In the United States, the active military services are responsible for nearly 380,000 facilities, with an estimated plant replacement value of over $435 billion. These facilities include buildings, such as barracks, administrative space, classrooms, hangars, warehouses, maintenance buildings, churches, and child development centers, as well as non-buildings, such as runways, roads, railroads, piers, and utility structures and systems. If family housing were included, the total number of facilities would rise to more than 524,000, with a plant replacement value of more than $477 billion. Historically, the military services used their own metrics, terminology, and accounting structures to manage their facilities. In fiscal year 2002, DOD replaced the operation and maintenance funded real property maintenance program with two distinct activities and accounting structures for (1) sustainment and (2) restoration and modernization, having already created a separate accounting structure for demolition and disposal in fiscal year 1999. In addition, DOD has developed a model for estimating sustainment funding needs, and it is developing a model for forecasting restoration and modernization funding requirements. The Army and the Air Force began using the sustainment and restoration and modernization programs in fiscal year 2002, while the Navy and the Marine Corps asked for and were given permission to delay implementation of these new programs until fiscal year 2003. Operation and maintenance funds primarily support sustainment activities, which are designed to keep facilities in good working order. Sustainment funds cover expenses for all recurring maintenance costs and contracts, as well as for major repairs of nonstructural facility components (e.g., replacing the roof or repairing the air-conditioning system) that are expected to occur during a facility’s life cycle. Restoration includes repair and replacement work to restore facilities damaged by inadequate sustainment, excessive age, natural disaster, fire, accident, or other causes. Modernization includes altering, or modernizing, facilities to meet new or higher standards, accommodate new functions, or replace structural components. Both operation and maintenance and military construction monies fund these activities, as well as demolition and disposal activities. A fourth activity—new construction—is also funded with both military construction and operation and maintenance monies. This activity involves the construction of new buildings and other facilities, referred to as new footprint projects. There are limitations to the amount of operation and maintenance funds that can be used for new construction and the alteration or conversion of existing facilities: a maximum of $750,000 per project or up to $1.5 million if the project is designed to correct a deficiency that threatens life, health, or safety. As figure 1 illustrates, overlapping funding sources support DOD’s sustainment, restoration, and modernization of military facilities, along with its demolition program and new military construction. According to DOD, fully funding sustainment is the most cost-effective approach to managing facilities because it provides the most performance over the longest period of time for the least investment. Without adequate sustainment, expected service life is reduced and facilities must be recapitalized sooner than expected. Yet, even with adequate sustainment, over time facilities eventually either physically wear out or become obsolete. An obsolete facility is one that is irrelevant to present-day missions regardless of its condition; for example, a firehouse built in 1930 that is too narrow or too short to accommodate modern fire trucks. Once facilities reach the end of their expected service life, they must be replaced or extensively renovated or modernized—referred to as recapitalization—if they are to continue providing adequate performance. DOD estimates that an average recapitalization rate of 67 years allows fully sustained facilities to meet their requirements. In fiscal year 2002, DOD’s average recapitalization rate was 101 years, and it is projected to increase to about 150 years in fiscal year 2003. Recapitalization investments can also be made periodically throughout a facility’s service life, which extends service life and delays the need for replacement. Moreover, even after recapitalization investments are made, facility performance can rapidly decline in the absence of adequate sustainment. In an attempt to standardize the rating of facilities across the services and to provide a measure of facility conditions, DOD issued its first Installations’ Readiness Report in 1999. Within the report, the services’ major commands report on each of their nine facility classes using a scale of C-1 through C-4, as defined in table 1. For example, a C-4 rating is an indication that a facility class for a specified installation or major command has deficiencies that require workarounds or effectively preclude satisfactory mission accomplishment. According to DOD’s guidance to the services, they could implement this readiness reporting system without modifying their existing assessment processes. As a result, all four services are using different systems to assess facility conditions and develop C-ratings. However, reporting their ratings to DOD requires the services to implement additional processes to summarize information by major commands using C-ratings for facility classes. The nine facility classes are groupings of like facilities. These facility classes are similar to the groupings traditionally used for military construction budgets and are consistent with the real property inventories the military services maintain. Table 2 lists the nine classes with examples of the types of facilities included in each class. In fiscal year 2001, DOD reported that 68 percent of facility classes rated by the services’ major commands received C-3 or C-4 ratings, indicating that they were in such deteriorated condition that they negatively affected the quality of life of military personnel and their families and their ability to achieve their mission. For example, the Army Forces Command did not rate any of its facility classes as C-1, but it rated its medical class as C-2 and its remaining eight classes as C-3. During the same period, the Navy’s Pacific Fleet did not rate any of its facility classes as C-1 or C-2, but it rated its community and housing class as C-4 and its remaining seven classes as C-3. The Pacific Fleet does not report ratings for the mobility class. DOD has labored in recent years to develop its Defense Facilities Strategic Plan, which outlines a set of initiatives over a 20-year period that are directly linked to the plan’s vision, mission, and goals. The vision set forth in the plan is to have installations and facilities available when and where needed to effectively and efficiently support missions. To achieve its vision, the plan’s strategic goals are to (1) locate, size, and configure defense installations and facilities to meet the requirements of today’s and tomorrow’s force structures; (2) acquire and sustain defense installations and facilities to provide mission-ready installations with quality living and work environments; (3) leverage resources—money, people, and equipment—to achieve the proper balance between requirements and available funding; and (4) improve facility management and planning by embracing best business practices and taking advantage of modern asset- management techniques and performance-assessment metrics. In addition to the broad goals set forth in its strategic plan, DOD established three key objectives. The objectives are (1) to fully fund sustainment, starting in fiscal year 2004; (2) to achieve an average recapitalization rate of 67 years, by fiscal year 2007; and (3) to concentrate funding so as to eliminate C-3 and C-4 facility ratings, bringing the ratings up to a minimal C-2 level by fiscal year 2010. As a point of reference, although there were no specific funding targets for fiscal year 2002, the military services intended to fund sustainment between 78 and 98 percent of requirements and reach an average recapitalization rate between 63 and 163 years in fiscal year 2002. As well, departmentwide facility ratings show that major commands rated 68 percent of facility classes C-3 or C-4. DOD gradually phased in its guidance to the services on sustainment beginning in fiscal year 2002 when it instructed the services to fund sustainment to the maximum extent possible. For fiscal year 2003, DOD instructed the services to attempt to fully fund sustainment to the levels specified by its facilities sustainment model. For fiscal year 2004 and thereafter, DOD instructed the services to fully fund sustainment to the levels defined by the facilities sustainment model. To reduce the recapitalization rate and eliminate C-3 and C-4 ratings, facilities need to be fully sustained. The Defense Facilities Strategic Plan also notes that DOD needs to better focus its sustainment and restoration and modernization dollars to cost- effectively operate and maintain its facilities to support its military missions. The plan states that DOD should only fund sustainment and restoration and modernization of those facilities that are needed. As authorized by Congress in 2001, DOD intends to reduce its inventory of facilities as the result of closing some installations and by consolidating overlapping activities within and across the services through a round of base realignments and closures scheduled for fiscal year 2005. We have conducted a number of reviews where we identified areas in which DOD and the services could improve their facilities management program. Since 1997, we have identified DOD infrastructure management as a high-risk area. In 2001, we reported that DOD needed to develop a comprehensive long-range plan for its facilities infrastructure that addresses facility requirements, recapitalization, and maintenance and repair needs. We updated this report in January 2003, as well as designated federal real property as a new high-risk area at the same time. In September 1999, we reported on the management of DOD’s facility maintenance and repair programs and recommended that the Secretary of Defense (1) develop a way to link needs assessment with both resource allocations and tracking systems that show whether high-priority needs are receiving funding, (2) establish standardized condition assessment criteria, and (3) have the services adopt a valid engineering-based assessment system for facilities maintenance.