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

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