Projects funded under the military construction appropriation generally cost over $300,000 and produce complete and usable new facilities or improvements to existing facilities. The Army Corps of Engineers and the Naval Facilities Engineering Command manage the design of all service construction projects; each service verifies that the project designs are at least 35 percent complete when submitted to Congress for funding. Congress appropriates 5-year funds for construction projects. The Office of the Secretary of Defense issues planning guidance to identify, prioritize, and fund construction projects. The military services and the Defense Logistics Agency (DLA) justify selected construction projects based on the need to comply with environmental laws and regulations. Although environmental military construction projects compete with other military construction projects for funding, DOD gives additional priority to those environmental projects that are to correct problems that do or will soon result in noncompliance with the requirements. Between fiscal years 1994 and 1996, DOD will have funded $689 million in environmental compliance construction projects. Figure 1 shows the funding and the types of construction projects executed during that time, and appendix I provides details on projects and their costs for the services, including the Air National Guard and the Air Force Reserve. In November 1993, we reported that the services’ processes for identifying, classifying, and funding environmental compliance projects varied. We stated that more consistent processes would help ensure that needs and costs were identified and ranked so that DOD and Congress could oversee trade-offs in funding and minimize inequities among the services’ projects. We recommended that DOD guidance specify how the services should report costs related to environmental compliance construction and determine which appropriation would provide funds. The services have taken initiatives to improve their programming and oversight of environmental construction projects. The Army is moving toward more centralization in the management of its military construction priorities to promote oversight of construction-related environmental issues on an Army-wide basis. The Air Force now requires its commands to prioritize and consolidate environmental compliance construction projects with other military construction projects, and has instituted an integrated process team at the Air Staff level to review military construction requirements during the budgeting and programming process. The Marine Corps is updating its environmental compliance tracking system to more easily identify environmental compliance and other environmental projects, and the Navy created a single-source headquarters sponsor for construction projects. In addition, the Naval Audit Service annually reviews the Navy’s and the Marine Corps’ proposed military construction projects. At the installation level, each of the services has formed working groups and committees to work with Environmental Protection Agency (EPA) and state and local representatives to better identify project requirements. Despite these actions, DOD still has not issued specific guidance on how the services should program and report costs related to environmental compliance construction projects and how they should determine which appropriations should be used to fund the projects. Consequently, the services continue to inconsistently program and report environmental compliance construction projects. One inconsistency is the manner in which the services justify projects that are to be funded within the military construction appropriation. In fiscal years 1994 and 1995, the Air Force funded about $10 million for hydrant fuel systems improvements with environmental compliance as justification for priority. Hydrant fuel systems consist of pressurized underground piping used to fuel various-sized aircraft. A 1995 Kelly Air Force Base, Texas, project was funded to comply with a state enforcement order to install leak detection and prevention equipment. On the other hand, DLA justifies its hydrant fueling systems based on mission-related requirements, but notes that the systems have environmental compliance aspects. DLA plans to spend $48 million in fiscal year 1996 military construction funds for these systems and $75 million in fiscal year 1997 funds for similar projects. This inconsistency may be minimized in the future because DLA’s Defense Fuel Supply Center is now responsible for sponsoring all fuel-related military construction. The Navy classified the construction of a Patuxent River, Maryland, hazardous material storehouse as an environmental compliance project and spent $3 million in fiscal year 1994 for the facility. Such storehouses are generally required for the safe storage and efficient processing of hazardous materials used by base and tenant activities. Under Air Force policy similar projects should not be funded as environmental compliance projects. The Army’s hazardous material storage projects, as we discussed in our 1993 report, are managed by its logistics experts rather than by environmental engineers who manage most environmental functions and are not justified or prioritized as compliance projects. The services justify as mission-related other projects that must comply with regulatory requirements. For example, the Marine Corps is requesting $13 million in fiscal year 1997 military construction funds for the construction of a mission-related corrosion control facility at New River, North Carolina. Such facilities are constructed to allow functional and environmentally safe paint stripping and application to control corrosion on various aircraft. The Marine Corps is constructing the facility to reduce air pollution and provide work areas that comply with requirements of the Clean Air Act and Occupational Safety and Health regulations. A Marine Corps official told us the project could be justified as either mission-related or environmental compliance. Another official told us that safety is the driving factor. Supporting documentation for the project shows both safety and environmental compliance requirements. The Air Force is funding similar projects as either environmental or mission-related. The Air Force was appropriated military construction funds for a fiscal year 1996 corrosion control facility at Davis-Monthan Air Force Base, Arizona, which it justified as environmental compliance. At Tinker Air Force Base, Oklahoma, a similar project is being requested as mission-related, although supporting documentation indicates the project is also required to comply with regulatory requirements. Tinker officials had proposed the project to be justified as environmental compliance to meet Clean Air Act requirements, but Air Force Materiel Command officials believed the existing facility could be modified to meet emissions requirements, and that the project was justified based on Tinker’s large paint workload. In discussing this issue, Air Force officials emphasized that while the project had environmental compliance aspects, the increased stripping and painting requirements drove the need to classify the project as mission-related. Another inconsistency among the services involves how the projects are designed, which in turn affects whether projects are funded with military construction funds or from the operations and maintenance appropriation. In this regard, while large projects are funded from the military construction appropriation, smaller scope minor construction (less than $300,000) projects can be funded with operation and maintenance funds or with minor construction funds that are managed by the installation. We found that the services sometimes design seemingly similar projects differently, resulting in different prioritization and funding of the projects. The Air Force obligated over $47 million in fiscal years 1994 and 1995 military construction funds for 34 underground fuel storage tank projects.Environmentally safe storage tanks are required to ensure continued operating storage of petroleum products and other environmentally controlled substances used to support the operation of such things as depot and base shops, electric generators, and gas stations. Air Force installations bundled together a number of individual tank projects to create single projects that would meet the $300,000 minimum for construction funding. For example, Tinker Air Force Base alone bundled together 78 individual tank upgrades to create a single construction project. During fiscal years 1994 and 1995, the Army obligated $80 million in operation and maintenance funds to upgrade and construct underground storage tanks similar to those of the Air Force to comply with environmental laws and regulations. For example, Fort Bliss obligated $1.4 million in fiscal year 1995 operation and maintenance funds to replace a number of underground storage tanks; it plans to spend $1.2 million in fiscal year 1996 operation and maintenance funds to replace and upgrade additional tanks. The Army plans to spend an additional $61 million in fiscal year 1996 operation and maintenance funds and $47 million in fiscal year 1997 operation and maintenance funds for the construction of tanks. We also found another example of project design and funding flexibility at Tinker Air Force Base. The Air Force eliminated a fiscal year 1996 storm drainage project at Tinker from its environmental compliance construction estimate. Officials determined the project would not receive a high enough priority if funded with military construction funds. Instead, Tinker officials told us they plan to divide the project into smaller units and fund them from the operation and maintenance appropriation. Services also fund projects in phases using the same appropriation. Officials believe this funding method helps ensure the funding of costlier projects. Such funding methods can minimize the apparent total cost of the project when supporting documentation for each phase does not identify the total project cost. The Marine Corps is funding a $77-million military construction wastewater treatment plant upgrade at Camp LeJeune, North Carolina, in three distinct phases in fiscal years 1994, 1996, and 1997. Officials stated they selected this funding method because they believed the project would more likely receive funding if it was submitted in complete and usable increments, rather than as a total package. The Marine Corps could not afford to fund such a large project in a single year because of fiscal constraints. Supporting budget documentation submitted to Congress identified each phase of the wastewater project but did not include the total cost of all project phases. The Navy is funding a $24-million military construction oily waste collection system at the Norfolk Naval Station, Virginia, in two distinct phases beginning with fiscal year 1996. The project is being constructed under a consent agreement with the local community. The Navy requires $12.2 million in fiscal year 1996 funds and is planning to request an additional $11.5 million in future year funds. Officials at the Naval Facilities Engineering Command, Atlantic Division, told us phase II of the fiscal year 1997 project has been delayed, and is currently being considered for fiscal year 1998. Officials are considering the impact of other related projects, such as the installation of oil/water separators on aircraft carriers. Supporting budget documentation submitted to Congress identified phases but not total project costs for all phases. These inconsistencies and funding practices have continued to occur because DOD has not clarified its guidance to provide better definitions for the classification and prioritization of compliance projects.