Military Base Realignments and Closures: Cost Estimates Have Increased and Are Likely to Continue to Evolve
Released: 2007-12-11T00:00:00

Letter

Background

DOD has undergone four BRAC rounds since 1988 and is currently implementing its fifth round. For the most recent BRAC round—referred to in this report as the BRAC 2005 round—DOD applied legally mandated selection criteria that included four criteria related to military value as well as other criteria regarding costs and savings, economic impact to local communities, community support infrastructure, and environmental impact, as shown in figure 1.

In applying these BRAC 2005 selection criteria, priority consideration was given to military value. In fact, as required by BRAC legislation, military value was the primary consideration for making BRAC recommendations, as reported by both DOD and the BRAC Commission. DOD also incorporated into its analytical process several key considerations required by BRAC legislation, including the use of certified data and basing its analysis on its 20-year force structure plan. In commenting on DOD’s BRAC process in July 2005, we reported that DOD established and generally followed a logical and reasoned process for formulating its list of BRAC recommendations. Using this analytical process, the Office of the Secretary of Defense (OSD) provided over 200 BRAC recommendations to the BRAC Commission for an independent assessment in May 2005. The BRAC Commission had the authority to change the Secretary’s recommendations if it determined that the Secretary deviated substantially from the legally mandated selection criteria and DOD’s force structure plan. After assessing OSD’s recommendations, the BRAC Commission stated that it rejected 13 recommendations in their entirety and significantly modified another 13. Ultimately, the BRAC Commission forwarded a list of 182 recommendations for base closure or realignment to the President for approval. The BRAC Commission’s recommendations were accepted in their entirety by the President and Congress and became effective November 9, 2005. The BRAC legislation requires DOD to complete recommendations for closing or realigning bases made in the BRAC 2005 round within a 6-year time frame ending September 15, 2011, 6 years from the date the President submitted to Congress his approval of the recommendations.

To provide a framework for promoting consistency in estimating the costs and savings associated with various proposed BRAC recommendations, DOD used an estimation model, known as the Cost of Base Realignment Actions (COBRA). The COBRA model has been used in the base closure process since 1988. It provided important financial information to the selection process as decision makers weighed the financial implications for various BRAC actions along with military value and other selection criteria when arriving at final decisions regarding the suitability of BRAC recommendations. In addition, the department designed the model to calculate estimated costs and savings associated with actions that are necessary to implement BRAC recommendations over the 6-year implementation period and to calculate recurring costs or savings thereafter. As such, the BRAC Commission continued to use DOD’s COBRA model for making its cost and savings estimates.

The COBRA model relies to a large extent on standard factors and averages but is not intended to—and consequently does not—represent budget-quality estimates. As a result, neither DOD’s or the BRAC Commission’s COBRA-generated estimates can be assumed to represent the actual completion costs that Congress will need to fund through appropriations or fully reflect the savings to be achieved after implementation. We have examined COBRA in the past and have found it to be a generally reasonable estimator for comparing potential costs and savings among candidate alternatives but have not considered it a tool for use in budgeting. In the intervening years, COBRA has been revised to address certain problems we and others have identified after each round. As with any model, the quality of the output is dependent on the quality of the input. For example, a DOD analyst could assume a building could be renovated to accommodate receiving personnel; however, when BRAC implementation began, site surveys showed that the building could not be renovated, thus requiring new construction that increased estimated costs.

The model provides a standard quantitative approach to comparing estimated costs and savings across various proposed recommendations. In this and previous BRAC rounds, DOD subsequently developed budget- quality estimates once BRAC recommendations became effective. Thus, the BRAC Commission’s estimated implementation costs and savings were useful for comparing candidate recommendations and DOD has subsequently refined these estimates based on better information after conducting site surveys.

BRAC legislation requires DOD to submit an annual schedule containing revised BRAC cost and savings estimates for each closure and realignment recommendation to Congress. To meet this legislative requirement, DOD presents its schedule in its annual BRAC budget submission to Congress. For BRAC 2005 recommendations, DOD’s first presentation of its cost and savings schedule was in its fiscal year 2007 budget submission to Congress in March 2006. However, the department stated in its submission that it did not have enough time to formulate a reasonable BRAC budget and that the fiscal year 2007 BRAC budget submission contained significant funding shortfalls. DOD’s second presentation of its cost and savings schedule was its fiscal year 2008 BRAC budget submission to Congress in February 2007.

For the BRAC 2005 round, the OSD BRAC Office—under the oversight of the Under Secretary of Defense for Acquisition, Technology and Logistics—has monitored the services’ and defense agencies’ implementation progress, analyzed budget justifications for significant differences in cost and savings estimates, and facilitated the resolution of any challenges that may impair the successful implementation of the recommendations within the 6-year completion period. To facilitate its oversight role, OSD required the military departments and certain defense agencies to submit a detailed business plan for each of their recommendations. These business plans include information such as a listing of all actions needed to implement each recommendation, schedules for personnel movements between installations, updated cost and savings estimates based on better and updated information, and implementation completion time frames. OSD’s general process for reviewing business plans is shown in figure 2.

OSD BRAC officials consider their business plans to be living documents that will evolve over the course of the 6-year implementation period. Additionally, OSD’s General Counsel assesses whether the business plans meet the intent of the BRAC Commission’s recommendations.

DOD Plans to Spend More and Save Less Than Originally Estimated and Will Take Longer Than Expected to Recoup Up-Front Costs

Compared to the BRAC Commission’s estimates, DOD plans to spend more and save less to implement BRAC recommendations than the BRAC Commission originally estimated, and it will take longer than expected for DOD to recoup its up-front costs. Since the BRAC Commission issued its cost and savings estimates in 2005, DOD’s reported estimates of the costs to implement about 180 BRAC recommendations have increased by $10 billion to about $31.2 billion while annual savings estimates have decreased by about $200 million—$4.2 billion to $4 billion. Moreover, our analysis of DOD’s current estimates shows that it will take until 2017 for the department to recoup its up-front costs to implement BRAC recommendations—4 years longer than the BRAC Commission’s estimates indicate this would happen. Similarly, whereas the BRAC Commission estimated that the implementation of the BRAC 2005 recommendations would save DOD about $36 billion over a 20-year period ending in 2025, BRAC implementation is now expected to save about $15 billion, a decrease of 58 percent.

DOD Plans to Spend More and Save Less Than Originally Estimated

Since the BRAC Commission issued its cost and savings projections in 2005, cost estimates to implement the BRAC 2005 recommendations have increased from $21 billion to $31 billion (48 percent) compared to the BRAC Commission’s reported estimates and net annual recurring savings estimates have decreased from $4.2 billion to $4 billion (5 percent) compared to the BRAC Commission’s reported estimates as shown in table 1.

A comparison of the BRAC Commission’s reported projections with DOD’s data shows that estimated implementation costs have increased by $10.1 billion or 48 percent and estimated net annual recurring savings have decreased by $212 million or 5 percent. However, another way to compare expected BRAC costs and saving is by omitting the effects of inflation. We found that using the same constant dollar basis as used by the BRAC Commission—meaning inflation is not considered—DOD’s estimated one- time costs to implement BRAC increased to about $28.6 billion or 36 percent in constant dollars and estimated net annual recurring savings decreased to about $3.4 billion or 20 percent in constant dollars compared to the BRAC Commission’s reported estimates.

We found that estimated military construction costs accounted for about 64 percent of the increase in expected BRAC one-time costs. Specifically, the BRAC Commission estimated that to implement the BRAC recommendations, military construction costs would be about $13 billion, whereas DOD’s current estimates for military construction, without inflation, were about $20 billion. We estimated that inflation accounted for about 25 percent, or about $2.6 billion of the increase in expected one-time costs. This mostly occurred because the BRAC Commission presented its estimates using constant fiscal year 2005 dollars, which does not include the effects of projected inflation, whereas DOD’s budgeted estimates were presented in current (inflated) dollars because budget requests take into consideration projected inflation. Further, the BRAC Commission estimates did not include projected environmental cleanup costs for BRAC-affected bases, which is a consistent practice with past BRAC rounds because DOD is required to perform needed environmental cleanup on its property whether a base is closed, realigned, or remains open. Environmental cleanup added about 6 percent, or about $590 million in expected costs. Finally, other projected expenses such as operation and maintenance accounted for about 5 percent or about $500 million of the increase in expected costs. Because the BRAC Commission’s data do not include some specific budget categories that are used in the DOD BRAC budget, we could not make direct comparisons and precisely identify all estimated cost and savings changes.

Estimated One-time Costs Have Increased

Our analysis shows that estimated one-time costs to implement 33 BRAC recommendations, representing nearly 1/5 of all the BRAC recommendations for this round, increased by more than $50 million each compared to the BRAC Commission’s estimates. (See app. II for a listing of these recommendations.) DOD’s expected costs to implement 6 of these recommendations increased by a total of about $4 billion. Specifically, we found about: $970 million increase in the estimated costs of consolidating various leased locations and closing other locations of the National Geospatial- Intelligence Agency to Fort Belvoir, Virginia, largely because the agency identified the need for additional supporting facilities, such as a technology center and additional warehouse space, as well as increased costs for information technology and furnishings to outfit the new buildings. According to OSD’s business plan, the COBRA analysis of specific costs and the number of personnel to realign were classified; $700 million increase in the estimated costs of realigning Walter Reed Army Medical Center, D.C., and relocating medical care functions to the National Naval Medical Center, Bethesda, Maryland, and Fort Belvoir, Virginia, largely because planning officials identified the need for additional space and supporting facilities at the receiving installations that increased estimated military construction costs by almost $440 million. Most of these estimated cost increases are expected to occur at the National Naval Medical Center, Maryland, because of increased requirements to renovate existing facilities, such as the medical center. Additionally, several other facilities, such as a parking structure and a larger than-initially-expected addition to the medical center, increased the construction cost estimates as well; $680 million increase in the estimated costs of relocating the Army’s armor center and school from Fort Knox, Kentucky, to Fort Benning, Georgia, to support the creation of a new maneuver school, largely because the Army identified the need for about $400 million in construction of several facility projects, such as training ranges, instructional facilities, barracks, medical facilities, and a child development center that were not in the initial estimates. Also, the Army identified the need for about $280 million more in infrastructure support, such as water, sewer, and gas lines, as well as roads to support the new maneuver school at Fort Benning; $680 million increase in the estimated costs of closing Fort Monmouth, New Jersey, largely because of increases in expected military construction costs, such as $375 million at Aberdeen Proving Ground, which is to receive many of the missions from the planned closure of Fort Monmouth and for additional facilities, such as a communications equipment building and an instructional auditorium. Also, the Army identified the need for additional infrastructure improvements at Aberdeen such as utilities, roads, and information technology upgrades. The Army determined that its military construction estimates would increase because the existing facilities at Aberdeen could not accommodate an increase in size of Fort Monmouth’s Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance mission as originally estimated. Moreover, military construction costs to relocate the U.S. Army Military Academy Preparatory School from Fort Monmouth to West Point, New York, increased about $175 million largely because the scope of the facility construction increased from approximately 80,000 square feet to more than 250,000 square feet and planning officials identified the need to spend about $40 million to prepare the site for construction, particularly for rock removal, given the terrain at West Point. Also, DOD’s cost estimates for environmental cleanup at Fort Monmouth have increased by more than $60 million; $600 million increase in the estimated costs of co-locating miscellaneous OSD, defense agency, and field activity-leased locations to Fort Belvoir and Fort Lee, Virginia, largely due to increases in military construction cost due to the identification of various required facilities at the receiving installations not included in the original estimate. For example, construction costs increased because it was determined a structured parking garage costing about $160 million would be needed to accommodate the increase in personnel with parking needs compared to the original nearly $3 million estimate for a flat surface parking lot. An additional estimated cost increase of nearly $50 million is needed to cover the costs for a heating and cooling plant and various safety and antiterrorism protection features. Estimated costs also increased by more than $160 million to implement this recommendation for increased information technology needs; and $550 million increase in the estimated costs of establishing the San Antonio Regional Medical Center and realigning enlisted medical training to Fort Sam Houston, Texas, largely because planning officials identified additional requirements to move medical inpatient care functions from Wilford Hall Medical Center at Lackland Air Force Base, Texas to Fort Sam Houston, including operating rooms and laboratory facilities not included in the original estimate. Additionally, requirements for more instructional and laboratory space increased to accommodate an increase in the number of students expected to receive medical training at Fort Sam Houston. Based on the services conducting additional analysis and using other planning assumptions, the number of students now expected to arrive at Fort Sam Houston for medical enlisted training increased by more than 2,700 (44 percent)—from about 6,270 students to approximately 9,000 students.

BRAC implementing officials told us that information gained from site visits, such as better information on the actual condition and availability of certain facilities, was a key factor as to why the department’s estimates changed from the BRAC Commission’s estimates. For example, DOD’s estimated cost increased over earlier projections as a result of better data becoming available on the realignment of the Army Forces Command headquarters due to the closure of Fort McPherson, Georgia. These data showed the Command realigned to Fort Bragg and Pope Air Force Base, North Carolina would be located in over 20 different buildings. The Army decided, therefore, to preserve existing operational efficiencies by keeping the entire Command intact in one location, as it is now at Fort McPherson, by building a new facility at Fort Bragg although this plan led to the increase in expected costs to implement the recommendation.

Moreover, data for some recommendations changed as certain requirements became better defined over time. For example, personnel requirements related to the recommendation to activate a brigade combat team and its associated headquarters unit at Fort Hood, Texas, and then relocate it to Fort Carson, Colorado, became better defined after the BRAC Commission made its estimates. During the BRAC decision-making process in 2005, the Army planned its facility requirement on about 3,200 soldiers per brigade combat team but subsequently increased the personnel requirement to 3,900 soldiers per brigade combat team as it budgeted for needed facilities in formulating the fiscal year 2008 BRAC budget submission. Likewise, the personnel requirement in providing facilities for an associated headquarters unit increased from 300 soldiers in the initial analysis to 900, thus increasing the expected costs. Thus, the number of personnel to be accommodated at Fort Carson in order to implement this BRAC recommendation increased by 37 percent from what was initially expected, which in turn increased the size of the facilities necessary to house the additional soldiers expected to arrive at Fort Carson, leading to an increase in expected cost to implement this recommendation.

As in all previous BRAC rounds, the BRAC Commission used DOD’s COBRA model to generate its estimates. Both we and the BRAC Commission acknowledged in our respective BRAC 2005 reports that the COBRA model, while valuable as a comparative tool, does not provide estimates that DOD is expected to use in formulating the BRAC budget and against which Congress will appropriate funds. We have stated that COBRA does not necessarily reflect with a high degree of precision the actual costs or savings that are ultimately associated with BRAC implementation. We have also stated that the services are expected to refine COBRA estimates following the BRAC decision-making process to better reflect expected costs and savings using site-specific information. While COBRA estimates do not reflect the actual costs and savings ultimately attributable to BRAC, we have recognized in the past and continue to believe that COBRA is a reasonably effective tool for the purpose for which it was designed—to aid in BRAC decision making—and that the BRAC Commission’s COBRA-generated estimates are the only reasonable baseline to use to identify BRAC cost and savings changes since the recommendations became effective.

Savings Estimates Have Decreased

Our analysis shows that estimated net annual recurring savings to implement 13 BRAC recommendations decreased by more than $25 million each compared to the BRAC Commission’s estimates. (See app. III for a listing of these recommendations.) The BRAC Commission estimated that BRAC 2005 would result in net annual recurring savings of $4.2 billion beginning in fiscal year 2012; however, we calculated that the net annual recurring savings have decreased to $4 billion (5 percent). DOD attributed the decrease in its savings estimate primarily to changes in initial assumptions or plans. We identified several BRAC recommendations for which savings estimates decreased compared to the BRAC Commission’s estimates. Specifically, we found about: $90 million decrease in the estimated savings of closing various leased locations of the National Geospatial-Intelligence Agency and realigning other locations to Fort Belvoir, Virginia. Initially, officials at the National Geospatial-Intelligence Agency and the OSD BRAC Office explained that fewer personnel eliminations caused some of the decrease in savings. Additionally, the day before we released this draft for comment, an OSD BRAC Office official explained to us that they underreported the estimated savings from expected lease terminations in the fiscal year 2008 BRAC budget submission. However, time did not permit us to analyze this information. $80 million decrease in the estimated savings of closing three chemical demilitarization depots (Deseret Chemical Depot, Utah; Newport Chemical Depot, Indiana; and Umatilla Chemical Depot, Oregon), largely because the Army expects not to close these facilities within the BRAC statutory implementation time frame because DOD must complete the chemical demilitarization mission to comply with treaty obligations before these facilities can close, which resulted in less expected savings; $70 million decrease in the estimated savings of establishing joint bases at multiple locations, largely because the Army did not include its share of the expected savings due to unresolved issues concerning joint base operations, whereas the other services included the COBRA-generated savings in DOD’s BRAC budget submission to Congress. OSD had not approved the business plan for this recommendation; thus additional information on expected savings was not available for us to review; and $50 million savings decrease in realigning the Defense Logistics Agency’s supply, storage, and distribution network, largely because of the need to retain higher inventory levels than anticipated and less personnel elimination.

DOD Will Take Longer to Recoup Up-Front Costs Than the BRAC Commission Expected

DOD’s current estimates to implement the BRAC recommendations show that it will take until 2017 for the department to recoup its up-front costs—4 years longer than the BRAC Commission’s estimates indicated it would take for DOD’s up-front investments to begin to pay back. Historically, it has taken DOD about 6½ years to recoup up-front costs for actions such as constructing new facilities, providing civilian severance pay, or moving personnel and equipment as a result of implementing BRAC recommendations. Our analysis of the BRAC Commission’s estimates shows that the time required to recoup such costs would be 8 years, or in 2013. However, using DOD’s current estimates, our analysis shows that the time required to recoup costs would be 12 years, or in 2017, as shown in figure 3.

Similarly, because DOD expects to spend more and save less compared to the BRAC Commission’s estimates, projected 20-year savings have decreased by more than half. The BRAC Commission estimated that the implementation of this BRAC round would save about $36 billion over a 20-year period ending in 2025. However, based on our analysis of DOD’s current estimates, implementation of this BRAC round will save about $15 billion, a decrease of $21 billion (58 percent), in fiscal year 2005 constant dollars. OSD BRAC officials told us that, although the 20-year savings estimate is less than the BRAC Commission expected, the department expects the implementation of this BRAC round to produce capabilities that will enhance defense operations and management, despite less than anticipated savings.

Moreover, DOD expects a majority of the expected costs and savings to be related to the implementation of a small percentage of the BRAC recommendations. For example, we determined that DOD expects the implementation of about 13 percent of the recommendations to incur 65 percent of the expected one-time costs (see app. IV); 15 percent of the recommendations to generate 85 percent of the expected annual recurring savings (see app. V); and 16 percent of the recommendations to generate 85 percent of the expected 20-year savings (see app. VI).

DOD’s Estimates to Implement BRAC Recommendations Will Likely Continue to Evolve, and Savings Estimates May be Overstated

Based on our analysis, we believe DOD’s cost and savings estimates to implement the BRAC 2005 recommendations are likely to continue to evolve in future BRAC budget submissions. First, DOD’s estimates for some key recommendations are uncertain because they are based on implementation details that are still evolving, especially for some complex recommendations such as establishing 12 new joint bases. Second, military construction costs could increase due to various economic factors and a possible readjustment of Army construction costs. Third, environmental cleanup costs for BRAC implementation are preliminary and are likely to increase. Furthermore, we believe that DOD’s annual recurring savings estimates may be overstated, largely because 46 percent of this savings is due to questionable military personnel savings.

Details for Several Key Recommendations Are Uncertain and Estimates Are Likely to Change

Many details involved in the implementation of several key BRAC recommendations were uncertain when the department submitted its fiscal year 2008 BRAC budget submission to Congress in February 2007; thus, these estimates are likely to continue to change in succeeding BRAC budget submissions. OSD officials told us that some estimates could change as implementation planning progresses and that initial planning for many recommendations was very difficult but they wanted to provide Congress with the best budget data available at the time of the budget submission. However, until DOD resolves implementation details surrounding its BRAC recommendations, it will continue to have difficulty in more precisely estimating costs and savings and the resolution of these details could cause the department’s cost and savings estimates to change. For example: Realigning Walter Reed Army Medical Center, Washington, D.C. Multiple groups reviewed current and future medical care for wounded soldiers, and DOD officials told us that cost estimates in DOD’s next BRAC budget submission to Congress could change pending the outcomes of these various review groups. OSD officials told us implementation costs will likely increase from the reported $1.7 billion estimate if the time frame to complete the recommendation is accelerated, as recommended by OSD’s independent panel to review current rehabilitative care at Walter Reed.

Co-locating miscellaneous OSD, defense agency, and field activity leased locations to Fort Belvoir, Virginia. The Army had planned to relocate these agencies and activities to Fort Belvoir’s Engineering Proving Ground, but in August 2007 the Army announced it is considering a nearby location currently belonging to the U.S. General Services Administration in Springfield, Virginia. Then, in October 2007, the Army announced it is also considering another site in Northern Virginia for relocating about 6,000 personnel. The reported cost estimate of $1.2 billion to implement this recommendation is likely to change depending on the Army’s site location for relocating these OSD offices, defense agencies, and defense field activities.

Establishing Army Centers of Excellence at several locations. The Army was not certain about the number of personnel it expected to eliminate as a result of combining several Army schools and centers at the time of the fiscal year 2008 BRAC budget submission to Congress. Based on our analysis, once the Army resolves the implementation details for these recommendations, the combined net annual savings estimate of $332 million is likely to change in the next BRAC budget submission.

Realigning Fort Bragg, North Carolina. The decision as to where to relocate on Eglin Air Force Base, Florida, the Army’s 7th Special Forces Group currently located at Fort Bragg remained uncertain as of August 2007. According to officials at Eglin, the planned location of the Special Forces Group could change because of various space and noise issues associated with the installation’s implementation of another BRAC recommendation to establish a joint training site for the Joint Strike Fighter aircraft, also at Eglin Air Force Base. DOD’s estimated $343 million in cost in its fiscal year 2008 BRAC budget submission to Congress would change depending on the final site location for the 7th Special Forces Group at Eglin.

Establishing joint basing at multiple locations. The services have yet to agree on many of the details involved with this recommendation to create 12 joint bases. According to BRAC implementing officials and recent testimony before Congress, it is still uncertain what the organizational and personnel requirements will be for these joint bases, thus making it difficult to provide a realistic estimate on the costs or savings from implementing this recommendation. DOD is currently estimating net savings of $116 million annually.

Realigning medical enlisted training at Fort Sam Houston, Texas.

Part of this recommendation required the services to co-locate their medical training to one location with the potential of transitioning to a joint training effort. Fort Sam Houston officials told us that the expected savings from this recommendation were anticipated based on a joint training effort. However, BRAC implementing officials told us the services had not yet agreed on the final joint curriculum when the fiscal year 2008 BRAC budget submission was provided to Congress; thus the number of instructors needed and several other details remained uncertain. These officials told us that once these details become final, the amount of expected net savings, which DOD estimated to be about $91 million annually, could change for this recommendation.

Creating a Naval Integrated Weapons and Armaments Research, Development and Acquisition, Test and Evaluation Center mostly at Naval Air Weapons Station China Lake, California. Navy officials told us they were uncertain how many personnel associated with a testing range mission will realign as they plan for the implementation of this recommendation. Moreover, the DOD Inspector General recently reported that the Navy did not adequately document the number of personnel expected to realign in this recommendation’s proposed business plan, citing that the number of personnel to move has ranged from about 1,660 to nearly 650. Until OSD resolves implementation details surrounding this recommendation, it will continue to have difficulty in more precisely estimating the associated costs and savings. DOD estimated it will cost about $427 million to implement this recommendation as presented in the fiscal year 2008 BRAC budget submission and OSD estimated it will accrue a net recurring savings of $68 million annually after 2011.

Co-locating medical command headquarters. Various BRAC implementing officials associated with planning the implementation for this recommendation told us that depending on the still undecided final site location and the number of personnel to relocate, the $50 million in estimated costs to implement this recommendation could likely change.

These recommendations illustrate the evolving nature of implementation planning and the likelihood that the associated cost and savings estimates could likely change. They are not the only recommendations which may experience changes in costs or savings; however, they are some of the recommendations from which DOD expects to incur the most costs and savings relative to other BRAC 2005 recommendations. Thus, changes to cost and savings estimates related to these recommendations will have a larger effect on the overall BRAC implementation estimates.

Military Construction Costs Could Increase

Military construction costs could increase due to various economic pressures and if the Army’s new initiatives designed to reduce construction costs do not achieve the planned results. DOD’s current cost estimates of $31 billion to implement the BRAC recommendations involve about $21 billion in estimated costs for military construction that could likely increase because of greater than expected inflation and the market demand for new construction. Since the majority of expected BRAC costs are for military construction, systemic increases in the cost of construction could have a considerable effect on the total cost to implement BRAC 2005. This change is important because DOD’s estimate of $21 billion in military construction is the single largest cost item associated with implementing BRAC 2005 recommendations and is unprecedented given that DOD spent less than $7 billion for military construction in the four previous BRAC rounds combined. In addition, we recognize that determining costs in construction programs that span years of effort is difficult. As such, DOD told us they will continue to monitor reasons for potential cost growth for BRAC construction contracts.

Additionally, BRAC implementing officials expressed concern that construction costs have the potential to increase in areas already experiencing high commercial construction demands such as the National Capital Region, Washington, D.C. and San Antonio, Texas. For example, DOD estimated it could cost about $3.4 billion in construction to implement several recommendations in the National Capital Region, Washington, D.C. (the realignment of Walter Reed Medical Center, the relocation of the National Geospatial-Intelligence Agency, and the realignment to Fort Belvoir due to numerous terminations of DOD-leased space in the Washington, D.C. area). Moreover, DOD estimated it could cost about $1.3 billion in construction to implement the recommendation to establish a new joint medical enlisted training center and relocate Lackland Air Force Base’s medical inpatient care to Fort Sam Houston, San Antonio, Texas. U.S. Army Corps of Engineers (USACE) officials told us they are concerned about what effect construction demand might have on bid proposals given the sizable amount of construction to take place in a limited amount of time to meet the BRAC statutory completion time frame. Additionally, service officials at various installations expressed concern about the potential for increases in construction costs because of ongoing reconstruction due to damage caused by Hurricane Katrina, coupled with the large volume of anticipated BRAC construction that could also affect bid proposals.

Similar to the current commercial construction market in general, military construction has been affected by rising costs for construction labor and materials for the last several years. USACE officials told us the actual rate of construction inflation for the last several years has exceeded the federal government’s inflation rate used for budgetary purposes, which is required to be used in budgeting for construction projects. While this difference was as high as 6.1 percentage points in 2004, the difference between the actual rate of construction inflation and the government’s budgetary inflation rate has diminished recently. USACE officials told us that if the extent to which the actual rate of inflation continues to exceed the budgeted rate as implementation proceeds, and if construction material costs are higher than anticipated, they would either have to redirect funding from other sources to provide for construction projects or resort to a reduction in the scope of some construction projects. However, this trend may not necessarily continue into the future depending on the economics surrounding the construction industry.

USACE is currently transforming and streamlining its process for managing and contracting for military construction. USACE officials told us that these transformation efforts could help in meeting Army’s expected large volume of military construction as well as costs associated with BRAC and other force structure initiatives such as overseas rebasing and Army modularity. USACE has developed a strategy intended to reduce construction costs by 15 percent and reduce construction time by 30 percent. Through its transformation strategy, USACE intends to change how it executes construction projects by standardizing facility designs and processes, expanding the use of premanufactured building where sections or modules of a building are constructed and transported to a construction site to be assembled, executing military construction as a continuous building program rather than a collection of individual construction projects, and emphasizing commercial rather that government building standards, which would allow contractors greater flexibility to use a wider variety of construction materials to meet construction requirements.

The Army has already incorporated a 15 percent reduction into its BRAC construction estimates and has budgeted accordingly. Although USACE officials expressed optimism that these cost savings will be realized, and preliminary results are encouraging, these results are based on recent, limited experience using this new process. Specifically, USACE initiated five construction pilots in 2006, all of which were awarded under its price limit. However, if the cost of construction materials escalates or if there is a shortage of construction labor, especially in locations of high construction volume such as Washington, D.C, and San Antonio, Texas, USACE told us that some of the expected military construction transformation savings could decrease. Given that the Army is expected to incur almost 60 percent of the estimated BRAC construction costs ($12 billion), the impact on overall BRAC costs if the Army is unable to achieve its projected 15 percent savings could be considerable, especially since USACE officials told us the majority of the Army’s BRAC-related construction projects incorporated the 15 percent reduction into their estimates.

Environmental Cleanup Costs Are Preliminary and Likely to Increase

We reported in January 2007 that DOD’s available data showed that at least $950 million will be needed to complete environmental cleanups underway for known hazards on the military bases scheduled for closure as a result of the BRAC 2005 round. Our prior work has shown that some closures result in more intensive environmental investigations and the uncovering of additional hazardous contaminations, thus resulting in higher cleanup costs than DOD predicted and budgeted. For example, additional hazardous contaminations were found at the former McClellan Air Force Base, California, which was recommended for closure in 1995. The discovery of traces of plutonium during a routine cleanup in 2000 caused cleanup costs to increase by $21 million. However, as certain bases undergo more complete and in-depth environmental assessments, a clearer picture of environmental cleanup costs will likely emerge.

Annual Recurring Savings Estimates May be Overstated

DOD’s estimated annual recurring savings resulting from base closures and realignments may be overstated by about 46 percent. Currently, DOD calculates total estimated annual recurring savings of about $4 billion. This amount includes $2.17 billion in eliminated overhead expenses such as the costs no longer needed to operate and maintain closed or realigned bases and reductions in civilian salaries, which will free up funds that DOD can then use for other defense priorities. However, DOD’s annual recurring savings estimate also includes $1.85 billion in military personnel entitlements—such as salaries and housing allowances—for military personnel DOD plans to shift to other positions but does not plan to eliminate. While DOD disagrees with us, we do not believe that transferring personnel to other locations produces tangible dollar savings outside the military personnel accounts that DOD can use to fund other defense priorities since these personnel will continue to receive salaries and benefits.

We recognize that DOD is trying to transform its infrastructure and the Secretary of Defense’s primary goal for the BRAC 2005 process was military transformation. We also recognize DOD’s position that military personnel reductions allow the department to reapply these personnel to support new capabilities and improve operational efficiencies. Nonetheless, DOD’s inclusion of military personnel entitlements in its estimates of annual recurring savings could generate a false sense that all of its reported savings would generate funds that DOD could apply elsewhere. Because DOD’s BRAC budget submission to Congress does not explain the difference between recurring savings attributable to military personnel entitlements and recurring savings that will make funds available for other defense priorities, DOD’s overall estimated annual recurring savings appear almost twice as large as those which will actually be realized. In addition, our analysis shows that the current percentage of estimated annual recurring savings from military personnel entitlements (46 percent) is considerably higher compared to the last round of BRAC that took place in 1995, in which DOD derived about 5 percent of BRAC annual recurring savings from military personnel entitlements. During the previous four rounds of BRAC that took place between 1988 and 1995, the military was downsizing in personnel strength, yet the average percentage of annual recurring savings DOD derived from military personnel entitlements was 26 percent.

We reported in July 2005 that military personnel position eliminations are not a true source of savings since DOD intends to reassign or shift personnel to other positions without reducing military end strength associated with the corresponding BRAC recommendation. Moreover, the BRAC Commission stated in its September 2005 report that DOD’s inclusion of savings from eliminating military personnel positions distorts the actual savings attributable to BRAC recommendations. The service officials we interviewed could not link actual military personnel eliminations directly to implementing a BRAC recommendation, as illustrated in the following: Army officials said its military end strength will not be reduced due to any BRAC recommendations. In fact, the Army plans to increase its active-duty end strength by 65,000 over the next several years.

Navy officials said they anticipate reducing the Navy’s end strength by 26,000 active duty military personnel between fiscal years 2006 and 2011. However, they told us they have not linked any of these anticipated reductions to BRAC recommendations.

Air Force officials said they are in the process of reducing the service’s active-duty end strength by about 40,000. However, Air Force officials said that they cannot link any reductions in military end strength to implementing their BRAC recommendations and the personnel drawdown is independent of BRAC.

DOD policy and Office of Management and Budget’s guidance require that an economic analysis be explicit about the underlying assumptions used to estimate future costs and benefits, which we believe includes estimating BRAC savings. If the savings we question were omitted from DOD’s savings estimates, net annual recurring savings would decrease by about 46 percent. As a result, DOD’s BRAC budget submission does not provide enough information to allow Congress full oversight of the savings that can be applied to other programs outside of the military personnel account. Greater transparency over the assumptions behind DOD’s BRAC savings estimates would help to promote independent analysis and review and facilitate congressional decision making related to the multibillion-dollar BRAC implementation program.

In addition to taking issue with how DOD characterizes military personnel savings, we also disagree with DOD claiming savings for closing a base that is actually going to stay open. At the time of DOD’s fiscal year 2008 BRAC budget submission to Congress, DOD claimed about $260 million in annual recurring savings for closing Cannon Air Force Base, New Mexico, which is now going to remain open. Although DOD recommended closing Cannon in May 2005 as a proposed recommendation, the BRAC Commission modified the proposed closure, and stated in its September 2005 report to the President that Cannon could remain open if the Secretary of Defense identified a new mission for the base and relocated the base’s fighter wing elsewhere. Subsequently, the Air Force announced in June 2006 that Cannon would remain open and the 16th Special Operations Wing, currently located at Hurlburt Field, Florida, would relocate to Cannon. Nevertheless, DOD still claimed about $200 million in annual savings for military personnel entitlements and about $60 million in annual savings for categories such as base operation and maintenance in its fiscal year 2008 BRAC budget. Officials at the Air Force BRAC office told us that they claimed these annual savings because they disestablished the fighter wing at Cannon, although they said most of the military personnel and aircraft associated with the disestablished fighter wing were reassigned or relocated and will continue to operate.

Furthermore, we have taken issue with estimated savings for several Air National Guard BRAC recommendations. As we reported in May 2007, the implementation of several Air National Guard recommendations is expected to result in annual recurring costs of $53 million rather than the annual recurring savings of $26 million estimated by the BRAC Commission—a $79 million per year difference that occurred primarily due to language in the BRAC Commission’s report that prevents the Air National Guard from reducing its current end strength in some states.

DOD Has Made Progress Implementing BRAC, but Several Challenges Increase Risk That All Recommendations Might Not be Completed by the Statutory Deadline

DOD has made progress implementing BRAC 2005, but faces a number of synchronization and coordination challenges related to implementing many BRAC recommendations. These challenges increase DOD’s risk of not meeting the September 2011 statutory deadline. For example, personnel movements involving tens of thousands of personnel must be synchronized with the expenditure of billions of dollars to construct or renovate facilities needed to support them by 2011. The time frames for completing many BRAC recommendations are so closely sequenced and scheduled to be completed in 2011 that any significant changes in personnel movement schedules or construction delays could jeopardize timely completion. Also, some recommendations are dependent on the completion of others, and delays in completing some interrelated actions might cause a domino effect that could jeopardize DOD’s ability to meet the statutory 2011 BRAC deadline. BRAC 2005, unlike prior BRAC rounds, included more joint recommendations involving more than one military component, thus creating challenges in achieving unity of effort among the services and defense agencies.

DOD Has Made Progress Implementing BRAC

DOD’s implementation of BRAC 2005 has progressed since the recommendations became effective in November 2005. For example, Navy officials reported that they completed implementing 14 BRAC actions involving the closure of Navy reserve centers and recruiting districts. To dedicate resources and facilitate communications to plan for the implementation of hundreds of BRAC actions, the military services and affected defense agencies have their own BRAC program management offices. Over the past 2 years, these offices have begun the planning and design for the $21 billion military construction program necessitated by the most recent BRAC round, including initiating site surveys and environmental assessments needed before military construction projects can begin.

OSD realized that the complexity of the BRAC 2005 round required it to strategically manage and oversee the entire BRAC 2005 program. During prior BRAC rounds, OSD’s oversight of BRAC implementation was typically limited to adjudicating disagreements among the services over implementation issues, according to OSD BRAC officials. However, for this BRAC round, the Principal Deputy Under Secretary of Defense for Acquisition, Technology and Logistics stated in 2005 that the large number of transformational recommendations, particularly recommendations to promote joint facility operations, would present OSD with significant implementation challenges. To meet these challenges, the department initiated a process to develop business plans that laid out the requisite actions, timing of those actions, and the costs and savings associated with implementing each recommendation. Additionally, OSD recognized that the development of business plans would serve as the foundation for the complex program management necessary to implement the BRAC 2005 recommendations. As such, the primary implementation activity of the military services, and defense agencies has been to develop about 240 business plans for OSD review and approval. According to OSD, these business plans have been used as the primary vehicle to delineate resource requirements and generate military construction requirements.

As of October 2007, OSD has approved about 220 business plans. Some business plans remain in draft and have not been approved for various reasons. According to OSD, these business plans involve complex issues associated with the services’ lines of authority and sizeable personnel realignments that OSD BRAC officials told us they intend to resolve soon. However, OSD has deferred the approval of about 15 business plans pending the development of broader policies to facilitate the implementation of the recommendations associated with joint basing and chemical demilitarization. Finally, officials in OSD’s BRAC Office told us they plan to continue reviewing business plans as part of their comprehensive, centrally managed oversight of the BRAC program. Recognizing that business plans provide important implementation details, in June 2007 OSD directed the services and defense agencies to update these business plans twice a year in conjunction with OSD program reviews.

Challenges in Synchronizing Many BRAC Actions Could Hinder DOD’s Ability to Complete Recommendations within the Statutory Time Frame

The department faces a number of challenges related to synchronizing the completion of many BRAC recommendations in order to meet the statutory 2011 time frame. For example, personnel movements involving tens of thousands of military and civilian personnel must be synchronized with billions of dollars worth of construction or renovation activities needed to ensure they have the necessary facilities to support them. Also, the implementation of some recommendations is dependent on the completion of other recommendations before facilities can be renovated for new uses, and some DOD installations are affected by more than six separate recommendations. Delays in synchronizing and completing these interrelated actions could cause a domino effect that might jeopardize DOD’s ability to meet the statutory 2011 BRAC deadline. Also, synchronizing the implementation of several force structure initiatives could further complicate DOD’s BRAC implementation efforts.

DOD Must Synchronize Personnel Movements with Construction Time Frames

Implementation challenges primarily stem from the complexity of synchronizing the realignment of over 123,000 personnel with the completion of over $21 billion in new construction or renovation projects. According to DOD officials, construction schedules are often the primary driver in setting BRAC implementation timelines due to the amount of time needed to design and build new facilities or renovate existing facilities. The time frames for completing many BRAC recommendations are closely sequenced and scheduled to be completed in 2011 but any significant changes in personnel movement schedules or construction delays could jeopardize DOD’s ability to meet the statutory 2011 BRAC deadline.

According to OSD’s approved business plans and DOD officials, the following are some BRAC recommendations that could experience synchronization challenges: Realigning Army reserve components, constructing 125 new Armed Forces Reserve Centers, and closing 387 existing reserve component facilities: Army reserve component officials told us they are managing the construction of new Armed Forces Reserve Centers in a compressed time frame. The data in our recently issued report show that 26 percent of the BRAC actions implementing these recommendations will begin in fiscal year 2010, according to the approved business plans. This approach compresses the amount of time available to construct the facilities and respond to any construction delays that might arise, which increases the risk that the projects might not be completed in time to meet the BRAC statutory completion deadline. On the other hand, Army officials told us that they would assume less risk because many of these projects are small and can be completed within shorter time frames compared to larger projects. For example, the Army considered starting construction on the Armed Forces Reserve Centers toward the beginning of the implementation period and closing older reserve facilities. Instead, more complex and costly recommendations became a higher priority and reserve center actions were delayed.

Co-locating miscellaneous OSD, defense agency, and field activity leased locations at Fort Belvoir, Virginia: OSD officials told us that these activities have scheduled the arrival of over 6,000 personnel by September 1, 2011—2 weeks before the BRAC statutory deadline—to implement over 30 discrete actions associated with this recommendation. In addition, recent developments could affect the timing of this realignment to Fort Belvoir because, at the time of our review, the Army was revising its implementation planning to accommodate the possibility of using nearby land owned by the U.S. General Services Administration or another location in Northern Virginia, which will require additional studies to determine environmental impacts and transportation requirements at the new location, according to Fort Belvoir officials. If the process of identifying alternative site locations results in delaying the movement of miscellaneous OSD offices, defense agencies, and field offices, this could jeopardize meeting the statutory deadline.

Realigning the National Geospatial-Intelligence Agency to Fort Belvoir, Virginia: The fiscal year 2008 BRAC budget submission shows that construction is expected to be completed by June 2011, which allows 3 months before the statutory deadline to move its missions. To mitigate mission impact and the risk of not completing these moves if construction is delayed, the agency plans to begin moving its personnel in phases starting in April 2010.

Realigning Walter Reed Army Medical Center, Washington, D.C., to the National Naval Medical Center, Maryland, and Fort Belvoir, Virginia: Completion is scheduled by September 2011 according to the business plan. The medical joint cross-service group that developed this recommendation in 2005 stated that delays in constructing and occupying the buildings could risk the timely completion of this recommendation and concluded that aggressive actions would be needed to meet the 6-year deadline. Army and OSD officials testified before Congress in January 2007 that the time frame was “very tight” for completing this recommendation. Also, in response to various concerns about the quality of care for warfighters at Walter Reed, an official with the Army’s Surgeon’s General Office told us in September 2007 that certain parts of the recommendation supporting the construction of intensive medical care facilities are expected to be completed sooner than originally planned, while the move to the National Naval Medical Center, Maryland, and Fort Belvoir, Virginia is still scheduled to be completed by September 2011. DOD’s standard construction schedules for medical facilities indicate new hospitals, or additions and renovations to an existing hospital, generally take longer to complete compared to other facilities.

Some Recommendations Are Dependent on the Completion of Others

In some cases, DOD’s synchronization challenges are exacerbated when the completion of one recommendation is dependent on the completion of another. For example, the BRAC recommendation to close Fort Monmouth, New Jersey, involves relocating personnel from the Army’s Communications-Electronics Life Cycle Management Command currently located at Monmouth to Aberdeen Proving Ground, Maryland. The new facilities at Aberdeen are expected to be renovated by February 2011. However, DOD cannot begin those renovations until the training activity currently occupying the Aberdeen facilities relocates to Fort Lee, Virginia, an action associated with the implementation of another BRAC recommendation. Consequently, the training activity cannot vacate the Aberdeen space until a new facility is built for them at Fort Lee sometime in 2009. This interdependence is shown in figure 4.

Likewise, such interdependence could undermine the Navy’s ability to complete within the statutory deadline the recommendation to consolidate various Navy-leased locations onto government-owned property. The business plan that describes the actions and time frames for moving various Navy-leased locations onto government-owned property stated that it will begin renovating space for the move to Arlington, Virginia, in September 2008. However, the current occupant of the space—a component of the Defense Information Systems Agency—is not scheduled to vacate the space the Navy is to move into until June 2011 because the Defense Information Systems Agency component needs to wait until it can move into newly constructed space at Fort Meade, Maryland—an action associated with another BRAC recommendation. Although both DOD components are working on a solution, the business plans for these two recommendations stated several options in order to meet the 2011 BRAC deadline, such as having the Navy occupy “portable facilities,” build a new facility, or explore other workarounds to meet the statutory time frame.

Some Installations Affected by Multiple Recommendations

Another factor that could threaten the timely completion of some of the BRAC recommendations is the number of DOD installations that are affected by more than one recommendation. Based on BRAC Commission data, 27 installations are affected by six or more BRAC recommendations that include installations such as Fort Belvoir, Virginia; Fort Sam Houston, Texas; Lackland Air Force Base, Texas; Wright-Patterson Air Force Base, Ohio; Naval Station Norfolk, Virginia; Aberdeen Proving Ground, Maryland; and Redstone Arsenal, Alabama. In addition to their routine duties for facility management, installation officials are responsible for synchronizing and coordinating the movements of personnel with the availability of facilities. The following are examples of installations affected by multiple recommendations: Fort Belvoir, Virginia: Officials responsible for implementing the BRAC actions associated with 14 separate recommendations told us that they need to synchronize the availability of various facilities to accommodate the increase of nearly 24,000 personnel expected to arrive, primarily as a result of BRAC recommendations resulting in the closure or realignment of numerous DOD agencies and activities. These officials said that they have concerns about meeting the overall time frame because their plans do not allow for any delays in construction projects or funding. Fort Belvoir officials told us they are encountering challenges when planning the synchronization of the large volume of construction and personnel movement throughout the implementation period. For example, the Army initially planned to site the implementation of 2 recommendations (realigning the National Geospatial-Intelligence Agency and co-locating miscellaneous OSD, defense agency, and field activity leased locations) at Fort Belvoir that would have an unfavorable impact on the surrounding community due to increased traffic congestion. Though Fort Belvoir in October 2007 announced new plans to obtain property near Fort Belvoir that might lessen traffic congestion for the move of miscellaneous OSD, defense agency, and field activity leased locations, Fort Belvoir officials told us that these plans could raise new implementation challenges to meet the statutory deadline because of additional time needed for environmental impact studies, planning and design of new construction, and demolition of existing structures at the new proposed site.

Fort Sam Houston, Texas: Installation officials at Fort Sam Houston told us that they have to synchronize numerous actions involving eight separate BRAC recommendations and have concerns about coordinating the availability of facilities—either to be constructed or renovated—with the planned net increase of over 10,000 personnel. Furthermore, officials told us the lack of guidance on how installation officials will establish a joint base with nearby Lackland and Randolph Air Force Bases, Texas, in accordance with the BRAC recommendation on joint basing exacerbates the uncertainty in planning for the implementation of these recommendations.

Force Structure Initiatives Further Complicate DOD’s BRAC Implementation Efforts

Two Army force restructuring initiatives—modularity and overseas rebasing strategy—could exacerbate the Army’s BRAC synchronization challenges. The Army considers modularity to be the most extensive reorganization of its force since World War II, in which it restructures itself from a division-based force to a more agile and responsive modular brigade-based force. According to Army estimates, this initiative will require a significant investment through fiscal year 2011. DOD’s Global Defense Posture Realignment Plan, also known as overseas rebasing, will result in a global realignment of U.S. forces and installations, including the planned transfer to American territory of up to 70,000 defense personnel and about 100,000 family members and civilian employees currently living overseas. As a result of mostly these force structure initiatives and BRAC, the Army plans to relocate over 150,000 soldiers and civilian personnel by fiscal year 2012, representing over 20 percent of the Army’s total projected active-duty and civilian personnel end strength. To illustrate, Army installations that expect personnel increases of greater than 5,000 over the next 5 years, as of March 2007, are shown in table 2.

As shown in table 2, some installations are expecting substantial growth; Forts Belvoir, Bliss, Riley, and Lee each anticipate net personnel gains of more than 50 percent. For example, the Army plans to relocate at Fort Bliss, Texas, about 18,000 personnel as part of BRAC, the transformation of Army modular brigade units, and DOD’s overseas rebasing efforts. The Army is planning 54 new construction projects over the 6-year BRAC implementation period to accommodate the increase in base population at Fort Bliss. Also, some of the installations listed in table 2 may experience more growth in the next several years depending on whether the Army’s active end strength is increased by 65,000 soldiers.

Coordination Among Multiple Services and Agencies Presents Additional Challenges

BRAC 2005, unlike prior BRAC rounds, included more joint recommendations involving more than one military component, thus creating challenges in achieving unity of effort among the services and defense agencies. According to our analysis, 43 percent of the 240 OSD- required business plans involved formal coordination between at least two services or agencies. Service officials said that gaining consensus among military services and defense agencies has been challenging in the areas of personnel and facility requirements, implementation schedules, and funding responsibilities. For example, officials told us it was a challenge due to the joint nature in planning for the implementation of the recommendation to realign Fort Bragg, North Carolina, by relocating Army’s 7th Special Forces Group to Eglin Air Force Base, Florida. Service officials told us it took time for the Army and Air Force to coordinate how to share base operations costs given these two services have different standards for calculating these costs. Similarly, regarding the recommendation to establish the Joint Strike Fighter initial joint training site at Eglin Air Force Base, Florida, it took time for the Navy, Marine Corps, and Air Force to agree on cost-sharing arrangements and a joint training curriculum designed to achieve savings from consolidated training on the aircraft. Likewise, other complex joint cross-service recommendations could be slowed by a similar need to coordinate and negotiate agreements. The following are some BRAC recommendations with unresolved coordination challenges.

Create joint bases involving multiple defense installations: The 26 defense installations involved with creating 12 new joint bases required DOD to define the governance structure over how these joint bases should be organized, the associated chain of command authority, and the operational concepts for managing these joint bases. According to service officials, some of their most challenging issues to resolve include 1) transferring real property and budget authority to the lead service, 2) determining standard levels of base operating support and which base functions to transfer to the lead service, 3) deciding whether civilian personnel on a joint base will become employees of the lead service, 4) agreeing on common terminology and standards, and 5) funding contributions from each service. These challenges to establishing joint bases have been problematic since each service has its own concept of how installations should be managed and organized. In particular, during recent congressional testimony, the Air Force expressed views on joint basing concepts contrary to those of OSD and the other services. To overcome these challenges, OSD formed a special working group to resolve these issues and OSD officials told us they would approve the joint basing business plan when more of the planning details have been resolved.

Realign supply, storage, and distribution management at multiple locations: There are several potential issues between the Defense Logistics Agency and the military services that may affect the planned implementation of the recommendation. While baseline agreements have been reached between the Defense Logistics Agency and the services on the transfer of supply-related personnel positions and related inventories to the Defense Logistics Agency, some important aspects of the implementation plans are incomplete and still need to be resolved. For example, performance-based agreements that will establish responsibilities, metrics to measure performance, costs, and business rules between the Defense Logistics Agency and the services have yet to be negotiated and agreed upon. Additionally, the funding and decision- making process for future maintenance, upgrades, usage, and integration of information technology systems transferring to Defense Logistics Agency has not been agreed to. Lastly, due to the way the Defense Logistics Agency plans to implement the recommendation by staging the personnel transfers over time by each military service, it plans to apply lessons learned to resolve issues as implementation proceeds. We also reviewed a separate BRAC action, which is part of this recommendation, in more detail and issued our report in October 2007.

Co-locate medical command headquarters: The affected agencies have had challenges in reaching agreement on where to co-locate these medical commands. Specifically, the Air Force and OSD Health Affairs have disagreed with the business manager on associated cost and implementation time frames. As such, OSD has not yet approved the business plan for this recommendation.

As a result of these coordination challenges, the planning process has lengthened beyond that which DOD officials initially expected, which could result in delayed implementation of certain recommendations. The need for gaining consensus about planning and implementation details among the services and defense agencies could continue throughout the BRAC implementation period. At the same time, DOD believes the review process helps to ensure that BRAC actions meet the intent of the law, are accurate, and effectively coordinated. However, if gaining consensus among these entities continues to be a challenge or if new organizations established under BRAC continue to lack fully developed operational concepts and organizational structures, it may become increasingly difficult to implement these recommendations before the statutory 2011 deadline.

Conclusion

DOD recognizes that its BRAC recommendations and its implementation are of high public interest. As such, it is paramount that DOD communicates openly about the expected savings that could result from the implementation of BRAC actions. As long as DOD continues to assert that nearly half of its estimated $4 billion in annual recurring BRAC savings come from military personnel reassignments, which will not free up funds for other defense priorities, DOD could create a false sense that BRAC 2005 will result in a much higher dollar savings than will actually be realized to readily fund other priorities. Without explaining the difference between annual recurring savings attributable to military personnel reassignments and annual recurring savings that will make funds available for other defense priorities, DOD could lessen the credibility of the BRAC program and decrease the public’s trust in the BRAC process. Greater transparency over the source of expected BRAC savings could help to preserve public confidence in the integrity of the BRAC program.

Recommendation for Executive Action

To provide more transparency over DOD’s estimated annual recurring savings from BRAC implementation, we recommend that the Secretary of Defense direct the Under Secretary of Defense for Acquisition, Technology and Logistics, in consultation with the Office of the Under Secretary of Defense (Comptroller), to explain, in DOD’s BRAC budget submission to Congress, the difference between annual recurring savings attributable to military personnel entitlements and annual recurring savings that will readily result in funds available for other defense priorities.

Agency Comments and Our Evaluation

In written comments on a draft of this report, DOD concurred with our recommendation and agreed to include an explanation of the annual recurring savings in its BRAC budget justification material that accompanies the annual President’s budget. DOD also noted in its comments to us that military personnel reductions attributable to a BRAC recommendation as savings are as real as savings generated through end strength reductions. DOD also stated that while it may not reduce overall end strength, its reductions in military personnel for each recommendation at a specific location are real and these personnel reductions allow the department to reapply these military personnel to support new capabilities and improve operational efficiencies. While we recognize these benefits from reapplying freed up military personnel to other locations due to implementing BRAC recommendations, we do question that nearly half of DOD’s annual recurring savings estimate of $4 billion includes military personnel entitlements—such as salaries and housing allowances—for military personnel DOD plans to shift to other positions but does not plan to eliminate thus requiring DOD to continue paying the salaries and benefits. While DOD disagrees with us, we do not believe that shifting or transferring personnel to other locations produces tangible dollar savings outside the military personnel accounts that DOD can use to fund other defense priorities since these personnel will continue to receive salaries and benefits. DOD did acknowledge however, that these savings may not be available to fund other defense priorities because they have already been spent to fund military personnel priorities. It is also worth noting that DOD commented that although its net annual recurring savings estimates have decreased from $4.2 billion to $4 billion, these savings still represent a significant benefit that will result from the implementation of BRAC recommendations. DOD’s written comments are reprinted in appendix VII. DOD also provided technical comments, which we have incorporated into this report as appropriate.

We are sending copies of this report to interested congressional committees; the Secretaries of Defense; the Secretaries of the Army, Navy, and Air Force; Commandant of the Marine Corps; and the Director, Office of Management and Budget. We will also make copies available to others upon request. In addition, the report will be available at no charge on GAO’s Web site at http://www.gao.gov.

If you or your staff has any questions concerning this report, please contact me on (202) 512-4523 or by e-mail at leporeb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs are on the last page of this report. GAO staff that made major contributions to this report are listed in appendix VIII.

Appendix I: Scope and Methodology

We reviewed the Defense Base Closure and Realignment Commission’s 182 recommendations to realign and close military bases, but mostly focused our work on the recommendations that changed the most in expected costs and savings compared to the Commission’s estimates. Recognizing that the Department of Defense (DOD) was in the process of initial planning for base realignment and closure (BRAC) implementation, and the associated financial data were changed frequently during our review, we compared BRAC cost and savings estimates primarily using two key publicly available documents—the 2005 BRAC Commission report to the President released in September 2005 and DOD’s latest BRAC budget submission provided to Congress in February 2007. We used data from the BRAC Commission report to the President because the estimates contained in this report were the closest estimates available associated with the final and approved BRAC recommendations. We used DOD’s most recent BRAC budget submission because it was the most authoritative information publicly available for making broad comparisons of BRAC cost and savings estimates. Specifically, we compared the change in cost estimates as well as the estimates for net annual recurring savings that DOD expects to incur after BRAC implementation and noted those recommendations that have increased the most in expected costs and decreased the most in expected savings. In addition, we used the BRAC Commission’s data generated from DOD’s estimation model, known as the Cost of Base Realignment Actions, to determine changes in expected one- time costs, to include military construction cost estimates and inflation. We generally reported costs and savings in current dollars and not constant dollars except where noted.

To calculate DOD’s estimate of net annual recurring savings, we used OSD’s data provided to us for estimated savings in fiscal year 2012—the year after OSD expects all recommendations to be completed—because these data more fully captured these savings and allowed us to replicate the same methodology used by the BRAC Commission in its calculation of this estimate. We used OSD’s fiscal year 2012 data and subtracted the estimates for annual recurring costs from the estimates for annual recurring savings, which is the same method both DOD and we have used for prior BRAC rounds. To determine expected 20-year savings—also known as the 20-year net present value—we used the same formulas and assumptions as DOD and the BRAC Commission used to calculate these savings. Specifically, we used DOD’s BRAC fiscal year 2008 budget data for expected costs and savings to implement each recommendation for fiscal years 2006 through 2011. We also used data that the BRAC Office in the Office of the Deputy Under Secretary of Defense for Installations and Environment provided us for expected net annual recurring savings after the completion of each recommendation for fiscal years 2012 to 2025. We then converted these data to fiscal year constant 2005 dollars using DOD price indexes to distinguish real changes from changes due to inflation. We used fiscal year 2005 dollars to calculate 20-year savings because the BRAC Commission also used fiscal year 2005 dollars for this calculation.Finally, we calculated how many years it would take for expected BRAC savings to recoup the expected initial investment costs to implement the recommendations, comparing the fiscal years, or break-even points, when cumulative net savings would exceed cumulative one-time costs. We did this to be consistent with the way DOD had reported their break-even points for past BRAC rounds, which is a methodology we also replicated in our prior reports on BRAC implementation.

To assess the reliability of DOD’s BRAC cost and savings data, we tested computer-generated data for errors, reviewed relevant documentation, and discussed data quality control procedures with officials at the Office of the Secretary of Defense (OSD) BRAC Office. We determined that the data were sufficiently reliable for the purposes of making broad comparisons between DOD’s reported cost and savings estimates and the BRAC Commission’s reported estimates.

To determine why DOD’s estimates changed compared to the BRAC Commission’s estimates, we reviewed over 200 OSD-approved business plans that outlined actions, time frames, and financial estimates for implementing each BRAC recommendation. We also obtained and analyzed information from the U.S. Army Corps of Engineers about its recent initiative to transform how it manages military construction projects and how these new initiatives are expected to reduce military construction costs during BRAC implementation. We did not validate the services’ or defense agencies’ BRAC military construction requirements because DOD’s Office of the Inspector General, the Army Audit Agency, the Naval Audit Service, and the Air Force Audit Agency were reviewing BRAC military construction projects at the time of this report. Their work in this area is expected to continue over the next several years. However, we met with staff of these audit services periodically over the course of our review.

Further, we met periodically with officials at the OSD BRAC office and corresponding BRAC implementation offices in the Army, Navy, and Air Force to determine why DOD’s estimates changed compared to the BRAC Commission’s estimates. We also met with these officials to discuss their roles and responsibilities as they began BRAC implementation planning and to obtain their perspectives on any implementation challenges that they encountered. Given the unprecedented number of BRAC 2005 closures and realignments, we focused our analysis on broad issues affecting DOD’s cost and savings estimates and implementation challenges rather than on specific implementation issues of individual recommendations.

To obtain the perspective of installation and command officials directly involved in BRAC implementation planning and execution, we visited 17 bases and 8 major commands affected by BRAC. We selected these bases and commands because they were among the closures or realignments that DOD projected to have significant costs or savings, or because we wanted to obtain more information about particular implementation issues. Installations we visited include: Aberdeen Proving Ground, Maryland; Brooks City-Base, Texas; Eglin Air Force Base, Florida; Fort Belvoir, Virginia; Fort Benning, Georgia; Fort Bliss, Texas; Fort Dix, New Jersey; Fort McPherson, Georgia; Fort Monmouth, New Jersey; Fort Monroe, Virginia; Fort Sam Houston, Texas; Lackland Air Force Base, Texas; McGuire Air Force Base, New Jersey; National Naval Medical Center, Maryland; Randolph Air Force Base, Texas; Rock Island Army Arsenal, Illinois; and Walter Reed Army Medical Center, District of Columbia.

In addition, we met with officials from eight commands to obtain a command-level perspective about BRAC implementation and because these commands were involved in coordinating the business plans or were responsible for key decisions in implementation planning. Commands visited include the Air Force’s Air Education and Training Command; Army Communications–Electronics Life Cycle Management Command; Army Forces Command; Army Information Systems Engineering Command; Army Medical Command; Army Training and Doctrine Command; Naval Installations Command; and the U.S. Army Corps of Engineers. As we obtained information concerning implementation challenges during interviews, we assessed the reliability of that information by asking similar questions from officials at different military services at the installation and headquarters levels.

We conducted our work from November 2005, when the BRAC recommendations became effective, through October 2007 so we could analyze data in DOD’s BRAC budget submission provided to Congress in February 2007. Our work was done in accordance with generally accepted government auditing standards.

Appendix II: BRAC Recommendations with the Largest Increases in Estimated Costs

Appendix II lists specific base realignment and closure (BRAC) recommendations that have increased the most in estimated one-time costs compared to the BRAC Commission estimates reported in September 2005. Table 3 shows that the Department of Defense’s (DOD) one-time implementation cost estimates have increased by more than $50 million each for 33 recommendations compared to BRAC Commission estimates.

Appendix III: BRAC Recommendations with the Largest Decreases in Estimated Net Annual Recurring Savings

Appendix III lists specific base realignment and closure (BRAC) recommendations that have decreased the most in estimated net annual recurring savings compared to the BRAC Commission estimates. Table 4 shows that the Department of Defense’s (DOD) net annual recurring savings estimates have decreased by more than $25 million each for 13 recommendations compared to BRAC Commission estimates.

Appendix IV: BRAC Recommendations DOD Expects to Cost the Most

Appendix IV lists individual base realignment and closure (BRAC) recommendations that the Department of Defense (DOD) expects to cost the most to implement. DOD expects 24 recommendations (13 percent) to generate 65 percent of the one-time costs to implement BRAC recommendations during fiscal years 2006 through September 15, 2011, as shown in table 5.

Appendix V: BRAC Recommendations DOD Expects to Save the Most Annually

Appendix V lists individual base realignment and closure (BRAC) recommendations that the Department of Defense (DOD) expects to save the most annually after it has implemented the recommendations. DOD expects 28 recommendations (15 percent) to generate 85 percent of the net annual recurring savings as shown in table 6.

Appendix VI: BRAC Recommendations DOD Expects to Save the Most Over a 20-Year Period

Appendix VI lists individual base realignment and closure (BRAC) recommendations that the Department of Defense (DOD) expects to save the most over a 20-year period. DOD expects the implementation of 29 recommendations (16 percent) to generate 85 percent of the 20-year savings as shown in table 7.

Appendix VII: Comments from the Department of Defense

Appendix VIII: GAO Contact and Staff Acknowledgments

Acknowledgments

In addition to the individual named above, Barry Holman, Director (retired); Laura Talbott, Assistant Director; Leigh Caraher; Grace Coleman; Susan Ditto; Thomas Mahalek; Julia Matta; Charles Perdue; Benjamin Thompson; and Tristan T. To made key contributions to this report.

Related GAO Products

Military Base Realignments and Closures: Impact of Terminating, Relocating, or Outsourcing the Services of the Armed Forces Institute of Pathology. GAO-08-20. Washington, D.C.: November 9, 2007.

Military Base Realignments and Closures: Transfer of Supply, Storage, and Distribution Functions from Military Services to Defense Logistics Agency. GAO-08-121R. Washington, D.C.: October 26, 2007.

Defense Infrastructure: Challenges Increase Risks for Providing Timely Infrastructure Support for Army Installations Expecting Substantial Personnel Growth. GAO-07-1007. Washington, D.C.: September 13, 2007.

Military Base Realignments and Closures: Plan Needed to Monitor Challenges for Completing More than 100 Armed Forces Reserve Centers. GAO-07-1040. Washington, D.C.: September 13, 2007.

Military Base Realignments and Closures: Observations Related to the 2005 Round. GAO-07-1203R. Washington, D.C.: September 6, 2007.

Military Base Closures: Projected Savings from Fleet Readiness Centers Are Likely Overstated and Actions Needed to Track Actual Savings and Overcome Certain Challenges. GAO-07-304. Washington, D.C.: June 29, 2007.

Military Base Closures: Management Strategy Needed to Mitigate Challenges and Improve Communication to Help Ensure Timely Implementation of Air National Guard Recommendations. GAO-07-641. Washington, D.C.: May 16, 2007.

Military Base Closures: Opportunities Exist to Improve Environmental Cleanup Cost Reporting and to Expedite Transfer of Unneeded Property. GAO-07-166. Washington, D.C.: January 30, 2007.

Military Bases: Observations on DOD’s 2005 Base Realignment and Closure Selection Process and Recommendations. GAO-05-905. Washington, D.C.: July 18, 2005.

Military Bases: Analysis of DOD’s 2005 Selection Process and Recommendations for Base Closures and Realignments. GAO-05-785. Washington, D.C.: July 1, 2005.

Military Base Closures: Observations on Prior and Current BRAC Rounds. GAO-05-614. Washington, D.C.: May 3, 2005.

Military Base Closures: Updated Status of Prior Base Realignments and Closures. GAO-05-138. Washington, D.C.: January 13, 2005.

Military Base Closures: Assessment of DOD’s 2004 Report on the Need for a Base Realignment and Closure Round. GAO-04-760. Washington, D.C.: May 17, 2004.

Military Base Closures: Observations on Preparations for the Upcoming Base Realignment and Closure Round. GAO-04-558T. Washington, D.C.: March 25, 2004.