For information on how to access GAO reports on the Internet, send an email message with “info” in the body to:

Info@www.gao.gov

or visit GAO’s World Wide Web home page at:

http://www.gao.gov

Contact one:

Web site: http://www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

1-800-424-5454 (automated answering system)

Ordering Information

To Report Fraud,

Waste, and Abuse in

Federal Programs