Defense Infrastructure: DOD's Excess Capacity Estimating Methods Have Limitations
Released: 2013-06-20T00:00:00

Letter

Background

The first BRAC Commission was chartered by the Secretary of Defense in 1988, and operated in accordance with processes later established by the Defense Authorization Amendments and Base Closure and Realignment Act of 1988. Since that time, the BRAC process has changed in many ways, with a variety of requirements and procedures mandated by subsequent BRAC statutes or adopted by DOD. Among these is the requirement that the Secretary of Defense develop a current force structure plan. DOD’s force structure plan is designed to identify the number and type of forces that DOD needs to combat the anticipated threats to the security of the United States. As specified in DOD’s force structure plan in support of BRAC 2005, the President’s National Security Strategy and the Secretary of Defense’s National Defense Strategy provide the focus for the military forces. DOD then analyzes current and future threats, challenges, and opportunities to develop the force structure plan. DOD’s planning framework helps determine the capabilities required to respond to a range of scenarios. The Department then analyzes the force requirements for the most likely, the most dangerous, and the most demanding circumstances.

One of the objectives of the first BRAC Commission was to review the current and planned military base structure in light of force structure assumptions and, using the process and the criteria the Commission developed, to identify which bases should be realigned or closed. To accomplish this, the Commission used a two-phase approach. Phase I grouped bases into 22 overall categories, such as training bases and administrative headquarters, and then focused on determining the military value of bases within each category, each base’s capacity to absorb additional missions and forces, and the overall excess capacity within the category. The Commission then ranked the bases to identify those warranting review in phase II, which focused on assessing the cost and savings of base realignment and closure options.

The Defense Base Realignment and Closure Act of 1990 substantially revised the process for DOD base closure and realignment actions within the United States, establishing an independent Defense Base Closure and Realignment Commission and providing for BRAC rounds in 1991, 1993, and 1995. One of the key elements of the 1990 BRAC statute was the requirement that DOD submit a force structure plan and that closure and realignment decisions be based on that force structure plan and on the final selection criteria established for the BRAC round. As part of the BRAC process for 1991, 1993, and 1995, an important step in the military services’ approach for identifying bases to close or realign was determining whether excess capacity existed at their bases. The starting point for this step was comparing changes in the force structure plan to the base structure of the military services. After applying military value criteria and other specific BRAC criteria, each of the services developed their recommendations for closures and realignments for submission to the BRAC Commission.

In May 1997, the Secretary of Defense announced his intention to ask Congress to authorize two additional BRAC rounds. Later that year, Congress enacted section 2824 of the National Defense Authorization Act for Fiscal Year 1998, which required that the Secretary of Defense provide the congressional defense committees with a comprehensive report on a range of BRAC issues, including the need for any additional BRAC rounds and an estimate of the amount of DOD’s excess capacity. DOD submitted the required report in April 1998 and estimated that DOD had 23 percent excess capacity. In the report, DOD also stated that its method for estimating excess capacity determined the extent to which reductions in base structure had kept pace with reductions in force structure since 1989.

The National Defense Authorization Act for Fiscal Year 2002 amended the 1990 BRAC statute by authorizing a BRAC round for 2005, and required DOD to report to Congress on several BRAC-related issues in 2004 in order for the 2005 round to proceed. The statute directed, among other things, that the Secretary of Defense provide Congress with a 20- year force structure plan and a worldwide inventory of military installations and facilities as part of DOD’s fiscal year 2005 budget justification documents. In addition, as part of the force structure plan and inventory submission, the Secretary was to prepare (1) a description of the infrastructure necessary to support the force structure described in the force-structure plan, (2) a discussion of categories of excess infrastructure and infrastructure capacity, and (3) an economic analysis of the effect of the closure or realignment of military installations to reduce excess infrastructure. DOD provided the required report, which estimated that the department had 24 percent excess capacity, on March 23, 2004. In that report, the Secretary of Defense also certified that an additional round of BRAC was needed and that the round would result in savings by fiscal year 2011.

Subsequently, an initial part of DOD’s BRAC recommendations development process for the 2005 round involved an overall capacity analysis of specific locations or functions and subfunctions at specific locations. 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. This capacity analysis—in conjunction with the department’s 20-year force structure plan, military value analysis, and transformational options; applicable guiding principles, objectives, or policy imperatives identified by individual military services or joint cross- service groups; and military judgment—was used to identify realignment and closure scenarios for further analysis, ultimately leading to finalized recommendations for base realignments and closures.

DOD’s Methods for Calculating Pre-BRAC Estimates of Excess Capacity Have Limitations

Our review of DOD’s pre-BRAC estimates of excess capacity found that the methods DOD has used and the resulting estimates have limitations. DOD used similar methods in 1998 and 2004 to calculate its pre-BRAC estimates of excess capacity. However, our current review identified a number of additional limitations with DOD’s methods. For example, DOD’s approach assigns each installation to only one mission category, even though most installations support more than one mission. In addition, to arrive at the excess capacity estimate it provided to Congress in 2012 and repeated in 2013, DOD subtracted an estimate of excess capacity that it expected would be disposed of during the 2005 BRAC round from the amount of excess capacity estimated to exist immediately before that BRAC round to arrive at the current excess capacity estimate of about 20 percent. However, because DOD’s pre-BRAC excess capacity estimate, expressed as a percentage of bases, and plant replacement value, expressed in dollars, are not measured in the same units, they are not comparable measures.

DOD’s Method for Estimating Excess Capacity in 1998 and 2004

DOD based its 1998 and 2004 estimates of 23 percent and 24 percent excess capacity, respectively, on a method that compared measures of force structure projected to be in place at the end of the 5-year Future Years Defense Programs that were current at the time of each estimate, to associated indicators of capacity. DOD’s 1998 and 2004 technique consisted of three major steps: (1) categorizing bases according to their primary missions and defining indicators of capacity, (2) developing ratios of capacity-to-force structure for DOD’s baseline year of 1989, and (3) aggregating these various excess capacity indicators that were calculated at the installation level to the military service level and then department- wide.

To begin DOD’s analysis, each of the military services identified categories for their bases, identified bases that the services considered major installations, and categorized their bases according to their primary missions—such as depots, training, or administration—so that each installation was included in only one category. Figure 1 shows the installation categories used by each military service and the Defense Logistics Agency.

Figure 1. Installation Categories for the Military Services and the Defense Logistics Agency.

The services then defined various indicators of capacity—such as maneuver base acres or facility square feet—for each installation category.

Next, DOD divided each services’ indicators of capacity by a measure of force structure—such as the number of military and civilian personnel authorized, authorized end strength, or the size of the acquisition workforce—to develop ratios of capacity-to-projected force structure and compared them to ratios from 1989, which was used as a baseline. For its 1998 analysis DOD projected force structure through 2003, and for its 2004 analysis DOD projected force structure through 2009 because these dates marked the end of DOD’s Future Year’s Defense Program projections that were current at the time the analyses were performed.

For example, as illustrated in Figure 2, in its 1998 capacity analysis, DOD projected, that in 2003, there would be 6.575 million square feet of administrative space on Army administrative bases, and DOD projected that there would be 65,516 military and civilian personnel assigned to those bases, resulting in a capacity-to-force structure ratio of 100.4. Similarly, according to its 2004 capacity analysis, DOD projected that, in 2009, there would be 6.121 million square feet of administrative space on Army administrative bases, and DOD projected that there would be 64,598 military and civilian personnel assigned to those bases, resulting in a capacity-to-force structure ratio of 94.8.

DOD then calculated the extent to which the ratio of capacity-to-force structure for each base category differed from the ratio in 1989, which was used as a baseline. To do this, DOD first calculated an estimate of capacity it would need for the year in question for each of its various indicators of capacity. For instance, to continue with the second example above, DOD calculated an estimate of administrative capacity the Army would need for 2009. As illustrated in Figure 3, DOD calculated its needed capacity indicators by multiplying the projected 2009 force structure measure (64,598 military and civilian personnel in this case) by the 1989 capacity-to-force ratio (81.3 for Army administrative bases), which in this case resulted in an estimated needed capacity of 5.25 million square feet of Army administrative space.

To calculate the projected excess capacity for 2009, DOD subtracted a base category’s estimated needed capacity from its projected 2009 capacity. In our Army administrative base example, DOD subtracted its estimated needed capacity for 2009 of 5.25 million square feet from its estimated existing capacity in 2009 of 6.12 million square feet, which resulted in DOD’s estimate of 0.87 million square feet of excess Army administrative space or 14 percent of the Army’s existing administrative space in 2009.

After computing these indicators of excess capacity for each category of installation for each military service and the Defense Logistics Agency, DOD then aggregated these indicators departmentwide. Specifically, DOD first multiplied the number of bases in a category by the percentage of excess for that category, which resulted in DOD’s estimate of the number of excess bases in each category. Continuing our Army administrative capacity example above, as illustrated in Figure 4, the percentage of excess capacity (in this case, the Army’s estimated 14- percent excess of projected administrative space in 2009) would be multiplied by the number bases in the category (12 in the case of Army administrative bases), resulting in an estimated number of excess administrative bases (1.7 in this case).

As illustrated in Figure 5, to calculate an overall indication of excess capacity for each DOD component, DOD summed the estimated number of excess bases for each installation category within a component (22.3 in the case of the Army) and divided this by the sum of the number of all bases in all categories for that component (78 in the case of the Army), which resulted in a percentage of excess bases for the component. In our example, DOD estimated that 29 percent of the Army’s bases were in excess to its estimated needed capacity.

Finally, the departmentwide excess was calculated by summing the estimated number of excess bases for each military service and the Defense Logistics Agency (65.2), summing the number of bases included in the analysis (276), then dividing the sum of the excess bases by the total number of bases in the analysis, resulting in estimated department- wide excess of 24 percent.

The Methods DOD Used to Estimate Excess Capacity in 1998 and 2004 Have Limitations

DOD recognized some limitations within its method for estimating excess capacity, stating in both its 1998 and 2004 reports to Congress that the analysis it performed provided an indication of the type and amount of excess capacity within the department, but recognizing that the analyses lacked the precision to identify specific installations or functional configurations for realignment or closure. In addition, our current review of DOD’s method for estimating excess capacity outside of a congressionally-authorized BRAC process identified a number of limitations.

First, DOD assigned each base to only one installation category, even though most bases support more than one mission. This approach effectively excluded significant portions of a base’s infrastructure from the analysis. For example, in the case of Army maneuver bases, using base acres as the indicator of capacity does not include about 204 million square feet of buildings located on the 12 Army maneuver bases in DOD’s analysis. Another limitation associated with DOD’s method is that the services measured capacity for some similar functions differently. For example, the Army and Air Force measured capacity for test and evaluation facilities in terms of physical total square feet of space, while the Navy measured its capacity for these facilities in terms of work years. These differences make it difficult for DOD to assess excess capacity across the department. A third limitation is that, in using 1989 as a baseline, DOD assumed that the bases and facilities as they existed in 1989 were appropriately sized to support missions, and DOD did not identify any excess capacity or capacity shortfall that may have existed at that time. This approach, in essence, transfers any excesses and shortfalls that existed in 1989 into DOD’s estimates of future capacity needs because, as illustrated in Figure 3 above, the capacity-to-force structure ratio from 1989 was used to calculate the needed capacity for 2009. It is therefore uncertain to what extent DOD’s estimates of excess capacity are overstated or understated. Finally, in both the 1998 and 2004 analyses, in instances where DOD’s analysis indicated that projected capacity was less than needed capacity—indicating a capacity shortage—within a specific installation category, DOD treated these cases as having zero or no excess capacity. Despite the data showing capacity shortages, DOD used this data to aggregate the results of its analysis across the department. If DOD had treated those installation categories as having capacity shortages, DOD’s estimates would have resulted in a lower number of excess bases and consequently a lower percentage of excess capacity across the department than DOD reported to Congress.

DOD’s Statements about Remaining Excess Capacity in 2012 and 2013 Relied on Two Earlier Calculations

DOD’s testimony in March 2012 and March 2013, that by its estimates DOD had about 20 percent excess capacity remaining after the end of BRAC 2005, relied on earlier calculations that the department made in 2004 and 2005. First, in 2004, using the method described above, the department estimated that it had 24 percent excess capacity. Then, in 2005, DOD’s report transmitting its recommendations to the BRAC Commission stated that, while it is difficult to measure the full extent of the improvements in effectiveness and efficiency of the BRAC 2005 recommendations, four statistics would illustrate the breadth and depth of the effect of its proposed actions. One of those statistics was the department’s projection that DOD’s plant-replacement value would be reduced by 5 percent. After the BRAC Commission reviewed DOD’s recommendations and made some changes, including reducing the number of closures at major installations, DOD revised its estimate of the expected percentage reduction in plant-replacement value and projected that it would likely be around 3 percent. In 2012, the Deputy Under Secretary of Defense (Installations and Environment) said that these estimates from 2004 and 2005 suggested that roughly 20 percent excess capacity remained. However, because DOD’s pre-BRAC excess capacity estimate, which is expressed as a percentage of bases, and plant replacement value, which is expressed in dollars, are not measured in the same units, they are not comparable measures.

In March 2013, the Acting Deputy Under Secretary of Defense (Installations and Environment) testified that the method upon which DOD’s current estimate of 20 percent excess capacity is based is helpful in making a broad assessment in determining whether an additional BRAC round is justified, but it cannot identify specific installations or functional configurations for realignment or closure. The Acting Deputy Under Secretary further stated that the specific capacity analysis that is an integral part of the BRAC process is preferable to aggregate metrics used in DOD’s pre-BRAC estimates. He further stated that only through the BRAC process is the Department able to determine excess capacity by installation and by mission or function in a process that is thorough and fair.

Agency Comments

We provided a draft of this report to DOD for comment. In its written comments, which are reproduced in appendix I, DOD stated that we properly highlighted the limitations of its approach used to estimate excess capacity. In addition, DOD stated that our report provides proper context for its methodology by contrasting it with the extensive and detailed data collection and analysis that DOD has used to develop BRAC recommendations. DOD concluded that only through the BRAC process is it able to determine excess capacity by installation and mission or function in a fair and thorough way. DOD also provided a technical comment which we incorporated into our report.

We are sending copies of this report to appropriate congressional committees and the Secretary of Defense; the Secretaries of the Army, Navy, and Air Force; the Commandant of the Marine Corps; and the Director, Office of Management and Budget. This report is also available at no charge on our Web site at http://www.gao.gov.

If you or your staff have any questions about this report, please contact me at (202) 512-4523 or leporeb@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix II.

Appendix I: Comments from the Department of Defense

Appendix II: GAO Contact and Staff Acknowledgments

GAO Contact

Brian J. Lepore, (202) 512-4523 or leporeb@gao.gov.

Staff Acknowledgments

In addition to the contact named above, Harold Reich (Assistant Director), Ronald Bergman, Timothy Burke, Susan Ditto, Gregory Marchand, Carol Petersen, Amie Steele, Laura Talbott, John Van Schaik, and John Wren made significant contributions to the report.

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