" ! SENATE 113TH CONGRESS

1st Session 

REPORT

113–12 

INQUIRY INTO U.S. COSTS AND ALLIED 

CONTRIBUTIONS TO SUPPORT THE 

U.S. MILITARY PRESENCE OVERSEAS 

R E P O R T 

OF THE 

COMMITTEE ON ARMED SERVICES 

UNITED STATES SENATE 

APRIL 15, 2013.—Ordered to be printed 


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1 

80–395 

" ! SENATE 113TH CONGRESS

1st Session 

REPORT

2013

113–12 

INQUIRY INTO U.S. COSTS AND ALLIED 

CONTRIBUTIONS TO SUPPORT THE 

U.S. MILITARY PRESENCE OVERSEAS 

R E P O R T 

OF THE 

COMMITTEE ON ARMED SERVICES 

UNITED STATES SENATE 

APRIL 15, 2013.—Ordered to be printed 


congress.#13
COMMITTEE ON ARMED SERVICES 

CARL LEVIN, Michigan, Chairman 

JACK REED, Rhode Island 

BILL NELSON, Florida 

CLAIRE MCCASKILL, Missouri 

MARK UDALL, Colorado 

KAY R. HAGAN, North Carolina 

JOE MANCHIN III, West Virginia 

JEANNE SHAHEEN, New Hampshire 

KIRSTEN E. GILLIBRAND, New York 

RICHARD BLUMENTHAL, Connecticut 

JOE DONNELLY, Indiana 

MAZIE K. HIRONO, Hawaii 

TIM KAINE, Virginia 

ANGUS S. KING, JR., Maine 

JAMES M. INHOFE, OKLAHOMA

JOHN McCAIN, Arizona 

JEFF SESSIONS, Alabama 

SAXBY CHAMBLISS, Georgia 

ROGER F. WICKER, Mississippi 

KELLY AYOTTE, New Hampshire 

DEB FISCHER, Nebraska 

LINDSEY GRAHAM, South Carolina 

DAVID VITTER, Louisiana 

ROY BLUNT, Missouri 

MIKE LEE, Utah 

TED CRUZ, Texas 

PETER K. LEVINE, Staff Director 

JOHN A. BONSELL, Minority Staff Director 

INVESTIGATION TEAM

JOSEPH M. BRYAN, Professional Staff Member 

OZGE GUZELSU, Majority Counsel 

LUCIAN L. NIEMEYER, Professional Staff Member 

BRYAN D. PARKER, Minority Investigative Counsel 

BRADLEY S. WATSON, Staff Assistant 

TABLE OF CONTENTS 

EXECUTIVE SUMMARY ............................................................................................................. i

CONCLUSIONS OF THE SENATE ARMED SERVICES COMMITTEE .............................. viii

INTRODUCTION .......................................................................................................................... 1

I. RESIDUAL VALUE COMPENSATION IN GERMANY ............................................................................................. 3

A. Military Services Fail to Pursue Cash Settlements ..................................................................................... 5

B. Congress Not Notified of Intent to Negotiate for Payment-In-Kind ........................................................... 5

C. Payment-in-Kind Not Used for Priority Projects ........................................................................................ 6

D. Presumption for Military Construction ....................................................................................................... 8

E. IMCOM-E Seeks to Use Payment-in-Kind for Project Rejected by Congress ........................................... 9

F. Army Negotiates “Advance” Payment in-Kind ........................................................................................ 10

1. IMCOM-E Cites “Acute” Need for Construction Funds ...................................................................................... 10

2. No Legal Review or Congressional Notification of Advance ............................................................................... 11

3. Advance Used for Questionable Projects ............................................................................................................. 12

a. Furniture Storage Warehouse in Grafenwoehr ................................................................................................ 13

b. Sunroom Additions to Senior Officer Housing in Stuttgart ............................................................................. 15

II. COSTS ASSOCIATED WITH THE U.S. MILITARY PRESENCE IN THE REPUBLIC OF SOUTH KOREA .................... 18

A. South Korean Contributions to U.S. Costs ............................................................................................... 19

B. Special Measures Agreement (SMA) Programs ....................................................................................... 21

C. Questionable Use of South Korean Contributions .................................................................................... 22

1. ROKFC Funds for LPP Projects at Camp Humphreys ......................................................................................... 23

2. USFK’s Use of South Korean Labor Cost Sharing Contributions at Yongsan ..................................................... 24

D. Shift in DOD Policy Increases U.S. Costs in South Korea ....................................................................... 25

1. USFK Proposes Full Tour Normalization............................................................................................................. 25

2. Phase I of Tour Normalization Challenges USFK Infrastructure ......................................................................... 27

3. Family Housing Demand at Camp Humphreys .................................................................................................... 29

a. Humphreys Housing Opportunity Plan ........................................................................................................... 30

i. DOD Announces Public-Private Venture................................................................................................... 30

ii. Housing Agreement Depends on Massive Rental Rate Increase ................................................................ 30

iii. Long Term HHOP Costs ............................................................................................................................ 32

iv. Legal Concerns with HHOP ...................................................................................................................... 33

E. Oversight of Republic of South Korea SMA Contributions ..................................................................... 35

1. Congressional Oversight of South Korean Construction-Related Contributions ................................................. 35

2. OSD, PACOM & Military Service Oversight of South Korean Contributions ..................................................... 36

3. USFK Accounting for Special Measure Agreement ROKFC In-Kind Contributions .......................................... 38

III. COSTS ASSOCIATED WITH THE U.S. MILITARY PRESENCE IN JAPAN .............................................................. 39

A. Japan’s Host Nation Support: Special Measures Agreement and the Facility Improvement Program .... 41

1. 2011-2015 Special Measures Agreement ............................................................................................................. 42

a. Japan’s Support for U.S. Labor Costs ............................................................................................................. 42

b. Japan’s Support for U.S. Utility Costs ............................................................................................................ 43

2. Facility Improvement Program (FIP) ................................................................................................................... 44

a. Twenty Percent of FIP is Reserved for GOJ-Initiated Projects ....................................................................... 46

b. Top U.S. Priorities are Often Not Funded ....................................................................................................... 46

c. FIP Lacks Transparency .................................................................................................................................. 47

B. Planned Posture Changes .......................................................................................................................... 48

1. U.S. Realignment Plans ........................................................................................................................................ 48

a. U.S. and Japan Roadmap for Realignment ...................................................................................................... 48

a. Senate Armed Services Committee and Government Accountability Office Express Concerns About 

Laydown Costs ................................................................................................................................................ 49

b. New Force Laydown Proposed ....................................................................................................................... 50

c. Congress Freezes Funding .............................................................................................................................. 50

2. Japan’s Contribution to Realignment ................................................................................................................... 51

a. Roadmap Agreement Includes $6.09 Billion Japanese Contribution .............................................................. 51

b. SPEs Off the Table – U.S. to Incur Additional $1 Billion in Costs ................................................................. 53

3. MCAS Futenma and the Futenma Replacement Facility (FRF) ........................................................................... 53

a. No Timeline for FRF Completion ................................................................................................................... 53
b. Critical Repairs Needed at MCAS Futenma .................................................................................................... 55

4. New Asia-Pacific Force Laydown - Unknown Cost and Uncertain Timing ......................................................... 57

 
i 

Executive Summary

"We must make every dollar count." 

Leon Panetta 

Secretary of Defense 

December 18, 2012 

The United States spends more than $10 billion a year to support our permanent military 

presence overseas. And that does not include military personnel costs or spending to support the 

war in Afghanistan. 

Nearly 70 percent of that $10 billion is spent in Germany, the Republic of Korea, and 

Japan. The fact that such a high percentage of our overseas spending involves those three 

countries is not surprising. Germany is among our most important partners in the North Atlantic 

Treaty Organization (NATO), an alliance President Obama has rightly called “indispensable to 

global security and prosperity.” The U.S. – Japan alliance is, and will continue to be, a 

cornerstone of our engagement in the Asia Pacific region. And our alliance with the Republic of 

Korea is central to both our strategic interests in the Asia Pacific and our ability to deal with the 

unpredictable and frequently aggressive behavior of the North Korean regime. 

Major U.S. force posture initiatives are either underway or under consideration that will 

define our relationship with NATO and our allies and partners in the Asia Pacific for decades to 

come. As we renew our commitments to these critical relationships, we must also look for ways 

to support our strategic goals while avoiding excessive and unsustainable costs. With that in 

mind, the Senate Armed Services Committee conducted a review of certain costs associated with 

U.S. military presence in Germany and the Asia Pacific, including how the burden of costs is 

shared between the U.S. and our allies, the impact of planned posture changes on those costs, and 

the spending and oversight of foreign government payments – particularly in-kind payments used 

for military construction projects. (U.S. burden-sharing agreements with Korea and Japan both 

include in-kind payments. In addition payments from the German government to compensate the 

United States for improvements made to facilities on U.S. bases in Germany are almost 

exclusively in-kind.) The Committee’s review identified a number of concerns which are 

summarized below. 

Residual Value Compensation in Germany 

 

In Germany, force reductions will result in the return of a large number of U.S. facilities 

to the German government. These returns will likely generate significant payments from 

Germany for the “residual value” of U.S. investments in those facilities. The Committee’s 

review of how the Department of Defense (DOD) has spent residual value payments from 

previous facility returns raises concerns about the use and oversight of such payments going 

forward. Those concerns are particularly strong with respect to in-kind payments. In-kind refers 
ii 

to non-cash payments, such as the provision of services or facilities that have cash value. 

Notwithstanding the Committee’s concerns, the Department has said that it believes its practices 

are consistent with statutory requirements relating to residual value. 

 Payments-in-kind have replaced cash in residual value settlements – While the law 

permits DOD to negotiate for residual value payments in-kind rather than in cash, in-kind 

settlements are supposed to be a last resort when cash negotiations have been 

unsuccessful. Despite that, according to the DOD Inspector General (IG), “all residual 

value settlement agreements completed after 1997 with either Germany or the U.K. were 

settled for [payment-in-kind].” In fact, the expectation that negotiations will conclude 

with an in-kind settlement has so permeated the process that neither the Installation 

Management Command - Europe (IMCOM-E), which conducts residual value 

negotiations on behalf of the Army, nor U.S. Air Force - Europe (USAFE), even 

discusses the potential for cash settlements in their negotiations with Germany. 

 Required Congressional notifications nonexistent or inaccurate – The law requires 

DOD to notify Congress before beginning residual value negotiations for payment-inkind. The Committee’s review revealed that the Department does not comply with that 

requirement. The law also requires the Secretary of Defense to certify that, if projects 

were not funded with payment-in-kind, “it would be necessary to provide for the project 

in the next [Future Years Defense Program].” (The FYDP is a planning document that 

includes priority military construction projects for which the Department intends to seek 

appropriations.) While those certifications are provided to the Congress, the 

Committee’s review of twelve military construction projects for which the use of 

payments-in-kind was approved revealed that none was ever submitted for FYDP 

consideration. In fact, IMCOM-E allocates residual value payments to projects unlikely 

to be included in the FYDP. 

 U.S. Army accepts $60 million in-kind advance from German government – In 2008,

citing an “acute” need for construction funds, IMCOM-E solicited and accepted an 

approximately $60 million advance payment-in-kind from the German government to be 

repaid with future U.S. facility returns to the German government. Congress was not 

informed of the advance when it was accepted, despite the statutory requirement that 

DOD notify Congress before even entering into negotiations for residual value paymentin-kind. There are serious questions as to whether the solicitation and expenditure of an 

advance is consistent with fiscal law. As of August 2012, IMCOM-E had programmed 

more than $43.5 million of the advance for military construction projects and had spent 

more than $9 million. No facility returns have yet been applied against that debt. 

 Residual value payments directed to questionable projects – Unlike cash payments, 

which are placed in a special account and may only be used for maintenance, repair and 

environmental restoration, payments-in-kind may be used for military construction 

projects. The Committee’s review of projects to which residual value payments-in-kind 

have been directed raises concerns. For example: 
iii 

 IMCOM-E programmed more than $6 million for a furniture storage warehouse in 

Grafenwoehr, Germany. Documents state that a new warehouse was “the most cost 

effective method to satisfy the requirement.” However, the Committee’s review of 

the Army’s flawed Economic Analysis revealed the furniture warehouse was actually 

the most, rather than least expensive of the alternatives considered. The Committee 

asked the Department to reconsider the decision to build the warehouse and the 

Department has since asked the Army to put the project on hold. 

 IMCOM-E has directed about $200,000 in residual value in-kind payments to 

sunroom additions for senior officer homes in Stuttgart, Germany. The decision to 

build the sunrooms resulted from complaints by the then Chief of Staff of U.S. Africa 

Command that the homes were too small. Before the 200 square foot additions, the 

homes were each 2,490 square feet, well above DOD’s minimum size standard. 

Costs Associated with the U.S. Military Presence in the Republic of South Korea 

U.S. Forces Korea (USFK) is repositioning and consolidating forces in South Korea 

pursuant to two agreements. One of those, the Yongsan Relocation Plan (YRP), was initiated by 

South Korea and will result in the move of U.S. forces from Yongsan to Camp Humphreys, 

about 40 miles south of Seoul. The second, called the Land Partnership Plan (LPP), involves a 

repositioning and consolidation of forces mostly from areas north of Seoul to Camp Humphreys 

and Daegu, also south of Seoul. The Committee reviewed U.S. costs associated with 

implementing those plans, South Korean contributions to U.S. costs made under bilateral 

“Special Measures Agreements” (SMA), and USFK spending and oversight of SMA payments. 

 U.S. costs to support force posture changes are significant – U.S. costs associated 

with implementing the force posture changes in South Korea will be significant. For 

example, U.S. costs associated with implementing the LPP are estimated at $3.2 billion, 

and that does not include an estimated $100-$200 million in transition costs for 

sustaining facilities until the move is completed. Once the moves are complete, the U.S. 

will be responsible for costs associated with operating and maintaining facilities. While 

DOD has said that the force posture changes will “reduce[] the overall cost to maintain 

redundant U.S. facilities,” such a reduction – if it is achieved – will not likely be realized 

for several years. 

 South Korean Special Measures Agreement contributions have not kept up with 

U.S. costs – Beginning in the 1990s, the United States and South Korea signed a series of 

“Special Measures Agreements” (SMA) under which South Korea began contributing 

toward U.S. costs associated with maintaining forces in the country. The Committee’s 

review found that South Korean SMA contributions are not keeping pace with the growth 

in U.S. costs. For example, while South Korea’s estimated SMA contributions grew by 

about $42 million between 2008 and 2012 (from approximately $723 million to $765 

million), U.S. non-personnel costs increased by more than $500 million during the same 

period ($592 million to nearly $1.1 billion).1

 

 

1

 South Korean funding for the Yongsan Relocation Program and for South Korean obligations under the Land 

Partnership Plan are not part of the SMA. 
iv 

 Oversight weaknesses in USFK spending of South Korean contributions – 

Aggressive oversight of USFK’s use of South Korean contributions is important to 

ensuring that the benefit of these contributions to U.S. taxpayers is maximized. USFK 

construction projects built with South Korean in-kind contributions are not reviewed by 

the Department of the Army, undergo limited review at U.S. Pacific Command and the 

Office of the Under Secretary of Defense for Acquisition, Technology and Logistics, and 

are not authorized by or even notified to Congress. 

 SMA contributions directed to projects of questionable value – Every dollar in costs 

that can be met with a South Korean contribution is a dollar less in U.S. taxpayer funds 

that must be spent. It is therefore critical that USFK direct South Korean contributions to 

mission-critical requirements. Diverting funds to nonessential or economically unsound 

projects can leave U.S. taxpayers on the hook for unmet requirements and create future 

sustainment obligations. The Committee review found that USFK has used or is 

considering the use of South Korean contributions on projects of questionable value or 

that do not make economic sense. For example: 

 USFK’s plans for Camp Humphreys include a $10.4 million museum for the Army’s 

2nd Infantry Division. USFK has said the museum was a “command requirement” 

and is “required to provide adequate services to the increased population associated 

with restationing U.S. Forces as part of the Land Partnership Program.” 

 U.S. Army Garrison at Yongsan invested $1.4 million to consolidate two dining 

facilities. Analysis supporting that decision purported to show that the $1.4 million 

investment would reduce annual operating costs by $295,000 per year. The “savings” 

identified, however, resulted from the garrison excluding from the cost-benefit 

analysis labor costs paid with South Korean SMA funds– in effect, treating the SMA 

contribution as “free” money. 

 Proposed family housing plan portends dramatic increase in long-term U.S. costs – 

Recent changes in policy have led to a more than doubling in the number of Command 

Sponsored Families in South Korea. The Army has proposed a public-private partnership 

– called the Humphreys Housing Opportunity Program (HHOP) – in part to build family 

housing to accommodate that increase. The Committee’s analysis suggests that the rent 

the U.S. would pay to the private developer for the 850 HHOP units would cost U.S. 

taxpayers $630 million more than the standard overseas housing allowance provided to 

military families over 20 years. That $630 million figure does not include an additional 

$125 million that the Army has agreed to direct to HHOP as an equity contribution. In 

addition to its cost, the Committee also has questions about the legality of the plan. 

Costs Associated with the U.S. Military Presence in Japan 

The Government of Japan (GOJ) provides funding to support the U.S. military presence 

through two streams, the Facility Improvement Program (FIP), a voluntary program under which 

Japan provides funding for U.S. infrastructure and facilities, and a “Special Measures 
v 

Agreement” (SMA), which sets Japan’s contributions to U.S. labor, utilities, and training 

relocation costs. In 2012, Japan contributed approximately $2 billion through the SMA and FIP 

to support the U.S. military presence.2

 

 Japan’s burden-sharing contributions have not kept pace with U.S. costs – For 

example, Japan’s contributions to FIP have declined significantly in the last twenty years. 

At its peak in 1992, Japan’s contribution to FIP amounted to more than $1 billion. That 

figure has fallen 80 percent to approximately $200 million for 2012. In addition, while 

Japan’s contribution (in yen terms) to U.S. utility costs has not changed since 2009, U.S. 

costs are growing considerably. For instance, the U.S paid approximately $71 million for 

utilities in 2009 and projections are that the U.S. will pay nearly $217 million in 2015. 

 Potential problems in shift in Japanese contributions from SMA to FIP – While there 

may be reductions in Japanese contributions under labor and utility formulas contained in 

the most recent SMA, the U.S. and Japan have agreed that any such reductions would be 

applied to FIP to ensure Japan meets its commitment to maintain burden-sharing 

contributions at 2010 levels through 2015. The Committee’s review suggests, however, 

that shifting funding from SMA to FIP carries risk. Each dollar that Japan contributes 

under the SMA directly offsets a dollar in U.S. taxpayer funds. The same cannot be said 

for the FIP program, as about 20 percent of Japan’s FIP contributions are reserved for 

Japan-initiated projects. Moreover, Japan ultimately chooses which U.S. -proposed 

projects receive the remaining 80 percent of FIP funds. 

 U.S. FIP priorities often go unfunded – While the list of projects that will secure 

funding is negotiated between the U.S. and Japan, GOJ ultimately decides whether or not 

a U.S. priority will be funded. The Committee’s review found that U.S. Forces Japan’s 

top FIP priorities are often not funded and sometimes remain on the list for years. Of 

USFJ’s top 50 priorities on the 2011 Integrated Priority List, 22 projects were not funded. 

Of the top 100 USFJ priorities, 53 projects were not funded. For example, among those 

unfunded U.S. priorities was a fire station at Camp Hansen on Okinawa, which was 

priority number eight on the U.S. list. Two years later, the fire station is still on the FIP 

list as a “new projects to be negotiated of future years funding when available.” 

Costs of Force Posture Changes in the Asia Pacific 

U.S. Forces Japan (USFJ) and U.S. Pacific Command (PACOM) have proposed a 

number of posture changes in the Pacific, including reducing the U.S. military presence on 

Okinawa. The Marine Corps’ preliminary cost estimate to implement the proposed changes is 

$13.7 billion. However, Congress has declined to fund many of these initiatives pending the 

completion of various requirements, including the development of detailed cost estimates. 

Uncertainty about those costs and Japan’s contributions cautions against lifting the 

Congressional restriction until such information is made available. 

 

2

 Outside the SMA and FIP, Japan also pays rent to private landowners on whose land U.S. military 

facilities are located. 
vi 

 Reduction in Japanese contributions to support Marines move increases U.S. costs – 

In April 2012, the U.S. and Japan issued a statement indicating that Japan would no 

longer provide $3.29 billion in support it had previously committed to the cost of moving 

U.S. Marines from Okinawa to Guam. That contribution, which Japan had proposed 

making though “Special Purpose Entities” (SPEs), was intended to pay for the 

construction of housing and utility infrastructure on Guam, with the possibility of Japan 

recouping some of that investment over time through rental and utility payments. The 

loss of the SPEs leaves the U.S. responsible for substantial military construction costs 

that would previously have been funded by Japan. In fact, current estimates include $400 

million to construct housing and $600 million to fund utility upgrades on Guam that 

would previously have been funded by the SPEs. 

 Potentially large U.S. costs not yet quantified – Planned force posture changes involve 

moving thousands of Marines to Australia, Guam, and Hawaii over a period of decades. 

Before a majority of the construction required to support these moves can begin, 

environmental studies on Guam and Hawaii must be completed. Detailed master 

planning cannot occur until these studies are complete. As a result, the Marine Corps 

$13.7 billion preliminary cost estimates may not be accurate. Indeed, the current 

estimates do not account for some potentially large costs. For example: 

 The estimate does not include the cost of additional lift and other resources that might 

be required to support geographically dispersed Marines. 

 The Marines estimate of $2.5 billion to move forces to Hawaii is highly speculative 

as a study of possible locations is yet to be completed. 

 The Marines preliminary estimate for the Australia portion of the plan is $1.6 billion. 

However, an assessment of what facilities might be needed in Australia has not yet 

been completed and formal negotiations with Australia have yet to begin. 

 Completion of a Futenma Replacement Facility at Camp Schwab remains unlikely – 

A 2006 agreement between the U.S. and Japan provided that approximately 8,000 U.S. 

Marines and their dependents would move from Okinawa when Japan made “tangible 

progress” toward completing a facility to replace Marine Corps Air Station (MCAS) 

Futenma. The agreement set the timeline for completing the Marine move at 2014. In 

2012, however, the move of Marines was “de-linked” from the requirement for tangible 

progress on the Futenma Replacement Facility (FRF) and the 2014 date was abandoned. 

The government of Japan has said that it still intends to build the FRF at Camp Schwab, a 

plan that depends on a massive landfill of the sea surrounding Camp Schwab. The 

Committee’s observations support our previous assessment that the landfill will cost 

more and take longer than even the most conservative estimates have projected to date. 

 Futenma disrepair requires action - Japan’s contribution in question – Given that the 

completion of the FRF is, at best, far in the future, MCAS Futenma will continue to be a 

critical military asset. However, expectations that MCAS Futenma would be closed have 

led to a significant maintenance and repair backlog at the base. As of 2012, the Marines 
vii 

had identified approximately $180 million in necessary construction and renovation 

projects, including the construction of a runway overrun to accommodate the new V-22 

Ospreys and minimize the risk of serious damage to aircraft. While GOJ has agreed to 

“mutually” contribute to Futenma’s sustainment until the FRF is constructed, the U.S. 

faces the real prospect of bearing the brunt of these renovation and construction costs. 

Indications are that any GOJ contributions to Futenma sustainment would likely come 

from FIP – at the expense of other U.S. priorities in Japan. 

 
viii 

Conclusions of the Senate Armed Services Committee

Conclusions Relating to Residual Value Compensation in Germany 

Conclusion 1: The Department of Defense (DOD) has failed to pursue cash settlements for 

facilities returned to the German government and has not complied with the requirement 

that Congress be notified about in-kind residual value negotiations. In-kind residual value 

settlements are supposed to be a last resort when cash negotiations have been unsuccessful. 

According to the DOD Inspector General, however, all residual value settlement agreements 

completed after 1997 with Germany have been settled for payment-in-kind. Neither Installation 

Management Command - Europe (IMCOM-E), which conducts residual value negotiations on 

behalf of the Army, nor U.S. Air Force - Europe (USAFE), even discusses the potential for cash 

settlements in their negotiations with Germany. In addition, while the law requires DOD to 

notify Congress before beginning residual value negotiations for payment-in-kind, the 

Department has not complied with that requirement. 

Conclusion 2: The use of in-kind residual value payments to fund non-priority military 

construction projects is inconsistent with Congressional intent. The law requires the 

Department of Defense to certify that, if proposed projects were not funded with residual value 

payments-in-kind, “appropriations would be necessary and it would be necessary to provide for 

the project in the next [Future Years Defense Program]” (FYDP). Projects funded with German 

payments-in-kind include plans for a $6 million furniture storage warehouse in Grafenwoehr, 

Germany and $200,000 for sunroom additions for senior officer homes in Stuttgart, Germany. 

Neither project, however, was submitted for FYDP consideration. In fact, the Committee’s 

review of twelve military construction projects for which the use of payments-in-kind was 

approved revealed that none was ever submitted for FYDP consideration. 

Conclusion 3: IMCOM-E’s solicitation, acceptance, and expenditure of an “advance” 

residual value payment from the German government in exchange for future U.S. facility 

returns raises serious legal questions. In 2008, IMCOM-E solicited and accepted 

approximately $60 million in advance residual value payment-in-kind from the German 

government. Congress was not informed of the advance when it was accepted, despite the 

statutory requirement that DOD notify Congress before even entering into negotiations for 

residual value payment-in-kind. The furniture warehouse and the sunroom additions mentioned 

above were among the projects for which advance funds have been expended. There are 

questions as to whether the solicitation and expenditure of an advance is consistent with the law. 

Conclusions Relating to U.S. Costs and South Korean Burden-Sharing Contributions 

Conclusion 4: Burden-sharing contributions from the South Korean government made 

pursuant to Special Measures Agreements have not kept pace with U.S. costs. Beginning in 

the 1990s, the United States and South Korea signed a series of “Special Measures Agreements” 

(SMA) under which South Korea began contributing toward U.S. costs of maintaining a military 

presence in the country. South Korean SMA contributions, however, have not kept pace with the 

growth in U.S. costs. For example, while South Korea’s estimated SMA contributions grew 

from approximately $723 million in 2008 to $765 million in 2012, U.S. non-personnel costs 
ix 

increased by more than $500 million during the same period, from $592 million to nearly $1.1 

billion. 

Conclusion 5: There are significant weaknesses in the oversight of South Korean in-kind 

contributions used for military construction projects. Under the 2009 SMA, South Korea’s 

contributions to the Republic of Korea Funded Construction (ROKFC) program transitioned 

from cash to in-kind payments. South Korean in-kind contributions to the ROKFC program 

were about $339 million in 2012. Aggressive oversight of USFK’s use of those in-kind 

contributions is critical to ensuring that the benefit to U.S. taxpayers is maximized. However, 

USFK construction projects built with South Korean in-kind contributions are not reviewed by 

the Department of the Army, undergo limited review at U.S. Pacific Command and DOD, and 

are not authorized by, or even notified to, Congress. In-kind payments are not included in 

DOD’s annual burden-sharing reports to Congress, nor are they tracked by the DOD 

Comptroller. 

Conclusion 6: The use of South Korean Special Measures Agreement contributions for 

projects that do not make economic sense or are not mission-critical can leave taxpayers on 

the hook for the cost of such projects. Every dollar in costs that can be met with a South 

Korean contribution is a dollar less in U.S. taxpayer funds that must be spent. Diverting funds to 

nonessential or economically unsound projects can leave U.S. taxpayers on the hook for unmet 

requirements and create future sustainment obligations. The Committee review found that 

USFK has used or is considering the use of South Korean contributions on questionable projects. 

In addition, U.S. Army Garrison Yongsan justified a $1.4 million investment by excluding from 

the cost-benefit analysis all labor costs paid with South Korean SMA funds – in effect, treating 

the Korean contribution as “free” money. 

Conclusion 7: DOD approval of the U.S. Army’s plan for a public-private partnership to 

build family housing at Camp Humphreys would substantially increase long-term costs for 

U.S. taxpayers and set a troubling precedent for future military housing plans. The Army 

has proposed a public-private partnership – called the Humphreys Housing Opportunity Program 

(HHOP) to construct housing at Camp Humphreys. The Army has requested that DOD approve 

a massive increase in the Overseas Housing Allowance (OHA) – from about $1,600 to $3,900 

per unit per month – specifically for Camp Humphreys to support HHOP. The Committee’s 

analysis suggests that DOD approval of such an increase would cost U.S. taxpayers $630 million 

more than the standard overseas housing allowance provided to military families over 20 years. 

That $630 million figure does not include an additional $125 million that the Army has, in effect, 

agreed to contribute to the cost of constructing HHOP units. 

Conclusions Relating to U.S. Costs and Japanese Burden-Sharing Contributions 

Conclusion 8: Japan Special Measures Agreement (SMA) and Facilities Improvement 

Program (FIP) burden-sharing contributions have not kept pace with U.S. costs. For 

example, at its peak in 1992, Japan’s contribution to FIP amounted to more than $1 billion. That 

figure has fallen 80 percent to approximately $200 million for 2012. In addition, while Japan’s 

contribution to U.S. utility costs has not changed since 2009, U.S. costs are growing 
x 

considerably. While the U.S paid approximately $71 million for utilities in 2009, projections are 

that the U.S. will pay nearly $217 million in 2015. 

Conclusion 9: Shifts in funding from the Special Measures Agreement (SMA) to the 

Facility Improvement Program (FIP) carry unacceptable risk for the United States. In 

2011, the U.S. and Japan agreed in that Japan would maintain its burden-sharing contributions at 

2010 levels through the year 2015 and that any reductions that result from changes in the SMA 

formula for utility and labor contributions would be applied to FIP, which is not part of the 

SMA. Shifting funding from SMA to FIP, however, carries risk for U.S. taxpayers. Each dollar 

in Japanese contributions to the SMA directly offsets a dollar in U.S. taxpayer funds that would 

be spent on utility or labor costs. The same cannot be said for the FIP program. About 20 

percent of Japan’s FIP contributions are reserved for Japan-initiated projects. Moreover, Japan 

ultimately chooses which U.S. - proposed projects receive the remaining 80 percent of FIP funds. 

U.S. Forces Japan’s top FIP priorities are often not funded and sometimes remain unfunded for 

years. 

Conclusions Relating to Costs of U.S. Posture Changes in the Asia Pacific Region 

Conclusion 10: Loss of over $3 billion of Japanese contributions to defray the cost of 

moving U.S. Marines off Okinawa will lead to increased costs for the United States. In 

April 2012, the U.S. and Japan issued a statement indicating that Japan would no longer provide 

$3.29 billion in support it had previously committed to the cost of moving U.S. Marines from 

Okinawa to Guam. That contribution, which Japan had proposed making though “Special 

Purpose Entities” (SPEs), was intended to pay for the construction of housing and utility 

infrastructure on Guam, with the possibility of Japan recouping some of that investment over 

time through rental and utility payments. While the new proposed force laydown will likely 

reduce infrastructure requirements on Guam as fewer Marines will be moving to the island, 

current estimates indicate that the loss of the SPEs will still leave the U.S. on the hook for $400 

million to construct housing and $600 million to fund utility upgrades on Guam that would 

previously have been funded by the SPEs. 

Conclusion 11: Unknown costs and uncertain timeframes for implementing the planned 

U.S. Marine Corps force posture changes in the Asia Pacific argue for maintaining 

Congressional funding restrictions. The Marine Corps $13.7 billion preliminary estimate for 

planned posture changes in the Asia Pacific is a rough estimate that does not account for all 

future costs associated with the plan. For example, the estimate does not include the cost of 

additional lift that might be required. In addition, the estimate of the cost of moving forces to 

Hawaii is highly speculative, as is the estimate for the Australia portion of the plan. Congress 

has declined to fund investments necessary to implement many of the planned posture changes 

pending the completion of various requirements by DOD, including providing detailed cost 

estimates. Uncertainty about those costs and other details argues for maintaining those 

restrictions. 

Conclusion 12: Japan’s construction of a facility at Camp Schwab to replace Marine 

Corps Air Station (MCAS) Futenma is unlikely. Meanwhile, MCAS Futenma faces 

substantial renovation and military construction costs. While Japan and the U.S. have 
xi 

agreed to “mutually contribute” to the maintenance of Futenma, the brunt of those costs 

will likely fall on U.S. taxpayers or come at the expense of other U.S. priorities. Japan has 

stated that it intends to build a replacement for MCAS Futenma at Camp Schwab. That plan 

depends, however, on the construction of a massive landfill that will likely cost more and take 

longer than the most conservative estimates have projected. Given that, MCAS Futenma will 

continue to be a critical military asset. However, expectations that MCAS Futenma would be 

closed have led to a significant maintenance and repair backlog. The Marines have identified 

approximately $180 million in necessary construction and renovation projects at Futenma. 

While Japan has agreed to “mutually” contribute to Futenma’s sustainment until the replacement 

facility is constructed, the U.S. faces the prospect of bearing the brunt of those costs. Further, 

any Japanese contributions to Futenma sustainment will likely come from the Facilities 

Improvement Program – at the expense of other U.S. priorities. 

 
1 

Introduction

The United States spends more than $10 billion a year to support our permanent military 

presence overseas. That does not include military personnel costs or spending to support the war 

in Afghanistan. The cost of maintaining that presence in Germany, South Korea, and Japan – 

three critical allies – makes up about 70% of that total, costing American taxpayers nearly $7 

billion a year. The United States is engaged in several force posture changes in Europe and the 

Asia Pacific that will affect our presence in those three countries and have long-term strategic 

and fiscal impacts. In March 2012, the Senate Armed Services Committee initiated a review of 

U.S. costs in Germany, South Korea, and Japan, including how the burden of costs is shared 

between the U.S. and our allies, the impact of planned posture changes on those costs, and the 

spending and oversight of foreign government payments – particularly in-kind payments used for 

military construction projects. 

Over the course of the review, Committee staff reviewed thousands of pages of 

documents, the majority of which were provided by the Department of Defense (DOD). Staff 

also traveled to Germany, South Korea, and Japan where they visited military installations and 

met with members of U.S. European Command (EUCOM), U.S. Forces Korea, U.S. Forces 

Japan, and the Army’s Installation Management Command (IMCOM). In Japan, staff also met 

with representatives of the U.S. Department of State and the Government of Japan. In addition, 

staff conducted meetings and interviews in the United States with officials from the Department 

of Defense and the Military Services. This report, which is a product of the Committee’s review, 

consists of three sections, each examining specific issues in Germany, South Korea, and Japan 

respectively. 

Section I of the report discusses so-called residual value payments in Germany. Residual 

value payments result from negotiations between the U.S. and certain host countries to determine 

compensation to be paid for the return of U.S. facilities to the host country. Force reductions in 

Germany have resulted in the return of a large number of U.S. facilities to the German 

government, and will continue to do so in the future. These returns will likely generate 

significant residual value payments from Germany. Section I describes the use and oversight of 

residual value payments from previous facility returns and discusses whether DOD practices are 

in accordance with law and regulations. 

 

Section II examines U.S. costs associated with our military presence in South Korea and 

South Korean burden-sharing contributions made pursuant to the bilateral Special Measures 

Agreement (SMA). The section focuses on U.S. costs associated with planned posture changes 

in South Korea, assesses whether South Korea’s SMA contributions are keeping pace with the 

growth in U.S. costs, and reviews the use and oversight of Korean SMA contributions. The 

section also discusses potential long-term costs associated with the U.S. Army’s proposal to 

construct military family housing at Camp Humphreys. 

Section III assesses Japan’s burden-sharing contributions to the U.S. under the bilateral 

Special Measures Agreement (SMA) and the Japanese Facilities Improvement Program (FIP). It 
2 

describes the challenges of securing FIP funding for U.S. priorities and the risks associated with 

potential shifts in Japanese contributions from SMA to FIP. Section III also identifies potentially 

large U.S. costs associated with planned force posture changes in the Asia Pacific. It discusses 

reductions in Japan’s financial support for those changes and describes pressing construction and 

renovation needs at Marine Corps Air Station Futenma, a critical U.S. asset in the region. 

 
3 

I. Residual Value Compensation in Germany 

As of August 31, 2012, there were more than 75,000 active duty U.S. forces in Europe, 

more than 90 percent of whom were stationed in Germany, Italy or the United Kingdom. Of 

those three countries, Germany was home to the largest number with more than 48,000 active 

duty U.S. personnel stationed there.3 The cost to maintain those U.S. forces is significant. DOD 

estimates that the non-personnel related costs associated with supporting the U.S. military 

presence in Germany was approximately $4 billion in Fiscal Year 2012. That figure does not 

include nearly $3.9 billion in military personnel costs.4

 

U.S. European Command (EUCOM) is in the process of implementing force posture 

changes that will significantly impact the U.S. military presence in Europe. The Army’s V 

Corps Headquarters will not return to Europe after its deployment to Afghanistan is complete in 

late Fiscal Year 2013.5 In addition, the Army deactivated one heavy brigade combat team (BCT) 

in Europe – the 170th BCT in October 2012.6

 The Army plans to deactivate the 172nd BCT in 

Fiscal Year 2014, and has also said that additional forces “potentially in the range of 2,500 

Soldiers, could be reduced from Europe.”7 The impact of these changes is most significant in 

Germany where U.S. Army Europe has said they will reduce the number of U.S. soldiers by 

about 25 percent by 2017.8

Those force reductions will result in a significant number of excess military facilities 

which will be returned to the German government. The United States does not own the land on 

which those facilities are located and cannot seek compensation for returning that land. 

Congress has said, however, that when facilities are returned to a host country, the Secretary of 

Defense “should take steps to ensure that the United States receives, through direct payment or 

otherwise, consideration equal to the fair market value of the improvements made by the United 

States” to those facilities.9 Existing law authorizes negotiations with host countries to determine 

the value of returned facilities. The compensation that DOD receives from host nations as a 

result of those negotiations is called “residual value.”10

In 1990, Congress passed legislation establishing a special account called the Department 

of Defense Overseas Military Facility Investment Recovery Account (DOMFIRA) into which 

the Department is required to deposit cash from residual value settlements. The law was 

 

3

 U.S. Department of Defense, Total Military Personnel Strengths by Service, Regional Area and Country (August 

31, 2012). 

4

 Office of the Under Secretary of Defense (Comptroller)/Chief Financial Officer, Operation and Maintenance 

Overview Fiscal Year 2013 Budget Estimates (February 2012). DOD estimates are $3.1 billion for Operations and 

Maintenance, $444 million in Family Housing Operations and Construction, and $460 million for Military 

Construction. Id. 5

 U.S. Army, Information Paper: Army Force Structure Reductions in Europe (February 16, 2012). 6 See 170th Infantry Brigade website, available at http://www.170infantry.army.mil/ (March 19, 2013). 7

 U.S. Army, Information Paper: Army Force Structure Reductions in Europe (February 16, 2012). 8

 U.S. Army Europe, Press Release: DOD Announces Plans to Adjust Posture of Land Forces in Europe (February 

16, 2012). 

9

 10 USC § 2687 Note, Sense of Congress (a)(2) (2012). Status of Forces Agreements (SOFAs) in Japan and South 

Korea preclude the U.S. from seeking residual value. See notes 219 and 108. 10 U.S. Department of Defense, Instruction Number 4165.69, Realignment of DOD Sites Overseas (April 6, 2005) 

(hereinafter “DODI 4165.69”). 
4 

amended in 1992 to permit DOD to negotiate for residual value payments-in-kind, though 

negotiations for payment-in-kind were intended for those cases when cash negotiations have 

failed.11 

According to a review conducted by the Department of Defense Inspector General (IG), 

since 1991, the United States has received more than $920 million in residual value 

compensation for excess military facilities returned to Germany. Despite the expectation that inkind payments would be a last resort, more than 95 percent of that $920 million has been in the 

form of payment-in-kind rather than cash.12 

The historical average residual value return on U.S. investments is approximately 10 

percent, though the Army’s Installation Management Command – Europe (IMCOM-E) has said 

that the amount that the U.S. will receive in exchange for future returns is hard to predict and 

may be lower.13 Nevertheless, the U.S. expects to receive significant additional residual value 

compensation from Germany over the next several years. The U.S. has returned over 100 

facilities since FY 2005 that have yet to be included in residual value settlements.14 The current 

value of U.S. investments in those facilities is nearly $1.1 billion.15 The Department has also 

designated 19 other facilities for closure in Germany between 2012 and 2015.16 According to the 

DOD IG, U.S. investments in those 19 facilities is nearly $600 million.17 Recently announced 

posture changes will result in significant additional facility returns to Germany that will also lead 

to residual value compensation. 

Residual value compensation can be used to reduce costs associated with maintaining 

U.S. forces in Germany and existing law contains requirements intended to ensure that outcome. 

Among those requirements are provisions to keep Congress informed about residual value 

negotiations and settlements that involve payment-in-kind compensation. The Department of 

Defense has said that it believes its practices with respect to residual value are consistent with the 

law.18 A Committee review, however, identified failures by the services to comply with legal 

requirements. In addition, it found residual value payments-in-kind being used on military 

construction projects of questionable value. The review also identified a number of issues 

 

11 See Public Law 103-337 (October 23, 1992). “[T]he President should enter into negotiations for payments-inkind only as a last resort and only after informing the Congress that negotiations for cash payments have not been 

successful.” Id. 12 U.S. Department of Defense Inspector General, Chart: Residual Value Settlements by Country and Year (May 

2012). 

13 Email from IMCOM-E Realty Specialist to IMCOM-E Chief, Real Estate et al. (October 19, 2007). IMCOM-E 

has said the amount that the U.S. will receive in residual value in future negotiations is hard to predict and called 10 

percent a high estimate. Committee staff meeting with IMCOM-E (August 7, 2012). 14 Residual value negotiations typically occur years after a facility has been returned to the German government as it 

takes time for the German government to either sell the facility or, alternatively, to identify a government purpose 

and establish a market value for investments made by the U.S. in the facility. 

15 IMCOM-E, Chart: Next Proposed RV Settlement Package (October 2011). 16 U.S. Department of Defense, Press Release: DOD Announces Installation Realignments in Germany (June 23, 

2010). 17 U.S. Department of Defense Inspector General responses to July 18, 2012 Committee staff questions (August 2, 

2012). 

18 Letter from Under Secretary of Defense for Acquisition, Technology and Logistics to Senator Carl Levin 

(February 21, 2013). 
5 

associated with IMCOM-E’s solicitation and acceptance of an approximately $60 million 

advance from the German government for U.S. facility returns – a payment the Committee first 

became aware of through a DOD IG audit of the residual value program.19 

A. Military Services Fail to Pursue Cash Settlements 

While the law relating to residual value originally only contemplated the acceptance of 

cash compensation for facilities returned to host countries, it was subsequently amended to 

permit DOD to negotiate for residual value payments-in-kind.20 However, negotiations for 

payments-in-kind were not supposed to replace cash negotiations. In fact, a 1994 Sense of 

Congress stated that negotiations for residual value payment-in-kind should only be entered into 

“as a last resort and only after informing the Congress that negotiations for cash payments have 

not been successful.”21 The Department of Defense Instruction (DODI) that specifies procedures 

for DOD components states that residual value “shall normally be sought as a cash payment” and 

authorizes payment-in-kind negotiations only as an alternate.22 In cases where a Combatant 

Commander wishes to pursue negotiations for payment-in-kind, the DODI requires the 

Commander to submit a proposal, for approval by the Secretary, providing a rationale for 

payment-in-kind versus cash negotiations and indicating that “the acceptance of payment in-kind 

is a last resort and that discussions of cash payment have been unsuccessful.” 23 

 Despite those requirements, payment-in-kind has become the first option for residual 

value negotiations in Germany rather than a last resort. According to the DOD IG, “all residual 

value settlement agreements completed after 1997 with either Germany or the U.K. were settled 

for [payment-in-kind].”24 In fact, the expectation that residual value negotiations will conclude 

with an in-kind settlement has so permeated the process that neither the Installation Management 

Command - Europe (IMCOM-E), which conducts residual value negotiations on behalf of the 

Army, nor U.S. Air Force - Europe (USAFE) even discusses the potential for cash settlement in 

their residual value negotiations with Germany.25 

B. Congress Not Notified of Intent to Negotiate for Payment-In-Kind 

When it amended the law to provide the Department authority to negotiate residual value 

settlements for payments-in-kind, Congress expressed a clear interest in being kept informed 

about such negotiations. To that end, the law requires the Secretary of Defense to notify 

Congress of its intent to enter into residual value negotiations for payment-in-kind before such 

 

19 U.S. Department of Defense Inspector General, Report: DOD Can Improve Its Accounting for Residual Value 

from the Sale of U.S. Facilities in Europe (May 4, 2012) at 11. 20 Public Law 101-510 (November 5, 1990); Public Law 102-484 (October 23, 1992). 

21 Public Law 103–337 (October 5, 1994). 

22 DODI 4165.69 Section E.3.1. 

23 DODI 4165.69 Section 6.3.5.2. 

24 DODI 4165.69 Section 6.3.5.2; U.S. Department of Defense Inspector General, Report: DOD Can Improve Its 

Accounting for Residual Value from the Sale of U.S. Facilities in Europe (May 4, 2012) at 2. 25 Committee staff meeting with IMCOM-E (August 7, 2012); Committee staff telephone conference with U.S. Air 

Force Europe (October 29, 2012). 
6 

negotiations are initiated and include a justification with that notification as to why payment-inkind compensation was being pursued instead of cash.26 

The Committee requested that the Department provide copies of such notifications for 

several recent residual negotiations that resulted in payment-in-kind settlements. The 

Department has been unable to produce correspondence indicating that Congress was notified of 

their intent to pursue negotiations for payment-in-kind in any of those cases.27 

Not only has the Department apparently failed to meet the requirement that Congress be 

notified of the intent to initiate negotiations for payment-in-kind, but such settlement 

negotiations are apparently proceeding without the authority required under the Department’s 

own guidance. As discussed above, the DODI requires Combatant Commanders to submit 

proposals, for approval by the Secretary of Defense, providing a rationale for payment-in-kind 

versus cash negotiations. EUCOM has been unable to produce any such proposals. In fact, the 

Air Force advised the Committee that it “has not prepared any proposals relative to residual 

value settlements” required by the DODI.28

C. Payment-in-Kind Not Used for Priority Projects 

As discussed above, originally the law only contemplated residual value cash payments 

and limited the use of settlement funds to facility maintenance, repair and environmental 

restoration at military installations in the United States.29 While it was subsequently amended to 

permit the use of residual value cash payments at installations outside the United States, the law 

has never authorized the use of residual value cash payments on military construction projects 

either overseas or in the United States.30 

By contrast, residual value settlements for payment-in-kind may be used for military 

construction projects, in addition to facility improvements and operating costs. In authorizing 

the use of payment-in-kind for construction projects, however, Congress sought to ensure that 

such compensation would be used to offset costs that the military would otherwise be forced to 

pay with appropriated funds. A 1994 Sense of Congress stated that “to the extent that in-kind 

contributions are received in lieu of cash payments in any fiscal year, the in-kind contributions 

 

26 The law requires DOD to notify the House of Representatives Committees on Armed Services, Appropriations, 

and the National Security Subcommittee of the Committee on Appropriations, as well as the Senate Committees on 

Armed Services, Appropriations, and the Subcommittee on Defense of the Committee on Appropriations. 10 U.S.C. 

§ 2687 Note (e)(3)(A)-(B). 

27 DOD did provide the Committee with a June 2, 1994 letter from then-Deputy Secretary of Defense John Deutch 

notifying Congress that the Deputy Secretary was authorizing the EUCOM Commander “to negotiate with the 

Government of Germany for a long term agreement to provide in-kind compensation for the residual value of 

facilities being returned.” The long term agreement being sought was for $200 million in in-kind compensation 

over the course of five years. The Deputy Secretary’s letter also states, “The Department will continue to press for 

cash settlements when possible.” Letter from Deputy Secretary of Defense John Deutch to Hon. Ronald V. Dellums 

(June 2, 1994). 

28 U.S. Air Force responses to October 31, 2012 Committee questions (November 8, 2012). 

29 Public Law 101-510 Section 2921 (1990). 

30 10 U.S.C. § 2687 Note. 
7 

should be used for projects that are identified priorities of the Department of Defense.”

31 Both 

the statute and DOD guidance contain requirements to ensure that outcome. 

The law requires that the Secretary of Defense provide Congress, prior to initiating 

negotiations for payment-in-kind, a description of adjustments DOD intends to make in the 

future-years defense program (FYDP) or the DOD budget to reflect costs that DOD may no 

longer incur as a result of potential payments-in-kind.32 (The FYDP is a planning document that 

describes how the Department intends to allocate resources, including priority military 

construction projects for which the Department intends to seek appropriations.) In addition, 

before concluding an agreement to accept a military construction project as payment-in-kind, the 

Secretary must certify to Congress that the project to be accepted as compensation is needed and 

that, if it were not funded with payment-in-kind, “appropriations would be necessary for the 

project and it would be necessary to provide for the project in the next [FYDP].”33 The relevant 

DODI requires that Combatant Commanders submit proposals to the Secretary of Defense that 

describe adjustments to be made in the FYDP or the DOD budget to reflect costs that may be 

avoided though payments-in-kind.34 

Notwithstanding those requirements, none of the twelve military construction projects 

reviewed by the Committee for which the use of payments-in-kind was approved was included in 

a FYDP.35 Moreover, despite the clear Congressional intent that payment-in-kind be used on 

priority projects, USAFE does not even include payment-in-kind projects on its list of priority 

military construction projects submitted to Air Force headquarters for FYDP consideration.36 

Similarly, none of IMCOM-E projects for which payment-in-kind was approved was submitted 

to the Army for FYDP consideration.37 

The law requires that DOD certify that projects would be included on the FYDP and 

would require appropriations were they not built with payment-in-kind. Notifications provided 

to the Congress relating to projects funded with payments-in-kind contained that certification.38

Notwithstanding those certifications, however, IMCOM-E told Committee staff that payment-inkind is actually deliberately programmed for projects that would not compete well for inclusion 

on the Army’s FYDP. 39 In fact, as mentioned above, most projects built with residual value 

 

31 Public Law 103–337 (October 5, 1994) (emphasis added). 

32 10 U.S.C. § 2687 Note (e)(2)(c). 

33 10 U.S.C. § 2687 Note (g)(1)(D). 

34 DODI 4165.69 Section 6.3.5. 

35 U.S. Department of Defense, Payment-in-Kind (PIK) Projects 2003-2012 (May 7, 2012). 36 U.S. Air Force, Response to SASC Inquiry regarding USAFE Residual Value (RV) Negotiations and Payment-inKind (PIK) (October 18, 2012). 37 Email from Department of Defense Office of Legislative Counsel to Committee staff (November 8, 2012); U.S. 

Air Force, Response to SASC Inquiry regarding USAFE Residual Value (RV) Negotiations and Payment-in-Kind 

(PIK) (October 18, 2012). 38 See, e.g., Letter from Deputy Secretary of Defense to Senator Carl Levin (October 20, 2010) notifying the Senate 

Armed Services Committee that DOD intended to use payment-in-kind to accomplish site preparations for a new 

post exchange and commissary complex in Wiesbaden, construct a new fuel tanker purging station in Kaiserslautern, 

and increase the size of three family housing units in Stuttgart. The letter states that “if these military construction 

projects were to be carried out by the Department of Defense, appropriations would be necessary for the projects, 

and it would be necessary to provide for the projects in the next Future Years Defense Program.” Id. 39 Committee staff meeting with IMCOM-E staff (September 7, 2012). 
8 

payments-in-kind are never even submitted for FYDP consideration. The Committee is only 

aware of one project, discussed in more detail below, for which IMCOM-E has programmed 

payment-in-kind that was included in a DOD budget request to Congress. But, as described 

below, IMCOM-E only sought to use payment-in-kind after Congress decided not to fund the 

project. 

D. Presumption for Military Construction 

 

Current law permits the Department to accept residual value payment-in-kind for military 

construction projects, facility improvements, or operating costs. There appears to be a 

presumption by the Military Services, however, that payments-in-kind will be used for military 

construction projects. In fact, the Committee is unaware of residual value payment-in-kind being 

used for any other purpose. Host nations may prefer that residual value payments-in-kind be 

used for construction rather than operating costs. As one IMCOM-E employee put it, residual 

value payment-in-kind provided by Germany will “stay in Germany in order to pay local national 

construction companies and therefore will support the local employment market.”40 

Evidence that both the German government and the United States presume that 

payments-in-kind will be used for military construction projects appears in residual value 

settlements themselves. For example, a residual value settlement agreement signed by USAFE 

and the German government in May 2005 for the return of 30 installations stated that the purpose 

of the €1.6 million settlement was for “U.S. Air Force (USAFE) construction projects at 

Ramstein and Spangdahlem Air Bases, Germany.”41 In response to Committee questions about 

the settlement, the Air Force said: 

Because [payment-in-kind] residual value recoupments must be spent in the host 

country where settled and there are only two air bases left in Germany, i.e., 

Ramstein and Spangdahlem, these are the only two locations where such 

[payment-in-kind] funds could be spent by the Air Force in Germany. As a result, 

the locations are quoted correctly in the subject residual value “settlement” 

agreements.42

However, while Ramstein and Spangdahlem may be the only air bases in Germany, 

military construction is not the only purpose for which residual value payments-in-kind may be 

used. As discussed above, the statute also contemplates the use of residual value payments-inkind to offset U.S. operating costs in host countries or to make facility improvements.43 The 

2005 USAFE settlement, however, presumes the use of in-kind payments for construction 

projects. In fact, the settlement appears to actually preclude the use of payments-in-kind for any 

other purpose. 

 

40 Email from IMCOM-E Realty Specialist to IMCOM-E Chief, Real Estate et al. (October 19, 2007). 41 Residual Value Settlement Agreement (May 23, 2005). 

42 U.S. Air Force, USAFE Residual Value (RV) Negotiations and Payment-in-Kind (PIK) (November 8, 2012). 43 10 U.S.C. § 2687 (g) Note. 
9 

By including the intent to use settlement payments to fund construction projects, USAFE 

failed to consider that Congress, if properly notified, might have sought to direct payment-inkind to facility improvements or to offset operating costs in order to, for example, reduce the 

need for appropriations for these purposes.44 While the law requires that Congress be notified 

before acceptance of military construction projects as in-kind compensation, it was not until May 

2008, nearly three years after the settlement, that the Department notified Congress of their intent 

to use funds from that 2005 settlement agreement to construct a utility and infrastructure 

improvement project at Spangdahlem Air Base.45 

Asked whether agreeing in the residual value settlement to use funds for construction 

projects at Ramstein and Spangdahlem was consistent with the statutory requirement that 

Congress be notified about military construction projects before an agreement was concluded, 

the Air Force stated: 

Those agreements ... are not residual value “payment-in-kind (PIK) construction” 

agreements within the meaning of [the statute]. They are residual value 

“settlement” agreements and address in general terms at which bases the subject 

PIK funds may be used. They do not, however, specify projects for which the 

respective PIK funds would be used.46

E. IMCOM-E Seeks to Use Payment-in-Kind for Project Rejected by Congress 

As mentioned above, IMCOM-E has programmed payment-in-kind for a project that was 

originally included in a DOD budget request to Congress but was not authorized for funding. 

DOD’s FY 2012 budget request included two Department of the Army projects planned for an 

Army Depot in Germersheim, Germany: one a $16.5 million infrastructure project and the other 

a $21 million central distribution facility.47 According to IMCOM-E, construction of the two 

projects would allow for the closure of warehouse/distribution operations in Giessen, Germany.48 

The Committee did not support funding for the projects in the Fiscal Year 2012 National 

Defense Authorization Act (NDAA).49 

Despite the fact that the Committee decided not to include them in the NDAA, IMCOME reconfigured the projects and programmed $6.7 million in payment-in-kind for them (in 

addition to $6.2 million in appropriated sustainment, restoration, and modernization funds).50 In 

fact, the military construction project data sheet (DD Form 1391) for the project states: 

 

44 Residual Value Settlement Agreement (May 23, 2005). 

45 Letter from Deputy Secretary of Defense Gordon England to Senator Carl Levin (May 2, 2008). 

46 U.S. Air Force, USAFE Residual Value (RV) Negotiations and Payment-in-Kind (PIK) (November 8, 2012). 47 U.S. Department of the Army, Fiscal Year (FY) 2012 Budget Submissions: Military Construction, Army Family 

Housing & Homeowners Assistance (Justification Data Submitted to Congress February 2011). 48 U.S. Department of the Army, Fiscal Year (FY) 2012 Budget Submissions: Military Construction, Army Family 

Housing & Homeowners Assistance (Justification Data Submitted to Congress February 2011); Committee staff 

meeting with IMCOM-E (September 7, 2012). 

49 2012 National Defense Authorization Act (December 31, 2011). 50 DD Form 1391, Project Number 81000, Germersheim Army Depot, Staging Area and Access Roads (July 20, 

2012); Email from Department of Defense Office of Legislative Counsel to Committee staff (October 25, 2012). 
10 

Payment-in-Kind (PIK) have been programmed for this project since Congress 

did not support MCA funding as stated in the FY12 NDA (sic).51

While IMCOM-E has programmed payment-in-kind for the project, it has not yet been 

approved by EUCOM and the Department has not yet notified Congress that it intends to 

proceed with construction.52

F. Army Negotiates “Advance” Payment in-Kind 

 In May 2012, the Department of Defense Inspector General (IG) published results of an 

audit of DOD’s accounting for residual value compensation for returned facilities in Europe. 

The DOD IG’s report included as a “matter of interest” IMCOM-E’s 2008 solicitation and 

subsequent acceptance of a $60 million payment-in-kind “advance” from the German 

government. The report indicated that Congress had not been notified of the advance, which the 

IG said was to be paid back with facility returns.53 As of August 2012, IMCOM-E had 

programmed more than $43.5 million of the advance for military construction projects and had 

spent more than $9 million.54 The Committee reviewed IMCOM-E’s solicitation and acceptance 

of the advance as well as the military construction projects IMCOM-E funded with it. 55

1. IMCOM-E Cites “Acute” Need for Construction Funds 

 The idea of requesting an advance was discussed by IMCOM-E staff in email exchanges 

in the fall of 2007, one of which explained IMCOM-E’s rationale for pursuing the advance: 

[We have been] releasing installations since 2000, many of them have already 

been sold by the [Federal Republic of Germany (FRG), meaning that] the FRG 

has already received significant net sale proceed portions, and they continue to do 

so. Why should we wait another 7 or 8 years for our entitled [residual value] 

 

51 DD Form 1391, Project Number 81000, Germersheim Army Depot, Staging Area and Access Roads (July 20, 

2012). 

52 Email from Department of Defense Office of Legislative Counsel to Committee staff (October 25, 2012). 53 U.S. Department of Defense Inspector General, Report: DOD Can Improve Its Accounting for Residual Value 

from the Sale of U.S. Facilities in Europe (May 4, 2012) at 11. 54 IMCOM-E, Chart: PIK Funded Projects Using Advance (August 31, 2012). 55 According to a 2006 DOD report to Congress: 

From 1993 to 1998, when numerous facilities were being returned as part of the drawdown in 

Europe, the [Federal Republic of Germany] agreed to provide the U.S. with [payment-in-kind] 

“advances”; they agreed to build projects at enduring facilities in anticipation that eventual 

compensation to the U.S. for returned facilities would be equivalent to the value of the PIK 

compensation. Subsequent final settlements for returned facilities were offset against the advance 

amounts. Since return of installations has slowed considerably and there is less residual value 

expected to be due the U.S., the FRG no longer advances PIK amounts. 

U.S. Department of Defense, 2006 Annual Report Status of Residual Value Negotiation. See also description of 

advance payments-in-kind in U.S. Department of Defense, Annual Report: Status of Residual Value Negotiations 

(2002). 
11 

payments? Let us request [payment-in-kind] now like we did it in the nineties. 

The money, that they will provide us in advance [] will anyway stay in Germany 

in order to pay local national construction companies and therefore will support 

the local employment market.56 

 

A few months later, in February 2008, IMCOM-E’s Payment-in-Kind Program Manager 

wrote that “[t]he need for advance [payment-in-kind] is becoming more acute based on evolving 

infrastructure requirements.” 57 The email indicated that the German government had expressed 

a willingness to consider an advance but that IMCOM-E would need to make a written request.58 

Two weeks later, the chief of IMCOM-E Public Works Division’s Real Estate branch sent a 

letter to the German government proposing that the two countries discuss an advance.59 That 

letter pointed to “recent and anticipated transformation activities and the cost associated with 

those activities” as the reason for seeking an advance.60

 In June 2008, IMCOM-E staff reached an agreement with the Germans in which the 

German government would provide €40 million (about $60 million) to IMCOM-E as advance 

payment-in-kind. An exchange of letters between IMCOM-E and the German government 

followed with IMCOM-E’s Real Estate branch chief writing that “advance funds will prove 

helpful in construction projects to be performed in Wiesbaden and other locations in 

Germany.”61 Between the time that the agreement for an advance was reached and September 

2012, IMCOM-E programmed more than $43.5 million of the advance for eight construction 

projects in Germany. 

2. No Legal Review or Congressional Notification of Advance 

There are questions as to whether IMCOM-E’s expenditure of advanced payments is 

consistent with fiscal law. The agreement by IMCOM-E to accept the 2008 advance did not 

undergo a legal review at IMCOM-E at the time it was negotiated.62 While it is unclear whether 

or not IMCOM-E’s solicitation of an advance was known to DOD at the time, the Department 

has since said that it believes IMCOM-E’s acceptance of the $60 million was legal.63 

 

As discussed above, current law relating to residual value states: 

“[b]efore the Secretary of Defense enters into negotiations with a host country 

regarding the acceptance by the United States of any payment-in-kind in 

connection with the release to the host country of improvements made by the 

United States at military installations in the host country, the Secretary shall 

 

56 Email from IMCOM-E Realty Specialist to IMCOM-E Chief, Real Estate et al. (October 19, 2007). 57 Email from IMCOM-E PIK Program Manager to IMCOM-E Chief, Real Estate et al. (February 29, 2008). 

58 Id. 59 Letter from IMCOM-E Chief, Real Estate to German Institute for Federal Real Estate (March 13, 2008). 60 Id. 61 Id. 62 Committee staff meeting with IMCOM-E (September 7, 2012). 63 Committee staff meeting with Office of the Deputy Under Secretary of Defense (Installations and Environment) 

(November 20, 2012). 
12 

submit to the appropriate congressional committees a written notice regarding the 

intended negotiations.”64 

The Committee was not notified that IMCOM-E intended to negotiate an advance payment-inkind in connection with facility returns. In fact, the Committee only became aware of it in May 

2012 when the DOD IG published its audit of residual value transactions in Europe. When asked 

why the Department did not notify Congress, DOD told the Committee that, in the Department’s 

view, the statute did not require them to do so.65

As to how the debt resulting from the advance is to be repaid, while letters exchanged 

between IMCOM-E and the German government discuss the advance in the context of U.S. 

facility returns, there is apparently no contract or other written agreement stating that the U.S. 

would repay the debt through facility returns.66 Nor does any agreement appear to exist 

describing how the debt is to be repaid should residual value negotiated for returns be less than 

the $60 million that the German government already advanced to IMCOM-E. Though both 

IMCOM-E and the German government understood at the time the advance was extended that 

the $60 million would be repaid with future facilities returns, both IMCOM-E and DOD have 

stated that the U.S. actually has no legal obligation to repay the advance.67 

It is unclear whether residual value payments that the German government agrees to 

make in the next round of negotiations, expected to occur in 2013, will be sufficient to offset the 

full amount of the advance. According to data provided by IMCOM-E, as of October 2012, the 

U.S. and Germany had agreed to less than $9 million in residual value for facility returns that 

will be considered in settlement negotiations expected to occur in 2013.68 

3. Advance Used for Questionable Projects 

While IMCOM-E staff called the need for the advance payment “acute,” a review of 

projects for which IMCOM-E has programmed advance payments-in-kind raises questions as to 

the accuracy of that assessment.69 For example, more than $6 million of the advance paymentin-kind was programmed for a furniture storage warehouse in Grafenwoehr, Germany and 

$200,000 of the advance was earmarked for the construction of sunroom additions onto three 

senior officer houses in Stuttgart, Germany. Neither these projects, which are described in detail 

below, nor any other project against which advance payment-in-kind has been earmarked, was 

ever even submitted by IMCOM-E for FYDP consideration. 70 

 

64 10 U.S.C. § 2687 Note (e). 

65 Committee staff meeting with Office of the Deputy Under Secretary of Defense (Installations and Environment) 

(November 20, 2012). 

66 Committee staff meeting with IMCOM-E (September 7, 2012). 67 Committee staff meeting with Office of the Deputy Under Secretary of Defense (Installations and Environment) 

(November 20, 2012); Committee staff meeting with IMCOM-E (September 7, 2012). 68 IMCOM-E, Spreadsheet: Next Proposed RV Settlement Package (October 2011). 69 Email from IMCOM-E PIK Program Manager to IMCOM-E Chief, Real Estate et al. (February 29, 2008). 

70 Email from Department of Defense Office of Legislative Counsel to Committee staff (November 8, 2012). 
13 

a. Furniture Storage Warehouse in Grafenwoehr

Among the projects that IMCOM-E proposed building with advance payment-in-kind is a 

furniture storage warehouse in Grafenwoehr, Germany. The new warehouse, which is intended 

to replace an existing leased facility, was estimated to cost $6.2 million.71 The current 

warehouse stores furniture and appliances for soldiers stationed in Grafenwoehr and surrounding 

areas.72

The Department of Defense notified Congress about the furniture warehouse project in 

July 2011. The notification stated that DOD “certifies that if [the furniture warehouse project] 

were to be carried out [by DOD], Congress would need to appropriate funds [for the warehouse] 

in the next Future Years Defense Program.”73 Like most payment-in-kind projects, however, the 

warehouse had never even been submitted by IMCOM-E for consideration to be included on the 

Army’s FYDP.74 IMCOM-E staff said that the furniture warehouse would not have competed 

well for military construction funding.75 Despite that, the Department of Defense has maintained 

that the warehouse would have been included on the FYDP had residual value funding not been 

available for the project. 76 

The notification was accompanied by a Military Construction Project Data Sheet (DD 

Form 1391) describing the warehouse project and including cost and schedule information.77 

The DD Form 1391 says that the existing leased warehouse is insufficient to meet long-term 

requirements and that the 80 year-old building is affected by persistent maintenance challenges 

such as water damage from a leaking roof and burst pipes.78 (According to warehouse staff, the 

landlord has been responsive to minor repair requests.79 However, IMCOM-E states that the 

landlord has not made necessary investments to bring the warehouse up to current standards. 

IMCOM-E has been unable to reach an agreement with the landlord to complete major repairs 

that are needed.80 IMCOM-E has not advised the landlord that it plans to build a new facility 

rather than renew its lease.81)

 

71 Letter from Deputy Secretary of Defense to Senator Carl Levin, Chairman, Committee on Armed Services (July 

19, 2011). 

72 DD Form 1391, Project Number 78223, Furniture Warehouse/Office Space (June 11, 2010). 

73 Letter from Deputy Secretary of Defense to Senator Carl Levin (July 19, 2011). 

74 Email from Department of Defense Office of Legislative Counsel to Committee staff (November 8, 2012). 75 Committee staff meeting with IMCOM-E staff (August 15, 2012). 

76 Letter from Under Secretary of Defense for Acquisition, Technology and Logistics to Senator Carl Levin 

(February 21, 2013). 

77 DD Form 1391, Project Number 78223, Furniture Warehouse/Office Space (June 11, 2010). 

78 Id. 79 Committee staff tour of the furniture warehouse and related discussions (September 5, 2012). 80 According to IMCOM-E: 

Discussions with the landlord regarding repairs and improvement to the warehouse resulted in no 

commitments by the landlord. The landlord has stated that if he were given a 5-year fixed contract 

then he would be willing to do some repairs, however, he would not specify what repairs he would 

do or the amount of money he would be willing to spend on improving the warehouse. The 

landlord was also unwilling to discuss new contract terms or revisions to the cost of the lease. 

EUCOM responses to September 12, 2012 Committee staff questions (October 4, 2012). 

81 EUCOM responses to September 12, 2012 Committee staff questions (October 4, 2012). 
14 

The DD Form 1391 also states that “an economic analysis was prepared and utilized in 

evaluating this project” and that the construction of a new furniture warehouse “is the most cost 

effective method to satisfy the requirement.”82 The economic analysis was not included with the 

July 2011 notification. The Department provided it to the Committee in August 2012. The 

Committee’s review of that analysis raises serious concerns about the accuracy of its 

conclusions. 

The economic analysis discusses three alternatives to meet the furniture storage 

requirement: maintaining the status quo, constructing a new warehouse, or leasing a different 

facility. Each of the three was judged to be “a viable alternative.” 83 According to the economic 

analysis, however, keeping the current facility was the “most expensive alternative and results in 

a higher cost to the government.” 84 The analysis states that building a new facility, on the other 

hand, “is the best option” and “has the lowest [net present value].”85

As reflected in Figure 1, the economic analysis concluded that the net present value of 

new construction would be $200,000 less than leasing a different facility and $1.8 million less 

than the status quo.86 Those conclusions, however, are based on the dubious assumption that the 

U.S. would recoup more than half of the cost to build the warehouse in future residual value 

negotiations. 

Figure 1 

Furniture Warehouse Economic Analysis 

Alternative Net Present Value 

($ in thousands) 

Status Quo (current lease) $5,567 

New Construction $3,767 

New Leasing $3,964 

In calculating the net present value of the new warehouse, the analysis assumed that the 

U.S. government would be able to recover more than $3.2 million in residual value for the 

furniture storage warehouse in the year 2038. That assumption resulted in the net present value 

of the new warehouse option being reduced from more than $7 million, which would have made 

it the most expensive alternative, to less than $3.8 million, making it appear to be the least 

expensive alternative. Assuming that the U.S. government would receive more than 50 percent 

of its investment in the furniture warehouse in residual value from the German government is not 

a reasonable assumption and is inconsistent with past experience. As discussed above, the 

 

82 DD Form 1391, Project Number 78223, Furniture Warehouse/Office Space (June 11, 2010). 

83 IMCOM-Europe, Furniture Warehouse Office Space Economic Analysis (May 24, 2011). 84 Id. 85 Id. IMCOM-E has also said that that “[i]t would be cheaper to build a new facility than to repair the existing 

facility and bring up to current codes.” EUCOM responses to September 12, 2012 Committee staff questions 

(October 4, 2012). However, that alternative was not included in the economic analysis and the basis for that 

conclusion is not clear. 

86 IMCOM-Europe, Furniture Warehouse Office Space Economic Analysis (May 24, 2011). 
15 

historical average residual value return on U.S. Army investments is about 10 percent.87 Had the 

economic analysis assumed a 10 percent residual value return on the warehouse, the net present 

value of a new facility would have exceeded $6.4 million, making it nearly $2.5 million more 

than securing alternate leased space, and nearly $900,000 more than the status quo. The 

Department of Defense has acknowledged shortcomings in the economic analysis but has said 

that “other important operational factors contributed to the decision to construct a new facility.”88

On November 26, 2012, Chairman Levin wrote to Secretary Panetta raising concerns 

about the furniture storage warehouse and urging the Department to reconsider its decision to 

construct the project.89 DOD has since asked the Army to “put the [furniture warehouse] project 

on hold pending a reassessment of the size and alternatives for procuring the facility.”90

b. Sunroom Additions to Senior Officer Housing in Stuttgart

Perhaps none of the projects for which advance payment-in-kind has been earmarked 

raises more concerns than the construction of sunroom additions to three senior office houses in 

Stuttgart, Germany. 

In 2010, IMCOM-E proposed using advance payment-in-kind to build the additions. The 

three houses to which the additions were to be attached were brand new, having been built by the 

German government as part of a separate 2007 agreement with the United States.91 The three 

new homes are located amidst several older, similar homes for senior EUCOM and U.S. Africa 

Command (AFRICOM) officers.92 The Department notified Congress of its plans to construct 

the sunroom additions in October 2010.93 The Committee did not object to the project at the 

time of that notification. 

The Department’s notification letter stated that the project would increase the size of 

three family housing units in Stuttgart “to conform to DOD construction size standards.”94 A 

Military Construction Project Data Sheet (DD Form 1391) that accompanied the notification 

stated that the sunroom additions would be approximately 215 square feet per home. 95 Figure 2 

shows the existing homes and the sunroom additions. The DD Form 1391 said that the three 

existing homes did “not meet [DOD’s] benchmark size standards” and that if the sunrooms were 

not built “Senior Officer families will be assigned to units that do not meet Army and DOD 

 

87 Email from IMCOM-E Realty Specialist to IMCOM-E Chief, Real Estate et al. (October 19, 2007). 88 Letter from Under Secretary of Defense for Acquisition, Technology and Logistics to Senator Carl Levin 

(February 21, 2013). 

89 Letter from Senator Carl Levin to Secretary Leon E. Panetta (November 26, 2012). 

90 Letter from Under Secretary of Defense for Acquisition, Technology and Logistics to Senator Carl Levin 

(February 21, 2013). 

91 DD Form 1391, Project Number 77150, AFH Additions (January 13, 2010); Committee staff meeting with 

EUCOM (September 6, 2012). 

92 Id. 93 Letter from Deputy Secretary of Defense to Congressman Norm Dicks, Chairman, Subcommittee on Defense, 

Committee on Appropriations (October 20, 2012). 

94 Id. 95 DD Form 1391, Project Number 77150, AFH Additions (January 13, 2010).
16 

construction size standards.”96 That statement, however, was inaccurate as the existing homes 

already met the Department’s size standards. 

Figure 2 

Stuttgart Senior Officer Housing Sunroom Additions97

According to DOD’s Unified Facilities Criteria (UFC) for family housing, the minimum 

size for new O-6 Colonel housing is 2,110 square feet.98 Before the addition of sunrooms, the 

three homes were 2,490 square feet each, well above the minimum.99 EUCOM staff said that, 

while the homes met the minimum, they were below the “benchmark” size standard.100 While 

that is accurate, the benchmark size standard for 0-6 Colonel housing is only 2,520 square feet – 

30 square feet more than the size of the original homes. 101 Moreover, EUCOM staff could not 

recall another occasion in which home additions were built for the sole purpose of meeting 

benchmark size requirements.102 The decision to do so in this case was, according to IMCOM-E 

and EUCOM staff, instigated by the then Chief of Staff for AFRICOM. 

According to IMCOM-E and EUCOM staff, in 2009, they became aware of email 

discussions between the then-AFRICOM Chief of Staff and IMCOM-E’s Regional Director, 

regarding the AFRICOM Chief of Staff’s concerns about the size of the three homes. The 

Department of Defense has been unable to locate those emails but, according to IMCOM-E and 

EUCOM staff, it was the AFRICOM Chief of Staff’s complaints that led to the sunroom 

additions being built.103 

The Committee spoke with the former AFRICOM Chief of Staff. The former Chief of 

Staff acknowledged that he complained to IMCOM-E at the time the three homes were under 

 

96 Id. 97 Photos were taken by Senate Armed Services Committee staff on September 6, 2012. 

98 U.S. Department of Defense, Unified Facilities Criteria (UFC): Family Housing (July 13, 2006) at 12. 99 Committee staff meeting with EUCOM (September 6, 2012). 

100 Email from Department of Defense Office of Legislative Counsel to Committee staff (November 29, 2012); 

Committee staff meeting with EUCOM (September 6, 2012). 101 U.S. Department of Defense, Unified Facilities Criteria (UFC): Family Housing (July 13, 2006) at 12. 102 Committee staff meeting with EUCOM (September 6, 2012). 103 Committee staff meeting with EUCOM (September 6, 2012); EUCOM responses to October 9, 2012 Committee 

staff questions (October 22, 2012). 
17 

construction that they were too small.104 Not only that, but he also acknowledged sending 

IMCOM-E blueprints of family houses that had been built at another U.S. military base in 

Germany that included heated sunrooms.105 The former AFRICOM Chief of Staff said, 

however, that he did not request that sunrooms be added on to the three Stuttgart homes and that 

such a request would have been outside of his authority.106 

 

 

104 Committee staff telephone conference with former Chief of Staff, U.S. Africa Command (November 2, 2012). 105 Id. 106 Id.
18 

II. Costs Associated with the U.S. Military Presence in the Republic of South Korea 

On July 27, 1953, following three years of war that began on June 25, 1950, the senior 

delegates for the United Nations Command Delegation and the Delegation of the Korean 

People's Army and the Chinese People's Volunteers, signed an Armistice Agreement, suspending 

hostilities on the Korean peninsula. Three years later, in October 1953, the United States and the 

Republic of South Korea (ROK) signed a Mutual Defense Treaty which granted the U.S. the 

authority to station military forces in South Korea.107 In 1966, the U.S. and South Korea signed 

a Status of Forces agreement (SOFA) that granted the United States the right to use certain 

facilities and areas in the country. The agreement provided that South Korea would furnish 

without cost to the United States “all facilities and areas and rights of way” in the country but 

that the U.S. would bear “all expenditures incident to the maintenance of the United States armed 

forces in the Republic of South Korea.”108

In 1953, there were more than 325,000 U.S. troops in South Korea. In the fifteen years 

following the signing of the Armistice, that number fell to around 60,000 before declining to 

around 40,000 in the early 1970s.109 By 2012, additional troop reductions had reduced that 

number to approximately 28,500, a level the U.S. has said it will maintain.110 

The cost to taxpayers of supporting U.S. troop levels in South Korea is significant. The 

Department of Defense (DOD) estimates that non-personnel U.S. costs in South Korea were 

nearly $1.1 billion in Fiscal Year 2012 – and that figure does not include more than $2 billion in 

U.S. military personnel costs or hundreds of millions of dollars in South Korean contributions 

intended to offset U.S. costs.111 

Over the next several years, the U.S. will incur additional costs to support the 

repositioning of forces on the Korean peninsula. The moves are being carried out pursuant to 

two agreements. One, called the Yongsan Relocation Plan (YRP), involves the move of U.S. 

forces from Yongsan Garrison in Seoul to Camp Humphreys, about 40 miles south of Seoul. 

The YRP was initiated by South Korea to allow the government to reclaim valuable real estate in 

downtown Seoul where the garrison is located. Implementing the YRP is expected to cost 

approximately $7 billion.112 While, most YRP-related construction costs will be paid by South 

Korea, there are also substantial U.S. costs associated with the move. For example, the U.S. is 

responsible for providing most of the military family housing necessitated by the move. 

 

107 Mutual Defense Treaty between the Republic of South Korea and the United States of America (signed October 

1, 1953). 

108 Facilities and Area and the Status of United States Armed Forces in South Korea Agreement between the United 

States of America and the Republic of South Korea, Agreement between the United States of America and the 

Republic of Korea (July 9, 1966). 

109 Department of Defense, Military Personnel Historical Reports, available at

http://siadapp.dmdc.osd.mil/personnel/MILITARY/history/309hist.htm (January 16, 2013). 

110 Joint Statement of the 2012 United States – Republic of South Korea Foreign and Defense Ministers’ Meeting 

(June 14, 2012). 

111 Office of the Under Secretary of Defense (Comptroller)/Chief Financial Officer, Operation and Maintenance 

Overview Fiscal Year 2013 Budget Estimates (February 2012). 

112 U.S. Department of Defense, Military Realignments in South Korea Report to Congress (July 18, 2012). 
19 

The second agreement, called the Land Partnership Plan (LPP), involves a repositioning 

and consolidation of forces mostly from areas north of Seoul to Camp Humphreys and Daegu, 

also south of Seoul. The U.S. is responsible for most costs associated with the LPP, which are 

estimated to be nearly $3.2 billion.113 While the U.S. plans to pay a significant amount of these 

costs with host nation support payments from South Korea, doing so will result in less South 

Korean funding being available for other U.S. expenses.114

There will also be transition costs as force posture changes are being implemented. U.S. 

Army projections suggest transition costs of $100-$200 million for facility sustainment alone.115 

Transition costs for Base Operations Support, which includes such expenses as utility payments 

and equipment maintenance, have not been estimated.116 Once the moves are complete, the U.S. 

will be responsible for costs associated with operating and maintaining facilities at Camp 

Humphreys and elsewhere. DOD has said that the force posture changes will “reduce[] the 

overall cost to maintain redundant U.S. facilities.” 117 However, such a reduction – if it is 

achieved – will not be realized for several years. 

The Committee reviewed U.S. costs associated with the military presence in South Korea 

and South Korean contributions made pursuant to bilateral Special Measures Agreements (SMA) 

to offset those costs. As described below, the review found that South Korea’s contributions 

have not kept pace with the growth in U.S. costs. The Committee also reviewed projects for 

which U.S. Forces Korea (USFK) has used or is considering using South Korean contributions. 

Using South Korean contributions on economically unsound or non-mission-critical projects can 

leave other requirements unmet or require U.S. taxpayers to cover the costs. USFK’s family 

housing requirement is an example of a large, as yet unfunded expense in South Korea. As 

discussed below, the Army’s proposal to provide that housing, if approved, would create 

substantial long-term costs for U.S. taxpayers. Aggressive oversight of the use of South Korean 

contributions is critical to ensuring that their benefit to U.S. taxpayers is maximized. The 

Committee’s review, however, has identified weaknesses in that oversight, particularly with 

respect to South Korea’s in-kind SMA contributions. In-kind refers to non-cash contributions 

such as services or facilities that have a cash value. 

A. South Korean Contributions to U.S. Costs 

For years after the Armistice Agreement was signed, South Korea remained a poor 

country. In 1960, the country’s per capita Gross Domestic Product was comparable to that of 

Liberia and Sierra Leone.118 Since that time, however, the South Korean economy has grown to 

become one of the world’s fifteen largest.119 Beginning in the 1990s, the United States and 

South Korea signed a series of “Special Measures Agreements” (SMA), under which South 

 

113 U.S. Forces Korea, U.S. Costs Associated with LPP (August 9, 2012). 114 U.S. Forces Korea responses to February 9, 2012 Committee staff questions (March 19, 2012). 115 U.S. Army, Summary of USFK Sustainment Requirement (November 30, 2012). 116 Email from Department of Defense Office of Legislative Counsel to Committee staff (December 14, 2012). 117 U.S. Department of Defense, Military Realignments in South Korea Report to Congress (July 18, 2012) at 4. 118 World Bank, DataBank: 1960 Per Capita GDP, available at http://databank.worldbank.org/ddp/home.do (January 

16, 2013). 

119 World Bank, Gross Domestic Product Ranking Table (2011). 
20 

Korea began contributing toward U.S. costs.120 In January 2009, the two countries signed the 

most recent SMA, establishing South Korea’s contribution to U.S. costs for 2009-2013. That 

agreement set South Korea’s contribution at ₩760 billion for 2009 (approximately $775 

million). While the agreement increased South Korean contributions in subsequent years to keep 

up with inflation, South Korea’s SMA contributions have not kept pace with U.S. costs.121 

Figure 3 shows the estimated amount of South Korean SMA contributions and U.S. 

appropriations (excluding appropriations for U.S. military personnel costs) in calendar years 

2008-2012. Figure 3 does not include South Korean costs to implement the Yongsan Relocation 

Program, as that move was initiated by South Korea and is being funded pursuant to the YRP 

agreement. 

Every dollar in costs that can be met with a South Korean contribution is a dollar less in 

U.S. taxpayer funds that must be spent. It is therefore critical that the growth in South Korea’s 

contributions keep pace with U.S. costs. As shown in Figure 3, since 2009, that has not been the 

case. South Korea’s estimated SMA contributions exceeded U.S. appropriations by $131 million 

in 2008. By contrast, in 2012 U.S. spending in South Korea was expected to exceed South 

Korean SMA contributions by $330 million. 

 

120 U.S. Forces Korea, 2009-2013 Special Measures Agreement (January 10, 2011). 121 The agreement specifies that increases in South Korea’s contributions will not exceed four percent in any single 

year. Agreement Between the United States of America and the Republic of South Korea Concerning Special 

Measures Relating to Article V of the Agreement Under Article IV of the Mutual Defense Treaty Between the 

Republic of South Korea and the United States of America Regarding Facilities and Areas and the Status of United 

States Armed Forces in the Republic of South Korea (hereinafter “2009 Special Measures Agreement”) (January 15, 

2009). 
21 

Figure 3122

B. Special Measures Agreement (SMA) Programs 

South Korea’s SMA contributions fall into one of three categories: Labor Cost Sharing, 

Logistics Cost Sharing, and Republic of South Korea Funded Construction (ROKFC). Labor 

Cost Sharing contributions are provided in cash and are used to pay the salaries and benefits of 

USFK’s South Korean employees. Logistics Cost Sharing contributions are “in-kind” and are 

used to pay for such things as equipment maintenance, certain leases, and sustainment of USFK 

facilities.123 ROKFC contributions are used for the design and construction of facilities for use 

by USFK. Under the 2009 SMA, South Korea’s contributions to the ROKFC program 

transitioned from cash to in-kind, with all contributions being in-kind by 2011.124 According to 

 

122 South Korean SMA contribution amounts are best estimates based on Won to dollar conversions using annual 

budget rates published by the U.S. Department of Defense. Those rates differ from actual market exchange rates 

and do not reflect exchange rates used in instances where South Korean contributions were actually converted into 

U.S. dollars. The U.S. appropriations figures are based on FY 2008-2011expenditures, FY 2012 enacted 

appropriations, and FY 2013 requested appropriations. U.S. Forces Korea responses to April 18, 2012 letter from 

Senator Carl Levin (May 21, 2012); Office of the Under Secretary of Defense (Comptroller) Chief Financial Officer 

responses to Committee staff questions (October 25, 2012). 

123 Implementation Agreement for Special Measures Agreement (March 24, 2009). 124 An exchange of notes related to in-kind contributions under the ROKFC program specified the in-kind portion of 

the ROKFC program at 30% in 2009, 60% in 2010 and 88% in each of 2011, 2012, and 2013. The remaining 12% 

for the latter three years are cash contributions associated with U.S. costs for design and construction oversight. 

ROKFC contributions cannot be used to “construct, expand, repair, or manage recreation facilities such as clubs, 

golf courses, theaters, and bowling alleys.” Implementation Agreement for Special Measures Agreement (March 

24, 2009); 2009 Special Measures Agreement (January 15, 2009); Exchange of Notes on In-kind Contribution of 

Republic of South Korea Funded Construction under the Agreement concerning Special Measures relating to Article 

V of SOFA (January 15, 2009). 
22 

USFK, the shift from cash to in-kind contributions was a result of the South Korean 

government’s desire for more control over how ROKFC contributions were spent and which 

contractors were used.125 As described in Section E below, however, that shift makes U.S. 

oversight more difficult. 

The allocation of South Korea’s SMA contributions among the three cost-sharing 

programs is largely done at the discretion of the USFK Commander. 126 It has been USFK’s 

practice to allocate approximately 40 percent of SMA contributions to each of ROKFC and 

Labor Cost Sharing, and the remaining 20 percent to Logistics Cost Sharing. 127 South Korea’s 

calendar year 2012 contribution will be approximately $765 million. Of that total USFK planned 

to allocate slightly more than 40 percent ($307 million) to labor cost sharing, about 16 percent 

($119 million) to logistics cost sharing, and approximately 44 percent ($339 million) to 

ROKFC.128 

 

As reflected in Figure 3, U.S. costs in South Korea have grown significantly over the past 

several years. In this context, it is important that South Korea’s contributions to U.S. costs be 

directed at mission critical requirements. The Committee’s review of projects either funded with 

South Korean contributions or being considered for such funding identified some questionable 

projects. 

C. Questionable Use of South Korean Contributions 

In 2012 South Korea’s SMA contributions were expected to amount to approximately 

$765 million. Maximizing their value to U.S. taxpayers depends on using those funds to offset 

U.S. costs by directing them to mission-critical requirements. Using South Korean funds to 

supplement U.S. funding by diverting them to nonessential or economically unsound projects can 

leave U.S. taxpayers on the hook for unmet requirements and create sustainment obligations that 

generate costs for years into the future. 

The Committee reviewed Military Construction Project Data Sheets (DD Form 1391) and 

other documents associated with projects completed, underway and planned in South Korea. 

That review raised questions about whether, in some cases, South Korean contributions are being 

used to supplement, rather than offset, U.S. appropriations. 

 

125 Committee staff telephone conference with U.S. Forces Korea (June 6, 2012). 126 Email from Department of Defense Office of Legislative Counsel to Committee staff (July 31, 2012). Though 

the allocation of SMA funds is largely at the discretion of the U.S. Forces Korea Commander, the Implementation 

Arrangement for the Special Measures Agreement states that the contribution to U.S. Forces Korea’s labor cost for 

its South Korean employees may not exceed 71 percent of U.S. Forces Korea’s total labor cost for its South Korean 

employees. Implementation Arrangement for Special Measures Agreement (March 24, 2009). 127 Committee staff meeting with U.S. Forces Korea (June 25, 2012). 128 General James Thurman, Statement before Hearing of the U.S. House of Representatives Committee on 

Appropriations, Subcommittee on Military Construction, Veterans Affairs, and Related Agencies (March 29, 2012). 
23 

1. ROKFC Funds for LPP Projects at Camp Humphreys 

As discussed above, force posture changes underway in South Korea will result in a large 

number of U.S. forces moving from Yongsan Garrison in Seoul, as well as areas north of Seoul, 

to Camp Humphreys. The build-up of Camp Humphreys is said to be the largest construction 

project in the history of the Department of Defense.129 Of South Korea’s SMA contributions for 

calendar year 2012 alone, USFK intended to spend more than $280 million for the design and 

construction of facilities at Camp Humphreys.130 Aggressive oversight is critical to ensuring that 

U.S. and South Korean funds at Camp Humphreys are wisely spent. Oversight weaknesses, such 

as those identified by the Committee and described in Section E, risk funds being spent 

inefficiently or on unnecessary projects. 

For example, USFK’s plans for Camp Humphreys include constructing a $10.4 million 

museum for the U.S. Army’s 2nd Infantry Division. The museum, which is to replace an existing 

museum at Camp Red Cloud, is targeted for construction in 2014. The DD Form 1391 for the 

project, which was approved by the Garrison Commander in February 2012, states that it is 

“required to provide adequate services to the increased population associated with restationing 

US Forces as part of the Land Partnership Program.”131 USFK has said that the museum was a 

“command requirement.”132 The Committee has traditionally viewed using appropriated funds to 

construct military museums with some skepticism and USFK’s interest in using ROKFC 

contributions to build the museum raises the question whether those contributions might be 

better directed toward more mission critical requirements.133 

The Committee also raised questions about USFK’s consideration of ROKFC 

contributions to build a $5 million bread and pastry facility at Camp Humphreys. USFK had 

previously submitted the project for the Army to consider including as a priority for military 

construction appropriations in the Army’s Future Years’ Defense Program (FYDP). 134 

According to the Army, however, the project “never made the cut” for inclusion in the FYDP. 135 

Nevertheless, USFK continued to consider using ROKFC funds to build the facility. The 

 

129 U.S. Army website, available at

http://www.army.mil/article/84441/Deputy_Defense_Secretary_visits_Camp_Humphreys__thanks_troops/ (January 

16, 2013). 

130 U.F. Forces Korea responses to February 9, 2012 Committee staff questions (March 19, 2012) 131 DD Form 1391, Project Number SPT 050, ROKFC Museum (February 27, 2012). 132 Committee staff meeting with U.S. Forces Korea (June 25, 2012). 133 See, e.g., discussion of National Museum of the United States Army contained in Conference Report to 

accompany H.R. 1540, National Defense Authorization Act for Fiscal Year 2012. The conference report states: 

 

[T]he conferees direct the Secretary of the Army to establish and maintain a clear and auditable 

separation of accounts between appropriations and private donations to ensure that the military 

construction appropriations are used only for the infrastructure and utilities up to the museum 

building exterior. The conferees agree that amounts appropriated for military construction should 

not be used to construct the museum. 

Id.

134 U.S. Forces Korea responses to October 9, 2012 Committee staff questions (October 22, 2012) 135 Email from Army Legislative Liaison to Committee staff (October 15, 2012). 
24 

Committee asked for clarification on those plans and was informed in January 2013 that USFK 

was no longer considering the use of ROKFC contributions to build the facility.136 

2. USFK’s Use of South Korean Labor Cost Sharing Contributions at Yongsan 

According to USFK, unit moves associated with the Yongsan Relocation Plan will be 

completed by 2016 and, at that point, the population at Yongsan will include only a relatively 

small number of personnel.137 As forces move from Seoul to Camp Humphreys, land and 

facilities currently occupied at Yongsan will be returned to the South Korean government. 

During the transition, it is important that proposed investments in new construction and facility 

improvements be carefully scrutinized to ensure that we do not overinvest in non-enduring 

facilities at Yongsan. The Committee’s review, however, raises questions about certain projects 

at Yongsan. One of those, a project to consolidate two garrison dining facilities, underscores the 

need for better accounting to ensure that South Korean contributions are actually used to offset 

U.S. costs rather than supplement U.S. spending. 

In 2010, Yongsan Garrison decided to consolidate two existing dining facilities into one 

on the basis that maintaining the status quo would be “[c]ostly in terms of 

operations/maintenance for two separate and independent [dining facilities].”138 Analysis 

supporting that decision purported to show that a one-time investment of $1.4 million to 

consolidate and renovate the remaining facility would reduce annual operating costs by $295,000 

per year, resulting in a five year payback. The “savings” identified by the garrison’s analysis, 

however, were not actually savings at all. Rather, they were a product of a decision to not 

include certain labor costs for the dining facility in the cost-benefit analysis because the garrison 

expected to pay those costs with South Korean funds.139 The analysis, in effect, treated South 

Korea’s SMA contribution as “free” money. 

According to the garrison’s cost-benefit analysis, annual direct hire labor costs for the 

two existing dining facilities amounted to $288,000 per year. Of that amount, $246,000 was 

being paid with Labor Cost Sharing funds, leaving $42,000 to be paid with U.S. appropriated 

funds. The analysis indicated that consolidating the two dining facilities would increase the 

annual cost of direct hire labor to $843,000, and that $594,000 of that amount would be paid with 

South Korean contributions under the SMA Labor Cost Sharing program. The remainder, or 

$249,000, was to be paid with appropriated funds.140 

In concluding that consolidation was the less expensive option, however, the garrison 

excluded from the cost-benefit analysis all labor costs paid with South Korean Labor Cost 

Sharing contributions. Doing so distorted the comparison of alternatives and resulted in an 

underestimation of operating costs for the consolidation by $594,000. At the same time, South 

 

136 U.S. Forces Korea, Korea Bread and Pastry Facility (January 28, 2013). 137 The total U.S. population (including dependents) at Yongsan Garrison in June 2012 was more than 6,000. By 

2017, USFK estimated the total U.S. population would number in the hundreds. U.S. Forces Korea responses to 

July 6, 2012 Committee staff questions (July 17, 2012). 

138 U.S. Forces Korea, Honor’s Café Business Case (July 17, 2012). 139 Id. 140 Id. 
25 

Korean Labor Cost Sharing contributions used for the project were not available for other 

purposes. Had South Korean contributions been included as a cost, the analysis would have 

shown that, rather than saving $295,000 a year in operating costs, the $1.4 million spent by the 

garrison to consolidate the two facilities actually increased operating costs by $53,000 per 

year.141 

The Committee asked whether it was Yongsan Garrison’s regular practice to subtract 

SMA labor cost sharing (LCS) funds from the “cost” portion of cost benefit analyses for 

proposed projects. The garrison responded that Korean contributions “are subtracted when we 

wish to specifically consider the actual U.S. government costs in cases where Korean labor costs 

are also involved.”142 What that practice fails to consider is that Korean contributions are best 

used to offset – rather than supplement – U.S. costs. That practice runs the risk of U.S. taxpayer 

funds being used to subsidize projects that do not make economic sense – as appears to have 

been the case with the dining facility consolidation. 

D. Shift in DOD Policy Increases U.S. Costs in South Korea 

Recent changes in policy have led to a more than doubling in the number of Command 

Sponsored Families in South Korea. If that number remains at the 2012 level, the cost to support 

the increase will be significant. The Army’s proposed plan to provide on-post family housing 

relies on U.S. taxpayers paying hundreds of millions of dollars in inflated rental costs for 

decades to come. 

1. USFK Proposes Full Tour Normalization 

When a U.S. service member is assigned overseas, his or her orders specify whether the 

tour is to be Accompanied or Unaccompanied by family members. Service members who have 

orders for Accompanied tours and are sponsored by their new command are extended a range of 

benefits, including eligibility for on-post family housing and space for their dependent children 

at a Department of Defense school. 

According to USFK, in 2007 there were around 1,700 Command Sponsored Families in 

South Korea.143 In 2008, USFK sought a change in policy, referred to as Tour Normalization, to 

make tours for U.S. service members assigned to South Korea more like those for service 

members assigned to other overseas locations like Germany or Japan, and to increase the number 

of Command Sponsored Families in South Korea. Under Tour Normalization, forces assigned to 

South Korea could also be deployed off of the Korean peninsula while their families remained in 

the country. 

In November of that year, the Chairman of the Joints Chiefs of Staff sent a memo to the 

Under Secretary of Defense for Personnel and Readiness endorsing USFK’s request and 

 

141 Id. 142 U.S. Forces Korea, USAG Yongsan Honor’s Café and Labor Cost Sharing Funds (February 4, 2013) (emphasis 

added). 

143 U.S. Forces Korea, Military Command Sponsored Families from 2005-2012 (July 6, 2012). 
26 

recommending “an immediate increase of command sponsorship,” with the caveat that growth in 

the number of command sponsored families should occur “as the needed growth in 

infrastructure, services, and base support is realized.”144 Weeks later, the Undersecretary of 

Defense for Personnel and Readiness approved the request but stated that “accompanied tour 

lengths are subject to adequacy of support infrastructure.” 145 

The change in policy allowed USFK to implement the first phase of Tour Normalization 

and increase the number of Command Sponsored Families in South Korea.146 In fact, between 

2008 and 2010, the number of Command Sponsored Families in South Korea more than 

doubled.147 At the time, USFK said that they intended to eventually expand the number of 

Command Sponsored families to “about 14,250 families” which would have represented half of 

the total number of troops assigned to South Korea.148 In September 2010, the Secretary of 

Defense directed USFK and the military services to proceed with full Tour Normalization “as 

affordable.”149 

During the same time frame, questions were being raised about the cost of posture 

changes in South Korea. At a September 2010 Senate Armed Services Committee hearing, 

Chairman Carl Levin asked the USFK Commander about significant increases in cost estimates 

for the build-up at Camp Humphreys and about USFK plans for Tour Normalization. In 

questions for the record following the hearing, Senator McCain asked specifically about what 

could be done to reign in “incredibly high” costs associated with building family housing at 

Camp Humphreys.150 A few months later, in February 2011, Senator McCain asked Secretary of 

Defense Gates about costs associated with Tour Normalization and whether, given North 

Korea’s continued belligerence, the Department still intended to station U.S. military families in 

South Korea.151

At an April 2011 hearing, Chairman Levin called the timing of Tour Normalization in 

South Korea “questionable, given the belligerence of North Korea” and raised concern about the 

potentially significant costs associated with family housing.152 In questions for the record 

following that hearing, Senator McCain similarly asked whether the U.S. “really need[s] to 

 

144 Admiral M.G. Mullen, Memorandum re South Korea Tour Length Change Request (November 13, 2008). 145 Under Secretary of Defense for Personnel and Readiness, Memorandum re South Korea Tour Length (December 

1, 2008). 

146 U.S. Forces Korea, The New South Korea, Strategic Digest, Strategic Alliance 2015 (October 2010); U.S. Forces 

Korea, Press Release: DoD Memo lays Groundwork for Tour Normalization in South Korea (December 11, 2008). 147 U.S. Forces Korea, Military Command Sponsored Families from 2005-2012 (July 6, 2012). 148 U.S. Forces Korea, Press Release: DoD Memo lays Groundwork for Tour Normalization in South Korea

(December 11, 2008). 

149 Secretary of Defense Robert M. Gates, Memorandum re U.S. Forces Korea (USFK) Tour Normalization

(October 18, 2010). 

150 Senate Armed Services Committee hearing, The Current Security Situation on the Korean Peninsula (September 

16, 2010). 

151 Senate Armed Services Committee Hearing to receive Testimony on DOD Authorization for Appropriations for 

the Fiscal Year 2012 and the Future Years Defense Program (February 17, 2011). 152 Senate Armed Services Committee Hearing to receive Testimony on U.S. Pacific Command and U.S. Forces 

Korea in review of the Defense Authorization Request for Fiscal Year 2012 and the Future Years Defense Program 

(April 12, 2011). 
27 

station families in an area near an unstable and unpredictable adversary” and again raised 

questions about costs associated with providing family housing at Camp Humphreys.153

The following month, Senators Levin, McCain, and Webb issued a statement calling on 

DOD to place realignment of U.S. forces in South Korea “on hold pending further review, and 

reevaluate any proposal to increase the number of family members accompanying military 

personnel.”154 

Also in May 2011, the Government Accountability Office (GAO) issued a report raising 

questions about Tour Normalization, stating that the initiative “could cost DOD $5 billion by 

2020 and $22 billion or more through 2050.” 155 GAO criticized the lack of a business case 

analysis and said that DOD was “unable to demonstrate that tour normalization is the most costeffective approach to meeting its strategic objectives.”156 In fact, GAO went so far as to 

recommend that DOD “limit investments at Camp Humphreys [where most of the infrastructure 

to support Tour Normalization was to be built] until the business case is completed.” 157

A month later, the Senate Armed Services Committee’s issued its report to accompany 

the National Defense Authorization Act Fiscal Year 2012. The report expressed concerns about 

the cost of USFK’s plan – particularly those likely at Camp Humphreys: 

In addition to these high, unbudgeted costs, the precarious security situation on 

the South Korean Peninsula created by the belligerent and unpredictable regime in 

North Korea raises serious concerns about the appropriateness of pursuing Tour 

Normalization at this time or in the foreseeable future.158

Less than a year later, in March 2012, USFK’s Commander said that the Department of 

Defense was “not able to afford Tour Normalization at this time.”159 Notwithstanding that 

decision, however, USFK still faces the challenge of funding infrastructure to support the large 

increase in Command Sponsored Families that resulted from Phase I of Tour Normalization – 

including the cost of family housing. 

2. Phase I of Tour Normalization Challenges USFK Infrastructure 

When the USFK Commander announced the suspension of full Tour Normalization, he 

said that he was “content to remain at the currently authorized 4,645 Command Sponsored 

 

153 Id. 154 Press Release, Senators Levin, McCain, Webb Call for Re-Examination of Military Basing Plans in East Asia

(May 11, 2011). 

155 Government Accountability Office, Comprehensive Cost Information and Analysis of Alternatives Needed to 

Assess Military Posture in Asia (May 2011) (hereinafter GAO Asia Report). 156 GAO Asia Report at highlights page. 157 Id. 158 U.S. Senate, Report No. 112-026, National Defense Authorization Act for Fiscal Year 2012: Military 

Realignments in Korea (June 22, 2011). 159 General James Thurman, Statement before Hearing of the U.S. House of Representatives Committee on 

Appropriations, Subcommittee on Military Construction, Veterans Affairs, and Related Agencies (March 29, 2012) 

at 14. 
28 

Families” that resulted from the first phase of Tour Normalization.160 As shown in Figure 4, 

however, 4,645 families still represented a more than doubling of the number of Command 

Sponsored Families in South Korea since 2008, when DOD approved Tour Normalization. 

Figure 4 

 Source: USFK161

The increase in the number of Command Sponsored Families that occurred after 2008 not 

only exhausted many existing resources but it also posed a challenge for USFK’s planning for its 

future force posture. The growth occurred as USFK was planning to move a large number of its 

forces to Camp Humphreys as part of the Yongsan Relocation Program (YRP) and Land 

Partnership Plan (LPP). As discussed above, the YRP involves the move of U.S. forces from 

Seoul to Camp Humphreys while the LPP involves repositioning forces mostly from areas north 

of Seoul to Camp Humphreys and the City of Daegu. 

According to USFK, when unit moves from the YRP and LPP are complete in 2016, 

there will be 3,308 Command Sponsored Families assigned to Camp Humphreys.162 The number 

of families projected at Camp Humphreys alone is nearly double the number of Command 

Sponsored families in all of South Korea in 2008. There are substantial costs associated with the 

increase in families that occurred as a result of Phase I of the plan, including the cost of family 

housing. 

 

160 Id. 161 U.S. Forces Korea, Military Command Sponsored Families from 2005-2012 (July 6, 2012); U.S. Forces Korea, 

Military Command Sponsored Families Approved as of 09-20-2012 available at

(http://www.usfk.mil/usfk/Uploads/120/USFK_CS_NCS_Families_Report_20_Sep_12.pdf (January 25, 2013). 162 U.S. Forces Korea, USFK Relocation and Master Plan Execution at USAG Humphreys (February 2012). 
29 

3. Family Housing Demand at Camp Humphreys 

In the YRP agreement, South Korea agreed to pay to build housing at Camp Humphreys 

to replace DOD owned housing at Yongsan Garrison.163 However, most family housing at 

Yongsan is not owned by the United States and South Korea is only obligated to fund the 

construction of 333 family housing units at Camp Humphreys.164 The U.S. is responsible for the 

remainder. Other U.S. forces will also be moving to Camp Humphreys under the LPP, 

increasing the demand for family housing. The cost of any family housing necessitated by the 

LPP is a U.S. obligation. 

 

The USFK Commander has stated that 40 percent of the 3,308 Command Sponsored 

Families slated for assignment to Camp Humphreys must live on-post to “fully meet operational 

requirements.”165 Meeting that 40 percent on-post requirement would mean that 1,324 family 

housing units would need to be available on-post at Camp Humphreys. USFK has proposed 

combining several sources to meet that total. As reflected in Figure 5, there are 142 existing 

family housing units at Humphreys. Additionally, Congress previously appropriated funds to 

build 210 additional family housing units, and the YRP obligates South Korea to build 333 units. 

However, the combination of those three still leaves a deficit of 639 family housing units, if the 

Commander’s 40 percent requirement is to be met. 

Figure 5 

Family Housing at Camp Humphreys 

Source of On-Post Family Housing Family Housing Units 

Existing Family Housing at Camp Humphreys 142 

Family Housing Built With FY 2009 Appropriations 210 

Family Housing Paid by South Korea under YRP 333 

Total Family Housing from identified sources 685 

Family Housing “Required” by USFK 1,324 

Family Housing Deficit 639 

 

163 Agreement Between the United States of America and the Republic of South Korea on the relocation of United 

States Forces from the Seoul Metropolitan Area, Article 4 (October 26, 2004) (emphasis added). As of July 11, 

2012, there were 853 command sponsored families living on-post at Yongsan. However, most of those families 

were living in on-post leased housing. U.S. Forces Korea responses to July 9, 2012 Committee staff questions (July 

16, 2012). 

164 Joint Committee under the United States of America and the Republic of Korea Status of Forces Agreement, 

Memorandum re Agreed Recommendation of Ad Hoc Subcommittee for the Yongsan Relocation Plan (January 7, 

2008). 

165 Email from Committee staff to Office of the Under Secretary of the Army et al. (September 10, 2012); U.S. 

Forces Korea, General James D. Thurman to the Secretary of the Army, Memorandum re USFK Housing 

Requirement (July 10, 2012). 
30 

The Army has proposed a private-public venture to build the family housing units 

necessary to make up for the deficit. However, the Army’s plan, called the Humphreys Housing 

Opportunity Program (HHOP), has given rise to concerns about the costs, the legality, and the 

precedential impact of the proposed arrangement. 

a. Humphreys Housing Opportunity Plan 

i. DOD Announces Public‐Private Venture		

On December 18, 2008, the Deputy Assistant Secretary of the Army (Installations and 

Environment) and the Managing Director of a private development group called Humphreys 

Family Communities LLC signed a Business Points Memorandum (BPM) outlining terms and 

conditions to be incorporated into a future agreement for Humphreys Family Communities LLC 

to construct, operate and maintain family housing at Camp Humphreys. The Army said at the 

time that the HHOP project would be the “largest single military housing project since World 

War II.”166

The Army’s agreement with the developer stipulated that the developer would build, 

operate and maintain housing that could be rented to military families using the rental portion of 

their overseas housing allowance (OHA).167 In effect, the Army proposed to use housing 

allowances, rather than military construction funds, to pay for the construction of military 

housing. According to the Army, U.S. occupancy of HHOP units would not be guaranteed and 

the Army could withdraw from the agreement “at any time ... without incurring any penalty or 

further financial obligation.”168 The Army has said that HHOP would enable them “to produce 

affordable housing for individual rentals at no capital construction investment by the Army.” 169 

However, as discussed below, the Army has since proposed contributing, in effect, $125 million 

to the cost of HHOP. While the developer would bear the balance of HHOP construction costs, 

that investment would be recovered over time through inflated rental rates paid by U.S. 

taxpayers. 

ii. Housing Agreement Depends on Massive Rental Rate Increase

The BPM agreement set rental rates for HHOP family housing units at a weighted 

average of $3,617 per unit and stipulated that each year the rate “will be increased by an amount 

 

166 U.S. Army, Press Release: Army announces $1.3 billion housing agreement in South Korea (January 8, 2009). 167 OHA is a monthly allowance paid to service members assigned to permanent duty stations overseas and who are 

authorized to live in private housing. OHA includes rent, utilities and a move-in housing allowance. U.S. 

Department of Defense, Joint Federal Travel Regulation, Appendix K (October 1, 2012). 168 Those terms would be contained in a yet-to-be completed “Use Agreement” between the Army and Humphreys 

Family Housing, LLC. U.S. Forces Korea, Information Paper: Duration of Humphreys Housing Opportunity 

Program Use Agreement (February 17, 2012) (emphasis added). 169 U.S. Army, Press Release: Army announces $1.3 billion housing agreement in South Korea (January 8, 2009). 
31 

equal to three percent (3%) of the then applicable Rental Rate.” 170 (Notwithstanding that 

statement in the BPM, the Army has said that 3 percent increase is not automatic.) By contrast, 

at the time the agreement was signed, the rental component of the overseas housing allowance 

(OHA) for an accompanied U.S. service member serving at Camp Humphreys was 

approximately $1,000.171 

By January 2010, turmoil in the financial markets had resulted in the proposed HHOP 

rental rate necessary for the developer to secure financing to balloon to $6,000 per month.172 

As discussed above, under the YRP agreement, South Korea agreed to pay for the 

construction of 333 family housing units at Camp Humphreys. In order to reduce the capital cost 

of the HHOP project and thereby reduce the $6,000 rental rate, the Army decided to use 216 of 

those 333 family housing units – worth approximately $125 million – as an equity contribution 

to support the construction of HHOP.173 Even with that $125 million factored in, however, the 

proposed HHOP rent only fell to $4,200, a rate that would apply to all HHOP units, even ones 

that the Army’s equity contribution paid to build. Nevertheless, in September 2010 the Secretary 

of Defense directed the Army to execute the first phase of HHOP.174 

In March 2011, the Secretary of the Army wrote to the Under Secretary of Defense for 

Personnel and Readiness, requesting approval of an OHA of $4,200 for HHOP units. The 

request cited “special circumstances” relating to the YRP as a basis for the increase.175 In 2012, 

the Army reduced the amount of that request to $3,900.176 As of March 2013, the Army was still 

seeking approval of a $3,900 OHA rate for HHOP units.177 By contrast, in March 2013, the 

rental portion of the OHA for a military family assigned to Camp Humphreys was roughly 

$1,600 per month, less than half the current proposed HHOP rate.178 The $3,900 rate already 

factors in the Army’s $125 million equity contribution. As of March 2013, the Department of 

 

170 That rental rate did not include the cost of utilities and, according to the BPM, tenants would pay their bills with 

their DOD provided utility allowance. USAG Humphreys Housing Opportunity Project (HHOP) Business Points 

Memorandum (BPM) (December 18, 2008) at 7. 

171 Defense Travel Management Office, December 2008 Overseas Housing Allowance, as reported in OHA 

Calculator available at http://www.defensetravel.dod.mil/site/ohaCalc.cfm (January 20, 2013). 172 U.S. Army, U.S. Army Garrison Humphreys Army Family Housing Support for Yongsan Relocation Program 

(YRP) (August 23, 2012) at 7. 173 Id. 174 Secretary of Defense Robert M. Gates, Memorandum re U.S. Forces Korea (USFK) Tour Normalization

(October 18, 2010). 

175 John M. McHugh to Under Secretary of Defense for Personnel and Readiness, Memorandum re Request 

Establishment of an Overseas Allowance (OHA) Rate for United States Army Garrison (USAG) Humphreys based 

on Special Circumstances (March 29, 2011). 176 The Army was able to lower the amount of the requested increase by reducing apartment sizes by five percent 

and by reducing the number of five bedroom units. U.S. Army, Humphreys Housing Opportunity Program (August 

17, 2012). 

177 Email from Deputy Assistant Secretary of Army (Installations, Energy and Environment) to Committee staff 

(March 20, 2013). 

178 Defense Travel Management Office, December 2008 Overseas Housing Allowance as reported in OHA 

Calculator available at http://www.defensetravel.dod.mil/site/ohaCalc.cfm (January 20, 2013). 
32 

Defense had yet to act on the Army’s request to increase the OHA for HHOP, approval of which 

would impose substantial long-term costs.179

iii. Long Term HHOP Costs

As discussed above, the USFK Commander has set the number of on-post family housing 

units needed at Camp Humphreys at 1,324. The Army intends for 850 of those 1,324 units to be 

HHOP units, with the remainder coming from a combination of existing units, South Korean 

funded units, and units built with already appropriated funds. 

The Army has said that the cost of 850 HHOP units at $3,900 a month per unit “equals a 

marginal increase” in the cost to house military families in South Korea.180 That claim is based 

on a comparison of the HHOP rate to the current OHA rental rate in Seoul, which was 

approximately $3,400 in December 2012.181 However, HHOP is to be built at Camp 

Humphreys, 40 kilometers south of Seoul where, as of October 2012, the OHA rate was about 

$1,600. 182 

The potential long-term costs of the proposed HHOP rate are significant. As shown in 

Figure 6, over 20 years, the cost of 850 units at the HHOP rental rate would exceed the cost of 

the October 2012 Camp Humphreys OHA rental rate by more than $630 million. That $630 

million would be a U.S. cost and does not even include the Army’s $125 million equity 

contribution. 

 

 

179 Email from Deputy Assistant Secretary of Army (Installations, Energy and Environment) to Committee staff 

(March 20, 2013). 

180 U.S. Army, Information Paper: Humphreys Housing Opportunity Program (August 17, 2012). 181 Defense Travel Management Office, OHA Calculator available at

http://www.defensetravel.dod.mil/site/ohaCalc.cfm (January 20, 2013). 182 Id. The Army’s use of Seoul rates as a benchmark for rents at Humphreys is not new. In its May 2008 

solicitation for parties to submit Statements of Qualification for HHOP, the Army stated that “offerors should expect 

that OHA for U.S. Army Garrison-Humphreys will fall between the rates currently paid to Soldiers assigned to U.S. 

Army Garrison – Humphreys and the OHA paid to Soldiers assigned to installations in Seoul.” U.S. Army Garrison 

– Humphreys Housing Opportunity Statement of Qualification (SOQ) for Apartment-Style Military Family Housing 

Under a Use Agreement at U.S. Army Garrison – Humphreys, Republic of South Korea (May 16, 2008) at 5. 
33 

Figure 6183

Long-Term HHOP Costs 

iv. Legal Concerns with HHOP

In addition to its long-term costs, HHOP also raises serious legal questions. The law 

requires the Secretary of Defense to “establish the basic allowance for housing [for a military 

service member] on the basis of housing costs in the overseas area in which the member is 

assigned.”184 The Joint Federal Travel Regulations (JFTR) state that maximum OHA rates are to 

be calculated based on “actual rent data derived from pay systems.”185 As discussed above, the 

proposed OHA rental rate sought for HHOP was based on the Army’s negotiations with the 

developer to build housing rather than actual rent data in the Camp Humphreys area as 

proscribed by the JFTR. 

 

183 The analysis assumes an initial OHA rental rate of $1,600 and HHOP of $3,900 and escalates rates by 3 percent a 

year. If rents do not escalate at the 3 percent rate specified in the BPM, long-term costs of HHOP could be reduced. 

However, even if HHOP rents were to hold steady at $3,900 over twenty years, a seemingly unlikely prospect, and 

OHA rates conversely escalated by 3 percent annually, the long-term cost of HHOP would still amount to hundreds 

of millions of dollars. 

184 37 U.S.C. § 403 (c)(1). 185 Joint Federal Travel Regulations, Volume 1, Chapter 10, paragraph U10002: Housing Allowance. 

Year 850 units @ OHA Rental Rate 850 units at HHOP Rental Rate Cost Difference OHA vs. HHOP

2013 $16,320,000 $39,780,000 $23,460,000

2014 $16,809,600 $40,973,400 $24,163,800

2015 $17,313,888 $42,202,602 $24,888,714

2016 $17,833,305 $43,468,680 $25,635,375

2017 $18,368,304 $44,772,740 $26,404,437

2018 $18,919,353 $46,115,923 $27,196,570

2019 $19,486,933 $47,499,400 $28,012,467

2020 $20,071,541 $48,924,382 $28,852,841

2021 $20,673,688 $50,392,114 $29,718,426

2022 $21,293,898 $51,903,877 $30,609,979

2023 $21,932,715 $53,460,994 $31,528,278

2024 $22,590,697 $55,064,823 $32,474,127

2025 $23,268,418 $56,716,768 $33,448,350

2026 $23,966,470 $58,418,271 $34,451,801

2027 $24,685,464 $60,170,819 $35,485,355

2028 $25,426,028 $61,975,944 $36,549,916

2029 $26,188,809 $63,835,222 $37,646,413

2030 $26,974,473 $65,750,279 $38,775,805

2031 $27,783,708 $67,722,787 $39,939,080

2032 $28,617,219 $69,754,471 $41,137,252

TOTALS $438,524,512 $1,068,903,497 $630,378,986
34 

In his request for the Department of Defense to approve a separate OHA rate for HHOP, 

the Secretary of the Army stated that the need for the increase was based on “special 

circumstances” relating to the relocation of personnel from Seoul to Camp Humphreys under the 

YRP. 186 The JFTR permits the Secretary of the Army and the Per Diem, Travel and 

Transportation Allowance Committee (PDTATAC) Chair to jointly authorize a different rate for 

a service member than would otherwise be required “due to special circumstances.”187 However, 

the regulation does not define “special circumstances.”188 While the Army’s request invokes 

special circumstances to justify increasing the OHA for HHOP, the Army has not identified any 

previous case in which special circumstances were used in this manner. 

In response to the Secretary of the Army’s request for an OHA increase, the office of the 

Under Secretary of Defense for Personnel and Readiness requested that the Army provide a 

written justification that the “requested rate reflects local economic conditions.”189 The request 

also stated that there is “an essential link between OHA and the prevailing local rental 

markets.”190 The resulting Army analysis raises concerns. 

The analysis stated that it is “legally unobjectionable” to base the OHA rate “at least in 

part” on the expected future rental cost of HHOP housing units. 191 Neither the law nor the JFTR 

directly address that issue but the Army’s interpretation appears to be without precedent. 

Further, even if one accepted the argument that it is legally permissible to set future OHA rates 

based, in part, on the rental cost of HHOP units, the Army’s own analysis also stated that: 

[S]uch a [OHA rate-setting] methodology will take into account the costs of 

adequate rental housing procured by Soldiers off of USAG-Humphreys as well as 

the proposed HHOP related housing on-post.

192 

It does not appear, however, that actual off-post rental rates were factored into the 

proposed OHA rate. Rather, the Army has said that “rental data associated with suitable family 

housing located in the vicinity of [Camp Humphreys] was normalized to account for ‘unique’ 

costs” associated with HHOP – such as meeting Army on-post building requirements.193 The 

Committee is unaware of such a methodology ever being used to justify an OHA rate. Given 

their support for HHOP, it is perhaps not surprising that the Army’s process for normalizing the 

off-post OHA rate led them to conclude that $3,900, the same rate deemed necessary for 

HHOP’s developer to secure financing for the project, was justified. 

 

186 John M. McHugh to Under Secretary of Defense for Personnel and Readiness, Memorandum re Request 

Establishment of an Overseas Housing Allowance (OHA) Rate for United States Army Garrison (USAG) 

Humphreys based on Special Circumstances (March 29, 2011). 187 Joint Federal Travel Regulations, Volume 1 Chapter 10, paragraph U10020: OHA-General. 188 Id. The regulation states, “The amount of OHA payable is determined as shown in APP K, unless a special 

determination jointly issued by the Secretary Concerned and the PDTATAC Chair authorizes a different rate due to 

special circumstances.” Id. 189 Office of the Under Secretary of Defense for Personnel and Readiness to Secretary of the Army, Memorandum re 

Execution of Humphreys Housing Opportunity Program Phase I (HHOP-I) (November 5, 2010). 190 Id. 191 U.S. Army, Analysis for Special Circumstances (2011). 192 U.S. Army, Analysis for Special Circumstances (2011) (emphasis added). 193 U.S. Army, Information Paper (January 16, 2013). 
35 

E. Oversight of Republic of South Korea SMA Contributions 

Aggressive oversight of USFK’s use of South Korean contributions is important to 

ensuring that the benefit of South Korean contributions to U.S. taxpayers is maximized. 

Compared with military construction projects for which appropriated funds are sought, however, 

USFK appears to have a considerable amount of discretion in deciding how to use South Korean 

contributions. In fact, the Committee’s review of the oversight process for military construction 

projects paid with South Korean contributions identified several areas for concern, including the 

review process for proposed construction projects and USFK’s ability to account for South 

Korean in-kind contributions. 

1. Congressional Oversight of South Korean Construction-Related Contributions 

Military construction projects built with appropriated funds go through a rigorous review 

and approval process. Before U.S. appropriations are authorized, such projects have typically 

been reviewed by the relevant Military Service and the Department of Defense and included in 

the Department’s budget request to Congress. Prior to including a project in its annual National 

Defense Authorization Act, the Senate Armed Services Committee reviews detailed information 

about the project, including the associated Military Construction Project Data Sheet (DD Form 

1391), and is typically briefed by the relevant service component on the need for the project. 

The same is not true of construction projects funded with South Korean contributions. 

Most military construction projects underway or planned in South Korea are being 

funded under either the YRP agreement or with South Korean contributions provided under the 

SMA’s Republic of South Korea Funded Construction Program (ROKFC). Unlike projects 

funded with U.S. appropriations, no Congressional authorization for YRP and ROKFC-funded 

projects is required. The amount spent on such projects is not easily determined and there are 

significant gaps in requirements relating to reporting how South Korean contributions are spent. 

Under existing law, the Secretary of Defense is required to submit an annual report to 

Congress listing total cash contributions accepted from foreign governments in the preceding 

year, how much of the total amount was expended, and for what purpose – including cash used 

for military construction projects.194 Cash contributions provided by South Korea under the 

SMA’s Labor Cost Sharing and ROKFC programs have been included in those annual reports. 

For example, the FY 2011 report identified $358 million in South Korean cash contributions.195 

The law does not, however, require that in-kind contributions be reported. So, for 

example, the USFK Commander has said that $339 million in 2012 South Korean contributions 

will be directed to the ROKFC program – an in-kind program.196 Because those contributions 

 

194 The law permits the Secretary of Defense to accept cash contributions from foreign governments to compensate 

local national employees and pay for services, supplies and military construction projects. 10 U.S.C. § 2350j. 

195 U.S. Department of Defense, Fiscal Year 2011 Burden Sharing Contribution Report (December 28, 2011). 196 General James Thurman, Statement before Hearing of the U.S. House of Representatives Committee on 

Appropriations, Subcommittee on Military Construction, Veterans Affairs, and Related Agencies (March 29, 2012). 
36 

are in-kind rather than cash, they will not be included in DOD’s annual burden-sharing reports to 

Congress.197 Nor are in-kind contributions tracked by the DOD Comptroller.198

The law also requires that the Department notify Congress of any military construction 

project funded with cash contributions from another country. Notifications must include a 

justification for the project as well as its estimated cost. While the law does not explicitly 

require Congressional approval as a precondition for the Department to proceed, projects may 

not be initiated for 21 days after such notification has been submitted, providing Congress an 

opportunity to review and potentially object to the proposed project.199 

The law’s notice and wait provisions relating to military construction projects do not 

extend to projects built with in-kind contributions.200 So, none of the projects built with the $339 

million in 2012 South Korean contributions will be notified to Congress. In fact, no 

Congressional notification was provided for well over $100 million in military construction 

projects that USFK has already completed with ROKFC in-kind contributions from previous 

years.201 Notwithstanding the lack of notification, Congress will be responsible for appropriating 

funds to operate and maintain those facilities once they are completed. 

2. OSD, PACOM and Military Service Oversight of South Korean Contributions 

DOD Directive 4270.34 assigns responsibilities for the oversight of host nation funded 

construction programs in the U.S. Pacific Command’s (PACOM) Area of Responsibility (AOR) 

to the Under Secretary of Defense for Acquisition, Technology, and Logistics (AT&L), the 

military services, and PACOM. 202 The Committee’s review identified weaknesses in how that 

directive is applied. 

The DOD Directive assigns “overall direction and policy control” of host nation funded 

construction programs in PACOM’s AOR to AT&L and charges the Under Secretary with the 

responsibility to review proposed host nation funded construction projects.203 South Korean 

 

197 Id. Logistics Cost Sharing contributions are also in-kind and, as such, are not included in the annual reports 

required by 10 U.S.C. § 2350j. 

198 Committee staff meeting with staff of the Under Office of Secretary of Defense (Comptroller) (March 16, 2012). 199 The law’s notice and wait requirements, however, do not apply to projects carried out in countries where a 

declaration of war has been issued or a national emergency has been declared by the President. In such cases, the 

Secretary of Defense is required to notify Congress and provide the project’s estimated cost. 10 U.S.C. § 2350(j). 200 Id. 201 USFK does not have discretion to choose YRP projects as they were specified in agreements reached between the 

U.S. and South Korea in 1998. Memorandum of the Joint Committee under the United States of America and the 

Republic of South Korea Status of Forces Agreement (January 7, 2008); U.S. Forces Korea responses to October 9, 

2012 Committee staff questions (October 22, 2012). 

202 The Directive defines “host nation funded program” as “[a]ny construction program that provides facilities in 

direct support of DOD personnel or programs, and that is funded partially or totally by a host nation in which DOD 

personnel are stationed.” U.S. Department of Defense, Directive 4270.34 (January 12, 2005). 

203 South Korean contributions under the YRP program are not covered by the Directive. While the Directive does 

apply to the Republic of South Korea Funded Construction Program (ROKFC), AT&L has not issued written 

policies on the use of or accounting for ROKFC contributions. U.S. Department of Defense, Directive 4270.34; 

Committee staff meeting with Office of the Deputy Under Secretary of Defense (Installations and Environment) 

(June 12, 2012). 
37 

contributions under the YRP program are not covered by the Directive.204 AT&L receives 

Military Construction Project Data Sheets (DD Form 1391), which include detailed project 

descriptions and cost and schedule information for ROKFC projects funded with cash 

contributions. However, for ROKFC in-kind contributions, AT&L normally reviews only a list 

of projects, a cost estimate and a brief (typically one sentence) description.205 Typically AT&L 

does not even receive DD Form 1391s for these in-kind ROKFC projects.206 Nor is AT&L 

appropriately staffed to conduct detailed reviews of military construction projects.207

The DOD Directive states that the PACOM Commander, through the Chairman of the 

Joint Chiefs of Staff, shall “exercise overall theater direction and control” and “monitor the 

planning, programming, design, and construction” of host nation funded construction 

programs.208 PACOM staff advised the Committee that, in the case of the ROKFC and other 

host nation funded construction programs in South Korea, responsibilities assigned to PACOM 

in the Directive are largely delegated to USFK. While, like AT&L, PACOM reviews 

construction project lists provided by USFK, the Command’s primary interest is ensuring that 

USFK plans are consistent with PACOM’s Theater Posture Plan and maintain required 

operational capabilities.209 PACOM does not typically review individual construction 

projects.210

As discussed above, before U.S. appropriations are authorized for a military construction 

project, that project has typically undergone a detailed review by the relevant Military Service 

before being designated as a priority and submitted to Congress as part of a DOD budget request. 

That is not the case for most military construction projects built with South Korean contributions 

as the Army, for example, exerts little influence in USFK decisions to direct SMA funding to 

particular projects. The Army does not approve South Korea funded construction projects 

planned by USFK. In fact, the Army does not even receive DD Form 1391s produced by USFK 

for South Korean-funded projects.211 

 

204 Specific facilities to be built by South Korea under the YRP were included in a January 7, 2008 agreement 

between the United States and Republic of South Korea. Memorandum of the Joint Committee Under the United 

States of America and the Republic of South Korea Status of Forces Agreement (January 7, 2008); Committee staff 

meeting with Office of the Deputy Under Secretary of Defense (Installations and Environment) (June 12, 2012). 

205 The Committee reviewed project lists provided by USFK to AT&L for calendar years 2011 and 2012. 

Committee staff meeting with Office of the Deputy Under Secretary of Defense (Installations and Environment) 

(June 12, 2012). 

206 AT&L receives the DD Form 1391s for cash projects only because 10 U.S.C. § 2350j requires that Congress be 

notified of any military construction project funded with cash contributions from another country and the DD Form 

1391 is included as part of that notification. Committee staff meeting with Office of the Deputy Under Secretary of 

Defense (Installations and Environment) (June 12, 2012). 

207 Committee staff meeting with Office of the Deputy Under Secretary of Defense (Installations and Environment). 

(June 12, 2012). 

208 Department of Defense, Directive 4270.34. 209 Committee staff telephone conferences with U.S. Pacific Command staff (July 20, 2012 & July 26, 2012). 210 Id. 211 Email from Department of Defense Office of Legislative Counsel to Committee staff (December 17, 2012); 

Committee staff meeting with U.S. Army (November 19, 2012). 
38 

3. USFK Accounting for Special Measure Agreement ROKFC In-Kind Contributions 

Construction projects funded through the ROKFC in-kind program are selected by the 

USFK Commander, after consultation with the Republic of South Korea, and USFK provides a 

list of approved projects and cost estimates to the South Korean Ministry of National Defense 

(MND).212 

The U.S. Army Corps of Engineers (USACE) provides South Korea with a list of 

acceptable contractors, but the South Korean MND chooses which contractor will build each 

project and manages project construction.213 To track actual construction costs for in-kind 

projects, USFK relies on contract documents provided by the South Korean MND.214 In 2012, 

MND also began providing USFK with a quarterly report detailing contract obligations and 

expenditures for each ROKFC in-kind project. 

The Committee reviewed U.S. cost estimates for in-kind projects completed to date and 

USFK supplied the Committee with copies of construction contract documents for ROKFC inkind projects that the MND had provided them. However, the Committee was unable to read 

those documents because they are written entirely in South Korean. It is also unclear whether 

the documents are complete contracts as the overwhelming majority of them are only a few 

pages long despite being for millions of dollars’ worth of construction. USFK staff reports that 

they do not translate the documents but only extract cost figures from them to track construction 

costs.215 

USFK has allocated more than $600 million to the ROKFC in-kind program since 2011 

and will likely allocate more than $300 million in 2013, the final year of the current SMA. It is 

critical that USFK closely monitor spending on ROKFC in-kind projects to ensure that the U.S. 

receives the most value for South Korea’s host nation support commitments. It is unclear how 

that can be accomplished if USFK doesn’t read the construction contracts. USFK has said, 

however, that they believe that the U.S. is getting good value from the ROKFC in-kind program 

and USFK staff has said they are uncertain as to whether translating and reviewing the contract 

documents would be worthwhile.216

 

 

212 U.S. Forces Korea also provides the South Korean Ministry of National Defense with the DD 1391 forms for 

each project. Implementation Arrangement for Special Measures Agreement ((March 24, 2009); Implementing 

Agreement for Republic of South Korea Funded Construction In-Kind Projects under the CY 2009-2013 

Implementation Arrangement for Special Measures Agreement (January 27, 2012). 213 Implementing Agreement for Republic of South Korea Funded Construction In-Kind Projects under the CY2009-

2013 Implementation Arrangement for Special Measures Agreement. (January 27, 2012). 214 Id. 215 Committee staff meeting with U.S. Forces Korea staff (June 25, 2012). 216 U.S. Forces Korea has said that, as of April 2012, costs for in-kind projects were 9 percent lower than initial 

estimates. U.S. Forces Korea, Analysis of Final ROKFC In-Kind Costs (July 16, 2012); Committee staff meeting 

with U.S. Forces Korea staff (June 25, 2012). 
39 

III. Costs Associated with the U.S. Military Presence in Japan 

The United States has maintained a military presence on Japan since the Japanese 

surrender in 1945 ended World War II. In September 1951, the United States and other allies 

signed the Treaty of Peace with Japan under which Japan regained full sovereignty.217 And on 

January 19, 1960, the U.S. and the Government of Japan (GOJ) executed the Treaty of Mutual 

Cooperation granting the U.S. military access to “facilities and areas” in the country.218 That 

same day, the U.S. and Japan executed a Status of Forces Agreement (SOFA).219 Article XXIV 

of the SOFA states that the U.S. will bear all expenditures incident to maintenance of the U.S. 

presence in Japan but that Japan will provide the use of land and facilities, such as airfields and 

ports, “without cost to the United States.”220

The SOFA also created the U.S.-Japan Security Consultative Committee (SCC) which 

consists of the U.S. Secretaries of State and Defense and the Japanese Ministers of Foreign 

Affairs and Defense.221 The SCC meets periodically to set “bilateral policy regarding the 

security relationship between the United States and Japan.”222 A number of agreements and 

force realignment actions have also been announced through the SCC.223

 As of 2012, U.S. military strength in Japan was approximately 50,000 troops, about half 

of whom were stationed on Okinawa.224 According to the Department of Defense, the U.S. cost 

to maintain forces in Japan was expected to be more than $4.8 billion in Fiscal Year 2012.225 

That amount is on top of approximately $2 billion contributed by the Government of Japan.226 

For FY 2012, U.S. costs included approximately $2.75 billion in personnel costs and 

more than $2 billion in non-personnel costs.227 As shown in Figure 7, U.S. non-personnel costs 

 

217 U.S. State Department, Japan Country Page available at http://www.state.gov/r/pa/ei/bgn/4142.htm (September 

27, 2012). 

218 Treaty of Mutual Cooperation and Security between Japan and the United States of America (January 19, 1960). 219 Agreement Under Article VI of the Treaty of Mutual Cooperation and Security Between the United States of 

America and Japan, Regarding Facilities and Areas and the Status of U.S. Armed Forces in Japan (January 19, 1960) 

(hereinafter “US-Japan SOFA”). 

220 US-Japan SOFA, Article XXIV. 221 US-Japan SOFA, Article XXV; Joint Statement of the Security Consultative Committee (April 27, 2012); U.S. 

State Department, Japan Country Page available at http://www.state.gov/r/pa/ei/bgn/4142.htm (September 27, 

2012); GAO, Overseas Presence: Issues Involved in Reducing the Impact of the U.S. Military Presence on Okinawa 

(March 1998) at 15. 

222 GAO, Overseas Presence: Issues Involved in Reducing the Impact of the U.S. Military Presence on Okinawa 

(March 1998) at 15. 

223 See, e.g., Security Consultative Committee Document, US-Japan Alliance: Transformation and Realignment for 

the Future (October 29, 2005). 224 Congressional Research Service, The U.S. Military Presence in Okinawa and the Futenma Base Controversy

(August 3, 2012) at 8. There are also approximately 5,000 DOD civilians and 43,000 DOD dependents in Japan. 

USFJ Website available at http://www.usfj.mil/ (September 27, 2012). 225 Office of the Under Secretary of Defense (Comptroller)/Chief Financial Officer, Operation and Maintenance 

Overview: Fiscal Year 2013 Budget Estimates (February 2012) at 201. 226 U.S. Forces Japan, Presentation: Special Measures Agreement Overview (June 27, 2012). 227 Office of the Under Secretary of Defense (Comptroller)/Chief Financial Officer, Operation and Maintenance 

Overview: Fiscal Year 2013 Budget Estimates (February 2012) at 201. 
40 

have grown significantly over the past several years and, in FY 2013, are expected to be nearly 

double what they were in 2008. 

Figure 7 228

 There are a number of force posture changes planned or underway that will affect future 

U.S. costs in Japan and the Pacific. As part of an ongoing series of talks under the U.S. - Japan 

Defense Policy Review Initiative (DPRI), U.S. Forces Japan (USFJ) and U.S. Pacific Command 

(PACOM) have proposed a number of significant posture changes, including actions to reduce 

the U.S. military presence on Okinawa. 229 Congress has declined to fund projects necessary to 

implement many of these posture changes pending the completion of various requirements, 

including providing Congress with detailed cost estimates. 

The Committee conducted a review of Japan’s contributions to offset U.S. costs. As 

described in Part A below, that review raises concern about the downward trend in the amount 

that Japan contributes. It also identified risks associated with the shift in Japanese support from 

funding U.S. utilities and labor costs to funding the Facility Improvement Program (FIP), a 

voluntary program over which U.S. control is limited. The Committee also reviewed costs 

associated with proposed force posture changes affecting Japan. As described in Part B, 

significant potential costs have yet to be quantified. Uncertainty about those costs cautions 

against lifting Congressional restrictions on DOD spending to implement some of the posture 

changes until detailed estimates are completed and provided to Congress. 

 

228 Office of the Under Secretary of Defense (Comptroller)/Chief Financial Officer, 2008-2013 Japan Cost Data, 

attached to email from Comptroller to Committee staff (December 17, 2012). 229 U.S. Marine Corps Installation Pacific, Presentation: Defense Policy Review Initiative (DPRI) (June 28-29, 

2012) at 3. 
41 

A. Japan’s Host Nation Support: Special Measures Agreement and the Facility 

Improvement Program 

Since 1978 Japan has contributed funding to offset U.S. costs associated with the U.S. 

military presence in Japan through a series of bilateral agreements and arrangements. Currently, 

GOJ provides monetary support mainly through two funding streams, the Facility Improvement 

Program (FIP) and Special Measures Agreements (SMA). 

Since 1987, the U.S. and Japan have entered into a series of formal agreements, called 

Special Measures Agreements (SMA), which have set Japan’s contributions to U.S. costs for 

labor, utilities and training relocation.230 The U.S. and Japan negotiate a new SMA every three 

to five years. FIP, on the other hand, is a voluntary program under which Japan provides funding 

for U.S. infrastructure and facilities in Japan. While Japan has stated that it will contribute to the 

program through 2015, FIP is not part of the SMA and remains a voluntary program.231 

As shown in Figure 8, Japan’s contributions to U.S. costs grew steadily through the early 

1990s, peaking around the year 2000, before declining significantly over the last decade.232

Figure 8233

 

230 Japanese support for U.S. utility costs and training relocation began in 1991 and 1996, respectively. U.S. Forces 

Japan has undertaken a number of realignment initiatives, at the behest of GOJ, to alleviate the burden on local 

communities. GOJ contributes to the costs of these initiatives. Those contributions are not included in this report’s 

discussion of host nation support as realignment was initiated at the behest of Japan. U.S. Forces Japan, 

Presentation: Special Measures Agreement Overview (June 27, 2012) at 4-6. 231 Security Consultative Committee Document, Host Nation Support (June 21, 2011). 232 U.S. Forces Japan, Presentation: Special Measures Agreement Overview (June 27, 2012) at 7; U.S. Forces Japan, 

HNS % of JDA (undated). 233 Chart from U.S. Forces Japan, Presentation: Special Measures Agreement Overview (June 27, 2012). 
42 

USFJ has stated that the U.S. has sought to stop the downward slide of Japanese contributions, 

though the Committee’s review raises questions about GOJ support levels in the long-term.234

1. 2011-2015 Special Measures Agreement 

In January 2011, the U.S. and Japan signed a Special Measures Agreement covering 

Japanese Fiscal Years 2011-2015. Under the SMA, GOJ provides labor and utility payment 

support for USFJ.235 In June 2011, U.S. Secretary of State Hillary Clinton, Secretary of Defense 

Robert Gates and the Japanese Ministers of Foreign Affairs and Defense released a statement 

calling the SMA “a pillar of the Alliance” and affirming that Japan’s host nation support would 

remain at the 2010 level over the five years covered by the SMA.236 While the statement 

acknowledged a “phased reduction” in Japan’s contributions to U.S. labor and utilities costs 

during the period covered by the SMA, the statement indicated that an amount corresponding to 

that reduction would be added to the Facilities Improvement Program (FIP) to keep the level of 

Japanese support constant. 237 The Committee’s review raises concern about that shift. 

a. Japan’s Support for U.S. Labor Costs 

Under prior SMAs, GOJ paid wages for 23,055 Japanese nationals employed on U.S. 

bases. The 2011 SMA, however, reduces that number from 23,055 in 2011, to 22,625 in 2015.238 

As a result of that reduction, GOJ will be providing less labor funding by 2015.239 While the 

decrease is expected to be relatively small, as shown in Figure 9, it continues a trend of declines 

in SMA labor funding since 1996.240 

 

234 Committee staff meetings with U.S. Forces Japan (June 27-28, 2012). 235 U.S. Forces Japan, Presentation: Special Measures Agreement Overview (June 27, 2012) at 8-12. The SMA also 

includes support for U.S. costs to construct training facilities when GOJ requests that the U.S. relocate to another 

site. Training relocation costs are variable based on GOJ’s requests. Id. at 19. 236 Security Consultative Committee Document, Host Nation Support (June 21, 2011). 237 Id.; see also U.S. Forces Japan, Presentation: Special Measures Agreement Overview (June 27, 2012) at 7. 238 U.S. Forces Japan, Presentation: Special Measures Agreement Overview (June 27, 2012) at 7. 239 U.S. Forces Japan, SMA LCS Funding Loss (Based on JFY2010 data) (undated); GOJ Budget spreadsheet 

attached to email from Department of Defense Office of Legislative Counsel to Committee staff (October 24, 2012). 

240 U.S. Forces Japan, Presentation: Special Measures Agreement Overview (June 27, 2012) at 11. 
43 

Figure 9241

b. Japan’s Support for U.S. Utility Costs 

SMAs prior to the 2011 agreement set an annual cap on Japanese contributions to U.S. 

utility costs. For example, the 2008-2010 SMA set Japan’s maximum annual contribution for 

2009 and 2010 at ¥24.9 billion (approximately $326.5 million in 2012).242 The 2011 SMA 

maintains the maximum Japanese contribution at ¥24.9 billion but also caps the percentage of 

U.S. utility costs that Japan will pay and reduces that percentage cap over time.243 GOJ’s annual 

contribution to utility costs will likely remain at ¥24.9 billion through 2015. However, as shown 

in Figure 10, U.S. costs are expected to rise.244 While the U.S paid approximately $71 million – 

or 20 percent of its utility costs in 2009, by 2015 the U.S. expects to pay nearly $217 million, or 

about 40 percent.245 

 

241 Data drawn from spreadsheet provided in email from U.S. Department of Defense to Committee staff (October 

24, 2012). 

242 Special Measures Agreement (SMA) on Host Nation Support (December 12, 2007). 243 Japan’s contribution is set at 76 percent for 2011, declining to 72 percent by 2015. U.S. Forces Japan, 

Presentation: Special Measures Agreement Overview (June 27, 2012) at 7. 244 Department of Defense responses to July 12, 2012 Committee staff questions, attached to email from Department 

of Defense Office of Legislative Counsel to Committee staff (July 30, 2012). 245 Id.
44 

Figure 10246

USFJ has said that GOJ sought to eliminate the utility cost sharing program in 2011 and that it is 

“highly probable” GOJ will target utility cost sharing for reduction or elimination when the next 

SMA is negotiated.247 

2. Facility Improvement Program (FIP) 

FIP was initiated in 1978 by GOJ to provide housing for U.S. military personnel.248 Over 

time, the program has evolved to also fund projects to ameliorate the burden on local Japanese 

communities affected by the U.S. military presence.249 While Japanese contributions to FIP are 

 

246 Chart created from data contained in U.S. Forces Japan responses to Committee staff questions (July 27, 2012). 

The data assumes a future Yen-dollar exchange rate equal to the 2011 rate. Id. According to U.S. Forces Japan, 

utility cost projections are uncertain as future costs are influenced by unpredictable factors such as mission 

requirements, personnel assignment fluctuation, annual weather patterns, utility unit prices, and foreign currency 

exchange fluctuations. Id. 247 U.S. Forces Japan, Presentation: Special Measures Agreement Overview (June 27, 2012) at 14. 248 U.S. Forces Japan, Presentation: JFIP (undated); GAO, Statement for the Record by the International Division, 

submitted to the Subcommittee on Defense Committee on Appropriations: Defense Burdensharing by Japan (April 

21, 1982) at 5. 

249 In 2000, GOJ released criteria used to evaluate proposed FIP projects. The criteria identified three categories of 

projects (1) Projects that constitute the foundation of US Forces activities, such as family housing or barracks; (2) 

Projects that contribute to a harmonious relationship between US Forces and local communities, such as 

environment-related facilities and safety measures; and (3) Welfare facilities, such as recreational facilities and 

entertainment-oriented facilities. Japan has said that proposed projects in the third category will be “especially 
45 

considered host nation support, FIP is not included in the SMA. And, unlike the SMA, FIP is a 

voluntary program.250 While FIP is discussed in the context of Japan’s support for the U.S. 

presence, FIP funds Japanese as well as U.S. proposed projects. 

The amount of FIP funding has declined significantly in the last twenty years. At its peak 

in 1992, Japan’s annual FIP contribution amounted to more than $1 billion.251 As reflected in 

Figure 11, that amount has fallen to approximately $200 million for 2012.252 

Figure 11253

Shortly after the 2011 SMA was agreed to, the U.S. and Japan agreed to FIP funding 

levels for 2011-2015. The FIP arrangement established a “floor” or minimum contribution 

amount of ¥20.6 billion (approximately $200 million) per year. The two countries also agreed 

that any decreases in GOJ funding for SMA programs occurring from 2011-2015 would be 

added to that FIP floor.254 

 

Restrictions on the availability and use of FIP funding, however, raise questions as to 

whether reducing SMA funding for labor and utility costs in exchange for corresponding 

increases in FIP is a good deal for U.S. taxpayers. Each dollar that Japan contributes under the 

 scrutinized.” Press Release after the Joint Committee on Adoption Criteria for the Facility Improvement Program

(undated). 

250 Department of Defense, References to Host Nation Burden Sharing in the 2011 USAPACOM Theater Posture 

Plan (undated). “This program is voluntary and is not a treaty obligation.” Id. 251 U.S. Forces Japan, Presentation: JFIP (undated). 252 Id. 253 U.S. Department of Defense, JFY79-2011 JFIP Summary (SASC) (undated). 254 Security Consultative Committee Document, Host Nation Support (June 21, 2012). 
46 

SMA to U.S. utility and labor costs directly offsets a dollar in U.S. taxpayer funds that would 

have to be spent. The same cannot be said for the FIP program. 

a. Twenty Percent of FIP is Reserved for GOJ-Initiated Projects 

Each year the U.S. produces an Integrated FIP Priority List which ranks USFJ’s priorities 

for FIP funding.255 However, FIP does not only fund U.S. priorities. Japan also directs FIP 

funding to its own priorities. In fact, according to USFJ, approximately 20 percent of FIP 

funding is reserved for GOJ-initiated projects.256 Such projects are often requested by local 

Japanese communities. While USFJ can object to a GOJ-initiated project being funded with FIP, 

according to USFJ, those unspent funds may not then be spent on a U.S. priority.257 In addition, 

as discussed below, the U.S. does not ultimately determine how the remaining 80 percent of FIP 

funding is spent either. 

b. Top U.S. Priorities are Often Not Funded 

U.S. Forces Japan produces an Integrated Priority List of projects for which it is seeking 

FIP funding.258 While the final list of projects that will secure funding is negotiated between the 

two countries, GOJ ultimately decides whether or not a U.S. priority will be funded. In addition 

to GOJ approval for any project, local community approval is also necessary.259 The Committee 

reviewed the FIP Priority Lists for Japanese Fiscal Years 2011-2013.260 That review found that 

USFJ’s top FIP priorities are often not funded and sometimes remain on the list for years. 

Of USFJ’s top 50 priorities on the 2011 Integrated Priority List, for example, 22 projects 

were not funded.261 Of the top 100 USFJ priorities, 53 projects were not funded. 262 Among 

those unfunded U.S. priorities was a fire station at Camp Hansen, which was priority number 

eight on the U.S. list, estimated by USFJ to cost approximately $4 million.263 Two years later, 

 

255 Committee staff meeting with U.S. Forces Japan (June 27, 2012). The military services propose projects to be 

considered for FIP funding. U.S. Forces Japan reviews the proposals and integrate service priorities into a single 

Integrated Priorities list. Committee Staff meeting with U.S. Forces Japan (June 27, 2012). Once finalized by U.S. 

Forces Japan, the list is reviewed by U.S. Pacific Command and the Office of the Under Secretary of Defense 

(Acquisition, Technology & Logistics (AT&L)). DOD Directive, Host Nation-Funded Construction Programs in 

the U.S. Pacific Command Area of Responsibility (January 12, 2005); U.S. Forces Japan, Instruction: Host Nation 

Funded Construction (November 27, 2002). 

256 Committee staff meeting with U.S. Forces Japan (June 27, 2012). 257 Id. 258 Beginning in fiscal year 2012, U.S. Forces Japan instituted a new format for the Priority List that segregates the 

list into four categories – (1) Projects for which approval to negotiate is requested, (2) Projects committed to by bilateral agreement, (3) Projects under survey and design, and (4) New projects to be negotiated for future years 

funding when available. See, e.g., U.S. Forces Japan, JFY13 Japan Facilities Improvement Program – Integrated 

Priority List (undated). 259 U.S. Forces Japan, Presentation: JFIP (undated). 260 U.S. Forces Japan, JFY2011 JFIP Integrated Priority List (April 29, 2010); U.S. Forces Japan, JFY13 Japan 

Facilities Improvement Program – Integrated Priority List (undated); U.S. Forces Japan, JFY12 Japan Facilities 

Improvement Program – Integrated Priority List (undated). 261 U.S. Forces Japan, JFY2011 JFIP Integrated Priority List (April 29, 2010). 262 Id. 263 Id. 
47 

the fire station is still on the FIP list as a “new projects to be negotiated of future years funding 

when available.”264 

By contrast, among the GOJ-initiated projects on the 2011 list was a $2.9 million “Safety 

Countermeasure (Net)” at Camp Zama.265 The safety countermeasure was actually a net to be 

constructed around the golf course at Camp Zama.266 According to USFJ: 

In 2010, due to continued complaints from Japanese citizens of golf balls 

damaging cars and houses adjacent to the golf courses at Camp Zama, the 

Government of Japan (GOJ) requested the U.S. Government to accept a FIP 

project to install golf nets at specific locations w[h]ere the golf balls were causing 

damage.267

The golf netting is expected to be completed by March 2013.268 As of January 2013, the fire 

house was still not funded. 

In 2006, GOJ initiated a Seaweed Bed and Tidal Flat restoration project which is 

estimated to cost $57.7 million.269 The project is a result of a previously funded GOJ-initiated 

FIP project, the Iwakuni Runway Relocation Project (IRRP).270 The latter project, which began 

in 1997 and cost $2.4 billion, was requested by the City of Iwakuni to relocate a runway that was 

causing noise and safety concerns for the local Japanese community.271 The local governor 

approved the landfill permit for the runway project “with the condition that ‘GOJ makes every 

effort to develop new seaweed beds and tidal flats at the sea area around this reclamation area by 

getting instruction and advice from specialists.’”272 The runway was completed in 2010. Now 

FIP funds are being used for the seaweed project which will not be completed until 2024.273 

c. FIP Lacks Transparency 

In addition to lacking control over how FIP funds are spent, the U.S. also suffers from 

FIP’s lack of transparency. For example, USFJ is not able to review construction contracts 

between GOJ and the contractors that perform the work on U.S. installations. According to 

USFJ, GOJ has consistently refused to provide copies of the bid documents or construction 

 

264 U.S. Forces Japan, JFY13 Japan Facilities Improvement Program – Integrated Priority List (undated). 265 U.S. Forces Japan, JFY11 JFIP Integrated Priority List (2011). 266 It is unclear why the golf netting was not paid out of Non-Appropriated Funds (NAF) since the golf course was 

built with NAF funds. Spreadsheet attached to email from Edward Richards to Committee staff. 

267 Senate Armed Services Committee (SASC) STAFFDEL request for Facilities Improvement Program (FIP) 

project information, attached to Email from Department of Defense Office of Legislative Counsel to Committee 

staff (July 19, 2012). 

268 Id. 269 Senate Armed Services Committee (SASC) STAFFDEL request for Facilities Improvement Program (FIP) 

Project Information: MC981 Seaweed Bed/Tidal Flat (undated), attached to Email from Department of Defense 

Office of Legislative Counsel to Committee staff (July 19, 2012). 

270 Id. 271 Id. 272 Id. 273 Id. 
48 

contracts that reflect the cost of the projects, as a result, the U.S. is unable to verify amounts 

actually spent on FIP projects.274 

B. Planned Posture Changes 

The Committee reviewed recent U.S.-Japan agreements pertaining to plans for U.S. 

military realignment in the Pacific. As described below, the review identified significant 

military construction costs that the U.S. will incur as a result of the loss of Japanese contributions 

for the move of U.S. Marines off of the island of Okinawa. The review also revealed potentially 

significant unknown costs associated with the most recent proposed force laydown. It found that 

uncertain timelines for completing necessary projects, such as a replacement facility for Marine 

Corps Air Station Futenma, will likely lead to additional U.S. costs. Uncertainty about those 

costs cautions against lifting the Congressional restriction on DOD spending to implement the 

posture changes until detailed estimates are completed. 

1. U.S. Realignment Plans 

a. U.S. and Japan Roadmap for Realignment 

In early 2005, Secretary of State Condoleeza Rice and Secretary of Defense Donald 

Rumsfeld hosted Japan’s Minister for Foreign Affairs and other high-level Japanese officials in a 

meeting of the United States-Japan Security Consultative Committee (SCC).275 At the meeting, 

the two sides agreed to “intensify their consultations” relating to the realignment of U.S. forces 

in Japan.”276 Later that year, the U.S. and Japan released a SCC document laying out a number 

of realignment initiatives, including accelerating the relocation of Marine Corps Air Station 

(MCAS) Futenma and the construction of a Futenma Replacement Facility (FRF) in the area of 

Camp Schwab in the northern part of Okinawa.277 The document also recommended a move of 

approximately 7,000 Marines from Okinawa to Guam and discussed the “consolidation of those 

Marine Corps units that remain in Okinawa into a smaller total land area,” allowing for land 

returns “in the densely populated areas south of Kadena Air Base.”278 

The following year, the U.S. and Japan released the United States-Japan Roadmap for 

Realignment Implementation plan (“Roadmap Agreement”) that provided greater detail about the 

realignment initiatives.279 The Roadmap Agreement stated that “construction and other costs for 

facility development in the implementation of these initiatives will be borne by the Government 

of Japan (GOJ) unless otherwise specified” and that the United States “will bear the operational 

 

274 Committee staff meeting with U.S. Forces Japan (June 27, 2012). 275 GAO Asia Report at 21. 276 U.S.-Japan Security Consultative Committee, Joint Statement (February 19, 2005). 277 Security Consultative Committee Document, US-Japan Alliance: Transformation and Realignment for the 

Future (October 29, 2005) at 10-11. 278 Security Consultative Committee Document, US-Japan Alliance: Transformation and Realignment for the 

Future (October 29, 2005) at 12. 279 United States – Japan Roadmap for Realignment Implementation (May 1, 2006). 
49 

costs that arise from implementation of these initiatives.”280 The Roadmap Agreement stated 

that “[a]pproximately 8,000 III Marine Expeditionary Force (MEF) personnel and their 

approximately 9,000 dependents will relocate from Okinawa to Guam by 2014.”281 

DOD estimated the cost of the relocation and build-up on Guam at approximately $10.3 

billion and the Roadmap stipulated that, of the $10.3 billion, “Japan will provide $6.09 billion (in 

U.S. Fiscal Year 2008 dollars), including $2.8 billion in direct cash contributions, to develop 

facilities and infrastructure on Guam.” 282 The Roadmap also stated that “[t]he III [Marine 

Expeditionary Force] relocation from Okinawa to Guam is dependent on: (1) tangible process 

toward completion of the FRF, and (2) Japan’s financial contributions to fund development of 

required facilities and infrastructure on Guam.”283 Nearly three years later, the United States and 

Japan executed the Guam International Agreement, reaffirming their Roadmap commitments, 

including GOJ’s $6.09 billion contribution and the requirement for “tangible progress” toward 

the completion of the FRF as a precondition of the relocation of Marines to Guam.284 

b. Senate Armed Services Committee and Government Accountability Office 

Express Concerns About Laydown Costs 

In the spring of 2011, leaders of the Senate Armed Services Committee expressed 

concern about the Department’s force realignment plans in the Pacific. In early May of that year, 

Chairman Carl Levin, Ranking Member John McCain, and Senator Jim Webb called on DOD to 

“re-examine plans to restructure U.S. military forces in East Asia,” calling DOD realignment 

plans “unrealistic, unworkable, and unaffordable.”285 

Later that same month, the Government Accountability Office (GAO) released a report 

raising concerns about the costs associated with DOD’s planned force posture changes. GAO 

stated that “DOD has embarked on a major realignment of U.S. military posture in mainland 

Japan, Okinawa, and Guam, but has not developed comprehensive cost estimates for these 

initiatives.”286 The report stated that DOD’s estimate of $10.3 billion for the move of Marines to 

Guam underestimated costs by at least $7.1 billion, not including $1.9 billion in costs required to 

build training ranges on the Northern Mariana Islands, necessitated by the fact that building 

 

280 Id. 281 Id. The number of Marines identified as moving from Okinawa represents an increase from the previous year’s 

Security Consultative Committee Document’s estimate of 7,000. Compare with Security Consultative Committee 

Document, US-Japan Alliance: Transformation and Realignment for the Future (October 29, 2005). 282 Negotiating documents indicated that $2.8 billion (in 2008 dollars) of GOJ’s $6.09 billion contribution would be 

in cash and $3.29 billion in equity investments and loans for housing and utilities infrastructure. United States – 

Japan Roadmap for Realignment Implementation (May 1, 2006); Department of Defense Information Paper, 

Defense Policy Review Initiative (July 24, 2012) at 1. 283 United States – Japan Roadmap for Realignment Implementation (May 1, 2006). 284 Agreement Between the Government of Japan and the Government of the United States of America Concerning 

the Implementation of the Relocation of III Marine Expeditionary Force Personnel and Their Dependents From 

Okinawa to Guam (February 17, 2009). 

285 Press Release: Senators Levin, McCain, Webb Call for Re-Examination of Military Basing Plans in East Asia

(May 11, 2011). 

286 GAO Asia Report at 21. 
50 

sufficient ranges for the Marines on Guam was not feasible.287 GAO estimated the total cost of 

the Guam buildup and Northern Mariana Islands training range at $19.3 billion, of which Japan 

was to contribute $6.1 billion, leaving the U.S. portion of the bill at approximately $13.2 billion, 

or more than two-thirds of the total cost.288

GAO also pointed out that the U.S. had not even estimated costs to implement other 

initiatives under the Roadmap Agreement, including the return of installations in populated areas 

of Okinawa and the associated construction of installations in less populated areas of the island 

(hereinafter referred to as the Okinawa Consolidation).289 

c. New Force Laydown Proposed 

Following GAO’s release of its report, Chairman Levin again called on DOD to “reexamine” its plans while Senator McCain called for “a pause in the use of taxpayer funds” for 

the initiatives.290 Senator Webb noted the “urgent need” to address the basing issues.291 

Following GAO’s report and the Congressional reaction to the high costs associated with the 

plan, in April 2012, the SCC released a new Joint Statement announcing a revised force 

laydown.292

The new plan envisions approximately 5,000 Marines moving to Guam and distributing 

others across the Pacific including to Hawaii and the continental United States. The plan also 

includes a rotational Marine presence in Australia.293 The Marine Corps has produced a rough 

order of magnitude cost estimate for the revised laydown of $13.7 billion.294 

d. Congress Sets Conditions on Funding 

In response to concerns about cost and feasibility of force realignment plans, the Senate 

Armed Services Committee included provisions in the Fiscal Year 2012 National Defense 

Authorization Act (NDAA) prohibiting the Department from spending funds, including GOJ 

 

287 These costs were identified by the Marine Corps and were in addition to the $10.3 billion previously identified by 

DOD. The $7.1 billion also covered the cost of moving 1,700 Marines from Okinawa to Hawaii under the original 

laydown. GAO Asia Report at 25-26, 34; U.S. Marine Corps responses to October 18, 2012 Committee staff 

questions (October 26, 2012). 

288 GAO Asia Report at 25. The GAO Asia Report rounded up GOJ’s contribution from $6.09 billion to $6.1 

billion. 

289 The report stated that, according to DOD officials “comprehensive cost estimates for posture initiatives in Japan, 

including all costs that will be incurred by the United States, have not been completed because there are many 

uncertainties surrounding initiative implementation schedules.” GAO Asia Report at 27, 34. 

290 Senator Carl Levin, Press Release: GAO Report Validation Recommendations for Bases in East Asia; Action 

Needed to Re-Examine DoD Planning (May 26, 2011). 291 Id. 292 Joint Statement of the Security Consultative Committee (April 27, 2012); Committee staff meeting with U.S. 

Department of Defense regarding Special Purpose Entities (June 19, 2012). 293 U.S. Marine Corps, Presentation: Distributed Laydown (May 4, 2012) at 13. 294 U.S. Marine Corps, United States Marine Corps Response to SASC PSM Questions on Preliminary ROM 

“Distributed Laydown” Cost Estimate (May 31, 2012). 
51 

funds, for the realignment of Marines until certain conditions were met.295 A modified version 

of those prohibitions was included in the Fiscal Year 2013 NDAA.296 The 2013 NDAA provides 

that funds cannot be spent until: 

1) The Commander of United States Pacific Command provides Congress an 

assessment of the strategic and logistical resources needed to ensure the 

distributed lay-down of members of the United States Marine Corps in the 

USPACOM Area of Responsibility meets the contingency operation plans; 

2) The Secretary of Defense submits master plans for the construction of facilities 

and infrastructure to execute the distributed lay-down on Guam and Hawaii, 

including a detailed description of costs and the schedule for such construction; 

3) The Secretary of the Navy submits a plan detailing proposed investments and 

schedules required to restore facilities and infrastructure at MCAS Futenma; and 

4) A plan coordinated by all pertinent Federal agencies regarding work, costs, and 

schedule for completion of construction, improvements, and repairs to the nonmilitary utilities, facilities and infrastructure, if any, on Guam affected by 

realignment of forces is submitted to Congress.297 

2. Japan’s Contribution to Realignment 

The April 2012 SCC statement regarding the new proposed force laydown stated that 

GOJ’s direct cash contribution toward the cost of implementing the revised laydown would be 

consistent with their previous commitments.298 With regard to the $3.29 billion in Japanese 

support that the United States was supposed to receive in addition to the cash contribution, the 

SCC statement said that “other forms of Japanese financial support to Guam relocation would not

be utilized.”299

a. Roadmap Agreement Includes $6.09 Billion Japanese Contribution 

Under the original Roadmap Agreement, GOJ was to contribute $6.09 billion to defray 

U.S. costs associated with the move of Marines from Okinawa to Guam. Of that amount, $2.8 

billion was to be in cash. For the balance, GOJ proposed, in lieu of cash, the creation of Special 

 

295 2012 National Defense Authorization Act, Section 2207: Guam Realignment (December 31, 2011). The 2012 

NDAA also required that the Secretary of Defense certify to Congress that tangible process had been made on the 

Futenma Replacement Facility. That section was not included in the 2013 NDAA. Id. 296 2013 National Defense Authorization Act for Fiscal Year 2013, Section 2208: Realignment of Marines in the 

Asia-Pacific Region (January 2, 2013). 

297 Id. 298 Joint Statement of the Security Consultative Committee (April 27, 2012). The amount of the direct cash 

contribution was cited in the statement as $3.1 billion. That figure represents Japan’s original $2.8 billion 

commitment inflated to 2012 dollars. U.S. Marine Corps, Presentation: United States Marine Corps Distributed 

Laydown (May 4, 2012) at 14. 299 Joint Statement of the Security Consultative Committee (April 27, 2012). 
52 

Purpose Entities (“SPEs”) to finance $3.29 billion in family housing and utilities infrastructure 

projects on Guam.300 Under those proposed SPEs, GOJ would invest in military housing and 

improving the utilities infrastructure on the island and, in return, recoup part or all of its 

investments through rent and utility payments respectively.301 The U.S. would benefit by 

avoiding having to appropriate funds for U.S. military construction. 

Disagreements developed, however, about the nature of Japan’s contribution. After the 

Roadmap Agreement was negotiated, GOJ apparently began to insist on a guaranteed return on 

its investment in the SPEs, a guarantee the U.S. believed was inconsistent with the original 

agreement and was unwilling to provide.302 One DOD official involved in the talks said that, by 

2010, GOJ was insisting on an increase in the Department’s Overseas Housing Allowance 

(OHA) rental rate and utility payments in order to better its return on its investment in the 

SPEs.303 According to the Navy, “the U.S. and Japan never reached full agreement on the 

recoverability of Japanese financing.”304 

Nevertheless, between 2006, when the Roadmap Agreement was reached, and 2011, 

public statements reiterated that GOJ’s total contribution would be over $6 billion. As recently 

as June 21, 2011, the SCC stated that both the U.S. and Japan “confirmed their commitment to 

ensuring the funding necessary for the steady implementation of the relocation in accordance 

with the terms and conditions of the Roadmap and the Guam International Agreement,” both of 

which had indicated Japan’s contribution at $6.09 billion.305 

(It is also worth noting that the actual amount of Japan’s contribution to the SPEs appears 

to have been overstated by $450 million.306 A negotiating document relating to the agreement 

stated that “Japan will finance $2.1B ($1.5 equity + .6B loan to project owner) to fund and 

develop 3,250 units of housing, valued at $2.55B by DOD.”307 While public statements credited 

Japan with a $2.55 billion contribution for housing infrastructure, the actual contribution was 

apparently only to be $2.1 billion. The $450 million difference representing avoided U.S. 

military construction costs, rather than GOJ’s actual contribution.308) 

 

300 Committee staff meeting with U.S. Department of Defense regarding Special Purpose Entities (June 19, 2012). 301 Committee staff telephone conference with former Japan Director at OSD (August 27, 2012). 302 When the contribution was first being negotiated, the parties used a working table that stated that $740 million of 

GOJ’s contribution for utilities, and $2.1 billion of its contribution for housing, would be “recoverable.” According 

to the individual who was DOD’s Japan Director from 1999 to 2006, the U.S. position during the negotiations and 

after the agreement was reached was that the U.S. would not guarantee the recoverability of GOJ’s investment. U.S. 

Navy, Information Paper: Defense Policy Review Initiative – Guam (July 24, 2012); Committee staff telephone 

conference with former Japan Director at OSD (August 27, 2012). 303 Committee staff telephone conference with former Japan Director at OSD (August 27, 2012). OHA is a monthly 

allowance paid to service members assigned to permanent duty stations overseas and who are authorized to live in 

private housing. OHA includes rent, utilities and a move-in housing allowance. Department of Defense Travel 

Website available at http://www.defensetravel.dod.mil/site/faqoha.cfm#Q1 (December 10, 2012). 304 U.S. Navy, Department of Defense Information Paper, Defense Policy Review Initiative – Guam (July 24, 2012). 305 Security Consultative Committee Document, Progress on the Realignment of U.S. Forces in Japan (June 21, 

2012) at 2. 

306 U.S. Navy, Information Paper: Defense Policy Review Initiative – Guam (July 24, 2012). 307 Id. 308 Committee staff telephone conference with former Japan Director at OSD (August 27, 2012). 
53 

b. SPEs Off the Table – U.S. to Incur Additional $1 Billion in Costs 

The April 2012 SCC statement indicated that Government of Japan would no longer 

provide the non-cash portion of the $6.09 billion it had previously committed.309 According to 

DOD, under the revised plan, the SPEs proposed by Japan to meet $3.29 billion of that 

commitment, were no longer viable as the number of Marines paying rent and utilities on Guam 

would be insufficient to allow GOJ to recoup its investment in a reasonable period of time.310 

The loss of the SPEs leaves the U.S. responsible for significant military construction 

costs that would previously have been funded through the SPEs. Estimates for the new plan 

include at least $1 billion of U.S. military construction costs on Guam that would have been 

covered by the SPEs, including $400 million in housing costs and $600 million to fund water and 

wastewater utilities upgrades.311 The reduction in Japanese financial support was in spite of the 

fact that GOJ representatives have said that that they are “very much in support” of the new force 

laydown, that it meets Japan’s security concerns, and reduces the U.S. presence on Okinawa.312 

3. MCAS Futenma and the Futenma Replacement Facility (FRF) 

In 2006, as part of the Roadmap Agreement, the U.S. and GOJ announced that GOJ 

would build a Futenma Replacement Facility (FRF) to replace Marine Corps Air Station 

(MCAS) Futenma at Camp Schwab in the less populated Henoko area of Okinawa. MCAS 

Futenma has been a U.S. military base since 1945. The primary mission of MCAS Futenma is to 

“maintain and operate facilities and provide services and materials to support Marine aircraft 

operations.”313 Futenma is surrounded by Ginowan City and since the 1990s, there have been 

discussions regarding closing the base and moving it to a less populated area on Okinawa.314 

a. No Timeline for FRF Completion 

The 2006 Roadmap Agreement stipulated that the U.S. would move approximately 8,000 

Marines and their dependents off Okinawa when “tangible progress” was made on the FRF.315 

 

309 Joint Statement of the Security Consultative Committee (April 27, 2012); U.S. Marine Corps, Presentation: 

United States Marine Corps Distributed Laydown (May 4, 2012) at 14; Agreement Between the Government of 

Japan and the Government of the United States of America Concerning the Implementation of the Relocation of III 

Marine Expeditionary Force Personnel and Their Dependents from Okinawa to Guam (February 17, 2009). 

310 Committee Staff telephone conference with former Japan Director at OSD (August 27, 2012); Committee staff 

telephone calls with NAVFAC and Joint Guam Program Office (July 31 & August 22, 2012). 

311 U.S. Marine Corps, United States Marine Corps Response to SASC PSM Questions on Preliminary ROM 

“Distributed Laydown” Cost Estimate (May 31, 2012). “~$2.5B to Family Housing Special Purpose Entity (SPE) 

included in PL estimate replaced by ~$0.4B in US MILCON for Guam PCS housing requirements.” Id.

“Assumption of ~600M total, paid for by USG, to fund Northern water and wastewater that would have previously 

been paid for by GOJ.” Id. 312 Committee staff meeting with representative of the Japanese Ministry of Defense (October 10, 2012); Committee 

staff meeting with representative of the Japanese Ministry of Foreign Affairs (July 17, 2012). 313 GAO, Overseas Presence: Issues Involved in Reducing the Impact of the U.S. Military Presence on Okinawa 

(March 1998). 

314 Id. 315 United States – Japan Roadmap for Realignment Implementation (May 1, 2006). 
54 

However, in in the April 2012 Statement, the move of Marines off of Okinawa was “de-linked” 

from the requirement for tangible progress on the FRF, and the 2014 date for completion of the 

FRF was abandoned.316 

Headquarters Marine Corps (HQMC) and USFJ have developed an estimated schedule 

for the FRF that projects completion of the facility by 2021. There are significant obstacles, 

however, that make it unlikely that schedule can be met.317 In December 2012, the Ministry of 

Defense (MOD) submitted a final Environmental Impact Study for the FRF to the governor of 

the Okinawa Prefecture.318 That allowed the MOD to submit, in March 2013, an application to 

the governor for a permit to construct the massive landfill required to build the FRF. The 

schedule for the governor to approve that application is uncertain, however, particularly given 

the continuing controversy surrounding the proposed move to Camp Schwab.319 In fact, the 

governor has the authority to reject the application.320 

While the current Marine Corps timeline accounts for only four years for the completion 

of the landfill at Camp Schwab, a similar, less complicated landfill project at Iwakuni took ten 

years to complete.321 As the Committee has already noted, regarding the plan for a landfill at 

Camp Schwab: 

While it appears that such an enormous undertaking is technically achievable, the 

reality is that the cost and time required to complete it, combined with the 

substantial local political and public opposition to the plan, make it clear that the 

project will likely never be finished; and, even if it is, it will cost more and take 

longer than even the most conservative estimates have projected to date.322 

GOJ is expected to pay for the majority of the construction costs for the FRF.323 

However, the Marines have said that the U.S. will incur approximately $200 million in one-time 

construction costs.324

 

316 Joint Statement of the Security Consultative Committee (April 27, 2012); see also U.S. State Department, Japan 

Country Page available at http://www.state.gov/r/pa/ei/bgn/4142.htm (September 27, 2012); U.S. Marine Corps 

Installation Pacific, Defense Policy Review Initiative (DPRI) Presentation (June 28-29, 2012). 317 U.S. Marine Corps Installation Pacific, Defense Policy Review Initiative (DPRI) Presentation (June 28-29, 2012); 

U.S. Marine Corps, Futenma Replacement Facility (FRF) Top Level Schedule (August 13, 2012). 318 Committee staff meeting with representative of the Japanese Ministry of Defense (October 10, 2012); Email from 

U.S. Marine Corps to Committee staff (March 18, 2013). 

319 2012 National Defense Authorization Act Report to Accompany S.1253, Items of Special Interest, Report on the 

Feasibility of Moving Marine Corps Aviation on Okinawa from Marine Corps Air Station Futenma to Kadena Air 

Base (June 22, 2011). 

320 Committee staff meeting with representative of the Japanese Ministry of Foreign Affairs (July 17, 2012); Email 

from U.S. Marine Corps to Committee staff (March 18, 2013); U.S. Department of Defense, Press Release: 

Statement on Futenma Replacement Facility Landfill Permit Request (March 22, 2013). 321 Email from U.S. Marine Corps to Committee staff (October 11, 2012); Committee staff meetings with U.S. 

Forces Japan and U.S. Marine Corps Installation Pacific (June 27-29, 2012). 

322 FY 2012 National Defense Authorization Act Report to Accompany S.1253, Items of Special Interest, Report on 

the Feasibility of Moving Marine Corps Aviation on Okinawa from Marine Corps Air Station Futenma to Kadena 

Air Base (June 22, 2011). 

323 Committee staff meetings with U.S. Forces Japan and U.S. Marine Corps Installation Pacific (June 27-29, 2012). 324 U.S. Marine Corps, Estimated DPRI Related Costs for FRF (Camp Schwab) (undated). 
55 

b. Marine Corps Air Station Futenma: “Closing Since 1996” 

 While a realistic timeline for building the FRF has remained elusive, expectations that 

MCAS Futenma would be closed have led to a significant maintenance and repair backlog at the 

base. The issue of Futenma sustainment has been a concern for decades.325 According to a 

1998 GAO report, “[b]ecause of the planned closure of MCAS Futenma, the government of 

Japan cancelled about $140 million worth of projects at the air station.”326 Since the 1990s that 

lack of funding has continued. According to Marine Corps Installations Pacific (MCIPAC), GOJ 

has been unwilling to fund renovation and repair projects for MCAS Futenma because it has 

been slated for return.327 GOJ has only provided FIP funding for a few minor projects at 

Futenma since 1996.328 

Many of the facilities at MCAS Futenma are over 50 years old.329 The April 2012 SCC 

statement announced that the U.S. and GOJ would “contribute mutually” to necessary 

refurbishment projects at MCAS Futenma.330 However, according to the U.S. State Department, 

as of June 2012, GOJ was only willing to fund projects at Futenma that were safety or 

environment-related.331 In addition, the April SCC 2012 statement did not identify a source of 

funding for GOJ’s contribution. Both USFJ and the Marines have said that they expect GOJ to 

use FIP funding for Futenma projects.332 As discussed above, however, the pool of FIP funding 

is limited and many top priorities are already unfunded. 

b. Critical Repairs Needed at MCAS Futenma 

The failure to maintain Futenma has resulted in a back-log of renovation and repair 

projects at the facility. As of 2012, the Marines had identified approximately $180 million worth 

of necessary military construction and renovation projects.333 According to MCIPAC: 

MCAS Futenma will require significant investment in facility sustainment and capital 

improvements to maintain mission capability and readiness for the next 10 years.334 

 

325 GAO, Overseas Presence: Issues Involved in Reducing the Impact of the U.S. Military Presence on Okinawa 

(March 1998) at 4. 

326 GAO, Overseas Presence: Issues Involved in Reducing the Impact of the U.S. Military Presence on Okinawa 

(March 1998) at 37. 

327 Committee staff meeting with U.S. Marine Corps Installation Pacific (June 28, 2012). 328 Email from U.S. Marine Corps to Committee staff (December 7, 2012). According to the U.S. Marine Corps, the 

following projects have been funded with FIP funds since 1996: Two temporary warehouses (1998); two BEQ 

renovations (1998); and the installation of Runway End Identifier Lights and a Precision Approach Path Indicator 

system (2009). Id. 329 U.S. Marine Corps Installation Pacific, Presentation: Marine Corps Air Station Futenma: “Closing Since 1996”

(June 28, 2012). 

330 Joint Statement of the Security Consultative Committee (April 27, 2012). 331 Committee staff meeting with U.S. State Department (June 25, 2012). 332 Email from U.S. Marine Corps to Committee staff (August 21, 2012); Committee staff meetings with U.S. Forces 

Japan and U.S. Marine Corps Installation Pacific (June 27-29, 2012). 

333 U.S. Marine Corps Installation Pacific, Presentation: Marine Corps Air Station Futenma: “Closing Since 1996”

(June 28, 2012) at 9-11. 

334 U.S. Marine Corps Installation Pacific, Presentation: Marine Corps Air Station Futenma: “Closing Since 1996”

(June 28, 2012). 
56 

For example, one building had to be “abandoned due to roof/ceiling structure compromise, 

concrete spalling, and exposed and corroded rebar.”335 MCIPAC described problems at another 

building on the base: 

There is extensive concrete spalling and cracking throughout the building. 

Several balconies require scaffolding reinforcement. Structural survey/study 

found beyond reasonable repair.336

Due to the deteriorated conditions of the base sewage system, there have been “a number 

of large emergency repairs required in recent years.”337 One hangar flooded due to the storm 

drainage system being insufficient to handle runoff.338 Sanitary sewer lines are “very old and 

severely deteriorated.”339 According to the MCIPAC, 

The storm drainage system is a safety and environmental concern. During heavy 

rains and typhoons, the storm drainage system is overwhelmed and flooding 

occurs. Besides soil runoff due to flooding, buildings, pavement, or infrastructure 

can be damaged by erratic water flows and undermining of the structures.340

The $180 million of necessary projects also includes an airfield security fence, a hanger 

to accommodate the new MV-22 Osprey, an upgraded main gate, and a new bachelor officer 

quarters structure.341 One runway needs a 1,000 foot overrun to accommodate the new Ospreys 

and to “minimize the probability of serious damage to an aircraft should the aircraft run off the 

runway end during takeoff or landing, or land short during a landing.”342 The runway also 

requires runway/taxiway shoulders in order to “help reduce the possibility of serious damage 

should an aircraft depart the primary transitioning surface.”343 These projects are currently 

unfunded. 

Many projects, including upgrading the main gate and constructing a new hangar for the 

Ospreys, have not been funded, in part, because GOJ is reportedly reluctant to fund projects that 

make MCAS Futenma appear as an enduring base.344 However, many of these same projects 

have been made necessary by the failure to build the Futenma Replacement Facility (FRF). 

While GOJ has agreed to “mutually” contribute to Futenma’s sustainment until the FRF is 

constructed, the U.S. faces the prospect of bearing the brunt of renovation and military 

 

335 Id. 336 Id. 337 Id. 338 Id. 339 U.S. Marine Corps, MCAS Futenma FSRM List FY12-FY18 (undated). 340 U.S. Marine Corps, MCAS Futenma MilCon List (undated). 341 U.S. Marine Corps Installation Pacific, Presentation: Marine Corps Air Station Futenma: “Closing Since 1996”

(June 28, 2012). 

342 U.S. Marine Corps Installation Pacific, Presentation: Marine Corps Air Station Futenma: “Closing Since 1996”

(June 28, 2012) at 11. 

343 Id. 344 Committee staff meetings with U.S. Forces Japan and U.S. Marine Corps Installation Pacific (June 27-29, 2012). 
57 

construction costs at Futenma. In addition, any expenditure of FIP funding for Futenma will 

likely come at the expense of other U.S. priorities. 

4. New Asia-Pacific Force Laydown - Unknown Cost and Uncertain Timing 

As discussed above, when the plan for moving forces from Okinawa to Guam was 

announced in the 2006 Roadmap Agreement, DOD estimated the cost of the relocation and 

build-up on Guam at approximately $10.3 billion. The $10.3 billion estimate, however, did not 

capture major costs associated with the plan, including environmental mitigation and site 

development costs.345 The estimate did not account for the cost of other facilities necessitated by 

the move, including building training ranges on the Northern Mariana Islands.346 Nor did it 

include $900 million in costs associated with moving 1,700 Marines from Okinawa to Hawaii.347 

According to GAO, including these in the estimate would have increased the cost of the original 

laydown to approximately $19 billion.348 It was in part because of the costs associated with the 

plan that the Department of Defense revised its force laydown plan.349 

As shown in Figure 12, the revised plan re-distributes the III Marine Expeditionary Force 

(MEF) across the Pacific instead of concentrating them on Guam and Hawaii. 

Figure 12350 

Marine Force Laydown 

Implementing the revised laydown will involve the eventual restationing of thousands of 

Marines to three continents over at least twenty years. The Marine Corps cost estimate for the 

plan is $13.7 billion. However, as the Marine Corps has acknowledged, the $13.7 billion is a 

preliminary rough order of magnitude estimate.351 Each component of the plan has its own 

complications and unknown factors that will affect both the timeline and the estimated costs. 

 

345 U.S. Marine Corps, Presentation: United States Marine Corps Distributed Laydown (May 4, 2012). 346 Id. 347 U.S. Marine Corps responses to October 18, 2012 Committee staff questions (October 26, 2012). 348 GAO Asia Report at 25. 349 Joint Statement of the Security Consultative Committee (April 27, 2012). 350 U.S. Marine Corps responses to November 13, 2012 Committee staff questions (November 26, 2012). 351 Committee staff briefing with U.S. Marine Corps (May 4, 2012). 

Original Laydown Revised Laydown

Japan (Iwakuni & Okinawa) 13800 14954

Guam 9700 4776

Hawaii 8200 8830

Australia N/A 2485

Continental U.S. N/A 800

TOTAL 31700 31845
58 

 Guam – The Marine Corps’ rough order of magnitude cost estimate for the Guam 

portion of the revised laydown is $8.6 billion.352 That estimate, however, does not 

account for other potential costs, such as additional lift that might be required due to 

the plan’s proposed force laydown.353 In addition, the Guam timeline is uncertain. 

Before most of the construction of infrastructure on Guam can begin, a new 

supplemental environmental impact study (SEIS) needs to be completed. That SEIS 

is expected to take two years.354 Even were the spending ban imposed by Congress to 

be lifted, the Marine Corps Guam timeline projects that military construction on 

Guam would not begin until 2016 and would not be completed until 2024.355

 Hawaii - The Marines have estimated the cost of moving approximately 2,500 forces 

from Okinawa to Hawaii at $2.5 billion.356 However, that estimate is highly 

speculative. A study of possible locations started in August 2012 and will not be 

completed until December 2013.357 As of November 2012, a number of locations for 

stationing those forces were being considered, including Pearl City Peninsula, Ford 

Island, and Naval Computer and Telecommunications Area Master Station Pacific.358 

Only when a site is chosen can the required environmental impact study be initiated 

and costs be better quantified.359 

 Australia - According to the Marine Corps, the Australia component of the 

revised laydown is an “event-driven, phased implementation” in four phases 

starting with a small, 250 Marine rotational force and gradually increasing the 

size of the force to a 2,500 Marine Air Ground Task Force.360 The Marines 

preliminary estimate of the U.S. cost to support a rotational force in Australia 

is $1.6 billion.361 However, a joint facilities assessment of existing and 

needed facilities is not expected to be complete until June 2013.362 In 

addition, a decision regarding where the forces that will rotate into Australia 

will be permanently stationed has not yet been made. While DOD is 

exchanging views with the Australian Government on a number of sensitive 

issues that will likely lead to a future agreement, as of March 2013, 

negotiations were still ongoing.363 Given these uncertainties, the timeline and 

actual cost of moving troops to Australia cannot be predicted with any 

confidence.364

 

352 U.S. Marine Corps, United States Marine Corps Distributed Laydown Presentation (May 4, 2012) at 15. 353 Id. 354 Committee staff briefing with U.S. Marine Corps (May 4, 2012). 355 U.S. Marine Corps, United States Marine Corps Distributed Laydown Presentation (May 4, 2012); Committee 

staff meeting with U.S. Marine Corps Headquarters (August 2, 2012). 

356 U.S. Marine Corps, United States Marine Corps Distributed Laydown Presentation (May 4, 2012). 357 U.S. Marine Corps answers to October 18, 2012 Committee staff questions (October 26, 2012). 358 U.S. Marine Corps, United States Marine Corps Distributed Laydown Presentation (May 4, 2012) at 26. 359 U.S. Marine Corps answers to October 18, 2012 Committee staff questions (October 26, 2012). 360 U.S. Marine Corps Presentation, United States Marine Corps Distributed Laydown (May 4, 2012). 361 Id. 362 Id.; U.S. Marine Corps answers to October 18, 2012 Committee staff questions (October 26, 2012). 363 U.S. Marine Corps answers to October 18, 2012 Committee staff questions (October 26, 2012) (emphasis added); 

Email from U.S. Marine Corps to Committee staff (March 20, 2013). 364 U.S. Marine Corps answers to October 18, 2012 Committee staff questions (October 26, 2012). 
59 

 Okinawa Consolidation – A bilateral Okinawa consolidation plan was not finalized 

until April 2013, and many of the facility returns on Okinawa are not scheduled to 

occur for a decade or longer.365 For example, the plan estimates the return of the 

Naha Port in Japanese Fiscal Year 2028 or later.366 Given uncertainty in the 

implementation timeline, it is unclear how the future force laydown will affect U.S. 

costs. For example, the Committee asked each of the services for estimates of 

operations and maintenance (O&M) costs after force posture changes associated with 

the Okinawa Consolidation are complete. The U.S. Navy identified one change – an 

increase of approximately $2-3 million per year due to the move of the carrier air 

wing from Atsugi to Iwakuni.367 The other services, however, were unable to provide 

an estimate of future O&M costs following the Okinawa Consolidation. 

Many of the troop movements planned in the revised laydown are inter-dependent. 

Several aspects of the Okinawa Consolidation plan, for example, cannot be effectuated until the 

build-up of Guam infrastructure is completed.368 Additionally, some of the Okinawa 

Consolidation plan is dependent on the completion of the FRF, which is unlikely to be completed 

in the next decade. 

 

 

365 U.S. Department of Defense, Consolidation Plan for Facilities and Areas in Okinawa (April 2013). 366 Id. 367 U.S. Naval Forces, Japan, Navy O&M and DPRI Impact (June 27, 2012); USFJ responses to Committee staff 

questions (July 27, 2012). 

368 Committee staff meeting with U.S. Marine Corps Headquarters (August 2, 2012). 
60 

COMMITTEE ACTION

On March 20, 2013, by voice vote, the Committee adopted the report and conclusion of 

the inquiry into U.S. costs and allied contributions to support the U.S. military presence 

overseas. Eighteen Senators were present. No Senator voted in the negative. 
Correction

Figure 8 on page 41 of the Committee’s report is a chart titled “Japan’s SMA and FIP 

Contributions.” Figure 8 is a reproduction of a chart supplied to the Committee by the 

Department of Defense and depicts the nominal dollar value of Japanese Special Measures 

Agreement (SMA) and Facilities Improvement Program (FIP) contributions between 1978 and 

2012. Dollar values reflected in the chart are based on the Department’s use of an exchange rate 

of 100 yen to the dollar. However, the yen-dollar exchange rate actually fluctuated during the 

period depicted in the chart. As a result, the figures reflected in the chart are in error. For 

example, while Japan’s yen-denominated contributions declined over the last decade, the 

nominal dollar value of those contributions actually fluctuated during that period and ended the 

decade higher. Notwithstanding the error, the Committee’s conclusion that Japanese burdensharing contributions have not kept pace with U.S. costs remains accurate.