Military Bases: Observations on DOD's 2005 Base Realignment and Closure Selection Process and Recommendations
Published: 2005-07-18T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: On May 13, 2005, the Department of Defense (DOD) submitted 222 base realignment and closure (BRAC) recommendations, involving an unprecedented 837 BRAC actions, to the Defense Base Closure and Realignment Commission for its review. DOD expects the proposals, if approved, would generate net annual recurring savings of about $5.5 billion beginning in fiscal year 2012 and net savings of nearly $50 billion over a 20-year period, despite an expected cost of over $24 billion to implement the recommendations. The Commission is charged with reviewing these proposals and submitting its own list to the President by September 8, 2005. The Commission requested GAO to provide testimony before the Commission summarizing the results of its report, issued on July 1, 2005, on the 2005 BRAC process. This statement presents GAO views on (1)whether DOD's selection process in developing BRAC actions was logical and reasoned, (2) selected issues regarding the recommendations, and (3) certain challenges associated with implementing the BRAC recommendations, if approved.
section_title: What GAO Found
paragraphs: DOD established and generally followed a logical and reasoned process for assessing its bases and considering potential BRAC actions. The process was organized in a largely sequential manner with an emphasis on ensuring that reliable data were obtained and used, with special audit assistance from military service audit agencies and the DOD Inspector General. Despite some overlap in data collection and other phases of the process, the three military departments and seven joint cross-service groups generally followed the sequential BRAC process to evaluate facilities and functions, and identify recommendations in their respective areas. DOD's analytical process also addressed requirements of the BRAC legislation regarding the certification of data, basing its analysis on its 20-year force structure plan and emphasizing use of military value criteria as a primary basis for decision making--including consideration of such facets as homeland defense and surge capabilities--which the Congress added for emphasis in 2005. GAO did, however, identify a number of issues with the proposed recommendations that may warrant attention by the BRAC Commission. For example, while GAO believes savings could be achieved from DOD's proposals, there are certain limitations associated with the magnitude of the savings projected by DOD. About 47 percent, or $2.5 billion of DOD's projected net annual recurring savings is associated with eliminating jobs currently held by military personnel. However, rather than reducing end-strength, DOD indicates the positions are expected to be reassigned to other areas, which may enhance capabilities but also reduce or eliminate dollar savings available for other uses. Sizeable savings are also projected from efficiency measures and other actions related to a variety of recommendations, but underlying assumptions have not been validated and may be difficult to track and achieve over time. GAO also identified many recommendations requiring far longer periods of time for savings to offset the costs associated with implementing the recommendations than was typical in the 1995 BRAC round, raising questions about the cost/benefit ratio of selected recommendations. There are significant implementation challenges that lie ahead, to the extent proposed recommendations are approved, which could have a bearing on the ultimate savings realized and overall success of the BRAC round. They include the need for (1) transition planning to minimize the adverse impacts on operations, including steps to mitigate the potential loss of specialized human capital skills; (2) mechanisms to monitor implementation of recommendations in line with approved actions, along with mechanisms to ensure the tracking and periodic updating of savings that DOD expects from implementing the recommendations; (3) plans to address and adequately fund environmental restoration of unneeded property in order to expedite property transfer and put property to productive reuse; and (4) assistance for both losing and gaining communities affected by BRAC recommendations, including costs to DOD and other federal agencies.

section_title: Letter
paragraphs: I appreciate the opportunity to be here today to provide you with the  results of our work on the defense base realignment and closure (BRAC)  2005 selection process and recommendations.  First, I would like to  commend you, Mr. Chairman, and your fellow Commissioners for  undertaking the very important, complex and controversial task of  reviewing the Department of Defense’s (DOD) list of proposed  recommendations and recognizing you have to forward your  recommendations to the President in September of this year.  I am well  aware that your task is especially demanding, given the limited time in  which you have to do your work and the broad scope of your  responsibilities.  However, I would like to point out that your work is of  critical importance since, while reasonable people can and will differ on  specific recommendations, it is clear that DOD must reduce its excess  support infrastructure in order to generate savings for higher priority  needs, including the military and business transformation efforts in light of  21st century trends and challenges.
We have frequently reported in recent years on the long-term challenges  DOD faces in managing its portfolio of facilities, halting degradation of  facilities, and reducing unneeded infrastructure to free up funds to better  maintain enduring facilities and meet other needs. Because of these long- standing issues, DOD’s management of its support infrastructure has been  included in our list of high-risk areas since 1997.  While the previous four  rounds of closures and realignments have helped reduce excess  infrastructure and generate savings, DOD’s infrastructure costs continue  to consume a larger-than-necessary portion of the DOD budget, and as a  result, DOD has not been able to devote funds to more critical needs.
While the 2005 BRAC round affords the department an additional  opportunity to further reduce infrastructure and generate savings, it will  not, in itself, be sufficient to stem the overall rising costs of DOD’s  operations and much more will need to be done to transform the  department.  It is critical that DOD continue to search out ways to reduce  unnecessary spending and significantly improve its business processes.   Further, it must recognize that tough choices need to be made in  connection with a variety of initiatives (e.g., weapons systems) and areas  (e.g., health care) that are not affordable or sustainable over the longer  term, given our large and growing long-term deficits.  Moreover, reducing  unnecessary defense costs and creating more efficiency within DOD is an  important step in addressing the nation’s growing fiscal imbalances.  Over  the long term, the nation’s growing fiscal imbalances, if left unchecked,  will ultimately impede our economic growth; have an adverse impact on  our future standard of living; and in due course, affect our ability to  address key national and homeland security needs.  These factors create  the need to make choices at a national level that will only become more  difficult the longer they are postponed.
Now, if I could turn your attention to the specifics of the 2005 BRAC  round.  On May 13, 2005, the Secretary of Defense publicly announced his  list of recommended realignment and closure actions.  The department’s  list consists of 222 recommendations involving an unprecedented 837  closure and realignment actions—including 33 major base closures and 30  major realignments, plus numerous other closures and realignments.  The  department expects that these recommendations, if approved, would  generate net annual recurring savings of about $5.5 billion beginning in  fiscal year 2012 and nearly $50 billion in net present value savings over a  20-year period, despite an up-front expected cost of over $24 billion to  implement those recommended actions.  In my testimony today, I will  address (1) whether DOD’s selection process in developing the  recommended actions was logical and reasoned; (2) selected issues  regarding the recommendations that the BRAC Commission may wish to  consider as part of its analysis of DOD’s recommendations; and (3) certain  challenges we see in implementing DOD’s proposed BRAC  recommendations, if they are approved.
To analyze the BRAC selection process and the proposed  recommendations, we monitored various aspects of the process as it  evolved over time leading up to and following the public release of the  Secretary of Defense’s recommendations. We sought to assure ourselves  that DOD followed a logical, reasoned, and well-documented decision- making process leading to the proposed recommendations.  With the  approval of the large number of recommendations occurring in the final  weeks of the process, the broad scope and complexity of the  recommendations, and the limited time available for us to report our  results, we generally focused greater attention following the  announcement of the proposed closures and realignments on those issues  affecting more than one recommendation than on issues pertaining to the  implementation of individual recommendations. However, as time  permitted, we visited selected installations to better gauge the operational  and economic impact of the proposed recommendations. We generally  experienced good access to relevant documentation and to key senior  officials and staff involved in the BRAC process.
My statement is based primarily on our July 1, 2005, report on the 2005  BRAC selection process and recommendations, which was provided to  you at that time.  Our work was performed in accordance with generally  accepted government auditing standards.
subsections: section_title: Background
paragraphs: The legislation authorizing the 2005 BRAC round, enacted as part of the  National Defense Authorization Act for Fiscal Year 2002, required DOD to  give priority to selection criteria dealing with military value and added  elements of specificity to criteria previously used by DOD in prior BRAC  rounds. In large measure, the final criteria closely followed the criteria  DOD employed in previous rounds, with greater specificity added in some  areas, as required by Congress. To ensure that the selection criteria were  consistently applied, the Office of the Secretary of Defense (OSD)  established a common analytical framework to be used by the three  military departments and the seven joint cross-service groups. Each  service and group adapted this framework, in varying degrees, to its  individual activities and functions in evaluating facilities and functions and  identifying closure and realignment options. Despite the diversity of bases  and cross-service functions analyzed, each of the groups was expected to  first analyze capacity and military value of its respective facilities or  functions, and then to identify and evaluate various closure and  realignment scenarios and provide specific recommendations. The  analysis relied on data calls to obtain certified data to assess such factors  as maximum potential capacity, current capacity, current usage, excess  capacity, and capacity needed to meet surge requirements.
The military value analysis consisted of assessments of operational and  physical characteristics of each installation, or specific functions on an  installation related to a specific joint cross-service group’s area of  responsibility. These would include an installation’s or function’s current  and future mission capabilities, physical condition, ability to  accommodate future needs, and cost of operations. This analysis also  relied on data calls to obtain certified data on the various attributes and  metrics used to assess each of the four military value criteria and permit  meaningful comparisons between like installations or facilities with  reference to the collective military value selection criteria.
The scenario development and analysis phase focused on identifying  various realignment and closure scenarios for further analysis. These  scenarios were to be derived from consideration of the department’s 20- year force structure plan, capacity analysis, military value analysis, and, as  appropriate, the exercise of military judgment through consideration of  transformational options, applicable guiding principles, objectives, or  policy imperatives identified by individual military services or joint cross- service groups.
The BRAC 2005 round is different from previous base closure rounds in  terms of number of actions, projected implementation costs, and  estimated annual recurring savings. While the number of major closures  and realignments is just a little greater than those in individual previous  rounds, the number of minor closures and realignments, as shown in table  1, is significantly greater than those in all previous rounds combined.  DOD data indicate that over 200,000 military and civilian personnel jobs,  exclusive of personnel returning from overseas locations, will be affected  by the implementation of the DOD’s BRAC recommended actions, if they  are approved.  Further, it is likely that thousands of contractor personnel  will be similarly affected.
The large increase in minor closures and realignments is attributable  partly to actions involving the Army National Guard, Army Reserve, and  Air National Guard and vacating leased space.
DOD’s projected cost to implement the proposed actions is $24.4 billion  compared to a $22 billion total from the four previous rounds through  2001, the end of the 6-year implementation period for the 1995 BRAC  round. The increase in costs is due partly to significant military  construction and moving costs associated with Army recommendations to  realign its force structure, and to recommendations to move activities  from leased space onto military installations. For example, the Army  projects that it will need about $2.3 billion in military construction funds  to build facilities for the troops returning from overseas. Likewise, DOD  projects that it will need an additional $1.3 billion to build facilities for  recommendations that include activities being moved from leased space.
section_title: DOD Developed a Generally Logical and Reasoned Process for Making BRAC Decisions
paragraphs: DOD’s decision-making process for evaluating its facilities and studying  potential recommendations was generally logical, well documented, and  reasoned, although there were delays in making the supporting data  available to the Commission and to the public after the Secretary  announced his proposed recommendations on May 13, 2005. In  establishing the framework for the 2005 BRAC round, DOD provided  overall policy guidance for the BRAC process, including a requirement that  its components develop and implement internal control plans to ensure  the accuracy and consistency of their data collection and analyses. These  plans also helped to ensure the overall integrity of the process and the  information upon which OSD considered each group’s recommendations.  OSD also established a common analytical framework used by each  military department to analyze its service-unique functions and by each of  the seven joint cross-service groups to analyze its common business- oriented functions. The military departments and each joint cross-service  group adapted this framework, in varying degrees, to its individual  activities and functions in evaluating facilities and functions that shaped  its analysis. The process began with a set of sequential steps by assessing  capacity and military value, developing and analyzing scenarios, then  identifying candidate recommendations, which led to the final list of  recommendations.  Military judgment also played a role throughout the  process. Figure 1 illustrates the overall sequential analytical process  generally employed to develop BRAC recommendations.
It must be noted, however, that while the process largely followed the  sequential process, initial difficulties associated with obtaining complete  and accurate data in a timely manner added to overlap and varying  degrees of concurrency between data collection efforts and other steps in  the process.  To assist in the process for analyzing and developing  recommendations, the military services and joint cross-service groups  used various analytical tools that helped to ensure a more consistent  approach to BRAC analysis and decision making. For example, all of the  groups used the DOD-approved Cost of Base Realignment Actions  (COBRA) model to calculate costs, savings, and return on investment for  BRAC scenarios and, ultimately, for the final 222 BRAC recommendations.  DOD has used the COBRA model in each of the previous BRAC rounds  and, over time, has improved upon its design to provide better estimating  capability. In our past and current reviews of the COBRA model, we found  it to be a generally reasonable estimator for comparing potential costs and  savings among various BRAC options.
subsections: section_title: BRAC Process Incorporated Key Legislative Requirements
paragraphs: The BRAC process follows a historical analytical framework with many  elements of the process being carried forward or building upon lessons  learned from previous rounds.  For example, the selection process  essentially followed a framework similar to that employed in previous  BRAC rounds, with more specificity in selected military value areas like  surge and homeland defense as required by Congress.  At the same time,  DOD incorporated into its analytical process other legal considerations for  formulating its realignment and closure recommendations. As required by  BRAC legislation, DOD certified the data used in the selection process and  based its recommendations on the congressional specified selection  criteria, its 20-year force structure plan, and gave priority consideration to  the military value criteria.
DOD collected capacity and military value data that were certified as to  their accuracy by hundreds of persons in senior leadership positions  across the country.  These certified data were obtained from corporate  databases and from hundreds of defense installations.  In total, DOD  projects that it collected over 25 million pieces of data as part of the BRAC  process. Given the extensive volume of requested data from the 10  separate groups (3 military departments and 7 joint cross-service groups),  we noted that the data collection process was quite lengthy and required  significant efforts to help ensure data accuracy. In some cases,  coordinating data requests, clarifying questions and answers, controlling  database entries, and other issues led to delays in the data-driven analysis  DOD originally envisioned. As such, some groups had to develop strategy- based proposals. As time progressed, however, these groups reported that  they obtained the needed data, for the most part, to inform and support  their scenarios. At the same time, because of data limitations, a few of the  joint cross-service groups relied on some data from commercially  available databases to support their decision making.  While it was  difficult for these data to be validated in a fashion similar to most other  DOD collected-data, the data came from widely used databases and were  approved by the chairs of the relevant joint cross-service groups.
Each of the military services and the seven joint cross-service groups  considered DOD’s 20-year force structure plan in its analysis. DOD based  its force structure plan for BRAC purposes on an assessment of probable  threats to national security during a 20-year period beginning with fiscal  year 2005. DOD provided this plan to Congress in March 2004, and as  authorized by the statute, it subsequently updated it 1 year later in March  2005. Based on our analysis, updates to the force structure affected some  ongoing BRAC analyses. For example, the Industrial Joint Cross-Service  Group reassessed its data pertaining to overhauling and repairing ships  based on the updated force structure and decided that one of its two  smaller shipyards—Naval Shipyard Pearl Harbor or Naval Shipyard  Portsmouth—could close.  However, as you know, much debate continues  over the size of the Navy’s future force structure.
DOD gave primary consideration to its military value selection criteria in  its process. Specifically, military value refers to the first four selection  criteria: an installation’s current and future mission capabilities, condition,  ability to accommodate future needs, and cost of operations. The manner  in which each military service or joint cross-service group approached its  analysis of military value varied according to the unique aspects of the  individual service or cross-service function. These groups typically  assessed military value by identifying multiple attributes or characteristics  related to each military value criterion, then identifying qualitative metrics  and measures and associated questions to collect data to support the  overall military value analysis. For example, figure 2 illustrates how the  Headquarters and Support Activities Joint Cross-Service Group linked  several of its military value attributes, metrics, and data questions to the  mandated military value criteria.
Based on congressional direction, there was enhanced emphasis on two  aspects of military value—an installation’s ability to serve as a staging area  for homeland defense missions and its ability to meet unanticipated  surge.  Each military department considered homeland defense roles in  its BRAC analysis and coordinated with the U.S. Northern Command—a  unified command responsible for homeland defense and civil support. Our  analysis shows that all three military departments considered homeland  defense needs, with the Air Force recommendations having the most  impact. According to Air Force officials, the U.S. Northern Command  identified specific homeland defense missions assigned to the Air Force,  which it incorporated into its decision-making process. Navy officials  likewise discussed the impact of potential BRAC scenarios on the Navy’s   maritime homeland defense mission with U.S. Northern Command, U.S.  Strategic Command, and the U.S. Coast Guard. In this regard, for example,  the Navy decision to retain Naval Air Station Point Mugu, California, was  influenced, in part, because the U.S. Coast Guard wanted to consolidate its  West Coast aviation assets at this installation for homeland defense  purposes. According to Army officials, most of the Army’s role in  supporting homeland defense is carried out by the Army National Guard.  The U.S. Northern Command reviewed the recommendations and found  no unacceptable risk to the homeland defense mission and support to civil  authorities.
DOD left it to each military service and joint cross-service group to  determine how surge would be considered in its analysis.  Generally, all  the groups considered surge by retaining a certain percentage of  infrastructure, making more frequent use of existing infrastructure, or  retaining difficult-to-reconstitute assets. For example, the Technical Joint  Cross-Service Group set aside 10 percent of its facility infrastructure for  surge, while the Industrial Joint Cross-Service Group factored additional  work shifts in its analysis. The military services retained difficult-to- reconstitute assets as the primary driver to satisfying the statutory  requirement to consider surge capability. Both the Army and Navy gave  strong consideration to infrastructure that would be difficult to  reconstitute, such as large tracts of land for maneuver training purposes or  berthing space for docking ships. For example, the Navy has a finite  number of ships and aircraft and would likely have to increase operating  tempo to meet surge needs. The Air Force addressed surge by retaining  sufficient capacity to absorb temporary increases in operations, such as  responding to emergencies or natural catastrophic events like hurricane  damage, and the capacity to permanently relocate all of its aircraft  stationed overseas in the United States if needed.
As noted earlier, the BRAC process used in 2005 followed a historical  analytical framework with many elements of the process being carried  forward or building upon lessons learned from previous rounds.  We have  noted previously in examining lessons learned from prior BRAC rounds  the general agreement that this framework has served the BRAC decision- making process well, even as improvements were made to the process for  each BRAC round. If future BRAC rounds are held, as suggested by the  Secretary of Defense in transmitting his 2005 BRAC recommendations to  the Commission, we believe it will be important to document lessons  learned from this round to determine what actions might be needed to  strengthen the process for the future. We believe that will be especially  important given the broad range of realignment actions proposed for this  BRAC round, compared with previous rounds.
section_title: DOD Audit Agencies Helped to Improve the Accuracy of Data Used during the BRAC Process
paragraphs: The DOD Inspector General and the services’ audit agencies played an  important role in ensuring that the data used in the BRAC analyses were  accurate and certified by cognizant senior officials. Through extensive  audits of the capacity, military value, and scenario data collected from  field activities, these audit agencies notified various BRAC teams of data  discrepancies for corrective action. The audit activities included validation  of data, compliance with data certification requirements employed  throughout the chain of command, and examination of the accuracy of the  analytical data. While the auditors initially encountered problems with  regard to data accuracy and the lack of supporting documentation for  certain questions and data elements, most of these concerns were  resolved. In addition, the auditors worked to ensure certified information  was used for BRAC analysis. These audit agencies also reviewed other  facets of the process, including the various internal control plans, the  COBRA model, and other modeling and analytical tools that were used in  the development of recommendations.
section_title: Issues Related to DOD’s Recommendations
paragraphs: We identified issues regarding various DOD’s recommendations that may  warrant further attention by the BRAC Commission. The issues we are  highlighting in this statement relate to cost and savings estimates, lengthy  payback periods for many recommendations, and efforts to move DOD  organizations out of leased space onto military bases. Other issues are  further discussed in our July 1, 2005, report on the 2005 BRAC process.
subsections: section_title: Issues Related to Projected Savings
paragraphs: DOD projects that its proposed recommendations will produce nearly $50  billion in 20-year net present value savings, with net annual recurring  savings of about $5.5 billion. While we believe the 2005 BRAC process  could produce savings for DOD, we must emphasize that the majority of  the projected savings are related to a small percentage of the  recommendations (see app. I). Also, a large portion of projected savings  are related to military personnel reductions but the lack of planned end- strength reductions reduces dollar savings available for other purposes.   Also, we believe there is uncertainty regarding the magnitude of savings  likely to be realized in other areas, given unvalidated assumptions  regarding expected efficiency gains from business process reengineering  efforts and projected savings from sustainment, recapitalization, and base  operating support. Table 2 summarizes the projected one-time cost, the  cost or savings anticipated during the 6-year implementation period for the  closure or realignment, the estimated net annual recurring savings, and the  projected 20-year net present value cost or savings of DOD’s  recommendations.
Table 2 also shows the Navy, Air Force, and joint cross-service groups all  projecting net savings within the 6-year implementation period, as well as  significant 20-year net savings. In contrast, because of the nature of the  Army’s proposed actions and costs, such as providing infrastructure for  troops returning from overseas and the consolidation and recapitalization  of reserve facilities, the Army does not achieve net savings either during  the implementation period or within 20 years.
As figure 3 shows, 47 percent of the net annual recurring savings can be  attributed to projected military personnel reductions. About 40 percent  ($2.1 billion) of the projected net annual recurring savings can be  attributed to savings from operation and maintenance activities, which  include terminating or reducing property sustainment and recapitalization,  base operating support, and civilian payroll.
Furthermore, about $500 million of the “other” savings is based on  business process reengineering efforts, but some of the assumptions  supporting the expected efficiency gains have not been validated.  Also, a  significant portion of the projected savings involving sustainment and  recapitalization is for space being vacated as functions and activities are  moved from one base to another.  However, in various instances, plans for  the vacated space are uncertain as is the magnitude of the projected  savings.
subsections: section_title: Military Personnel Savings
paragraphs: Much of the projected net annual recurring savings (47 percent) is  associated with eliminating positions currently held by military personnel;  but end-strength levels will not be reduced as DOD indicates the positions  are expected to be reassigned to other areas.  Without reducing end- strength levels, there are no dollar savings from military personnel that  can be applied elsewhere.  At best, these freed-up resources could be  viewed as a cost avoidance, if the resources are redeployed to an  area of  need and, as a result help offset any expected congressional action to  otherwise authorize an increase in end-strength.  On the other hand, if an  increase in end-strength is not planned and you are simply redirecting the  freed-up resources to another area of need, it could be viewed as  enhancing capabilities and achieving more effective utilization of your  personnel resources, not dollar savings.
For example, although the Air Force projects net annual recurring savings  of about $732 million from eliminating about 10,200 military positions, Air  Force officials stated the active duty positions will be reassigned to relieve  stress on high demand career fields and the reserve positions to new  missions yet to be identified. Likewise, the Army is projecting savings from  eliminating about 5,800 military positions, but it has no plans to reduce its  end strength. Finally, the Navy is projecting it will eliminate about 4,000  active duty military positions, which a Navy official noted will help it  achieve the end-strength reductions already planned. As we noted during  our review of DOD’s process during the 1995 BRAC round, since these  personnel will be assigned elsewhere rather than taken out of the force  structure, they do not represent dollar savings that can be readily  reallocated outside the personnel accounts. Not recognizing that these  are not dollar savings that can be readily applied elsewhere could create a  false sense of savings available for use in other areas traditionally cited as  beneficiaries of BRAC savings, such as making more funds available for  modernization and better maintenance of remaining facilities.
section_title: Sustainment, Recapitalization, and Base Operating Support Savings
paragraphs: DOD is also projecting savings from the sustainment and recapitalization  of facilities that are scheduled to be demolished, as well as from facilities  that might remain in DOD’s real property inventory when activities are  realigned from one base to another. For example, the Industrial Joint  Cross-Service Group is claiming about $20 million in annual recurring  savings from the recapitalization of facilities at installations responsible  for destroying chemical weapons at three locations recommended for  closure. However, the Army had already expected to demolish these  chemical destruction facilities upon completing the destruction of the  chemical weapons at each site and the Army has not identified future  missions for these installations. As a result, we do not believe it is  appropriate for the Industrial Joint Cross-Service Group to claim any  recapitalization savings related to these installations.
DOD is also projecting savings from the recapitalization and sustainment  of facilities in cases where functions or activities would be realigned from  one base to another. However, it is not clear to what extent the proposed  realignments would result in an entire building or portion of a building  being vacated, or if entire buildings were vacated, whether they would be  declared excess and removed from the military services’ real property  inventory. Our analysis shows that the supply and storage group’s  recommendations project about $100 million in sustainment and  recapitalization savings from realigning defense distribution depots. The  group estimates its recommendations will vacate about 27 million square  feet of storage space. Supply and storage officials told us their goal is to  vacate as much space as possible by rewarehousing inventory and by  reducing personnel spaces, but they do not have a specific plan for what  will happen to the space once it is vacated. In addition, until these  recommendations are ultimately approved and implemented, DOD will not  be in a good position to know exactly how much space is available or how  this space will be disposed of or utilized. As a result, it is uncertain how  much of the estimated $100 million in annual recurring savings will  actually occur.
section_title: Savings Based on Business Process Reengineering
paragraphs: DOD projected net annual recurring savings in the “other” category as  shown in figure 3 include about $500 million that is based on business  process reengineering efforts. Our analysis indicates that four  recommendations—one from the Industrial Joint Cross-Service Group and  three from the Supply and Storage Joint Cross-Service Group—involve  primarily business process reengineering efforts. However, the expected  efficiency gains from these recommendations are based on assumptions  that are subject to some uncertainty and have not been validated.
Our analysis indicates that $215 million, or 63 percent, of the estimated net  annual recurring savings from the Industrial Joint Cross-Service Group  recommendation to create fleet readiness centers within the Navy is based  on business reengineering efforts that would result in overhead  efficiencies. Although the data suggest there is the potential for savings,  we believe the magnitude of the savings is somewhat uncertain because  the estimates are based on assumptions that have undergone only limited  testing. Realizing the full extent of the savings would depend on actual  implementation of the recommended actions and modifications to the  Navy’s supply system. The industrial group and the Navy assumed that  combining depot and intermediate maintenance levels would reduce the  time needed for an item to be repaired at the intermediate level, which in  turn would reduce the number of items needing to be kept in inventory, as  well as the number of items being sent to a depot for repair. These  assumptions, which were the major determinant of the realignment  savings, were reportedly based on historical data and pilot projects and  have not been independently reviewed or verified by the Naval Audit  Service, the DOD Inspector General, or us.
Furthermore, our analysis indicates that $291 million, or about 72 percent,  of the net annual recurring savings expected from the Supply and Storage  Joint Cross-Service Group’s three recommendations are also based on  business process reengineering. In the COBRA model, the savings are  categorized as procurement savings and are based on the expanded use of  performance-based logistics and reductions to duplicate inventory.  Supply and storage group staff said that these savings accrue from  reduced contract prices because the Defense Logistics Agency (DLA) will  have increased buying power since it is responsible for purchasing many  more items that before were purchased by each of the services. In  addition, savings accrue from increased use of performance-based  agreements, a key component of performance-based logistics. The group  estimates DLA can save 2.8 cents on each contract dollar placed on  performance-based agreements. In addition, savings result from  reductions in the amount of stock that must be held in inventory. Supply  and storage staff said that these savings are attributable to reductions in  the cost of money, cost of stock losses due to obsolescence, and cost of  storage. The group estimates that together these factors save about 17  percent of the estimated value of the acquisition cost of the stock that is  no longer required to be held in inventory. These savings estimates, for the  most part, are based on historical documentation provided by DLA, which  time did not allow us to validate. The extent to which these same savings  will be achieved in the future is uncertain. As noted above, how these  actions are implemented could also affect savings. We are concerned that  this is another area that could lead to a false sense of savings and lead to  premature reductions in affected budgets in advance of actual savings  being fully realized, as has sometimes occurred in past efforts to achieve  savings through business process reengineering efforts.
section_title: Transformation Cited as Justification for Many Recommendations despite Lack of Clear Agreement on Transformational Options
paragraphs: While furthering transformation was one of the BRAC 2005 goals, there  was no agreement between DOD and its components on what should be  considered a transformational effort. As part of the BRAC process, the  department developed over 200 transformational options for stationing  and supporting forces as well as for increasing operational efficiency and  effectiveness. The OSD BRAC office narrowed this list to 77 options, but  agreement was not reached within the department on these options, so  none of them were formally approved. Nonetheless, each service and joint  cross-service group was permitted to use the transformational options as  appropriate to support its candidate recommendations. Collectively, these  draft options did not provide a clear definition of transformation across  the department. The options ranged from those that seemed to be service  specific to those that suggested new ways of doing business. For example,  some transformational options included reducing the number of Army  Reserve regional headquarters; optimizing Air Force squadrons; and co- locating various functions such as recruiting, military and civilian  personnel training, and research, development and acquisition and test  and evaluation, across the military departments. In contrast, some options  suggested consideration of new ways of doing business, such as  privatizing some functions and establishing a DOD agency to oversee  depot-level reparables.
While the transformational options were never formally approved, our  analysis indicates that many of DOD’s recommendations reference one or  more of the 77 transformational options as a resulting benefit of the  proposed actions. For example, 15 of the headquarters and support  activities group recommendations reference the option to minimize leased  space and move organizations in leased space to DOD-owned space.  Likewise, 37 of the Army reserve component recommendations reference  the option to co-locate guard and reserve units at active bases or  consolidate guard and reserve units that are located in proximity to one  another at one location. Conversely, a number of the scenarios that were  initially considered but not adopted reference transformational options  that could have changed existing business practices. For example, the  education and training group developed a number of scenarios— privatizing graduate education programs and consolidating undergraduate  fixed and rotary wing pilot training—based on the draft transformational  options, but none were ultimately approved by the department.
section_title: Some Proposals Have Lengthy Payback Periods
paragraphs: Many of the 222 recommendations DOD made in the 2005 round are  associated with lengthy payback periods, which, in some cases, call into  question whether the department would be gaining sufficient monetary  value for the up-front investment cost required to implement its  recommendations and the time required to recover this investment. Our  analysis indicates that 143, or 64 percent, of DOD’s recommendations are  associated with payback periods that are 6 years or less while 79, or 36  percent, of the recommendations are associated with lengthier paybacks  that exceed the 6-year mark or never produce savings. Furthermore, our  analysis shows that the number of recommendations with lengthy payback  periods varied across the military services and the joint cross-service  groups, as shown in table 3.
As shown in table 3, the Army has five recommendations and the  education and training group has one recommendation that never  payback, as described below:    Army realignment of a special forces unit from Fort Bragg, North  Carolina, to Eglin Air Force Base, Florida;    Army realignment of a heavy brigade from Fort Hood, Texas, to Fort    Army realignment of a heavy brigade to Fort Bliss, Texas, and infantry  and aviation units to Fort Riley, Kansas;    Army reserve component consolidations in Minnesota;    Army reserve component consolidations in North Dakota; and    Education and Training Joint Cross-Service Group’s establishment of  Joint Strike Fighter aircraft training at Eglin Air Force Base, Florida.
According to Army officials, these five recommendations have no payback  because, in part, they must build additional facilities to accommodate the  return of about 47,000 forces currently stationed overseas to the United  States as part of DOD’s Integrated Global Presence and Basing Strategy  initiative. According to the education and training group, its one  recommendation with no payback period is due to the high military  construction costs associated with the new mission to consolidate initial  training for the Joint Strike Fighter aircraft for the Navy, the Marine Corps,  and the Air Force.
We also identified some portions of DOD’s individual recommendations  that are associated with lengthy payback periods for certain BRAC actions  but are imbedded within larger, bundled recommendations. The following  example illustrates this point.
A proposal initially developed by the Headquarters and Support  Activities Joint Cross-Service Group to move the Army Materiel  Command from Fort Belvoir, Virginia, to Redstone Arsenal, Alabama,  had more than a 100-year payback period with a net cost over a 20-year  period. However, the proposal did not include some expected savings  that if included, would have reduced the payback period to 32 years.  Concurrently, the group developed a separate proposal to relocate  various Army offices from leased and government-owned office space  onto Fort Sam Houston, Texas, which would have resulted in a 3-year  payback period. The headquarters group decided to combine these two  stand-alone proposals into one recommendation, resulting in an  expected 20-year net present value savings of about $123 million with a  10-year payback.
section_title: Vacating Leased Space
paragraphs: Fifteen of the Headquarters and Support Activities Joint Cross-Service  Group’s recommendations include a one-time savings of over $300 million  from moving activities from leased space onto military installations.   These recommendations, if approved, would reduce total DOD leased  space within the National Capital Region from 8.3 million square feet to  about 1.7 million square feet, or by 80 percent. While our prior work  generally supports the premise that leased property is more expensive  than government-owned property, the recommendations related to  vacating leased space also raise questions about a limitation in projected  savings and impact on local communities.
The one-time cost savings represents costs expected to be avoided in the  future by moving from leased facilities into government owned and  protected facilities rather than upgrading existing leased space to meet  DOD’s antiterrorism/force protection standards.  According to a DOD  official, after the June 1996 Khobar Tower bombing incident in Dhahran,  Saudi Arabia, the department created a task force of mostly engineers to  develop minimum force protection standards for all DOD-occupied  locations.  The official also stated that the standards were not the result of  a formal threat assessment.  The force protection standards for leased  buildings apply only where DOD personnel occupy at least 25 percent of  the net interior usable area; only to the portion of the building occupied by  DOD personnel; to all new leases that are executed on or after October 1,  2005, and to leases renewed or extended on or after October 1, 2009.
Initially, the joint cross-service group prepared military value data call  questions that could determine whether a leased location met the force  protection requirements.  However, group officials stated that most of  these questions were discarded because of inconsistencies in how the  questions were answered. As noted in our July 1 report, we have also  learned that the Pentagon Force Protection Agency will shortly begin 10- month antiterrorism and force protection vulnerability assessments of  about 60 DOD-occupied leased buildings in the National Capital Region.  One could question whether this action should not have been completed  prior to recommending a broad-based divestiture of leased space.
Another significant issue related to the leased space, at least in the  National Capital Region, is the impact of such a major divestiture of leased  space on community infrastructure. Four of the Headquarters and Support  Activities Joint Cross-Service Group’s recommendations involve moving  personnel from leased space to Fort Belvoir, Virginia, increasing Fort  Belvoir’s population by about 10,700.  The recommendations include  military construction projects to build facilities for these personnel on  Fort Belvoir.  In addition, the recommendations include $55 million to  improve roads and other infrastructure in the area surrounding the base.   However, it is uncertain at this time whether this will be sufficient to fully  support the impact on the surrounding community’s infrastructure or the  likelihood that local governments will seek federal assistance to help  communities reduce the impact—costs that will have the effect of  increasing one-time costs and offsetting short-term savings from the  recommendations.
section_title: Significant Challenges Ahead for Implementing BRAC Recommendations
paragraphs: While we realize that the BRAC Commission is charged with reviewing  DOD’s proposed list of recommended BRAC actions and submitting its  own list to the President by September 8, 2005, there are significant  challenges ahead for implementing BRAC recommendations which I  would like to bring to the Commission’s attention—challenges that will  likely affect how successful this BRAC round could be viewed historically.   These challenges include the need for (1) transition planning to minimize  the impact of the loss of specialized human capital skills in implementing  recommended actions on ongoing defense operations; (2) mechanisms to  monitor implementation, including the tracking and periodic updating of  savings that DOD expects from implementing BRAC recommendations; (3)  plans to address and adequately fund environmental restoration of  unneeded property in order to expedite property transfer and put property  to productive reuse; and (4) assistance for both losing and gaining  communities affected by the BRAC recommendations.
subsections: section_title: Transition Plans for Minimizing Disruption of Operations due to Loss of Specialized Skills
paragraphs: A significant challenge facing the department is the need for transition  plans to address the human capital skills that are likely to be lost and in  need of replacement in order to provide for uninterrupted operations as  BRAC recommendations are implemented.  In its cost and savings  analyses, the department estimated in most instances that, as a standard  factor in its COBRA model, about 75 percent of the personnel at a facility  being closed or realigned would move to the gaining installation receiving  the mission or workload.
However, in some cases, this percentage may be overstated resulting in  less actual movement than anticipated, which may in turn present  challenges for gaining bases. For example, Industrial Joint-Cross Service  Group officials told us that based on the Navy’s prior experience in closing  shipyards, they did not expect many personnel to move to other shipyards  if the Portsmouth shipyard were closed.  They further told us that because  it takes about 8 years for personnel to become fully proficient in  maintaining nuclear-powered submarines, this would present a challenge  for the other yards to replicate the loss in skills due to the unwillingness of  workers to move with the relocated workload.  Officials at Fort  Monmouth, New Jersey, expressed similar concerns regarding the planned  closure of the base and plans for a large portion of the work to be  transferred to the Aberdeen Proving Ground in Maryland.  Information  provided by these officials suggest that the potential loss of a large  retirement age population must be balanced against the impact on ongoing  mission activities providing real-time assistance to warfighters and  transformation initiatives.
In other cases, the loss of personnel skills at a location may cause some  concern but may not be as difficult to reconstitute. For example, DOD  projects that about 7,400 personnel would move under the proposal to  consolidate the Defense Finance and Accounting Service from 26 to 3  sites.  While the actual number of personnel that may move is unknown, a  Defense Finance and Accounting Service official stated that the  accounting skills required are available at the receiving sites. Our analysis  indicates that over 4,590, or 62 percent, of the workforce at the 26 sites are  classified as accounting-related civilian positions at General Schedule  grade 11 or below.
Should there be recommendations where the loss of personnel is  extensive, particularly for those skills requiring extensive education,  training, and experience, it could prove challenging to the department to  satisfactorily provide for the replacement of these critical skills.  In this  regard, it is important that the department develop transition plans that  would recognize the loss of human capital skills and provide for  replacement capability to minimize disruption of ongoing defense  operations.  Without such a plan, the department could be at risk in  providing the necessary support to our military forces.
section_title: Mechanisms for Monitoring Implementation and Tracking and Updating Savings Estimates
paragraphs: As noted in our July 1, 2005, report, the department has proposed various  BRAC actions involving business process changes and other actions, such  as in joint basing, where likely savings will very much depend on  implementation actions, the details of which are yet to be developed.  We  believe it will be important that DOD monitor implementation of these  actions to ensure compliance with proposed actions. With respect to  savings estimates, we believe it is also critical that the department devise a  mechanism to track and periodically update its savings estimates from the  final recommendations in order to provide not only Congress but the  public with a full accounting of the dollars saved through the BRAC  process.  Our interest in this area is evidenced by our recommendation in  our July 2005, report to provide for this.  However, given the problems in  tracking savings from the previous rounds, and the large volume of BRAC  actions that are more oriented to realignments and business process  engineering rather than closures, along with our concerns about claimed  military personnel savings, we believe it is of paramount importance that  DOD put in place a process to track and periodically update its savings  estimates.
section_title: Plans for Addressing Environmental Restoration
paragraphs: In accordance with long-standing DOD practice in previous rounds,  estimated environmental restoration costs for bases undergoing closure or  realignment are not included in DOD’s cost and savings analyses. Such  costs are excluded for comparative purposes based on DOD’s position that  restoration is a liability that the department must address regardless of  whether a base is kept open or closed. Nevertheless, DOD did give  consideration to such costs in addressing selection criterion 8, and  included available information on estimated restoration costs as part of  the data supporting its BRAC recommendations. DOD data indicate that  estimated restoration costs for its 33 major base closures would be about  $949 million, as shown in table 4.
As shown in the table 4, the Army is expected to incur the largest share of  estimated restoration costs due to the proposed closure of several  ammunition plants and chemical depots.  While the DOD BRAC report  does not specifically identify the potential for additional restoration costs  at DOD installations, available supporting documentation does identify  some additional costs. For example, the Army estimated that range  restoration at Hawthorne Army Depot could cost between $27 million to  $147 million in addition to the $383 million reported and included in the  estimates in table 4. Further, the Army recognizes that additional  restoration costs could be incurred at six additional locations that have  ranges and chemical munitions, but these costs have not yet been  determined.
More recent environmental restoration cost data indicate that the  estimates are increasing.  As noted in a June 2005 Congressional Research  Service report, the estimates for the recommended 33 major base  closures have increased by nearly $600 million to over $1.5 billion.   Estimated costs to complete environmental restoration now exceed $100  million at each of the following proposed major closures:  Hawthorne  Army Depot, Nevada ($465 million); Otis Air National Guard Base,  Massachusetts ($373 million); Fort Monroe, Virginia ($201 million); and  Deseret Chemical Depot, Utah ($180 million).
Service officials told us that the projected cost estimates for  environmental restoration are lower, in general, than evidenced in  previous rounds, because the environmental conditions of today’s bases  are much better than those closed or realigned in previous rounds,  primarily because of DOD’s ongoing active base environmental restoration  program. Nonetheless, our prior work has indicated that as closures are  implemented, more intensive environmental investigations occur and  additional hazardous conditions may be uncovered that could result in  additional, unanticipated restoration and higher costs. Finally, the  services’ preliminary estimates are based on restoration standards that are  applicable for the current use of the base property. Because reuse plans  developed by communities receiving former base property sometimes  reflect different uses for the property, this could lead to more stringent  and thus more expensive restoration in many cases.
While it is uncertain at this point what the ultimate restoration costs at  BRAC-affected bases will be, it is likely that environmental restoration has  the potential to slow the transfer of unneeded base property freed up by  the BRAC process to communities surrounding those bases.  Our prior  work has shown that environmental restoration is the primary impediment  to the transfer of unneeded property to others for reuse.  In our January  2005 report we noted that, as of September 30, 2004, the reasons why  most of the 140,000 acres from the prior four rounds remained  untransferred were due to issues regarding environmental restoration.   Such delays in the transfer of property have adverse effects on BRAC  communities, as this property cannot be put to productive reuse.  In this  regard, we believe it is critical that the department adequately plan for and  fund environmental restoration requirements to provide for the expedited  transfer of unneeded property to others for subsequent reuse.
section_title: Assistance for BRAC- Affected Communities
paragraphs: The recommended actions for the 2005 BRAC round will have varying  degrees of impact on communities surrounding bases undergoing a  closure or realignment. While some will face economic recovery  challenges as a result of a closure and associated losses of base personnel,  others, which expect large influxes of personnel due to increased base  activity, face a different set of challenges involving community  infrastructure necessary to accommodate growth.  These communities  may likely require assistance from various sources to help them address  the many challenges facing them as they plan for either economic recovery  or infrastructure growth as a result of recommended BRAC actions.
DOD data indicate that most economic areas across the country are  expected to be affected very little by DOD’s recommended actions, but a  few could face substantial impact. Almost 83 percent of the 244 economic  areas affected by BRAC recommendations fall between a 1 percent loss in  employment and a 1 percent gain in employment. However, for some of  these areas, the projected impact is fairly significant, ranging up to a  potential direct and indirect loss of up to nearly 21 percent. In this regard,  six communities—Cannon Air Force Base, New Mexico; Hawthorne Army  Depot, Nevada; Naval Support Activity Crane, Indiana; Submarine Base  New London, Connecticut; Eielson Air Force Base, Alaska; and Ellsworth  Air Force Base, South Dakota—had negative employment impacts ranging  from 8.5 percent to 20.5 percent.
Our prior work has shown that a variety of factors will affect how quickly  communities are able to rebound from the negative economic  consequences of closures and realignments. They include such factors as  trends associated with the national, regional, and local economies; natural  and labor resources; effective planning for reuse of base property; and  federal, state, and local government assistance to facilitate transition  planning and execution.  Our prior work has shown that most  communities surrounding closed bases in the previous rounds have been  faring well in relation to key national economic indicators— unemployment rate and the average annual real per capita income growth  rates. In our January 2005 report, for example, we further reported that  while some communities surrounding closed bases were faring better than  others, most have recovered or were continuing to recover from the  impact of BRAC, with more mixed results recently, allowing for some  negative impact from the economic downturn nationwide in recent years.
The 2005 round, however, also has the potential to significantly affect a  number of communities surrounding installations, which are expected to  experience considerable growth in the numbers of military, civilian, and  civilian support personnel. DOD indicated that about 20 installations are  expected to experience a net gain of over 2,000 military and civilian  personnel. This is particularly evident for several Army bases, such as Fort  Belvoir, Virginia which is expected to have a net gain of over 20,000  military and civilian personnel, where personnel increases are likely to  place additional demands on community services, such as providing  adequate housing, schools, and other infrastructure support, for which the  communities may not have adequate resources in the short term.
Based on the experience from the previous BRAC rounds, we believe it is  likely that additional federal costs are likely to be incurred, although these  costs are not required to be included in DOD’s cost and savings analyses,  for providing assistance to BRAC-affected communities.  These costs  include transition assistance, planning grants, and other assistance made  available to communities by DOD and other federal agencies.  As we  reported in January 2005, in the previous four BRAC rounds, DOD’s  Office of Economic Adjustment, the Department of Labor, the Economic  Development Administration within the Department of Commerce, and the  Federal Aviation Administration provided nearly $2 billion in assistance  through fiscal year 2004 to communities and individuals, and according to  DOD officials, these agencies are slated to perform similar roles for the  2005 round. We believe it is important that those agencies that have  traditionally provided assistance are prepared and adequately budget for  the necessary funds to provide assistance to those communities affected  by the BRAC 2005 process. As previously discussed, the number of bases  in the 2005 BRAC round that will gain several thousand personnel from the  recommended actions could increase pressure for federal assistance to  mitigate the impact on community infrastructure, such as schools and  roads, with the potential for more costs than in the prior rounds.
This concludes my statement.  I would be pleased to answer any questions  you or other members of the Commission may have at this time.
section_title: Contact and Acknowledgments
paragraphs: For further information regarding this statement, please contact Barry W.  Holman at (202) 512-5581.  Individuals making key contributions to this  statement include Nelsie Alcoser, Shawn Arbogast, Raymond Bickert,  Andrew Edelson, Mike Kennedy, Glenn Knoepfle, Nancy Lively, Warren  Lowman, Tom Mahalek, David Mayfield, Richard Meeks, Hilary Murrish,  Charles Perdue, Robert Poetta, Jim Reifsnyder, James Reynolds, and Laura  Talbott.
section_title: Appendix I: 20-Year Net Present Value Savings from the Top 10 Percent of DOD’s BRAC 2005 Recommendations
paragraphs: This is a work of the U.S. government and is not subject to copyright protection in the  United States. It may be reproduced and distributed in its entirety without further  permission from GAO. However, because this work may contain copyrighted images or  other material, permission from the copyright holder may be necessary if you wish to  reproduce this material separately.