DOD’s lodging programs were established to maintain mission readiness and improve productivity, and were intended to provide good quality temporary lodging facilities and service for authorized personnel. They were also created with the goal of reducing official travel costs for DOD’s mobile military community by charging room rates lower than those of commercial hotels. Within the Office of the Secretary of Defense, the Office of the Under Secretary of Defense (Personnel and Readiness) has issued the majority of guidance governing TDY and PCS lodging program and resource management, although the Office of the Under Secretary of Defense (Acquisition, Technology and Logistics) has established some lodging room quality standards within its housing management guidance and is responsible for the housing privatization efforts. Further, while DOD Instruction 1015.11 states that the Principal Deputy Under Secretary of Defense (Personnel and Readiness) is to provide lodging oversight, guidance, and procedures to ensure proper administration and management of DOD lodging programs and monitor compliance with these procedures and guidance, DOD Directive 4165.63 states that DOD housing (the responsibility for management of which rests with the Under Secretary of Defense for Acquisition, Technology, and Logistics) “encompasses housing for accompanied and unaccompanied personnel and temporary lodging facilities.” Each of the services also has policies to guide the administration of its lodging programs. In 1999, the Office of the Under Secretary of Defense (Personnel and Readiness) developed the DOD Lodging Strategic Plan and DOD Lodging Program Standards, and neither have been revised or updated subsequently. The program goals established in the lodging strategic plan are to (1) promote customer satisfaction through exceptional service, (2) develop a professional management team and motivated workforce, (3) employ a corporate approach to enhance business-based methods of operation, (4) develop and manage the lodging facilities, (5) assure sound financial management and accountability reflective of the hospitality industry, and (6) pursue efficiencies through interservice cooperative efforts. The DOD Lodging Program Standards task the military services with applying these program standards and developing detailed operating standards as appropriate, so each of the services also has policies to guide the administration of its lodging programs. DOD has approximately 82,000 transient lodging rooms. The major differences between TDY and PCS lodges are the number of rooms in their inventory and the type of traveler they primarily serve. Table 1 shows the magnitude of DOD’s lodging programs. Transient lodging serves various military and civilian travelers. TDY lodges serve mainly individual military or civilian travelers who are temporarily assigned to a duty station other than their home station. PCS lodges mainly serve military personnel and their families who are changing permanent duty stations. On a space-available basis, TDY and PCS lodges can accommodate some kinds of “unofficial travelers,” such as military retirees and relatives and guests of service members assigned to the installation. Total occupancy rates vary by program, ranging from 75 to 92 percent for fiscal year 2005. In addition, lodging occupancy by official and unofficial travelers varies by service. The Army serves the highest percentage of official travelers, and the Marine Corps the lowest, as table 2 shows. Funds provided for lodging operations originate from two sources: appropriated funds and nonappropriated funds. DOD Lodging guidance provides specific guidelines on whether an expense should be paid for with appropriated or nonappropriated funding. DOD Instruction 1015.12 states that the military services have the authority to waive the fund source that will create higher nonappropriated expenses for TDY lodging and PCS lodging not run as an MWR program. Appropriated funds are typically used for operations and maintenance expenses, such as laundry services and utilities, and some kinds of minor construction. Nonappropriated funds are generated from room rate revenues, and each of the lodging programs sets room rates according to the amount of revenue needed to pay for expenses not covered by appropriated funds. Nonappropriated funds are used to pay for a wide variety of expenses, from some employee wages to certain kinds of replacement furnishings. Funds generated from room rates at TDY lodging and PCS lodging not run as an MWR program are considered to be nonappropriated because the traveler pays for the charge at the time of his or her stay. Most lodging patrons are on official TDY or PCS travel, however, and are reimbursed with funds appropriated to the military services for travel either from operations and maintenance or military personnel accounts. Thus, the majority of funding originates from appropriated dollars. However, to distinguish funding streams, revenues from room sales are referred to as nonappropriated funds. According to DOD financial data, the total amount of appropriated and nonappropriated funding support for operating the lodging programs was about $857million for fiscal year 2005. Room rates at these lodges are intended to be set at the lowest rate possible to reduce travel costs, yet generate enough revenue to cover expenses. Some services have added a surcharge to the nightly room rate, which they accumulate and use for lodge construction and major renovation. Revenues from TDY lodging must be maintained in a separate nonappropriated fund account, designated as lodging, or billeting, fund. DOD Instruction 1015.12 permits military services to operate PCS lodging either (1) through a lodging or billeting fund, or (2) through an MWR fund. PCS lodging that is built, maintained, or operated by other than the MWR program or exchange service must be maintained in a separate fund account, designated as a lodging, or billeting, fund, and is independent of the single MWR fund. When PCS needs are met by MWR operating funds, they are part of the single MWR nonappropriated fund instrumentality and are operated as a category C revenue generating activity. The Marine Corps operates its PCS lodging as part of its MWR program, which is operated as a Category C, revenue generating program. Thus, the lodging revenues are deposited into the Marine Corps’s single MWR nonappropriated fund account, which can be used to benefit any of the service’s MWR programs. The vast majority of transient lodging facilities are managed and operated by the military services with civilian workers paid by nonappropriated funds. Over the past decade, however, the Army, Air Force, and Navy have entered into limited public-private ventures to construct and operate lodging facilities on 10 installations with some degree of risk shared between the government and the private sector. Appendix II provides additional details concerning the 10 previous public-private lodging ventures. According to the Army, approximately 80 percent of Army lodging inventory needs replacement or major renovation because of persistent funding shortfalls and the lack of capital investment. The Army estimates that, absent privatization, it would cost about $1.1 billion and would take more than 20 years to renovate or build new lodging facilities. Given the cost and length of time associated with revitalization under the Lodging Wellness Plan, the Army considered the use of commercial loans and enhanced-use leasing, before deciding on privatization of lodging facilities in the United States. The Army is using the same legislation that allowed the department to privatize its family housing for its lodging privatization effort. Congress established the MHPI in the National Defense Authorization Act for Fiscal Year 1996. The MPHI legislation gives the Secretary of Defense the authority to (with certain restrictions) provide direct loans, rental guarantees, ground leases, and other incentives to encourage private developers to construct and renovate housing. Under the Army’s PAL program, the selected developer will receive a 50-year ground lease and will be responsible for asset, property, and maintenance management. The Army placed installations in the United States into one of three privatization groups. According to the Army, this was done to mitigate some of the risk associated with privatization, such as the developer choosing high-value properties over those in greater need of repair. The Army planned to select a developer for Group A during September 2006, and to transfer the lodging in this group to the developer by September 2007. The Army plans to transfer installations in Group B by September 2008 and those in Group C by September 2009. The Army anticipates that all lodging facilities will be renovated or replaced in 7 years, by 2014. Furthermore, the Army expects the developers to establish a lodging sustainment and recapitalization fund to maintain the lodging over the 50- year life of the project. On September 28, 2006, the Army selected a developer for Group A which must submit a lodging development and management plan (LDMP). According to the Army PAL program, after approval of the LDMP business plan by Headquarters, Department of the Army, OSD, and the Office of Management and Budget (OMB), Congress will have a 45-day period to review the plan prior to the Army transferring Group A to the developer. Each military service takes its own approach to manage and fund its lodging programs, but current DOD lodging guidance does not establish performance standards and measures needed to assess program effectiveness. Each of the military services uses a different approach to manage and fund its transient lodging programs. The Army and the Air Force each manage their TDY and PCS lodging under one organization, while the Navy and Marine Corps both opt to have one organization manage TDY lodges and another one for PCS facilities. The Army and Air Force believe using one management structure to serve both TDY and PCS travelers is the most efficient approach. Alternatively, the Navy and Marine Corps believe operating two separate programs, one for TDY travelers and one for PCS travelers, is the most efficient approach for meeting their service’s needs. Neither of the two military services currently has plans to merge management of the lodging programs.