[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
MILITARY CONSTRUCTION APPROPRIATIONS FOR 2001--Part 5
MILITARY CONSTRUCTION APPROPRIATIONS
FOR 2001
_______________________________________________________________________
HEARINGS
BEFORE A
SUBCOMMITTEE OF THE
COMMITTEE ON APPROPRIATIONS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
________
SUBCOMMITTEE ON MILITARY CONSTRUCTION APPROPRIATIONS
DAVID L. HOBSON, Ohio, Chairman
JOHN EDWARD PORTER, Illinois JOHN W. OLVER, Massachusetts
TODD TIAHRT, Kansas CHET EDWARDS, Texas
JAMES T. WALSH, New York SAM FARR, California
DAN MILLER, Florida ALLEN BOYD, Florida
ROBERT B. ADERHOLT, Alabama NORMAN D. DICKS, Washington
KAY GRANGER, Texas
VIRGIL H. GOODE, Jr., Virginia
NOTE: Under Committee Rules, Mr. Young, as Chairman of the Full
Committee, and Mr. Obey, as Ranking Minority Member of the Full
Committee, are authorized to sit as Members of all Subcommittees.
Elizabeth C. Dawson, Brian L. Potts, and Mary C. Arnold, Subcommittee
Staff
________
PART 5
Page
Overview......................................................... 1
Quality of Life.................................................. 121
Army............................................................. 203
Navy............................................................. 305
Air Force........................................................ 371
Housing Privatization--Department of Defense..................... 511
Housing Privatization--Outside Witnesses......................... 627
Testimony Submitted for the Record............................... 730
________
U.S. GOVERNMENT PRINTING OFFICE
65-951 WASHINGTON : 2000
COMMITTEE ON APPROPRIATIONS
C. W. BILL YOUNG, Florida, Chairman
RALPH REGULA, Ohio DAVID R. OBEY, Wisconsin
JERRY LEWIS, California JOHN P. MURTHA, Pennsylvania
JOHN EDWARD PORTER, Illinois NORMAN D. DICKS, Washington
HAROLD ROGERS, Kentucky MARTIN OLAV SABO, Minnesota
JOE SKEEN, New Mexico JULIAN C. DIXON, California
FRANK R. WOLF, Virginia STENY H. HOYER, Maryland
TOM DeLAY, Texas ALAN B. MOLLOHAN, West Virginia
JIM KOLBE, Arizona MARCY KAPTUR, Ohio
RON PACKARD, California NANCY PELOSI, California
SONNY CALLAHAN, Alabama PETER J. VISCLOSKY, Indiana
JAMES T. WALSH, New York NITA M. LOWEY, New York
CHARLES H. TAYLOR, North Carolina JOSE E. SERRANO, New York
DAVID L. HOBSON, Ohio ROSA L. DeLAURO, Connecticut
ERNEST J. ISTOOK, Jr., Oklahoma JAMES P. MORAN, Virginia
HENRY BONILLA, Texas JOHN W. OLVER, Massachusetts
JOE KNOLLENBERG, Michigan ED PASTOR, Arizona
DAN MILLER, Florida CARRIE P. MEEK, Florida
JAY DICKEY, Arkansas DAVID E. PRICE, North Carolina
JACK KINGSTON, Georgia MICHAEL P. FORBES, New York
RODNEY P. FRELINGHUYSEN, New Jersey CHET EDWARDS, Texas
ROGER F. WICKER, Mississippi ROBERT E. ``BUD'' CRAMER, Jr.,
GEORGE R. NETHERCUTT, Jr., Alabama
Washington MAURICE D. HINCHEY, New York
RANDY ``DUKE'' CUNNINGHAM, LUCILLE ROYBAL-ALLARD, California
California SAM FARR, California
TODD TIAHRT, Kansas JESSE L. JACKSON, Jr., Illinois
ZACH WAMP, Tennessee CAROLYN C. KILPATRICK, Michigan
TOM LATHAM, Iowa ALLEN BOYD, Florida
ANNE M. NORTHUP, Kentucky
ROBERT B. ADERHOLT, Alabama
JO ANN EMERSON, Missouri
JOHN E. SUNUNU, New Hampshire
KAY GRANGER, Texas
JOHN E. PETERSON, Pennsylvania
VIRGIL H. GOODE, Jr., Virginia
James W. Dyer, Clerk and Staff Director
(ii)
MILITARY CONSTRUCTION APPROPRIATIONS FOR 2001
----------
Tuesday, February 15, 2000.
DEPARTMENT OF DEFENSE
WITNESS
WILLIAM J. LYNN III, UNDER SECRETARY OF DEFENSE (COMPTROLLER)
Statement of the Chairman
Mr. Hobson. We are 4 minutes late. We are going to try to
start these hearings on time. I appreciate all the members
coming this morning. We are going to try to follow the rule
that whoever is here will get to ask the questions; who arrives
late is going to be later, no matter what their seniority may
be.
We are going to try to be flexible. We will go around and
let everybody ask an initial question or so, and then we will
come back. Mr. Olver can ask whatever he wants and take the
amount of time he needs. But everybody else, we will try to do
the 5-minute rule if we can.
If there are any questions for the record, we need to have
those, and we need two copies.
I want to thank Mr. Lynn for coming this morning. This is
our second shot at him. We had him earlier in the week--or I
guess it was last week.
Just let me say that I have some concerns with the budget
request. The overall defense budget is up $15 billion. Funding
on this bill is down $297 million, excluding BRAC, MilCon, and
family housing, funding decreases $950 million from last year.
I am particularly pleased with Secretary Cohen and his
approach this year on housing and making it a top priority. I
have some overall concerns about the issue, as we have
discussed before, especially in the area of privatization, and
we will probably have some more detailed questions on that as
we go through this.
One thing I would like to mention is--and I have got a
chart here which I have given you. This is a chart that Rep.
Hayes got to me from Fort Bragg in North Carolina. One of the
things that we have heard is that while we have raised the
Basic Allowance for Housing (BAH) in a number of places, there
is an inequity in many people's minds happening with this. I am
not sure that everybody shares that it is an inequity in the
same way, but in talking with troops, in talking with
commanders, the way this is being implemented appears to them
to be negative. It is good for certain lower pay grades. There
are some places that it is not. But at some point, I would
like, after Mr. Olver is finished with his opening statement, I
would like you to address that because I think Norm has the
same problem. Norm is not here, but Norm Dicks has the same
problem in Washington, and I do not know whether Fort Hood has
been hit or not in Mr. Edwards' district, but certainly Fort
Bragg in Mr. Hayes' district has been hit also.
So, with that, we will look forward to your testimony, and,
Mr. Olver, I will turn it over to you for any opening comments
that you might have.
Mr. Olver. Thank you. Thank you very much, Mr. Chairman.
Thank you, Mr. Secretary, for being here to present the
President's budget request for fiscal year 2001. I have
reviewed your testimony and the budget, and I think it gets us
off to a good start.
We all have some issues that we want to discuss. The
chairman has already indicated one such issue, which I will
comment on in just a moment.
I, too, am concerned about the progress on housing
privatization, and the corollary to that is any possibility
that we end up decreasing the military housing proportion of
this budget while personnel accounts are increased to
accommodate increased housing allowances in the other budget.
That is of great concern, and I know the chairman is much
concerned about those relationships as well. So we will get to
them.
I am also concerned about the continued need for base
closings, the proposal for further BRAC Commissions and how
that is to be defended and whether this is a serious proposal
or just something that is out there for show.
I am especially concerned about the request for
construction funds for the missile defense system, while there
is still no formal decision to implement the program.
So I am looking forward to your testimony and discussing
that with you. I do have another hearing shortly, so, in
effect, I think that from what the chairman has said, he is
going to be dwelling heavily on some of the very issues that I
am concerned about, and I will defer to his work on that.
Mr. Hobson. First of all, we have all the members here, and
I want to recognize Robin Hayes. I am not going to let him
speak. I let Porter speak when he came one time from the other
side, but Robin is here and he is very interested in what is
going on at Fort Bragg, and he brought me the stuff about the
Fort Bragg problem that we have.
Why don't we let you, Mr. Lynn, if you would, just briefly
highlight your testimony. Everybody has a copy, I think, of the
testimony, and so we can get down to an exchange here which I
think would be helpful to both of us.
STATEMENT OF HON. WILLIAM J. LYNN, III
Mr. Lynn. Okay. Thank you very much, Mr. Chairman. I
appreciate the opportunity to come again to this subcommittee
and present the President's budget. I would like to follow your
suggestion and just incorporate my full statement in the
record, and what I would like to do is just summarize a few
comments and maybe address a couple of the things that you, Mr.
Olver, raised in your opening comments.
Let me start with the context. This is the second year of a
sustained buildup that the President has proposed in the
defense budget. It is the first increase since the end of the
Cold War. Over 6 years, the President proposed an increase of
$112 billion. That increase was, in fact, front-loaded. Often
with defense increases you see them out in 2004 and 2005, the
fifth or sixth year of the program, not really considered real
money by the people doing the Nation's business. In this case,
actually, the biggest increases are in the first and the second
year. You noted the $15 billion increase this year alone.
The President has gone further than he did last year and
has added some to the $112 billion in order to try and protect
the program that was encompassed in that. We have added funding
for new contingencies, specifically in Kosovo, and we have
added funding for the dramatically increased cost in fuel.
The purpose of those, as I say, was to protect the
underlying program. I think we have succeeded in doing that,
but as you noted, the military construction request, while it
stays on the path that we had set out last year in terms of the
$112 billion increase--and that was an increase, a relatively
sizable one, from prior budgets for military construction and
family housing--we have not matched your increase of last year.
And so it depends on which column you want to compare. If you
compared to where we said we would be this year, if you take
account of inflation and foreign currency, we are pretty close
to what we said we would be at. If you compare it to what the
committee enacted last year, as you said, we are down $200 or
$300 million from that point and a more sizable amount if you
just narrow it to look at military construction and family
housing.
As I said, we would like to, frankly, do more in the
facilities area. The President put forward a $112 billion
increase. What we would like to have seen from the perspective
of the Chiefs was $148 billion. The $112 billion was the
minimum we thought was needed to put the defense budget on the
right track, but the full proposal, as it was made a year and a
half ago, was $148 billion.
A good part of the difference between $112 billion and $148
billion is actually in the facilities area, both in terms of
construction itself as well as real property maintenance and
the associated costs of operating the bases. So we would aspire
to higher budgets, but in this instance, we have not been able
to devote more resources than we put forward in this budget
proposal.
Let me tick down a few of the issues that you raised and
address a couple of things. One, you raised the President's
housing proposal which centers on an increase in the basic
allowance for housing. The proposal changes the system that we
have used for housing allowances, which have always assumed, by
legislation, that the service member and his or her family
would have absorbed 15 percent of the cost of off-base housing.
That is, the allowances were capped at 85 percent of housing
costs.
We are proposing this year to repeal that limitation and
over the course of 5 years bring the housing allowance up to
the full cost of housing in the service member's region. That,
I think, will have several important benefits.
The first and most obvious, of course, is that it puts more
money in the pocketbooks of service families. That is
important. Also, it is tax-free money as well, so there is a
multiplier effect in that regard. But the importance of this
initiative actually extends beyond just the money in the
service member's pocket. By eliminating the absorption rate, as
it is called, we hope to change the demand for on-base housing
by equalizing the cost between on-base and off-base. We will
reduce the demand for on-base housing, but we do not plan to
reduce the budgets. The supply of on-base housing will remain
the same. The demand will go down. So with this initiative, the
on-base housing should become more adequate as well.
A third important ramification of eliminating out-of-pocket
cost and raising the housing allowance is with the initiative
Mr. Olver mentioned, which is the privatization initiative.
There we are trying to leverage off private sector initiatives
to try and bring them in to build and operate our housing.
Those kinds of deals that we are striking with the private
sector are keyed very much to housing allowances. If the
housing allowances go up, the rental flow that would go into
these private sector initiatives would go up as well. And we
think we will have a better opportunity to make these kinds of
deals.
These privatization initiatives are extremely important to
deal with the biggest problem we have in housing. That is, two-
thirds of our housing stock, 200,000 of the 300,000 units, are
labeled right now as inadequate. If we are going to turn that
over--and our goal is to eliminate that inadequate housing
stock by 2010--we are going to have to go beyond traditional
funding means for family housing. Traditional funding would get
you six to seven to eight thousand new housing units a year.
Now, you can do the math. If you are turning it over at six
or seven or eight thousand a year, and you are trying to
eliminate a backlog of 200,000 inadequate units, you will never
catch up.
With privatization, we think we can get upwards of 20,000 a
year by leveraging the housing allowances in private sector
developments in order to bring on 20,000 housing units in a
single year. That is the pace we need if we are going to
eliminate inadequate housing in 10 years, 20,000 a year; we
think we may even be able to go up above that.
Now, I understand the committee has scrutinized this
initiative, which is appropriate. These deals are set for a
long period of time, 30, 40, 50 years.
Mr. Hobson. Fort Carson is a 50-year lease.
Mr. Lynn. That is what I thought, 30, 40, 50 years. Some
are shorter. Some are as long as 50 years. So you are
absolutely right. We have to have the financial underpinnings
exactly right if we are going to enter into that kind of deal.
And we appreciate the kind of scrutiny that you have brought.
Frankly, I think it has improved these deals. But I think the
underlying truth from my perspective in terms of overseeing the
finances of the Department is that if we do not have this tool,
we are not going to be able to reach our goal. So we need to
use the tool right, but we need to use it.
Let me stay with the basic allowance for housing, and I am
sure you will have some questions, but let me address the other
issue. There is a second issue that you raised, Mr. Chairman,
with the basic allowance for housing, which is the question of
the adjustments that have been made this year in how that
housing allowance is distributed regionally. And what you are
seeing this year is the completion of a move that started
several years ago to move us away from an across-the-board
housing allowance, something called the BAQ, that was not tied
to housing costs in the area; it was supplemented by a variable
housing allowance that did have some relationship to high-cost
areas. We found that system to be essentially unfair. Some
people got too much, some people got too little, and there was
the sense that their housing costs were either overcovered or
not adequately covered.
We have moved to the BAH, which is a single housing
allowance. We have combined this BAQ and BAH into a single
housing allowance which is intended to be tied to the cost of
housing in that region. We are making that shift right now. A
number of regions in the country have seen their housing
allowances go up as a consequence of that, but there are a few
areas where allowances have decreased, one of which is Fort
Bragg, and Washington State is another.
Mr. Hobson. Wright-Patterson, too.
Mr. Lynn. Wright-Patterson. There are several areas where
the adjustment from this standard housing allowance to one tied
to housing cost has caused some decreases, and that has caused
consternation among service member families.
Now, one thing in the conversation that we had beforehand
that you suggested people did not know--and I think we need to
probably do a much better job in making sure people
understand--is that these housing allowance adjustments are
prospective only; that is, if a service member is at Fort
Bragg, his or her housing allowance does not change. Someone
coming into Fort Bragg after January 1 would be subject to the
new housing allowance. You run into the potential inequity
problem that somebody next door is going to have a higher
housing allowance than their neighbor, or a lower one, but in
the middle of a tour at Fort Bragg or Washington State or
Wright-Patterson, you will not reduce the housing allowance for
a family that is already there.
As I say, we understand the consternation. I think the
principle of the system is right, that the housing allowances
should be tied to housing costs. We need to make sure that we
are doing that right in the sense that we need to make sure we
have an accurate judgment. We do this by survey. We have hired
a contractor to do the surveys, but we need to ensure that the
surveys have accurately judged the housing costs in the area.
And we certainly need to make sure that the service members and
their families understand how we are doing this and how this
grandfathering provision works for people that are already on
base now.
I would be happy to answer more questions on that as we go
into it.
Let me mention one other initiative that Mr. Olver
mentioned. We are serious, Mr. Olver, about the base closure
proposal. We have not been successful in the past. We
understand it is a difficult job of persuading this body and
the Senate to give us the authority for two additional BRACs.
But we think it is absolutely essential.
Going back to the first point I made about the military
construction budget, it is going to be very, very difficult to
ever get the military construction budget right as long as we
are maintaining a base structure that is demonstrably larger
than the force structure. We have cut the force structure by
between 35 and 40 percent. Depending on how you measure it, we
have cut the base structure by 21 to 26 percent. No matter how
you cut it, whether you look at ramp space, pier space,
training space, we have more base structure than we need for
the current force structure. Carrying that extra infrastructure
in the end means that we have too few dollars in the military
construction arena chasing too many bases. And until we fix
that mismatch, it is going to be very difficult to ever get the
funding level for military construction right.
Let me close with that and prepare to answer your
questions.
[The prepared statement of Hon. William J. Lynn, III
follows:]
Mr. Hobson. Okay. I just want to make a comment. I do not
want you to respond to this, but I hope somebody is looking at
the contractor to make sure. One of the complaints I have had
is there are some people concerned that the contractor was
correct in what they did. I do not want to be redundant and
keep going back and then we have to look at that one and that
one. But there ought to be some way to make sure that we are
okay in the markets.
John, I know you have got another hearing, so why don't you
ask your questions.
BASE STRUCTURE AND FORCE STRUCTURE
Mr. Olver. Well, thank you, Mr. Chairman.
I just want to comment on your comments. If what you say
about the mismatch between base structure and force structure
is correct, the percentage of reduction as we have modernized
and gone more technological and made smarter forces rather than
large numbers of forces, which I happen to agree would be the
way we ought to be doing it as we head into this 21st century,
if that is true then there is a point at which we inevitably
reach shell forces in structures where the structures have a
large base cost, fixed cost related to them. We do not have
enough forces spread all over that for that to be efficient and
good training kinds of locations. But it all depends upon, it
seems to me, convincing people that, in fact, there is such a
mismatch between the base structure and the force structure,
the physical structure and the force structure that is there.
HOUSING PRIVATIZATION
I want to go back to the housing privatization. My
understanding was that the original idea of the housing
privatization problem, based upon your statement that two-
thirds of our housing is inadequate, was that we were not
putting enough money in this budget to do the maintenance and
the reconstructions and so on to update or new construction of
housing, and so at least a part--a part--of the privatization
process was intended to take large pieces of that out and
thereby leave money available, the money that would be
available so that we could apply that amount to some of the
remaining pieces which were not being privatized and thereby be
able to upgrade more of the remainder, both of these working in
balance.
Now, my understanding is that some of the services are
reducing the housing overhead and maintenance accounts as
privatized housing comes on and making--although there are only
a few of those projects actually in place, making adjustments
in pay accounts. Is there a DOD position on that, or is it up
to each of the services?
Mr. Lynn. Both, actually. Let me start back a step.
I think I understand what you are referring to. You are
saying that the housing operations money was shifted out of
housing and into allowances.
Mr. Olver. Yes.
Mr. Lynn. I have actually gone back and looked at that. The
issue here is, I think, largely with the Army. I think the Navy
and the Air Force have essentially protected their housing
operations budget. The Army, as you suggest, did cut their
housing operations budget because they have 10,000 fewer units.
Mr. Olver. But the Army has not yet finished a single
privatization project, has it?
Mr. Lynn. They have not finished, but we are talking about
fiscal year 2001, and they will have. They expect to have
reduced the housing stock by 10,000 units in FY 2000.
Mr. Olver. During this year?
Mr. Lynn. During this year. A portion of that is
privatization; and some of that is demolition. They are
demolishing some older, unusable units. So they have reduced
their housing operations budget; however, they increased their
housing construction budget by an even larger amount.
Mr. Hobson. Wait a minute. Wait a minute. Last year they
did not ask for any.
Mr. Lynn. Right. And this year they have asked for $160
million.
Mr. Hobson. And what he is pointing out is that last year
they did not ask for anything, so somehow they were going to--I
do not know what they were going to do. Then this year they
have now started to get into it, but they are not going to
have, the way they are proceeding, that they are going to get
to the numbers because we do not even have a process yet that
anybody is comfortable with. Fort Carson has a different--
excuse me for interrupting you, John.
Mr. Olver. That is fine.
Mr. Hobson. Fort Carson had a different process than the
RCI process. We do not know whether the RCI process works yet
or the Fort Carson process is the way to go. The Army is doing
it one way. The Air Force is doing it another way. The Navy is
doing it another way. We have got all these consultants trying
to protect them, but nobody has reached a pattern in their
service yet, and I think that is part of all of our collective
problem. And yet they are shifting this money.
Mr. Lynn. Well, I think we are saying the same thing, Mr.
Chairman. The Army has shifted some money from housing
operations to housing construction. They have also added beyond
that to housing construction. As you said, the budget, if it
had been put forward as it was last year, would have been
inadequate.
But, essentially, I think the point Mr. Olver is making is
a little bit more complex.
Mr. Hobson. But didn't it go to personnel accounts? Isn't
that money shifted to personnel accounts?
Mr. Lynn. There is more money--you do not know what went
from where to where.
Mr. Hobson. We think it is----
Mr. Lynn. What I am saying is the overall Army housing
budget, construction and operations, is up $77 million from
where the Army said it would be last year. Their operations
budget is down, but their construction budget is up, as you
said, $160 million.
Mr. Olver. That is the housing allowance.
Mr. Lynn. The housing allowance budget is also up.
Mr. Olver. There are some personnel costs that are going
up, or is that--I am not sure. Maybe that is part of the
allowance, housing allowance.
Mr. Lynn. The housing allowance budget had to go up to
cover the costs of more people being on housing allowance
because you are shifting these 10,000 people. What I am saying
is that, overall, the Army family housing budget actually went
up as well. It went down in operations and up in construction,
and the net was a net increase of over $70 million.
Mr. Olver. Obviously, we are going to be very concerned
about the balance here.
Mr. Lynn. So I think what I am saying----
Mr. Olver. Whether the numbers fit.
Mr. Lynn. I understand that. I guess what I am saying, is
that there was a net increase by the Army in housing. The other
services were essentially a wash.
The general point you made that I will come back to is what
is the service role and the Department-wide role. The
Department has given guidance to the services, in general
terms, that the savings from housing privatization should
remain in the housing accounts.
Mr. Olver. You have given general directives, but, there
may be differences between the services----
Mr. Lynn. There may be differences----
Mr. Olver [continuing]. And that is expected.
Mr. Lynn. Exactly, and let me complicate it further. We
give the services a lot of general guidance, to be fair, and we
expect them then to balance within a top line. We tell them
here is how much money you have and here is all the general
guidance.
They can make a fair point that if they do absolutely 100
percent of all the guidance that they are told, they will
exceed their budget. So they have to balance the general
guidance with the fiscal guidance, and they have to balance. In
this case, as I said, I think the Army did that, and they
shifted some money from operations. They also added money to
construction to remedy the situation that you highlighted--that
last year they had no money in family housing. This year they
put in $160 million. About half of that increase was financed
by the shift from housing operations; the other half they had
to finance from other areas.
Mr. Olver. Let me lay out one other question here. If we
are increasing the basic housing allowance to 100 percent of
cost and that was not part of the analyses for the various
privatizations up to this point, it would seem to me that might
have some effect upon the economics of the privatizations. Has
anybody gone back to look at the privatization projects and
analyze what effects the BAH would have on them?
In particular, if we are going to go up with the basic
housing allowance, private housing may come up and it may
affect both the private side's portion on the military side and
also the need for base housing.
It seems to me there is a connection. How many developers
are just going to go out and build privately because now it is
covering the average cost within the area? And how is that
going to affect both the privatized programs where we have got
them going to move those couple of hundred thousand units over
and the ones that are actually our own and continue to be our
own DOD-operated housing?
Mr. Lynn. I think I agree with you on both points. What I
tried to say in my opening statement is we think that this
initiative will indeed improve the economics, the underlying
economics for the privatization deals. I think you are
absolutely right. We need to review the deals we have already
developed and make sure that those make sense.
I know in some instances, Alaska in particular, we were
having trouble----
Mr. Hobson. Elmendorf.
Mr. Lynn. Elmendorf. We were having trouble. Before we
eliminated this absorption rate, the developer said it did not
look like the economics supported them getting involved. We are
hopeful that with the increase that this will become more
attractive to them.
So I think you are right. We need to review what we have
done, and we certainly think it is going to improve,
prospectively, developers wanting to get involved in this.
I think the other point you made, the point I was trying to
make, is it will make off-base housing more attractive to more
service members, which will reduce the demand for on-base
housing. So instead of having these long waiting lists, the
waiting list will be shortened. If we are covering 100 percent
of the costs off base and 100 percent on base, you are going to
clear the market effectively towards the off-base housing.
Mr. Olver. But there is a potential contradiction there.
While you are suggesting that the full cost improves the
economics of the privatization, the fact that the off-base,
truly off-base kind of stuff, totally private stuff, is also--
the prospects there, that has a depressing effect upon the
privatization. I do not know whether we have really thought on
the potential success of the privatization or the need for the
privatization, and it seems to me those are countering forces.
Mr. Lynn. Well, I guess I would not describe them as
countering forces. I would call them reinforcing forces. We
have a huge problem of 200,000 units. We are trying to attack
it every way we can. If we can reduce the demand for on-base
housing, that is one way. If we can increase the attractiveness
of private developers coming in and developing the on-base
housing, that is a second way. And so I think they are
reinforcing in that they both attack this stock of inadequate
housing.
Mr. Olver. Well, Mr. Chairman, I appreciate your allowing
me to ask those questions, and I am sure we have now laid open
some other things that I am sure you are going to get into, so
I thank you very much.
Mr. Hobson. Okay. This is the way we are going to go in the
order people arrived: Mr. Farr, Mr. Miller, Mr. Tiahrt, Mr.
Walsh, Mr. Boyd. If we can keep to the 5-minute rule, we will
do rounds. We can get around and everybody can ask something.
Sam.
Mr. Farr. Thank you very much, Mr. Chairman. I appreciate
this first hearing of the Mil Con Subcommittee and, Mr. Lynn,
thank you for coming over.
I like to remind people in your position that you are
facing Members of the House of Representatives, and what we do
is we represent the way the Federal Government, particularly
the DOD, hits the ground all over the United States. And I do
not think we fully understand how the military hits the ground
until you have a military base closing, because that is when
the people of the community get to come in and really see what
was built, how it was built, how it is going to be reused. And
I think that the best minds probably in the country are here in
Washington, but I think that the work they have done in this
country is absolutely appalling. It is so poor.
Military housing cannot be sold in the private market
because it does not meet any code standards and nobody wants to
put in the money to retrofit them. And I think the fact that we
are building housing around this country that does not meet
local code standards is abominable. And I think that if we
factor in the costs of what a base has to do to clean up the
mess that the military makes, and the inability for even modern
housing to meet code standards, and to retrofit them and go
back and do the asbestos and lead paint cleanup, you know, on
and on and on, you just find--why doesn't the military do more
like the private sector, like the community does it, build it
to community standards?
One of the things that I am very interested in is
privatization, but I am interested that it not be done from
Washington down. I think that gets too damn costly here. If you
have one-size-fits-all in a privatization, you are going to
have the same problem that we had when one size fit all doing
it under the military.
So I think that this is an interesting time because if we
are at the same time asking for another BRAC go-round so we
know that we are going to be downsizing or not having buildings
that are necessary for the military to occupy, as we build new
buildings, we ought to ask the first question: When we leave
this building, can we sell it? Would anybody want it? What are
the costs of getting out of it, not just the costs of getting
in?
I think you will find that if you go back and look at the
cost of getting out of buildings and apply this to this
privatization formula, you are going to find a lot more
interest in the privatization. I frankly do not understand why
all houses cannot be built privately except in some remote area
where nobody wants to live. But where we have the military
land, it is nonsense for us to be building the housing on the
taxpayer dollar when you can have that done at the private
sector dollar. Where you can retrofit and have lease-back
conditions, we ought to be doing that.
So my question is--we have a new law since the committee
last met, and that law is that when we do have a base closure,
you can give that land to the local community at a no-cost
economic development conveyance, and that the revenues derived
from that conveyance for any increased value that the local
government gets out of it has to stay in that community for job
re-employment and rehab and things like that. And I think that
is a great deal. But if indeed these no-cost EDCs are really
going to cost us a hell of a lot to have to bring all these
properties up to code standards--I mean, we can understand why
we have not built military properties to meet the ADA, the
Americans with Disabilities Act, but there is no reason why we
shouldn't build properties in earthquake zones to meet
earthquake standards or in flood zones to met flood zone
standards. And that is what I have seen in California.
I am a big fan of privatization if it is done right and it
is done from the bottom up rather than the top down. But I
think the market out there will be much more interesting than
Washington has ever imagined. But I would like you to be able
to give this committee some examples, because we are all
representing different parts of the country. And I would be
very curious of what the Department decides--what you think is
the best cleanup that you have done, the best base cleanup, and
what the cost of that does, and, frankly, give us what you
think is the worst example of base cleanup and what the costs
were incurred.
I would also be interested in this issue of privatization
and retrofitting of housing, where you have the best retrofit
examples and where you have the worst. And while we are on the
issue of privatization, I would be interested in what you think
is the best privatization practices that have gone on in the
military and perhaps, again, what this committee hears is the
worst.
What we are all going to come to you with is vignettes of
our own knowledge. And I will tell you, what I have seen in the
base closure at Fort Ord, California, which was the largest
base the Army has ever closed--the chairman has been out to
that base, saw 27,000 people that got up and left. It was a
great opportunity except for the fact that it is a really dirty
base, the fact that the buildings are all non-code buildings,
the fact that you can't even get into the buildings because of
the cleanup process and the lawsuits that have been filed.
We had housing that looked like the middle picture there
when the Army pulled out. Six years later, it looked like the
picture on the left. The windows are all broken, the streets
are all full of ruts, roots coming up through them, potholes,
all the vegetation has died.
Mr. Hobson. How many houses are sitting there vacant?
Mr. Farr. Eleven hundred.
Mr. Hobson. Eleven hundred houses sitting vacant.
Mr. Farr. And you know what happens? And this is where the
chairman really understands the problem. As politicians, we get
called upon by people who drive by that housing and they call
you with stories, mothers telling you about their daughters who
have been abandoned by their husbands with their children, they
are sleeping in their car. Why can't they move the kids into
this housing? Look at it. It is nice. Really, it looks as nice
as that middle picture. And they see that all boarded up, the
windows broken, and they wonder why can't we get that.
We have a situation where, when we close these bases, we
have figured out how many officers could we downsize and kept
some of the housing for the military. But guess what? They
didn't figure out that 70 percent of the people were not even
married. And when you deploy a soldier, the family gets to stay
behind for a number of months. So the housing that we expected
the new soldier to come into is being occupied by the family of
the soldier that just left. And we have got to go back and get
some more of these houses.
There are just a lot of things we have to do, and I would
be interested in getting your answers to the questions that I
asked.
Thank you, Mr. Chairman.
Mr. Hobson. I do not know if you can do that in the time
left. [Laughter.]
Mr. Lynn. Well, let me make a couple of points and then get
some things to you.
First, on the cleanup issue that you have mentioned, Mr.
Farr, I think that was one of the core issues that was
decided--when the original BRACs were set up. In the end I
think the decision by Congress was the right one, which is that
the cleanup costs can be horrendous on an individual base, and
the clean up is going to have to be done whether we keep the
base or whether we return it to private use. The only thing
that changes potentially is the schedule of that cleanup. We
are going to have to clean up--where we polluted the
groundwater, we have to clean it up. Where we have asbestos, we
have to take it out.
Mr. Farr. But there is an ounce of prevention, what we are
talking about. As we go into these new buildings, we ought to
make sure that nothing we are doing on these bases is going to
incur these incredible cleanup costs.
Mr. Lynn. There I agree with you. I think in that instance
privatization will help us. We will build to code as a matter
of course, a matter of law. And so I think we need to do that.
While we can be criticized on a number of grounds for
privatization, I do not think one of them is that we have tried
one size fits all.
Mr. Hobson. I will agree to that. I will stipulate to that.
Mr. Lynn. The services have all done this quite
differently.
Mr. Hobson. Even within the services, they have done it----
Mr. Lynn. Even within the services they have a whole
variety of tools. One of the ones you mentioned, which is a
lease-back arrangement, we do do. I will have Randall Yim
either brief you or provide some material you can review on how
we do privatization. The chairman has spent a lot of time with
us, and we have let a thousand flowers bloom. That may indeed
be one of the problems. We may indeed have to systematize it a
bit more than we do.
On your point that we should not do this centrally, I think
we have discovered that as well. We originally had this
centralized in OSD. We have now pushed it out to the services
so as to implement it on a region-by-region basis.
Mr. Farr. When you push it out to the services, does it
trickle down to where it is done regionally? Or is it done just
by Washington?
Mr. Lynn. It is done regionally, but it varies by service.
But the key player here is the base commander who helps.
Mr. Farr. Would you give us those examples?
Mr. Lynn. Sure. I am going to ask Randall Yim to do that.
We will try and give you some kind of assessment as to where we
are.
BASE REALIGNMENT AND CLOSURE
Then, finally, on BRAC, I know we have a report in the
Department that goes through a number of the closures and
evaluates them in terms of successes and failures. And I will
provide that to you as well.
Mr. Farr. May I have a follow-up question of John's on the
BRAC? The question asked here is: What authority do you need--
why do you need congressional authority to begin a BRAC
process? If indeed a BRAC is essential for the military now,
why not just begin it internally?
Mr. Lynn. The law would prevent this at this point. The law
passed in the early 1970s has an elaborate set of notification
requirements.
Mr. Farr. It is the procedure once you have made your list,
the internal decision of what you think ought to be eliminated
is not----
Mr. Lynn. Is not barred, that is correct.
Mr. Farr. When it becomes public, there is a process for
reviewing it.
Mr. Lynn. That is true, and that would be a possibility. We
have not developed a list, and we have not developed one
intentionally. The thing that held the base closure rounds
together before was the independence of the Commission. Now, it
got questioned at the end, but I think throughout the four
rounds, it was the independence of the judgment of the
Commission, and the oversight to the process that went into
submitting the list to the Commission, that was important. And
we have tried to protect that by proposing a base closure round
without prejudging it with the list.
Now, it could get to where you have to ultimately develop a
list. Indeed, I think one of the impetuses of the original BRAC
rounds was Secretary Cheney did develop just such a list, and
people were so horrified by the list that they reacted to set
up the commissions.
We haven't gone to that step, and as I say, what we are
trying to do is ensure that we haven't prejudged anything and
that GAO and the other oversight organizations will be able to
see the preparation of the list and then move it to the
Commission and make the decision. So it is all done as
objectively as possible.
Mr. Hobson. Mr. Miller.
Mr. Miller. So there is no internal list, and so when you
come up with the military construction budget, you don't
prioritize those that may be a low-priority base as such.
Mr. Lynn. No--well, I mean, you obviously make priorities
in the budget, but it is not done on the basis of a shadow
closure list.
Mr. Miller. Okay.
Mr. Hobson. There is an office--excuse me. There are some
guys in an office of BRAC somewhere.
Mr. Lynn. There is nobody developing closure lists. I mean,
obviously, we are implementing the four prior BRACs, and so
there is a BRAC office, absolutely. But they are not--the ones
who develop the list. You would actually ask the individual
service departments to pull together a team, and they would
evaluate all of the bases in a category and decide what was the
needed capacity and what exceeded it based on a variety of
criteria that were laid out in the original BRAC law. They
would look at military utility, economic return and so on. You
would do a systematic evaluation of the bases.
We have not done that because of the way the process has
worked in the past. People want to have oversight and an
ability to basically go through and reconstruct how you made
the list and see how it was done each step.
This is a very controversial and contentious process, as
the questioning makes clear, and we----
Mr. Hobson. Having been through it twice, I----
Mr. Lynn. I am sorry?
Mr. Hobson. Having been through it twice with one of my
bases, I can tell you.
Mr. Miller. So, yes, but when you prioritize, to some
extent you have to be into the process, and that if that is a
low-priority base to you, you are not going to be spending
money on a new medical facility, necessarily, or----
Mr. Lynn. You would probably want to check with the
individual military departments as to how they do this. But I
think the priorities right now are more driven by what is
needed on the base and how urgent the need is. If it is a
front-line unit, that is going to get a higher priority.
DAVIS-BACON AND PRIVATIZATION
Mr. Miller. Next question. When you privatize, how does
Davis-Bacon fit into privatization? Does it apply?
Mr. Lynn. Prevailing wage--I don't know. I would have to
get that to you for the record.
Mr. Miller. I don't know if it is privatized----
Mr. Lynn. Your question is does Davis-Bacon on prevailing
wage apply to a contractor who is doing a privatization project
on a military base, and the chairman says it does.
Mr. Hobson. I think it does.
Mr. Lynn. I don't know.
Mr. Miller. Have there ever been any studies of the costs
Davis-Bacon adds--I mean, one of the problems with the
Government when it builds facilities, it costs more than the
private sector. That is one of the reasons for privatization.
And Davis-Bacon is one of the contributing factors. I don't
know if that has ever been studied.
Mr. Lynn. I am not aware of any studies.
BOSNIA AND KOSOVO
Mr. Miller. Over in Bosnia and Kosovo, are we--what kind of
infrastructure monies are we spending there that is--when I
visited last summer, they were talking about having plywood
houses rather than tents this year. Is that under the military
construction budget, plywood?
Mr. Lynn. No.
Mr. Miller. Okay. What kind of military construction
investments are going into that area that you can comment on
here?
Mr. Lynn. Yes, the intent in both Bosnia and Kosovo is to
walk a line between adequate quality of life for the troops
that are spending at this point an indefinite duration there--I
mean, 6-month tours but we don't know for how long--and
permanent military construction. We try to avoid permanent
military construction, but provide adequate quality of life.
When we first walked that line in Bosnia, we didn't walk it
very well. We put people in tents in very severe winter
weather, and they did not have much in the way of quality of
life. There was no gym. There were no weights, no kind of place
to go at night.
Mr. Hobson. Well, originally, it was supposed to be one
year.
Mr. Lynn. Exactly right. It was supposed to be one year.
Mr. Hobson. I just thought I would remind you of that.
Mr. Lynn. That is right. That was the initial rationale.
Mr. Walsh. Christmas, wasn't it?
Mr. Lynn. Christmas. And that was several years ago, and we
are still there. We have tried to basically learn the lesson of
that in Kosovo because we don't know how long the Kosovo
operation will last. So we have gone straight to what you said,
which is plywood structures. They are relatively easy to tear
down. They are not permanent. But in terms of the quality of
life, it is far better than the kind of tent cities that we
initially put into Bosnia.
We are also trying to put in temporary gyms to be able to
play basketball, lift weights, and to have basic amenities.
Again, we are trying to walk a line between permanent
structures and adequate quality of life. And I think we have
done that. We have done it better on the first shot out of
Kosovo, having learned the lessons from Bosnia, including the
lesson of not setting an artificial deadline.
Mr. Hobson. But the money came out of O&M money.
Mr. Lynn. Yes.
Mr. Hobson. And then you do the supplemental, you pay it
back. Is that right?
Mr. Lynn. There is a transfer account we have called the
Overseas Contingency Operation Transfer Fund, OCOTF. We like
acronyms. The money all goes into that account, and then it is
transferred to the O&M account.
Mr. Miller. Is any money out of this account going into
Kosovo or Bosnia?
Mr. Lynn. I don't believe so.
Mr. Miller. Thank you, Mr. Chairman.
Mr. Hobson. Mr. Tiahrt.
Mr. Tiahrt. Thanks for coming, Mr. Lynn, and thank you for
the first hearing, Mr. Chairman. I believe we share some common
frustrations with trying to get adequate resources to do the
job we need to do to enhance the quality of life in order to
keep people in the services. And one of the problems with
recruiting is directly related to housing as well as other
areas. You have to factor in numerous deployments that are
extended and pay discrepancies which Congress took first steps
last year toward fixing. But in this committee, we had a very
tough job last year, and I have to say that the staff did an
excellent job of trying to fight back from a very large
reduction in the FY00 military construction budget.
This year you have not helped with the budget that the
administration is submitting. This is frustrating because it is
a very difficult process. If I look at canvass alone, we met
about one-fourth of our needs in this last year in the
President's budget. We have the same situation this year. So we
have a very difficult job to try to overcome the limited
resources that we have available.
It appears that the President's priorities continue to be
starting new programs in the Washington, D.C., area through the
appropriate bill Labor, Health, and Human Services. And that
priority is frustrating when we have young men and women who
are serving our country and Congress is trying to protect them,
trying to get them to volunteer and stay in the service trying
to keep them on board. And yet the President priorities are
different.
They face extended deployments, with their families at home
and them overseas. We have got to take care of those families
when they are home if we want to sign them up again.
So it is a very difficult task that this committee and
staff has had to carry out this year, and I hope that we can
work through that as successfully as we did last year. It took
all of Congress to pull together for us to do that.
BASIC ALLOWANCE FOR HOUSING
I went down to Fort Bragg, Mr. Chairman, with Congressman
Hayes yesterday, and there was a master sergeant who stood up
in front of a three-star general and a two-star general and the
community fathers, and he went to bat for the people who were
down there that have just taken a cut in their base allowance
for housing. And it is a big problem.
Now last year one of the reasons we enacted a military pay
raise is because we are trying to get people off of food stamps
that are in our military. And yet $118 in housing allowance was
what he was saying that some of them were cut.
I am sure that is not a lot of money to many people in
Washington, but for a guy who is fighting to keep his family
off of food stamps, that is a lot of money each month. And if
there was some way of freezing the payments on that as you go
through the process of implementing these new requirements for
BAH, your 5-year plan, I think it would be good for our
military personnel, and I hope you take that into
consideration. We need some type of freeze so that there is no
penalty associated with it, especially in these areas like
Washington State that Norm Dicks is going to keep reminding you
of, and the chairman's district, and McConnell Air Force Base
in my district.
Another thing that I want to bring up is on page 3 in your
report you talked about the energy programs, and you have goals
that you are wanting to achieve, and those are admirable goals.
But I think if you look at the time period that you are using
as a baseline, and particularly, I will go back to Fort Bragg
because it is a fresh example. They didn't use to have air-
conditioning at Fort Bragg during the time period that you are
using. Through quality-of-life issues, we are trying to make
housing a little more comfortable, new insulation, air-
conditioning. Energy consumption is going to have something to
do with air-conditioning and quality of life that wasn't
existent in the period that you are using.
So that is a precautionary note. When you are forcing these
bases to hold down energy costs, it is going to be tough for
some of them to do that because of these issues.
But the thing that I would like you to comment on is: We
have four BRACs going on. Is that correct? Have we completed
all four of them? Or before we start another one, when do they
complete? Do you know? Are you familiar with when they are
going to be done?
Mr. Lynn. The last one is completed, I think, in the middle
of 2001. July 2001.
Mr. Tiahrt. Is the first one complete?
Mr. Lynn. The first one should be complete.
Mr. Tiahrt. The second one is still in process?
Mr. Lynn. Implementation of the first, and second, third
are completed, and the fourth, is still open.
Mr. Tiahrt. The concept was to not make this political, but
in the 1996 Presidential campaign in California, it became
political. We don't want to see that happen again. We want to
see these go to completion. But I hope that we can keep them
from being political in the future.
I would just like you to comment on your plan on the basic
allowance for housing. That is a big concern.
Mr. Lynn. Sure. But can I make a couple of comments in
response to your comments?
Mr. Tiahrt. Sure.
Mr. Lynn. One, going back to your core comment about the
importance of treating the troops and their families right, we
absolutely agree, and what we have tried to do with this budget
is to address what we see as the four pillars of quality of
life, which are pay, retirement, housing, and medical.
With your help last year, we had the largest pay increase
in a generation; the largest pay increase since the early
1980s. We have continued on this pattern in this budget
proposal by increasing civilian pay based on employment
comparability index plus half a percent. We have a way of
measuring civilian pay increases called the employment
comparability index. We take that index, add a half a percent
to it, and that is the pay proposal that we put in this year.
The law used to require that the civilian pay raise equal
ECT minus half a percent. Now it is plus half a percent. That
is what you did last year. That is what we propose this year.
So on pay, we are trying to continue to keep faith with that.
On retirement, we proposed, and you accepted or passed a
proposal, to change the retirement system back from what was
called the Redux which passed in 1986. Redux lowered the basic
retirement to 40 percent of basic pay. We increased that back
to 50 percent. You passed that, we funded it, so the second leg
I think we have addressed.
The third leg you asked about was the basic allowance for
housing. As I said in my opening comments, we want to change
the way we have done that. Up until now we have covered 85
percent of the costs for people in the continental United
States. We think we ought to cover 100 percent of the costs. We
propose that we achieve this about 4 or 5 percent increments.
We will move from the current 19 percent down to zero in terms
of the amount of out-of-pocket expenses that service member
families have to absorb.
Finally, I think medical is the most difficult area to
tackle, while not in this committee's cognizance, I can tell
you that we have taken a number of steps to improve access to
TriCare, but we are not done yet. We need to improve the
TriCare process for our military. They are, I think, relatively
happy with the level of care they get, but not so happy with
the process they go through to get it. We need to improve that
process. We are also going to have to address retirees.
But the overall point is we tried to address each of those
four legs of quality of life as we went through.
Your point on freezing BAH. We have, I think, come halfway
to where you are saying; in other words, a family member or a
military family at Fort Bragg who is there now--or was there
before January 1st, will not see their housing allowance drop.
They are grandfathered, as it is. New people coming to Fort
Bragg would see a lower housing allowance than the people who
are there now.
Mr. Hobson. The only question on that is: Is that corrected
when they arrive? Is the number meeting the standard for the
community? Which is what it is supposed to do.
Mr. Lynn. That is what it is supposed to do.
Mr. Hobson. And we need to make sure that it just the
perception of somebody coming in who is taking a cut, maybe
that it isn't, and somebody needs to monitor this to make
sure--because I can tell you from talking to soldiers, this is
a big perception. I don't know the reality, but it is a big
perception problem with soldiers that they are getting a raw
deal: My pay went up, my final went down. And that is a
problem.
Mr. Walsh.
Mr. Walsh. Thank you, Mr. Chairman, and thank you for the
great job that you do on the subcommittee. You take your
responsibilities very seriously, and I know that of all the
Members of the House, you know this issue better than anyone.
So thanks for the job that you do.
FUNDING LEVELS
Under Secretary, thank you for your testimony. I am really
concerned about the inadequate amount of funding being provided
to the Air National Guard and the Army Guard. I am looking at
the--and I am talking about construction right now. As I
understand it, the President's request for Army National Guard
for major construction is $52 million; Air National Guard, $37
million. That is wholly inadequate.
Mr. Hobson. Got none in my district.
Mr. Walsh. Well, that is part of the problem, I think, that
there just--the priorities are not right. And the Congress ends
up--as I understand it, we appropriated over $200 million for
each last year. And it is sort of a game being played, I think,
that the services come in and within the President's request
they lay out a low-ball figure, knowing that the Congress will
come back and put in a higher figure. But ultimately it hurts
them because the projections on construction are not realistic.
I just wondered if you agreed with my assessment, and could
you tell me who determines that funding level? How do we arrive
at that President's request of $52 million and $37 million for
those respective Guard units?
Mr. Lynn. The point you make is right. The biggest drop
between the enacted level in 2000 and the level that we have
proposed is the Guard and Reserve area. The other reductions
are far smaller. It is a $480 million or so reduction from what
you had last year to what we have proposed this year.
You are also right that this is a repeated problem. It is a
historical problem. Your request will always favor the Guard
and Reserve far more--or your appropriation will always favor
the Guard and Reserve more than our request does.
Is it a game? I think to a degree it probably is. It is a
problem that we have been having----
Mr. Hobson. At least that is an honest answer. [Laughter.]
Mr. Walsh. Thank you for the straightforward response.
Mr. Lynn. And we have seen it in other areas, too. We have
seen this Guard and Reserve issue with other committees. In
fact, I think we are having a bit more success in other areas
than we are in this particular one in terms of trying to get
things on a more even footing.
In the O&M and personnel budget, we used to have the same
kind of thing where we would low-ball it, you would increase
it. For the last 2 years, I think, the Army, in particular,
deserves credit. They have been trying to work with their
Guard, in particular, which is where the biggest part of this
issue is.
Mr. Hobson. They finally realized they had one.
Mr. Lynn. They finally--well----
Mr. Hobson. Anything is better than nothing. I mean----
Mr. Lynn. I think first under General Reimer, now General
Shinsecki has picked up the banner. They have developed a
better partnership, and that partnership has resulted in
increased operating budgets for the Guard and Reserve over what
you enacted for the last 2 years. That, as I say, is--
``historic'', which may be too big a word for that, but it is a
dramatic change in pattern. We have not done that.
I don't know that we are ever going to quite get to that
level in this committee, but we need to take a closer look at
what the right level is and see if we can take a bit of the
game out of this.
Let me answer your last question, who is responsible. The
way it works is the services propose a program, as I indicated
in answer to an earlier question. We provide them general
guidance and fiscal guidance, basically a funding level. They
propose a program in reaction to that, and then the Secretary
makes whatever changes he felt necessary to that.
So the initiative is with the services, but the final say
is with the Secretary.
Mr. Walsh. It is significant in that we ask the Guards,
Army and Air, to perform similar duties, and many the exact
same duties. And yet I think they feel that there is a lack of
commitment to their role. They get second fiddle at best.
In my State, for example, our number one project, it is not
even initially--it was last year--was not even in the
President's request. And, you know, this does affect, along
with pay and other things, it affects attitude all the way
through.
So we have to make sure that when you come to us with a
request it reflects the real need out there, and I think we
will try to work with you on those.
Thank you.
Mr. Hobson. Mr. Boyd.
Mr. Boyd. Thank you, Mr. Chairman.
First of all, Mr. Chairman, I want to echo the comments of
the gentleman from New York, Mr. Walsh, about your knowledge of
the issues before this committee and the way you run this
committee, and we are all deeply appreciative of that.
Secretary Lynn, I had a couple of questions. I guess the
first one was going to be about housing, but since we have
developed or investigated that in depth in this committee prior
to----
Mr. Hobson. We are not done yet.
Mr. Boyd. Well, I want to move to a couple other issues.
forward operating locations in Ecuador and Aruba
One, I noticed in your testimony that you reference a $77
million appropriations for construction of FOLs in Ecuador and
Aruba. Given the recent coup and general problems and general
unrest in Ecuador, are you rethinking that request? Or how does
that play into what you will be doing, we will be doing there?
Mr. Lynn. The purpose of these forward operating locations,
the FOLs, is to replace the counterdrug operations that
heretofore have gone out of Howard Air Force Base in Panama. As
we pull out of Panama, we are losing those operations. We need
to replace them in order to reduce the inflow of drugs to the
United States.
The money for those forward operating locations is actually
in two places. There is $38 million proposed in the
supplemental for this year. It is known as the Colombia
Supplemental. That is a misnomer. It really is a counterdrug
supplemental, and the $38 million will entirely support the FOL
in Ecuador. Then there is another $78 million, as you
mentioned, in the 2001 request that would complete Ecuador and
also do the Aruba and Curacao bases.
We did take a look at the recent events in Ecuador, and
also asked the Joint Staff and our policy folks in the State
Department to take a look, and they think that there is
stability now. Therefore, we do not think it affects the
supplemental request. It is the right question. I think it has,
at least in the Department, been asked and answered. But we are
happy to get more people up here and brief you on the details.
Mr. Hobson. While you are asking that question, let me
interject. This won't come out of your time. I do not
understand why--part of this is emergency and then we get
whacked. Why didn't it all go in the supplemental?
Mr. Lynn. It was divided into two pieces. The most urgent
piece was in Ecuador. It is going to take a relatively large
effort to bring that base into something that we can use
effectively. So we front-loaded that piece. And then the second
piece was in the normal budget request.
I will tell you, in fact, that as we were doing the budget,
was in the normal budget request. When the Colombia
Supplemental came along, we frankly pressed to have some of the
most urgent piece included in the Supplemental. So originally
our request would have been for the full $117 million in 2001.
We actually reduced that.
Mr. Hobson. We wish it was the other way around so we could
take care of some of this----
Mr. Lynn. Well, I mean, you could. It would certainly be
possible to do it all in the Supplemental.
Mr. Hobson. Was that an OMB decision or was that----
Mr. Lynn. Well, the content of all of the supplemental
ultimately is an OMB decision. We proposed that some of the
FOLs be accommodated within that, and they approved it.
Mr. Hobson. Did you ask for it all?
Mr. Lynn. Yes.
Mr. Hobson. We just need to get that, because it affects us
dramatically on something that--you know, if you had seen this
kid yesterday--my wife tells me I have got to stop calling
these people kids, but this was a young man who could have been
most of our sons in here. But here is a PFC and his wife living
in a brand-new house, and, I mean, they were so proud of what
they had. The young man was happy. I guarantee you, they are
going to re-up. They like where they are living. He is going to
do his job better. His family is happy. Why can't we do this
other places? And we are doing it--in the stuff we are
privatizing, we are trying to build to community standards now
in size and other things, and we have to change the law on some
other things, the authorizing that you have to do. But it is
just so wonderful to see that.
And then you go and see some of other stuff that we are
doing, and it is just very depressing to go through that. And
then we see we are going to--I understand we have got missions
we have got to do, but if we don't have people, we do not do
the missions. And we have got to take care of these people.
I find it very difficult to fund FOLs out of what I think
is taking away from normal housing, and when I get back to
this, I am going to ask you some questions about numbers,
because the numbers are off.
I am sorry. Go ahead. But you brought up the FOL question.
Mr. Boyd. Thank you, Mr. Chairman. I think that, of course,
the major concern of the committee and probably most House
Members would be the security of our personnel who would be
manning that FOL. And your answer that you have taken a look at
it since the coup obviously is satisfactory to me.
BASE REALIGNMENT AND CLOSURE
Mr. Chairman, I wanted to move to another area, and that is
the area of BRAC, just very briefly for a brief question. But,
first of all, before I ask the question, I wanted to follow up
on Mr. Farr's line of questioning, and that was about a list. I
mean, I sat here a year ago in absolute fear that there was a
list because of some things that I had seen happen at some
facilities in Florida. And I was assured, I think, by you and
others, that there was no such list. And I want to strongly
recommend--at least know that this member doesn't want there to
be a list. I think the only way for the process to be effective
and get done in the proper way is for us to not have a list and
let the BRAC Commission, if we decide to go there, do that
work.
It really created some heartburn for myself and for some
other members last year about some of the things, because we
had even seen documentation from some Air Force folks that said
that there was a list, and, you know, this particular facility
was on it and these are the reasons we need to do these things.
But we will cross that bridge and hopefully----
Mr. Lynn. There is no list.
Mr. Boyd. Thank you, sir.
Mr. Farr. Can I say one thing, though? The game has changed
from when you had the lease and further conveyance, and I do
not think DOD understands that what we ought to do is be
engaging these communities early and looking at military bases
and saying--we may have some interest in this. We will help you
rather than fight you.
Mr. Hobson. Well, we are working on it. You guys are not on
the Defense subcommittee, but we have a situation at Brooks Air
Force Base which, if we can work it out, if I can ever get the
Air Force to come back to me before we get this thing done, may
begin the beginning of this program. I am a believer that you
can go take a base that--and Brooks has some problems, and we
want to keep some things there for a while. But it has been on
the BRAC list, and the community stepped forward and
understands this.
There may be ways to begin a process where you begin to
lease out or give parts of the base back to the community so
they can build up a private consortium of jobs, and then if--
and leave some of the stuff there, and then if that stuff
becomes where it should be moved later, you can move it and you
don't have the community uproar because they can already see
it.
I will give you an example--and the biggest problem is
getting the base back to the community fast enough. And I can
give you one. Gentile Air Force Station in Kettering, Ohio,
which is right next to Dayton--it is in Tony Hall's district.
Everybody went nuts when we were going to BRAC it. The mayor
just beat the heck out of me, a nicer word of saying it. Why
can't I get this back?
Once we got it back to him, it is now the private sector
and everybody is happy. But at the time it was a problem. We
are working on that. We are working on that with the services.
We have got to find a way. I did not like the way that--they
had originally come up with the leasing of it as the way they
are doing this. It can also be used--if it is not used right,
it can be used the way of non-BRAC'ing a base. We have to be--
and that was the big controversy we had in the big committee
about what was happening at Brooks.
So I think you all need to get into this, too, and not just
let the Air Force--because it is a program that could be used
all across service-wide. So I think you all ought to look at
it, too.
Mr. Boyd. Mr. Chairman, I have one question about the BRAC
process, if I might.
Mr. Hobson. Yes, sure.
Mr. Boyd. That is, Secretary Lynn, your statement that you
made here orally about BRAC earlier seemed to be made with the
premise that base structure and force structure reductions must
be made on a percentage equal basis. My question is--two
questions: What basis do you have for that premise, number one?
And how does that premise square with the accomplishment of our
mission as a Nation and as a military?
Mr. Lynn. That is a good question, Congressman. We do not
have a list of bases to close, as I said. So in order to
understand the rationale, we have fallen to percentages. You
don't want to use even examples because then you are prejudging
the results.
There is such a large mismatch between 21-25 percent and
35-40 percent. You might be able to justify some discrepancy
between force structure reductions and base reductions, but not
one that large.
Now, when you get down to it, it doesn't have to be exact.
You would use that as justification for starting a BRAC
process. You wouldn't use it for actually implementing it. Then
you would have to go through category by category.
Mr. Boyd. Facility by facility.
Mr. Lynn. Facility by facility. How many training bases do
I need? How many maneuver bases do I need? And so on. And you
would go down and actually look at each category.
I can take the percentages down another step, I think,
without implicating individual bases. For examples, Navy ships
have dropped by 45 percent and Navy pier space has gone down by
17 percent. There is a fundamental mismatch. What bases you
would change and so on, I don't know. You would have to have
the Navy do a careful review.
Mr. Boyd. Geographic----
Mr. Lynn. Geographic, military utility, you would want to
go through it. Another example is the number of small aircraft
in the Air Force has come down by 53 percent, whereas the ramp
space for those aircraft has only come down 34 percent.
You go through it category by category and you see
mismatches. It doesn't tell you which bases to close, but it
tells you you do need a process for evaluating that structure
and be able to close some.
Mr. Boyd. Thank you very much, Mr. Chairman.
Mr. Hobson. The interesting thing about that is the Navy
says they need more ships, and if you take away the pier space,
then do you get it back? So there are all kinds of processes
that have to go on. We are going to hear from two more members.
Actually, we have a new member of our subcommittee, Mr. Goode,
and he is keeping up the tradition of this subcommittee of only
having three members who have ever been on active duty--or even
been in the military, I guess. I don't know if you were on
active duty. You were in the Guard, I guess. I was in the
Guard. I was activated, but you were in the active, so we have
got three members, only three today. When I think of years ago,
it is a different thing. I think it is one of the reasons we
all need to get out and look at some of this stuff from time to
time and make sure that we all know what is going on.
I have been in the Air Force, and going down to look at the
Army was a good thing for me the other day. I'm not sure going
up to West Point was a good thing. But we will get into that
later.
So we will go Mr. Edwards, then Virgil.
BASIC ALLOWANCE FOR HOUSING
Mr. Edwards. Secretary Lynn, thank you for coming. We all
know--we appropriate funds every year, don't give you enough
money, and the Department of Defense has to juggle balls and
make priorities, and I understand that and I respect that. You
have a tough job, and I appreciate the job you are doing.
But I have just got to say, once in a while we are penny-
wise and pound-foolish. A couple of years ago when I was on the
Armed Services Committee, in July, we passed a bill that was
going to--small measures, an amendment to a bill that was going
to reduce the retirement benefits of our military personnel. In
48 hours, I landed in the Azores on a trip to Europe, and our
delegation was bombarded with questions from uniformed
personnel that were already demoralized because of the rumor
getting to the Azores faster than our jet airplane could get
there.
I think what DOD has done on the housing allowance is close
to that example as anything I have seen in a while. It is
creating--I represent 20 percent of the active-duty Army
divisions in the world at Fort Hood, as you know. I cannot
overemphasize, I couldn't raise my voice high enough to clearly
point out the kind of morale problem that this is creating. And
I know this is just starting. I think we are just seeing the
tip of the iceberg.
It wasn't pleasant as a Member of Congress to go back and
give a speech to the Rotary Club where there were a number of
uniformed personnel there and to talk about the commitment
Congress has made to military families and the quality of life,
mention in detail the improvement in their retirement benefits,
mention in detail the salary increase and how much that was
going to cost the taxpayers, about how good that was, and then
have an officer raise his hand and say, ``How about my reduced
housing allowance?'' And I sit there dumbfounded, didn't even
know anything about it, and felt badly enough about it that I
came back and asked Ike Skelton, who is ranking Democrat on the
Armed Services Committee, didn't know anything about it. John
McHugh, who along with me co-chairs the Army Caucus and
represents Fort Drum, didn't know anything about it 3 days ago
or 4 days ago when I mentioned this to him.
But, that aside, I would hope DOD would let Members of
Congress know of major installations when a decision like this
is made. If it is a right decision, then perhaps we can help
sell that decision.
But, given that, I just tell you, I guess my question is:
Do you want us, do you need us to organize a number of Members
of Congress to riot on this issue? I have talked to six or
seven or eight or nine or ten, some of them directly affected,
some of them understand the impact of spending tens of billions
of dollars to improve morale by increased pay and retirement
benefits, and then you undermine virtually all of the good you
have accomplished by those expensive measures by saying to
junior-level officers we are going to reduce your housing
allowance. And compounding the problem, I will promise you,
even though it was intended to grandfather and help some people
presently at these installations, when you end up having two
majors living next door to each other in an apartment or
townhouse complex and one of them realizes that the other one
who is doing the same job they are doing is getting, you know,
reimbursed $100 a month or $200 a month less than the other
person for housing, it is going to create animosity that will
just add fuel to the fire.
I guess my question is: Where are we in terms of looking at
that? I would almost bet every dime I own that the cost of
housing at Fort Hood, Texas, has not gone down in those
communities, and yet their housing allowances are going down.
How seriously are you looking at it? Some mistakes I think
are better just--rather than analyzing them forever, just
correct it and cut off the weed at the root and solve the
problem before it seriously undermines morale. Because if we
spend the next 6 or 9 months studying this thing, the impact--
even if we correct it, you are going to have--those soldiers
are going to say to me, you know, I can't trust the Government
anymore. You guys come back and tell us you are helping us with
the salary and you are helping us with the retirement, and then
you screw us with, you know, reducing--you know, taking money
out of one pocket that you put in the other, as the chairman
said.
Maybe I am overestimating this. I do not think I am. I
think it is going to be a huge morale problem. I wish we could
correct this as quickly as we could. What are you doing about
it? And how can we help you solve that problem? And do we need
20 or 30 Members of Congress to organize and come meet with you
and the Secretary and others and raise hell about it? Because
they are willing to do it. I would rather solve it quietly
behind the scenes.
Mr. Lynn. I think it violates my oath of office to foment a
riot. [Laughter.]
It is not even hard to do.
Mr. Edwards. And you can help me stop the riot I am going
to have to put up with down there because people are so
disappointed. They just think once again we have--they have
lost trust. You know, I am up there speaking in a group saying,
you know, gosh, Congress has made a commitment to helping you
and your quality of life. You know, we have made a commitment
to you. And then to have to have soldiers say, ``Well, sir, do
you realize that you just took money out of my other pocket?''
Mr. Hobson. One thing is that the pay raise is taxable. The
BAH is not taxable. So, you know, perception is reality in
this. I mean, and it is fermenting. One person talks to another
person, whether he is really involved or not, it becomes a
discussion. And we need to figure out a way to get that----
Mr. Edwards. And this will become an issue, Mr. Chairman, I
think, along the lines you just said, far better than even the
actual dollars mentioned. It is an important dollar problem for
a lot of people who are struggling to pay the bills every
month. But this is like that issue I saw in the Azores. It is
going to grow beyond itself and is going to hurt the morale of
our military men and women at the very time we are trying to
recommit to them and we want to help them with the quality-of-
life issues.
Mr. Lynn. You are right. We have a problem, and we
understand we have a problem. The theory is good. Housing
allowances ought to match the housing costs in a particular
area, I do not think anybody quarrels with the theory. And that
was not the system we were on before. I do not think you want
to go back to a system that was overcomplex, and where
allowances didn't match costs. I understand the problems you
are having at Fort Hood and Fort Bragg and some other
installations. There are also people living in high-cost areas
who saw their allowances go up to come closer to covering the
cost. You are not hearing from them, but I think that is an
important side of this that you need to keep in mind as you
look. It is not in my mind the underlying system that is the
problem.
That said, the execution of this and the timing, in some
ways, is worse than you said. We have the large initiative to
eliminate absorption costs but it is being overwhelmed by the
publicity, which is, I think, unfortunate. I think we are
basically saying to everybody that we are going to add 15
percent to your housing allowances over 5 years, and that it is
tax-free. That is a huge step forward both in terms of dollars
to the family member as well as changing the fundamental system
we have, which was biased against people who lived off base.
That is an important element that is being overshadowed by
this, and, in fact, would, over time, correct it. As we raise
the housing allowance itself, it will start covering the
changes here that you have on your Fort Bragg chart. But it
will take some time, probably a couple of years for that to
occur. In the interim, we have this morale problem. We have
been talking with the personnel and readiness folks about what
to do with it. Certainly we are taking a look at it, and we
certainly need to make people understand better how it works
and why it was done.
Mr. Edwards. I do understand the plus of that, but just
take Fort Hood. It has 20 percent of the active-duty Army.
Mr. Lynn. Right.
Mr. Edwards. And no matter what you tell them about what it
is going to do for, you know, high-income areas----
Mr. Lynn. They don't care about the sailors in San Diego. I
understand.
Mr. Edwards [continuing]. In the Navy and somewhere else,
you know, you got 20 percent of the Army, you add Fort Bragg
and Fort Hood together, and you got a huge part of the Army.
And it looks to me like the Army is one that ended up getting
the short end of this stick.
Mr. Lynn. The Army, because of where it is located, did.
That is true.
Mr. Edwards. And telling them what we are going to do 5
years from now is not----
Mr. Lynn. No.
Mr. Edwards. How much would it cost to hold harmless
those--and I know you have a grandfather clause for those that
are presently in installations. But to not drop the rates at
Fort Hood or Fort Bragg across the board, how big----
Mr. Lynn. I might have to beg your indulgence on that and
provide it. I did try and get that number. I thought you might
ask that. I have heard a couple of different numbers. I have
asked the question a couple of different times, and I am
getting different answers. Until I am sure of an answer, I do
not want to give you an answer. So let me provide that for the
record.
Mr. Hobson. One thing you might add to that is rather than
reducing the BAH is use the initiative to increase the out-of-
pocket expenses to correct the problem. I do not know if that
will work or not, but you could look at that and see.
Mr. Edwards. Well, not knowing what the number is, if it is
a huge number, then that is a huge number of dollars that are
being taken out of the pockets of our uniformed men and women.
If it is not a huge number, then, you know, we ought to go back
and fix that. It is just not worth--I know the theory of this,
but it is just--you know, when you are hurting this big of a
percentage of the active-duty Army, just as one example, it is
just not worth the dollars. It undermines--we would have been
better off having a much smaller pay raise than not hurting
this many people.
I know you are studying the issue, but, you know, I have
seen studies go on for 5 years around here. Can you be more
specific? At what level--you know, is this being seriously
discussed at your level at the Pentagon about coming up with a
solution? If so, what would be a possible time frame?
Mr. Lynn. I do not have a time frame. It is being discussed
at the highest levels on essentially a daily basis. But I do
not have any time frame for any sort of action.
Mr. Edwards. In the ballpark, is it, you know, hundreds of
millions? Or is it----
Mr. Lynn. I do not think it is that high.
Mr. Edwards [continuing]. Billions of dollars?
Mr. Lynn. It is definitely not billions. I do not even
think it is hundreds of millions.
Mr. Edwards. How much did the pay raise cost on an annual
basis, would you estimate ballpark?
Mr. Lynn. A couple billion dollars.
Mr. Edwards. How about the retirement benefit increase?
Just ballpark.
Mr. Lynn. A year? I think a billion.
Mr. Edwards. Okay. I would just hope you would let us know
how we can work with you, because, you know, we have spent
billions of dollars on those two measures and just cut the
needs out for the benefit of that, actually going backwards in
terms of trust. At the very time we are asking people to trust
us about going into the military or, you know, re-enlisting,
now it is hard for us to go back with a straight face and
explain it. I sure wish we could somehow follow up and get more
specific----
Mr. Hobson. Well, you are going to come back to us.
Mr. Lynn. I will come back to you. I am hesitant to
publicly say a number that I am not sure of.
Mr. Hobson. Maybe we will have a private meeting on this.
Mr. Lynn. We will get you the number.
Mr. Edwards. Then we are going to have to create a riot.
Mr. Lynn. Well, the worst thing I can do right now is give
you the wrong number.
Mr. Hobson. This is a big deal and it runs through the
ranks, in the middle ranks and some upper ranks, of the people
you are trying to get to re-up. And I think when a policy was
good--I thought when I saw the BAH going up that it was going
to be really good because it would work some of these
privatization deals better and the numbers. And then I started
hearing--you know, and then I went to this base, and I think
you are hearing it and I have heard it.
Mr. Edwards. Twenty-three thousand people, Mr. Chairman,
they were not grandfathered; 23,233 people would end up getting
less money as a result of this at Fort Hood.
Now, as soon as those are replaced, in a year or two, that
will be 23,000 people whose income, after-tax income has been
dropped, in some cases considerably. This is from forces
command. You have Fort Bragg.
Mr. Lynn. I have Fort Bragg.
Mr. Edwards. This is from forces command on all the other
Army installations.
Mr. Hobson. This is about 90,000--I would say that is
probably closer to 90,000 people between those two bases.
Mr. Edwards. Mr. Chairman, I would look forward to working
with you, and I am serious. There are a lot of other members
that had no idea this was happening. Some of them haven't been
hurt directly, but they feel very strongly about this as a
morale problem. And I would love to work with you, Mr.
Chairman, and you, Mr. Secretary, to see if we can work
together. And we have to help to see if we can solve this
problem.
Thank you.
Mr. Farr. Couldn't we solve that the same way we solved the
civilian sector? We have what we call locality pay.
Mr. Hobson. Well, we have that now, and it----
Mr. Farr. But wouldn't that also help with this?
Mr. Lynn. We had a system, Mr. Farr, where we gave
everybody a blanket housing allowance regardless of their
housing costs. And then we had close to a locality pay,
something called a variable housing allowance, for high-cost
areas. We found that system was overcomplex, and it ended up
paying some people too much relative to housing costs and many
people too little. So what we are trying to do is move to a
system where the housing allowance is tied to the housing cost
in the area in which you live.
As I was saying to Mr. Edwards, the theory of this is
flawless. The problem is that in transitioning from the old
system to the new system, some people's income is going down.
And that is the problem. Regardless of whether they should be
going down or not, the fact that they are seeing a reduction or
as they come into a new base they see a reduction based on what
people had before them is clearly causing a lot of
consternation and morale problems and we need to address those.
Mr. Edwards. Mr. Chairman, if I could submit this? Mr.
Dicks' office just delivered this to me. It is a letter from
Mr. Murtha and Mr. Dicks expressing their strong problems with
the present policy.
Mr. Lynn. Is this the riot he predicted?
Mr. Edwards. It is just the beginning.
Mr. Hobson. Well, these are two of the leaders. They will
be joined by others. [Laughter.]
Mr. Edwards. They are kind of like Texas Rangers, one
person, one riot, you know, one Ranger, one riot.
Mr. Hobson. We will accept this for the record.
[The information follows:]
Mr. Hobson. This is similar to the discussion we had, a
little more in-depth in here than we did the other day in the
other committee. But I think you have sensed the concern that
we had before.
Mr. Lynn. Yes.
Mr. Hobson. You know, we need to all sit down and figure
out a right answer for the troops.
Welcome, Virgil. You can ask for about 5 minutes or so.
Nobody has kind of stuck to the 5 minutes. We are glad you were
in the Guard.
Mr. Goode. Thank you, Mr. Chairman.
First, I want to say it is an honor to be on your
subcommittee, and I am really looking forward to it. As some
have said before, you do have an enviable reputation in this
critical subject.
FORWARD OPERATING LOCATIONS
Mr. Hobson. Just as long as it continues.
Mr. Goode. I really just have one question. I am new on the
committee and am not too familiar with forward operating
locations. Do you have any in Venezuela, or did you have any?
Mr. Lynn. No.
Mr. Goode. Say on the one you want to do in Ecuador, how
much do you put in in the way of fixtures? Just ballpark it.
And fixtures are things that you can't take with you after----
Mr. Hobson. He is a lawyer.
Mr. Lynn. Most of the money that we are talking about here
would be for fixtures. For Ecuador $38 million in 2000 and
another $23 million in 2001. Most of that is to build
facilities. This is military construction. There would be an
additional budget that is in that, with a counterdrug budget
account to operate, but most of this is to build a squadron
operations center, maintenance hangars, maintenance facilities,
visiting officer quarters, those kinds of facilities.
Basically, the facility is to operate an air base in order to
counter the inflow of drugs.
Mr. Goode. If you had the facility back in Panama, would
you need the facility in Ecuador?
Mr. Lynn. I am not sure I am qualified to answer that. I
can answer the narrower question. This FOL is meant to replace
the counterdrug operations that were going out of Howard.
Whether the people we have in charge of counterdrug operations
would want to supplement Howard with something in Ecuador,
because they were running into a problem with people trying to
get around Howard, I do not know the answer. I would have to
get that for you as to whether they would want to supplement
it.
But the direct answer to your question is that Ecuador and
Aruba and Curacao are meant to make up for the loss of Howard.
Mr. Goode. What have you got--and I do not even know their
names. I am like George Bush. I do not know the names of all
these leaders. If you had the leader in Venezuela--the leader
in Ecuador and he told you to get out, you would just lose it,
wouldn't you?
Mr. Lynn. I suppose. You always are there with their
permission, in a sovereign country.
Mr. Goode. Right.
Mr. Lynn. So we would have to react to that. I think as I
indicated to Mr. Boyd----
Mr. Goode. But you think Ecuador is the best choice?
Mr. Lynn. We think Ecuador is, yes. That was the military
judgment. This was done largely by our Southern Command.
General Wilhelm is the one that identifies the bases. He, I
know, feels quite strongly that these are absolutely essential
to these operations.
Mr. Goode. That is all.
Mr. Hobson. We are still in Cuba, and they have not kicked
us out. So I think you can stay in some of these places.
What I am concerned about, though, along this line is these
may not be the only places we are looking at. There are some
other places that I understand we may be looking at. So these
are not the last dollars that we are going to see on this. So I
think we need to be very clear and do not get the impression
that this may be all of the forward operating locations. To my
understanding, there may be one or two other places that we are
talking with that I do not want to get into right now that may
or may not have forward operating locations. So you do not need
to answer that, but I just do not want anybody here to think
that this is the end. We will think more of it in the
supplemental and not this bill, especially with our housing
problems that we have got.
I want to ask two or three things, and then we will do
another round.
HISTORIC HOUSES
I sense--and I want to get this out in the public, and I
want this on the record--we have got a huge problem with
historic houses, and I thought I was talking about 55,000
buildings in the Army. I understand from the Army's numbers
there may be 70,000 buildings that must be evaluated for
historic significance over the next number of years. I think
over the next five it may be around 50,000. I do not know. And
the Air Force has got 35,000.
I mean, this is a huge potential problem and I keep
bringing it up so that there is somebody in your shops over
there thinking about it, because nobody has come back to me yet
and said how we are going to handle all these. We do not have
the money to handle all these, in my opinion, down the road. We
cannot tear them down fast enough, some of this stuff. Some of
this stuff should not be kept. Some of the warehouses and stuff
I saw yesterday ought to be gone, and they are tearing them
down about as fast as they can get them down, but they run into
asbestos. These are mainly wood structures, and some of them
are vintage 1950s and 1960s stuff that is a little harder to
tear down than some of that old World War II stuff.
But that is a real, real problem. You do not have to
comment on it. I want to get it out on the record. I want
people thinking about it.
GENERAL OFFICER QUARTERS
The general officers' quarters over $25,000 are going
through this committee now. And we have approved some, some
with changes. And I think they have gotten the message that we
are reading these. I think it took a while for people to
understand that we will read these things, we will look at the
numbers, and we will question the numbers. Even if it is a
small number, we are going to question it.
I think the Navy got the message on that. The Air Force has
gotten the message. But I am sure some of these--I read some
testimony the other day where some guy said, some Admiral said,
Oh, I am just going to wait it out until this other Admiral
retires, and then I am going to spend the money, and he did.
And he spent O&M money. And now he is retired. By the time I
read it, he was retired. And I am hoping that we do not have
any more of this stuff going on. I hope you guys are policing
it where these general officers are going out and redoing their
kitchens and their private residences to the tune of--I do not
mean just hundreds of thousands of dollars. I mean millions of
dollars--out of the wrong accounts. So I hope we do not see any
more of that.
The other thing I do think that needs to be changed in the
authorizing committee is this deal that you could only build a
general officers' house of 2,200 square feet--is my
understanding--needs to be changed because, frankly, what we
wind up with is rehabbing some larger houses that are not worth
keeping. I can give you an example. One is in Osan, Korea, for
example. We ought to build that--I do not know whether he was a
four-star or whatever. But we ought to probably build him a new
house rather than putting 80,000 or more back into that old
house that is what I would call a zipper house. I have not seen
it, but it is probably pre-fab, put together. We ought to build
him a better house and one that will last and that is done
right rather than doing what we are doing. But everybody tells
me, oh, you know, all this stuff.
We just need to change some of these rules. The housing
stuff, we need to go to what Sam is talking about when we do
privatization. We need to build to community standards so that
if that project--if we BRAC that base or we do not have housing
the same way anymore, it now goes to a community standard and
they rent it out. First of all, it makes it cheaper for them to
finance when they finance it if it is built to that because it
is a dual-use type thing. It is not a single-purpose building.
Some of the stuff on Sam's base does not meet the code. And I
think it is outrageous for the Army to have 1,100 houses
sitting there, and until we went out there, they were not even
being maintained at all. And that is how many--what are those
houses worth, $150,000, $250,000 apiece?
Mr. Farr. Probably $250,000.
Mr. Hobson. All right. So you are talking about $250
million worth of--$225 million, anyway, of houses sitting there
in an area that is, you know----
Mr. Farr. Zero occupancy.
Mr. Hobson. Yes. We could fill those houses. They could be
leased in the private sector, some of them, and that is not the
only place where that is.
But if you look at a BRAC, in my opinion, you ought to look
at a BRAC that does some of these things that we would like to
do down at Brooks, where we would get--it is terrible to these
communities to go in and just shut down a base almost
overnight. It is devastating. That is why they fight so hard.
But if they have got private sector jobs that would gradually
move in there, I think there would be much less of that. And I
hope everybody would look at that. We are trying to work Brooks
that way now. I hope you all are helping us because this right
now is the whole Air Force thing, but it has more synergy than
that. It could affect everybody, the Army and whoever has to go
through this.
INCREMENTALLY FUNDED PROJECTS
The last question I want to hit you with is--and a little
of this is not totally your fault. Dr. Hamre was here last
year, and I think he is a good guy, as I told you the other
day. But there is a little inconsistency here that we need to
talk about.
In your opening remarks, you stated that the budget request
is at the same level you projected last year. However, last
year you asked us to incrementally fund construction projects
and to fund the balance of the projects this year.
Now, in the infinite wisdom of this subcommittee, we denied
your request, and I remember the projections. For the year it
was, I think, around $11 billion, $3 billion of which was to
pay for the projects begun last year, the incrementally funded
projects.
I looked at this--and I do not know if you will agree to
this or not--as a $3 billion reduction that we are taking a hit
on if we had followed what was going on from you all last year.
And I do not think you did it. This is from the Department. But
is there an inconsistency here?
Mr. Lynn. Well, now, I should have been clearer. We had the
funding for the 2000 military construction budget split-funded
between 2000 and 2001. You, as you say, did not approve that
and fully funded it in 2000.
When I said we funded essentially our 2001 request, I mean
minus that funding that you already paid. You are right. That
$3 billion that would have paid the 2001 costs of the 2000
projects did not stay in military construction. I did not mean
to indicate that it had.
Mr. Hobson. Okay. I just did not want to misunderstand. We
could use $3 billion. We could spend it real easy. And I just
would encourage everybody to go to these bases and see some of
the working conditions that these people have, see some of the
housing conditions that these people are in on these bases.
HOUSING PRIVATIZATION
We really need to get at this partnership of--we are going
to have to have MilCon some places. No question about it. We
cannot privatize everything. But we have got to figure out how
to privatize things. I am not sure in the Army what is the
right way to go yet, whether the RCI is the right way to go. I
think we ought to do one in the RCI to see whether it comes up,
and we have this other one that we did at Fort Carson in a
different way. And we ought to see which one gets us the best
bang for the buck. Maybe we have to disapprove one as we go
along to make sure that we--if it is not getting the best bang
for the buck.
I do want to compliment the services. I think they finally
got the right consultants, or they have got consultants that
are defending them with the developers and looking at what I
call the underwriting of these projects before we get too long.
These are big dollars. And before we get out there and make--
you know, and get into this, we need to know where we are
going, because if we make some mistakes in this, we will kill
the privatization and people will run from it.
FACILITIES REDUCTION
The other thing is--just a last comment I have, and then we
will go back to another round here--there are a number of--I am
concerned about the utilities privatization, and all the bases
are running around scared to death of this. They are not quite
sure where to go with it. And the other thing is--here it is,
the facilities reductions. As a part of the Defense Reform
Initiative, each military service surveyed its building
inventory to identify the obsolete and excess buildings they
could demolish and otherwise dispose of. The survey identified
80 million square feet and about 8,000 specific structures, and
at some point I would like you to tell us what progress the
Department has made in disposing of this excess real property.
And when does the Department expect to meet the desired end
state?
Mr. Lynn. I can answer that right now.
Mr. Hobson. Okay.
Mr. Lynn. You are right, 80 million square feet is the
target. The target date is 2003. Thus far in 1998 and 1999 we
have demolished and disposed of just over 30 million square
feet. That is actually a little bit ahead of the schedule that
we planned, and it is actually a little bit below cost.
Unfortunately, we probably will not be able to keep to that
pace because, as is natural, you take the low-hanging fruit
first. And so the easiest and cheapest structures have
probably, almost surely, been demolished.
Mr. Hobson. No, I can show you a whole bunch of them out
there. There are still a bunch of them.
Mr. Lynn. That leaves about 50 million square feet to do
over the next 3 years, and as I say, we are currently actually
a little ahead of schedule. We expect it to get tougher,
though.
Mr. Hobson. Sam.
Mr. Farr. Mr. Chairman, following up on that, you know, we
have certainly moved in the Pentagon to off-the-shelf
technology. It seems to me that is where we are in this
housing, and we have got to look to more off-the-shelf
technology.
But just quickly a budgetary comment I would like to make.
We have in this budget $473 million for construction projects
overseas. I wondered whether staff might review whether how
much of that could be in the emergency that would be relevant
to the supplemental.
Mr. Hobson. With the fight I had with those guys the last
time----
Mr. Farr. I know, and you did a good job. I think you are
doing such a good job, we ought to consider it again this year.
Secondly, I would like to express my concern about building
the national missile defense system. I think that we ought to
wait for the President's decision on that before we go ahead,
and I just want to share that I am concerned about that, as did
Mr. Olver.
I would also like to express my interest in seeing the
Pentagon move stronger on contracting out for base operations
and savings that could be incurred. We are finding we are
getting into the typical fight that it is people who
essentially are in the Federal family that want the job, don't
want to let those jobs go to the local family. But in both
cases, it is one public sector to another public sector. And
since these bases are in the local community which does have
police, fire, and public works and so on, there ought to be--we
ought to look closely at how much we can save by allowing local
communities to do the work.
Lastly, I will just submit to you two questions that I
would like responded to in writing, and I know this is not the
formal way of doing it, but perhaps these notes can get the
same results. That is, I would like to have a list of the
conveyance dates for the remaining projects at Fort Ord. I got
it from the----
Mr. Hobson. Yes, I would like to see that, too.
Mr. Farr. What I find is that there are dates there and
that some of the reasons for not being able to convey are
locally generated and others are federally generated. I would
like to see at least what your guesstimates are when those
properties can be finally conveyed. You know, we have signed
the economic development conveyance, the no-cost conveyance,
and it is signed by the local re-use authority. So there is no
reason other than the cleanup that ought to keep these
properties from being transferred.
Secondly, one question I get and you are all going to get,
not only with base ops, but when you do construction on a base,
the local contractors are very interested in how they can get
in line to bid on it. It seems to be a very federally
controlled, in-house process of base contractors. Frankly,
there is a lot more work that could be done by the locals, and
so if you could have somebody write how the local contractors
can bid on base projects, including privatization, we might be
able to use that for information that every Member of Congress
would like to let out to their local building construction
community.
Mr. Hobson. One of the complaints on privatization is, as
some services are looking at it, that it is skewed to the large
national developers, I think is what he is getting to.
Therefore, the local community is cut out, and so you do not
get the use of local contractors and the subs that you do in a
normal housing project. Now, some of these are pretty big and
the bonding requirements are pretty high. But I think we would
like to see as much--I hate to see in the housing area the same
thing happens when we built tanks or trucks or some of these
things where you get the traditional--I think this is what you
are fighting against, the traditional Government contractor, he
knows all the hoops and all the paperwork, and the local guys
are just--well, they do not want to do it because of that.
Mr. Farr. The outside contractors have been scandalous, and
they have walked away from projects, they have not built them
to standards. You know, there is a lot of local checking,
particularly by the labor unions.
The other thing that happens is that the response is, well,
you can bid on it, you just have to read the Federal Register
or the contract, which, you know, small businesses do not have
the time nor the ability to subscribe to that volume of
information that comes out every week. And at least there ought
to be some way of notifying the local community, some sort of
sidebar process.
Mr. Hobson. The Army has had some hearings--or meetings, I
think, in some of the local communities on theirs, but the
feedback I get back is that a lot of the locals feel they are
skewed to the large national developers. Whether that is true
or not, I do not----
Mr. Lynn. Well, let me get back to you for the record on
that, on both the conveyance dates at Fort Ord as well as what
kind of procedures we have to involve the local community in
military construction.
Let me just make a couple of comments about your earlier
statements.
NATIONAL MISSILE DEFENSE
Funding for the national missile defense is not meant to
prejudge the decision the President will make this summer. It
was meant to enable it. We think we have put together a 5-year
program that is fully funded to an initial operating capability
in 2005 should the President decide to deploy to that date. It
does not in and of itself make the decision. I think that is
particularly true with the military construction.
BASE OPERATING SUPPORT
With regard to competing base operating support functions,
we are trying to do that. We have already studied well over
100,000 positions in the Department for competition. We have in
training nearly an equal number to do over the next 2 or 3
years. Base operating support is one of the principal
functions, for the reasons you indicate. There is a large
commercial market in most of these functions, and we would like
to improve our cost structure by allowing competition in that
area, because what we found in all these areas is that,
regardless of who wins, whether it is the Government entity or
a private competitor, we save 20 to 30 percent. The competition
itself causes the Government entity to restructure in ways that
reduces its costs and in ways really only they understand. I
mean, it is impossible to do this top down and to say from
Washington, here is how you can do your business better. They
know far better how to do that. And when put into a competition
with an aggressive private sector, they do do far better.
It does cause problems with Government employees. I do not
want to minimize that. There is instability and heartache and
difficulty, and I need to be cognizant of that. But I think as
long as the competition is fair, fairly run and fairly decided,
this is definitely a positive thing for the Department.
Mr. Farr. Are you including in that housing authorities? My
county housing authority says they can operate, keep the
military housing in better condition at a cheaper cost.
Mr. Lynn. I would have, though that would be on a service-
by-service basis. I do not know the answer.
Mr. Hobson. I think we had to change the law. I think the
law is now changed, isn't it, that we can use these--there have
been a couple of housing authorities that are trying to bid.
Mr. Hoyer and Mr. Cardin are very interested in one. I think
there are a couple others that have tried. There was something
wrong with the law, but I understand now they can. I think that
has been changed. If not, we need to look at that.
Mr. Farr. Well, I would include that in your consideration
of base ops along with, you know, public works and----
Mr. Hobson. I think it was changed. He said it was changed
last year. Now, before that, there was a problem.
Mr. Farr. Thank you.
Mr. Hobson. Allen.
Mr. Boyd. No questions.
Mr. Hobson. Chet.
Mr. Edwards. Just very briefly, Mr. Chairman. Since this is
the first meeting of the year, I want to thank you for all the
tough questions you asked about privatization last year. I
think it is going to be a better program because of that, and I
appreciate your approach, your cautious approach, and the tough
questions, and I hope we can move forward on some of these
projects. We are getting closer, but I really do think that a
lot of those issues need to be raised, and I am glad you have.
Mr. Secretary, again, as long as you will not interpret my
silence of further follow-up on the housing allowance as being
lack of concern, I just would re-emphasize briefly that I just
think that is an enormous issue that goes way beyond the
numbers, and surely, the quicker we can solve that without 6
months of studies and committees and evaluation and this and
that and passing the buck back and forth, the better off we
will be. We already have hurt our trust with our uniformed
personnel, and I hope we could cut our losses and do it quickly
and move on with the number of good programs you have that will
let them know we care about their quality of life.
Thank you for the job you are doing. It is tough one, and I
appreciate what you are doing.
Mr. Lynn. Thank you, Mr. Edwards.
Mr. Hobson. Virgil.
Mr. Goode. Just one question, Mr. Chairman. I look under
medical projects, and you have got $1.4 million for a
veterinary treatment facility. What is that? What kind of
animals?
Mr. Lynn. I am afraid I do not know. We will have to get
back to you.
Mr. Hobson. Anybody else?
[No response.]
Mr. Hobson. Well, Mr. Secretary, we have got some questions
for you for the record. We will give them to you and you can
answer them, and we would appreciate a timely response. Good
luck to you with your duties, and we really want to work
together. I hope it does not appear sometimes that we are
adversarial. We have to be in some respects, but our mutual
goals are the same. We want to help our military do the things
that they are asked to do, and we want to protect their
families and their quality of life. We think that is part of
our job, and it is your job, and I think we share that.
I tried to say this yesterday with the officers I was with.
I learn by asking questions and having a dialogue, and if we do
not have that dialogue, we all cannot get our jobs done better.
And I very much appreciate your candor with me over the time we
have spent together. And our next hearing--is there anything
you would like to say before we end?
Mr. Lynn. Well, no. Thank you very much, Mr. Chairman, for
the opportunity, and I do look forward to working with you. I
think this committee has always been constructive, and I am
sure it is going to continue under your leadership.
Mr. Hobson. If we can just get enough money. [Laughter.]
Our next hearing is tomorrow at 9:30. The subject will be
quality of life in the military. Our witnesses will be the
senior enlisted from each service, and that is always a very
interesting hearing, and we look forward to that.
I am sure you might have somebody here listening to what
they may say about that.
Mr. Lynn. We usually do.
Mr. Hobson. Thank you.
Mr. Lynn. Thank you very much.
Mr. Hobson. Thank you.
[Clerk's note.--Questions for the record submitted by
Chairman Hobson.]
HISTORIC PRESERVATION EFFORTS
Question. What efforts are being undertaken by the Department to
reduce costs and improve the maintenance of historic buildings?
Answer. The Department of Defense (DoD) has undertaken several
initiatives. First, the Services have implemented a centralized
demolition plan to remove facilities from its inventory that have
exceeded their economic life and have no enduring historic
significance. By eliminating buildings that are simply old but not
historic, this action will limit unwanted future expansion of the
inventory of historic buildings that must be maintained. Secondly, the
Services are working with the State Historic Preservation Officers and
Advisory Council on Historic Preservation to form programmatic
agreements (PAs) regarding the management of historic facilities. The
PAs range in scope from specific historic facilities or classes of
facilities (such as family housing) to those covering all historic
facilities in a region or historic district. The standards implemented
by the PAs are expected to improve quality and also reduce costs by
eliminating uncertainty and improving the timeliness of performing
maintenance and improvement projects. In addition, since it may not be
prudent to maintain all the potentially eligible facilities in the
DoD's inventory, the PAs will help determine which facilities should be
maintained and which are potential candidates for the Services
centralized demolition program. Thirdly, the Services are updating
their Installation Cultural Resource Management Plans and integrating
them with other installation planning documents such as master plans.
Finally, the Services have established working groups to develop a
management plan for the ownership, operation and maintenance of
historic family housing. We are preparing a report entitled ``The Cost
of Maintaining Historic Family Housing'' which will provide
installation commanders, cultural resource managers, and other base
personnel with information on how to reduce the costs of maintaining
these historic structures.
HISTORIC PRESERVATION ACTIVITY ACCOUNTS
Question. In order to keep historic costs distinct from normal
maintenance and repair funding, has the Department considered
reconfiguring the military construction and family housing accounts to
provide specific line items for the lump-sum funding of all historic
preservation activities? If not, why not?
Answer. The Services have considered the establishment of separate
accounts to track costs associated with historic preservation. While
such accounts would certainly provide visibility for costs associated
with historic structures, careful thought needs to be given to the
advantages and disadvantages of creating separate accounts. The
Services are concerned that the creation of separate accounts would
restrict their flexibility in managing maintenance and repair programs
and preempt their ability to move money to accommodate higher
priorities, should the need arise. It is also questionable whether
separate historic preservation accounts would meet their intended
purpose, since in practice, it is difficult to break out costs
associated with maintaining historic aspects of facilities from those
that would be incurred regardless of historic status. It is a fact that
the size and condition of historic quarters, not historic preservation
requirements, are the main cost drivers. In summary, the DoD is not
confident the benefits of establishing and maintaining separate
accounts to track historic preservation expenses would outweigh the
additional management and overhead costs.
Question. If separate, sole-source, historic preservation accounts
were established, does the Department believe this would assist in
forcing prioritization of preservation activities?
Answer. No. In theory, the establishment of separate historic
preservation accounts would provide visibility in the programming and
budgeting process. However, in practice it is unclear whether historic
preservation activities can be completely isolated from other property
management considerations. The size and condition, not historic
preservation requirements, are the main cost drivers for maintaining
historic housing. Overall, the DoD is concerned that a focus on
historic preservation in the budget process would ultimately extend
beyond basic stewardship principles and detract from the Services
primary responsibility to prioritize and maintain its facilities to
meet mission requirements.
HISTORIC PRESERVATION--PRIVATE FUNDING
Question. Under Title 10, does the Department have the authority to
use private donations for the upgrade and maintenance of historic
quarters or buildings? If not, is the Department seeking to make a
legislative proposal to allow such expenditures?
Answer. Section 2601 of title 10, United States Code, authorizes
the Secretary to accept gifts for the benefit of any organization or
institution under its jurisdiction. Although the Department has
accepted private gifts for the benefit of historic facilities in the
past, the Department is not confident that a sufficient quantity of
gifts will be available on an ongoing basis to play a significant role
in the maintenance of historic facilities. Regarding historic family
quarters, the Section 128 of the Military Construction Appropriations
Act, 2000 (Public Law 106-52) specifically prohibits the use of sources
other than military family housing appropriations for the maintenance
and repair of military family housing.
Although the Department is not seeking any specific legislation
regarding historic quarters, we are seeking improvements to our current
outleasing authorities to enhance our ability to make better economic
use of less than fully utilized assets. Those improved authorities, if
enacted, would be available for use with historic quarters and could
help offset some of our current costs for those facilities.
HISTORIC PRESERVATION--COOPERATIVE AGREEMENTS
Question. Please describe the efforts being made by the Department
to reach cooperative agreements, if any, with the Advisory Council on
Historic Preservation, the National Trust for Historic Preservation,
and State Historic Preservation Offices on historic property
management.
Answer. The Army entered into an Interagency Agreement (IAG) with
the Advisory Council on Historic Preservation (ACHP) in February 1996
to assist the Army in management of its historic properties. The IAG
facilitates protection, enhancement, and preservation of historic
properties on Army lands; provides a cost effective means for
addressing recurring historic property management issues; and enhances
Army stewardship of our Nation's heritage. The ACHP continues to assist
Army Headquarters in such diverse actions as development of Army policy
and guidance for management of historic properties; establishment of
guidance for Integrated Cultural Resources Management Plans; and the
development of Army-specific ``alternate procedures'' that can
substitute for the ACHP's Section 106 National Historic Preservation
Act regulations.
In August 1999, the Department of the Army entered a cooperative
agreement with the National Trust for Historic Preservation (NTHP) to
improve management of the Army's historic property inventory. Goals of
the initiative include: identifying and evaluating past and ongoing
efforts at Army installations to involve private entities in the
redevelopment, use, and management of historic properties; developing a
model for evaluating opportunities for redevelopment of historic
properties on Army installations similar to that used for the NTHP's
National Main Street program; implementing pilot projects to evaluate
opportunities for redevelopment of historic properties at Army
installations; and identifying potential state, local, and private
partners.
The Navy recently negotiated a programmatic agreement in Virginia
that covers the naval complex in Hampton Roads. It is nearing
completion of a programmatic agreement concerning Navy properties on
Oahu, notably the Pearl Harbor National Historic Landmark District, and
a nationwide programmatic agreement concerning historic family housing.
The Navy routinely executes programmatic agreements or memoranda of
understanding for BRAC dispositions. All programmatic agreements and
memoranda of understanding involve consultation with one or more State
or Tribal Historic Preservation Officers, and may involve consultation
with the National Conference of State Historic Preservation Officers
(SHPOs), the ACHP, and other parties, as required by 36 CFR Part 800.
The Marine Corps has negotiated a programmatic agreement for
historic property management at MCAGCC Twentynine Palms, CA, and MCAS
Yuma, AZ, with the cognizant State Historic Preservation Offices and
the ACHP. It is in the process of negotiating agreements at MCB Camp
Pendleton, CA; MCB Camp Lejeune, NC; and MCB Quantico, VA. The Marine
Corps intends to begin negotiations at Marine Barracks Washington, DC;
MCAS Cherry Point, NC; MCRD San Diego, CA; and MCRD Parris Island, SC.
It negotiated an agreement for the disposition of historic properties
at MCAS Tustin, a BRAC base. MCAS El Toro, another BRAC base, does not
possess historic properties.
In 1995, the Air Force signed a proclamation entitled Preservation
and Management of Historic Properties in the Department of the Air
Force with the NTHP, the ACHP, the National Council of Historic
Preservation Officers (NCSHPOs), and the Keeper of the National
Register of Historic Places. The Proclamation recognizes the Air
Force's need to support mission requirements while maintaining historic
resources in a cost-effective manner. To support this Proclamation, the
Air Force has encouraged its installations to develop, where
appropriate, programmatic agreements with the State Historic Property
Officer and the ACHP to streamline the Section 106 consultation
process. The Air Force also uses programmatic agreements as effective
tools for identifying cost effective maintenance and treatment methods
that meet the Secretary of the Interior standards for historic
buildings.
HISTORIC PRESERVATION--HISTORIC PROPERTY INVENTORY
Question. By Service, how many Department of Defense properties are
considered historic?
Answer. The Army's real property management system, the Integrated
Facilities System (IFS), includes a coding category to reflect whether
a property is ``historic,'' Use of this coded field is not mandatory
and definitions governing the field have been subject to varying
interpretations. As a result, Army installation real property managers
have not used the system in a completely reliable way. The following
figures are the best Army estimates:
Buildings listed or eligible to be listed on the National Register:
Family Housing................................................ 4,559
GFOQ (quarters)........................................... 168
Non-GFOQ (quarters)....................................... 4,391
All other buildings........................................... 2,413
The figure for ``All other buildings'' is significantly
understated. Annual Environmental Quality Reports from Army
installations respond to a query for the number of listed or eligible
historic properties. The sum of these responses for a substantial
number of Army installations totals 8,801. Based on this sample of
responses, a reasonable estimate of all historic Army properties in
12,000. Knowing the housing numbers are nearly precise at 4,559, this
yields a figure for all other buildings between 7,400 and 7,,500. Note
that the total count of 12,000 buildings listed or eligible to be
listed on the National Register of Historic Places in 22 percent of all
Army buildings over 50 years old.
The Navy and Marine Corps currently have approximately 2763
buildings and structures on or eligible for the National Register of
Historic Places. Of these, approximately 946 will be transferred as
BRAC disposals. This figure differs from input to a similar HAC
question a couple of weeks ago in that it includes structures in
addition to buildings. It does not include National Register-eligible
sites (including archaeological sites), objects, ships, or shipwrecks.
The Air Force has approximately 4177 historic buildings and
structures.
Question. By Service, how many Department of Defense properties are
considered National Historic Landmarks (HNLs)?
Answer. The Army has a total of 15 National Historic Landmarks:
Carlisle Indian School, PA; Fort Huachuca, AZ; Fort Leavenworth, KS;
Fort McNair, Washington DC; Fort Monroe, VA; Fort Sam Houston, TX; Fort
Shafter, HI; Fort Sill, OK; Rock Island Arsenal, IL; Fort Wainright,
AK; U.S. Military Academy, NY; Watervliet Arsenal, NY; White Sands
Missile Range, NM; Fort Douglas, UT; and Yuchi Town, Fort Benning, GA.
The Air Force has a total of 11 National Historic Landmarks,
including Fort David Russell (F.E. Warren AFB, WY), Cape Canaveral
Launch Site, FL, and Wheeler Field, HI.
The Navy has 13 National Historic Landmarks, including the Pearl
Harbor National Historic Landmark District, HI; NAS Pensacola, FL;
Puget Sound Naval Shipyard, WA; U.S. Naval Academy, MD; and Washington
Navy Yard, DC. Pearl Harbor has 550 buildings and structures, nearly
three-quarters of all the Navy buildings located in National Historic
Landmarks or National Historic Landmark districts.
Question. By Service, in the next 20 to 30 years, how many
Department of Defense properties will reach 50 years of age (the
minimum age for listing a property on the National Register)?
Answer. In the next 20 to 30 years, approximately 48,500 Department
of the Navy buildings and structures will reach 50 years of age in
addition to the 29,500 buildings and structures in the current
inventory of age 50 or older. These figures do not account for
facilities that will be removed from the Navy's inventory under the
centralized demolition program.
In the next 20 to 30 years, approximately 155,317 Department of the
Army buildings and structures will reach 50 years of age in addition to
the 53,975 buildings and structures in the current inventory of age 50
or older. These figures do not account for facilities that will be
removed from the Army's inventory under the centralized demolition
program.
The Air Force does not have that data.
HISTORIC PRESERVATION--COSTS
Question. By Service, what is the total operation and maintenance
costs for all historic properties?
Answer. The Services have no accounting system in place to provide
this information.
Question. By Service, what is the average annual maintenance and
repair cost per historic property?
Answer. The Services have no accounting system in place to provide
this information.
Question. By Service, what is the average annual maintenance and
repair cost per non-historic property?
Answer. The Services have no accounting system in place to provide
this information.
Historic Preservation--Coordination With Housing Privatization
Question. How are utilities privatization and housing privatization
being coordinated?
Answer. Coordination of utilities privatization and housing
privatization is done primarily at the local installation level, since
most of the issues are location dependent. Overall integration of the
two programs is the responsibility of the Deputy Under Secretary of
Defense for Installations.
Question. What is the impact of utilities privatization on housing
privatization?
Answer. DoD policy directs that members living in privatized
housing be responsible for their utilities usage. Rents are limited to
an amount that, on average, allows members to pay both their rent and
their utilities from their housing allowances. In off-base privatized
housing, members would normally pay their bills directly to private
utility providers. Similarly, in on-based privatized housing, they
would pay a utility provider or an administrative entity, which would
be either the developer or a private utility provider.
One concern is that commodity price increases caused by the utility
system conveyance could reduce housing project rents because member
rents are reduced by the member tenant's expected utility expense. This
could cause a reduction in the developer's income that could affect the
financial viability of the housing project. This matter will require
coordination between housing and utilities privatization.
HISTORIC PRESERVATION--FEASIBILITY STUDIES
Question. The first of two interim milestones of the utility
privatization effort is to determine whether or not to pursue
privatization for each system by September 30, 2000. Has the Office of
the Secretary of Defense provided economic feasibility guidance for the
Services' to use in their evaluation of systems? If not, why not?
Answer. Defense Reform Initiative Directive #49 provides basic
guidance for conducting the utilities privatization economic analysis.
Feedback we received from the Services after they conducted several
solicitations indicated that additional guidance was necessary. As a
result, the Office of the Secretary of Defense, in conjunction with the
Military Services and supported by a private consultant hired by the
Department is developing more comprehensive cost and economic analysis
guidance. We expect to publish this guidance by May 2000.
Question. By Service, what is the total cost to perform the
necessary studies to meet the first DoD utility privatization
milestone?
Answer. The Services have different approaches towards utilities
privatization implementation and use studies to different degrees.
Studies are performed for determining the economic feasibility to
privatize, to prepare environmental baselines and to secure contracting
assistance to evaluate solicitations. The amount of money spent
specifically on studies to meet the first utilities privatization
milestone, however, is not broken out from overall program study costs.
The Military Departments estimate that it will cost $264 million to
conduct studies in support of utilities privatization (Army, $60
million; Navy, $99.7 million; and Air Force, $85 million).
NATO SECURITY INVESTMENT PROGRAM
Question. The budget request for fiscal year 2000 was $191 million
and the fiscal year 2001 request is $190 million. Has the request been
adjusted to reflect the three new members?
Answer. Yes, the budget request has been adjusted to reflect the
three new members and their potential participation in the various
funding requirements for the Alliance. The request also considers the
fact that many projects still requiring funding were approved prior to
the expansion. Therefore, the U.S. contribution is greater in those
instances.
Question. What is the revised U.S. share since the three new
members, Hungary, Poland, and the Czech Republic, have been admitted to
the Alliance?
Answer. The revised U.S. share when the total Alliance of 19
members participate is 22.3 percent, and increases to 25.5 percent when
only 18 members participate (France abstaining). Not all members of the
Alliance participate in every project and some ongoing projects were
approved prior to the expansion. Therefore, it is estimated that the
average annual U.S. contribution is closer to 26 percent.
Question. How much is programmed in fiscal year 2001 for NATO
Expansion? How does this compare to expansion costs in fiscal year
2000?
Answer. As provided for in the budget justification for the NATO
Security Investment Program, $12 million is requested in fiscal year
2001 to cover the anticipated requirements for NATO expansion. Our
request for fiscal year 2000 was $5 million. The funding requirement
for expansion will level out for the next few years and then diminish
dramatically in the final period of the ten-year program.
Question. What are the anticipated recoupments in fiscal year 2001
for the NATO Security Investment Program?
Answer. The estimated recoupments for NATO is $11.0 million for
fiscal year 2001.
Question. How much did the Department recoup in fiscal year 2000?
Answer. The Department estimates that $11.0 million will be
recouped in fiscal year 2000.
Question. What NAU rate was used in formulating the fiscal year
2001 budget request and what is the date of the next revaluation of the
NAU?
Answer. The NAU rate used in formulation for fiscal year 2001 was
3.641 NAU. The next revaluation of the NAU rate will be July 1, 2000.
CHEMICAL DEMILITARIZATION
Question. The Chemical Weapons Convention (CWC) Treaty disposal
deadline is in 2007. Due to evaluation of alternative technologies and
delays in receiving the necessary environmental permits, the
Department's Chemical Demilitarization construction program has fallen
behind schedule. Is compliance with the Treaty date at risk? If so,
what are the consequences if we fail to meet the 2007 goal?
Answer. The Program remains on schedule to comply with the CWC
completion date of April 2007 at all sites except Pueblo, Colorado and
Blue Grass, Kentucky. Public Law 104-208 prohibited obligation of funds
to construct incineration facilities at Blue Grass and Pueblo until 180
days after the Department of Defense submitted its report to Congress
on demonstration of at least two alternative technologies to
incineration to destroy assembled chemical weapons. This report was
provided to Congress in October 1999. In addition, Public Law 106-52
prohibits obligation of funds to construct any disposal facility at
Blue Grass until the SECDEF certifies to Congress that the remaining
alternative technologies identified by the ACWA Program will be
demonstrated. On July 27, 1999, my office certified that the Department
would proceed to demonstrate the remaining technologies. Demonstration
testing of these technologies is scheduled to begin in the third
quarter of Fiscal Year 2000. Our preliminary assessment indicates that
the Blue Grass site is at risk in breaching the CWC. There is some
degree of risk associated with the Pueblo site making the CWC deadline.
The Department continues to assess options to mitigate schedule delays,
while complying with existing laws and regulations. The Department
remains committed to meeting the United States' obligations under the
CWC.
The CWC does not specify whether or what type of penalty would be
levied should a State Party be unable to destroy chemical weapons
within ten years of entry into force of the Convention (April 2007). In
accordance with the Verification Annex, Part IV(A), Section C,
paragraph 24-28, a State Party is entitled to request up a to five-year
extension if it is unable to complete destruction operations within the
designated 10 years. If granted, the Executive Council shall set
conditions for the granting of the extension, including the specific
verification measures deemed necessary as well as the specific actions
to be taken by the State Party to overcome problems in its destruction
program. There is no guarantee, however, that a State Party would be
granted this extension during a review and vote by the Executive
Council.
Question. Once again, the Department proposes to shift funding for
the Chemical Demilitarization Program from Defense-wide to the Army
Account. What precautions have been taken to make sure the Army program
is not reduced to fund chemical demilitarization?
Answer. A complete evaluation of the Chemical Demilitarization
program was accomplished as part of the last Quadrennial Defense
Review. Consistent with this review, all known Chemical
Demilitarization program requirements were fully funded at the time of
the transfer to the Army. As a result of this transfer, the Army's
topline was commensurately increased thereby holding all Army programs
harmless. Since then, additional funding has been programmed in the
outyears to cover unanticipated requirements and restore congressional
reductions (to place funds in the year in which they will execute)
before transferring it to the Army again this year.
ADVANCED APPROPRIATIONS
Question. Advance appropriations totaling $821 million for 8
projects are requested in the budget. What criteria were applied in
determining which projects would receive advance appropriations?
Answer. Advance appropriations are requested for projects which the
Department plans to incrementally fund. Of the 8 projects requested in
the budget, 4 have been authorized and approved for incremental funding
by Congress in previous years. The four criteria used to determine if a
project will be incrementally funded are: (1) the estimated cost of the
project should be $50 million or greater; (2) the construction schedule
should be equal to or greater than 24 months; (3) contracts shall
conform with the Federal Acquisition Regulation to prevent over-
obligation of the government; and (4) configuration of the contract in
separate increments will not significantly increase the cost of the
project.
Question. What benefit is expected from advance appropriations?
Answer. The Department hopes to make more efficient use of
available funding by not budgeting or funding construction that cannot
be executed in the budget year. As noted above, full authorization for
4 of the 8 projects has already been approved, and the Department has
requested full authorization and advance appropriations in the FY 2001
budget request to complete all projects. This funding approach,
incidentally, is similar to the way many projects have been financed by
Congress in the past.
UNOBLIGATED BALANCES
Question. The budget proposes to finance $20 million of the
Military Construction, Navy account from unobligated prior year
appropriations of four accounts. Why was it formulated in this
manner and why didn't the Department request a traditional
rescission of these funds? Provide for the record the
individual sources, which derive the $20 million.
Answer. The Navy Military Construction request was
formulated in this manner in order to maximize the use of
available resources. We routinely monitor program execution. In
this case, the review of program execution in prior years
showed that actual contract amounts, outstanding commitments,
current working estimates and the use of split funding had
generated unobligated balances that were greater than the
remaining program requirements for those years.
The use of unobligated balances to finance a portion of the
FY 2001 program is consistent with previous budget requests.
Most recently, in FY 1999 our budget proposed financing $15.5
million of the Army, Navy, and Air Force family housing
construction programs with prior year unobligated balances. In
FY 1998, the budget proposed using $23.8 million of unobligated
balances to finance part of the Air Force military construction
program.
Using either method (unobligated balances or rescissions)
achieves the same result--maximum use of scarce military
construction resources.
Since the FY 2001 review was based on actual and projected
costs at the program level, individual sources by project for
the $20 million were not identified. The Navy will identify the
individual sources as it executes its FY 2001 program.
SOUTHCOM HOUSING
Question. What is OSD's long-term plan to provide housing
for all U.S. Southern Command (SOUTHCOM) Headquarters
personnel?
Answer. The long-term housing plan continues to focus on
providing adequate housing for all HQ, SOUTHCOM personnel. This
will be accomplished by a variety of strategies that may
include: government construction of accompanied, unaccompanied,
and key personnel housing; partnering with the private sector
for a privatization type housing project(s); lease/purchase of
existing housing; continued use of housing allowances for
private rental housing; or a combination of all. A cost benefit
analysis would dictate the best alternative(s) to pursue.
Legislation may be required to accomplish long-term housing
solutions.
Question. Has the Department programmed construction
dollars for military housing at SOUTHCOM Headquarters? If so,
how much and what fiscal year?
Answer. The Army has not programmed any construction for
military housing at SOUTHCOM Headquarters.
Question. How is housing currently provided for all
SOUTHCOM Headquarters personnel, and how much is budgeted in
fiscal year 2001 to provide housing for all SOUTHCOM personnel?
Answer. $2.029 million is currently budgeted for 112 leased
family housing apartments for junior enlisted personnel, and 8
units for Key and Essential (K&E) personnel. An additional
$.85M is budgeted for 66 apartments (double occupancy) for
unaccompanied junior enlisted and one unaccompanied K&E
officer.
BASE REALIGNMENT AND CLOSURE
Question. Why does the Department need authority for two
additional rounds of base realignment and closure?
Answer. The Department needs this authority for a number of
reasons. I will address the three most significant points.
First, the Department estimates it has 23 percent excess base
capacity, relative to 1989 force levels, as reported in the
April 1998 Report of the Department of Defense on Base
Realignment and Closure. Maintaining infrastructure we no
longer need is not prudent management. We need to properly
manage our facility resources by reducing the excess capacity
and freeing up funds for war fighting capability and quality of
life programs. Second, the Department needs to reshape its base
infrastructure to match its changing mission requirements. Only
through BRAC authority is the Department able to reshape its
infrastructure, when reshaping involves the closure and
realignment of some of its bases. Third, BRAC actions generate
significant savings, a point on which both the General
Accounting Office and the Congressional Office are in agreement
with the Department. The Department estimates that current BRAC
rounds could generate approximately $6 billion in annual
recurring savings, and over $3 billion for future rounds. These
savings or cost avoidance could be better applied toward higher
priority Defense programs.
Question. Is it correct that the Future Years Defense Plan
has ``placeholders'' for future BRAC rounds in fiscal year 2004
and beyond? If so, how much is set aside in each year, and how
would administrative expenses be financed prior to fiscal year
2004?
Answer. The Future Years Defense Plan accompanying the FY
2001 President's Budget includes $691.0 million in FY 2004 and
$1,381.0 million in FY 2005 to implement two new Base
Realignment and Closure rounds in FY 2003 and FY 2005. Prior to
FY 2004, administrative expenses associated with formulating
two new BRAC rounds would be financed by current DoD operating
accounts.
Question. The implementation of the last round of the four
approved BRACs will be complete July 13, 2001. What are the
projected annual savings after fiscal year 2001? Additionally,
over the implementation period (FY 1990-2001), how much will
the Department have invested in the four approved BRACs, and
what were the total realized savings and total net savings as a
result of the process?
Answer. If the BRAC portion of the FY 2001 MilCon budget is
approved as requested, the Department will have invested $22
billion to implement the current BRAC rounds through 2001.
Through the same period, the Department estimates BRAC should
generate approximately $37 billion, resulting in net cumulative
savings of approximately $15 billion.
FACILITY REDUCTIONS
Question. By service, what are the future funding requirements to
complete this initiative?
Answer. Beginning with the fiscal year 2001 request, these are the
future funding requirements to achieve the Defense Reform target of
80.1 million square feet eliminated by the end of fiscal year 2003.
DEFENSE REFORM INITIATIVE REQUIREMENT IN MILLIONS FISCAL YEAR 2001
THROUGH COMPLETION
------------------------------------------------------------------------
Fiscal year of
completion
------------------------------------------------------------------------
Army................................... $299.9 2003
Navy................................... 79.6 2002
Marine Corps........................... 0 2000
Air Force.............................. 146.9 2003
------------------------------------------------------------------------
The Marine Corps will achieve their portion of the Defense Reform
target (2.1 million square feet disposed) in FY 2000, so they have no
future requirement related to this initiative. However, this does not
mean the Marine Corps have no future requirement for demolition
funding. The Marine Corps will continue to have demolition requirements
in the future but these additional requirements are beyond the scope of
the Defense Reform Initiative. The same will apply to other military
services once they achieve their individual Defense Reform objectives.
Question. To date, what are the estimated avoided operation and
maintenance costs due to the demolition effort, and how are these
savings being re-applied?
Answer. DoD will avoid operations and maintenance costs of about $2
per square foot eliminated. During fiscal year 1999, DoD avoided about
$32 million in costs due to the fiscal year 1998 demolition effort
(over 16 million square feet eliminated). During fiscal year 2000, DoD
will avoid an additional $61 million in costs due the combined 1998-
1999 demolition results (over 30 million square feet eliminated). In
total, by the end of fiscal year 2000 DoD will have avoided
approximately $93 million in costs due to the 1998-1999 demolition
effort, and will continue to avoid these costs in each future year. In
accordance with DepSecDef's original direction, any savings derived
from demolition programs remain with the military service that
accomplished the demolition to be re-applied to their highest priority
unfunded requirements. Our accounting system does not track where
dollars formerly spent on obsolete facilities are now being spent.
Question. What are the annual savings per year upon completion of
the demolition initiative?
Answer. DoD will avoid annual operations and maintenance costs of
about $2 per square foot eliminated, or approximately $160 million each
year upon completion of 80.1 million square feet by the end of fiscal
year 2003.
GENERAL PROVISIONS: DELETIONS
Question. Why does the budget propose to delete the following
sections:
Section 111--American preference for A&E contracts.
Section 113--notification of exercises.
Section 119--annual burdensharing report.
Section 121--compliance with ``Buy American Act''.
Section 122--American-made equipment and products.
Section 124--Partnership for Peace Programs.
Section 125--notification of housing privatization solicitations.
Answer. Sections 111 (American preference for A&E contracts), 121
(compliance with ``Buy American Act''), and 122 (American-made
equipment and products) are unnecessary restrictions which limit the
bidding climate. Similarly, Section 124 (Partnership for Peace
Programs) places unnecessary limits on the Partnership for Peace
Programs. Section 113 (notification of exercises) inhibits the
President's ability to perform his function of Commander-in-Chief by
requiring a 30-day notification before military exercises occur. The
continuing requirement to provide an annual burdensharing report under
Section 119 is burdensome and unnecessary since it duplicates
information already provided the committee. Section 125, which requires
a 60-day notification prior to any housing privatization solicitations
containing a base closure guarantee, only serves to delay privatization
initiatives an additional 30 days since 10 U.S.C. 2883 already requires
a 30-day notification prior to any family housing privatization
solicitations.
TROOP HOUSING--``1 PLUS 1''
Question. What progress is the Department making in upgrading
barracks for our single members to meet the new ``1 Plus 1'' standard?
Answer. The Services are making good progress in building to the
1+1 barracks construction standard. The Army indicates it will achieve
the 1+1 standard by 2008, and the Air Force by 2009. The Marine Corps
(operating under a waiver to the 1+1 standard) will achieve its two
person per room standard by 2037.
The Navy has constructed or renovated 10,687 spaces to the ``1 Plus
1'' standard. The Navy is currently reviewing a new policy to allow
junior enlisted unaccompanied shipboard Sailors to move off ship when
the ship is in its homeport. As a first step in providing ashore living
accommodations to shipboard Sailors, Navy was granted a waiver by the
Deputy Assistant Secretary of the Navy for Installations and Facilities
to construct/renovate permanent party enlisted barracks at the ``2 Plus
0'' standard. Once it satisfies the housing requirement at the ``2 Plus
0'' standard, the Navy will proceed to construct facilities at the 1+1
standard until all Sailors are provided a private sleeping room.
Additional details concerning an implementation plan are being
developed.
The Air Force has invested military construction (MilCon) funds to
construct new or renovate existing critical condition permanent-party
dormitories to provide 9,600 ``1+1'' standard dormitory rooms. In
addition to MilCon, the Air Force has invested Congressionally
appropriated Quality of Life Enhancement, Defense funds to renovate
existing critical dormitories to the ``1+1'' standard to include the
conversion of 30 central latrine dormitories.
Question. What has the average cost per space been under the ``1
Plus 1'' barracks standard?
Answer. The Army's average cost per space for FY96-FY00 was $46,000
from all funding sources. The average cost of military construction
(MilCon) funded projects was $80,000 per space. This amount includes
barracks, Soldier Community Buildings, administrative buildings, and
dining facilities of the entire brigade complex. The average for O&M
funded renovations of existing barracks was $25,000 per space.
The Navy's average cost is $62,700 per space constructed at the
``1+1'' construction standard. The Marine Corps' average cost is
$48,400 per space ($80,800 per two-person room constructed at the 2+0
standard).
The Air Force's average cost per space for new ``1+1'' dormitories
constructed in FY96-FY98 MilCon programs has been approximately
$58,000.
BARRACKS
Question. Submit for the record a chart that will show, by Service,
the timetable for completion of the barracks revitalization effort at
the time OSD approved the ``1 plus 1'' barracks standard, as compared
with the timetable for completion of this effort as a result of
Congressional initiatives to accelerate this effort.
Answer. The additional appropriations for quality of life programs
that Congress has added in the FY 97 to FY 00 budgets have contributed
to the acceleration to the 1+1 barracks standard. These funds have also
contributed to improvements in other quality of life facilities.
------------------------------------------------------------------------
Original Current
timetable timetable
------------------------------------------------------------------------
Army.................................. 2020 2008
Navy.................................. 2013 \1\ 2013
Air Force............................. 2019 2009
Marine Corps.......................... 2013 2037
------------------------------------------------------------------------
\1\ Under review.
The Navy is currently reviewing a new policy to allow junior
enlisted unaccompanied shipboard Sailors to move off ship when the ship
is in its homeport. As a first step in providing ashore living
accommodations to shipboard Sailors, Navy was granted a waiver by the
Deputy Assistant Secretary of the Navy for Installations and Facilities
to construct/renovate permanent party enlisted barracks at the ``2 Plus
0'' standard. Once details of this initiative are completed, the Navy
will be able to provide more accurate projections for attaining the 1+1
barracks standard.
The original target date for the Marine Corps refers to the
Service's initial plan (Dec 1995) to meet the 1+1 barracks standard. In
1996, the Marine Corps revised its plan to build to the 1+1 barracks
standard and requested a waiver that would allow them to build to a
standard that provides for two enlisted members per room, sharing a
bath (2+0 configuration). The Marine Corps estimated that it would
complete building to the 2+0 configuration by 2070. As a result of
additional resourcing and the Committees efforts, the date for meeting
the 2+0 standard has been accelerated to 2037.
TROOP HOUSING: DEFICIT
Question. By Service, what is the total current troop-housing
deficit?
Answer. The deficit is defined as the number of soldiers, sailors
and airmen for which no housing is available. The Army has also
included in its deficit figure the number of soldiers that currently
occupy inadequate quarters. The Army's troop-housing deficit is
approximately 55,500 bed spaces, which represents approximately 46,600
soldier remaining to be adequately housed after FY01 funding. The
Navy's troop-housing deficit is about 18,000 spaces. This deficit was
calculated before adoption of its new policy to allow shipboard Sailors
to move off ship when the ship is in its homeport. The Navy is
currently assessing the effect of the new shipboard Sailor policy on
the troop-housing deficit. The Marine Corps current enlisted room
configured housing deficit is 27,500 spaces. The Navy and Marine Corps
troop-housing deficits include both shortages in quantity as well as
spaces that are inadequate or are served by central heads. The Air
Force's troop-housing deficit is 13,000 rooms.
Question. What progress has been made by the other services in
developing a ``Master Plan'' similar to the Air Force's?
Answer. The Army has completed a ``Barracks Assessment Study''
similar to the Air Force for all U.S. installations and a
representative sample of installations in Korea and Europe. The Navy
and Marine Corps are currently developing their barracks plans, along
with required statements, for submission to OSD this Spring. The Navy
is presently incorporating its Homeport Ashore initiative, which
provides ashore living accommodations to shipboard Sailors while in
homeport, into its plan.
TROOP HOUSING: INADEQUACIES
Questions. Provide a breakout of how many barracks are considered
substandard, inadequate and facilities with central latrines/showers.
Answer. The following table indicates the number of permanent party
bed spaces in barracks and dormitories considered substandard or
inadequate and the number with central latrines/showers:
------------------------------------------------------------------------
Substandard or Central
Service inadequate latrines
------------------------------------------------------------------------
Army.................................... 12,900 28,300
Navy \1\................................ 37,700 10,300
Air Force............................... 4,000 0
Marine Corps............................ 6,300 7,900
------------------------------------------------------------------------
\1\ Includes permanent party and student spaces.
TROOP HOUSING: BUDGET REQUEST
Question. How many spaces are included in the budget request for
troop housing?
Answer. The Department's FY 2001 budget request includes funding
for about 11,810 barracks spaces (maximum use) with an intended use of
10,950 spaces. The difference between maximum use and intended use is
that the Services usually grant E-5s and above two spaces due to their
seniority.
TROOP HOUSING: COST TO BUY-OUT TROOP DEFICIT
Question. By Service, what would it cost to buy-out the current
troop-housing deficit?
Answer. For the Army, the total remaining requirement FY 02-08, is
$5.1 billion. Of this amount, $4.5 billion is in the MilCon funding.
The remainder is required in Operations and Maintenance and host nation
funds.
The Navy estimates that it would require about $1.2 billion to buy
out the troop housing deficit to the ``1+1'' construction standard.
This estimate is based on the current troop-housing deficit and does
not take into consideration the impact of the new shipboard Sailor
policy.
The Marine Corps estimates it would cost about $1.2 billion to
eliminate its bachelor enlisted housing deficit and reach a person per
room assignment standard.
The Air Force estimates its cost to buy-out the current troop
housing deficit is $743 million between FY 01 and FY 09.
Question. By Service, what is the estimated cost per space to
eliminate the current troop-housing deficit?
Answer. The Army's anticipated average cost per space for the
remaining program is $93,000. MCA projects will average $112,000 per
space and O&M renovations will average $41,000 per space. These amounts
do not include contingencies, and do include an estimate for anti-
terrorism/force protection measures. The costs are higher than historic
costs primarily because much of the least expensive O&M and MCA
projects were funded early in the program.
The estimated cost per space to eliminate the Navy's troop-housing
deficit is $62,000, at the ``1 Plus 1'' standard. For the Marine Corps,
the cost per 2x0 configured room is $80,000.
The Air Force's estimated cost per space to eliminate the current
troop-housing deficit is $60,000.
TROOP HOUSING AVERAGE AGE
Question. What is the average age of barracks facilities?
Answer. The average age of barracks for each Service is:
Army.............................................................. 38
Navy.............................................................. 39
Air Force......................................................... 29
Marine Corps...................................................... 24
Question. Approximately, how many barracks were built over 30 years
ago?
Answer. More than 7,600 barracks buildings were built over 30 years
ago. This is based on the date of acquisition from the current FY 1999
inventory.
UNACCOMPANIED PERSONNEL
Question. What percentage is the enlisted force does the Department
estimate is single or unaccompanied?
Answer. At the end of FY 1999, 48.5 percent of the enlisted force
was single. Of the enlisted force, 41.9 percent was single with no
children.
Question. What percentage of the officers does the Department
estimate is single or unaccompanied.
Answer. At the end of FY 1999, 30.0 percent of the officer corps
was single. Of the officer corps, 26.7 percent was single with no
children.
Question. How many men and women currently live in permanent party
unaccompanied personnel housing? Of this amount, how many are enlisted
personnel and how many are officers?
Answer. According to the Department's Selected Military
Compensation Tables for January 2000, about 416,463 single military
personnel are living on-base in unaccompanied personnel housing. This
figure can be further broken down to 10,995 officers and warrant
officers and 405,468 enlisted personnel residing on-base.
Question. What percentage of single or unaccompanied personnel does
the Department estimate lives in private off-base housing?
Answer. According to the Department's Selected Military
Compensation Tables for January 2000, 180,443 (30 percent) of the
Department's 596,906 single or unaccompanied personnel receive cash
allowances for living off-base.
AVERAGE AGE OF FACILITIES
Question. What is the average age of facilities and family housing?
Answer. The average age for all DoD-owned facilities and family
housing is 35.0 years based on the date of acquisition. If the date of
acquisition is weighted by plant replacement value so that a large
facility is given more weight than a small facility, the average is
40.3 years. This has the effect of giving a small storage shed less
weight in the average than a large tactical vehicle maintenance
facility--to more accurately measure average age in the context of DoD
recapitalization requirements.
FAMILY HOUSING: REPLACEMENT VALUE
Question. What is the current housing replacement value for the
Department of Defense?
Answer. Based on a Department-wide average cost of $160,000 for
construction of a new family housing unit, it would cost about $48.5
billion to replace the 286,500 houses owned by DoD.
FAMILY HOUSING: DEFICIT
Question. What is the current total family housing deficit for the
Department of Defense, both in units and in cost of replacement,
repair, or improvements?
Answer. The following table represents the Department's estimate of
family housing deficits for new construction, replacement and/or
improvements:
[In thousands of dollars]
----------------------------------------------------------------------------------------------------------------
New
construction Replacement Improvement
----------------------------------------------------------------------------------------------------------------
Army:
Units....................................................... 7,000 20,000 41,000
Cost........................................................ $965,000 $3,000,000 $3,000,000
Navy:
Units....................................................... 15,600 4,200 13,600
Cost........................................................ $2,294,300 $693,000 $1,088,000
Air Force:
Units....................................................... 6,000 26,700 38,500
Cost........................................................ $417,845 $2,575,395 $3,031,112
Marine Corps:
Units....................................................... 10,731 5,611 6,278
Costs....................................................... $1,622,464 $960,135 $370,717
----------------------------------------------------------------------------------------------------------------
Family Housing: Average Age of Units
Question: What is the average age of on-base housing?
Answer. The average age of family housing is as follows:
Army.............................................................. 37
Navy.............................................................. 35
Air Force......................................................... 36
Marine Corps...................................................... 35
FAMILY HOUSING: ANNUAL MAINTENANCE AND REPAIR
Question: What is the annual maintenance and repair bill on average
for each unit?
Answer. The average annual maintenance and repair cost in the FY
2001 President's Budget request is $4,270 per unit.
FAMILY HOUSING: MAINTENANCE COSTS
Question: Provide for the record a chart, which will show a five-
year history, by service, of the annual inventory of family housing
units, the annual maintenance amount, and the annual maintenance cost
per unit.
Answer. The average annual inventory, maintenance and unit costs
for each Service of the last five years are:
----------------------------------------------------------------------------------------------------------------
FY97 FY98 FY99 FY00 FY01
----------------------------------------------------------------------------------------------------------------
Army:
Inventory.................................. 122,370 118,416 115,527 111,125 100,974
Maintenance (000).......................... $531,922 $475,480 $489,908 $460,594 $300,792
Unit cost.................................. $4,347 $4,015 $4,241 $4,145 $3,940
Navy:
Inventory.................................. 69,337 62,684 61,554 58,143 55,636
Maintenance (000).......................... $440,255 $417,263 $351,425 $331,008 $328,135
Unit cost.................................. $6,349 $6,657 $5,709 $5,693 $5,898
Marine Corps:
Inventory.................................. 22,351 25,569 24,125 22,983 23,022
Maintenance (000).......................... $75,699 $63,084 $70,815 $60,506 $65,695
Unit cost.................................. $2,986 $2,467 $2,935 $2,633 $2,854
Air Force:
Inventory.................................. 100,299 109,609 109,856 109,013 106,122
Maintenance (000).......................... $406,660 $418,211 $409,786 $408,001 $428,456
Unit cost.................................. $3,687 $3,815 $3,730 $3,743 $4,037
----------------------------------------------------------------------------------------------------------------
HOUSING ALLOWANCES
Question. Submit for the record a chart that will show, by
appropriation account, the amount expended during fiscal year 1999 and
the amounts budgeted for fiscal years 2000 and 2001 for housing
allowance, separately identifying accompanied and unaccompanied
allowances.
Answer. The following is the requested information: ($000)
----------------------------------------------------------------------------------------------------------------
Appropriation account FY 1999 FY 2000 FY 2001
----------------------------------------------------------------------------------------------------------------
Military Personnel, Army:
Accompanied................................................. 1,441,268 1,555,819 1,625,489
Unaccompanied............................................... 329,699 319,629 334,888
Military Personnel, Navy:
Accompanied................................................. 1,454,791 1,615,985 1,599,635
Unaccompanied............................................... 417,247 418,988 446,663
Military Personnel, Marine Corps:
Accompanied................................................. 424,985 460,317 474,699
Unaccompanied............................................... 92,561 98,559 101,913
Military Personnel, Air Force:
Accompanied................................................. 1,237,172 1,248,372 1,321,149
Unaccompanied............................................... 487,783 500,133 507,652
----------------------------------------------------------------------------------------------------------------
INFLATION
Question. What inflation rate was used in formulating the budget
request?
Answer. For military construction, family housing, and base closure
accounts, the budget request reflects an inflation rate of 1.5%.
NON-APPROPRIATED FUNDS
Question. Provide for the record the estimated costs (by State,
Service and project) of all non-appropriated funded construction over
$500,000 in fiscal years 2000 and 2001. Also include the lump sum total
of all projects between $200,000 and $500,000.
Answer. Provided is the FY 2000 NAF Construction Program estimated
costs (by State, Service and project). Attachment 1 has all projects
over $500,000 for FY 2000 and attachment 2 has all FY 2000 projects
between $200,000 and $500,000.
The FY 2001 NAF Construction program will not be determined until
August 2000.
PLANNING AND DESIGN
Question. Provide for the record a detailed project listing by
Service of all projects included in the fiscal year 2001 planning and
design request. The listing should include project scope, estimated
cost, and estimated design cost.
Answer. The information is provided in the attached spreadsheets.
SUMMARY AND RECONCILIATION
Question. Please submit for the record the two-page chart
titled ``Summary and Reconciliation of Authorization,
Authorization of Appropriations, and Appropriations Requested
from Congress for Fiscal Year 2001''.
Answer. The summary chart is attached.
FOREIGN CURRENCY EXCHANGE RATES
Question. Provide for the record the exchange rates assumed
in the fiscal year 2001 budget request.
Answer.
UNITS OF FOREIGN CURRENCY PER ONE U.S. DOLLAR
------------------------------------------------------------------------
Fy 2001
Fy 2000 President
Country Monetary unit execution budget
rates rates
------------------------------------------------------------------------
Belgium...................... Franc.......... 38.260 40.210
Denmark...................... Krone.......... 7.110 7.3930
European Community........... Euro........... 0.9486 0.9982
France....................... Franc.......... 6.2211 6.5471
Germany...................... Deutsche Mark.. 1.8549 1.9521
Greece....................... Drachma........ 312.670 326.900
Italy........................ Lira........... 1,836.370 1,932.190
Japan........................ Yen............ 111.6695 102.6700
Netherlands.................. Guilder........ 2.0899 2.1968
Norway....................... Krone.......... 7.8880 8.0720
Portugal..................... Escudo......... 190.6800 198.830
Singapore.................... Dollar......... 1.6640 1.6850
South Korea.................. Won............ 1,199.10 1,149.80
Spain........................ Peseta......... 158.250 165.300
Turkey....................... Lira........... 480,770.0 518,220.0
United Kingdom............... Pound.......... 0.6080 0.6250
------------------------------------------------------------------------
Question. What is the current balance in the Foreign Currency
Fluctuation Account?
Answer. Only a small balance ($1,680,000) is currently held in the
Foreign Currency Fluctuation, Construction, Account. Most funds have
been transferred to the Components' Centrally Managed Allotments (CMAs)
to meet FY 2000 foreign currency fluctuation requirements. The amounts
currently held in the Components' CMAs are as follows ($ in thousands):
MILCON, Army.................................................. 20,349
Family Housing Construction, Army............................. 4,218
Family Housing Operations, Army............................... 120,218
MILCON, Navy.................................................. 100
Family Housing Construction, Navy............................. 100
Family Housing Operations, Navy............................... 1,430
MILCON, Air Force............................................. 4,721
Family Housing Construction, Air Force........................ 1,289
Family Housing Operations, Air Force.......................... 10,000
MILCON, Defense-Wide.......................................... 6,464
Family Housing Operations, Defense-Wide....................... 378
--------------------------------------------------------------
____________________________________________________
Total..................................................... 169,367
Question. How much additional cost has been incurred as a result of
foreign currency fluctuation over the last three years, in both
construction and family housing operations and maintenance?
Answer. The following table reflects the gains and losses
associated with foreign currency fluctuation during the last three
years:
[In millions of dollars]
----------------------------------------------------------------------------------------------------------------
Family housing Family housing
MILCON construction operations Total
----------------------------------------------------------------------------------------------------------------
FY 1997......................................... +3.6 +0.6 +38.3 +42.5
FY 1998......................................... +8.5 +1.5 +38.4 +48.4
FY 1999......................................... -0.3 +2.2 -20.9 -19.0
----------------------------------------------------------------------------------------------------------------
Question. How much has been transferred into the Foreign Currency
Fluctuation Account at the end of the last five fiscal years?
Answer. The following amounts are transferred into the Foreign
Currency Fluctuation Account at the end of the fiscal year:
Thousands
1995.......................................................... $79,773
1996.......................................................... 79,045
1997.......................................................... 63,867
1998.......................................................... 141,391
1999.......................................................... 169,084
LOST DESIGN
Question. How much in lost design occurred in fiscal year 1999 for
each service?
Answer. The table below identifies the amount of lost designed in
fiscal year 1999 by service.
Lost design costs
Army.................................................... $5,800,000
Navy.................................................... 1,600,000
Air Force............................................... 212,896
Army National Guard..................................... 85,886
Army Reserve............................................ 170,000
--------------------------------------------------------
____________________________________________________
Total............................................... 7,868,782
BREAKAGE AND DESIGN
Question. How much breakage and deferred design occurred in fiscal
year 1999 for each service?
Answer. The table below identifies the amount of breakage and
deferred design in fiscal year 1999 by service.
Design breakage costs
Navy.................................................... $337,000
Army National Guard..................................... 180,000
Navy Reserve............................................ 4,200
--------------------------------------------------------
____________________________________________________
Total............................................... 521,200
DAVIS-BACON: COSTS
Question. What is your estimate of the amount within the budget
request for fiscal year 2001 that is attributable to the provisions of
Davis-Bacon?
Answer. The Department conservatively estimates that 5 to 8 percent
of project costs could be reduced were the Davis-Bacon provisions to be
waived. Amounts attributable to Davis-Bacon for Military Construction
are $121 million at 5 percent and $193 million at 8 percent. Amounts
for family Housing are $26 million and $42 million, respectively.
DOD ENVIRONMENTAL PROJECT LIST
Question. Provide for the record a list of environmental compliance
projects requested in the budget, sorted by service, installation, and
by level of compliance.
Answer. The following environmental projects are in the FY 2001
budget:
ENVIRONMENTAL COMPLIANCE PROJECTS
----------------------------------------------------------------------------------------------------------------
Compliance
Service Installation Project level
----------------------------------------------------------------------------------------------------------------
Navy..................................... Puget Sound, WA, NSY....... Oily wastewater collection. I
Air Force................................ Vandenburg, CA............. Upgrade water dist. system. I
Air Force................................ Beale, CA.................. Water treatment plant...... I
Air Force................................ Moody, GA.................. Water treatment plant...... I
Air Force................................ Eielson, AK................ Hazardous material storage. I
Air Force................................ Incirlik, TU............... Fire training facility..... I
Air Force................................ Cape Romanzof, AK.......... Generator fuel storage..... I
Air NG................................... Ft. Smith, AR.............. Fire training facility..... I
----------------------------------------------------------------------------------------------------------------
ENVIRONMENTAL LEVELS
Question. For the record, what is the definition of ``Level I''
``Level II'', and ``Level III'' projects?
Answer. The term ``Level'' should be changed to ``Class''. The
definitions for Class I through Class III projects are found in the DoD
Environmental Compliance Instruction, DoD I 4715.6, dated April 24,
1996. The definitions are as follows:
Class I--Projects and activities needed that are currently out of
compliance (have received an enforcement action from a duly authorized
Federal, State, or local authority, have a signed compliance agreement
or received a consent order; and/or have not met requirements based on
applicable Federal, State, and local laws, regulations, and Executive
Orders, DoD policies, and Final Governing Standards overseas). This
class also includes projects and activities needed that are not
currently out of compliance (deadlines or requirements have been
established by applicable authorities, but deadlines have not passed or
requirements are not in force) but shall be if projects or activities
are not implemented within the current program year. Those activities
include the preparation of plans (e.g.: National Environmental Policy
Act documentation, master plans, emergency response plans, integrated
natural and cultural resource management plans, pollution prevention
plans; etc.), opportunity assessments and inventories. The preferred
approach is to use pollution prevention projects or activities, if cost
effective, to bring a facility into compliance. Overseas, this class
includes projects and activities necessary to alleviate the human
health threats to ongoing operations or necessary to comply with
applicable treaties and agreements.
Class II--Projects and activities needed that are not currently out
of compliance (deadlines or requirements have been established by
applicable Federal, State, and local laws, regulations, and Executive
Orders, DoD policies and Final Governing Standards overseas, but
deadlines have not passed or requirements are not in force) but will be
if projects or activities are not implemented in time to meet an
established deadline beyond the current program year. The preferred
approach is to use pollution prevention projects or activities, if cost
effective, as the means of maintaining or bringing a facility into
compliance. Overseas, this class includes projects and activities
identified using risk based prioritization practices that meet the
long-term objective of full implementation of the Final Governing
Standards for each foreign country where DoD maintains substantial
installations.
Class III--Includes projects and activities that are not explicitly
required by law, but are needed to address overall environmental goals
and objectives.
There is also a Class 0 that includes activities needed to cover
the recurring administrative, personnel and other costs associated with
managing environmental programs that are necessary to meet applicable
compliance requirements (Federal, State, and local laws, regulations,
Executive Orders, DoD policies, and Final Governing Standards overseas)
or which are in direct support of the military mission. Also, includes
environmental management activities associated with the operation of
facilities, installations and deployed weapon systems. Recurring costs
consist of manpower, training, supplies, hazardous waste disposal,
operating recycling activities, permits, fees, testing and monitoring
and/or sampling and analysis, reporting and record keeping (e.g. Toxic
Release Inventory reporting), maintenance of environmental equipment,
and compliance self assessments.
DOD LIFE SAFETY/HEALTH PROJECT LIST
Question. Provide for the record a list of life safety/health
compliance projects requested in the budget, sorted by service,
installation, and by level of compliance.
Answer. The following life safety/health compliance projects are in
the FY 2001 budget.
----------------------------------------------------------------------------------------------------------------
Compliance
Service Installation Project level
----------------------------------------------------------------------------------------------------------------
Navy..................................... Puget Sound, WA NSY........ Chemical Metallurigal Lab.. ...........
Navy..................................... Cherry Point, NC NADEP..... Aircraft Stripping Fac. ...........
Addn.
Navy..................................... Little Creek, VA, Waterfront Ops Building.... ...........
NAVPHIBASE.
----------------------------------------------------------------------------------------------------------------
UNSPECIFIED MINOR CONSTRUCTION
Question. Provide for the record a chart, which will show the
budget request for unspecified minor construction by component,
compared to the enacted fiscal year 2000 level.
Answer. The following table identifies the FY 2001 budget request
and the FY 2000 enacted level by component for unspecified minor
construction.
[Dollars in thousands]
------------------------------------------------------------------------
FY 2000 FY 2001
Component enacted request
------------------------------------------------------------------------
Army.................................... 14,600 15,000
Navy.................................... 8,862 7,659
Air Force............................... 11,341 9,850
Defense Wide............................ 18,618 17,390
Army National Guard..................... 15,629 2,295
Air National Guard...................... 3,500 4,000
Army Reserve............................ 2,716 1,917
Air Force Reserve....................... 4,467 4,115
Navy Reserve............................ 2,806 ..............
-------------------------------
Total............................... 82,539 62,226
------------------------------------------------------------------------
EXECUTION RATES
Question. What is the execution rate of each component for the past
three years for both military construction and family housing?
Answer. Execution rates are shown below:
EXECUTION RATES
----------------------------------------------------------------------------------------------------------------
FY 1997 FY 1998 FY 1999
Service Appropriation (Percent) (Percent) (Percent)
----------------------------------------------------------------------------------------------------------------
Army...................................... MCA.......................... 82 82 91
Army...................................... MCAR......................... 86 69 79
Army...................................... MCNG......................... 61 69 70
Army...................................... AFHC......................... 83 55 62
Army...................................... AFHO......................... 100 100 100
Navy...................................... MCON......................... 93 96 92
Navy...................................... MCNR......................... 74 85 87
Navy...................................... FH Const..................... 100 100 100
Navy...................................... FH Impr...................... 90 95 85
Air Force................................. MCAF......................... 95 98.8 97.8
Air Force................................. MCAFR........................ 71 100 100
Air Force................................. MCANG........................ 89 98 92
Air Force................................. FH Const..................... 84 65 77
Air Force................................. FHO&M........................ 100 90 100
----------------------------------------------------------------------------------------------------------------
BRAC FUNDING HISTORY
Question. Provide for the record an updated version of the chart,
which appeared in last year's hearing (part 5, page 77), together with
whatever comments you may care to add.
Answer. A revised chart of BRAC environmental restoration funding
is provided below:
DATA AS OF DECEMBER 31, 1999
[in millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
BRAC I:
Floor........................................... 100.0 220.0 134.6 0.0 66.8 N/A N/A N/A N/A N/A 521.4
Allocation...................................... 350.6 362.7 179.3 0.0 91.2 N/A N/A N/A N/A N/A 983.8
Obligations..................................... 347.0 357.8 167.6 0.0 90.4 N/A N/A N/A N/A N/A 962.7
Outlays......................................... 341.9 347.2 163.4 0.0 87.6 N/A N/A N/A N/A N/A 940.1
BRAC II:
Floor/ceiling................................... N/A 231.7 308.9 262.3 138.7 469.5 223.8 105.2 N/A N/A 1,740.1
Allocation...................................... N/A 264.7 311.7 277.1 211.2 433.2 177.1 50.9 N/A N/A 1,725.9
Obligation...................................... N/A 263.9 309.4 275.9 210.3 430.8 176.2 50.9 N/A N/A 1,717.5
Outlays......................................... N/A 256.2 298.1 267.9 188.6 400.5 147.8 39.2 N/A N/A 1,598.2
BRAC III:
Floor/ceiling................................... N/A N/A N/A 200.0 302.7 236.7 352.0 410.8 271.8 N/A 1,774.0
Allocation...................................... N/A N/A N/A 249.2 333.4 191.0 263.2 358.8 245.9 N/A 1,641.5
Obligations..................................... N/A N/A N/A 248.0 331.4 184.9 261.9 356.1 243.3 N/A 1,625.6
Outlays......................................... N/A N/A N/A 242.3 310.2 174.6 215.0 250.0 100.6 N/A 1,292.7
BRAC IV:
Floor/ceiling................................... N/A N/A N/A N/A N/A N/A 226.1 416.2 491.0 346.4 1,479.7
Allocations..................................... N/A N/A N/A N/A N/A 205.0 212.3 418.7 469.9 340.0 1,626.0
Obligations..................................... N/A N/A N/A N/A N/A 201.4 208.7 400.9 442.5 73.2 1,326.7
Outlays......................................... N/A N/A N/A N/A N/A 183.3 184.1 264.6 167.1 11.7 810.9
Summary:
Floor/ceiling................................... 100.0 451.7 443.5 462.3 508.2 706.2 801.9 932.2 762.8 346.4 5,515.2
Allocation...................................... 350.6 627.4 491.0 526.3 635.8 829.2 652.6 818.4 715.8 340.0 5,987.1
Obligations..................................... 347.0 621.7 477.0 523.9 632.1 817.1 646.8 807.9 685.8 73.2 5,632.5
Outlays......................................... 341.9 603.4 461.5 510.2 586.4 758.4 546.9 553.8 267.7 11.7 4,641.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
(Numbers may not add due to rounding.)
Notes: (1) The FY 1994 Military Construction Appropriations Act set the floor for BRAC III a $300.0 million. However, this floor was revised to $200.0
million in the FY 1994 Supplemental Appropriations Act and further revised to $249.7 million through DoD congressional notification actions.
(2) The FY 1996 Military Construction Appropriations Act established ceilings on environmental amounts for BRAC II and BRAC III as indicated. The
amounts for FYs 1991-1995 are floors and the amounts in FY 1996 and out are ceilings. No FY 1996 ceiling on environmental amounts was set for BRAC IV.
(3) On 3 September 1999, The Department notified the Congress of the need to raise the FY 1999 ceiling on environmental amounts for BRAC IV by $65.0
million to $491.0 million.
CONTINGENCY CONSTRUCTION
Question. What is the current unobligated balance of prior year's
appropriation, which remain available for contingency construction?
Answer. Of the funds appropriated for contingency construction in
FY 1996-2000, $9.4 million remains available.
Question. Provide for the record a list of amounts appropriated for
contingency construction projects for fiscal years 1996, 1997, 1998,
1999, and 2000 together with a list of projects for which these funds
have been obligated.
Answer.
[In thousands of dollars]
----------------------------------------------------------------------------------------------------------------
General Projects
Appropriated Rescission reduction funded Balance
----------------------------------------------------------------------------------------------------------------
FY 1996....................................... 11,037 2,315 ........... \1\ 7,750 972
FY 1997....................................... 4,500 3,000 ........... ........... 1,500
FY 1998....................................... 4,000 ........... 1,900 ........... 2,026
FY 1999....................................... 4,890 ........... 900 ........... 3,990
FY 2000....................................... 938 ........... ........... ........... 938
----------------------------------------------------------------------------------------------------------------
\1\ $3,750 was provided to USCENTCOM for a Forward Headquarters facility at a Classified location. $4,000 was
used to provide operational space for National Security Agency (NSA) personnel during the renovation of the
current Operations Building at Menwith Hill Station, England.
Question. Has this appropriation met the needs of the
components over the last two years? What shortfalls, if any,
have been encountered?
Answer. The appropriation for unspecified minor
construction has been adequate over the last two years since
minor construction funds are requested based on historical
experience. The components also have the ability to split-fund
projects with prior year appropriations and have the authority
to reprogram an additional 25 percent over the amount
authorized to be appropriated for minor construction. This
maximizes the use of these funds and minimizes the budget year
financing requirement.
PLANNING AND DESIGN
Question. Does the budget request include sufficient
planning and design funds to execute the entire fiscal year
2001 program?
Answer. The Department's estimate for planning and design
(P&D) requirements for the budget year is based on the size of
the two succeeding fiscal year military construction programs.
For example, the amount requested for FY 2001 will be used to
complete design on FY 2002 projects and to initiate design on
the FY 2003 projects. Therefore, the size of the FY 2001
request is a function of the size of the FY 2002 and FY 2003
construction programs. Consequently, the $314 million requested
in FY 2001 for planning and design is sufficient to complete
design on the FY 2002 military construction program, which will
allow for execution in FY 2002, and bring the FY 2003 program
to the required 35% design level.
Question. Are any projects in the budget request at less than 35
percent design? If so, list and justify such projects.
Answer. The reason for requiring a project to be at the 35 percent
design level is to have a high confidence cost estimate and to increase
the chances of awarding the project in the year in which it was
requested. Over the past several years Congress has been encouraging
the Department to use parametric cost estimating in an effort to lessen
lost design. Therefore, most of the projects in the FY 2001 President's
budget use parametric estimating consistent with this congressional
desire. Parametric estimating is not considered design; therefore, most
of the projects are not considered to be 35 percent designed. However,
all of the projects satisfy the congressional requirement of either
having a parametric estimate or being at the 35 percent design level.
REAL PROPERTY MAINTENANCE
Question. What is the total fiscal year 2001 budget request for
real property maintenance? How much is earmarked for barrack
renovation?
Answer. The fiscal year 2001 RPM request is $5.6 billion, or which,
approximately $727 million is for various barracks renovation projects.
Question. Submit for the record a table which will show, by fiscal
year, the total amount approved by Congress for reprogramming for
`Military Construction, Defense-Wide' for the last five years.
Answer. The following is a list of reprogrammings processed in each
fiscal year.
------------------------------------------------------------------------
Number of Amounts
reprogramming approved for
actions reprogramming
------------------------------------------------------------------------
Fiscal year 1995........................ 7 $21,893,000
Fiscal year 1996........................ 2 2,920,000
Fiscal year 1997........................ 3 1,250,000
Fiscal year 1998........................ 2 2,540,000
Fiscal year 1999........................ 7 22,008,000
Fiscal year 2000 \1\.................... .............. ..............
------------------------------------------------------------------------
\1\ As of 2/25/00.
SUMMARY AND RECONCILIATION
Question. Please submit for the record the two-page chart titled
``Summary and Reconciliation of Authorization, Authorization of
Appropriations, and Appropriations Requested from Congress for Fiscal
Year 2001''.
Answer. The summary chart is attached.
OVERALL FUNDING
Question. In your opinion, what can be done about the lack of
support and funding requested by the Department for facility investment
and housing and when can we expect to see a steady path of funding?
Answer. While we would love to have the topline allocated to this
committee for military construction and family housing, and are very
appreciative of the efforts this subcommittee has made on the behalf of
the soldiers, sailors, and airmen, we don't have that luxury. Military
construction, family housing, and RPM, by their very nature, are things
that can be postponed because you can always provide a temporary fix
and make due for one more year.
That aside, we always mark our progress against the amount we had
programmed in the FYDP. From that benchmark of $8.3 billion that was
programmed in the FY 2001 column of the FY 2000 President's Budget
request (excluding all of the advance appropriations carried over from
the FY 2000 program), our FY 2001 President's Budget request of $8.0
billion fairs pretty well. We are down $278.6 million; however, a
sizable portion of that reduction is for inflation ($59.2 million) and
foreign currency fluctuations ($61 million), both of which have no
programmatic impact. The balance is associated with the deletion of
contingencies ($158.4 million). Therefore, if you add these adjustments
back to the amount requested in FY 2001, we actually have a more
slightly larger program than originally programmed.
CONTINGENCY REDUCTION
Question. How much savings did this initiative create, and how were
those savings reapplied?
Answer. By eliminating funding for contingency, the Department
freed up $158 million in FY 2001 which was reapplied toward addressing
readiness shortfalls and weapons modernization requirements.
Question. Will this reduction hinder successful program execution?
Do you expect the Services will have to defer projects as a result of
this initiative?
Answer. We do not anticipate any project cancellations, however,
some project deferrals may be necessary. There is also an element of
risk that the Services' may not be able to maintain full project scope
(especially in family housing projects) and the quality of construction
may be compromised.
Question. The Committee is concerned about mission essential
related projects, such as the beddown of the C-17 and testing of the F-
22. How can you assure us that operation schedules will be met with no
contingency allowances?
Answer. We are currently working award and funding strategies with
our design/construction agents to ensure sufficient funds can be made
available for each project so construction can proceed as necessary to
meet need dates and avoid costly delays. However, elimination of
contingency funding for fiscal year 2001 MILCON projects increases the
possibility of deferring projects to provide funds to complete projects
under construction.
BASIC ALLOWANCE FOR HOUSING (BAH) INITIATIVE
Question. The Department proposes a Basic Allowance for Housing
(BAH) plan that will completely eliminate out-of-pocket housing
expenses for military members by 2005. How will this initiative impact
the family housing accounts?
Answer. The Department believes that eliminating service members'
out-of-pocket expenses will decrease the demand for on-base housing.
However, only by conducting Housing Market Analyses at all
installations, which is a long-term effort, can we determine whether
the demand will reduce on-base housing inventories or address existing
deficits at installations. In recent years, the Department has focused
its funding on improving existing housing and not building out our
deficit. One important prong of Secretary Cohen's housing initiative is
to maintain a consistent level of family housing funding for additional
housing privatization and to improve housing the Department retains.
SHIFTS IN COSTS
The Committee has always been concerned about the shift in costs
from the family housing accounts to the personnel accounts to pay for
family housing privatization. In last year's testimony for the record,
it states that, ``Guidance from the Secretary of Defense (SECDEF)
requires that any savings resulting from privatization be re-applied to
housing.'' This year, the Army and Navy transferred roughly $112
million from the family housing accounts to cover necessary increases
in housing allowances due to privatization.
Question. Has there been a change in SECDEF guidance on this issue?
Answer. No. The Army and Navy decisions to realign $112 million
from family housing accounts to military personnel accounts are
consistent with the SECDEF guidance on reapplication of savings.
Although we may have preferred the Air Force approach (no realignment
of housing funds to military personnel account), the Army and Navy
decisions to shift costs (not savings) comport with the Department's
generally accepted principals of budgeting.
Question. The Committee has always been concerned about the shift
in costs from the family housing accounts to the personnel accounts to
pay for family housing privatization. In last year's testimony for the
record, it states that, ``Guidance from the Secretary of Defense
(SECDEF) requires that any savings resulting from privatization be re-
applied to housing.'' This year, the Army and Navy transferred roughly
$112 million from the family housing accounts to cover necessary
increases in housing allowances due to privatization. Is the Department
working to integrate the personnel and installation departments on this
issue?
Answer. The Department has made progress in ensuring that the
personnel and installation organizations are coordinating issues that
affect housing allowances, construction and privatization initiatives.
In addition to the Department's planning, programming and budgeting
system, we have established a Housing Policy Panel to guide issues that
cut across the relevant offices within the Under Secretary of Defense
for Acquisition, Technology and Logistics and the Under Secretary of
Defense for Personnel and Readiness. Housing issues are also reviewed
and vetted within the Quality of Life Executive Committee and
Department of Defense Installation Policy Board. Both of these groups
are chaired by senior Department officials with membership from the
Office of the Secretary of Defense, Services and Defense Agencies to
ensure we obtain the broadest possible input and dissemination of
housing related policies.
FAMILY HOUSING INTEGRATION
Question. Now that the Department has developed an integrated plan
to improve housing, will we see an integration of the personnel and
family housing departments to oversee the initiative?
Answer. The Department's integration of personnel and family
housing organizations to address important housing related issues will
be conducted through existing boards and committees. Additionally, the
Deputy Under Secretary of Defense for Installations has established a
Housing Policy Panel made up of relevant representatives throughout the
Department that specifically focus on housing issues. This group is
responsible for identifying, discussing and recommending new solutions
to common housing problems, sharing lessons learned, and vetting new
ideas and techniques for managing the Department's housing program. To
fully implement and integrate the housing privatization, military
construction and compensation pieces of the housing program, the
Department has also initiated a peer/audit review project. The goal is
to bring the expertise of credible and highly esteemed firms who have
the private sector experience that DoD would use to augment the
development of a coordinated housing strategy. Both of these entities
report to the Department's Installation Policy Board, chaired by the
Deputy Under Secretary of Defense for Installations.
GENERAL OFFICER QUARTERS
Question. What efforts have you taken to assure that there is no
further abuse of operation and maintenance of general and flag officer
quarters?
Answer. Internal discussion between OSD and the Services has
culminated in a policy memorandum which I recently issued. The purpose
of my memorandum essentially was to reinforce Section 128 of the FY
2000 Military Construction Act that makes family housing O&M funds the
sole source for repair and maintenance of all family housing, including
the general and flag officer quarters. A copy of the memorandum is
attached.
UTILITIES PRIVATIZATION
Question. The Department has undertaken an aggressive utility
privatization effort. The goal is to privatize all utility systems
unless uneconomical or exempt for security reasons by September 30,
2003. What progress has been made by the Department in achieving this
goals?
Answer. Defense Reform Initiative Directive (DRID) #9 directed the
privatization of electric, water, wastewater and natural gas systems by
January 1, 2000, except where uneconomical or for or for unique
security reasons. DRID #49 changed this goal to September 30, 2003, and
established two interim milestones: (1) for all systems, determine
whether to pursue privatization by September 30, 2000 (go/no go
decisions); and (2) issue all requests for proposals (RFPs) by
September 30, 2001.
In January 2000, the Services reported that of the 2,742 utility
systems that support our installations worldwide, they still owned,
1,721 systems (13 systems have been privatized since DRID #49 was
issued and 1,008 systems were either privatized prior to DRID #49 or
were owned by other entities, such as host nations). The Services also
reported that they were on track to meet the first DRID #49 milestone
and had made go/no go decisions for 942 systems, with 897 systems
moving on to the RFP stage (RFPs have been issued for 257 of these 897
systems). A total of 46 systems have been determined to be uneconomical
to privatize or classified as exempt due to security reasons.
Question. Has the Department been able to document any savings or
avoided costs, which may result from this (utilities privatization)
effort?
Answer. Twelve systems at eight installations have been privatized
since DRID #49 was issued. These solicitations individually meet the
requirements of Title 10 U.S.C. Section 2688 and represent an
aggregated annual economic benefit of more than $10 million. However,
since the economic analyses were based on the ``should costs'' of
operating and maintaining the systems in accordance with industry
standards, this does not necessarily mean the utility bills at these
installations will go down by this amount. The economic analyses
consider long-term capitalization costs, which include deferred major
repair and construction projects. When system ownership is transferred
to a utility provider, the Services in turn purchase utility services
from the new owner, which includes the cost of operations, maintenance,
rehabilitation, and technological or environmental upgrades.
Ultimately, by the provider bringing the utilities up to industry
standards, the Department of Defense will have more efficient and
reliable systems.
Question. What assurances can the Department provide that the
conveyances of utility systems will not result in a substantial
increase in long-term utility cost?
Answer. The authority under which these systems are conveyed, Title
10 U.S.C., Section 2688, requires that the Department certify to
Congress that the long-term economic benefit of the conveyance exceeds
the long-term economic cost, and the conveyance will reduce the long-
term costs for utility services provided by the utility system
concerned. The Department does not have the authority to convey a
utility system when the conveyance does not meet this standard.
BASE REALIGNMENT AND CLOSURE
Question. How does the Department intend to budget for the
continuing environmental restoration efforts at BRAC I through IV
locations beyond fiscal year 2001--will there be a continuing account
in this appropriations bill to fund these costs?
Answer. The Department intends to budget for continuing
environmental and caretaker costs at BRAC I through IV locations in the
existing BRAC Account. Section 2822 of the FY 2000 National Defense
Authorization Act (P.L. 106-65) contained a provision which amends
section 2703 of Title 10, United States Code, to extend the existing
BRAC Account as the sole source of funds to carry out environmental
restoration and mitigation activities and other caretaker activities
after the period of BRAC implementation. This extension of the current
BRAC account negates the need to establish a successor account.
Question. Do you have an estimate of the annual level of funding
required for this effort for fiscal 2002 and beyond?
Answer. For continuing BRAC environmental costs, the Future Years
Defense Program (FYDP) accompanying the FY 2001 President's Budget
request contains a total of approximately $1.0 billion for these costs
for FY 2002 through FY 2005, ranging from a high of $0.4 billion in FY
2002 to $0.2 billion in FY 2005. The FYDP also contains less $0.1
billion per fiscal year for calendar costs.
Question. Although the four approved BRAC's are to be completed by
July 13, 2001, the Department will continue to incur environmental
restoration costs in the out years. How long will the Department
continue to incur these costs?
Answer. The Department should continue to incur environmental
clean-up costs for a moderate period of time beyond 2001. The Military
Services project that, by 2001, 72 percent of the BRAC installations
should either be cleaned or should a clean-up remedy in place. That
rate is projected to grow to 98 percent through 2005. For the remaining
few installations, clean-up remedies should be in place by 2015.
FACILITY REDUCTIONS
Question. What progress has the Department made in
disposing of this excess real property, and when does the
Department expect to meet desired end-state?
Answer. During fiscal years 1998 and 1999 (the first two
years of the six-year Defense Reform Initiative to demolish and
dispose obsolete and excess facilities), DoD eliminated 30.6
million square feet. The department plans to achieve its DRI
goal of 80.1 million square feet before the end of fiscal year
2003.
Question. How much has the Department expended to date to
achieve its demolition initiative and, by service, how were
these costs funded?
Answer. During fiscal years 1998 and 1999 (the first two
years of the six-year Defense Reform Initiative to demolish and
dispose obsolete and excess facilities) DoD expended $303.3
million on this initiative. The costs were funded within the
operations and maintenance appropriations for each military
service. The amounts by service are:
[Dollars in millions to date, FY 1998-1999]
Army..............................................................$203.6
Navy.............................................................. 57.0
Marine Corps...................................................... 10.8
Air Force......................................................... 31.9
BASIC ALLOWANCE FOR HOUSING (BAH) INITIATIVE
Question. In the Department's three-pronged integrated plan to
improve housing, how much will the Department rely on traditional
family housing construction? Will we see an increase or decrease in
future family housing construction funding?
Answer. The Department's housing policy is to rely first on the
private sector for its housing needs. The Department will rely on the
traditional family housing construction to build and maintain on-base
housing only in those instances where the private sector cannot provide
the types of housing the Services require to house their military
members and families. The Secretary of Defense's recent three-prong
initiative to improve housing does not alter this policy. In fact, it
further enhances our reliance on the private sector by making more
quality housing available for service members. We believe that some
number of on-base housing will always be needed, such as for key and
essential military members. Because two-thirds of the Department's
housing inventory is in need of revitalization, the third prong of the
Secretary's initiative is to maintain current family housing funding
levels to continue improving on base housing units we will need to
retain in the long-term.
Question. For the record, please provide the programmed funding
levels for family housing construction over the next five years (fiscal
years 2001-2005).
Answer. The following table reflects the military departments'
future years family housing construction program: ($000)
----------------------------------------------------------------------------------------------------------------
FY 2001 FY 2002 FY 2003 FY 2004 FY 2005
----------------------------------------------------------------------------------------------------------------
Army........................................... 162,106 133,282 136,083 138,961 140,902
Navy........................................... 362,822 308.106 344,811 372,809 423,998
Air Force...................................... 223,483 366,327 363,336 417,321 384,017
Defensewide.................................... 0 0 50 50 50
----------------------------------------------------------------
Total.................................... 748,411 807,715 844,280 929,141 948,967
----------------------------------------------------------------------------------------------------------------
Question. Increasing the Basic Allowance for Housing will reduce
the demand for on-base housing, what is the Department's plan for re-
evaluating its on-base housing requirements and deficits?
Answer. The Department's current family housing requirements
process requires the Services to have a current Housing Market Analyses
(HMAs) available for installations in which they are proposing to build
or renovate housing. Since the HMAs are to include projections of
housing availability in the future, each Service will need to include
the projected housing allowances in its requirements analyses to ensure
the Department does not build or maintain unneeded housing.
Question. A decrease in the demand for on-base housing will reduce
the need to maintain older, high cost units. What is the Department's
plan for divesting itself of unneeded housing units, and how will those
resources be re-applied?
Answer. The Department believes that the increase in Basic
Allowance for Housing will decrease the need to maintain older, high
cost on-base housing. However, without conducting a detailed Housing
Market Analyses at all installations, which is a long-term effort, it
is premature to predict the extent of this decrease in demand and
impossible to predict the amount or allocations of these resources. The
Department will look at demolishing old housing units that are no
longer cost effective to maintain or replace.
Question. For the record, explain the new housing allowances
program the Department began implementing in January 1998.
Answer.
BASIC ALLOWANCE FOR HOUSING (BAH)
A. Background.--
1. Because of inaccuracies and inequities inherent in the old
housing allowance system, the 1998 National Defense Authorization Act
established the Basic Allowance for Housing (BAH) designed to establish
a uniform out-of-pocket cost, in terms of dollars spent, for every
member within the same pay grade for housing that is essentially the
same as what a civilian of like income would spend on housing in that
area.
2. The transition was initially proposed to occur over 6 years. In
response to the concerns of members in high-cost housing locations,
Congress authorized the expenditure of an additional $225 million to
complete the transition process. This allowed us to fully increase
rates in high-cost areas, and to decrease rates in other areas where
out-of-pocket costs were less than the 18.8 percent average.
3. Many people have expressed concerns that the new rates
inappropriately went down in some areas and that Service members in
these areas are being significantly disadvantaged. This is not the
case--the new housing allowance system is appropriate and will
ultimately work to the advantage of every member living on or off base
in the future. However, on February 23rd, the Secretary of Defense
announced that housing allowances would be restored in those locations
where the 2000 BAH rates were lower than the 1999 rates.
4. On January 6th, the Secretary of Defense announced a plan to
increase housing allowances enough to lower average out-of-pocket costs
from the current 18.8 percent to 15 percent in 2001, and to eliminate
them altogether by 2005.
a. To do this, an additional $3.1 billion has been committed to
housing allowances over the next five years. This will result in
increased housing allowances everywhere in the country.
b. Service members will see their housing allowances increase over
the next five years. For a typical married E-4, the 2001 monthly
increase would be $28, with a total monthly increase by 2005 of $139.
Allowances will increase for both members with and without family
members.
B. Administration Position.--
1. Rate protection and the announced restoration of housing
allowance rates ensure that no Service member, regardless of where
assigned in the United States will see a reduction in their pay due to
decreased housing allowances.
2. In 2005, the average member's housing allowance will be
sufficient to cover the full cost of rent and utilities for the average
cost standard housing, by pay grade, in every region of the country.
HOUSING PRIVATIZATION
Question. The Department is proposing to extend the Military
Housing Privatization Initiative (MHPI) authorities for an additional
five years. The Department is still actively testing most of the
authorities and has only completed one project to date. However, an
increased reliance upon housing privatization is part of the
Department's three-pronged integrated plan to improve housing. Why is
the Department increasing its reliance on authorities it is still
testing?
Answer. The Department has completed four solicitations under the
Military Housing Privatization Initiative. While it is true that we are
still testing to determine the optimal uses of the authorities granted
by the initiative, it is clear from these first four projects that
privatization provides tremendous leveraging of our military
construction funds. This leverage is essential in the Department's
plans to fix its inadequate housing stock by 2010. We are requesting
extension of the authorities, vice permanent legislation, so that we
can further refine the authorities through experience. The eventual
permanent legislation would then reflect a much more comprehensive body
of experience.
Question. As part of its new housing plan, will the Department seek
to add projects to the current list? If so, how many?
Answer. The Air Force identified six housing privatization sites in
their family housing master plan as submitted in FY99, totaling
approximately 6,900 units. The House Appropriations Committee applauded
the Air Force approach and required similar plans from all Services.
Those master plans are due in June 2000 and will identify future
privatization sites needed to reach the Department's 2010 goal to
eliminate inadequate family housing. These projections represent future
plans and not approved projects. Prior to soliciting any projects OSD
review and approval and required Congressional notifications will be
accomplished.
Question. To what extent does OSD (or the Services) rely on
consultant support for design, development and finalization of housing
privatization projects?
Answer. OSD and the Services rely on consultant support to an
extent appropriate to the nature of the action being taken. For actions
that are inherently governmental, such as decision-making or oversight,
the reliance is minimal. For actions that are technical or that involve
sophisticated financial transactions, the reliance is more extensive.
While consultants provide very little support in developing housing
requirements or in the physical housing design, they work closely with
the Services in designing financial concepts and in developing
solicitations which will elicit optimal proposals. The best proposals
are those which provide the best housing for the government's
contribution, while minimizing the government's financial risk.
Financial consultants always advise solicitation evaluation teams on
the technical aspects of proposals. Consultants also play a key
advisory role in oral discussions and negotiations with developers.
Finally, consultant support is most extensive at award and closing of
the deal to help ensure that last-minute document revisions do not
adversely impact the government's interest.
Question. By Service and fiscal year, please provide a chart of the
total amount of expenditures for consultants under the Military Housing
Privatization Initiative (MHPI). Please indicate account source for all
expenditures. This chart should also include OSD's Competitive Sourcing
and Privatization Office.
Answer. OSD expenditures for contractor support of the MHPI made
from the Family Housing Improvement Fund are as follows:
Millions
FY 96............................................................. $0.9
FY 97............................................................. 6.7
FY 98............................................................. 6.7
FY 99............................................................. 3.2
Question. Please provide name(s) of consultants used for MHPI
projects, experience in real estate and financial deal making, years
worked for OSD (or Service), method of selection and amounts paid by
account source.
Answer. In November 1997, GSA competitively awarded a multiple
year, multiple award contract for professional services in support of
MHPI projects. There were six prime contractor awardees for the base
year and options were exercised for three prime contractors for option
year one. Each of the awardees had subcontractors and key personnel
experienced in accounting, real estate development, real estate
financing, and real estate law. The prime contractors and the amounts
they have been paid are as follows: Ernst & Young Kenneth Leventhal
($15.6M); Hawkins, Delafield & Wood ($.5 million); Price Waterhouse,
LLP ($.09 million); KPMG Peat Marwick ($.06 million); Deloitte & Touche
($.06 million); and Arthur Andersen ($.05 million). All funds were paid
from the Family Housing Improvement Fund.
Question. What products and services have been provided by
consultants for the MHPI?
Answer. A wide range of products and services have been provided
during both program and project development, development and
preparation of project solicitations, pre-award evaluations, loan
instruments and other legal documents, and independent legal analyses.
The following list is representative of key deliverables:
Project development including site visits, analysis and
proforma runs for all alternatives
Solicitation development and preparation including developing
of RFQ/RFP
Analyses of lessons learned during solicitation
Documentation of guarantee and loan program requirements
Development of borrower and lender application forms
Development of loan servicing agreements
Training on budget scoring
Analytical and technical support to resolve OMB scoring
issues
Assist in development of a model for estimating defaults/
recoveries on loans/guarantees
Assist in award closing and documentation
Provide post award training and assistance
PRIVATIZATION OF UNACCOMPANIED HOUSING
Question. In addition to family housing privatization, the Military
Housing Privatization Initiative provides for the privatization of
unaccompanied housing. However, no Service has yet launched a project
for unaccompanied housing. It is our understanding, the Navy and Marine
Corps are considering privatization projects for unaccompanied housing.
What are the obstacles to the privatization of unaccompanied
housing?
Answer. Scoring consideration limited unaccompanied housing
projects until 1998, when OMB interpretation of assignment of personnel
made projects viable. Department of Navy is considering unaccompanied
projects in Washington, DC and at Quantico, VA. Unaccompanied housing
remains an option at other locations as well. Our focus in housing
privatization has been primarily on family housing, but we strongly
desire retention of unaccompanied housing authorities to allow us to
pursue such privatization where feasible. Our analysis shows that such
projects are financially viable in many locations.
FAMILY HOUSING MAINTENANCE
Question. The budget request includes a reduction of $110 million
from the enacted levels for family housing maintenance. Is this budget
adequate to address the tremendous need for maintenance and repair of
existing units?
Answer. The FY 2001 budget reflects the balance of priorities
across many programs and requirements. The Department allocated as much
of its resources to housing maintenance and repair as it could afford
while maintaining other readiness and quality of life programs.
[Clerk's note.--End of questions for the record submitted
by Chairman Hobson.]
----------
[Clerk's note.--Questions for the record submitted by
Congressman Farr.]
FORT ORD, CALIFORNIA
Question. Please provide a list of Conveyances dates for the
remaining properties at Fort Ord, California.
Answer. Attached at Table 1 is a listing of property at the former
Fort Ord, their environmental category, and the expected recipient.
Table 2 explains the categories used in Table 1. Table 3 lists the
environmental categories and the anticipated conveyance dates that are
based on current conditions. Category A parcels are clean and are
expected to transfer in April 00. Category E parcels remain to be
investigated and are suspected to have significant OE issues and may
require significant remediation to insure health and human safety.
These dates represent the best estimates of the various offices
involved with Army Base Realignment and Closure (BRAC) actions at the
former Fort Ord.
BIDDING PROCESS
Question. Provide an explanation of how local contractors can bid
on base projects, including privatization?
Answer. The Department recognizes that robust competition is a
critical component to successful privatization of utility distribution
systems and family housing. Given competing demands for business
opportunities in today's market, the Military Departments must often be
proactive in seeking market interest. All potential base contracts over
$25,000 are listed in the Commerce Business Daily (available either on-
line or in printed format) and local contractors can and do review the
Daily for bidding opportunities. However, because the Commerce Business
Daily may not be routinely referenced by certain potential bidders,
other public media such as local and regional newspapers, industry
journals and magazines, trade associations and the Internet will be
used to attract the greatest amount of interest in local privatization
projects. Local contractors can access these various media and can
submit proposals to the contracting officer if they desire to take part
in the solicitation. Additionally, solicitations for housing
privatization projects commence with a widely publicized industry forum
held in the local vicinity of the proposed project to ensure all
interested parties can participate.
[Clerk's note.--End of questions for the record submitted
by Congressman Farr.]
Wednesday, February 16, 2000.
U.S. DEPARTMENT OF DEFENSE
WITNESSES
ROBERT E. HALL, SERGEANT MAJOR, UNITED STATES ARMY
JAMES L. HERDT, MASTER CHIEF PETTY OFFICER, UNITED STATES NAVY
ALFORD L. McMICHAEL, SERGEANT MAJOR, UNITED STATES MARINE CORPS
FREDERICK J. FINCH, CHIEF MASTER SERGEANT, UNITED STATES AIR FORCE
STATEMENT OF THE CHAIRMAN
Mr. Hobson. The hearing will come to order, fairly close to
on time. By Government standards, I guess that is pretty good,
at least when I was in the State Senate; we try to start on
time when we can.
Today's hearing is going to focus on the quality of life in
the military. The witnesses today are the senior enlisted
members from each service. This hearing is intended to continue
the tradition of this subcommittee, which is to focus on the
quality of life issues.
We look forward to hearing your views since you should be
most in touch with our young people in the services and their
families. I have been out traveling around a little bit, and
there are some issues that we are going to raise in our
questions.
I want to thank the members of the committee who are here
so far and thank Mr. Hoyer for showing his interest in the
committee by showing up. It seems like every day we hold a
hearing, we have someone who is not on our committee, and now
we are bipartisan, because yesterday we had a Republican, and
today we have a Democrat. But in this committee, we are just
looking for the truth, and I think that is the way we want this
committee to be.
I will yield at this point to Mr. Olver for anything that
he might have to say.
John.
Mr. Olver. Thank you, Mr. Chairman.
I also want to welcome you, who represent the backbone of
the men and women--although you are all men--who serve on
behalf of America in the armed forces.
This is always a very interesting hearing because all the
Members on both sides of the aisle are deeply concerned about
the quality of life that the men, women, families must deal
with as they serve us. I think your concerns are undoubtedly
about the same as other Americans' for health care, child care,
and good housing, and that really affects the readiness of the
services and the retention. You are representatives of
retention perhaps even at the extreme level, but we have lots
of other needs in terms of retention.
I do not want to go on and presume what you are going to
tell us about these issues of quality of life. I would rather
not try to put words in your mouths; let us hear from you. We
want to do the best we can on all sides, in this subcommittee
and throughout the Congress.
Mr. Hobson. But I want you to be prepared for two things--
and I think Mr. Edwards is going to hit on this, too, when he
gets his shot--there are two things I would like you to talk
about, that you might summarize in your testimony. Those are
the Basic Allowance for Housing (BAH) and the change in the
(BAH) and what has happened as a result of that. And what you
are hearing, based on the hearing we held yesterday and the one
we had last Thursday, is very important to us, and if there is
any fix that you know of that is happening. Also, in the area
of health care, I have had some complaints from recruiters, a
Navy recruiter whose credit was really messed up because he
could not get his TRICARE health care stuff. I think there are
some Air Force people, and I do not know about the Marine
recruiters--they are too big; I do not really handle those guys
too much--but there are some problems with TRICARE in that
respect, and we need to know about that, too.
So if you would just summarize your testimony, and then we
will get to some questions.
Do you want to start, Sergeant Major Hall?
STATEMENT OF SERGEANT MAJOR ROBERT E. HALL
Sergeant Major Hall. I would be honored to, Mr. Chairman,
distinguished members of the subcommittee.
As you know, sir, I have submitted a statement for the
record, but I would appreciate a few minutes just to make some
opening comments.
Mr. Hobson. Certainly.
Sergeant Major Hall. It is an honor to appear before you
today to represent and talk to you about the health and the
needs of our soldiers, the young men and women who are the
United States Army. You begin to realize what a great country
this is when a country boy from South Carolina is afforded the
opportunity to testify in front of Congress.
This is my 29th month as Sergeant Major of the Army, a
relatively short period, but Saturday marks 32 years of service
in uniform as a soldier. On a sadder note, I will retire this
summer and will pass on to another deserving noncommissioned
leader the opportunity to sit here next year. I may not miss
that part, but I will miss the opportunity to serve with
soldiers and to represent them at every level of leadership.
My guidance from two Army Chiefs of Staff is to be a
forceful advocate for soldiers, to be with soldiers and keep my
eye on the future. I have done that to the best of my ability
during testimony and also as I travel throughout the Army
talking with soldiers at every step.
My goal has been that I always tell their story and express
their concerns, and I knew I could only do that if I had some
of the same mud on my boots as the soldiers whom I lead and
represent have on theirs.
I will tell you, sir, that the Army is answering the
Nation's call in a way that makes soldiers, past and present,
swell with pride. They are peacekeepers, they are peacemakers,
they are warriors. They are continually called upon to meet the
Nation's commitments, sometimes in places whose names they
cannot even spell and always only a quick breath from being in
harm's way.
This is my third and final opportunity to appear before
you, but I would be remiss if I did not take a second to thank
you for your support. There is a song that we use as one of our
recruiting themes that goes: ``When we were needed, we were
there.'' That is also true of you. When we needed you, you were
there. You provided for contingency operations and addressed
some of our most pressing near-term readiness issues; you
financed and funded key unfinanced requirements. Your support
and leadership significantly improved our ability to maintain a
trained and ready force, and it created a better quality of
life for our soldiers and their families.
I will tell you that from my foxhole, the Army's challenge
has not changed much from last year. Recruiting and retention
remains a challenge. The balancing act between people,
readiness and transformation in the budget process is delicate.
Deployments are high and our warriors are much in demand
throughout the world.
We fully understand that we as an Army exist for one
reason--to fight America's wars when called upon to do so. This
requires a force that is trained and ready to fight and one
that has the ability to sustain and win. The single most
important resource for making that happen is our people; our
soldiers whose selfless service, dedication and professionalism
sustain us today on missions in 74 different countries. They do
not ask for much. They face an unprecedented operational pace.
They are top-quality people. They are diverse, highly-skilled,
well-trained, well-led.
Our soldiers did not ask to be in those faraway lands, but
they are. And they are doing everything that our Army or our
Nation could ask of them, and in return, they ask for decent
pay, housing, medical care, and retirement benefits for the day
when they too take off their uniforms for the last time.
I think their hopes and expectations are reasonable. These
young men and women protect the freedom of our Nation without a
single thought about comfort or pleasure or profit or personal
safety. They do so much and ask for so little.
I am very proud of our soldiers, and I am extremely proud
to have the opportunity and the privilege to represent them
here today.
Thank you, Mr. Chairman, for giving me the opportunity to
make this statement.
Mr. Hobson. Thank you for your service.
PREPARED STATEMENT OF HON. ROBERT E. HALL
Mr. Hobson. Petty Officer Herdt.
STATEMENT OF MASTER CHIEF PETTY OFFICER JAMES L. HERDT
Chief Petty Officer Herdt. Good morning, sir, Chairman
Hobson, members of the committee.
Thank you for the opportunity again to speak on behalf of
the sailors and families of our great Navy. This is my second
opportunity to testify before this committee. It is my distinct
pleasure to thank you on behalf of America's sailors serving
around the world for taking the time to listen and respond to
their concerns.
Sailors enthusiastically send their thanks for your
congressional support in passing last year's pay triad. It was
an enormous first step in the right direction, and we must now
continue this progress. I look forward to answering your
questions later.
My duties had me traveling over 200 days last year,
visiting with thousands of sailors and their families stationed
across Europe, in the corners of Japan and Korea, in the
Arabian Gulf, and throughout the United States. Sustained
forward presence on station is the unique attribute that your
Navy brings to the table for America's defense.
Approximately 40,000 sailors are on deployment on any given
day, lasting anywhere from 3 to 6 months. In my travels to
ships deployed in virtually every corner of the world, I find
that our sailors do not complain about deploying or living
aboard their ships; neither do they complain about working 14
to 16 hours per day, 7 days a week, while at sea. Deployments
are what we do in our vehicles for combat--our ships.
Sailors know this and take intense pride in fulfilling
their duty to all Americans. However, when their duty does not
call for them to make these expected sacrifices life at sea
brings, they should and do expect to be provided adequate
living conditions ashore commensurate with their peers not in
the military.
The great gains Congress made to financially compensate
service members in last year's budget were very well-received.
Yet I know we will never be able to afford to pay our service
members enough for their sacrifices, and our sailors understand
this. Luckily, America has sons and daughters who realize that
the importance of freedom and democracy goes beyond financial
value.
Relative to the vital job they do in ensuring the freedoms
we all enjoy, they do not expect much. Everywhere I travel, the
number one request is for improved quality of life. It is
essential now more than ever to show our sailors our commitment
to ensuring they can live within the modest and reasonable
quality of life standards they request.
We in the Navy are reemphasizing our commitment to retain
sailors. This commitment is essential to sustaining the
fighting force America has come to expect from us and to
ensuring that we are responsible stewards of the taxpayer's
dollar.
I am convinced that the quality of the facilities in which
we train, work and live plays a vital role in retaining Navy
families. The key in our retention efforts is to retain the
Navy family. We recruit sailors but retain families. Last year
was a monumental year for sailors' compensation, and they
noticed and appreciate your commitment.
While I am confident that other crucial issues are being
addressed, I want to stress my belief that compensation alone
will not guarantee that we recruit and retain a quality force.
As I have stated in my written statement, I have three main
concerns in regard to quality of life and military
construction. The first is to define Basic Allowance for
Housing (BAH) to cover 100 percent of a sailor's housing needs,
as the Secretary of Defense has proposed. The second is to
increase our commitment to continue meeting the growing needs
for military family housing in the Navy; and finally, to
continue support for the Navy's Public-Private Venture.
These three initiatives would be the most welcome
expression of commitment from the Congress and the American
people. This ``Thank you'' would be a most appropriate
reflection of our Nation's appreciation for the sacrifices that
United States sailors and their families make and the hardships
they endure every day in providing freedom and democracy around
the world.
In regard to the two issues that you specifically asked
about, sir, BAH and TRICARE, I will just make a very brief
comment before we get into the questions about it.
I think BAH, if calculated appropriately, will serve us
very well. I think there are some issues that need to be
addressed in it as it is currently being implemented. I am not
sure the standards are right, for one. But in the end, I think
it will serve us well if we continue, if we stick with it, and
we iron out what difficulties we have with it.
The TRICARE piece is a little more problematic, because I
have spoken to the same individuals that you have with regard
to indebtedness brought about by nonpayment of TRICARE bills on
time. That is a fundamental issue that I had hoped would be
addressed earlier than it has been. But I will tell you that my
vision of a fix that is fundamental to getting TRICARE right is
a military care system where the sailor never receives a bill.
This is something that I think should be handled between the
contractor and the doctor. Sailors and their families do not
care to navigate medical care systems----
Mr. Hobson. Their credit should not be affected by the
nonpayment by the contractor. It is outrageous.
Master Chief Petty Officer Herdt. Absolutely.
Mr. Hobson. We got it worked out, but he had to come to me
before we could take care of it, and that tension should not be
there.
Master Chief Petty Officer Herdt. And he is not the only
one.
Mr. Hobson. I am sorry to get into that before the
questions, but I had about five or six different recruiters in
a room who came to me, and the Navy guy had a number of years
in--they all had good years in--this is a very prideful thing.
You pay your bills, and something that you have no control over
happens and ruins your credit rating. How do you get that back?
We can get it paid, but how do you get that expunged from his
record and frankly from his family's mind and so on?
Master Chief Petty Officer Herdt. Absolutely, sir, and the
financial accountability is one of the things that we key on in
leadership, and here we have a system that has brought about
some of these problems.
The other two issues with regard to retiree and Medicare-
eligible military retirees is also problematic, and I am
looking forward to whatever we can bring about this year to put
some of this right.
So, sir, in closing, let me just say that I look forward to
addressing your specific questions on these and other issues
you may wish to discuss and thank the committee for its
continued support.
Thank you, sir.
Mr. Hobson. Certainly.
[The prepared statement of Master Chief Petty Officer James
L. Herdt follows:]
Mr. Hobson. Sergeant Major McMichael.
Sergeant Major McMichael. Good morning, Mr. Chairman.
Mr. Hobson. This is your first time, isn't it?
Sergeant Major McMichael. This is my first time.
Mr. Hobson. We are not as bad as you have heard.
[Laughter.]
STATEMENT OF SERGEANT MAJOR ALFORD L. MCMICHAEL
Sergeant Major McMichael. Good morning, sir, and
distinguished members of the Military Construction
Subcommittee.
It is a privilege for me to have the opportunity to come
before you this morning, and as the chairman has stated, as my
first time in my capacity as Sergeant Major of the Marine
Corps. But I am also honored to have the opportunity to come
this morning and discuss with you the military construction
program that we have for the Marine Corps which vitally impacts
on the quality of life of our Marines, or your Marines. In
that, we are very thankful for all the things that our
leadership of this great Nation, including the Secretary of
Defense and our leaders in Congress, have done to help us build
this bridge that we cross every day with military construction
and quality of life to a point where we can actually get on the
bridge and now have a feeling that we will one day cross it. A
lot of that has been done with the support of people in the
right places of leadership and concern.
Although the weapons and all the plus-ups of money for the
budget and pay are very vital, and we can see those things, one
thing that is really a quality of life issue to the Marines--
and when I talk about Marines, I am talking about not only
those who are in uniform but the family members as well, and
that includes those who have gone before us who now carried the
title of ``retiree''--when they come aboard our bases and
stations and see that things have changed, and they see new
construction and new barracks and new family housing, they see
state-of-the-art fitness centers and day care centers, these
things make a major contribution to retention as well as
recruiting. That is why I speak of the ``Marine family,'' and I
try to paint the picture of the Marine family as everyone who
has worn the uniform as well as those of us who are still in
uniform today.
At this point, I will say to you that we are very grateful
for those things that we have received, but there is still a
lot to be done. I will say to you this morning that the
foundation is strong, but without the sustainability of the
appropriation that has been requested for FY01, we might find
ourselves taking a step back as far as quality of life is
concerned.
We must sustain that request and support the request to be
able to continue to upgrade the 97,000 single bachelor quarters
throughout the world that the Marine Corps manages each day.
For us to continue to make this happen, we will ask for support
from an appropriations standpoint for the year FY01.
I am here to say that we cannot get there without that. We
will stay at the front of that bridge and never be able to
cross it.
But even with that, we must understand that once we build
these things, we have to put the right stuff inside so that
these young men and women who are still so willingly and
faithfully, even with a robust economy, coming into our
military to serve. They may dress a little differently, and
they may think a little differently, but they are still showing
up to answer the call of their Nation. The patriotism is there,
and I believe they deserve to be in a comfortable dwelling when
they are away from the battlefield and away from the foxhole.
That is why we have to have this support, and we plead for
this support so that we can carry on and continue to add to the
single barracks or the bachelor housing.
We have moved into a ``whole room'' concept which has
allowed us to give facelifts and some of the needed repairs in
preparation for giving them quality of life. That is a great
asset, but we still have to go further. We cannot stop now. It
would be like buying a new car and never putting fuel in it--
one tank of gas when you drive off the parking lot will not get
you good use of that vehicle when it is time to trade it in for
a new one. That is why we need to continue to add to our
request for appropriation help in the years to come.
Our family housing consists of 23,000 quarters that we
manage a year in the Marine Corps--23,000--but 80 percent of
those quarters need major repairs. I will say to you that we
have done a great thing in trying to work in this area, but if
we stop there, where will we be in 2005? We believe that if we
get the support we need, we can eliminate some of this by the
year 2010 and make quality of life central.
It is not only a readiness issue; it is a retention issue,
it is a recruitment issue, it is a Nation's issue. It is all of
our concern to do this thing in a partnership manner so that we
can take care of the young men and women that we bring from the
streets of America, the homes of our mothers and fathers, every
day. We deserve to be able to treat them with dignity and
respect by giving them the things that we would want any
serviceman, any American, to have in quality of life.
So my thing today is not just the barracks maintenance and
the single Marine quarters, but the families as well, because
it will make a great impact on quality of life.
To touch on TRICARE, it is another major issue for us to be
very, very focused on. Without good health care, you do not
have a healthy Marine family to be there to support them when
they go off to battle. On any given day, we have 23,000 Marines
forward-deployed to do the things that our Nation requires of
us. We should be able to know that those families, whether it
is an earache of a 3-year-old at 2 o'clock in the morning, can
go out and get taken care of without having to worry about
being financially strapped or credit ruined just to take care
of that child. That keeps the military member, your Marine,
focused on the mission that you expect of us when we go into
harm's way.
I look forward to answering any questions on those issues
this morning, and I once again say that even though this is my
first time here, I consider it a great privilege and look
forward to answering your questions.
Thank you.
Mr. Hobson. Thank you, sir.
[The prepared statement of Sergeant Major Alford L.
McMichael follows:]
STATEMENT OF CHIEF MASTER SERGEANT FREDERICK J. FINCH
Chief Master Sergeant of the Air Force Finch. Good morning,
Mr. Chairman, members of the committee. I, like my counterparts
here, am delighted to have an opportunity to come here and
address the concerns and issues on behalf of the 500,000 airmen
on active duty in the Air Force Reserve and the Air National
Guard as we go out and look for improvements for the year 2000
and beyond.
I first, like my counterparts, would like to thank the
Members of Congress and the administration for the great shot
in the arm that you have given us beginning with the year 2000
with the pay raise and the guaranteed plus-up above ECI for the
next few years and the repeal of the Redux retirement system.
All of those send a very strong message to our airmen as I
travel around that someone is very concerned and cares about
their sacrifices and contributions, and I think that that is a
big plus.
As I travel around, I find that our airmen, one, do very
important work and realize that fact; two, want to be
reasonably taken care of, themselves and their families; and
three, want to know that they are appreciated for what they do
for America.
So the messages that we send, and that you send, in terms
of the quality of life issues send a very important message to
the men and women about our care and feeding for their future.
As we begin the year 2000 and beyond and as we start
looking forward, the most serious challenges that we face in
the Air Force today are going to be in recruiting and
retention--finding enough people to sustain the Air Force and
what you and the American public want for our future. Now, that
is directly related to our ability to provide a quality of life
for these men and women and their families.
This is a difficult balance as we try to provide funds for
modernization, for readiness and for quality of life, but I
will tell you that without the people portion of this, it does
not make any difference how good the materials are as we go
forward.
I realize that direct compensation is probably the biggest
issue that people have addressed to me in the last 6 months
since I have been Chief Master Sergeant of the Air Force. I
have traveled to 35-plus bases in the 26 weeks that I have been
in this job, and all the issues that you addressed, Mr.
Chairman--the BAH issue, certainly for today--I have spent a
lot of time talking with people about that in the last 6
weeks--that is a big issue; TRICARE also remains a large issue.
People are cautiously optimistic about the future, but as the
Sergeant Major said, this is something that we must continue to
work as we move on.
We thank you for the many contributions you have made to
us, and the airmen thank you for that. We need more work to be
done, and I look forward to answering your questions to help in
this process.
Thank you.
[The prepared statement of Chief Master Sergeant Frederick
J. Finch follows:]
Mr. Hobson. I am going to let the members ask questions. We
have a conference on our side this morning, but I went ahead
with the meeting anyway, but that is why this side is not here.
OVERALL FUNDING
I just want to mention one thing for the information of
everybody so they understand. One of the problems we have is
that while the overall budget is an increase of $15 billion
from the Department of Defense, funding for this bill by the
administration, actually, if you take out base realignment and
closure, the military construction and family housing accounts
decreased $951 million. I do not know if they expect us to plus
it up or what, but I think all of you, when you are making out
your stuff and you are talking to people, need to fight a
little harder to make sure that we maintain at least our levels
as we go through these, because we just cannot afford to let
down in these accounts, and we cannot always depend on a plus-
up.
I might tell you that one member of this committee the
other day was on the ground, underneath a truck, looking at the
truck; and we have been on the bases; and members of this
committee are getting out, going into barracks and into family
housing to see what is going on. We have been traveling
together, some as individuals, and we hope that people will
understand that we are trying to make a difference for them;
every member of this committee is trying to do that.
We will move forward now and recognize people in the order
in which they came in. We will try to follow the 5-minute rule
in the first round, except for the ranking member, and see
where we go from there.
Mr. Olver.
Mr. Olver. Thank you, Mr. Chairman.
I would like to allow the other members on our side of the
aisle to have a chance. They have other things to do. We are
here for the duration, so I will have a chance, and I would
like to let them go, and I will follow them, if that would be
helpful to them.
Mr. Hobson. Certainly.
Chet, you are up.
Mr. Edwards. I do not know who tried to run over our
chairman with a truck, but Mr. Chairman, I am glad you are here
and set up this meeting.
Mr. Hobson. No, no. I was not under the truck. Another
member was under the truck, checking it out.
Mr. Edwards. I understand. I appreciate that.
Thank you for calling this meeting, Mr. Chairman. Having
the privilege and honor to represent Fort Hood, I find that
military leaders and national leaders from other countries are
more impressed by our Non-Commissioned Officers Corps than any
other single aspect of our military. You represent the very
finest of that today. As someone who believes in the concept of
public service, I feel honored to be at the same table with you
who have given your lives to the true meaning of public
service, and I want to say thank you to each and every one of
you.
BASIC ALLOWANCE FOR HOUSING
The issue of Basic Allowance for Housing was mentioned by
several of you as an important issue. I would like to ask what
you are hearing from the folks back home.
Sergeant Major Hall, I can tell you what I am hearing from
20 percent of the active duty Army divisions that are at Fort
Hood--they are located anywhere in the world, but 20 percent
being in Fort Hood--is that it is creating serious morale
problems, that as more and more soldiers learn about it, it is
causing great upset. In my opinion, it is undermining a lot of
the good will we intended to create with the billions of
dollars we committed to salary increases and retirement benefit
increases last year, and that even though the intent was to
help high-cost cities, it is insanity to harm those who are in
middle-cost cities who did not have their rent rates drop by
reducing their Basic Allowance for Housing. And for $20 or $30
million or whatever the savings is, to undermine the good will
that we spent billions to increase just does not make sense; it
is penny-wise and pound-foolish.
The chairman and I and a number of us are working with the
Pentagon and every other person we can talk to now to try to
change this. Some of us think it needs to be changed quickly,
that we do not need to analyze it for 6 months; it is wrong,
and we ought to have a ``hold harmless'' for those soldiers,
Marines, sailors, airmen who were in a mid-price city and did
not have their rent rates drop, but their allowances dropped as
of January 1.
Can you tell us--and I am not asking you to criticize the
Pentagon program that was put in place January 1--perhaps I
could ask it in a positive way--if this Basic Allowance for
Housing Program is important, wouldn't it do a lot of good for
morale if we could go back and correct that, if Congress and
the Pentagon working together could correct that quickly?
Couldn't this potentially be a serious problem as more and more
of our military men and women find out that their housing
allowances have been dropped?
Sergeant Major Hall. Sir, by the emails I receive, I think
they all know that it has been dropped.
Mr. Edwards. Okay.
Sergeant Major Hall. You started off asking what are we
hearing. The 4.8 percent pay raise was a great news story, a
show of faith that we appreciate the service and the sacrifice
of our people. Pay table reform, a movement in the right
direction, needs another look to give more compensation, more
money, to non-commissioned officers. Victory on the Redux
retirement system is probably the best thing we could have done
for those mid-grade noncommissioned officers.
So everybody is feeling good about their service and their
sacrifice and their leadership. BAH hits them--I would say that
the BAH still has the capability of being better than the old
Variable Housing Allowance which put the enlisted force in a
death spiral with regard to what their allowance was with
dollars. So this is better.
They think that we use smoke and mirrors; that you gave a
4.8 percent pay raise on one hand, and you took it back on BAH
on another. I do not think that that was the intent; I know
that was not the intent.
Mr. Hobson. But we did not do the BAH system, although we
may agree that things changed around correctly. We did the pay
raise and the retirement. Somebody else down there did that. I
do not want any misimpression that the Congress did that.
Sergeant Major Hall. First of all, I do not think the
soldiers care. [Laughter.]
Mr. Hobson. But we do.
Sergeant Major Hall. I know you do, and I do not mean to be
flip. I have been able to keep in pretty good touch with
soldiers. I have been in for 32 years, and I have a daughter
who is 29, a daughter who is 22, and a son who is 14, so I know
what young folks think today--they are a little bit strange
sometimes, but I know what they think.
My daughter is married to a sergeant who is at one of those
division installations--not yours, sir; he does not need
anymore pressure, he has enough--and when my daughter calls,
she does not call the Sergeant Major of the Army, she calls
``Dad.'' So I have been able to keep in touch.
The leadership and military leaders, uniformed and
civilian, have lost credibility because of the BAH issue. There
was a lack of communication between higher headquarters and the
contractor who did the surveys and who to this day keeps that
as proprietary information. So I do not know if the data is
right or not, because we cannot look at it. So there was a lack
of communication between those two elements, plus local housing
offices, which have got to play. The Fort Hood, Texas, housing
office has got to play. If there is a neighborhood that we do
not want soldiers in, we can exclude it. In some cases, those
housing offices did not play, and they were excluded--not at
your doing, but at our own doing, and some of them were Army.
And there was a lack of communication between the leaders. But
when you get all four of those entities in, and nobody is
communicating with each other, that is how it happens.
Absolutely the right thing to do is to go back in and buy
back so that you are back at the 1999 rates. And sir, I applaud
your efforts to do it very, very quickly. How do you account
for that later? If you want to, you can account for it, because
with the Secretary of Defense's initiative to now buy back the
15 percent of out-of-pocket expenses as allowances in high-cost
areas move up, if the data is right, maybe those locations move
up a little bit on a different pay scale--but absolutely to buy
back very quickly.
Mr. Edwards. One last quick question I think will finish my
time, but I will come back to this in the second round. Does
the level of concern that you have just expressed to this
subcommittee come from the four of you and upstairs at the
Pentagon to our Chiefs as well as the Secretaries? Are you
passing along this level of concern?
Mr. Hobson. And have you all heard the same things about
it?
Chief Master Sergeant Finch. Essentially, yes. I can speak
for the Air Force. Sixty-eight percent of the people will not
say anything because they get a plus-up in the BAH, so it is
pretty quiet from their perspective--not a lot of mail saying
gee whiz, thank you, thank you. But for anybody in the areas
where it went down--and there are over 16 areas for the Air
Force, some in Texas, by the way----
Mr. Hobson. Wright Patterson, I hear.
Chief Master Sergeant Finch. Wright Patterson, San Antonio;
a lot of information coming back to us. Part of it, though, is
a communication issue. BAH is, certainly as I explain it to
people, a much better program compared to what we had under the
old quarters allowance and then Variable Housing Allowance
(VHA) for our airmen and soldiers. So I hear this as an issue,
but I agree with the Sergeant Major that we did not communicate
all of this, so there are lots of questions. But we have pushed
this back to our senior leaders and explained it to them in the
services and in OSD, and they have responded by going out--I am
not yet to San Antonio, but I know that the Department of
Defense (DOD) experts and the Air Force experts just went out
to McCord in Washington to confirm the data and talk to people.
So it is being addressed.
Mr. Hobson. The Navy is being real quiet because they did
pretty well under this. The Marine Corps is not saying a lot
because they did not do as well, so they have been quiet about
it.
Mr. Edwards. But it is an issue of trust, and I think the
four of you are going to be crucial in this fight. I just want
to let you know that you are not alone. We will work with you
and fight with you, but we need your voices speaking out for
the working men and women in the military.
Thank you, Mr. Chairman.
Mr. Hobson. Thank you.
I think we have a few more minutes.
Allen, I think you were here next.
Mr. Boyd. Thank you, Mr. Chairman. I will be very brief.
HOUSING PRIVATIZATION
First of all, Chief Finch, I know that you all have done a
lot of experimentation with housing privatization in the Air
Force, and Congress is preparing to reauthorize some of those
projects and some of the statutes. Can you tell me if you are
making any recommendation in terms of any standard guideline or
template that we might follow--because I know you have done
lots of different kinds of experimentation with it.
Chief Master Sergeant Finch. We have about 10 privatization
projects ongoing right now. We just completed one.
Mr. Hobson. You have only completed one.
Chief Master Sergeant Finch. Right. Lackland was the first
one. There are some ongoing privatization projects. It is
something that we need to pursue, because at the end of the
day, right now, we have 106,000 houses in the Air Force
inventory of which 65,000 need some revitalization, and in
order for us to do it strictly with the military construction,
it would take us a long time to get there. So privatization is
a way to help down that road.
Mr. Boyd. But you are not ready at this time----
Chief Master Sergeant Finch. To give a template on how that
should go--I do not believe so, sir, but I can check with our
housing experts.
[The information follows:]
MILCON QUALITY OF LIFE
As you know we initially identified 10 pilot projects to
test a range of authorities provided in the 1996 authorization.
We currently have one project at Lackland awarded and three
others in the process of contract award (Robins--July 2000,
Dyess--July 2000, Elmendorf--August 2000). Each of these
projects have provided valuable lessons learned that we have
cross-fed to the field, but at the same time each project
provides its own unique set of challenges. Each of the projects
have a specific expense and income profile based on the
condition of the housing units and the BAH of the military
member to occupy the unit.
Regarding a standard guideline/template, we are
establishing the Air Force Center for Environmental Excellence
as our implementation focal point for housing privatization.
This ensures the lessons learned are incorporated in future
privatization ventures.
RETENTION
Mr. Boyd. One quick question, Sergeant Major.
I notice that your retention rates were at an all-time high
last year, but recruiting problems continued to exist, and you
did not meet enlistment goals. Is that retention rate because
of the good things that happened last year? Is that a one-shot
deal, or is that something we can expect to continue?
Sergeant Major Hall. Sir, I hope it is something that will
continue forever. It is really hard to explain. We did miss our
recruiting goals last year by about 6,300, but those who came
in stayed at rates that we had never seen before.
I think some of it was because of the initiatives with pay
and retirement. I think some of it is a belief that we will
work medical care the coming year, and that is important, that
we work TRICARE this year with the same intensity that we
worked pay and retirement last year.
I think part of it is the fact that they are doing what
they come in to do and they are making a difference, and they
feel glad about what they are doing.
When we go to places like Kosovo and Bosnia, those units
which are most deployed, retention rates are the highest in
those areas.
I hope it is because they have not lost faith--faith in the
Army, faith in the leadership of this country, and faith in
themselves, that they are going to do okay.
With regard to recruiting this year, I will tell you, sir,
that we made our recruiting goal for the first quarter; we
overproduced in January by about 700 soldiers, and the first
week of February was an extremely good recruiting week. No
promises--it feels good to sit here today and say we made it
for 4 months, but we still have some tough months ahead of us,
and I would not base any projections on making it by the end of
the year, but just to know that we made it the first quarter
and the first month of this new quarter is a pretty good goal.
But I think we need to continue working initiatives, General
Equivalency Diploma (GED) plus some other things; we need to
find every way we can to offer opportunities for young men and
women to come in and serve.
Mr. Boyd. Thank you very much.
Thank you, Mr. Chairman.
Mr. Hobson. Why don't we just stop here for a moment? We
have 7 minutes to vote, and then we will come back, because I
want to talk some more about these issues before we conclude.
[Recess.]
Mr. Hobson. We can proceed.
Mr. Walsh, do you have anything that you wanted to ask?
Mr. Walsh. I do not have any questions at this time, Mr.
Chairman. I just walked in. We are glad to have you here and
appreciate your testimony.
Mr. Hobson. Mr. Goode.
Mr. Goode. Not right now; thank you.
Mr. Hobson. Okay. Chet.
BASIC ALLOWANCE FOR HOUSING
Mr. Edwards. Just following up on the Basic Allowance for
Housing issue, I heard during the break that maybe July is a
period that the Pentagon brass are thinking about solving this
problem. I hope you will send back the message that a lot of us
feel that that is too late. That is 6 months of distrust that
we are fomenting, and it is 6 months of morale problems.
My concern is that just as when we backtracked on
retirement, even after you correct it, there is still that
trust issue in somebody's mind when they and their spouse are
thinking about whether or not to re-enlist. And I do not want
that distrust.
Sergeant Major, I think you said it well, that soldiers are
out there thinking this was a smoke and mirrors game where,
even though we gave them billions in new benefits and we only
took away about $30 million, they are thinking that for every
dollar you gave us in benefits, with smoke and mirrors, you
took that same dollar out of the other pocket. It is absurd to
create that kind of problem and let it go on for 6 months.
So I hope that you will, if you honestly feel this way,
pass back your judgment, which should be more important than
ours, on the importance of resolving this quickly. We do not
need 6 months to study this problem. We ought to be able to fix
it in 6 hours.
Thank you, Mr. Chairman, and thank you for your focus on
this.
Mr. Hobson. I just want to mention to each of you that I
did speak to some senior officers yesterday, and some of them
do not think this is a huge dollar amount, that we may be able
to handle it and handle it pretty quickly, but I would echo the
statement that it ought to be handled as fast as possible,
because with the emails you are getting and the emails we are
getting, it is just not worth the dollars having the trauma out
there, especially when--and I think you said it, Sergeant Major
Hall, and it was echoed--that the BAH change is an overall
positive change in the way we are doing it versus the way we
were doing it for the people in the military.
I think you would all agree that it is the right step; it
is just that the implementation is a problem at this point. Am
I correct in that?
Master Chief Petty Officer Herdt. Sir, if I might, I do
believe it is the right step. It is the right direction in
which to go. I am not sure that we have done a really good job
of educating folks in the process used to calculate the BAH.
Sir, in your question to Sergeant Major Hall, about folks
lining up saying, ``Hey, I have lost money,'' they have not
lost money. The folks coming in are not going to get the new
rate. The folks who are there are in a save pay. That is not
satisfactory, and I am not implying that. But I get the same
emails, ``Hey, I am losing money.'' Well, they are not losing
money. That does not imply that we have actually gotten it
right.
So if we can do a better job of being more open with how we
are coming about deriving the BAH--there does not seem to be a
lot of open information on how we got to what we came up with.
I still get questions about, hey, did you know that the only
enlisted pay grade that is expected to live in a single-family
dwelling is an E-9?
I am here to say that it would be my expectation that every
chief petty officer, E-7, 8, and 9, should be living in a
single-family dwelling.
So I am pretty sure that we do not have the standards
right, and that is another piece that I think needs to be
fixed.
Mr. Edwards. I agree that there is a terrible communication
problem. As an example, I found out about this when speaking to
a group of folks at Fort Hood, bragging about the pay raise and
the retirement benefits, and a soldier raised his hand and
said, ``Sir, how about the cut in our housing allowance?'' and
I did not even know anything about it.
But I do not want to leave here with us thinking that by
just communicating better, we can solve this problem, because
to some people, it is not a communication problem--it is a
reduction. If two majors are living next to each other in an
apartment complex, or two privates, and one is getting $100
less per month in housing allowance than the other person with
the same rank, doing the same job, that grandfathering, even
though it is well-intended, is actually going to exacerbate the
ill feelings about this process.
Master Chief Petty Officer Herdt. It is an inequity,
absolutely.
Sergeant Major Hall. It certainly bleeds into other areas,
if I may. I used an example 2 years ago of a private first-
class, an E3, at Fort Hood, Texas, who was married and had two
kids, not typical of our soldier today, but it does happen. If
you put expenses on one side of the ledger, and you put income
on the other, at that time, he had $17 of disposable income.
Now it is up to about $60 of disposable income. But he is
making medical decisions for his family sometimes based on how
many dollars he has in his pocket.
So it bleeds into everything with the full spectrum of
quality of life for soldiers.
Mr. Hobson. If I could interrupt for a moment, I am going
to have to leave, because I have to go to another committee
hearing and ask some of these questions in that hearing in
Defense Appropriations. It is going to end shortly, I want to
get in there and ask some of this stuff on readiness for you
all. It is not that I do not want to be here; it is that I have
got to get over there and ask that stuff.
Mr. Aderholt is going to take over.
I want to show you the stuff they gave us on Fort Bragg. I
do not know if you have seen a copy of that, and I am sure that
you have them also. If you could give them to us for our
committee, we can keep the pressure on. We are trying to raise
it to a level where it gets done, and we do not want to do
legislation. We think it can be fixed internally, and I have
been given some information that it can be fixed internally,
and Chet has raised it; it is the highest levels of this
country. So we are hoping we can get the right attention for
all of you.
And just before I leave, the whole purpose of this
committee is to try to improve the quality of life of the
people that you represent, and you need to tell all of us from
time to time the things that are most critical to you that we
can do to improve the quality of life of the people serving in
the armed services and the families at home.
I was in a home recently of a young PFC which I talked
about. He had a brand new house. His wife had a smile on her
face. The child was playing games on the computer. They were
the perfect model of what we would like to see. And you will
not have any problem with that kid's performance in the
service, because he has a happy home life, and he is going to
do well. And you will not have any problem with him re-upping,
because he is happy at his job and at his home. That is our
goal. He is our goal--she is our goal--wherever they are.
So, Robert--I do not know who is up next. Allen, were you
finished?
Mr. Boyd. Yes.
Mr. Hobson. Okay. Then, I think it is John, then Sam.
Mr. Aderholt [presiding]. Mr. Olver.
Mr. Olver. Thank you, Mr. Chairman.
I think we have asked a number of questions about the BAH,
and we know there are problems there. There are subtleties in
the way it has been handled that are not exactly simple, and we
really need to understand that very carefully, the kind of
inequity that can come out of the last discussion. All of us
are committed to making certain that that gets corrected. I
think it is fair to say that everyone on both sides of the
aisle here is committed to making that sort of change, and it
is important enough that the chairman has gone off to his other
committee, which is the committee in which that perhaps is
equally or more so the point. We sort of divvy up the housing
issues, where we do the military construction housing and the
privatization aspects, but the BAH is managed in the other
subcommittee, and how it is funded comes from there. So you can
take that to your constituents that we are all committed to
that.
I was sort of curious, just as one last question--Chief
Master Sergeant Finch, you had said that 68 percent in this
system were going to actually benefit, so they were being sort
of quiet. I take it you did not mean 68 percent across the
armed services. I take it you meant within the Air Force?
Chief Master Sergeant Finch. My understanding is that it is
across the services.
Mr. Olver. It is across all services that that 68 percent
applies.
Chief Master Sergeant Finch. Yes, that is my understanding.
Mr. Olver. Okay. I just wanted to clarify that for my own
information.
RECRUITMENT AND RETENTION
My colleague from Florida commented about recruitment and
retention, and I want to follow up on that just a little bit.
We did give pay and retirement benefits, but it was late enough
in the year that it is hard to imagine that it could have
really affected what was going on in retention and recruitment
during last year. So I do not know what to make of the fact,
Sergeant Major Hall, that retention was good, that recruitment
had a little bit of a problem.
Are you now--and I would like each of you to address this--
do you believe you are now seeing any impact now of what was
done late in the session last year, on both recruitment and
retention, each in turn? I think maybe I ought to hear from the
other three first.
Sergeant Major Hall. I would like to come back at the end.
Mr. Olver. Okay, sure.
Master Chief Petty Officer Herdt. Sir, if I might, we have
seen an upswing, an improvement in retention in the Navy.
Although we have seen it, we cannot be sure of this because of
the pay triad improvement of last year. We would like to think
so. It is early enough in the trend that we cannot say that it
is a sustaining trend, so we are sort of withholding right now.
We are watching it very closely to make sure that when we do
make a judgment based on it that we have some data to put it
against.
But I would tell you that what we have seen is heartening
in that we have stopped the downward trend, and it is actually
kind of coming up in the last couple of months.
Mr. Olver. On retention; how about recruitment?
Master Chief Petty Officer Herdt. On recruitment, I will
tell you that we continue to make goal in the Navy, but it is a
month-to-month battle. Our Delayed Entry Program pool that we
rely on is at an all-time low, and we are working very hard to
beef those delayed entry pools up. As you know, last year, we
plussed-up our recruiting force out there; we had let that
dwindle. We now have 5,000 recruiters on the streets. That is
paying dividends for us, but they are working hard.
I do not think there has been a lot of change in what we
have to offer. I do not want that to sound negative, but what I
am saying is that I do not think that the potential recruit is
saying, hey, things are better in the Navy, Army, Air Force,
whatever, based on the pay that they got last year.
I think they still come in for the same reasons. I think it
is still what each service individually has to offer in
addition to national service, military service, and the hard-
working recruiters that matter the most. But it is a month-to-
month battle for us, and I think it will continue to be that
way for us for some time.
Mr. Olver. And for the Marines?
Sergeant Major McMichael. The recruiting is still going
well for us. For 55 consecutive months, we have been able to
meet our mission of bringing young men and women off the
streets of America to serve in the United States Marine Corps.
But let us never forget that recruiting cannot go single-
handedly; it has to go hand-in-hand in a marriage with
retention. And these plus-ups that we have had for pay and BAH
and things of that nature more directly affect those who are
already in. That will affect those who will come, because they
will see that life is what they expect.
So we see it as a plus for the future to get us where we
want to go, but by the same token, we have to also remember
that retention will be greatly affected if the ones who are in
are starting to exit--and I am not going to say that it is
because of a great economy and the unemployment rate is low; I
am never going to complain about this great Nation for doing
what it should to help this Nation be healthy--but by the same
token, we have to realize that when we have health care in the
military that does not meet the standards that the Marines who
are already serving expect, and if you have housing that does
not meet the standards that your service members expect, then
it is hard for me to understand how we can expect them to want
to stay. So that is the retention piece.
We are concerned about retention. You cannot wait until you
lose a wheel to pull over and fix the wheel. So our focus now
is not only to put those quality of life things that have been
added on the table, but also to try to retain them so we can
get more.
Mr. Olver. A major point that you are making and a new
point, I think, is that we should expect last year's triad to
have affected, ultimately--even if we cannot really be sure
that it is affecting it now--ultimately, it is going to affect
more retention directly than recruitment. People at the
recruitment level are not really thinking about retirement--
maybe they would be about the pay, but not so much about the
retirement--and ultimately, if the people are in there and want
to stay, then that feeds back to the others. That is an
important point, and that----
Sergeant Major McMichael. That is the marriage.
Mr. Olver. That is very sensible.
What are you seeing at the Air Force level?
Chief Master Sergeant Finch. Actually, there is a
correlation between recruiting and retention. If you do not
retain people, you have to recruit a lot more. So we have found
that it is probably a little early to decide whether the
compensation gains we had in the FY00 National Defense
Authorization Act in this last recent go-around have had a
really significant impact on that yet, because most people in
the Air Force make some of those decisions 6 to 12 months out
as opposed to the event. So we are encouraged that that will
get better.
Our retention numbers to date, as we begin this fiscal
year, are still below in all three categories--first term,
second term, and career--below what we need to do and what we
believe will sustain the force. That drives recruiting
challenges, and like the other services' recruiting challenges,
we did not meet our recruiting goals in the Air Force for the
first time in 1999--although we plussed up the number just a
little bit, we did not quite meet that--so we started the year,
like the Navy, with a smaller pool in the Delayed Enlistment
Program, the banked people, if you will. So we have some
significant challenges ahead in recruiting, and we are
addressing those on a number of fronts with extra recruiters,
enlistment bonuses, and more advertising. So that is a big
issue for us.
Mr. Olver. It cannot be just triad, the program. It also
has to do with housing and the living conditions--and I will
have another round a little bit later--and it also involves
working conditions.
Chief Master Sergeant Finch. Sure, yes.
Mr. Olver. So all of those go hand-in-hand in creating the
atmosphere that is necessary for you to both recruit and
retain.
Chief Master Sergeant Finch. The core concept, sir, is
whether the people believe that what they are contributing is
being compensated in some way, how hard they are working
relative to what they are getting compensated. We are asking
them to deploy, so we have to take care of their families. It
is all interrelated, so it is hard to say that one thing is
going to affect retention or recruitment.
Mr. Olver. Thank you.
Mr. Aderholt. Mr. Farr.
1 PLUS 1
Mr. Farr. Thank you, Mr. Chairman.
I have three questions on things that I have been thinking
about. First, to Chief Petty Officer Herdt, the Navy has the
two-plus-two quarters for bachelor enlisted, and you are
proposing to go to a one-plus?
Master Chief Petty Officer Herdt. No, sir; it is just the
opposite. We are currently building to a one-plus-one
configuration, and that is our ultimate goal and will remain
our goal. What we are seeking to do is to establish an interim
goal of going to two-plus-zero, to renovate the two-plus-zero
standards.
The reason behind that as we renovate or build to the one-
plus-one standard, we typically lose about one-third of the
racks, or beds, in any structure that we put up.
Mr. Farr. So it is a space issue?
Master Chief Petty Officer Herdt. It is a bed issue, the
number of people that we can house issue, in the interim as we
are building out to one-plus-one.
Mr. Farr. What is the goal of getting to one-plus-one? When
do you think you will get there?
Master Chief Petty Officer Herdt. I would have to take that
for the record, sir. I cannot remember right off the top of my
head. I would be glad to get an answer back to you.
Mr. Farr. Do the other services have that one-plus-one
goal, too?
Sergeant Major McMichael. The Marines have two-plus-zero.
Sergeant Major Hall. The Army has a 1 + 1, with the
exception of Korea, which we would like to get to 2 + 2. We
think we are going to be able to get there in 2008, to a one-
plus-one standard.
Mr. Farr. One-plus-one is a higher standard, right?
Sergeant Major Hall. Yes, sir.
Mr. Farr. Single room, shared bathroom?
Sergeant Major Hall. Yes, sir.
Chief Master Sergeant Finch. We have a one-plus-one goal
also. It is the issue of privacy. Right now, our funding is to
get us there by the year 2008. We have 14,000 in deficit----
Mr. Farr. Does that go into a retention issue?
Chief Master Sergeant Finch. In which way?
Mr. Farr. Does that play in it in any way--that people
prefer so much to have their own room?
Chief Master Sergeant Finch. For us, sir, in the quality of
life surveys, the number one issue for our first-term force is
privacy and dormitories; the fact that we had different
standards for housing and we made them double up and live with
somebody else. And this addressed that----
Mr. Farr. Perhaps you can get for our committee--you do not
have to do it today--what the status of each of the services is
on the goal to get one-plus-one.
[The information follows:]
In our continued commitment to improve the quality of life
for our Sailors, the Navy is addressing one of its most
pressing challenges, the 25,000 E-1 through E-4 unaccompanied
enlisted Sailors who now live aboard ship when in homeport.
Studies, surveys, and my own personal observation have shown
that these young Sailors have the worst living accommodations
in the Department of Defense. When deployed, these Sailors have
no choice but to endure sleeping in bunk beds in cramped spaces
with dozens of their shipmates, with little more than a small
locker to store their personal belongings. When the ship
returns to homeport, these Sailors must continue to live aboard
ship. In contrast, unaccompanied E-1 through E-4s assigned to
aviation squadrons or submarines live aboard ship when
deployed, but merit BEQ spaces when the ship is in homeport,
and accompanied Sailors return to their homes to live with
their families. A 1999 Navy Quality of Life Domain Study
concluded that shipboard life and standards of living are major
dissatisfactions for target retention groups.
The Secretary of the Navy and the Chief of Naval Operations
have committed to developing a Homeport Ashore program that
will provide these Sailors accommodations, either in a BEQ or
in the community, when their assigned ship is in homeport. We
have a pilot project underway at Naval Base Pearl Harbor, HI,
where a unique combination of recent fleet reductions, a large
initial inventory of BEQ spaces, and a desire of more senior
enlisted to live in the community, has made BEQ spaces
available. So far about 900 shipboard E-1 through E-4 at Pearl
Harbor have moved ashore into BEQ spaces, with plans to house
the rest ashore by this summer. Initial results are extremely
positive.
The Navy remains committed to providing housing that meets
the 1+1 barracks construction standards. As an interim step to
start the Homeport Ashore effort, the Navy has granted a waiver
to use the 2+0 configuration to construct the FY-2001 Navy BQ
projects. Because 2+0 spaces cost about one third less than
1+1, we were able to provide spaces for 400 more single Sailors
than we would have been able to do under the 1+1 standard.
These 2+0 spaces will be converted in the future to equivalent
1+1 spaces through assignment policy.
The Marine Corps has received a permanent waiver to the DoD
1+1 standard that allows us to build 2x0 room configured
barracks buildings for E1-E5 Marines. This waiver was granted
in July 1998. Our current programming goal is to reach a 2-
person assignment standard (2x0) by fiscal year 2037. We are
evaluating this goal to determine the investment that would be
required to accelerate this goal to less than 20 years.
STATUS OF 1+1
The Army is on track to meet our 1+1 goal by 2008.
Since ``1+1'' was approved 6 November 1995, and through the
fiscal year 2000 MILCON program, the Air force has invested
$593,000,000 to construct new or renovate existing permanent-
party dormitories to provide 9,600 ``1+1'' dormitory rooms. The
Air Force's goal is to implement our vision of the standard, a
private room for every unaccompanied E-1 through E-4, by 2009.
We are using a dual-pronged approach consisting of both the
``1+1'' construction standard, in concert with the Air Force
Dormitory Master Plan, and a private assignment policy to meet
this vision. We will not replace or convert any existing
``2+2'' standard dormitories (two people per room) with ``1+1''
dormitories until they reach the end of their useful life.
Instead we implemented a private room assignment policy, phased
by grade, which will authorize our unaccompanied airmen private
rooms in these dormitories by 2002.
In addition to MILCON, we have invested $88,000,000 in
Congressionally appropriated Quality of Life Enhancement,
Defense funds to renovate existing critical condition
dormitories to ``1+1'', to include the conversion of 30 central
latrine dormitories. We will continue to use the Air Force
Dormitory Master Plan as our roadmap to eliminate the Air Force
wide deficit of 14,000 dormitory rooms and replace 5,500
existing critical condition dormitory rooms by 2009.
Chief Master Sergeant Finch. Yes, sir.
Master Chief Petty Officer Herdt. Sir, if I might, I would
like to expand just a brief minute on the two-plus-zero
concept, because it is not far off of the one-plus-one and in
some cases is actually better.
It is a room with an enclosed head, a private head, that
allows a little more flexibility in assignment of quarters. For
E4 and below, you put two people in this single room--and you
are right, they would not have the single room privacy, but
they would have their own head. E5 and E6 would have one person
to that room with a private head, and E7 and above, you would
take two of those rooms with an adjoining door, and they would
actually have a sleeping room and a sitting room, but they
would have the two heads incorporated with that. So you can see
that the flexibility is a little bit better for us, and we can
get there without losing the number of bunks in the interim as
we reach for an ultimate goal of one-plus-one.
TRICARE
Mr. Farr. The other question I have is I went through a
base closure where a military hospital closed, and at the same
time, the TRICARE contract was up, and it wound up in an
incredible mess. People not understanding who the providers
would be and certainly not having access to the military
hospitals. The more I see this, I just wonder why we do not put
the military under the Federal Employees Health Insurance
Program--perhaps not for the active duty, because you have to
have immediate health care--but for the families. I do not know
whether they benefit from TRICARE versus what we have, where
every Federal employee gets to choose what carrier they want in
the community they live in, and then you go out in the
community, and you have access to community medicine, community
hospitals, and everything--there is no separate process.
Do you have any feelings about that? Is there any
discussion about it?
Master Chief Petty Officer Herdt. The only discussion I
have heard with regard to FEHBP over the last year and a half
was centered around the retired military population.
Mr. Farr. Wanting to get into it.
Master Chief Petty Officer Herdt. Yes.
Mr. Farr. But nothing on the way the way the families have
reacted.
Master Chief Petty Officer Herdt. There has not been much
talk, at least in the Navy, from my perspective and experience,
on FEHBP.
The family issues with TRICARE have centered around, one,
accessibility. It has not been about quality of care so much as
it has been about accessibility and contractor payment, dealing
with the contractor. But I have not heard in the Navy anything
about family desirability with regard to FEHBP.
Mr. Farr. Okay.
QUALITY OF LIFE: MILITARY VS. CIVILIAN COMMUNITY
The last question I have--and I am just interested in your
reflection--the chairman has taken this committee to bases in
this country and other countries, and my impression--I have a
21-year-old daughter, and I look at her peers--my impression is
that what we have seen is that young people in America with
families live at a far better lifestyle in the military because
they have access to housing, they have quality child care if
they have children--the child care I have seen in the military
is much better than I have seen in the civilian community--they
have access to recreational opportunities, transportation, and
food services. When you add that up, if you were in the same
age group out on the street in the civilian community, you
would not be able, with your income at that level, to have that
kind of access.
I use this a lot when I go around and talk at high schools
now--in fact, in many ways, I guess I am recruiting--and I
wonder what your reflection is on that. People are always
complaining--we complain, Members of Congress complain about
our lifestyle--I know that that is typical. But what is your
impression--it seems to me that being in the military between
the ages of 18 and 30, you would have a hard time receiving as
much quality service if you were in the private sector earning
a salary.
Sergeant Major Hall. We work very hard to make it that way,
too, sir, as do you. But you can still never pay those young
men and women enough. We have soldiers in 74 countries today,
Bosnia and Kosovo, each a 6 month deployment, so at a moment's
notice, the potential is there for them to pick up and go fight
the Nation's wars. During the time that they are not deploying
in the Nation's interest or doing the training that prepares
them to do that, I think we have got to continue to give them
the best possible quality of life that we can.
RETENTION
Mr. Farr. But is the point, then, that retention--what is
the issue on retention? Is it pay scale? You can leave the
military and all of a sudden realize that your pay check in the
private sector is not going to be able to buy you the same kind
of child care services and all these other services you get in
the military. Do people realize that, and is there discussion
of it, or is it because you are deployed too much--and yet you
told us that being deployed, some of the people who were
happiest were the ones who were in Bosnia and Kosovo.
Master Chief Petty Officer Herdt. If I could, sir, I would
tell you that we are not asking the same thing of these two
different groups of young people. We are asking a tremendous
amount of the young people who serve in the military. In the
Navy's case, we are asking them to pick up every 18 months and
go away from home for 6 months. It makes no difference if they
are married or single--we are asking them to do this.
The retention piece, I would tell you, is significantly
about compensation. It is about money, and for those who say it
is not about money, I would say that is easy to say when you
have money. These folks are E5's and E6's and are not so junior
people. Our E7's and E8's and E9's are trying to put kids
through college and so forth, but for principally the midgrade
NCOs, when you have disposable income of $29 to $50 a month,
after not extravagant bills, you do begin to ask. And we are
asking in many cases the wives or the spouses to not have
meaningful careers because of the movements that we require of
them, the frequent transfers. So I think it is a lifestyle that
is very difficult to compare to civilians. And I would agree
that on face value, you could make that comparison, and it
would look favorable, but in the long haul, when you start
looking at the sacrifices required and the compensation for
those sacrifices, I think it is not in balance.
Chief Master Sergeant Finch. If I could add to that, sir, I
would agree with the Master Chief in some part of this. Our
expectations of the young people in the military are far
different than expectations in some of the civilian sectors
outside the military. We have people who are 21 years old
qualified to be crew chiefs in a multi-million-dollar F15 out
there with awesome responsibilities, and then, as we grow
supervisors, we put them in charge of not just themselves but
of other people. And as the MCPON was saying, we ask them to
pick up and move and deploy--and although people like to do
important work--I have talked to people who have gone over to
the desert in Saudi Arabia and have enjoyed their 120-day tour,
and now they are being given 90-day tours, and the first time
was fun, but the second time was not as much fun; by the time
they have been back there five times, their ``fun meter'' is
pretty much pegged out.
So it comes down to not just compensation; what it really
comes down to is do we really value their worth for what we are
asking them to contribute. And sometimes, the PCS seem to be
losing money, and all of that gets back to them and their
families. So it is not easy to say, well, you are making more
than the person who stayed home, because they are contributing
something different.
Mr. Farr. It sounds like what we ought to look at is how
much we move people around. One problem at the local base is
that the base commander comes in, gets totally involved in the
community, knows everybody, and is doing a great job and then
has to leave; so there is no continuity. And these are
important universities and training schools. I know that that
is the policy of the military, but I would think that it is
deployment--deployment is one thing--just moving because you
have to move every so many years is something else.
Chief Master Sergeant Finch. The majority of the moves for
the Air Force are rotational locational moves, taking people
over to forward locations, i.e., Korea, the Japans of the
world, Germany, overseas. So we do rotational moves as opposed
to just moving them for the sake of moving. So these are
required moves. We will have the haves and have-nots--some
people at locations who do not deploy at all, and other people
at locations who are deploying all the time. So there has got
to be a balance somewhere, giving the experiences and making
sure we do not help one person at one location at the expense
of someone else. There is a delicate balance.
Master Chief Petty Officer Herdt. The same is true in the
Navy.
Sergeant Major Hall. I think it is true for all of us. None
of us moves just for the sake of moving people. You have 53,000
soldiers stationed in Europe and 27,000 in Korea, and when
their time is up, they want to come back home, and somebody has
to go and replace them. And 40,000 in Europe, with a 480,000-
soldier Army becomes the pivot point to ensure that everybody
rotates, especially on that one-year tour over there, to get
them back in.
Master Chief Petty Officer Herdt. Sir, may I make one more
point about retention being highest on deployment. Take a look
at where we are deploying. We are deploying to what are
classified as tax exclusion areas. Our best retention rates are
in those areas where people make the most money. That is a
significant change in the pay that they receive, and things
look different when you are receiving that kind of money.
Every battle group that comes out of the Arabian Gulf has
sky-high retention. They reenlist there--their selective
reenlistment bonuses are tax-free. They are coming off of 6
months of tax-free pay. It is a significant issue.
Mr. Farr. So there is discussion--men and women in uniform
are aware of that is going on outside in the civilian community
and what their type of skill level could bring them.
Chief Master Sergeant Finch. Some are, sir. I cannot say
that everybody in the Air Force is doing that, but there are a
lot who are well aware. Some of our Local Access Network (LAN)
administrators know exactly how much they would make if they
decided to separate from the Air Force and go work for a
different company. Some do, and others certainly do not. But I
think people are fairly educated on what is going on.
Sergeant Major McMichael. And that is one of the things
that affects retention, because they know they can take their
skills outside the gate and be employed in the civilian sector.
So I think it is important to understand that even though we
say that military personnel in uniform who are serving our
Nation may have child care available and may have youth
programs and other things available, those programs are not
free. So if you are 21 years old, and you are outside and on
your own, and you are doing the same thing, the cost may not
have the same equitable price tag--but they are not free, and
based on the pay check that you are earning, trying to deploy
and run a household and keep your children in child care or
send them to school--65 percent of the families in the Marine
Corps live outside the gate, so some of those programs--for
instance, if I have to put my child in piano class in the
civilian sector, I have to pay the same dollar that everyone
else pays.
So I do not want anyone to think that because we serve our
country in this uniform that we are getting any more than
anyone else, because we have worked hard to put these things on
the bases so that we can continue to have cohesion and team-
building and camaraderie amongst the service members.
Mr. Farr. No, I was not trying to imply that. What I think
we do not do a very good job of is indicating the quality of
life issues that we really do support and that these are things
to be proud of in the service. I think the quality of child
care in the service is phenomenal. I think the DOD schools
overseas are very good schools. I think the recreation
facilities that we have been building are really good. These
are the kinds of things that the private sector advertises all
the time. We do not take advantage of pointing out that these
services are for our men and women in uniform because we are
proud of their service; we are proud that they are able to live
in a kind of quality of life.
I think the quality of life in the military, we have always
got to keep improving--and obviously, pay is the top--but where
we do a good job, we should also talk about that, and I do not
think we do. I think that if we did, people would feel better
about it.
You know as a recruiter, you have got to emphasize the
positive.
Master Chief Petty Officer Herdt. Yes. One thing that is
not seen as a positive by the men and women in uniform each
year is the Statement of Total Military Compensation. I can
just tell you from the Navy perspective that when they take a
look at their base pay and their BAH, and we start throwing in
the value of their medical care, the value of the commissary
privilege, the exchange privilege and all of that, that builds
in more cynicism than it does actually saying, hey, this job is
worth this amount of money.
First of all, not everyone benefits from all of those
things; not everyone uses them. They are not always convenient
to where the families live in the community, et cetera. We do
not offer housing to everyone. The current BAH policy does tax
people who do not live on base with the 15 percent out-of-
pocket, so there is an inequity there.
So we need to be careful, I think, in selling that kind of
stuff too ardently. But I do believe that one thing we do not
do especially well in the recruiting in particular is, as an
entire military, package ourselves very well with those
benefits that we do have to offer. I think we sort of leave it
up to each recruiter to do that. We do not have an employment
package as a DOD entity, as a military service. We all have our
various special interests or missions, but we just do not have
the employment package out there.
Mr. Farr. What can we do--if you were going to go to work
for IBM, they would certainly try to keep you--they are going
to hire you for life. They do not want to hire you for just a
couple months or a few years. And if we are interested in
retaining people, we ought to be able to do that kind of
employment tactic.
Master Chief Petty Officer Herdt. It is my thought that we
could.
Mr. Farr. I appreciate that.
By the way, have you ever tried to close military golf
course?
Sergeant Major Hall. You know, sir, it is not just for the
recreation. I am not a golfer, so I came into this position not
a real fan of golf courses. It is okay to build barracks and so
on. But when you really get into the MWR system, golf courses
are money-makers. So a golf course pays for everything else,
subsidizes everything else we are doing on a military
installation. So I am still not a golfer, but I have changed my
tune about golf courses.
Mr. Farr. Well, we closed the Army golf courses, and the
Navy built a big hotel with the money. So if you come to the
Monterey Peninsula, you can enjoy a lot of golf there.
Thank you, Mr. Chairman.
Mr. Aderholt. Mr. Olver.
Mr. Olver. Thank you very much, Mr. Chairman.
We are going to need to go to vote fairly soon, so I will
try to cover a little bit of ground quickly.
At least two of you have commented about the amount of time
that you spend going around to bases all over the country and
around the world. Are you all spending more than half of your
time visiting all of those bases as the senior noncommissioned
officer in the service? You are all doing that. That is your
job, to understand what is going on. Okay.
Now, we talked a little bit about the privatization issue,
and at least for the Air Force, you have only completed one in
10, and it has not been completed for very long, so you really
do not have much in the way of information back as to how it
affects the balance of the way people think about on-base
housing and off-base housing, private housing, and so forth. I
think the situation is roughly the same in the others; isn't
that correct? Okay. You do not have any completed housing
privatization projects; they are all in process. Okay.
So, ultimately, this committee has put a lot of effort, and
the chairman has been very strong on this, in trying to make
the privatization program and the base program fit together,
and I think that over time, we ought to have a balance.
What I would like to ask you about is the other side of the
coin. There are other issues. My colleague from California has
commented about the child development centers; he mentioned the
gymnasiums and fitness centers and so forth. But there are
other aspects of the working conditions that I think are also
important, and every one of these items--whether it is child
development, health care, housing, pay and benefits,
retirement, and so forth--goes to retention and, by word of
mouth, to recruitment down the road.
WORKING CONDITIONS
We have not heard much said about the other issues of
working conditions. Would you comment a little bit about that?
I am talking about the things that go beyond the housing--what
are the training facilities like, what is the equipment like,
things of that nature. Some of those are in the purview of this
subcommittee.
Sergeant Major Hall. Sir, each of those areas is being
worked, and sometimes they are being worked because we are
leveraging the privatization issue. The dollars are tight--a
$70 billion budget for the Army this year. It is the first time
during this Administration that we have gone over $70 billion.
But when you factor in inflation and everything else, that is
really a 1.7 percent decrease in buying power, so you have to
leverage privatization to make sure that the ranges are up to
standard. You can make sure that the motor pools are such that
soldiers can work on equipment. It just frees up or allows you
to spend a lot of other money other places, everything from
those training facilities to spare parts----
Mr. Olver. In your experience, are the training facilities
up to the level, or better or poorer? Would you care to give a
general view, compared with, say, the housing that you see?
Sergeant Major Hall. I would say generally poorer, simply
because base ops and real property management have been
underfunded for so many years. We have come back in in the 2001
budget and put additional moneys in there and funded it at a
level that is higher than in times past, but the infrastructure
was crumbling, so it is going to take a while to get out from
under that.
Mr. Olver. It sounds as if the workplace may be worse than
the housing.
Sergeant Major Hall. I would not say it is worse.
Mr. Olver. Not as good.
Sergeant Major Hall. We have 114,000 sets of quarters in
the Army, and 78 percent of them are inadequate. I will tell
you what we do have. For the first time ever, we have a
standard that is called an Installation Status Report, and
every agency on every installation is now rated against that
standard so we know exactly where to put the money. But if you
ask me the question you ask, I would tell you it is a toss-up.
Mr. Olver. Okay. Would you like to answer for the Marine
Corps? We will hear from the Sergeant Majors first.
Sergeant Major McMichael. Actually, we have had some very
needed facelifts in family housing and so forth. But our
training facilities are at an all-time high as we go into this
new decade. A lot of money and work has been put into our
training facilities, not just the ranges and things like that,
but the schoolhouses as well, the distance learning process--
all of these things have been plus-ups to increase better
learning and training.
The tradeoff is that when you put money into that, it comes
from somewhere else, as the Sergeant Major said, and it has
allowed the quality of life on the base side to pull some
stretched strings. So it is kind of a toss-up, but it does not
matter who is ahead in the middle of the race; we would like to
be able to run to the finish line.
Mr. Olver. We need to balance it.
Sergeant Major McMichael. We need to get to the finish line
with a tie, a photo-finish.
Chief Master Sergeant Finch. I agree the balance is always
a delicate thing to do. Housing has been a focus, and I know
that we focused on dormitories at the expense of some other
construction money. But as my counterparts have said, it has
got to be balanced. We look at infrastructure on the bases--and
I know it is difficult to say they have to fix the sewer system
at a base; no one wants to do that because we would rather
build a dormitory--but at some point in time, that priority has
to be laid out and we have to say yes, this is something we
will do.
But as the Army has done, we have got to match the plan on
each base and say here are the facilities, and let us
prioritize and decide which is the best to do and take a very
objective look.
Master Chief Petty Officer Herdt. Sir, I would just say
that I think what we are really talking about here is quality
of work life. It is something that we are really just starting
to see the need to address. Certainly when you go to work in a
rundown hangar--our shipboard quality of work life is fairly
fixed and does not change, but everyplace else in the Navy,
when you to go work each day in a place that is rundown, you
feel like you are working for a second-rate outfit in some
ways.
Real Property Maintenance (RPM) has not kept up. We are
building new barracks, we build new housing, and right away,
the RPM is not there. We use it as a bill-payer for other
things. That new housing and those new buildings do not remain
new for very long. Having the right furnishings--instead of
going to the Defense Reutilization Management office to get
castaway furniture, the ability to buy new furniture to put in
a work space makes a tremendous difference in the way people
perceive their daily work life, and it is important.
Mr. Olver. We are going to have to go and vote.
Would you like to come back for another round?
Mr. Edwards. I will submit any additional questions that I
might have.
Mr. Olver. Okay. Is that all right with you?
Mr. Farr. Yes.
Mr. Olver. Well, let me just say that I would invite you if
you wish to give us for each of your services a further
analysis, because this might have led to additional comment if
we were not sort of in a move here, to talk about that balance
from your point of view of the quality of life components and
the working condition components, because I really do believe
that we would all understand that they fit into the whole of
retention and recruitment, the issues of how you serve this
country. So I would invite you to submit that for each of your
services, and if you would do so, that would be fine.
Also, two of you have indicated that you have master plans
for your bases, which helps to identify what is the highest
priority of all these things in individual cases--three--you
have a master plan--all of the services have master plans that
relate all of these different issues in some way together,
which we could probably each do if we need to in talking about
exactly what we are doing. I think that that is a valuable
understanding for us to have as well.
Thank you very, very much for being here. This is always a
great hearing.
[The information follows:]
I think it's impossible to separate the two in reference to their
ties with retention. We continuously spend a lot of money on improving
the off-duty quality of life for Sailors, and this is very necessary.
However, we can't ignore the importance of improving the working
environment for Sailors also. Quality of life at work needs to be a
priority for us in leadership positions. Sailors should be proud of
where they come to work, and know that their spaces are ergonomically
efficient. We should continue to show our commitment to improving
overall quality of life for Navy families by ensuring the working
environments our Sailors work in are just as professional as the work
we expect the Sailors to produce in them.
We're trying to sell Sailors on staying with a top-quality
employment team in the Navy. In order to do this, we have to act like a
top-quality company and invest in the facilities we ask our people to
work in. We shouldn't stop after the initial investment either. It's
counterproductive to fund state-of-the-art facilities on one hand, and
not include the funding to properly maintain these facilities on the
other.
By the nature of our business, the Navy has to invest substantial
amounts of money in ships. All too often, the shore facilities that
support our fleets get short-changed when the funds run out. Sailors
ashore shouldn't be punished, or expected to work in substandard
facilities just because they're not at sea. We need to work towards
more equity throughout all of our services in regards to the quality of
working environments we expect our service members to do what we ask
them to do.
Based on our facilities condition assessment system, the majority
of the Marine Corps facilities are adequate to complete the mission but
require some maintenance and repair. While quality of life projects for
barracks improvements have received increased visibility, the Marine
Corps continues to make improvements in workplace conditions through
projects which renovate administrative buildings, modernize A/C and
heating in buildings, repave parking lots and improve maintenance
facilities contributing to improved workplace quality of life.
MILCON Quality of Life
The Air Force places quality of life investments in a balanced
funding priority with readiness and modernization. We will continue,
with your support, to pursue quality of life priorities such as fair
and competitive compensation and benefits; balanced TEMPO; safe,
affordable and adequate housing, increase and support of community and
family programs; expand education programs; and access to quality
health care. The Secretary of Defense and Chairman have made Basic
Allowance for Housing (BAH) and improvement of health care (TRICARE)
two of their top priorities for fiscal year 2001. The Secretary has
also announced intention to reduce out-of-pocket expenses to 15% in
fiscal year 2001 and perhaps eliminate out-of-pocket expenses entirely
within five years.
Planned actions to improve TRICARE will focus on fully funding and
placing more emphasis on the Defense Health Program; access to care;
enhancing access for remote locations; improving claims processing and
establishing a nationwide mail-order pharmacy service; and community-
based pharmacy network to serve the prescription drug needs of over-age
65 military retired members, their spouses, and survivors of the
military community.
Specific improvements concerning claims process are: claims
processing cycle time standards changed 1 September 1999 (with industry
standards adopted) from 75% in 21 days to 95% in 30 days and 100% in 60
days, with interest paid by the Managed Care Support Contract (MCSC)
for claims delayed past 30 days. This new standard relates to retained
claims. Claims that are not complete are returned to the submitter
after a couple of attempts to get the info via phone. Additionally,
contractor re-certification is required only for TRICARE network
providers; non-network provider claims are not delayed for processing.
Plus, claims processors are dedicating special units in the claims
processing center to solve claims problems. More improvements to the
claims processing system are being made. As it stands now, our system
is set up as ``chase and pay.'' That means there is a lengthy process
of deciding who should pay what. So lengthy, sometimes, the beneficiary
gets caught in the middle. The Joint Chiefs of Staff plan to change
this to ``pay and chase.'' The bill will be paid first, then it will be
determined who pays what. That way, the beneficiary will never have to
worry about being sent to a bill collector for something that was never
their responsibility.
Medical care is a top Air Force priority. The Air Force is working
actively with DoD's new Defense Medical Oversight Committee, which aims
to address current irritants and future benefits of the military
healthcare system. Our goal is a prevention focused comprehensive
health care system providing care to our beneficiaries wherever they
live. DoD has developed the TRICARE benefit into a nationwide offering
for individuals primarily located near bases. A new initiative will
ensure that family members living outside military catchment areas will
also be able to obtain care at TRICARE Prime prices. We don't concur
with changing the TRICARE benefit into an FEHBP-like benefit for the
following reasons. In the current DoD demonstration project offering
FEHBP to our Medicare eligible beneficiaries at eight sites, enrollment
has been very disappointing, less than 3% of the eligible individuals
at the sites have enrolled. It is clear that all estimates of demand
for FEHBP were wrong. The legislation that established the FEHBP
demonstration for Medicare eligible retires required a study on the
demonstration. One of the areas to be reviewed will be why enrollment
was so low. Another, perhaps more important concern is lockout. There
is a lockout in the FEHBP 65 program, enrolled individuals are not
eligible to obtain services from MTFs, because the government would be
paying twice for their care. The Office of Personnel Management which
operates the program has been experiencing double digit inflation in
premium rates over the past several years. Under FEHBP the family would
be responsible for 25-28% of the premium costs, which could increase
greatly each year with double-digit inflation.
While BAH and TRICARE are key issues for fiscal year 2001, other
areas of focus are equally important. We need to continually monitor
and review the pay of our military members to ensure we see a reduction
of the pay gap between military and civilian pay. A 3-year extension of
authority to use certain Force Management policies (TERA, SSB, VSI,
etc.) as tools to shape the officer and enlisted corps is needed.
Additionally, authority to reimburse parking expenses incurred by
military recruiters, senior ROTC cadre members, and MEPCOM members in
the performance of their assigned duties is essential. We are also
working to better manage our TEMPO. To help arrest the increasing TEMPO
levied on our people we implemented the Expeditionary Aerospace Force
concept, which will give our people more stability and predictability
in their deployment schedules.
The need for sustained investment levels, coupled with cost-based
housing allowances and the ability to competitively source and
privatize ailing infrastructure will go a long way to provide access to
safe, affordable and adequate housing. The Air Force's goal is to
implement our vision of the ``1+1'' standard, a private room for every
unaccompanied E-1 thru E-4, by 2009. We are using a dual-pronged
approach consisting of both the ``1+1'' construction standard, in
concert with the Air Force Dormitory Master Plan, and a private
assignment policy to meet this vision. We will not replace or convert
any existing ``2+2'' standard dormitories (two people per room) with
``1+1'' dormitories until they reach the end of their useful life.
Instead we implemented a private room assignment policy, phased by
grade, which will authorize our unaccompanied airmen private rooms in
these dormitories by 2002. Since ``1+1'' was approved 6 November 1995,
and through the fiscal year 2000 MILCON program, the Air Force has
invested $593,000,000 to construct new or renovate existing critical
condition permanent-party dormitories to provide 9,600 ``1+1''
dormitory rooms. In addition to MILCON, we have invested $88,000,000 in
Congressionally appropriated Quality of Life Enhancement, Defense funds
to renovate existing critical condition dormitories to ``1+1'', to
include the conversion of 30 central latrine dormitories. We will
continue to use the Air Force Dormitory Master Plan as our roadmap to
eliminate the Air Force-wide deficit of 14,000 dormitory rooms and
replace 5,500 existing critical condition dormitory rooms by 2009.
Programs like child development, fitness centers, lodging,
libraries, skills development, golf courses, and bowling centers all
offer programs and services that support and enhance the sense of
community and meet our members needs for relaxation and stress
reduction. On-base programs are part of the non-pay benefit system
providing savings over the cost members would pay to receive similar
services off base. For example, National Association for the Education
of Young Children (NAEYC) accredits only 5 to 8 percent of civilian
childcare centers, while all Air Force Child Development Centers are
NAEYC accredited. Accredited care generally costs twice as much as on-
base care. To a young enlisted family, these savings amount to $3,000
per child per year.
The Air Force continues to focus on helping active duty deployable
members with their dual responsibilities as military members and
parents. There is a need for 80,000 child care spaces. We were able to
meet 62 percent of this need by end of fiscal year 1998. Facility
projects and funding are in place to achieve 65 percent of the need by
2002 through:
Air Force members rated fitness centers as significant influences
in both their readiness and their career intentions in the 1999 CSAF
QoL Survey. Recognizing the importance of fitness, the Air Force has
made increasing the quality of fitness facilities and programs a top
priority. An independent needs assessment performed in 1995 indicated a
need for 53 fitness center construction projects at a cost of
$175,000,000. Further, the 1996 DoD Fitness Facility Survey determined
29 Air Force fitness centers were defined as in poor condition.
The Air Force is conducting an independent needs assessment of all
installation fitness centers and is developing a multi-year
construction program to upgrade all fitness facilities to the newly
defined Air Force standards. After completion of only 32 of 88 total
assessments, identified requirements already total over $280,000,000.
The allocation of $183,000,000 for fiscal years 2000-2005 from the
Secretary of Defense Quality of Life Funding Wedge for fitness center
improvements will serve as the centerpiece of our continued effort to
modernize fitness centers. Currently, an investment of $2,600,000 is
needed to equip Air Force fitness centers not meeting current
standards. Maintaining a sound fitness program, by investing in
facilities and programs, will ensure Air Force people continue to
choose a healthier lifestyle--a choice that is good both for them and
Air Force readiness.
We continue to demonstrate our commitment to our airmen and their
families through programs such as spouse employment, personal financial
management assistance, and relocation and transition assistance. For
our junior airmen, we offer a Personal Financial Management Program to
help deal successfully with today's heavily credit-based society.
A major quality of life factor impacting recruiting and retention
is expanded educational opportunities and access. For airmen working
toward attaining their initial college degree, the community College of
the Air Force allows them to combine college credits and military
education and experience to earn Associate Degrees in Applied Science.
Tuition Assistance pays up to 75% of tuition costs for individuals
pursuing an undergraduate or graduate degree. The Air Force supports
elimination of the $1,200 payment required to receive the education
benefit and seeks to gain support and approval, in addition to
expanding enrollment opportunities for the Montgomery GI Bill.
The Marine Corps recognizes that sustaining our installations
directly impacts readiness. Therefore, our approach to infrastructure
management includes maintaining the highest possible quality of life
for our Marines and their families. Our plan is developed from a
coordinated perspective that includes management of current
facilities,demolition of sub-standard buildings/structures, and
strategic planning for our installations, while recognizing the
limitations of our resource-constrained environment.
The goals for improving our infrastructure are articulated in an
Installations Campaign Plan. Our strategic approach will be developed
in our Marine Corps Installations 2020 Plan. The two plans cover such
areas as:
--assessing the ability of our infrastructure to meet Marine Corps
mission readiness requirements;
--providing continued and uninterrupted access to all critical
assets (land, airspace and water);
--having required infrastructure in place for equipment and
organizational fielding;
--divesting of inefficient assets;
--pursuing infrastructure reform initiatives (such as
regionalization, reengineering and competition) to improve our business
practices.
CONDITION OF FACILITIES IMPACT ON RETENTION AND RECRUITMENT OF SOLDIERS
AND ARMY MASTER PLANS
It is recognized that Army facilities generally are in poor
condition and may have an adverse impact on mission accomplishment.
Based on my observations as well as the data we have collected,
facilities supporting soldier well being and facilities in which
soldiers work and train are in about equally poor condition. We have
ongoing programs to improve soldier housing and other facilities
impacting soldier well being. We now have developed a plan to correct
the poor condition of facilities where soldiers work and train and we
hope to implement that plan in the next programming cycle.
The soldier's work place is their home away from home for nine to
ten or more hours each day. Their work surroundings and the condition
of those surroundings have an affect on them as it would any other
American. Soldiers, by the very nature of their jobs and experiences
around the world, are some of the most flexible and adaptable people
you'll find. Soldiers are extremely resourceful. They'll turn empty
water crates into a primitive executive desk set in the middle of the
desert if it helps get the job done. In the most dire of deployed
situations you'll find them improving their living and working
conditions whether it is a muddy foxhole or a bombed out stadium in
Bosnia. But, soldiers do appreciate living conditions that are clean,
safe and well equipped. As one NCO said the other day, ``It's hard to
do a job that requires two hands when one hand has to hold up the
desk.'' Whether in a hangar, an office, or a tent, the conditions of
the work environment do impact on soldier productivity and morale.
Improving the work conditions of soldiers directly impacts their
attitude and perception that they are part of the finest Army in the
world and positively impacts on retention.
Regarding Army Master Plans, the Army has 188 bases, each of which
has a master plan. It is Army policy that major Army commands manage
and approve the master planning of their installations. The master
plans are prepared and maintained at the installations.
[Questions for the record submitted by Congressman
Aderholt.]
FAMILY SEPARATIONS DUE TO AFFORDABLE HOUSING SHORTAGES
ARMY RESPONSE
Question. Are families choosing family separation because of
shortages of affordable housing rather than mission requirements? I
believe these personnel are referred to as ``geo bachelors.'' How
widespread is this problem?
Answer. There are many reasons a soldier may elect not to take his
or her family to a new duty station, such as: a spouse having a good
job at the old duty station; a soldier may own a house and not be able
sell or rent it, lack of good schools at new duty station and a
shortage of affordable housing at the new duty station.
The Army does not track the reason or the number of geographic
bachelors who do not take families to their new duty station.
[Clerk's note.--Questions for the record submitted by
Congressman Aderholt.]
NAVY RESPONSE
Question. Are families choosing family separation because of
shortages of affordable housing rather than mission requirements? I
believe these personnel are referred to as ``geo-bachelors'' How
widespread is this problem?
Answer. I'm hesitant to determine a specific reason Sailors would
serve a tour as a ``geo-bachelor.'' It is a difficult decision for any
family to choose, and narrowing the reasons to one or two would be
misleading.
The problem, as I see it, with ``geo-bachelors'' is that we don't
officially acknowledge them with housing policies. A majority of career
Sailors will serve as a geo-bachelor at one time or another throughout
a career. With this in mind, we're doing each of them an injustice by
not providing them with logical options.
I've said before that Sailors don't ask for too much. I assure you,
serving a tour as a geo-bachelor is not a favorable option for anyone
involved. Providing Sailors with a barracks room to sleep in is the
least we can do as their family is making this significant personal
sacrifice for their country.
MARINES RESPONSE
Question. Are families choosing family separation because of
shortages of affordable housing rather than mission requirements? I
believe these personnel are referred to as ``geo bachelors.'' How
widespread is this problem?
Answer. It is unlikely that an accurate accounting can be made of
how many service members are choosing family separations based on a
shortage of affordable housing. There are a variety of reasons a
military service member will choose to separate themselves from their
family or become a ``Geo Bachelor.'' In some cases, waiting for
available housing may be a factor but we also find that service members
do not want to disrupt their children's lives by switching schools in
mid-year. Additionally, many family members have spouses who work and
their skills are not as transferable from one location to the next.
This is a personal decision with each of these factors being weighted
collectively as the family decides when is the best time to relocate
with their service member.
MILCON QUALITY OF LIFE
AIR FORCE RESPONSE
Question. Are families choosing family separation because of
shortages of affordable housing rather than mission requirements? I
believe these personnel are referred to as ``geo bachelors.'' How
widespread is this problem?
Answer. The Air Force does not track family separation numbers at
CONUS locations. It is tracked for the overseas bases and current
numbers show approximately 91% of eligible Air Force members to be
serving ``accompanied'' tours at these locations. As far as reasons for
the approximate 9% of eligibles serving overseas in an
``unaccompanied'' status, we have no hard data regarding the member's
specific rationale. Anecdotally, we believe it to be more social (e.g.,
marital problems, extended family health issues, children schooling
concerns) than financial (e.g., housing costs) in nature.
[Clerk's note.--End of questions for the record submitted
by Congressman Aderholt.]
Thursday, March 2, 2000.
DEPARTMENT OF THE ARMY
WITNESSES
MAHLON APGAR IV, ASSISTANT SECRETARY OF THE ARMY, INSTALLATIONS AND
ENVIRONMENT
MAJOR GENERAL ROBERT L. VAN ANTWERP, JR., ASSISTANT CHIEF OF STAFF FOR
INSTALLATION MANAGEMENT
MAJOR GENERAL THOMAS J. PLEWES, CHIEF, ARMY RESERVE, OFFICE, CHIEF ARMY
RESERVE
BRIGADIER GENERAL MICHAEL J. SQUIER, DEPUTY DIRECTOR, ARMY NATIONAL
GUARD
STATEMENT OF THE CHAIRMAN
Mr. Hobson. The committee will come to order. This
afternoon's hearing will focus on the Army Military
Construction Program, including Family Housing, Base
Realignment and Closure, and the Guard and Reserve.
Our witnesses this afternoon are Secretary Apgar, who is
the Secretary of the Army for Installations and Environment;
and Major General Robert Van Antwerp, who is the Assistant
Chief of Staff for the Army for Installation Management. It is
a pleasure to have both of you appear before the subcommittee
this year, sir. Gentlemen, we look forward to your testimony
and a good hearing on the construction program for the Army,
Army National Guard and Army Reserve.
Mr. Olver, do you have any opening comment you would like
to make at this time?
Mr. Olver. Only I would like to welcome the secretary and
general, again. You have been with us before. I will have other
questions when your testimony is done.
Mr. Hobson. Mr. Edwards, since you are the only one here,
do you have anything you want to say or do you want to wait?
Mr. Edwards. Not at this point. I would just like to thank
you, Mr. Chairman.
Mr. Hobson. If you would make your opening comments and
keep them kind of brief because we do have some questions we
would like to ask you after you get finished. So if you will
just start, Mr. Secretary.
STATEMENT OF HON. MAHLON APGAR IV
Mr. Apgar. Thank you, Mr. Chairman, distinguished members
of the subcommittee. It is a pleasure to appear before you to
discuss the Army's military construction request for fiscal
year 2001. In addition to Major General Van Antwerp, I am also
joined by Major General Plewes, the Chief of the Army Reserve,
and Brigadier General Squier, Deputy Director of the Army
National Guard.
Our combined witness statement provides details of our
military construction budget request, and with your permission,
Mr. Chairman, I would like to submit the full statement for the
record.
Mr. Hobson. Sure.
Mr. Apgar. Before we address your specific questions
regarding the budget submission, I would like to highlight a
few of our key initiatives in the Army's active and reserve
components.
Forty-seven percent of our budget, $427 million, is
dedicated to providing facilities that help the well-being of
our soldiers, their families and civilians. This includes our
top MILCON priority to get soldiers out of inadequate barracks
and to provide new or upgraded barracks to over 136,000
soldiers. The fiscal year 2001 MCA budget request of $367
million for barracks will provide modern housing for over 3,100
soldiers worldwide.
Our Strategic Mobility Program is on track for completion
in fiscal year 2003. We realize that we will be examining our
entire strategic mobility requirement as part of transforming
the Army to a more strategically responsive force in line with
the new Army vision. But based on current plans, our MCA
program has been responsive to the current requirements of the
Army.
The Army's Family Housing Program contains a total of $154
million: over $100 million for the construction of new or
replacement housing or revitalization of current housing within
the United States and $54 million to improve our housing
overseas. Together with our Housing Privatization initiative
and Secretary Cohen's initiative to eliminate Service member's
out-of-pocket costs for off-base housing in the United States,
this MILCON funding will help improve the living conditions for
our married soldiers.
The Army National Guard's fiscal year 2001 MILCON budget
request focuses on training site modernization, readiness
centers and Army National Guard Division Redesign Study
projects. The Army National Guard's participation in Army
Division Redesign, ADRS, will provide needed forces to the
commanders-in-chief. ADRS will convert some National Guard
combat forces to combat support and service support forces that
are needed by the Army to implement the national military
strategy.
For the Army Reserves, the budget provides the essential
military construction resources for Army Reserve Centers, their
backbone for training, readiness and mobilization.
Mr. Chairman, our fiscal year 2001 budget permits us to
execute the Army's military construction programs. Our long-
term facility strategy can be accomplished only through
balanced funding, reduction of excess capacity and improvements
in management. We plan to work closely with you and this
committee to streamline, consolidate and establish partnerships
that generate resources for infrastructure improvements and
continuance of services.
And we look forward to working with you to help us manage
our installations as strategic assets, not simply a collection
of facilities and projects and to fix a fiscal model that is
broken, that is not suited to the long-term management of our
unique and valuable real estate assets. With the support of
this committee and approval of our budget, we will be better
able to support the Army and the soldiers and their families
who serve our Nation.
Thank you, Mr. Chairman. Major General Van Antwerp will now
provide his remarks.
STATEMENT OF MAJOR GENERAL ROBERT L. VAN ANTWERP, JR.
General Van Antwerp. Mr. Chairman, members of the
committee, I am honored to be here with you today and look
forward to a good discussion on where we are headed with this
2001 program.
As you know, it is an exciting time in the Army with
transformation. Some of the bills for transformation are yet to
be determined, a lot of questions to be asked and answered on
that.
For our initial brigades that go into Fort Lewis,
Washington, there is going to be very little facilities in the
early years. We have about $91 million that we are already
programming for Fort Lewis. So there is not a big change there.
Mr. Hobson. Where is Norman? [Laughter.]
General Van Antwerp. We will have to give him a separate
brief here.
But the other part that we are really doing is focusing on
some very special programs, as was already talked about, the
barracks renovation program. We intend to have all of our
soldiers in 1 plus 1 barracks by 2008. We are currently, after
this 2001 budget, we will be at 70 percent of our soldiers in 1
plus 1 rooms or, in Korea, 2 plus 2, which is a modification.
Currently, the budget in 2001, about 40 percent of the
MILCON goes towards those barracks renovation projects and
leaves about $119 million for other types of projects. After
you take out the barracks renovation, strategic mobility, and
then you have others. So it is a very focused program,
primarily on barracks and strategic mobility.
After that, I just wanted to say a few words about where we
are on quantity and quality of facilities. We have about
166,000 facilities in the Army. The average age of those
facilities is about 44 years old. We, of course, have a lot of
historic facilities, about 12,000 of that number is historic.
If you get into just something specific like the general
officer quarters, the average age of those general officer
quarters, we have 326 of them, it is about 70 years old. So
there is a lot of impact there, as far as maintenance repair
and upkeep of those facilities.
We have two models, two tools, that really help us to
program. And we think in the Army, and I speak for all of the
components here, that we have good fidelity on what our needs
are, both for RPM and for MILCON, both quantity and quality.
And I will tell you that the quality backlog of maintenance and
repair or modernization is about $15 billion. So in order to
eat that piece, it is a focused strategy to focus in on our RPM
and to focus in on modernization, which is a combination of OMA
and MILCON, and that is where we are headed.
The future, after barracks and after strategic mobility, is
tactical equipment shops, it is Army Reserve armories and
readiness centers for the Guard, it is classrooms, it is hard
stands, it is training barracks, and it is physical fitness
facilities. So that is just a glimpse of where we are headed in
the facilities business.
Currently, with all of the components, we meet about 40
percent of the needs, and that is a real challenge. So we have
had to really focus that down, and we are looking forward to
talking further with you about that, and we will receive any
guidance you have for us.
That ends my statement, and I look forward to your
questions.
[The information follows:]
PREPARED STATEMENT OF THE HONORABLE MAHLON APGAR IV AND MAJOR GENERAL
ROBERT L. VAN ANTWERP
Mr. Hobson. I will let my members go first. Mr. Olver.
Mr. Olver. I am going to wait.
Mr. Hobson. Chet.
Mr. Edwards. Thank you. This is the politest committee in
the U.S. House, I think. [Laughter.]
Mr. Secretary, thank you for being here, General. Thank you
all for a lifetime of service to our Army and families.
Obviously, this is a subcommittee that is especially
sensitive about quality-of-life issues, and I think all of us
think, if not all, I think we all probably think that housing
improvements is crucial to keeping and retaining the best. And
if there is any money left after Fort Lewis is funded--oh, I am
sorry----
[Laughter.]
Mr. Dicks. There will be a few. [Laughter.]
Mr. Edwards. I just mentioned it, and now you want a
million-dollar----
[Laughter.]
HOUSING PRIVATIZATION
Mr. Edwards. $91 million. But I guess, Secretary Apgar,
what I would like to ask you, just give me and the committee a
general overview of where we are on the Housing Privatization
Program.
Mr. Apgar. Certainly, sir.
As you know, Fort Carson was the first housing
privatization project to be awarded last fall and is now well
underway, under the traditional request for proposals
procurement method. I met with General Soriano, the Commanding
General, installation commander, his staff and the J.A. Jones
team, the contractor, for a day several weeks ago for the first
time to really understand and dissect their approach, what they
had done already, and what is still to come and was impressed
with progress to date. They have done some smart business
things.
Within 60 days of the contract award, they had mobilized a
maintenance task force and cleared 200 units which had been
unoccupied for months, in some cases, years, and brought them
online. So families were able to move in just before the
holidays in a troop redeployment that were headed to the
Balkans, and that was a major visible symbolic, but very real
step to show what can be done in this process.
As that first project comes online, as you know, we changed
last year the procurement methodology from the traditional RFP
to the Request for Qualifications method, and the first of
those projects, Fort Hood, is about to be awarded as soon as we
can clear a reprogramming step, which is essential to basically
fund the management and support for that project.
The Fort Lewis RFQ, closed recently, is now under
evaluation. We should be able to make that award within the
next two months.
Mr. Edwards. Does the reprogramming that affects Ford Hood
affect Fort Lewis also?
Mr. Apgar. It does. It affects all three of the pilot
projects: Forts Hood, Lewis and Meade. And, essentially, the
reprogramming is the enabler to fund and support those three
pilot projects to move ahead. Assuming we can stay on track and
recover the few weeks of lost ground in Fort Hood to open, we
should have, by the fourth quarter of this year, three pilot
projects under the RFQ methodology totalling about 12,000
units, in addition to the 2,000 at Fort Carson.
So the total privatization project program for the Army
will exceed 14,000 units and provide, we believe, precisely the
test that you, Mr. Chairman, exhorted us to do a year ago; a
test not only of methodologies for procurement, which are,
frankly, profound in their own impact, but also tests of
geography, markets, developers and approaches. In a sense,
these four pilots, if we include Fort Carson in that group,
will represent, and this is purely a judgment call, but
certainly 90-percent-plus of all of the situations that we face
within the Continental United States, in terms of diversity,
and geography and market conditions, we think.
So I would certainly be happy to expand further, but in a
nutshell, that is where we are.
Mr. Edwards. The reprogramming needs to be completed before
you can move ahead with Fort Lewis and Fort Hood.
Mr. Apgar. That is correct.
Mr. Hobson. I do not want to leave the impression that it
has been the committees that have held up totally the
reprogramming. There were some problems, we discussed the
reprogramming, we encouraged it to come forward. It did not
come forward as fast as we all, I think you thought it was
coming. Once we got it, I do not know what the dates were when
it came, but it did not come in the fashion as fast as I think
you thought it was going to be because you and I talked.
We have asked, I think, for some justifications along with
it, which we have not received yet. So I do not want to leave
the impression that this committee has held up that
reprogramming because that is not our intent to do that. We
just have certain things we have to follow. The problem is this
has gone on longer than I anticipated it would be because you
and I talked I think before the break----
Mr. Edwards. Yes, in December.
So there is still information forthcoming.
Mr. Hobson. That is what Brian tells me.
Mr. Edwards. My understanding was that it was being held up
predominantly in the Senate, but if we need more information
from the Army, then we need to get it.
Mr. Hobson. Even if the Senate had approved it right now,
we would not, I do not believe, be able to totally respond yet
to it. And it is not trying to do anything, and it is not
because of the concept.
Mr. Edwards. I would love to get Norman, myself, and
anybody else, to work together to encourage the Army to get
this information in or find out, Mr. Secretary, I do not know
if you are even aware that the information is not here. Do we
know what information has not been provided by the Army?
Mr. Hobson. Well, I think we need to sit down with staff,
your staff, and get it worked out.
Mr. Edwards. Okay. That would be great.
Mr. Apgar. Thank you, Mr. Chairman. We would like to do
that. This is a surprise, frankly, in terms of information
required. We have submitted, after the original submission to
this committee and the other three committees, through my
colleague, Ms. McCoy, Assistant Secretary for Financial
Management, the standard procedure for submissions, and then
learned from the staff response that it had to go to OSD first.
Mr. Hobson. That was my letter saying it had to go there
first.
Mr. Apgar. Yes. And having then crossed that hurdle, it did
take longer than expected in OSD. It is my understanding, as of
last Friday, that it cleared OSD and was resent to all four
committees from OSD.
Mr. Hobson. Well, I just do not want anybody to think that
we held it up. It has to go through certain hoops before we can
approve it. One of them was OSD. And as soon as we found it out
had not, we told them. So it is not any intent to flack
anything, it has just got to follow the steps.
Mr. Dicks. If the gentleman will yield.
Mr. Chairman, do you think there is any substantive problem
here at this juncture or is this procedural at this point? I
mean, if it is now over here----
Mr. Hobson. Well, I do not know if it is here.
Oh, we have had it since last Friday. I have not had a
chance to work it. We just need to have a meeting on it. We
will have a meeting on it.
Mr. Edwards. Thank you.
Mr. Hobson. Anything else?
Mr. Edwards. No other questions. Thank you, Mr. Secretary.
Thank you, Mr. Chairman.
Mr. Hobson. Sam.
Mr. Farr. Thank you, Mr. Chairman. I always seem to have
three questions.
Mr. Hobson. He had three this morning. So he has three this
afternoon. Three for three.
Mr. Farr. I do not know why, to me, it does not seem like
rocket science. I was a county supervisor and did a lot of
land-use development in the county. Why do we spend any public
money on building housing, family housing or bachelor housing
for the military? It seems to me that we own the land. We do
not have to buy it. And we have the people. We can present 100-
percent occupancy, and that occupancy is going to be good
occupants or we keep them out. We do not have to kick them out.
We pay the bill. We pay them electronically. I mean, this is a
``gift horse,'' and I would think anybody would say I would
love to build for that constituency.
FORT ORD FAMILY HOUSING
I guess the reason I am so sensitive to this is because of
a big military base being closed, Fort Ord where the Army built
state-of-the-art housing in the eighties. Now that the base is
closed, you have these civilians going in there and looking at
it and finding out we cannot convert even this modern,
beautiful housing. It never was built to local codes. So now it
is a closed base. You cannot even turn this--it has
deteriorated for other reasons--but even if you could just turn
it over, you have to go back and retrofit it. It does not meet
fire standards, it does not meet water hook-up standards, so
the liability by the utility companies and the liability for
anybody who is an owner because of fire insurance and things
like that.
I guess my first question goes to, when we build this
housing, whether we build it with private-sector money, which I
think we ought to do, or we build it with Government money, are
we going to start building this housing according to local
building standards?
Mr. Apgar. In fact, Mr. Farr, that is one of the principal
features of the military housing privatization legislation
that, to us, is most important. It enables us, for the first
time, to build to local market standards, including not only
the design, materials and geometry of the houses, but also
their features and internal appliances and the rest. And that
is a very important change. It is so important that, frankly,
it led me, upon assuming this responsibility, to assume--
wrongly, in retrospect--that we should privatize a much more
substantial percentage of our housing than we are.
Mr. Farr. I would like to have the Army go back and look at
private housing you built in Ford Ord called Sun Bay
Apartments. The Chairman has been there. This is really quality
housing. It was for the NCOs. And the agreement was that if the
base ever closed, you know, that a private developer--and it
worked out beautiful.
Now, I understand the reason we cannot do that kind of
anything any more is about 1991 or 1992 OMB changed the scoring
methods, and I do not understand what that is all about. But if
that is the problem, we ought to be dealing with it. Do you
know anything about that?
Mr. Apgar. Well, I know about certain aspects, but not
others. I am not familiar with the specific project you are
addressing.
Mr. Farr. Well, I do not know and you do not know, but I
would like to have the Department look into why we cannot do
more Sun Bay developments--Sun Bay, Fort Ord--developments on
bases all over the world?
Mr. Hobson. Well, scoring has, if you would just let me
interject, scoring is a very difficult problem in these deals.
And my problem has been we have allowed scoring to do
potentially dumb deals rather than do the right deal because of
the way it is scored, which is just something that somebody
figures out is a way of----
Mr. Apgar. An accounting principle.
Mr. Hobson. It is an accounting deal.
Mr. Farr. Well, we ought to write the law. We can tell them
how to score.
Mr. Hobson. And it certainly is not, when you say
``accounting principle,'' it is certainly not in FASBY or
anyplace else you are going to find it--only in the Government
will you find it. And what I object to in that is that we are,
on the one hand, trying to use private principles to develop
deals, which is along the lines of what you want to do, and
then we used Government jargon or manipulation to make those
not as good, from my perspective and from a financial
standpoint, as they should be. So he has got a good point.
The other thing that is going to help this stuff is the
recent change that the Secretary of Defense did in the BAH is
going to drive the deals better because there are places where,
because of the BAH, these deals did not make sense. They will
not be universal, but it will make them, I think--is that a
fair assessment of what he is talking about?
Mr. Apgar. Yes, Mr. Chairman, it is. And in addition, OSD
has, I understand, recently submitted proposals that would
extend this market-based design and development principle to
military construction as well. And that alone would be a
profound change; in other words, shifting from mil specs, which
are not adapted to local conditions and standards, to market-
based standards.
Mr. Hobson. And that would save money.
FORT HUNTER-LIGGETT
Mr. Farr. The second question I have is the Army cantonment
area at Fort Hunter-Liggett, which is now under the command of
Army Reserve. Are you aware of any reason that the Army may be
changing its mind, and can it? Can it withdraw from what has
already been put out, where you have asked for proposals from
other Federal agencies, and they have responded and said, ``We
are interested''? Once it has been BRAC'd, you can renege on
that?
Mr. Apgar. I am not certain, sir, but I wonder if General
Plewes would respond.
General Plewes. Yes, sir. I am Chief of the Army Reserves,
so I think I can try to answer that.
When we started to expand the training base at Hunter-
Liggett we discovered that many of the decisions made in the
BRAC process just did not seem to make any sense any more. We
have now gotten more training hours in there than when my
division was training there, for example.
Mr. Farr. If the Reserve is not training there, then the
National Guard is training there.
General Plewes. Well, the Reserve and National Guard, sir.
I have gotten the National Guard back in there again, and the
Army Reserve has put in two schools, and they are working
around the clock. So we are pretty busy there. I went back to
Forces Command, quite frankly, which has the overall
responsibility there, and I asked could we rethink some of the
BRAC decisions. And basically the decision we got back is, no,
we are not going to reopen BRAC.
Then came what you have been helping us with, and that is
going around to other agencies to determine whether or not it
is possible for another Agency to take responsibility, and then
we would rent back, lease back, whatever we could. We are still
in negotiations with the National Park Service. And that is
about as far as we are. They are taking a look at whether or
not they want to get involved in that business. It would make
good business sense for them if they decided that that is
consistent with what their charter is, and we would, I believe,
be in a position to offer them some long-term assurance that we
will provide the basis of funding.
Mr. Farr. Well, if for any reason that the National Park
Service does not, and it is BRACed, I think we ought to look at
the Forest Service because there is also civilian training
going on there in the Wild Land Fire Management, which benefits
all of the other Federal agencies; the Forest Service, Park
Service, BLM, working in conjunction with the National Guard
and the Reserves.
This is a great opportunity for training, and we ought to
just broaden and use that. This is a huge place that we have.
It is the fifth largest, I think, piece of land in the Army in
the United States.
Mr. Hobson. How many acres is it?
Mr. Farr. You have got the biggest. It is 168,000 acres.
And I look at, I said, ``Look, let us look at this like a
convention center. Anybody who wants to do training here,
whether they be military or civilian,'' I mean for all of this
detection of how you train people for explosives and
biologicals, we could use this. We have got all kinds of
capabilities. We ought to just think broadly on this one. And I
appreciate your answer.
PRESIDIO OF MONTEREY--ADDITIONAL HOUSING NEEDS
I understand that the Army is entering into a lease-back
arrangement with the City of Marina as a part of Fort Ord. The
initial contract consists of approximately 170 units with
another 530 units for potential lease arrangements. Is the
housing stock sufficient to fulfill the needs of the DLI, the
Defense Language Institute, at the Presidio in Monterey or do
you foresee even additional housing needs? And do you
anticipate that the Army will have to build new housing? You
still own military land. You have housing on there, about 5,000
soldiers and families of soldiers, and you have run out of
housing.
The reason is that when you send students to the DLI, (we
have about 70-percent married now), that when the student,
after they have their training, the student is deployed to
their next assignment, but the family of the student has up to
18 months to relocate. So the house that the incoming student
would have been in or the building that they would have been in
is occupied by the family of the outgoing. And we have this
overlap, and we are now suffering from lack of housing. If you
need more housing, you are going to lease back from Marina this
housing that you got rid of. You probably got rid of too much.
But are you considering, on that land on the Palm Annex, that
you may have to build some more land and build more military
housing?
Mr. Apgar. I do not know the answer, sir, but we will be
happy to look into it and report back to you.
CLEAN-UP OPERATIONS AT CLOSED BASES
Mr. Farr. And then, lastly, a very interesting thing that
this committee is probably involved with because of my concern
about it, can you tell me if the Army has been the subject of
any environmental lawsuits for clean-up operations at closed
bases--this goes to your BRAC statement here at the end--
similar to the lawsuit that was filed to clean up Fort Ord? Is
there any other lawsuit like that?
General Van Antwerp. Not that I am aware of. That is the
one unique thing. We have a considerable number of
environmental issues to overcome. There is $231 million in this
2001 budget to work BRAC environmental. So there are other
issues out there, but none have come to the point that Fort Ord
did.
Mr. Farr. I admonished the Navy this morning when they were
in here. The Services are going to have to get together on this
clean-up, particularly when they are dealing with the State of
California. Because you have one stop for all services in the
State of California. It is called the Office of Toxic
Substance. And they are in the process of determining what the
clean-up standards should be for re-use, for civilian re-use,
under California law. And it appears that their standard is
going to be higher than the Federal standard, which means,
essentially, that the land cannot be used for the purposes,
with the adopted re-use plan, that DoD has already approved.
See, this is where we are getting into a big problem, we
have said, ``Yes, we will clean up the land to the standard
which you have put in your master plan for re-use.'' And then
along comes the Toxics Office and says, ``Our standard for re-
use is going to be higher than the military,'' and you are held
accountable, responsible financially, to cleaning up to that
standard. And you are going to be held forever.
And what they have just agreed with an MOU with the Navy
could be the boilerplate covenant for all military land in
California, regardless of what Service.
The Army is the lead, but you are the unexploded ordnance
experts. You do that for all of the Services. It seems to me
that there has got to be a meeting between, and California is
probably the test place, between the Army, the Smart Team that
Ray Clark has headed up, and the Office of Toxic Substance to
really come--and I will push them--to come to some kind of
standard that you could both agree on, and you ought to work
out some covenants there, boilerplate language, that other
Services could use.
But do not let the Navy drive it. They have got a clean
piece of land, and they have essentially got you hooked into,
because I can see the same covenant coming along, and you are
going to have a financial responsibility beyond your
capability. And this is something this committee has got to
deal with because if we are going to build them and abandon
them, we are going to be responsible for cleaning them.
General Van Antwerp. We will definitely get with them and
look into it.
Mr. Farr. Thank you.
Thank you, Mr. Chairman.
Mr. Hobson. Norman.
HOUSING PRIVATIZATION--FORT LEWIS
Mr. Dicks. Assuming this reprogramming is approved, and you
have gone through kind of the schedule, could you give a little
more detail about just what is going to transpire at Fort
Lewis. You are going to turn over all of the military housing
to whoever wins the RFQ, and then they will build additional
housing over what period of time? Or is that an agreement that
has to be reached?
Mr. Apgar. It does. You have to go back to the process
itself.
As soon as we have made the award, two events occur
simultaneously: One, the development partner begins receiving
the revenue flow, if you will, from the basic allowance for
housing of all of the soldiers in family housing, and the Army
and the developer begin a joint planning process within a 6- to
9-month period to produce what we have called a Community
Development and Management plan, and that has three components:
A financing plan, source of capital, for both renovation and
new construction and ancillary facilities, landscaping and the
rest; a development plan over a period of time, how many units,
which ones, where, which are renovated, which are new; and,
thirdly, an operations plan, that is, ongoing maintenance and
management of units once they are renovated and/or constructed.
That is, although we are maintaining flexibility at this
point to be negotiated, typically going to be a 40- to 50-year
agreement, with very strong oversight on the Army's part. I
view the installation commander as the plant. My role and our
office's role in the task force at headquarters is there to
help make it all happen and basically to supervise the deal
until it is ready to be consummated.
So in that 6- to 9-month period, that plan, the detailed
plan, will be produced. And at the end of that plan, there will
then be the formal development agreement, and the management of
the whole portfolio, all family housing in Fort Lewis, will
then ensue.
We have set up a structure, including both the installation
commander and his staff, local community leaders--and Mr.
Edwards could perhaps describe to you how we have approached
that at Fort Hood already, and we are about to do this at Fort
Lewis. The model is to involve all of the stakeholders in
planning, not just Army, but local community, and in doing
that, to engage in all of the issues that are going to come up
from not only who is building the housing, but governance and
relationships with the local market service providers.
On an ongoing basis, the installation commander and his
staff will really have the day-to-day oversight of the
development partners' work. But in the cases to date, the
premise is that the development organization will have not only
a full-time staff, but senior executives there full time. And
those decisions could be really made and solved locally, not
from the Pentagon or here. But that is the basic framework.
Mr. Dicks. Interestingly, once this is, in essence,
privatized, and it is no longer the Government owning this
housing, through the Army, it will then be subjected to local
taxes, will it not, or local issues of that nature?
Mr. Apgar. It depends.
Mr. Dicks. On local zoning or whatever?
Mr. Apgar. Because we remain the landholder, and this is a
ground lease in some form, the present rules apply; that is, we
are our own zoning authority, and we are our own building
certification authority, and we are also the source, in effect,
of the revenues.
I think where we are going to have to forge new ground.
This is not clear yet. The linkages with the local community
where existing services that may be available off-post that
serve on-post residents, may be applicable, and the model
really is Monterey for that, which is a pioneering
relationship, joint agreement between the Army and the local
community and we have other models to look at. But that is
certainly a profound one, in my view, for how a long-term
partnership with the local community would work.
Some of those issues are precisely what we are going to
have to work through in each case and each case will be
different. There is no template that is uniform. In fact, it
would be a serious mistake to think that each post, each
location at this scale has a uniform template. There are some
principles that are the same but the specifics are a little
different in each case.
HOUSING PRIVATIZATION--TAXATION ISSUE
Mr. Dicks. But taxation will be an issue, right?
Mr. Apgar. Well, it will be an issue for schools as it is
today but it won't be an issue for property taxes.
Mr. Dicks. How would they be exempt from that?
Mr. Apgar. Because we own the real estate. In effect, the
developer will have the rights.
Mr. Dicks. What about the construction? In our State we
have a sales tax. But the sales tax is sometimes not imposed, I
believe, when the military does it. But if a private sector
person is doing it then they are going to have to pay that,
right?
Mr. Apgar. No. Because the development rights in this case
are on land that we own and, in effect, we are granting through
the form of a lease in whatever legal structures that we work
out--and that can be different, too--we are granting the
developer the rights to build, to renovate, to demolish. But I
have not, at least, been apprised as yet of a specific, either,
property tax or local excise tax except for sales taxes that
could apply if there were a revenue stream and so far there is
not.
Clearly it is an issue to be worked through.
Mr. Dicks. Yes, it has got to be worked through.
EXIT STRATEGY
Mr. Hobson. If I could interject. Where there could be a
problem some day in this that in most of these leases there is
a provision that I, one, frankly, and one of the reasons we are
building where we are building is that the military is going to
change. This doesn't necessarily mean Fort Hood because they
are probably going to be there ad infinitum as long as we have
got an Army. But there are other facilities that through a BRAC
or over a period of time as people as we have discussed at
another hearing move out of base, traditional base housing or
this housing, even, and would go into the economy maybe buy a
house or something--well, that is--who knows how missions are
going to change--this in character would change from a
predominantly occupied facility by active duty military into
maybe in the final analysis local community people after you
run through, you know, how the lease is drawn and the gamut.
So, it seems to me at some point the community is going to
get a little upset at some point if you have got people moving
in there, out of the community, and they are not getting some
sort of revenue back beyond the probably the income taxes that
they have or something of that sort that are occupying these.
It is something we need to think about as we are putting
these models together but one model that is going to be
consistent throughout all of this is that, I believe, that
should be here is that if we don't need this housing any more
we should not continue a leasing arrangement. I think everybody
agrees to that. The problem is when that shifts over to a
predominantly civilian, which who knows when that is going to
happen, what then happens to the taxation part of this? And I
don't know anybody really, how they are considering that in
their modelling now, but it is a good point to look at.
Mr. Apgar. To your point, Mr. Chairman, one lesson we have
already learned from the Fort Carson project is that I only
discovered in the course of this briefing, I mentioned a few
weeks ago, that there was no exit strategy. Now, that is a
central principle of any long-term real estate deal. And we had
already assumed that for the Forts Hood, Lewis and Meade cases.
As you know, the Fort Carson project was set up several years
ago. So, that is a specific example of why this issue is
important.
If you have an exit strategy, and let's say every five
years there is a trigger for whatever reason, the issues of
transfer of both ownership or in the case of a long-term lessee
controlled the values associated with that, both in the revenue
stream and in the underlying real estate, are carefully
defined. And that is not rocket science. It is complex.
Mr. Hobson. It is normal real estate.
Mr. Apgar. Well, exactly. It is normal real estate
practice. So, those are the sorts of issues which are
unconventional or even unprecedented for Government--and
remember I have only been in the Government now for about 20
months, so, I am still new to this--that are well-practiced in
the private sector.
So, we may have more difficulty, ourselves, with this than
our development partner will or even the local community.
Nonetheless, the short answer is a number of details have to be
worked out at that time.
Mr. Dicks. Okay.
Thank you, Mr. Chairman.
Mr. Hobson. I might add that we are going to have, for
anyone who might want to show up, we are going to have a
hearing on how to do privatization, alone, in about a week or
so, where we can discuss where we are, where we have been,
where we don't like where we are. I don't like 50-year leases
that are a 50-year term. I would rather have a shorter, 10-year
lease, and then be able to flip in or out as you go along and
Fort Carson, I think, is what 70----
Mr. Apgar. It is 50----
Mr. Hobson. Fifty with a 25--I don't know, if I was going
to do anything I would do 25 and then 50 but there are some
underwriting things that are all in these things. But if you
all--we are going to have a hearing on all this stuff so we
can--so the Committee, itself, can understand a little more as
we go through it.
Mr. Olver. On the housing privatization alone, we are going
to have a hearing?
Mr. Hobson. Yes.
Mr. Olver. Well, thank you, Mr. Chairman.
I don't know where to begin except that I want to ask a
couple of questions about the general budget and then I want to
go back to privatization.
ARMY MILCON BUDGET
It appears to me that the request here is about a quarter
of a billion below where it was last year on the Army's
request. On the Army's MILCON it was about $1.1 billion in the
fiscal year that we are presently in; for this coming year it
is about just under $900 million in the year coming up and of
that $900 million a sizable piece is a chemical
demilitarization amount which has on rare occasions appeared in
a different budget in different counts. And, so, it makes it
look as if it is even more down in that instance.
It appears to me that that family housing amount is
somewhat below last year. There are some shifts, obviously,
because what I am pointing out, I think, is that the amount
that MILCON is down, if you take in the chemical
demilitarization, it looks as if the comparable amount from
last year is about $725 million versus $1.1 billion for this
year. That is $350 million or thereabouts. And the amount that
the allocation for this year, just under a billion for family
housing operations, is 10 percent below. There must be some
other places where it is up.
But do you have any--I have a hard time here and this will
get to the other question now going back after laying that set
of numbers out, we understand that the Army's housing situation
is worse, more difficult, more daunting than any one of the
other services, than the Air Force, the Marines or the Navy. I
will get into some questions about, again to remind me exactly
what the proportions are in the Army's program, but under those
circumstances it particularly worries me that the amount for
the family housing operations seems to be down by an amount
from last year.
Is anything in here for the privatization or is that all in
last year's? Is some of that in here for privatization or is
that all in last year's, what covers the several accounts?
Mr. Apgar. Well, first we have actually budgeted a $154
million for housing and added $250 million to the pot in a
five-year program from last year. That is a very important
change in an otherwise very tight budget. And it assumes that
that level of MILCON expenditure will continue throughout the
five-year time.
What it does not assume is the rate of additional
privatizations beyond these pilot projects might occur since
the principle of privatization is leveraging public dollars,
MILCON dollars, there is an open question as to how far you
want to go and could go. In theory, anything that could be
privatized in a market sense would achieve an 8-to-10 or more
one leverage over that set of dollars. But so far we haven't
done that exercise or certainly haven't programmed it.
As to the overall level of expenditure, the Army has made
some very tough choices. The highest MILCON priorities are
funded at 100 percent--barracks, strategic mobility, Chem Demil
as you cited. Beyond those there are varying levels, as General
Van Antwerp has already pointed out, of funding to require
this. And frankly, where there are tradeoffs between military
construction and the quality of life components of total
military construction budgeting, they sometimes are at risk to
other readiness priorities and that is a central problem. It is
not new this year. And, as I understand it, it has been a
problem for some years and remains a problem.
General Van Antwerp. If I may just add one thing. Last year
we had the ill-fated incremental funding scheme out of DOD and,
so, and what Congress did and----
Mr. Hobson. I am glad you described it as an ill-fated
scheme.
General Van Antwerp. Ill-fated but the great thing that you
all did was to fully fund most of those projects forward. So,
the actual request was fairly close. The request for 01 was
fairly close to our request in 2000. You all helped us a lot.
Mr. Olver. Well, there is no forward funding in this
budget, the one that is before us now.
General Van Antwerp. That is correct.
Mr. Olver. But ultimately what I was making is a comparison
between what was enacted in the 2000 budget where by that time
there was no forward funding either, versus what we have here.
There are some shifts but I am having a hard time identifying
where they are. Is one of the pieces of that on the
construction part of your overall request, which is just under
$2.5 billion, and I think that overall enacted Army piece for
the fiscal year that we are presently in, the 2000 budget, was
just under $2.75 billion.
You know, is part of that because there is no contingency?
General Van Antwerp. There is about $58 million out of this
year's budget that would have been contingency with the Guard,
Reserve and the Active Force. That is that 5 percent that was
taken out of it. So, it comes to about $58 million. So, that is
out of this budget.
Mr. Olver. Okay. Well, that might explain why there is a
sizable piece but there are some other pieces that I am having
a hard time identifying. And maybe--what has gone up and what
has gone down. Especially when I have identified at least that
big chemical demilitarization piece which was not in this
budget last year. That is another large step that looks like
you are below. And given the needs for housing and given what I
am told about the base facilities and so on, it seems unusually
out--I am having a hard time grasping that you, the service
which is most in need on housing modernization and on
facilities, barracks and other facilities, find that this is a
year when that budget should end up being down.
Somehow there is something missing and I don't know where
this is.
HOUSING PRIVATIZATION--FORT CARSON
General Van Antwerp. One other factor is when you do
privatize, like in the case of Fort Carson, those operational
dollars now don't go--then we put money into the military pay
account from which the soldiers would pay the rent, their basic
housing allowance. And that used----
Mr. Olver. How much is that a factor? How big is that
factor? Carson is now just in--it was just opened?
General Van Antwerp. It was awarded, right. But for the----
Mr. Olver. Is it now occupied, Carson? How many units is
it, 2,000?
General Van Antwerp. It is 1,800.
Mr. Olver. Okay, 1,800. Okay. Is it now in occupancy?
General Van Antwerp. It is now under private ownership.
Mr. Olver. And it is now being occupied?
General Van Antwerp. Yes, sir.
Mr. Olver. So, for the present fiscal year there is some
reduction?
General Van Antwerp. Right. We are not putting operational
funds, AFHO funds, into Fort Carson this year.
Mr. Olver. Okay. That is fine, but if that is the case then
in the present fiscal year there has already been a factor
weighted into the present fiscal year, the enacted 2000 budget,
where a reduction of those maintenance funds that might shift
over there. Although I have to say that it was my impression
and that may be our problem within this branch, within the
Congress. I will have to say I thought that especially given
the needs that have been identified on the part of getting
housing that we were not going to lose those monies--because
our needs are so great for housing, the number of inadequate
units is so great, particularly in the Army--off to some place
else.
That apparently is a decision made within the Department of
Defense, that you are going to reduce the amount that goes into
the MILCON budget. That is how much?
Well, in the case of Fort Carson, if we were talking about
the difference between the 1999 budget and the 2000 budget, I
think what you have said would be true. There is only three-
quarters of that that would be attributable in the 2000 budget
versus a full year, four quarters, in the other. I don't know
how many millions that would identify as a reason why this one
is down.
But it worries me because the number of dollars for your
needs in the budget that has been offered to us is not helping
you. It doesn't give you any step forward toward meeting that
very great backlog of housing facility needs in the Army.
General Van Antwerp. You not only have Fort Carson, but the
expectation is that by the time of enactment of the 2001 budget
we will also have Hood and Lewis.
Mr. Olver. Already in occupation?
Mr. Hobson. No, wait, wait. Let me in here, John.
I want to put everybody on notice. This is a game we aren't
going to play. He has got a very good point here. What I sense
is just what we all worried about when we started with
privatization is happening, and it is not just with you guys.
It was with the Navy earlier this morning.
Mr. Olver. That is fine. That is fine.
MILITARY CONSTRUCTION ACCOUNT TO MILITARY PERSONNEL ACCOUNT
Mr. Hobson. So if I am understanding correctly, did the
Army put what they would have normally put in the family
housing for Fort Carson, the money that would normally go in
there, over into the military personnel account?
General Van Antwerp. I don't know if it is an exact thing,
but what we did, we figured out the operation requirements----
Mr. Hobson. That is right, and that is exactly----
General Van Antwerp [continuing]. At other installations.
So in the event----
Mr. Hobson. And that is exactly what we all said was going
to happen to the MILCON account when this started, and
everybody assured us it wasn't going to happen. And we are
going to go back and get the records out because if you guys
continue to do this, then we are never going to get all the
stuff we need to do in the other things in the installations. I
want to stop this now before it gets too far. We better send
the messages and people better pick it up. John is right. He is
going down the right track, and this just can't happen, or the
military construction accounts are going to be--and I have had
a meeting with Rudy De Leon 2 years ago or a year and a half
ago about this very issue, that that is what was going to
happen. They were going to shift the MILCON accounts over into
this military personnel account, and no provision was going to
be made for supping up that one without stealing from this one.
That is not right.
I want to put everybody on notice that we are going to
have--if we have to go to war over that, we are going to have
to go war.
CONTINGENCY REDUCTION
One other thing along what he said. When he was talking
about the contingencies--and I forgot to ask this in the Navy
hearing, but where did that originate from? Did you come up
with that, General Van Antwerp?
General Van Antwerp. No, sir. DOD. Our request was for 5
percent.
Mr. Hobson. Okay.
General Van Antwerp. Which is low-balling.
Mr. Hobson. I just want everybody to know where it came
from. That is all.
General Van Antwerp. I can explain why that was taken. I
heard Mr. Lynn speak at a hearing this morning, and he said it
was because there was a sense that the Congress last year took
that contingency money, and, therefore, we just took it in
advance this----
Mr. Hobson. Oh, it got social acceptance.
Mr. Olver. All right. I guess you get the point about what
I was delving at, and my chairman has jumped on that with both
feet. And I think that I am worried, particularly in the case
of the Army, I think we should be worried all along the line,
but in particular there, where we have been told that the
facilities, the barracks, the housing facilities have been
particularly inadequate. That is a serious problem.
Let me go on to another set of housing--oh, do you want to
go on?
Mr. Hobson. No, go ahead.
Mr. Olver. A different set of----
Mr. Hobson. As long as you don't mind if I interrupt you
once in a while.
Mr. Olver. I am happy to have you interrupt and, whenever
you want to, to come down in strong support. That is fine.
[Laughter.]
FAMILY HOUSING
On the broader housing issue of privatization, give me just
quickly, how many total family units does the Army have
nowadays?
General Van Antwerp. Worldwide, we have about 124,000 that
we own or lease.
Mr. Olver. 124,000
General Van Antwerp. Right. In the continental----
Mr. Olver. And what percentage of Army families are
actually out on the market?
General Van Antwerp. We house about 25 percent of our
people on the installations.
Mr. Olver. On the installations.
General Van Antwerp. So 75 percent----
Mr. Olver. So actually there is close to 500,000 total
families.
General Van Antwerp. Right. That would be----
Mr. Olver. Now, you are not including bachelors here?
General Van Antwerp. One in four families----
Mr. Olver. We are talking of only families. One in four
families is in base-related installations.
General Van Antwerp. We house about--right. About 25
percent of our families are housed on our installations.
Mr. Olver. Well, okay, 25 percent.
General Van Antwerp. So 85,000 is the number in CONUS.
Mr. Olver. So 375,000, just about three times, is out in
the community at the present time.
General Van Antwerp. Correct.
Mr. Olver. Okay. We are not proposing that we are going to
ever get to the point of being able to build enough housing,
either by privatization or otherwise, to change that 375. What
we are doing is within the 124,000 you are proposing some new
and some renovations, traditionally, and we are also having
some privatization projects, which in sum total represent 2,000
at Carson. And if I understood, Mr. Secretary, the number that
is in our other three, it must be 12,000. So there are 2,000 in
Carson and 12,000 in the other, and we have this in four
different projects.
If we--pardon?
General Van Antwerp. Another number I might give you is we
are calculating now, but it will be determined at Fort Hood,
what is the deficit at Fort Hood and at Fort Lewis, and that
will be done when this management plan is developed. But the
estimate before housing privatization was about 7,400 sets in
deficit. We did that additional----
Mr. Olver. 7,400 at Hood?
General Van Antwerp. No. Across the service. So that would
bring you up--I don't think we will ever expect to get more
than probably 30 or 33 percent of our families living on base.
Mr. Olver. Do you want it to go up?
General Van Antwerp. There is a mixture.
Mr. Apgar. It depends.
General Van Antwerp. If you ask families, there is always a
great waiting list at every installation.
Mr. Olver. At every installation.
General Van Antwerp. There are people----
BASIC ALLOWANCE FOR HOUSING
Mr. Olver. But we are also faced with the BAH situation.
Now, I don't know whether we have really taken into account
what the change in the BAH over a phased basis is going to have
as an effect. Aren't we likely to have the market begin to
provide--response? Because the BAH has gone up 20 percent and
that secures the potential payment on the part of people so
that maybe the private market is going to go up to more than 75
percent by its own natural force.
Now, I am not suggesting that that means we should do
anything less about what is on base or in the privatization
programs and the balance of what is in those two in our pilots
and things like that. But it seems to me that somewhere we are
going to have to be very watchful of what the BAH increase. If
we really get into a matter where we are going to go up all the
way to equalizing that, removing that discrepancy, that
inequity between those who are on base and those who are off
base, the private market should respond. That is what we would
normally believe here in the economics.
The deficit is so great on the bases that I don't think
that has much effect upon our need--we surely can't anticipate
what might happen 5 years from now but that doesn't have much
effect, I think, on what I am saying about our problematically
low numbers in these budgets for the housing initiatives that
are there.
And I guess I was a little worried, but, you know, talking
with my colleague in whose district Fort Hood is, I was afraid
that by having a huge privatization we might be putting
ourselves into a position where in the process of completing
that privatization while the BAH is being phased upward, that
we might end up not needing all of those units that we were
just privatizing on base. And I doubt that is the case.
HOUSING PRIVATIZATION--50-YEAR LEASES
Mr. Hobson. But that is the reason that the deal that is
made needs to take into consideration future changes in the
Army and future changes in lifestyles and other things that
could happen in the community. So you can't lock yourself
into--this is what I worry about--50-year leases or 100-year
deals and guaranteed on rent and, you know, all this kind of
stuff. You know, you are going to have BRACs. The BRAC problem
may not affect Fort Hood, but it is going to affect some
places. And if you have a deal in there that changes those
numbers so that it doesn't work, you have now locked yourself
into a base that you can't get out of. That is what I worry
about in these deals as you go through them, that you can't do
that.
Coming back to your exit strategy, which is in any good
real estate transaction or loan strategy or contract that you
make in a business, what is your exit strategy if things
change? That is very important. What he is saying is, I think,
very important.
Mr. Olver. So I am a little concerned about--every time I
see a huge project going out for privatization when we are
making this BAH phase-in change. I am concerned about that,
though I don't know that I can put it in quantitative terms by
any means at all. And the Army's cases are somewhat different
in the sense that it would appear that the Army has big, big
institutions, essentially, and big numbers.
Chet, you said how many? There is quite a large percentage
that are off on the community even at Fort Hood.
Mr. Edwards. Sure, 44,000 soldiers total. There is going to
be renovation and building at 5,000 or 6,000.
Mr. Olver. On the family side.
Mr. Edwards. Can I piggyback on that to clarify? Talking
about these huge projects, it is my understanding that--I
forget the total number--5,000 or 6,000 housing units are part
of the Fort Hood project. Over a period of 10 years, the net
increase in new units is 400 or less. Is that ballpark?
Mr. Apgar. Yes, and, of course, because of the agreement,
as a matter of longstanding policy, as I understand it, we
would not build in such a way that the local market would be
threatened.
But to your point, Mr. Chairman, earlier, if I may, there
is a reciprocal issue here which I hope we can work with you to
figure out. When you require us to program and specify a
precise number of units for a market condition that may be 15
to 20 years out and have no flexibility in that number, from a
business point of view, if you will forgive me, that is not as
sound a basis to structure a long-term plan. But our current
system requires a steady-state, fixed projection. The market
doesn't work that way.
So to the extent not only we are adapting local market
standards and the rest, we have to find a way with you to
protect the public interest, certainly, in having a long-term
projection, but also allow reviews periodically. If this were a
purely private investment with the same scale and the same time
frame, that review would probably occur on a formal basis every
3 years or so, certainly periodically in between, and you would
make a course correction. It is not 5,343 units to be renovated
and maybe 4,900.
Right now, I think we are getting the worst of both cases.
We are not getting the advantage of the long-term, large-scale
program which should produce enormous efficiencies because we
lock ourselves into a fixed-point estimate, and yet at the same
time, we haven't got the flexibility for an exit strategy, a
deal review.
So we are going to build those principles into this pilot
project, come back to you to show you the base case, which is
our current case together, fixed-point estimates, precise
measurement, even though it is 20 years out, of what is built,
what is renovated, what is demolished. But an alternative
scenario--and this is true to the military's own principle of
warfighting scenarios--an alternative methodology which has an
end state that is the same but a different method of getting
there, I think that is a really profound issue we need to
tackle together.
HOUSING PRIVATIZATION--MEETING LOCAL STANDARDS
Mr. Olver. May I just ask one other little thing that comes
out of that? Are we doing all these privatizations now, that
they privatize on a base, are these going to have all the
standards met that are local standards in the privatized
projects?
Mr. Apgar. Well, the word ``standard''----
Mr. Olver. Standards, I mean by that water and sewer and
local building code kinds of standards. These deals are all
going to have those brought up to what are the local standards
in the future?
Mr. Apgar. Yes. There are really two levels at which we
want to address this. One is local infrastructure and building
standards certainly to meet to local codes, even though we are
not, ``required to.'' But the other is local market features.
For example, in one region of the country, the
architectural design and the size and shape, even interior
features, would argue for a large family room and more
attention to the kitchen. In another location--Fort Lewis, as
the next, will differ in this--the climate and local market
tastes really have different standards, standards not in a
building or technical sense----
Mr. Olver. Fine.
Mr. Apgar. So both those apply.
Mr. Olver. Okay. Privatization, that is fine. Now, if we
are also doing new housing or renovating Army housing, as we do
new housing and we renovate present housing which is
inadequate--and you have a lot of units of that that are
involved in this year's proposals--are we bringing up those
kinds of things to local codes?
Mr. Apgar. Yes.
Mr. Olver. I mean, we have cases where we have housing
which is--has still considerable useful life where the
utilities are--I don't know whether they met--I doubt if they
met the code, stuff that was built during the Second World War,
during the Korean War, during the early parts of the Cold War
when we were really building up rather quickly, which has
problems which just don't meet what are now codes in those
areas. I don't know whether they did at that time, but is all
the new stuff up to what would be local codes in case that
needed to go back into a public market?
Mr. Apgar. I can't speak to all, but we certainly have two
basic conditions. One condition is where the military
specifications have produced units which are up to local codes
and are recent in the past, say, 10 to 15 years. The other set,
though, the much larger set, are those which still have useful
lives which were built 20 years or more ago, can be renovated,
according to current standards would be torn down, but if they
were, would take off line units when they still have useful
lives, and that is where the value of the development partner
coming in to look at the same conditions we have defined as
renovate, demolish, rebuild, could propose a different answer,
to say let's put half of the cost that it would take to
demolish and build new into renovation, which will produce a
larger number of occupiable units for the next 10 years, while
we are demolishing and rebuilding the older stock----
Mr. Olver. Up to full standard.
Mr. Apgar. Up to full standard. And that speaks to this
whole issue of a flexible approach. First, we want the
expertise to tell us that our own standards may simply be wrong
or too costly, and you will see those same economics that we
do, but at the same time, a phased program that over time
brings the Army stock up to local building code standards and
quality standards that we want, too.
Mr. Olver. Thank you, Mr. Chairman.
Mr. Hobson. Before Allen starts, I just want to mention one
thing. One of the problems I have when you say we will see them
is that you all have a year or two to put this program
together. Suddenly, we get 30 days to sign off or not sign off,
and sometimes I am not even--we have had a little disagreement
about this a couple times over, whether we really have 30 days
or not. If we change this law, we are going to get more than 30
days. And it is not designed to hold you down. It is the fact
that if we have to sign off, I think we have to do some due
diligence as to what we are doing, and 30 days in a cycle we
all live in just not enough, and we don't have the staff to do
it.
Even on the ones we have got now where we are dealing with
30 days, I think we all need to have some understanding that we
are going to work together a little better in making sure as we
go through the process or at the end of the process we all have
an opportunity--and I don't want it to just be me. I want
everybody--I mean, I know you are going to look at Fort Hood,
and I am offering this to Norm, also, or anybody else that
wants to look at it. We need to have--and we can be a much
better advocate and less likely to be had by something else or
influence this, if we have had an opportunity and our staffs
have had an opportunity to look at this stuff.
So if we can have that understanding, I think we just need
to work on it.
Allen.
Mr. Boyd. Thank you very much, Mr. Chairman. I apologize
for being late. Let me brag a little bit. I was attending a
reception for the National Champion FSU Seminoles, for those of
you interested in----
Mr. Hobson. Is that school accredited now? [Laughter.]
CONTINGENCY FUNDING REDUCTION
Mr. Boyd. They get no respect. But, seriously, I want to
thank you, Mr. Chairman, for your fair-handed way of
administering the committee. I really only want to ask one
brief question, and it has to do with an issue that came up
that you have already addressed, and that is the contingency
funding issue.
Now, we heard from the Navy this morning, and you have
confirmed what we heard then, that it was a directive from
above that that be eliminated totally. There was a reference to
the fact that the Congress eliminated all--I think we only
eliminated a part of it, though, not all of it. And I have
heard maybe that the 0.38 percent across-the-board cut, that
you guys got the rest of it in that.
Is that a fair assessment in the 2000 budget?
General Van Antwerp. That is a fair assessment.
Mr. Boyd. Okay. So we are operating now--you are operating
from a practical standpoint without having that contingency
plan even in this current year.
General Van Antwerp. That is correct.
Mr. Boyd. Okay. Is the evidence such that you can do that,
or does the Department expect Congress to put it back in? Or
where are we? I mean, we heard the story this morning from the
Navy. They thought it was going to be a real hardship.
General Van Antwerp. Well, we think all the services that
have gotten the other work committed did not cut in scope or
quality on these projects, so we are going to go through with
the projects as designed as to scope.
Where your problems arise is if you have varying site
conditions, and it happens with renovations mostly. You could
have some issues that you just can't foresee--bad
infrastructure, pipes not where they are supposed to be
underground, those things.
So what basically we have to do, probably more often we
will have to come back for reprogramming, if necessary, or if
we have bid savings in projects, we will be able to get some
there. But it could roll up that at the end of the year you
have to delay some projects from being executed into the next
year as you--because you just don't have the funds, total top
line in the budget. So those are some of the possibilities of
what could happen.
Mr. Boyd. Well, maybe we ought to ask this question of
someone else. What was the thought process to send a budget
request that totally eliminated it? Can you answer that?
General Van Antwerp. No, I----
Mr. Hobson. That is probably a four-star----
[Laughter.]
Mr. Apgar. I think that is a question of DOD, actually,
sir.
Mr. Boyd. Thank you, Mr. Chairman.
HOUSING PRIVATIZATION
Mr. Hobson. All right. Let me ask a couple things. This one
I hadn't planned to ask, but I want to talk about it because we
keep talking about the 8-to-1 leverage and things of this sort.
In underwriting a deal, in putting together a deal, why do
we have to put money in them when we are already putting the
land in them in many cases? We don't charge land leases. These
are not subordinated ground lease deals that we are doing. We
are giving them basically the ground free.
With the increase in the BAH, the numbers ought to look
better. It would seem to me that there are places--I am not
saying this is true everywhere, but I see a tendency to take
MILCON dollars and try to leverage MILCON dollars into the
transactions. And I am not just saying the Army. This is true
for the Navy and the Air Force.
I would think in some of these places that there could be a
private developer who, if they can do the underwriting right,
it may work out that we don't have to put any money in. He
might even pay us in certain cases to get into the deal with
some of the things that we are doing for him, because some of
the utilities where we are providing utilities in there
already, in some ways he doesn't have to put utility lines in
except running them into the buildings. He has got it already
in the streets. He doesn't have to build streets in a lot of
places.
I am just concerned, and my general comment, and you don't
have to really respond to this, but my comment is when these
people are looking at these transactions or deals, as I like to
call them, that they look at them in a traditional underwriting
sense. Suddenly some of the people who have been traditional
providers of services to the Government in building tanks or
other sorts of things are going to--I don't want to do tanks.
That is just a word that came to me, but airplanes or whatever,
guns--suddenly are seeing that this is a big source of dollars
here now and a way to get in.
I worry about that because they begin to think
traditionally inside the box. One of the things we are trying
to do and one of the reasons we wanted to go to the--let all
three of you do it at DOD, you know, come down this way, is to
think outside the traditional box, and that is why we have gone
down these roads.
I am worried, though, that we start talking about the
Government putting this money and the Government doing this,
the Government guaranteeing that, and then suddenly we are back
inside these same kind of dumb contracts that we do on some of
the other vehicles that I have dealt with where to cancel a
project costs more than to run it all the way out.
That is why I worry about the exit strategy. That is what I
worry about.
So from that standpoint, somebody needs to look at some of
these and say, hey, you want this deal, bid on it, and whoever
has got the best bid and pays us the most money, we are going
to make that deal. If you do close that base, they are going to
wind up with that property, and then they are underwriting--you
know, MetLife is buying for, you know, 100 years out in their
stuff when they buy stuff for somebody else.
So those are some considerations that I think your adviser
guys ought to be--the people that you hire or yourself ought to
look at.
BARRACKS
I went down to Fort Bragg and I understand Fort Benning has
got this. There are some special op forces barracks that I was
in that you wouldn't want your kid in, and these are people
that we want to keep. And I don't know that they are in
anybody's plan yet because we are doing some of the other
stuff. And these people aren't permanently there. By permanent
standards, I mean, they are only there, like, a year or so
training. But those training base barracks that I saw are
atrocious. We ought to be looking at those, and we ought to put
them at a higher priority, I think, than where they are.
I am going to hit you with a question, and I am going to
tell you--you saw me laughing before. The problem was I was
thinking about this question, and then I will tell you why I
was laughing. It is a very serious matter, but I am concerned
about a letter that appeared in the Stars and Stripes, last
Tuesday's Stars and Stripes. And I have got the letter here,
and I am going to read you the letter, and then I have got a
couple questions about it.
FIRE SUPPRESSION DEVICES IN FAMILY HOUSING
This is a letter to the editor, Tuesday, February 22, 2000.
It says: ``This is in regard to the recent fire in the Roman
Way Village housing in Butzbach, Germany. Why does the Army
feel that there is no need to install smoke detectors or fire
extinguishers in the stairwells, laundry rooms, and other areas
of the buildings, like every other multi-family dwelling is
required by law to have? Residents of the upper floors should
be issued portable escape ladders to ensure a safe way out
because of the stairwell. Unfortunately, we don't have any
option to choose where we live while stationed overseas. Fire
extinguishers are installed in schools, clinics, barracks,
commissaries and government offices and buildings. Why not in
government quarters?''
``We are all here to support our husbands during
deployment. We shouldn't have to worry about a way out in case
of a fire in a stairwell. All possible fire safety measures
should be in place. Sadly, this shows how much the Army truly
cares about families.'' And it is signed by this lady.
Now, the reason I was laughing is I looked up and the
fire----
[Laughter.]
Mr. Hobson [continuing]. Says ``Not in service.'' That is
the reason I was laughing. When I beat you up about it, we
ought to go beat up the House about it. They don't have one,
either.
But I guess the question is, I have been in several
stairwells in the past and believe that without adequate
warning devices, extinguishers, and escape routes, a fire can
quickly turn into a catastrophe.
I once had a building that I owned in which a fire started
in a stairwell, and it can be really bad.
We need to know what the Army's policy is with regards to
smoke detectors and fire extinguishers in family housing units
and, in particular, stairwells. How often are these devices
inspected? If they are like the elevators around here--I once
had one of my people stuck for 2 hours in an elevator in this
building. The phone didn't work, and we found out when we
checked around that there were three other phones or five other
phones that didn't work in the elevators here. So I am not just
yelling about what you do. We have done this with other people.
Mr. Secretary, this is something that I want--I must ask
you to have every family housing unit and public spaces and the
stairwells inspected to ensure adequate fire safety measures in
place. Specifically, I would like you to report back to this
committee within about 3 weeks from now on the findings and
what corrective actions are immediately taken to correct this
very serious situation. We should take care of this now while
we are aware of it, because if we are aware of it and something
happens, shame on us if we lose a life or a young child or
somebody.
We just had a situation on Capitol Hill where a building
caught on fire around here. So I would urge you to take this
very seriously and report back to this committee within 3
weeks. Is that doable, sir?
Mr. Apgar. Yes, sir.
HISTORIC PRESERVATION
Mr. Hobson. I have a couple of other questions. We will
submit some for the record, but this historic preservation
thing, you only talked about 15,000, I think, or something. It
is a much bigger number. And you have gotten into this, I
think, Mr. Secretary, early on. I brought this up with the
Secretary of Defense yesterday in the hearing we had. This is a
problem that could suck up all the money. I hear a big sucking
sound out there, and it is not very pleasant for you all in
doing your missions to have this there. We need to look at how
we are going to handle this.
Do you want to explain what you are doing a little bit
about it?
Mr. Apgar. I would be happy to, Mr. Chairman.
First, with respect to the facts, the Army is the largest
holder of historic properties in the Nation. We have 12
national historic landmarks under the National Preservation
Act. We have 12,000 individually listed buildings or buildings
that are eligible for listing, and we have another 70,000 that
will become eligible and have to be evaluated over the next 20
to 30 years. That is the portfolio. It represents a substantial
portion of our total facility stock.
The situation we face given that set of facts is that we
are stewards of a very large number of historically and
architecturally important buildings, and buildings that are
also central to the Army's heritage. Those are what I call the
jewels.
We are also saddled with a lot of junk. We are trying, with
your help, to clear the junk, and that is a large portion of
the 70,000 other buildings, the World War II wood and the rest,
as part of the demolition program, which you are well aware of.
But there is a risk in both respects of this. One risk is
that we continue to spread limited funds to maintain, just
because we are holders, a large number of buildings that should
be demolished. At the same time, given our efficiencies, we run
the risk of destroying some of the jewels while we are tearing
down the junk, too. So we have set out a three-point plan.
First, I have created an Office of Historic Properties and
a small team of specialists to review our methodologies for
both defining what a historic property is and how we manage it.
Secondly, we have signed protocols with both the National
Trust for Historic Preservation, the President's Advisory
Council on Historic Preservation, for technical service support
in looking at the National Preservation Act, all of the
legislative frameworks, both Federal and State, under whose
authorities we work, to see if changes can be made to
streamline both the process and the management itself.
Third, we are just embarking with the Corps of Engineers
and others on a review, which I hope will lead to policy
proposals this summer, of how we actually manage the stock. It
costs us 2 to 3 times what it does a new unit per square foot
to renovate and maintain, particularly the important historic
properties. But private sector comparables are not that great,
and my suspicion is--and I have no facts yet to demonstrate
this, so it is purely that--that we are overinvesting, if you
will, in renovating and maintaining some of our historic
properties. That goes to materials, methods, as you well know
from your own experience, sir. And so we are going to dissect
that issue.
If we find that we are imposing excessive standards, if you
will, we will have to see whether they are statutory or purely
internal and tackle them as we find them.
I have also just mounted a major study on how to
recapitalize the historic property stock. You think of this
from an inventory or portfolio point of view. We have a class
of assets, very large, which have unique characteristics. They
are larger, they are older, by definition more difficult and
problematic, and they are treated in our budget as if they are
a warehouse. And that is a big problem.
What universities and some other institutional holders have
done over the past two or three decades is to fundamentally
take that class of properties out of the standard facilities
budget, treat them on their own platform, if you will, and
through a combination of endowment and maintenance and
different standards, and in some cases divestment, struck a
portfolio that keeps the jewels and does something else with
the junk, to use the metaphor.
I believe that is an issue we have to tackle with your
support and help and one that is profoundly important. Right
now we are getting the worst of both worlds. Our historic
properties are at risk because they are too expensive to
maintain. On the other hand, we are doing it in such a way that
we literally do compare warehouses and standard boxes with
buildings of enormous importance at West Point or Fort
McPherson.
So in a nutshell, that is an initiative which the Army
leadership has now agreed is an important priority. We clearly
need Congress' help. We have neither the authorities nor the
framework, and we will take the initiative to propose to you or
to engage with you and the other committees.
Mr. Hobson. Well, we are going to need--you need
legislative help, and we need advice on the legislative process
services, and they will be a little different in each of the
services.
Mr. Farr. Mr. Chairman.
Mr. Hobson. Yes.
Mr. Farr. I like that idea. I think you are right. We need
that. And perhaps what we want to do is BRAC--sort of have a
BRAC for historical properties. If you are not using them, get
somebody else who does that business to do it, because I
believe you do have to have almost a different account.
Mr. Hobson. Yes.
Mr. Farr. I mean, these are essentially--by declaring them
historical, they have kind of a Cadillac status as buildings.
Maybe they have sort of a Volkswagen budget to maintain them. I
mean, you can't do that. You have got to either give them----
Mr. Hobson. Well, we talked--when you weren't here, I think
you had left this morning, we talked about the Smithsonian
possibly even--well, there are some places where we may be able
to find some other monies, some could be transferred that have
historic significance and things of that sort.
But I am concerned that we need some legislative language
not only to give you the ability to do some things, but to
protect you from having to do some things that you might
otherwise have to do.
I can tell you this, and I would like you to think out of
the box a little bit. I took a fellow to a Navy facility who
was a builder and does some historic stuff on the outside. And
we walked--the Navy was giving us a number of--we will just
pick numbers here because I don't remember the exact numbers.
But let's say they were doing $1.9 million, $2 million that
they wanted to put into this. I took this fellow with me, and
we went through it in an afternoon, and we came up with a
number of about $460,000, which, after we showed the Navy where
we were and what the reductions were, they have agreed to do
that and are moving forward with that, and I think cheerfully
so--I hope.
But there are a couple things in there that, you know--for
example, they were going to build closets out of cherry. Well,
you know, come on. And they were probably going to paint them.
I don't know. But----
[Laughter.]
Mr. Hobson. There were other issues in there. You know,
this is Government--it is like when I went one time to get
tires for my official vehicle in my district, and I said, What
kind of deal do you have on tires? And the guy said to me, Why
do you care? The Government is paying for this. And I said,
Hey, pal, if I don't care about the tires here, what do you
think about when we get, you know, to Norm's deal, the B-2
bomber, or something like that?
You know, it starts with little stuff, and it starts with,
you know, what are the carrot tops--and so I would suggest that
sometimes we find--and I didn't have this guy on contract. All
I did was buy this guy dinner. That cost me pretty good because
we went to the Monaco. But I think if somebody goes through
these things, there are practical people who build for their
living in the private sector and who are--I am not saying that
people are not concerned about cost, but I think there is just
a difference in the way it is looked at when it is coming--it
is like having a copay. I am a big believer in copays because I
think if you are in it, you are a participant and you are
buying into, you are a little more likely to look at it.
So I would like you to, as you look through these historic
things, one, take the ideas that Sam is starting to work on
here, and look for some other sources of money on things that
you don't really need to maintain, anyway, because they don't
have it.
The other thing I would like you to do is look at some
requirements. There are some--what is it?--372 general
officers?
General Van Antwerp. 326.
GENERAL OFFICER QUARTERS
Mr. Hobson. I missed a couple. One of the reasons those
general officers insist in staying in some of those--I don't
know all of them--is that if they go into something else, it is
going to be smaller because we can't build anything new in
excess of about 2,200----
General Van Antwerp. 2,100 square feet.
Mr. Hobson. Well, they are going to give that up? No. He is
going to go and tell his wife we are moving out of this thing
down to this? No way. So nobody comes to us and says build me a
2,100-square-foot general officer's house.
I think we need to talk to the authorizers. We are sending
this as the authorizers. I think it would be very helpful if
you all are in support of saying let's build appropriate
housing--no, don't go nuts--and we already have this rule that
says $25,000 you have got to come back to us for anyway, and
that was done because some guys went nuts and they were afraid
we wouldn't approve things. But we have approved some things.
We are--you know, we are approving things, but you know we
are reading them, too, because we ask you questions about them.
And I think that is important. It is not a challenge. It is
just a checks-and-balance thing.
So I think if you will talk to the people and then we start
building things that are real for these people, we will have
less likely a fight over this general officer's wife wanting to
put all this money into facility. And so we need your help on
that.
I am hoping--I was impressed for the most part by the
people that came in on Carson. I am hoping that that works out.
We had a little briefing on that, and I think that it looks
okay. I am going to let you go forward--that we get the right
numbers and the most cost-effective way of doing Fort Lewis and
Fort Hood, because those are huge projects and we don't have a
lot of time to review that. And I know we only risk a certain
amount of money if we turn them down, but I don't want you to
think if we don't think it is a good deal, we will turn them
down. And so I don't want any misunderstanding about the fact
that, you know, we are letting them go for now, but Chet is
going to look at it and we are going to look at it. If we don't
think we are getting the right square footage or the deals
don't work in a way that the committee believes they should for
the future, taking into account all this exit strategy and
everything else we are talking about, we are going to poke at
it.
But I want to look at this as more of a partnership and not
an adversarial because we all have the same goals in the end.
Sam?
FACILITIES DEMOLITION--FORT ORD
Mr. Farr. Could I ask one question? It came up that you
have a lot of deteriorating housing in the military stock that
you have got to tear down. But at Fort Ord we have 1,100 of
what they call B-52 buildings that hold 52 bodies, two stories,
World War II bachelor officer quarters, 1,100 of them. The
Packard Foundation has done--actually paid for and done a video
on it, the disassembling of those buildings, everything that is
in it and what the value could be for resale/reuse/recycling.
The study is there, the economics are there. We just don't have
anybody to use it. And I presume--I mean, what we would love to
do is just put them on railroad cars and take them somewhere.
We don't want them.
But, you know, the community is asking $10 million, which
nobody will find the money for that. But if you have some--if
you are going to take some down, maybe you could use the
buildings at Fort Ord for that. And if you come up with any
ideas of whatever uses there may be in the military inventory,
please come get them. The railroad tracks go right next to
them.
Mr. Hobson. You just raised another question. Does anybody
know what is happening to those houses? What has happened to
all those houses that are sitting there? Are they still sitting
there, Sam?
Mr. Farr. Still sitting there, and we are working on it.
That is what----
Mr. Hobson. How many are there?
Mr. Farr. Livable units? About another 1,100; 170 are going
to be leased right now. That is what we asked about. But they
have been going through this lawsuit. But they agreed on
Tuesday that they would have them ready to go. The military is
going to reoccupy them. They are going to be the first ones in.
Mr. Hobson. We are going full circle? Does anybody feel
like they have been around on this before?
Mr. Edwards. Mr. Chairman.
Mr. Hobson. Yes.
Mr. Edwards. Can I ask one question about another issue?
And I will be brief.
Mr. Hobson. Sure.
UTILITIES PRIVATIZATION
Mr. Edwards. I know we have gone a long time, but we have
talked a lot about housing privatization. A lot of us have
spent a lot of time, and we will spend more. But I see on page
5, Mr. Secretary, of your written statement you talk about,
``Our goal is to privatize all utility systems in CONUS by
2003,'' and then you speak in the next paragraph about
Executive Order 13123, about the Energy Savings Performance
Contracts.
I spoke with somebody--somebody came to my office from
Enron the other day and talked about work they are doing with
the Army. Does their contract fall under one of these two
programs? And my question is, this is a pretty aggressive
program, especially privatizing by 2003 all utility systems. Do
we have enough data to be comfortable that this is a wise way
to go? This is pretty aggressive. We are doing a test model
case on housing privatization, installations privatization by
2003. I mean, have we already proven that this is a real direct
cost savings for the Army and still remain in control of that?
Are you comfortable with the data to do that quickly?
Mr. Apgar. Let me first try and just dissect the pieces you
have raised.
Mr. Edwards. Right.
Mr. Apgar. We have identified 320 systems that are owned by
the active or reserve components, and they are available for
privatization. That is the first step.
Mr. Edwards. When you say system, what basically does that
include?
Mr. Apgar. The system, that includes both the facilities
and the commodities, if you will, and that is the next----
Mr. Edwards. The pipe, for example----
General Van Antwerp. Water, wastewater, electricity, and
natural gas.
Mr. Edwards. Okay.
Mr. Apgar. Of the 320, we have completed 45, 11 contracts
awarded but 34 systems exempted, and the bases for exemptions
are either privatization is uneconomical or there is a security
issue. And only one has been exempted for security reasons. The
rest that have been exempted are because they are uneconomical.
So that basic economic analysis is a very central principle.
Once that determination has been made, then the
privatization goes forward, and there is an aggressive program.
Frankly, part of the problem is the sheer age and condition
that our systems are in, and the reasons some become economical
is that there is no outside market force that is going to pick
them up. But that is the critical distinction, and from what I
have learned, it is as aggressive as we can make it.
Mr. Edwards. And is it--I mean, one of my questions in this
case, I have been pushing privatization, have tough questions
on that. I want to be sure that we are--I want to be
aggressive, but maybe I have raised the question, are we being
smart and making decisions based on actual operating expenses?
Or are we putting in place so many privatizations? This is a
huge program, big bucks to the private sector. Are you
confident we are not moving too quickly? Do we have data to
prove that what we have already put in place works before we
commit to privatizing, you know, all CONUS with those
exceptions by 2003?
Mr. Apgar. Well, that is a good question, sir, and the best
evidence actually, to date, is from a recent contract in the
Washington area for the Military District of Washington, where
the savings projections were carefully documented. In some of
the earlier projects they were not. But that is a discipline
which we are now imposing on all of it for just that reason.
Another of the lessons learned from privatization is good data,
good analytics up front before you commit further.
Mr. Edwards. Because what I understand from some of these
private groups is they want to come in and not only privatize
the utilities at Fort Hood, they want to take all of III Corps.
They want to take III Corps group. That is pretty big--I want
to be sure--you know, that is a big guinea pig, and I want to
be sure, if it is a good system, it is working, it is saving
the military money that we can use for quality of life, for
other programs, that is great. But I just hadn't heard about it
until somebody dropped by a couple of days ago.
Mr. Hobson. Go ahead.
Mr. Olver. If I follow that correctly, you have identified
350 such systems. You have actually looked at--or 325, whatever
it was, and you have actually examined--you have identified
300. You have taken about 50 or those, or 45, and only about 10
of them, 10 or 11 of them have actually----
Mr. Apgar. Been awarded.
Mr. Olver. Been awarded.
Mr. Apgar. Right.
Mr. Olver. Out of the 45. So that is 25 percent. One might
infer that if this is getting to be a pretty good size sample
of the total, there might be 80 out of the 320 where it proves
to be effective to do so, and maybe that is reasonable to be
able to do that by the year 2003, and presumably the other 240
of them, or whatever, are going to be--we are not going to be
able to do that.
Mr. Apgar. Right.
Mr. Edwards. These 10 percent are projected to save money.
My question is: Do we have data to show that the reality is
equivalent to the----
Mr. Hobson. You raise an interesting subject. I wrote a
bill some years ago at the urgency of some people with insight.
It was called the Forrestal bill. And the Forrestal bill was
going to do two things. It was going to cause competition, and
it was going to allow--and this is the part that is missing,
and then this part that I liked even better. There were energy
people out there who wanted to compete for energy on bases
where we only allowed one provider, and they were going to do--
not only provide energy, they were going to provide certain
infrastructure replacements along those facilities.
And so I put this bill in, and as you can imagine, all
kinds of outside utility companies got upset who had all these
exclusives with the bases, who didn't want any competition, and
somehow--and this administration over in OMB scored it wrong
or--by the way, they wanted to score it, anyway. So the one
side of the administration was encouraging this bill because
people had come to me about it. On the other side, they killed
the bill.
The result of that is that I think now somebody picked it
up and said, hey, this was a good idea from this standpoint, we
could get rid of some of this stuff. The bad part of it I see
from this side is I think there will be savings in a lot of
cases, just in reductions. But we are not going to achieve the
infrastructure replacement part of this that was going to be in
there from people competing against each other. Because what I
was envisioning is that three or four of these different energy
companies would come in and compete against each other to get
those contracts, and part of that deal would be that we are
going to replace these lines and we are going to provide this,
we are going to provide that.
In these deals that I think you are seeing now, I don't
think you are getting any of that.
Mr. Edwards. Mr. Chairman, could I ask specifically about
that? And, again, I am just scratching the surface on this
issue. But one of my questions about it goes to the point you
just made. We are about to enter an era of deregulated energy
where, for major customers like the Department of Defense, you
are going to get some awfully competitive pricing.
As I understand it, in this one program I was made aware
of, the company is actually putting in the infrastructure
pipeline, for example, gas to the base. I want to be sure that
this contract process doesn't give them, in effect, an
exclusive monopoly when it comes to competitive pricing over
the fuel that goes through those pipes. Just not having known
much about this--and I don't know how much of this comes under
our subcommittee's jurisdiction. Perhaps the part--because it
affects MILCON on bases, then I guess we do have a right to ask
questions about it. Maybe what I would like to do, Mr.
Chairman, is just ask for a general briefing to the chairman
and the committee on where we are on this, because it is--this
is a big-bucks program, and I want to be sure we are not
precluding the kind of competition the chairman has talked
about. Maybe it is not.
General Van Antwerp. There is competition. This is not for
the utility itself. This is not for the commodity.
Mr. Edwards. Right.
General Van Antwerp. It is for the infrastructure part.
Mr. Edwards. But, now, will they say, when 2 years from now
the debate is over who is supplying the commodity that is going
through that infrastructure, are they going to be able to price
their own energy sources cheaper than the competitor?
Mr. Hobson. I can tell you, just the threat of the
Forrestal bill caused some people to go in and renegotiate some
rates. [Laughter.]
Mr. Edwards. I can imagine.
Mr. Hobson. Allen.
Mr. Boyd. Just as a follow-up, I just want to make sure I
understood. The data that you have, the analysis that you have
done of that data up to this point shows that about 20 percent
of your facilities or your systems will fall into this
category? Is that----
General Van Antwerp. They were economical to privatize,
correct.
Mr. Boyd. All right. Well, Mr. Edwards is much more
optimistic about deregulation nationwide than some of us are on
the utility systems, but I think it is--the point is well taken
that we ought to be--that is certainly a possibility, and you
ought to be very careful about the contractual agreements that
you have, because this whole regulatory scheme could change
quickly.
General Van Antwerp. One of the push-backs we are getting
right now is that some of the regulated utilities feel they
have exclusive rights to it and they don't want the
competition. And we are saying because it is for the
infrastructure on the installation that we can compete that
infrastructure. But then they could make you pay through the
rates. So it is very complicated, and we need to come lay it
down----
Mr. Edwards. Right, and it may be a great program. I just,
because it is pretty new to most of us----
General Van Antwerp. Yes, sir.
Mr. Apgar. Where the economies actually come is beyond the
infrastructure itself in being able to bundle or pool the
commodities, because as you well know, that is where scale can
make a difference. And that is a separate action. That is a
management issue, separate economics from the hard assets, the
infrastructure.
So one of the lessons learned has been to keep very clear
whether you are privatizing the infrastructure or so-called
privatizing or competing the commodity, and only in some cases
do the two coincide. That is the competitive issue that General
Van Antwerp was raising.
From what we have seen so far, there is more leverage in
the commodity because that is where the prices are rising and
we don't have control. Our infrastructure is in such poor shape
that it would be, I think, imprudent to somehow assume that a
large proportion of these existing systems are going to be
privatized as infrastructure. The real leverage, the
opportunity is in the commodities.
Mr. Edwards. I just hope that--I mean, the scale these
folks are talking about is trying to get the Army to make a
decision for all of III Corps, which 37 percent of the combat
are the Army, I just hope this is something that somebody on
the Hill is aware of, has had a chance to review and be
comfortable with. And, again, it may be the best--I may be the
largest backer of this program, but right now I just don't know
enough about it and I want to be sure it doesn't lock out
competition down the line.
Mr. Apgar. We have--go ahead.
General Van Antwerp. I was just going to say, sir, that
Enron would like to go much larger and more much regional than
we have allowed.
Mr. Hobson. Probably country-wide.
General Van Antwerp. Right. And Enron did Fort Hamilton,
but it was a very small installation. And thus far we have kept
it very small, and we are walking before we run. They would
like to expand it.
Very few companies can do all four of those utilities we
mentioned, but what they are, Enron is a broker. They will
bring in the people. We are being very cautious.
Mr. Edwards. Thank you.
Mr. Hobson. Any other questions? John.
Mr. Olver. No questions.
Mr. Hobson. Well, thank you, gentlemen. Do you have any
further comments you want to make? Or you will be happy to get
out of here if I let you out of here? [Laughter.]
Our next hearing will be Thursday, March 9th, and there
will be two hearings that day. The Air Force construction
hearing will be at 9:30 a.m., following by a Defense agency
hearing at 1:30.
I thank you all for your coming and for your attention.
[Clerk's note.--Questions for the record submitted by
Chairman Hobson.]
OVERALL FUNDING
Question. Has the Army's program been reduced to make room for the
chemical demilitarization program, either this year of in the future?
Answer. The Army's program has gone down but not to make room for
the chemical demilitarization program. Current and future chemical
demilitarization construction program requirements were fully funded at
the time funding responsibility devolved from the Department of Defense
to the Army. In addition, due to future uncertainties and past history
of the program, additional funding was programmed in the out-years to
cover unanticipated requirements. It is not anticipated that there will
be any impact on the future Army program as a result of the chemical
demilitarization program.
TOTAL ARMY
Question. The Army has been working to integrate the active, guard,
and reserve forces into a total Army force structure. However, the Army
National Guard and Reserve's infrastructure requirements continue to be
underfunded.
First, to what extent is there integration in the planning and
budgeting process, especially for infrastructure requirement? How is
the integration of forces reflected in this budget request?
Answer. The Army program and budget process is fully integrated and
provides open forum, detailed assessment, adequate checks and balances,
and opportunities for multi-level decisions on allocating available
funding to validated requirements in support of the Army.
Active, Guard, and Reserve installation requirements are reviewed
and validated across all three components by program and budget review
committees. The Deputy Chief of Staff for Operations and Plans
integrates requirement priorities across all Army missions and
functions. The Secretary of the Army and the Chief of Staff, Army make
final resourcing decisions.
The fiscal year 2001 military construction Budget Request reflects
integrated planning and programming through projects which support the
Army's top priorities: readiness and well-being of our soldiers.
Question. Second, has any progress been made toward developing a
single integrated projects list, coordinating the facilities
requirements of the active duty Army, the Army National Guard, and the
Army Reserve?
Answer. No. We integrated the respective programmatic requirements
of the Active, Guard, and Reserve during the development of our
program. However, it would be impractical and cumbersome to integrate
the projects in the Army's Future Year Development Program (FYDP) due
to the fact that each component is founded through a separate
appropriation.
FIRE SAFETY
Question. What is the Army's policy in regards to smoke detectors
and fire extinguishers in family housing units, and in particular in
stairwells?
Answer. The Army requires that Government-installed smoke detectors
be hard-wired and located in the dwelling unit in accordance with NFPA
101, Life Safety Code (LSC). Smoke detectors in stairwells are not
required by the LSC if the stairwell meets certain criteria. Army
family housing (buildings with stairwells) are being inspected to
insure compliance with these LSC requirements. Results will be part of
the report that the Army will submit on 23 March 2000. The Army does
not require or recommend issuance of fire extinguishers to family
housing residents. Fire protection experts recommend that the first two
things homeowners and apartment residents should do upon seeing a fire
is to get everyone out of the building and call the fire department.
Untrained residents attempting to fight the fire might delay early
evacuation and notification of the fire department. Army regulations do
require portable, hand-held, multipurpose, fire extinguishers in family
housing units used as a Family Child Care homes.
Question. How often are these devices inspected?
Answer. Army regulations require family housing residents to test
their installed smoke detectors quarterly. Neither DoD nor the Army
requires regular smoke detector inspections. However, individual
installations have their own operating procedures and the frequency and
scope of smoke detector inspections will be included in the report to
be submitted on 23 March 2000.
BUY-OUT PROGRAMS
Question. The Army's construction budget main focus is the buy-out
of inadequate permanent party barracks and joint mobility projects.
Does the Army have any other buy-out programs in mind for when these
current programs are completed?
Answer. The Army has developed a facility strategy to sustain and
modernize its facilities bringing overall Army facility condition to C2
(mission capable with minor problems) and buy-out the RPM backlog. The
strategy has two parts: First fully fund the minimum annual sustainment
requirement; and second focus on modernization of selected facility
types in programs to be accomplished in 10-year increments. Fully
funding sustainment prevents further deterioration of facilities or
premature deterioration of modernized facilities. Investing in facility
modernization will bring facilities up to fully mission capable,
current standards and will eliminate the RPM backlog. The strategy
combines RPM and MILCON funding. The strategy builds upon the success
the Army has had to date in improving facilities and soldier well being
by focussing investments on specific facility types such as barracks
and strategic mobilization projects. As the barracks modernization and
strategic mobilization programs come to completion, we will focus on
buying-out the modernization of other facility types such as vehicle
maintenance facilities, classrooms, fitness centers, trainee barracks,
USAR Centers and ARNG Readiness Centers.
Question. At current funding levels, how long will it take the Army
to provide adequate permanent party living quarters?
Answer. The Army plans to complete funding of barracks for
permanent party soldiers to the 1+1 DoD standard, or equivalent, by
fiscal year (FY) 2008. Current funding levels support that plan.
FAMILY HOUSING MAINTENANCE
Question. The budget request includes a reduction of $103 million
from the enacted levels for family housing maintenance. Is this budget
adequate to address the tremendous need for maintenance and repair of
existing units?
Answer. The $103 million reduction was across the family housing
operations and maintenance program, which includes management,
utilities, maintenance and repair, and leasing. The reduction to the
maintenance and repair funding request is approximately $70 million and
includes the reduced requirement associated with the family housing
privatization program. The requested funding for maintenance and repair
is the minimum essential to keep units open, safe and habitable. It
will not improve the units or prevent the cumulative effect of
deterioration over the long-term.
Question. Why does the Army propose transferring $75 million from
the family housing construction and maintenance account into the
personnel accounts?
Answer. The transfer is to cover the cost of additional housing
allowances for about 13,000 military members that must be paid from the
personnel accounts at four privatization sites. Specific transfers for
fiscal year 2001 are: Fort Carson ($13.6 million), Fort Hood ($35.1
million), Fort Lewis ($20.2 million) and Fort Meade ($6.2 million)
UTILITY PRIVATIZATION
Question. What assurances can the Army provide that the conveyance
of utility systems will not result in a substantial increase in long-
term utility costs?
Answer. Privatization involves the conveyance of the utility
infrastructure (electrical lines, natural gas lines, water and waste
water distribution and collection systems, and treatment plants). The
decision to privatize a utility system is based on a detailed life
cycle analysis. If the long-term costs of privatization outweigh the
cost of government ownership, privatization is not done. The Army uses
competitive procurement procedures to ensure its selects the best value
offer.
CONTINGENCY REDUCTION
Question. The Department's construction budget eliminates the 5%
contingency allowance for all projects. Contingency allowances are an
essential element to accommodate uncertainties in project costs after
budget submittal and during the design and construction phases.
(a) What challenges will this budgeting approach present to the
Army in executing its budget?
Answer. The Army will execute the MILCON program, however without
contingency funds, the execution of construction contracts will be much
more difficult than in previous years, especially since we will not
cancel projects, reduce scope or lower our standards.
The Army's past construction program execution experience indicates
that mandatory construction changes will be required for virtually
every project after contract award. The lack of adequate contingency
funds precludes the speedy resolution of these changes and impacts our
ability to maintain timely construction progress thereby leading to
further cost growth and claims.
The need to borrow funds from unawarded projects may delay award of
some projects until the start of the next fiscal year.
Question. (b) Will any additional authorities be necessary?
Answer. No.
Question. If this reduction hinders program execution and projects
need to be deferred or canceled due to a lack of funds, how will the
Army determine which project to defer or cancel?
Answer. Projects will be executed until funds are not available to
award. Thus, those projects that are not ready for award until late in
the ready for award until late in the fiscal year would be candidates
for deferral.
BASIC ALLOWANCE FOR HOUSING (BAH) INITIATIVE
Question. The Department proposes a Basic Allowance for Housing
(BAH) plan that will completely eliminate out-of-pocket housing
expenses for military members by 2005. How will this initiative impact
the Army's family housing accounts?
Answer. The family housing accounts are not directly tied to BAH;
however, eliminating out-of-pocket housing expenses will have an impact
only in the funding transfer of Army Family Housing (AFH) to Military
Personnel Account (MPA) due to privatization of housing when and if
additional sites are approved for privatizing.
Question. Increasing the BAH will reduce the demand for on-base
housing, what is the Army's plan for re-evaluating its on-base housing
requirements and deficits?
Answer. The Army's plan for re-evaluating on-base housing
requirements and deficits is to conduct housing market analyses at our
installations to validate the continued need for on-base housing.
ENHANCED-USE LEASING
Question. The Department is continuing efforts to reduce base
operating support costs. Enhanced-use leasing is one element of this
effort. Both the Navy and Air Force are currently developing an
enhance-use leasing pilot program. These projects envision both the
selling and leasing of land. Is the Army planning any similar projects
and what recommendations would you have for any new enhanced-use
leasing authority?
Answer. The Army is focusing on leasing. We have a pilot project
underway at Fort Sam Houston, San Antonio, TX, aimed at fostering the
preservation of historic property. A solicitation for the Fort Sam
Houston project in the form of a Notice of Availability was issued on
20 Dec 99. Prior to executing any lease at Fort Sam Houston, the Army
will have to be satisfied that the arrangement will be in the best
interests of the Department and the public. The Army continues to
assess other enhanced use type leasing arrangements proposed for Fort
Leonard Wood, Missouri; Picatinny Arsenal, New Jersey; and Yuma Proving
Ground, Arizona. The Army will not go forward with these or any other
initiatives without consulting with the appropriate committees of
Congress.
The Army continues to support DoD's enhanced use legislation, which
may be required to support some of the specific proposals we are
evaluating. The recommendations embodied in the legislation constitute
modest adjustments to 10 U.S.C. 2667. These adjustments are categorized
into the following four areas: Permits immediate use of funds without
additional administrative procedures; Expands use of cash proceeds to
support renovations, base operating support services and new
construction with Congressional notification; Clarifies types of
authorized in-kind consideration and relaxes restrictions on where in-
kind services can be applied; and allows Environmental Indemnification
for pre-existing conditions on property considered for out-leasing.
BALANCED PROGRAM
Question. Almost half of the Army's construction budget is for
Whole Barracks Renewal. Has the Army been able to budget for a balanced
program, one which provides proper troop housing yet still meets the
growing infrastructure and operational needs?
Answer. Barracks and strategic mobility are the two highest MCA
priorities and have a defined end date. The majority of our budget
supports this goal. Additional projects were focused to gain the most
benefit from our limited resources. Thus, projects have been included
that will improve the Army's ability to improve soldier readiness and
to execute mission responsibilities.
Question. What else is the Army doing to help the soldiers through
its construction budget?
Answer. In addition to improving barracks for soldiers, our budget
provides funds for two training ranges to improve soldier readiness, a
wash facility to assist soldiers in vehicle maintenance, a Consolidated
Soldier Support Center to serve as a ``one-stop'' In/Out processing
center for soldiers and families, and a child development center.
FACILITY REDUCTION PROGRAM
Question. What efforts are being made by the Army to eliminate its
excess infrastructure?
Answer. The Army has been engaged in a Facility Reduction Program
to eliminate excess facilities for a number of years. The Army disposed
of 68 million square feet of buildings from fiscal year (FY) 1992
through FY 1999. The Army has budgeted $100 million per year to
eliminate excess infrastructure and we plan to dispose of another 7.7
million square feet (MSF) in FY2000. We also have a long standing
policy to eliminate an equivalent amount of infrastructure when we
build revitalization projects. This one-for-one demolition plan
compliments our facilities reduction program.
Also contributing to the elimination of excess infrastructure is
the CONUS BRAC effort and the CONUS return of installations to the host
nations. Through the summer of 1999, BRAC closures had amounted to 52
MSF. Overseas, 13 bases were returned to Panama in accordance with
treaty requirements. The U.S. has announced the return of 30 sites in
the Pacific and Korea, as well as 624 sites in Europe. These European
sites equal 188 MSF of facilities, the equivalent of closing 12 of the
biggest U.S. bases.
ALABAMA: REDSTONE ARSENAL
SPACE AND MISSILE DEFENSE COMMAND BUILDING ($23,400,000)
Question. The Form 1391 for this project indicates a fitness center
will be provided as part of the project. What is the square footage of
this fitness center and how much will it cost?
Answer. The fitness center is programmed for a maximum of 25000
gross square feet (or 2000 net square feet.) Construction cost
associated with this area is approximately $249.000.
Question. Additionally, is the equipment for the fitness center
included in the cost of the project? If so, how much? If not, how will
the equipment be provided?
Answer. Fitness center equipment is not included in the Military
Construction, Army project. The existing equipment will be relocated.
Question. Please describe in some detail the facilities to be
demolished as part of this project. Is the cost of the demolition
included in the project? If so, how much?
Answer. This project includes interior demolition of the building
to be renovated and does not include demolition of other buildings on
Redstone Arsenal. Demolition of an equivalent square-footage is
required for new construction only.
Question. What is the payback period for this project in avoided
lease payments?
Answer. The simple payback period for a project cost of $23.4
million is less than 4 years with the current lease cost of $6.7
million. The discounted payback period is approximately 7.6 years. The
discounted payback period takes other factors into consideration over a
27-year analysis period. Such cost items include interest rates,
inflation imputed taxes, utility and other operating costs maintenance
costs, salvage value, etc.
ALASKA: FORT WAINWRIGHT
CENTRAL HEATING AND POWER PLANT
Question. What is the current status of the environmental issues at
Fort Wainwright's Central Heating and Power Plant (CHPP)?
Answer. The U.S. Army, Alaska filed its answer to EPA Region 10's
Complaint on February 4, 2000. In its answer, the Army contests the EPA
position that Congress intended ``economic benefit'' and ``size-of-the-
business'' penalties to apply to enforcement actions against federal
facilities performing essential government missions. The Army also
objected to EPA's bringing the action after Fort Wainwright had
coordinated a compliance schedule with the Alaska regulator and
incorporated it into the operating permit application, and after it had
already obtained military construction and operational funding to
achieve compliance. EPA and the Army have agreed to participate in an
Alternate Dispute Resolution process that is overseen by a neutral EPA
Administrative Law Judge. If that process does not produce a
settlement, an Administrative Law Judge will be assigned to conduct an
administrative hearing.
Fort Wainwright installed continuous opacity monitors in August
1998 and continuous emissions monitors in November 1999. Fort
Wainwright continues to pursue the remaining compliance issue of
reducing particulate matter emissions (opacity) by installing a
baghouse for each boiler. The baghouse project, funded with Military
Construction, Army (MCA) appropriations, has a programmed amount (PA)
of $15.5 million and a current working estimate (CWE) of $17.9 million
for fiscal year (FY) 2000. The 65% design has been completed.
Construction contract award is scheduled for 31 August 2000 and
construction is scheduled for completion by the end of 2002. The 65%
design has also been completed for the Operation and Maintenance, Army
(OMA) Hearing and Power Plant Refurbishment. The project has a PA of
$21.2 million and a CWE of $24 million. Conjunctive award with the MCA
project is scheduled for 31 August 2000.
The CHPP is currently regulated by a state Operating Permit and a
Title V Permit Application (submitted in Dec. 97). These documents
identify all applicable requirements that apply to the operation of the
CHPP. A compliance schedule was included in the Title V Permit
application to address the CHPP's current noncompliance with the
opacity standard. This compliance schedule has dates and milestones
that must be met to demonstrate Fort Wainwright's commitment to
operating the CHPP in full compliance with environmental regulations.
To meet the requirements of the compliance schedule, the installation
of the baghouses must be complete by September 2003. After carefully
examining the construction schedule for the baghouses, Fort Wainwright
now projects that the project will be completed by December 2002. Both
EPA and state regulators have been notified of this change. The current
schedule of the project will meet this requirement, as modified.
ARIZONA: FORT HUACHUCA
Question. The Form 1391 indicates the current facility is on the
National Historic Registry. What are the plans for this building to be
re-occupied.
Answer. Current plans are for the building to be re-occupied.
Question. If the Army is required to maintain this historic
building, please describe the Army's historic preservation
responsibilities for the building and estimated annual costs?
Answer. In accordance with Section 106 of the National Historic
Preservation Act of 1966 and its implementing regulation 36 CFR 800
``Protection of Historic Properties'', any maintenance and repair
activities that are considered by the Army to be undertakings (which by
definition may include mothballing and caretaker maintenance and
repair, to complete rehabilitation and renovation for reuse) must be
reviewed by the State Historic Preservation Office and others following
the procedures defined in the regulation. The results of such
consultation can include a Memorandum of Agreement between the Army,
the State Historic Preservation Office, and possibly other interested
parties, stipulating actions that the Army will take to avoid, treat or
mitigate adverse effects to the property. We anticipate no additional
costs.
Question. Please describe the modified standard design used for
this project. What is the estimate of savings in design costs by
accomplishing this project using a modified standard-design?
Answer. The modification to the standard design involves reducing
the size of the facility based on the number of agents using the
facility. The standard design, which represents an Army-approved
functional and operational layout, provided the starting point for pre-
design discussions with the customer. By modifying the standard design,
which is of a larger facility, we avoid unnecessary cost by only
building what is required. No saving of design funds is expected.
ARKANSAS: PINE BLUFF ARSENAL
CHEMICAL DEFENSE QUALIFICATION FACILITY ($15,500,000)
Question. The Fiscal Year 2000 President's Budget FYDP included
this project for $18 million in fiscal year 2002. The project was
authorized last year at $15.408 million. However, no appropriations
were provided. What has the Army done to reduce the project cost to
$15,408,000?
Answer. An in-depth value engineering analysis will be completed to
reduce project cost.
Question. Will the Army design the project to the full scope of $18
million? If so, what will the Army do to reduce project costs?
Answer. The Army will design the project to full scope while
looking at ways to reduce project cost.
Question. What are some of the challenges facing the Army in
executing this project?
Answer. Constructing the new building, renovating existing
facilities, and moving the lab equipment while maintaining the required
filter testing will be challenging.
CALIFORNIA: FORT IRWIN LAND ACQUISITION
Question. Can you update the committee on the status of the Fort
Irwin land acquisition project, especially any additional funding
requirements and the status of required environmental assessments?
Answer. The Army proposes to acquire additional training land for
the National Training Center (NTC). Advances in equipment (e.g., longer
engagement ranges), doctrinal changes (by at least a factor of two in
required battlespace), and Force XXI doctrinal experimentation require
the expansion. The Army's primary challenge is to resolve an ongoing
discussion with the Department of Interior (DOI) on mitigation to
protect the Desert Tortoise and Lane Mountain Milkvetch.
In December 1997, the California office of Bureau of Land
Management (BLM) and the California office of U.S. Fish & Wildlife
Service (USFWS), with the approval of the DOI, presented a Southern
Expansion proposal for NTC consideration. The Army responded with a
Modified Southern Expansion Alternative in March 1999 that proposes to
acquire 174,461 acres of land for $90 million Military Construction,
Army (MCA). Additional funding requirements include an estimated $18
million Operation & Maintenance, Army (OMA) for environmental
mitigation and $62 million Other Procurement, Army (OPA) for
instruction.
On 13 July 99, informal consultation between NTC and USFWS on
protection of the Desert Tortoise was elevated to the DOI, DoD and DA
level. The DA and DOI have formed a team to develop a mitigation plan
for protection of the Desert Tortoise and the Lane Mountain Milkvetch.
Congress added $19 million in the FY00 MCA Appropriation for Phase
I of NTC land acquisition. The Army has prepared draft language for
withdrawal of public domain lands within the expansion area that will
be used for training. BLM has prepared a draft Environmental Impact
Statement (EIS) covering the NTC land expansion and use of the
expansion area for training activities. The EIS is currently on hold
pending approval of the mitigation plan by DOI.
GEORGIA: FORT STEWART
BARRACKS COMPLEX--HUNTER AAF PHASE 1C ($26,000,000)
Question. The form 1391 for this project indicates that upon
completion of this project, the remaining unaccompanied enlisted
permanent party deficit at Fort Stewart will be 889 personnel. The form
1390 for this project indicates no future barracks projects are planned
at Fort Stewart. What is the Army's plan to address the remaining
unaccompanied personnel housing deficit at Fort Stewart?
Answer. The Army's plan for Military Construction, Army (MCA) to
address the remaining unaccompanied personnel deficit is shown below.
The remaining deficit and future barracks projects refer to the Hunter
Army Airfield, which is a sub-post of Fort Stewart. Also, the DD Form
1390 includes only new mission projects for fiscal years (FY) 2003
through FY 2005, and not revitalization projects such as these
barracks.
[In millions of dollars]
FY 2001........................................................... 26.0
FY 2003........................................................... 26.0
FY 2005........................................................... 12.5
The main post of Fort Stewart does not require any MCA-funded
projects. Barracks Upgrade Program Operation & Maintenance, Army (OMA)
funds are renovating its existing 1970s-era buildings to an approximate
1+1 standard, which will satisfy the main post's entire requirement.
A recent plan included a new barracks building for Fort Stewart.
However, in December 1999, the Army reduced barracks requirements based
on the Heavy Division Redesign.
HAWAII: SCHOFIELD BARRACKS
BARRACKS COMPLEX--WILSON STREET, PHASE IB ($46,400,000)
Question. Please provide for the record the Army's plan (by fiscal
year and dollar amount) to meet the 1+1 barracks standard at Schofield
Barracks by 2008.
Answer. The Army's plan for Military Construction, Army (MCA) to
address the remaining unaccompanied personnel deficit is shown below.
Amounts include the main post at Schofield Barracks and the adjacent
sub-post of Wheeler Army Airfield. In addition to the amounts below,
Barracks Upgrade Program Operation & Maintenance, Army (OMA) funds will
renovate several existing buildings. Funding for all barracks is
completed by fiscal year (FY) 2007.
[In millions of dollars]
FY 2001........................................................... 90.2
FY 2002........................................................... 68.0
FY 2003........................................................... 75.0
FY 2004........................................................... 77.8
FY 2005........................................................... 74.5
FY 2006........................................................... 30.6
FY 2007........................................................... 31.8
INDIANA: NEWPORT ARMY AMMUNITION PLANT
AMMUNITION DEMILITARIZATION FACILITY, PHASE III ($54,400,000)
Question. What is the current status of the first two phases of
this project, which were funded in fiscal years 1999 and 2000?
Answer. Newport Chemical Agent Disposal Facility (NECDF) project
was awarded in February 1999 to Parsons Infrastructure & Technology
Group, Incorporated as the Systems Contractor for the design and
construction, systemization, operations and closure. The design and
construction phase of this project is scheduled to be completed in
fourth quarter fiscal year 2002. The design is about 30 percent
complete and construction is on schedule. To date, $34.7 million of
military construction funds has been obligated.
At Newport, the government office building has been completed and
occupied. The contractor office building has been constructed and will
be occupied by the end of March. Roads at the site have been upgraded
and a parking lot has been completed. Grading for the laydown areas is
completed and rough grading for process buildings is in progress.
Relocation and construction of site utilities (electricity, telephone,
water and sewer) is in progress. Construction activities for the
Chemical Demilitarization Building (digging footers and pouring
concrete) will commence in June 2000.
Question. This project differs greatly from other chemical
demilitarization projects, in that it provides a pilot test of an
alternative to incineration. As such, your estimates are based upon the
best available data and costs are adjusted for risk associated with
design and construction of a first-in-kind plant. What precautions is
the Department taking to prevent the government from cost overruns?
Answer. The Office of the Project Manager for Alternative
Technologies and Approaches (PMATA) is diligently monitoring the
Systems Contractor to protect the government from cost overruns to the
fullest extent possible consistent with the contract scope. Oversight
of the systems contractor is performed by PMATA and Industrial
Operations Command staff, U.S. Army Corps of Engineers, and Program and
Integration Support Contractor (PAISC) personnel.
One of the key tools in managing the systems contract is the use of
Earned Value Management System reporting on a monthly basis which
provides indications of potential cost growth. The contractor is also
required to prepare and maintain a resource loaded Integrated Master
Schedule for completion of the project. Other mechanisms to keep in
close contact with the contractor are the use of In Process Reviews,
Integrated Product Teams and Design Reviews which involve government,
PAISC and System Contractor personnel. These teams use past industrial
experience, government experience with similar buildings and equipment,
and the concept design provided to the system contractor by the
government to aid in evaluating performance, cost and schedule.
Question. How will the elimination of contingency funding affect
project execution if cost overruns occur?
Answer. The elimination of contingency funding is not expected to
affect project execution. By intensely managing changes and adjusting
the contractor's execution plan, a major cost overrun can be avoided.
Any cost overrun, if experienced, should be minimal and can be
effectively managed with available military construction resources.
KANSAS: FORT RILEY
BARRACKS COMPLEX--INFANTRY DRIVE, PHASE 1C ($15,000,000)
Question. According to the form 1391, the remaining unaccompanied
enlisted permanent party deficit will be 979 personnel upon completion
of this project. What is the Army's plan (by fiscal year and dollar
amount) to provide adequate living quarters at Fort Riley?
Answer. The Army's plan for Military Construction, Army (MCA) to
address the remaining unaccompanied personnel deficit is shown below.
In addition to the MCA amounts in the table, Barracks Upgrade Program
Operation & Maintenance, Army (OMA) funds will renovate several
existing buildings.
[In millions of dollars]
FY 2001........................................................... 15.0
FY 2003........................................................... 42.0
FY 2004........................................................... 28.0
Question. What is the estimate of savings in design costs by
accomplishing this project using a standard or definitive design?
Answer. Budget estimates of design costs are based on the projected
effort required to prepared the designs and contract solicitation
documents. Since a standard design was available for this facility,
design cost savings (which are difficult to quantify) were reflected
tin the budgeted design cost.
Standard designs yield benefits besides the potential of reduced
design costs. The Department of Army standard design packages provide
an Army-approved functional and operational layout for the specific
type of facility. They provide a starting point for pre-design
discussions with customers helping to reduce the time spent to develop
the preliminary layout. The standard or definitive design helps reduce
the risk of design deficiencies and assures that the design will be
consistent with Army-wide missions and policy.
KENTUCKY: BLUE GRASS ARMY DEPOT
AMMUNITION DEMILITARIZATION FACILITY
Question. What is the current status of the first phase of this
work, which was funded in fiscal year 2000?
Answer. The first phase of work for Blue Grass Army depot, funded
in fiscal year 2000, is for Depot Support, such as communication lines
upgrades, roads, road repairs, and security building upgrades. These
upgrades have not yet started. A meeting is scheduled in the near
future among the Corps of Engineers, Project Manager for Chemical
Stockpile Disposal, and Blue Grass Army Depot to finalize the plan for
the path forward.
Question. Why isn't phase II funding requested in fiscal year 2001?
Answer. Funding in the amount of $8.5 million was requested in
fiscal year 2001 for continued Depot Support improvement activities. No
funding was requested for Demilitarization Facility construction in
fiscal year 2001 because the disposal technology has not yet been
selected.
KENTUCKY: FORT CAMPBELL
BARRACKS COMPLEX--MARKET GARDEN ROAD, PHASE 2C ($9,400,000)
Question. Will the inadequate Korean War-era barracks currently
housing soldiers be demolished as part of this project? If not, why
not?
Answer. The Barracks Complex Market Garden Road is being
constructed on a new site. The Corps Support Group Barracks Complex,
Phase 1, slated for Fiscal Year 2003 will be constructed on the site of
these Korean War era barracks. At that time, these old barracks will be
demolished as part of this project to make room for the new barracks.
Question. According to the form 1391, the remaining unaccompanied
enlisted permanent party deficit will be 2,534 personnel upon
completion of this project. What is the Army's plan (by fiscal year and
dollar amount) to provide adequate living quarters at Fort Campbell?
Answer. The Army's plan for Military Construction, Army (MCA) to
address the remaining unaccompanied personnel deficit is shown below.
In addition to the MCA amounts in the table, Barracks Upgrade Program
Operation & Maintenance, Army (OMA) fund will renovate several existing
buildings.
[In millions of dollars]
FY 2001........................................................... 9.4
FY 2002........................................................... 43.0
FY 2003........................................................... 37.7
FY 2004........................................................... 40.0
FY 2005........................................................... 40.5
FY 2006........................................................... 53.0
FY 2007........................................................... 67.6
FY 2008........................................................... 72.2
MARYLAND: ABERDEEN PROVING GROUND
AMMUNITION DEMILITARIZATION FACILITY, PHASE I ($45,700,000)
Question. What is the current status of the first two phases of
this project which were funded in fiscal years 1999 and 2000?
Answer. Aberdeen Chemical Disposal Facility (ABCDF) project was
awarded in October 1998 to Bechtel National, Incorporated as the System
Contractor for the design, construction, systemization, operation and
closure. This project is incrementally funded starting in fiscal year
1999. The design and construction for this project is scheduled to be
complete by fourth quarter fiscal year 2002. The design is 55 percent
complete and construction is 8 percent complete. To date, $68.9 million
of military construction funds has been obligated.
At Aberdeen, the government/systems contractor office building has
been completed and will be occupied by the end of March. Roads at the
site have been upgraded and a parking lot has been completed. Grading
for the site is completed and the site has been elevated with fill.
External utilities (electricity, telephone, water and sewer) have been
brought to the site. Construction activities for the Chemical
Demilitarization Building (digging footers and pouring concrete) will
commence in April 2000.
Question. This project differs greatly from other chemical
demilitarization projects in that it provides a pilot test of an
alternative to incineration. As such, your estimates are based upon the
best available data and costs are adjusted for risk associated with
design and construction of a first-in-kind plant. What precautions are
the Department taking to prevent the government from cost overruns?
Answer. The Office of the Project Manager for Alternative
Technologies and Approaches (PMATA) is diligently monitoring the
Systems Contractor to protect the government from cost overruns to the
fullest extent possible consistent with the contract scope. Oversight
of the Systems Contractor is performed by PMATA, Industrial Operations
Command staff, U.S. Army Corps of Engineers, and Program and
Integration Support Contractor personnel (PAISC).
One of the key tools in managing the systems contract is the use of
Earned Value Management System reporting on a monthly basis which
provides indications of potential cost growth. The contractor is also
required to prepare and maintain a resource loaded Integrated Master
Schedule for completion of the project. Other mechanisms to keep in
close contact with the contractor are the use of In Process Reviews,
Integrated Product Teams and Design Reviews which involve government,
PAISC and System Contractor personnel. These teams use past industrial
experience, government experience with similar buildings and equipment,
and the concept design provided to the System Contractor by the
government to aid in evaluating performance, cost and schedule.
Question. How will the elimination of contingency funding affect
project execution if cost overruns occur?
Answer. The elimination of contingency funding is not expected to
affect project execution. By intensely managing changes and adjusting
the contractor's execution plan a major cost overrun can be avoided.
Any cost overrun, if experienced, should be minimal and can be
effectively managed with available military construction resources.
Question. Would this work be required if there were no chemical
demilitarization program?
Answer. The Munitions Assessment/Processing System (MAPS) project
would be required even if there were not a chemical demilitarization
program. MAPS is being driven by local community concerns (Edgewood/
Harford County/Kent County, Maryland about cleanup called remediation)
actions at the Edgewood Area of Aberdeen Proving Ground (APG-EA). APG-
EA has worked carefully with the State of Maryland and the local
citizens Restoration Advisory Board to schedule remediation activities
to clean up key areas of land at APG-EA, particularly those close to
the installation boundary. One of these, the Lauderick Creek area, is
very close to an off-post housing development. Lauderick Creek is
suspected to contain an unknown number of old range fired chemical and
smoke weapons. Clean up of this and other old range areas at APG-EA has
resulted in intense pressure on the Army to find a solution to
ultimately dispose of these recoveries without using open burn/open
detonation due to citizens' concerns over fugitive emissions of toxic
chemicals and noise. MAPS will be used to dispose of the majority of
items (both smoke and chemical) recovered from these remediation sites
under strict environmental control. Consequently, the driving forces
for MAPS are the environmental cleanup actions at APG-EA, and the need
to meet the requirements of the Chemical Weapons Convention once any
chemical munitions have been recovered.
Question. If not, why isn't this project with the ``Phase III''
demil project?
Answer. The project is required.
NEW YORK: FORT DRUM
consolidated soldier support center, phase ii ($10,300,000)
Question. How many buildings are currently used to provide soldier
support services at Fort Drum?
Answer. Including partial occupancies, approximately 50 buildings.
Question. Will all facilities currently used for these services be
demolished under the Army's facility reduction program once this
project is completed?
Answer. In large measure, yes; however, not precisely the same
buildings. Ft. Drum will manage the demolition so that the facilities
most in need of repair are the buildings demolished. Some of the
facilities occupied currently by functions that will move to the
Support Center are in better shape than others. The intent is to
demolish at least as many square feet of WWII space as that which will
be constructed in the new facility.
Question. If not, please describe the buildings that will not be
demolished and the Army's plan for re-use of these facilities?
Answer. Ft. Drum has not finalized plans for all buildings
involved. Some of the facilities vacated by functions that will be
moved into the Support Center will be back-filled by other agencies,
and then those facilities subsequently vacated will be demolished
instead. Square footage is the unit of measure that we manage for
demolition as opposed to number of buildings. Our aim is to demolish at
least an equal amount of square footage as that which will be added by
the new Support Center. Ultimately, it is anticipated that
approximately 14 buildings will be demolished as a direct result of
vacating by the tenant. Another 33 buildings will be demolished as
substituted buildings because of their state of repair or the utility
of space management on the installation. All of the structures
previously mentioned are WWII wood structures.
Question. Why wasn't the cost to demolish existing structures
included in the cost of this project?
Answer. Ft. Drum anticipated using Facility Reduction funds to
accomplish the demolition. All future revitalization projects have a
demolition line item within the DD Form 1391.
Question. What is the estimated cost to demolish the existing
soldier support services buildings at Fort Drum under the facilities
reduction program? When will this work be completed?
Answer. It is estimated that the demo will cost about $973,000.
Once the new facility is completed and the functions transferred,
demolition will begin immediately, providing funds are available.
NORTH CAROLINA: FORT BRAGG
BARRACKS COMPLEX--BUTNER ROAD, PHASE I ($26,000,000); BARRACKS
COMPLEX--LONGSTREET ROAD, PHASE I ($45,600,000); BARRACKS COMPLEX--
TAGAYTAY STREET, PHASE 2B ($38,600,000)
Question. According to the form 1391's, the remaining unaccompanied
enlisted permanent party deficit at Fort Bragg will be 6,371 personnel
upon completion of these three multi-phased projects. What is the
Army's plan (by fiscal year and dollar amount) to provide adequate
living quarters at Fort Bragg?
Answer. The Army's plan for Military Construction, Army (MCA) to
address the remaining unaccompanied personnel deficit is shown below.
The 6,371-soldier deficit is the remainder after the fiscal year (FY)
2001 funded increment or phase of the three projects. In addition to
the MCA amounts in the table, Barracks Upgrade Program Operation &
Maintenance, Army (OMA) funds will renovate several existing buildings.
[In millions of dollars]
FY 2001........................................................... 110.2
FY 2002........................................................... 86.6
FY 2003........................................................... 87.2
FY 2004........................................................... 86.0
FY 2005........................................................... 76.5
FY 2006........................................................... 76.3
FY 2007........................................................... 75.5
FY 2008........................................................... 79.4
Question. Under current plans, will the Army meet the 1+1 barracks
standard at Fort Bragg by 2008? What is the average annual funding
needed to achieve this goal?
Answer. There are sufficient funds in the plan to buy out Fort
Bragg barracks by fiscal year (FY) 2008. However, this installation
will be the most difficult location in the Army to achieve that goal.
The average Military Construction, Army (MCA) funding for FY 2001
through FY 2008 is $85 million per year.
Because of environmental or safety constraints, new starts after
the FY 2001 projects must be constructed on the site of existing
facilities to be demolished. Finding sufficient swing space to house
soldiers as buildings currently occupied by entire brigades are
demolished will require intense management. Fort Bragg is developing a
detailed plan to succesfully manage this complex effort to meet the FY
2008 goal.
Question. What is the maximum amount of barracks construction
funding that could be placed in one fiscal year at Fort Bragg?
Answer. The barracks construction placement at any one location is
highly dependent on the individual characteristics of each project.
However, because of the distance separation of these noncontiguous
barracks projects, the amount budgeted is considered the maximum
barracks construction placement possible in fiscal year 2001. Any
additional construction work in this area could saturate the market and
cause the use of less skilled tradesmen that create quality problems
and lead to increased construction costs.
OHIO: DEFENSE SUPPLY CENTER COLUMBUS
MILITARY ENTRANCE PROCESSING STATION ($1,832,000)
Question. What is the payback period for this project, in avoided
lease payments and utility cost as a result of this project?
Answer. The Military Entrance Processing Station discount payback
period is 3.2 years.
OREGON: UMATILLA DEPOT ACTIVITY
AMMUNITION DEMILITARIZATION FACILITY, PHASE VI ($9,400,000)
Question. What is the current status of the first six phases of
work, which were funded in Fiscal Years 1995 through 2000?
Answer. Umatilla Chemical Agent Disposal Facility (UMCDF) project
was awarded in February 1997 to Raytheon Demilitarization Company as
the Systems Contractor for the construction, equipment installation,
systemization, operations and closure of the facility. The construction
phase of this project is scheduled to be completed in first quarter of
fiscal year 2001. To date, construction is 81 percent complete and
$162.2 million of military construction funds has been obligated.
Question. With no contingency allowance budgeted in the cost of
this project, what assurances can be provided that projected operating
schedules will be met?
Answer. Operations should begin on schedule. Construction of the
demilitarization facility is approximately 81 percent complete and on
schedule for completion in the first quarter of fiscal year 2001. Based
on the state of construction and the incorporation of lessons learned
from the Johnston Atoll and Tooele facilities, no major changes are
expected. Any changes should be minimal and be effectively managed with
available military construction resources and should not impact
construction completion.
PENNSYLVANIA: CARLISLE BARRACKS
ACADEMIC RESEARCH FACILITY ($10,500,000)
Question. The form 1391 indicates operations are currently being
conducted in one primary facility and four support facilities. Why are
14 facilities being demolished as a result of this project?
Answer. The Military History Institute is housed in Upton Hall, a
historic building, portions of three other historical buildings, and
one non-historic building. The Army has identified fourteen other
buildings, which are in worse condition, totaling 54,628 SF (5,075
square meters) for demolition in support of the Army's one-for-one
offset program.
Question. This project includes demolition of 14 buildings totaling
5,075 square meters. What is the total demolition cost included in the
cost of this project?
Answer. Total estimated cost for demolition of these 14 buildings
is $491,000, which includes asbestos and lead-based paint abatement.
Question. Please describe the buildings to be demolished as part of
this project.
Answer. The majority of these buildings are 60 years old, single
story permanent facilities of brick construction. Missions housed in
these buildings will be consolidated into other buildings on post.
Specific information on each building to be demolished is as follows:
1. Building no. 608 at 2,362 SF, brick facility built in 1940,
administrative, general purpose.
2. Building no. 609 at 2,572 SF, brick facility built in 1940, Army
Education Center.
3. Building no. 610 at 2,040 SF, brick facility built in 1940,
administrative, general purpose.
4. Building no. 611 at 182 SF, brick facility built in 1940, heat
plant for Building no. 610.
5. Building no. 631 at 351 SF, brick facility built in 1942,
storage, general purpose.
6. Building no. 632 at 18,450 SF, brick facility built in 1941,
multiple current uses to include administrative, general purpose;
storage, general purpose; Drug & Alcohol Abuse Center; Army Community
Services Center; and Thrift Shop.
7. Building no. 633 at 480 SF, brick facility built in 1940,
storage, general purpose.
8. Building no. 634 at 130 SF, brick facility built in 1944, plant
utility building.
9. Building no. 635 at 4,274 SF, brick facility built in 1940,
administrative, general purpose.
10. Building no. 636 at 480 SF, metal frame and siding facility
built in 1934, storage, general purpose.
11. Building no. 637 at 10,804 SF, brick facility built in 1940,
Youth Center.
12. Building no. 39 at 3,500 SF, concrete masonry facility built in
1943, administrative, general purpose.
13. Building no. 45 at 6,950 SF, brick facility built in 1940,
administrative, general purpose and technical library.
14. Building no. 317 at 2,053 SF, brick facility built in 1951,
storage, general purpose.
TEXAS: FORT BLISS
RAILYARD INFRASTRUCTURE ($26,000,000)
Question. Will there be any difficulty continuing to operate and
meet current mobility requirements while this project is being
executed?
Answer. No additional difficulty will exist beyond that which is
already there. This project is required because existing facilities
cannot support rapid deployment within required window.
Question. What are the plans for the six existing rail loading
sites once this project is completed?
Answer. To the maximum extent possible, track from the current
sites will be used for construction of the new complex, and unusable
track will be salvaged to offset construction cost. Of the six sites,
one is not repairable and continued use of the other five pose serious
safety and control.
TEXAS: FORT HOOD
MULTI-PURPOSE DIGITAL TRAINING RANGE, PHASE I ($16,000,000)
Question. Why is this project divided into two phases?
Answer. The project was inserted into the Military Construction
program late in the budget development cycle and funding was programmed
on expected first year execution. Full authorization is requested to
allow contract award for the entire project with the balance of project
funding requested in Fiscal Year 2002.
WORLDWIDE VARIOUS
UNSPECIFIED MINOR CONSTRUCTION ($15,000,000)
Question. Provide for the record a ten-year history of amounts that
have been requested and appropriated for unspecified minor
construction.
Answer. Information follows:
------------------------------------------------------------------------
Fiscal year Army request Appropriated
------------------------------------------------------------------------
1991.................................... $7,603,000 $8,603,000
1992.................................... 11,000,000 11,000,000
1993.................................... 3,800,000 5,500,000
1994.................................... 12,000,000 12,000,000
1995.................................... 12,000,000 12,000,000
1996.................................... 9,000,000 9,000,000
1997.................................... 5,000,000 5,000,000
1998.................................... 6,000,000 7,400,000
1999.................................... 10,000,000 12,500,000
2000.................................... 9,500,000 14,600,000
------------------------------------------------------------------------
WORLDWIDE VARIOUS
PLANNING AND DESIGN ($72,106,000)
Question. Will this funding level meet the known requirements for
the fiscal year 2001 program, including the necessary work on projects
programmed for fiscal years 2002 and 2003?
Answer. Yes, funding is adequate to meet all our known
requirements.
WORLDWIDE VARIOUS
HOST NATIONAL SUPPORT ($22,600,000)
Question. Provide for the record a table that will show the
expected distribution of this amount among the three efforts--criteria
package preparation, design surveillance, and construction
surveillance--and that will also show the expected distribution by
country.
Answer. The proposed distribution of host nation support funds is--
[In thousands of dollars]
----------------------------------------------------------------------------------------------------------------
Japan Korea Okinawa Germany NATO Total
----------------------------------------------------------------------------------------------------------------
Criteria Package Preparation........................ 9,000 120 575 0 \1\ 300 9,995
Design Surveillance................................. 4,200 120 550 400 \2\ 150 5,420
Construction Surveillance........................... 4,050 1,660 325 800 \2\ 100 6,935
Recoupment Activities............................... 0 0 0 0 \3\ 250 250
-----------------------------------------------------------
Total............................................... 17,250 1,900 1,450 1,200 800 22,600
----------------------------------------------------------------------------------------------------------------
\1\ Funds are for the development of ``Capability Packages'' for all US Forces in Europe Approximately 80% of
the funds would be earmarked for US Army Europe in Germany and Italy.
\2\ Design and construction surveillance for NATO Minor and Major projects for US Army Europe in Germany and
Italy and a small portion for other Services.
\3\ Country-specific amounts cannot be identified at this time although the majority of work involves projects
previously pre-financed in Germany. Other recoupment will be made for projects in Italy, the United Kingdom,
and Turkey.
BARRACKS
Question. Provide for the record a chart that will show the Army's
barracks construction program at the time the ``one plus one'' standard
was approved, and the current program through completion, broken out by
locations in the U.S., in Germany, and in Korea.
Answer. The DoD 1+1 Standard was approved in 1995 and was first
reflected in the Army's fiscal year (FY) 1996 budget.
In the chart below, the 1996 Plan is expressed in constant 1996
dollars, while the FY 2001 Plan is expressed in program year inflated
dollars. In Europe, with numerous closures and the return of facilities
to the Host Nation, the 1996 original plan envisioned residual value
payment-in-kind resources as the principal fund source. The following
chart compares the barracks program as it was envisioned in the
beginning and as it is in the current budget request.
[In billions of dollars]
----------------------------------------------------------------------------------------------------------------
FY 1996 buyout plan-- FY 2001 buyout plan--
---------------------------------------------------------------
Total
Years Total Buyout year estimated
estimated cost cost (FY01-08)
----------------------------------------------------------------------------------------------------------------
United States
MCA............................................. 18 $4.50 2008 $3.26
OMA............................................. .............. 0.54 .............. 0.26
---------------- ---------------
Total..................................... .............. 5.04 .............. 3.52
================ ===============
Korea
MCA............................................. 25 $0.75 2008 $1.05
OMA............................................. .............. 0.45 .............. 0.22
HN.............................................. .............. 0.55 .............. 0.05
---------------- ---------------
Total..................................... .............. 1.75 .............. 1.32
================ ===============
Europe
MCA............................................. NA PIK 2008 $0.60
OMA............................................. .............. .............. .............. 0.37
---------------- ---------------
Total..................................... .............. .............. .............. 0.97
----------------------------------------------------------------------------------------------------------------
FAMILY HOUSING INVENTORY
Question. Provide for the record a chart that will show the average
number of family housing unites supported for fiscal years 1998, 1999,
and 2000, and those expected to be supported in fiscal year 2001,
broken out into government owned (U.S. and foreign), leased (U.S. and
foreign), and privatized under Public--Private Ventures.
Answer.
AVERAGE NUMBER OF FAMILY HOUSING UNITS
------------------------------------------------------------------------
Fiscal year--
-------------------------------------------
1998 1999 2000 2001
------------------------------------------------------------------------
Govt owned.................. 118,361 115,526 111,125 100,974
US...................... 90,642 88,875 85,449 76,20
Foreign................. 27,719 26,651 25,676 24,954
Leased...................... 13,565 13,616 13,620 13,581
US...................... 4,200 4,304 4,319 4,319
Foreign................. 9,365 9,312 9,301 9,262
Privatized\1\............... 0 0 1,823 13,896
------------------------------------------------------------------------
\1\ ``Privatized'' reflects total number of units privatized, units may
have been privatized for less than full fiscal year.
NATO
PRECAUTIONARY PREFINANCING STATEMENTS
Question. Submit for the record a copy of the precautionary
prefinancing statements that have been submitted to the NATO
infrastructure committees for each European project for which funds
were appropriated for fiscal year 1999, and for each such project
requested for fiscal year 2000.
Answer. No pre-financing statements were submitted for any of the
fiscal year 1999 or fiscal year 2000 projects.
Question. Provide an explanation for any project for which
statements have not been submitted.
Answer. It was determined that none of the projects were eligible
for NATO Infrastructure funding now or in the foreseeable future.
Question. Provide an explanation for any project for which
statements have not been submitted.
Answer. No pre-financing statements were submitted for any of the
fiscal year 1999 or fiscal year 2000 projects. It was determined that
none of the projects were eligible for NATO Infrastructure funding now
or in the foreseeable future.
PREVIOUSLY AUTHORIZED AND APPROPRIATED FUNDS
Question. For the record provide a list of all previously
authorized and appropriated housing projects (both new construction and
construction improvements) that the Army has not executed due to the
pending approval of housing privatization projects. This list should
include the location, fiscal year appropriated, account, dollar amount,
and number of units.
Answer. The Army has three such projects:
----------------------------------------------------------------------------------------------------------------
Amount Number of
Location Appropriation Account (millions) units
----------------------------------------------------------------------------------------------------------------
Fort Hood, TX................................ FY98.......................... AFHC $18.8 130
Fort Meade, MD............................... FY98.......................... AFHC 7.9 56
Fort Hood, TX................................ FY99.......................... AFHC 21.6 154
----------------------------------------------------------------------------------------------------------------
FAMILY HOUSING CONSTRUCTION IMPROVEMENTS
Question. Provide for the record a ten year history of amounts that
have been requested and appropriated for post-acquisition construction
of family housing.
Answer.
[In millions of dollars]
------------------------------------------------------------------------
Appropriation
requested Appropriated
------------------------------------------------------------------------
FY00.................................... \1\ 5.303 35.400
FY99.................................... 28.629 48.479
FY98.................................... 44.800 86.100
FY97.................................... 33.750 105.350
FY96.................................... 14.200 48.856
FY95.................................... 49.760 49.760
FY94.................................... 67.530 77.630
FY93.................................... 143.660 92.600
FY92.................................... 74.980 74.980
FY91.................................... 44.100 40.100
------------------------------------------------------------------------
\1\ Appropriation request based on incremental funding.
BRAC ENVIRONMENTAL RESTORATION
Question. What is the Army's current estimate of the annual funding
requirement for BRAC environmental restoration beginning in fiscal year
2002?
Answer. The Army program for BRAC environmental restoration in the
Future Year Defense Plan (FYDP) for fiscal years 2002-2005 totals $425
million.
Question. What is the Army's current estimate of the annual funding
requirement for BRAC other than environmental restoration beginning in
fiscal year 2002?
Answer. The Army program for BRAC property caretaking and
management in the Future Year Defense Plan (FYDP) for fiscal years
2002-2005 totals $44 million.
HOUSING DEFICITS AND WAITING LISTS
Question. What is your current worldwide family housing deficit?
Answer. The Army's family housing deficit is 7,426.
Question. What are your three largest deficits, and how large are
they?
Answer. The three largest deficit locations are: Fort Bragg, NC,
1,650 units; Fort Campbell, KY, 982 units; and Fort Bliss, TX, 466
units.
Question. How many families are on waiting lists for government-
provided family housing, and what is the average waiting time?
Answer. Historically, the Army has approximately 2,000 officer
families and 18,000 enlisted families on waiting lists for government
family housing. The average waiting time varies by location, depending
on bedroom requirements. On the average, officer families wait no more
than 10 months and enlisted families wait no more than 15 months for
on-post family housing.
CHEMICAL DEMILITARIZATION
Question. Why does the Department, once again, propose transferring
the Chemical Demilitarization program from the Military Construction,
Defense-wide account to the Military Construction, Army account? What
difference does it make whether this program is funded under the Army
or under Defense-wide?
Answer. The Defense Reform Initiative developed the Chemical
Demilitarization Program from the Office of the Secretary of Defense to
the Department of the Army beginning in FY99. Although Congress
authorized and appropriated funding for the Chemical Demilitarization
program to the Department of Defense, the overall responsibility for
the program remains with the Army and is included in this year's Army
budget.
From an execution standpoint, it should not make any difference
where the funds are appropriated provided legislative authority is
added to mix Military Construction, Defense and Army funds on a
particular project where needed.
Question. Has the Army's program been reduced to make room for the
chemical demilitarization program, either this year or in the future?
Answer. The Army's program has gone down but not to make room for
the chemical demilitarization program. Current and future chemical
demilitarization construction program requirements were fully funded at
the time funding responsibility devolved from the Department of Defense
to the Army. In addition, due to future uncertainties and past history
of the program, additional funding was programmed in the out-years to
cover unanticipated requirements. It is not anticipated that there will
be any impact on the future Army program as a result of the chemical
demilitarization program.
Question. Submit for the record a chart, which will show
unobligated balances available, by Fiscal Year and by location, and the
maximum amount of construction that could be put in place at these
locations through the end of fiscal year 2001. We would appreciate any
comments you may wish to add.
Answer. The following is a chart showing unobligated balances of
military construction funds as of the end of February 2000.
UNOBLIGATED BALANCE
[In millions of dollars]
----------------------------------------------------------------------------------------------------------------
Fiscal year--
-----------------------------------------------------------
1996 1997 1998 1999 2000 Total
----------------------------------------------------------------------------------------------------------------
Anniston............................................ 0.0 0.8 7.7 0.0 5.5 14.0
Umatilla............................................ 0.0 0.0 0.1 0.0 20.6 20.7
Pine Bluff.......................................... 0.0 0.1 0.0 0.0 15.2 15.3
Aberdeen............................................ 0.0 0.0 0.0 0.5 10.6 11.1
Newport............................................. 0.0 0.0 0.0 0.2 12.5 12.7
----------------------------------------------------------------------------------------------------------------
Note: The above amounts do not include the depot support projects.
The maximum amount of construction that could be put in place and
cover long lead construction material, equipment, supplies,
subcontracts and the Army Corps of Engineers contract oversight costs
at these locations through the end of Fiscal Year 2001 is as follows:
[In millions of dollars]
Site Amount
Anniston, Alabama................................................. 166.9
Umatilla, Oregon.................................................. 191.6
Pine Bluff, Arkansas.............................................. 151.4
Aberdeen, Maryland................................................ 125.7
Newport, Indiana.................................................. 101.8
Pueblo, Colorado \1\..............................................
Blue Grass, Kentucky \1\..........................................
---------------------------------------------------------------------------
\1\ On hold pending technology selection.
Question. For the record, describe the ``Public Law 104-208
baseline restrictions'' and how they are being addressed.
Answer. Public Law 104-208 prohibited the obligation of funds for
the construction of baseline incineration facilities at the Pueblo,
Colorado, and Blue Grass, Kentucky, storage sites until 180 days after
the Secretary of Defense submits a report on the effectiveness of each
demonstrated alternative technology versus incineration for the
destruction of assembled chemical munitions. That report was provided
to Congress on October 1, 1999. Environmental impact statements and
permitting activities are being initiated for Blue Grass and Pueblo in
anticipation of a technology decision.
Question. Please provide for the record a chart which will
show the amounts (by location) and the timeline for the entire
Military Construction cost of the Chemical Stockpile Disposal
Program.
Answer. The requested information is shown in the table
below.
[In millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fiscal year--
---------------------------------------------------------------------------
Project 1999 & Total
prior 2000 2001 2002 2003 2004 2005
--------------------------------------------------------------------------------------------------------------------------------------------------------
PM-Chem Demil Training Facility.................................. 16.1 .......... ........ ......... ........ ........ ........ 16.1
Tooele, UT Facility.............................................. 186.2 .......... ........ ......... ........ ........ ........ 186.2
Depot Support.................................................... 11.8 .......... ........ ......... ........ ........ ........ 11.8
Anniston, AL Facility............................................ 159.9 7.0 ........ ......... ........ ........ ........ 166.9
Depot Support.................................................... 14.3 .......... ........ ......... ........ ........ ........ 14.3
Umatilla, OR Facility............................................ 157.377 24.825 9.4 ......... ........ ........ ........ 191.602
Depot Support.................................................... 11.2 .......... ........ ......... ........ ........ ........ 11.2
Pine Bluff, AR Facility.......................................... 58.0 49.8 43.6 ......... ........ ........ ........ 151.4
Depot Support.................................................... 10.0 .......... ........ ......... ........ ........ ........ 10.0
Pueblo, CO Facility.............................................. .......... .......... 10.7 80.5 83.4 10.89 ........ 185.49
Depot Support.................................................... 6.3 .......... ........ ......... ........ ........ ........ 6.3
Blue Grass, KY \1\ Facility...................................... .......... .......... ........ 17.4 74.4 86.14 9.9 187.84
Depot Support.................................................... .......... 2.0 8.5 ......... ........ ........ ........ 10.5
Aberdeen, MD Facility............................................ 26.5 53.5 45.7 51.75 ........ ........ ........ 177.45
Depot Support.................................................... 1.85 .......... ........ ......... ........ ........ ........ 1.85
Newport, IN Facility............................................. 11.5 35.9 54.4 78.0 ........ ........ ........ 179.8
Depot Support.................................................... 2.0 .......... ........ ......... ........ ........ ........ 2.0
Planning & Design................................................ 114.5 .......... ........ ......... ........ ........ ........ 114.5
Non-Stockpile MAPs Facility...................................... .......... .......... 3.1 ......... ........ ........ ........ 3.1
--------------------------------------------------------------------------------------
Total...................................................... 787.527 173.025 175.4 227.65 157.8 97.03 9.9 1,628.332
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Funding requirement may change pending assessment of Assembled Chemical Weapon Assessment Program in consonance with Public Law 104-208.
Question. What is the timetable and what are the milestones
for completion of the chemical demilitarization program?
Answer. Following is the Chemical Stockpile Disposal
Program schedule and major milestones.
----------------------------------------------------------------------------------------------------------------
Start of Start of
Location construction systemization\4\ Operations
----------------------------------------------------------------------------------------------------------------
Johnston Atoll \1\.................. .................... ....................... 3QFY90-1QFY01.
Tooele, UT.......................... .................... ....................... 4QFY96-4QFY03.
Anniston, AL........................ 3QFY97.............. 2QFY00................. 2QFY02-1QFY06.
Umatilla, OR........................ 3QFY97.............. 3QFY00................. 2QFY02-3QFY05.
Pine Bluff, AR...................... 2QFY99.............. 4QFY01................. 4QFY03-1QFY07.
Pueblo, CO \2\...................... On Hold............. ....................... ...........................
Blue Grass, KY \2\.................. On Hold............. ....................... ...........................
Aberdeen, MD \3\.................... 3QFY00.............. 3QFY02................. 2QFY05-3QFY06.
Newport, IN \3\..................... 3QFY00.............. 4QFY02................. 3QFY04-1QFY05.
----------------------------------------------------------------------------------------------------------------
\1\ Full-scale operations began second quarter FY94.
\2\ Schedule on-hold pending, technology selection.
\3\ Schedule represents employment of neutralization-based technology. For Aberdeen and Newport, construction is
defined as the date on which footers are poured for the agent destruction facility.
\4\ Some systemization activities are started in the construction phase.
Question. Provide for the record a chart showing, by location, the
facilities and operational costs for the chemical demilitarization
program.
Answer. The requested information is shown in the table below.
CURRENT YEAR
[In millions of dollars]
------------------------------------------------------------------------
Location Facilities \1\ Operations \2\ Total
------------------------------------------------------------------------
Johnston Atoll............... .............. 1,472 1,472
Tooele, UT................... 198 1,317 1,515
Anniston, AL................. 181.2 1,034.8 1,216
Umatilla, OR................. 202.8 989.2 1,192
Pine Bluff, AR............... 161.4 870.6 1,032
Pueblo, CO................... 191.8 862.2 1,054
Blue Grass, KY............... 198.3 710.7 909
Aberdeen, MD................. 179.3 462.7 642
Newport, IN.................. 181.8 454.2 636
CAMDS, UT.................... .............. 448 448
PMCD Training Facility, MD... 16.1 119.9 136
Programmatics................ .............. 1,605 1,605
CSEP:
(On-Post)................ .............. 496 496
(Off-Post)............... .............. 741 741
MILCON P&D................... 114.5 .............. 114.5
------------------------------------------
Total.................. 1,625.2 11,583.3 13,208.5
------------------------------------------------------------------------
\1\ Facilities costs include the cost of designing and constructing and
equipping using Military Construction Funds.
\2\ Operational costs include all costs to test and operate each
facility, training and all other support costs related to the
operations of each facility, to include environmental requirements and
Chemical Stockpile Emergency Preparedness Program costs.
Question. What is the timetable for the funding of all construction
phases, for the obligation of funds, and for the construction and
operation of the chemical demilitarization facilities at the locations
for which military construction funds are requested--Anniston, Alabama;
Pine Bluff, Arkansas; Pueblo, Colorado; Newport, Indiana; Blue Grass,
Kentucky; Aberdeen, Maryland; and Umatilla, Oregon?
Answer. The spreadsheet provided in response to Question 82
identifies the funding requirement by fiscal year and site. The
obligation of funds is expected to be accomplished as follows:
Anniston: No fiscal year 2001 funds were requested or programmed.
Umatilla: Fiscal year 2001 funds will be applied to the on-going
contract and are earmarked for completing construction changes,
engineering during construction, supervision and administration, and
accomplishment of as-built drawings and will be obligated as required
prior to construction completion.
Pine Bluff: Fiscal year 2001 funds will be applied to the on-going
contract and obligated at that time. The majority of the funds is
expected to be obligation in the first quarter of the fiscal year. The
remainder is planned to be obligated throughout the fiscal year to fund
construction changes, engineering during construction, and supervision
and administration.
Aberdeen: Fiscal year 2001 funds will be applied to the on-going
contract and obligated at that time. The majority of the funds is
expected will be obligated in the first quarter of the fiscal year. The
remainder is planned to be obligated throughout the fiscal year to fund
construction changes, engineering during construction, and supervision
and administration.
Newport: Fiscal year 2001 funds will be applied to the on-going
contract and obligated at that time. The majority of the funds is
expected to be obligated in the first quarter of the fiscal year. The
remainder of funds is planned to be obligated throughout the fiscal
year to fund construction changes, engineering during construction, and
supervision and administration.
Pueblo: Fiscal year 2001 funds will be obligated when the
construction contract is awarded.
Blue Grass: Fiscal year 2001 funds will be obligated when the
construction contract is awarded.
The construction and operation timetable of the demilitarization
facilities follows:
------------------------------------------------------------------------
Operation status
Construction status ---------------------------------
Start End
------------------------------------------------------------------------
Anniston........ Under construction, 2 Q FY 02...... 1 Q FY 06
77% complete.
Umatilla........ Under construction, 2 Q FY 02...... 3 Q FY 05
81% complete.
Pine Bluff...... Under construction, 4 Q FY 03...... 1 Q FY 07
15% complete.
Aberdeen........ Contract awarded 10/ 2 Q FR 05...... 3 Q FY 06
98--construction
begins 3 Q FY 00.
Newport......... Contract awarded 2/ 3 Q FY 04...... 1 Q FY 05
99--construction
begins 3 Q FY 00.
Pueblo.......... Treatment method Schedule on hold.\1\
under study.
Blue Grass...... Treatment method Schedule on hold.\1\
under study.
------------------------------------------------------------------------
\1\ Schedules on hold pending technology selection.
Question. What is the total design life of each of these
demilitarization facilities?
Answer. Plant design is not driven by ``life'' criteria but rather
by environmental and safety requirements to achieve maximum protection
as required by law. This equates to a design life of five years of
continuous operation. With prudent maintenance and equipment
replacement, the facility's life can be extended significantly.
However, the expected operational life of all plants currently under
construction or planned is less than five years.
Question. Are the sums requested equal to the amount of
construction that can be put into place during fiscal year 2001?
Answer. Yes, for Umatilla, Aberdeen, Pine Bluff and Newport, the
sums requested in fiscal year 2001 when added to the funds already
appropriated total the cumulative amount of construction that can be
put into place through fiscal year 2001. For Pueblo and Blue Grass, the
amounts that can be placed during fiscal year 2001 will be dependent on
the selection of the technology to be used at the respective site.
Question. What is the current annual cost of maintaining the
stockpile?
Answer. The annual cost of maintaining the stockpile is $111.2
million for fiscal year 2000.
Question. What is the total ``sunk cost'' for the chemical
demilitarization program through the end of fiscal year 2000?
Answer. The Army projects that approximately $7.5 billion will be
obligated for the Chemical Demilitarization Program by the end of
Fiscal Year 2000. This figure includes $7.0 billion for the Chemical
Stockpile Disposal Program and $0.5 billion for the Non-Stockpile
Chemical Materiel Program.
Question. No funds are requested for chemical demilitarization
planning and design costs, which were funded in the past under the
``Defense-wide'' account. What is the current unobligated balance of
previously appropriated funds, by fiscal year, and what is the plan for
obligating these funds?
Answer. A total of $15.075 million in planning and design funds
remains unobligated. This amount includes $1.75 million in Fiscal Year
1996 funds, $4.124 million in Fiscal Year 1997 funds, and $9.2 million
in Fiscal Year 1998 funds. These funds will be used to accomplish
designs required for the Pueblo and Blue Grass construction
solicitations The amounts of funds required are indeterminate since
they are dependent on the technology selected and on the method of
contracting to be used. Once these facilities are awarded for
construction, all remaining planning and design funds will be returned
to the Office of Secretary of Defense for reprogramming as required.
ARMY NATIONAL GUARD PROGRAM
Question. Traditionally the Army National Guard has received many
Congressional adds. Yet, the funding level has remained significantly
below the requirements. Is the budget request for fiscal year 2001
sufficient to meet the Army National Guard's needs? If not, why is the
Army relying on Congress to plus up the Army National Guard's budget?
Answer. No, the budget request does not meet the Army National
Guard's needs. Their validated annual recurring requirements for 2001
are $575 million. However, the budget does not meet the needs of any of
the components for revitalization. After funding the highest
construction priorities (strategic mobility, whole barracks renewal,
and chemical demilitarization), there was not enough money left to fund
revitalization at a higher level than 5% for the Army National Guard,
10% for the active component, and 41% for the Army Reserve.
Question. In the Forms 1391 for the Organization Maintenance Shops,
the Army Division Redesign Study (ADRS) is cited as part of the reason
for the requirement. Please explain what the ADRS is.
Answer. The Army Division Redesign Study is a three phase Force
Structure initiative to convert twelve Army National Guard combat
brigades and slice elements from two combat divisions to required
combat support/combat service support structure to meet wartime and
domestic support requirements. This involves the conversion of
approximately 48,600 ARNG positions from low priority combat structure
to required combat support/combat service support structure.
NEW HAMPSHIRE: ROCHESTER U.S. ARMY RESERVE CENTER
LAND ACQUISITION ($980,000)
Question. According to the Form 1391, the facilities this land
acquisition will help replace are inadequate and overcrowded. Why is
the construction programmed for fiscal year 2003 rather than fiscal
year 2002?
Answer. Purchase of this land, which generally takes 9-12 months,
in FY 2001 allows the project design and projected construction costs
to be contained within budget. Therefore, the USAR has started a site
search in order to secure an option to purchase when this project is
appropriated. This will allow an accurate budget submission. Department
of Defense Instruction (DoDI) 1225.8 requires projects submitted in the
biennial budget to be at 35% design when the budget is submitted.
Therefore, land must be purchased in FY 2001 to accomplish all the
topographic and geotechnical investigations of the building site that
must be completed prior to the training building and supporting
facility design. DoDi 1225.8 also requires that related costs necessary
to meet the functional criteria of a facility, including . . . '' site
plans, . . . existing utility surveys, capacities, and sizes,'' be
accomplished as part of the 35% design. The design process for any
project begins at least two years in advance of the appropriation for
the project. The design must start soon after land acquisition, or
after securing an option to purchase, to meet the scheduled biennial
budget submission. Without land, a reasonably accurate project cost is
very difficult to obtain. Delaying the land acquisition until after FY
2001 impedes the timely start of the design process and eventually has
an adverse impact on the biennial budget submission and project costs.
[Clerk's note.--End of questions for the record submitted
by Chairman Hobson.]
Thursday, March 2, 2000.
DEPARTMENT OF THE NAVY
WITNESSES
ROBERT B. PIRIE, JR., ASSISTANT SECRETARY OF THE NAVY
REAR ADMIRAL LOUIS SMITH, FACILITIES ENGINEERING COMMAND
GENERAL HAROLD MASHBURN, ASSISTANT DEPUTY CHIEF'S STAFF, INSTALLATION &
FACILITIES
REAR ADMIRAL JOHN COTTON, DEPUTY CHIEF, NAVY RESERVE
STATEMENT OF THE CHAIRMAN
Mr. Hobson. The hearing will come to order.
Our hearing this morning is going to focus on the Navy
military construction program including family housing, base
realignment and closure and reserves.
Our witness today is Mr. Robert Pirie, Assistant Secretary
of the Navy for Installations and Environment.
I have been reading some testimony that you and I need to
talk about, in a friendly way. Do not worry.
Mr. Pirie. Oh, yes, sir.
Mr. Hobson. I did go back and read some of that.
Secretary Pirie, it is a pleasure to have you appear before
the subcommittee again this year, and we look forward to your
testimony and a good hearing on the construction program for
the Navy and the Marine Corps.
Mr. Pirie. Thank you, Mr. Chairman.
Mr. Hobson. John, do you have any opening statement that
you would like to give?
Mr. Olver. I do not.
Mr. Hobson. Okay.
Mr. Pirie. Mr. Chairman, with me this morning, this phalanx
of witnesses that I have brought along is Rear Admiral Lou
Smith, who is the----
Mr. Hobson. He and I spent an afternoon together.
Mr. Pirie. He's with the Naval Facilities Engineering
Command. And General Hal Mashburn, from the Assistant Deputy
Chief's Staff, Installations and Facilities; and Rear Admiral
John Cotton is Deputy Chief of the Navy Reserves.
These guys came in, sir, for your questions.
With your permission, sir, I will submit my full statement
for the record, and just have a few high points to read, with
your permission?
Mr. Hobson. Sure.
STATEMENT OF THE HONORABLE ROBERT B. PIRIE, JR.
Mr. Pirie. I think the 2001 program we are submitting to
you is the strongest facilities budget submitted to the
Congress during my six-year tenure in this position.
There is a lot to applaud in the area of housing,
particularly the Secretary of Defense proposes to reduce out-
of-pocket expenses, housing expenses, for members who own or
rent their homes in the community. An increase in basic
allowance for housing would cut out-of-pocket expenses from
about 19 percent, where they are running now on the average, to
15 percent in 2001. And then we propose to eliminate them by
2005. That will make housing more affordable for the nearly
three-quarters of the Navy and Marine Corps families, and many
single sailors and marines who live in private sector housing.
We have also renewed our commitment to family housing
construction. We are asking you to approve 6 Navy and 2 Marine
Corps construction projects for the next fiscal year. These
projects would build a total of 861 homes, all of them in the
United States, none of them public/private ventures. In keeping
with our philosophy of fixing what we own, nearly all of these
replace deteriorating homes that we still need, but which are
beyond economical repair guidelines.
We are proceeding with our housing privatization efforts.
There are 7 pilot projects previously authorized and
appropriated in various stages of the acquisition process. Any
necessary funding will come from prior year appropriations. We
are not asking for any new PPV funds with this budget.
I believe we are approaching success here. Later this year
I expect to provide the Congress with the required notification
of our intent to award contracts for most of these PPV
projects. Because we have been slower then I had hoped, we will
not have all of the data we would like about how PPVs work.
Nevertheless, I continue to believe they are an important way
that we can get more and better housing sooner for our people.
I would ask your support, Mr. Chairman, for extending PPV
authority for another five years.
We are also exploring an initiative to dramatically improve
housing for our most junior sailors assigned to ships. When
deployed away from home port, all sailors must endure bunk
beds, sharing cramped spaces with dozens of shipmates and
living out of a small locker. When they return to home port,
their peers, who are married or assigned to aviation squadrons
or submarines, get housing ashore. Shipboard E-1 through E-4s,
however, must continue to live aboard ship.
A proposed new ``Home Port Ashore Program'' would provide
these sailors housing, either in a BEQ or in the community when
the ship is in home port. In order to create space within the
housing budget for the rapid buildup of BQ spaces that would be
required for this initiative, we would build new spaces to the
``2 plus 0'' configuration, rather than the ``1 plus 1'' that
is the current DOD standard. Ultimately we intend to return to
the ``1 plus 1'' standard, but in the meantime, we will have
provided decent places for our young bachelor sailors in home
port. As we work out the details of implementing this
initiative, we will keep the committee informed.
I am very proud of our efforts to clean up closed bases and
get the property into the hands of local communities. Through
four rounds of BRAC we had a total of 178 closures and
realignments to accomplish. Only two remain. Both will be
completed next year. Cleanup and property disposal are now the
major focus of our activity.
With respect to BRAC funding, the apparent large increase
in funding requested in 2001 requires some explanation. Last
year's advance appropriation scheme, which met an untimely end,
shifted fiscal 2000 funding into 2001 based on the expected
rate of outlays. This occurred in the military construction,
family housing construction and BRAC accounts. Congress
rejected the idea of advanced appropriation, but made us whole
in fiscal 2000 by restoring funds to the military construction
and family housing accounts.
However, BRAC funding was not restored, and this left our
fiscal 2000 BRAC program severely short. We are doing our best
with communities to make do with the much smaller than planned
fiscal 2000 funds. The fiscal 2001 funds are critical to
continue the work begun this year, and get us and the community
redevelopment plans back on track.
Mr. Hobson. How much is that?
Mr. Pirie. We are asking for what, $477,000,000.
Cleanup delays will inevitably stretch our property
disposal schedules and be a major setback to community
redevelopment plans.
We have accomplished two Section 334 early transfers of
BRAC property. The former Fleet Industrial & Supply Center,
Oakland, California transferred to the Port of Oakland in June.
This transfer is unique in that with funding from us, the port
will do the cleanup as part of their redevelopment, saving both
time and money for all parties.
We also transferred the former Naval Air Station, Memphis,
Tennessee to the Millington Municipal Airport Authority. In
this case we will continue to do the cleanup, but also in
concert with the community's redevelopment effort.
While we have avoided including a major irritant this year
such as advance funding for MILCON and family housing, there
are aspects of our budget that may be problematic. One such
item is the lack of contingency funding for military and family
housing projects. We will certainly do our best to manage our
projects carefully, but inevitable fact-of-life changes will
confront us with a need to down-scope projects or reprogram for
increased costs. I do not propose to compromise on quality.
Another issue that we are working, but have not arrived at
a complete solution, is that of historic and flag officer
housing. These historic buildings represent a part of our
national heritage, of which the Navy Department is the steward.
We need to preserve these places for the benefit of present and
future generations of Americans. As a general rule, these
places are difficult and expensive to maintain. There is a real
question in equity whether the family housing account should
bear this burden when we have shortages elsewhere.
The idea of creating a separate account has proved very
unpopular, so I have created a working group to seek a long-
term solution, and I will keep you informed of our progress as
we go along, and ideas are welcome at any time.
Mr. Chairman, it has been a pleasure to work with this
committee and members of the committee over the course of the
last six years, and I very much am grateful for all the
consideration that you have shown to the Navy and to me
personally. I look forward to our continued dialogue.
[The prepared statement of Hon. Robert B. Pirie, Jr.
follows:]
Mr. Hobson. Thank you, and I appreciate the conciseness of
your comments, because I know members have a lot of questions
that they would like to ask. I have a number of them here. Some
of them you touched on, but I am going to start with the
members that are here, and there will be some other members
joining us, because some have planes to get.
John, do you have any questions you want to start with?
Mr. Olver. I am going to follow your lead on that, Mr.
Chairman, and let my members, who may have indeed have--I am
here, so I would them have their comments first.
Mr. Hobson. Who has an airplane to catch? Sam, do you have
an airplane to get to?
Mr. Farr. I have another approps. meeting at----
Mr. Hobson. So do I.
Mr. Farr. But I do have some questions.
Mr. Hobson. Go ahead. Or would Chet be----
Mr. Edwards. No, I am willing to----
Mr. Farr. Thank you very much, and I appreciate my
colleagues letting me ask these questions. I have three
questions.
EPA AND CALIFORNIA OFFICE OF TOXIC SUBSTANCE
The first is that at Tustin Naval Base, you have entered in
a Memorandum of Understanding (MOU) with the Environmental
Protection Agency (EPA) and the California Office of Toxic
Substance that I am really worried about. I think that this is
going to be the boiler-plate MOU for all the services, for all
the cleanup in California, and if other states learn about it,
it will become their standard of operation. It is very serious
because you allow the California State Office of Toxic
Substance to determine the quality of the cleanup and hold you
liable for it forever. You know, on certain cleanup there is a
strict liability, certainly, on unexploded ordinances. As I
understand, Tustin is not that dirty a base, so the MOU was
kind of easy to draft, but the language of the MOU--because I
am looking at how the same office is applying its standards to
the Army at Fort Ord. I just need you to realize that the
California Office of Toxic Substance, which is probably going
to be the strongest regulator in the United States, stronger
than EPA, has essentially got a standard that it is going to
have to be 100 percent clean. And what that means is that when
the land is transferred, if the land were going to be developed
for housing and it has ever had any contaminants on it, I mean
we would never get to 100 percent. And you financially are
liable and essentially leave the land fallow because you cannot
clean it up to that standard.
So would you take a re-look at that, and realize that the--
and let us chat about it, because I think that that MOU is
going to be boiler-plate for every----
Mr. Pirie. I will very definitely look at that.
NAVAL POST-GRADUATE SCHOOL
Mr. Farr. Secondly I would like to just--appreciate that.
You know, the crown jewel, I think, of the Navy is your Naval
Postgraduate Schools. No other service has anything like it.
The chairman has visited.
Mr. Hobson. Certainly, the facility----
Mr. Farr. And some of my colleagues here have visited.
What----
Mr. Hobson. Historic structures I am afraid.
Mr. Farr. One of the things that we have been trying to
do--and I know Congressman Edwards has been doing this in his
community--is entering new contracts with the local communities
on base operations. The Army has done it very effectively with
the DLI in Monterey, but the Navy has been a little more
reluctant, although it has a lot less real estate to govern.
And it, frankly, gets down to an issue which I know we are all
concerned about, is fire-fighting. The federal standard for
fire-fighting is you must have four men on a truck. The
California standard, which meets the same OSHA guidelines, is
that you have to have four people to enter a building. They do
not care how you arrive there. The federal law requires that
you arrive on the same vehicle. The state law requires that you
all--they do not care how you get there, but you all have to
enter the same--four in a building.
So what--this thing is broken down in Monterey, and I would
like you, Mr. Secretary, to comment and tell me if it is
possible to get a Navy directive for a more aggressive policy
on public/private partnerships to reduce basic structure cost.
Mr. Pirie. Well, we are putting a lot of pressure on that
in response to the fact that we really do need to economize,
and we really do need to bring in the private sector, who--
Mr. Farr. Not just the private sector, the public sector.
Mr. Pirie. Well, to bring in non-Department of the Navy
organizations. We are inhibited in some cases by law and
regulation. In the case of fire-fighters we have a prohibition
contracting them out. But in general, we are quite open to----
Mr. Farr. Why do you have that and the Army does not have
that?
Mr. Hobson. Is that a statutory thing?
Mr. Pirie. I believe so. Federal fire-fighters----
Admiral Smith. Fire-fighters and security are said to be
inherently governmental and----
Mr. Farr. Well, the DLI, the fire-fighting is done by the
municipality, and at the Naval Post-Graduate School you have 23
members on a fire station that is smaller than this building,
full time. But I am truly concerned about the cost of base ops
You are going through a public/private infrastructure review
out there, and I appreciate that.
Lastly, let me just--I just want you to know my concern is
that we move forward on that.
The third issue is one that is dear to the chairman here,
and that is the debate we are facing on school modernization.
And on the civilian side this is what Congress is talking
about, getting money to upgrade schools. Yet we forget that we
also have a lot of military campuses, and some of the
instructional buildings at the DLI--excuse me--at the Naval
Postgraduate School are 46 years old and have deferred
maintenance. The Naval Postgraduate School has been advised by
the N7 facilities director, that it makes more sense to
demolish several campus buildings than to invest in
rehabilitation. One of the recommendations is to construct new
instructional buildings, which incorporate the state-of-the-art
in instructional methods. These classrooms would be sized to
different capacities to adapt to the various sized classes and
teaching techniques currently used at the school. The
laboratory facilities, which are designed for more computerized
applications, are in, a 46-year-old building did not even have
computers. Nobody invented them yet. There is a cost savings to
the Navy. We think it is about threefold. There will be lower
operational cost. It will be designed around current seismic
requirements, making retro-fitting of the current facilities
unnecessary. Sizing of the buildings would be better controlled
by a newer facility than renovating the old one. As the school
moves forward with this plan, I want to be able to count on
you--hope that I can count on you for your support.
Mr. Pirie. We have in fact put in a significant amount of
construction in modern spaces in the recent past, and I agree
that the school is a gem, that it is unique and a national
asset, and that we need to move forward with modern facilities
everywhere.
Mr. Farr. Well, the fact of the matter is you did not put
in--this committee raised that level, because the chairman went
out and looked at it, and--but the request did not come on your
priority list.
Mr. Pirie. Having said that, we face austerity everywhere
in the military construction projects. We have piers, runways,
hangars that are deficient and need to be upgraded, and it is a
matter of priorities, and this is an internal dialogue in the
Navy that occurs every year. The committee help in this matter
has been very, very much appreciated. We cannot do everything
simultaneously.
Mr. Hobson. Could have taken some of that money from some
of those houses and put it over there in Hawaii and a couple
other places. Just a side comment.
Mr. Farr. Well, we can count on your support.
Mr. Pirie. Thanks. [Laughter.]
Mr. Farr. And I want to thank you. [Laughter.]
Mr. Pirie. You certainly will not have me saying that this
is a bad idea.
Mr. Farr. Getting back to that first question, that MOU--
Mr. Chairman, I think we ought to look at that. This is the
same issue that you are facing with all the historic buildings,
only this is progressive rather than retroactive.
Mr. Pirie. I am not aware of this particular one, but I
would have to strongly agree with you. We cannot set
precedents, particularly with the Department of Toxic Substance
Control, which is very difficult to deal with. And we are doing
it under a different standard here. We need to do CERCLA
cleanups where we need to do cleanups, and not have state
regulators arbitrating every step of the process.
Mr. Farr. But you cannot stop that, because the land ends
up in civilian control and has to be regulated by civilian law.
I think that what we need here is to get down with the civilian
regulators at the state level--and California is not a bad
place to start, because it has got a lot of it--and figure out
what is a standard that we can all agree to, and have some
boiler-plate covenants, which I think they are going to be, but
it ought to be something that is not negotiated at each base,
because this first one is the first one out of the box. And I
know the Office of Toxic Substance is going to use that for
every single other cleanup, and say, ``This is what we want.''
And you have already signed off on it, and they will say,
``Well, if the Navy can agree to this, then the Army can agree,
and the Air Force can agree and everyone else can agree.'' So
we have got a lot of work to do because we have never had the
ability for taking unexploded ordinances and more serious
cleanups and finding out what is mutually agreed upon,
including the local government, what they can live with,
because these covenants can--if we do not get there, I can just
see us building big fences around all of these closed military
bases.
Mr. Hobson. If I might, we might have to have a meeting,
just a private meeting to discuss this, because I do not know
how this generates and where it comes up through the chain. If
it begins to set a pattern, you all need to go back and begin
to document that this is not a pattern, that it was particular
to this site, so that--and that everybody recognizes that it is
peculiar to that site at that time, and that may not be your
position later. So you get your lawyers and you all document
that back, and if you look at what you have agreed to, to make
sure that it does not come out that way. So you start building
your case now, not waiting till somebody challenges you later
on the next one, and then you have this--but now you look at
it.
Mr. Pirie. Well, there is that. We resisted them strongly
in other locations in California, Nevada and Hunters Point and
elsewhere, and we are engaged in----
Admiral Smith. If I could, sir, the former Marine Corps
Station, Tustin, my folks in California--my branch offices are
out there, who now in fact are doing those negotiations with
our friends in the California Department of Toxic Substance
Control, and I was briefed on that a couple of weeks ago, and
that was seen still then as a proposal. It had not been signed
off. And we had kind of a lengthy discussion on the West Coast
about what we call the ``ratchet effect'' on some of these
regulatory matters. So there is always a lot of sensitivity in
that everything it seems that happens in our dealing with those
folks out there--and they are trying to do the right thing,
just as we are--everything we do is all prolonged.
Mr. Pirie. Well, I cannot imagine Admiral Smith's people
having signed off on such an MOU without checking with us.
Admiral Smith. Well, we will get to you on that though,
sir, but the last briefing I had said it had not been agreed
to.
Mr. Farr. The key here, Mr. Chairman, is that the Army
essentially takes the lead on unexploded ordinances for all of
the services, as I understand, and this is where the rubber
hits the road, because that is where--you know, the states want
to insure that nobody who ever stays on that land will ever
have any problems of any kind with unexploded ordinance. We all
agree with that. But there is a military standard which has not
yet been adopted by the states. And they are not sure that they
want to agree to the military standard. And therein is the rub,
and we need to find some commonality here, and all the services
need to participate in this, because what becomes the rules for
one will become the rules for all.
Mr. Pirie. Absolutely.
Mr. Hobson. I think they have the message, right?
Mr. Pirie. Yes, sir.
Mr. Hobson. Chet.
Mr. Edwards. Mr. Secretary, thank you for working to make--
those of us in this subcommittee are especially sensitive to
the importance of quality of life issues on our military
readiness.
PERCOLATION PLAN AND FORT HOOD
Just a specific request for information in regard to my
district. I have the former Hercules naval installation, built
block of motors for 40 years in my district, just outside of
Waco. There is a perchloric [ph] problem there. It is starting
to seep into tributaries that lead into the two largest lakes
in my district. If worse came to worse, we would have to shut
off the water supply of 400,000 of my constituents and also the
water supply of Fort Hood, which now represents 20 percent of
all of the active duty Army divisions. I appreciate the
commitment the Navy has made in the last couple of years to
that effort, but I would like to ask you if I could.
At the last exchange--I will not ask you to promise to do
everything I asked you to do, but would you--I would appreciate
you having someone report back to me where we are, what is the
Navy's multi-year plan on this and intentions, and what kind of
commitment of the resources could be made there? Just even a 1
percent chance of that becoming--the worst case scenario
becoming a reality is devastating to a lot of our area and to a
major Army installation as well.
Mr. Pirie. This has come to my attention in the past, and
we are committed to making sure that that does not happen. And
I think essentially what we can say is we have got it under
control, or at least there is a very low probability, a very,
very low probability.
Admiral Smith. And it is a slow percolation, I would tell
you, as an environmental engineer. But we can get you that
plan. I know that that has been thought out, so I would ask to
do that.
Mr. Edwards. Okay. I would appreciate that. Thank you very
much.
Admiral Smith. Sure.
Mr. Hobson. Mr. Boyd.
ELIMINATION OF CONTINGENCY FUNDING
Mr. Boyd. Thank you, Mr. Chairman, and Mr. Secretary. I
apologize. I have another hearing going on, a subcommittee
hearing also, so I will be leaving after the questioning.
But I had a couple questions. One was you noted the
contingency provision in your oral statement, and then I read
your written statement. What will the practical effect of that
be? Would you like to expound on that a little bit to us? We
eliminated--we reduced the contingency provision last year, we
did, and you have now decided to eliminate it totally.
Mr. Pirie. In anticipation of your reducing it further, the
Office of Secretary of Defense just took it all away so it
could not be reduced, but this unfortunately puts us in a
position where any unforeseen contingency--we are talking about
you appropriate this year, and we get started two, three, maybe
more years down the road. And changes in the labor situation,
changes in the price of material, changes in building
standards--who knows what is going to happen three years from
now? And if we do not have enough money to complete the
project, we have to decide to down-scope the project----
Mr. Hobson. Or you might not even start one.
Mr. Pirie. Or compromise on quality, which is a bad idea,
given how long these buildings have to last us, or ask for
reprogramming, which will clog the channels with paperwork that
flow between here and the administration. So this will create
difficulties, practical difficulties. Admiral Smith will have
to bear the burden of all of the execution difficulties. He can
talk eloquently about this I am sure.
Admiral Smith. As both the engineer, as a contracting
officer, sir, I would tell you this does give us a lot of
difficulties. We have--I spent a lot of time looking at cost
growth in new construction across America, and my friends in
private industry and engineering would tell you, on new
construction, depending on where you live, it averages anywhere
from 12 to 15 percent cost growth on a typical project. The
Corps of Engineers and the Navy historically----
Mr. Hobson. Over the life or over----
Admiral Smith. Over the original estimate of the project
average.
Mr. Hobson. What was that figure?
Admiral Smith. About 12 to 15 percent. That is cost growth
over the original estimate of the project, and we can all
remember projects that were more and we can all remember
projects that were less. That is an average, industry average.
The Corps of Engineers and the Navy historically have run
between 8 and 9 percent cost growth. That is in part because,
of course, we have done parametric or cost estimating on 35
percent design before you see the estimates.
With new tools, such as design-builds, we can run the
models now down at 4 to 5 percent cost growth, again, well
ahead of the industry average, doing very well, but I am not
aware of anybody who can build even a new construction project
on a clean site for 0 percent cost growth.
But that leads us to what Mr. Pirie said, kind of a rob
from Peter to pay Paul situation. And, Mr. Chairman, you are
exactly right, what happens to us towards the end of the year
then is we run out of cash. So we have to have projects we
could award wait until--so we wind up with these filings of
projects that have to be awarded, perhaps 2001 projects that
would be awarded with 2002 money, and that kind of spirals. So
this becomes what my aviation friends would call a graveyard
spiral. It just keeps getting worse and worse and worse. I am
hopeful this is not repeated in the future. It is a definite
problem for us next year.
BASE REALIGNMENT AND CLOSURE
Mr. Boyd. Mr. Secretary, if I might, one additional
question. I hesitate to ask this, but I think it is important,
and I know you may be aware of this or read this. You asked in
your testimony for two more rounds of BRAC. You have got a very
short paragraph on it in concluding--the sentence says, ``I
again ask for your support for two more BRAC rounds.''
Mr. Hobson. That is a common theme. The Secretary of
Defense did the same thing yesterday.
Mr. Boyd. I want to reflect a quote out of this morning's
National Journal, and this is by General Jones. Quote: ``As a
small service with the fewest military bases, I know of no
installation I would recommend to be closed in the Marine
Corps.'' General Jones.
Admiral J. Johnson, CON, said his view was, quote, ``Not
far'', end quote, from Jones.
Mr. Pirie. The Navy and Marine Corps were very strong
players in the '93 and '95 BRAC rounds, very strong players. We
closed all the facilities--virtually all of the facilities in
the San Francisco Bay area. We closed Charleston Naval Shipyard
and Naval Station. So we have participated very vigorously in
the last two rounds of BRAC.
Now, that having been said, there is still considerable
excess capacity in some of our activities. I do not think we
have too much in the way of naval air stations or naval
stations, real estate in port areas. I do not think we have too
many runways. We certainly do not have too much air space or
training space. But where the excess capacity tends to exist is
in the industrial areas and in test and evaluation and the
research and development areas and so forth, so that is
probably where the Navy and Marine Corps will look in any
future rounds of BRAC, and that is the area that was least
successfully approached in BRAC in '95, because we were
supposed to do so in a joint cross-service way, and basically
the services did not--were not able to come to an agreement
about how to do that.
PIER SPACE
Mr. Hobson. Well, let me just go on to one thing here,
interject something since you have already brought it up. What
about pier space? If you increase the number of ships in the
Navy, do you not then have a problem with pier space?
Mr. Pirie. We have a problem with pier space. We need to
build more modern piers that accommodate these ships better.
Right now, in major ports, San Diego and Norfolk, we have to
nest ships. In nest when groups of ships are periodically in
port rather than deployed, we--basically--we do a calculation
that assumes that something on the order of a quarter of the
force is deployed all the time. If everybody came home to all
our home ports, we could not possibly put them at piers. We do
need more pier space, and we need more modern pier space to
accommodate these new high-tech ships that we are spending lots
of money on.
Mr. Hobson. I just wanted to get it----
Mr. Boyd. Thank you, Chairman. That is all I have. Thank
you very much.
Mr. Hobson. John?
Mr. Olver. Thank you, Mr. Chairman. I just want to comment
that 1955 was a good year. I had not noticed before that you
were a 1955 grad of the Naval Academy. Somehow you look older
than I do though. [Laughter.]
Mr. Pirie. And I obviously feel a lot older than you do.
ELIMINATION OF CONTINGENCY FUNDING
Mr. Olver. Oh, really? I do not know whether I should get
any further into that one.
Anyway, I would like to explore a little bit further this
contingency issue. What you are saying is, that you raise it.
You are not here defending the budget. You are here raising
this as an issue of great concern to you in naval operations or
in your role, even though that is part of the President's
budget. I am correct on that, am I not?
Mr. Pirie. I am committed to defense of the President's
budget. We will find a way to make it work. It will be hard.
Mr. Hobson. This is that thing where we salute and we move
forward. We all step forward, and we try to figure out a way
around the side.
Mr. Olver. Well, let me just explore that one a minute or
two further. I had to refresh my own memory here with questions
to the staff on the traditional has been about 5 percent of
contingency?
Mr. Hobson. Or somewhat more.
Mr. Olver. And in this year, what is it that the final
result is for this year? Is it somewhere around 2 percent that
you were allowed this year?
Admiral Smith. No, sir, it is zero.
Mr. Olver. In the present--I do not mean in the budget year
pending. I mean in this year.
Admiral Smith. This year we are actually in--actually, no
we are in zero, because it was zero last year's number in the
budget. So 2000 is the first year because, remember the Senate
did it last year? Oh, they did not? So it is down to--the
budget----
Mr. Hobson. No, that is where you decided you were going to
take it.
Admiral Smith. We did not do that----
Mr. Olver. This was a choice of how to take certain savings
required and what does that mean?
Admiral Smith. That is real property maintenance, sir. I am
sorry. That is the recision we are talking about now. That is
the recision.
Mr. Pirie. That is not the contingency planning for
military construction.
Mr. Olver. What is the contingency for military
construction in the present fiscal year, 2000, within plus or
minus a half a percent?
Mr. Pirie. 4 percent.
Mr. Olver. 4 percent you are saying?
Mr. Pirie. Yes.
Mr. Olver. So what had been traditionally 5 is 4 in the
present fiscal year. Do you feel you cannot live--what effect
do you see in the present fiscal year from the things that we
appropriated last year for these military construction items in
the way the contingency was drafted?
Mr. Pirie. The same kind of a thing. I mean----
Mr. Olver. You cannot live with 4?
Mr. Pirie. If you depend on change. Maybe this year it will
be a great year, prices and materials will not go up, we will
not have any labor problems, nobody will change building
standards, and maybe we can do it, spending on account.
Admiral Smith. And if I could, sir. What happened was there
was a general reduction taken against MILCON last year that was
exactly equal by happenstance to the amount of the contingency,
so we did not spread it quite that way. We wound up with a
titular 4 percent, say, contingency.
To go back to what we discussed a minute ago though, what
happens is this has an insidious effect over time, because this
year, for example, we have 49 MILCON projects. We, obviously,
want to award all of those at the same time. They will drag on
out through the year. We try to award them as soon as we can.
Mr. Olver. Sure.
Admiral Smith. What happens is it becomes a cash management
problem, where if you have enough money for the early awards,
if you get good bids, great. The construction industry is
booming in America right now. We have been living off good
bids, frankly, for quite a while. I mean, they are rationing
drywall in the Washington, D.C. area right now.
Mr. Olver. So now the bids are going to go up because there
is not----
Admiral Smith. So the bids are starting to go up, depending
on where you are again.
Mr. Olver. Fine. If the--if we were to function largely
on--I mean, the problem of doing estimates at 35 percent, that
is a serious problem. We have had cases where you bring
forward--I had one in my district, admittedly, where the
estimates were made sometime ago and we did it, with the help
of the members of the committee and the Congress, and ended up
finding that it was 40 percent off I think, 30 percent off,
something like that, and needed to come back. And that is a
problem that we should not probably be doing, at least I should
not probably be doing.
But if we were working with 100 percent design, design 75
percent, close to the end, cannot we be much better than the
kinds of problems--can we not reduce those problems
substantially?
Admiral Smith. Something along----
Mr. Hobson. You are always going to have a problem
somewhere, someplace. You have to change orders when you get
into building. I do not think you can ever, ever say that it is
going to be perfect.
And what they have to do is manage their money, and it may
delay them starting the 43rd project or reprogramming off of
something where they might have----
Mr. Olver. At the end of the year.
Mr. Hobson. Well, they may have some delays and stuff,
where it is not going to happen that particular year, they can
take that money and ship it--they really need a contingency.
They can live with this without us. It is not a good thing, and
it becomes a management deal within their shop of what they do.
I do not like it, because I can tell you, I am starting a
project now and I ran into a whole bunch of rock. You know, and
we had to go back and talk to the guys who did the core
drilling and say, ``You know, you guys are going to have to
ante up for a little of this.'' So there is always something,
John, even if you think you know everything about it. It is
just part of what they have to live with right now, and I do
not know how we can change that, because they came forward with
it. We can maybe help someplace along the way, but in
construction there is always going to be the unknown. That is
why you have contingencies in it, because you do not know what
is going to happen all the time. It is not like----
Mr. Olver. I am largely trying to understand and to serve
as devil's advocate here to make them--you are answering very
well for them. [Laughter.]
Mr. Hobson. Well, it is partly because I have lived with
the same problem, and I understand their problem, but I guess
what I have a real problem with is the attitude that--I guess
what I would feel better about is if you did not have to defend
where you are, and just say, ``This is what we had to do. We do
not like it.'' It is kind of like the contingency thing. When
we finally got around to everybody understanding that we were
not going to do the contingency, everybody breathed a sigh of
relief, and I think that is kind of the same thing we are in
here. We may have to figure out--and I do not know where we
would get the money to do it. I mean, I am going to get into
that when you get done, about the money overall.
But I am sorry. I have never seen a building yet that is
exactly on time, the same cost and built exactly the same way
as it started out. Now maybe you can do that with some little
house somewhere, but even there.
Admiral Smith. Yes, sir.
HOUSING
Mr. Olver. Well, the Secretary has been very careful about
the language he has used on this one. So be that.
Let me go on to the housing issue. You know, I really do--I
like the conceptualization of the three ways of doing housing,
which is the triad, essentially, as you put it in your
testimony, Mr. Secretary. The community housing, and then the
military construction housing, and then the privatization
housing.
Let me just chase these numbers for a few minutes. I have
been here--as I was listening to other--my mind works on
numbers while it is also listening to verbal descriptions as
they go, and so the--as I read this, you said in the testimony
that you have about 80--a little over 80,000 units of actual
Navy housing.
Mr. Pirie. Navy and Marine.
Mr. Olver. Navy and Marine, okay, fine. Navy and Marine
housing. And that that represents, on the Navy side, about two-
thirds of all, because there is almost two-thirds of your
housing is out in the community--excuse me--one-third really,
because two-thirds is out in the community, and on the Marine
side--no. On the Navy side almost three-quarters is out in the
community, and in the Marines about two-thirds is out in the
community. So there must be then--calculating upwards, there
must be 175,000 units or something like that of family housing
which is out on the community. And is it your plan to change
the proportions, or do you expect those proportions to remain
relatively constant? So what I read in these numbers is that
the question of how much is either military construction to be
dealt with or PPV to be dealt with, is the 80,000 a proportion
which is somewhere in the range of 30 percent of all the
housing that the Navy--family housing that the Navy and the
Marine Corps uses is to be in those two portions, the PPV and
the MILCON related. And the other 70 percent, taking the two
services together, is out in the community. I do not know. You
would not know those exact numbers, but they must be--because
the person who knows the most about the housing, am I generally
correct in what I am inferring here from the testimony, or how
do you mix the populations?
Mr. Pirie. Yes. We expect to house 75 percent of our people
in the private sector, in houses that are owned by----
Mr. Olver. On the Navy side. And on the Marine side 65 or
66.
Mr. Pirie. It is really a similar number.
Mr. Olver. Okay.
Mr. Pirie. So three-quarters of our people are expected to
pay out--at present about 19 percent over and above their
housing allowance----
Mr. Olver. And the BAH change to remove that over five
years should be a great help in----
Mr. Pirie. Yeah. Not only that----
Mr. Olver. Is that going to make people--if a BAH change
occurs is that going to get a lot more people moving out into
the community, because the BAH is going up?
Mr. Pirie. Yes, absolutely.
Mr. Olver. Are you then going to maybe not need as many
housing units on the military construction or the PPV side as
pieces become really obsolete?
Mr. Pirie. We definitely hope that that will be----
Mr. Olver. That that will be the case.
Mr. Pirie. That that will be in effect, and because we will
be removing the inequity between the cost to the people who
live in the community and the cost to the people who live in
government furnished housing will reduce the demand for
government furnished housing. So we would expect that the
numbers of houses that we have to provide to go down.
Fundamentally, I think this is the right way to do it.
Mr. Olver. Now, in your testimony I think I see--I think I
have got this correctly, that there are eight projects totaling
about 860 units, and this is totally new construction.
Mr. Pirie. In some cases----
Mr. Olver. These are just wiping out what is there. These
are just totally inadequate houses, no reason to try to
rehabilitate, so it is new construction in those locations.
Mr. Pirie. Yes.
Mr. Olver. They are relatively small pieces, and the
average is a couple hundred thousand per unit essentially of
what is going on for that group.
I also see in this that you are doing a couple hundred
million dollars worth of bachelor quarters in your program, and
you are also rehabilitating another, about 2,500 or so units
of--and in those cases it is somewhere in the 50, $60,000 per
unit of rehabilitation, renovation prices; is that roughly----
Admiral Smith. I want to say yes. It is a large number.
Mr. Olver. Well, the language here says 1,700, and using
traditional family housing funds to the improvement program to
renovate 1,781 Navy at 12 locations in and out of the United
States, and 511, which is 2,292. Yeah, 2,292 of a total cost
there of $183,000,000 for those, which comes out to something
over 50,000, 60,000, perhaps averaging out somewhere in that--
and it is going to be a little bit higher than that probably.
The sum total of those two, the 2,200 plus the almost 700,
comes to about almost 3,000, which is about 4 percent of the
total of your family housing which is Navy operated.
I do not see the list here. You urged us to reauthorize,
which this committee is not into, but reauthorize the PPV
program. And there are seven projects now, five Navy and two
Marine that are in the PPV program on the present
authorization. If I remember correctly, those total somewhere
in the range of 4,000 plus or minus units.
Mr. Pirie. Somewhere in that area.
Mr. Olver. Which would be another 5 or 6 percent, somewhere
in that range. So in what is presently ongoing, plus what you
are asking here--and I do not know what the last couple years--
I am trying to sense where we are getting toward in renovation
and so forth of the 80,000 units that you have that are owned
housing, but also trying to sense how, if we are going to
change the BAH over a five-year period, what impact that has
upon the needs at the upper end here over a period of time,
where the total number of housing units may not be the whole
80,000. It may be that we are going to drop 20,000 or some
number. I should not even mention a number, because who the
hell knows at the other end? This is a process of mixing and
matching I guess to come back to a policy that serves the
quality of life of our personnel and gets them into good
housing over a period of time.
Mr. Pirie. Well, what you described here is exactly right.
I mean we are nibbling away at 5 percent or so a year, so we
got us a 20-year replacement cycle, which means that most of
our people are living in housing that is over 10-years-old, and
many of them are now living in housing with maintenance
backlogs of more than $15,000 of repairs that are needed.
Mr. Olver. I think the BAH change is fine.
Mr. Pirie. The BAH change is going to help us with that.
Mr. Olver. I think that this represents a good and balanced
and pretty robust actual housing program. If I remember
correctly--and I looked I think carefully in your testimony--
you are not asking any new money on the PPV side. That we have
done for the seven projects that are out there.
Mr. Pirie. We would ultimately I think return to this for
other locations and so forth. But for the foreseeable future,
our program, over the program years will be some MILCON, some
PPV.
Mr. Olver. Do you have a sense of how many you would like
to--if you were given the five-year authorization extension, if
that were to go through here, how many more units would you try
to do within the PPV program? We have not yet--as you pointed
out--we have not yet seen enough of those complete. Of those
seven, are any of them complete? Does that include the one or
two that are completed under previous----
Mr. Pirie. We have some completed under previous
authorities.
Mr. Olver. But nothing under the present authority.
Mr. Pirie. Nothing under the present authority.
Mr. Olver. We have two such projects out there under
previous authority, so the other seven are really the sort of
test cases to examine how well this works and--but do you have
a sense of how many more you might want to do under another
five-year authorization?
Mr. Pirie. It would really depend on market conditions and
what we see. I think we came forward with something, with a
total about 20,000 units last year.
Mr. Hobson. They were going to do 11,000 in one base in San
Diego.
Mr. Pirie. The committee did not like that idea, so----
Mr. Hobson. And they didn't like it to begin with, and so
we give the same regard with everything until we look at what
is a success, because Corpus Christi, right, John, does not
have the right mix of people that it was designed for in it.
And so until you can get some of these that work right, until
we know what the configuration--now the BAH is very good,
because the BAH is going to help do some of the privatization
numbers better, and you will be able to do those better as a
result of that, in my opinion.
Mr. Pirie. No, you are absolutely right.
Admiral Smith. Yes, sir.
Mr. Pirie. That is one of the desirable effects of it.
Mr. Olver. It also makes it possible to do the PPVs better,
but it also means that you can got out on the market if you are
closer by, and it may well be that as a result of this, that
the worst of the housing, you may not be coming back here, two,
three, four years from now to replace housing which is so
dilapidated that people should not be in it.
Mr. Hobson. But you need to get--while you are saying this,
this also points out why it is very important how you do those
deals on the privatization, because if you lock yourself--
John's point is very well taken. If you lock yourself in to a
50 or a 100-year deal, and suddenly people are using the BAH to
live off the facility, then you have commanders doing what they
used to when I was in the service, saying, ``You have got to
live on base because we have got to fill this stuff. I cannot
be embarrassed by having people live off base. I have got to
fill this stuff up.'' But if you have leases, and the
facilities are designed such that they can transition to the
private sector, and you have built them to the private sector
standard, then you accomplish what I think John would like to
get to in a way, is that you do not have this. You have
everybody living more in the private sector in newer housing.
Mr. Olver. Well, but it also is a reason why one does not
do 11,000 everything at one base in its completion, or you
might just sit there with just a lot of stuff that people
decided they wanted to be off base within a BAH that supports
that. So we are--it seems to me we are honing in by a number of
these processes. Now, maybe the proposal on BAH change has come
to us in part because we were not moving as swiftly as you
would like to have moved, as the Defense Department would have
liked to have moved on the privatization. I do not know. But we
are honing in.
Mr. Pirie. The BAH change addresses the fundamental
inequity that the quarter of the people who live in government
quarters are essentially subsidized, and three-quarters who are
not lucky enough to get government quarters are penalized by 19
percent additional housing costs, and that is just not an
inequity we want to continue to live with, so I believe that
Secretary Cohen really is--this is a major good step for the
people.
Mr. Olver. Let me just draw one other line. In the housing,
the proposals, the places where you are doing new housing, and
those where you are renovating housing that is part of the
Navy's and the Marine Corps' inventory of 60 and 23,000, do
those include both active personnel as well as--well, do they--
active and reserve, full-timers, reserve, as well as active
personnel?
Mr. Pirie. Yes.
Mr. Olver. I guess that may be a wrong way to put the
question. The full-timers on the reserve are probably
themselves active, are they not?
General Mashburn. They are active, sir.
Mr. Olver. So your full-timers on reserve, in your reserve
units would be included in the housing, but in both--both in
the programs of new construction and the renovations where they
are being proposed, the 12 locations and 2 locations--3
locations for the Marines, I guess it is, of the renovation
that I have described and gone through. Do the PPVs also
provide for the same active people, so that reserve and the
full-timers, whether reserve or--with reserve units otherwise,
in those provided for.
Mr. Pirie. Yes. These are treated, in terms of assignment
policy, exactly the same in government quarters.
Mr. Olver. Okay. Thank you very much, Mr. Chairman.
Mr. Hobson. You are done?
Mr. Olver. No. I will listen for a while.
OVERALL FUNDING
Mr. Hobson. Well, I have a number of questions here I would
like to get on the record. Some things we will submit for
later, but there are a number of things that I think we need to
discuss verbally. You know, I guess I may have a little
different--maybe it is terminology, when we talk about the
strongest budget in six years, but over last year's--and
actives were down $143,000,000, so without this committee's
help, you do not have as robust a deal as we had last year, but
that is semantics maybe. I do not know. But from your
perspective of these submissions, maybe that is true. So we
will deal with that.
Mr. Pirie. We are grateful for the committee's help, Mr.
Chairman.
Mr. Hobson. And I also want to say generally, I think you
are going right in the privatization, and I would probably
support, with some modifications, the change--I do not like the
way this committee has to react within 30 days. First of all,
we do not have the expertise. We do not get them fast enough. I
have had a big fight with another service about--who gave me
one, then the meter started running from their thing before I
had even seen the thing, and so the last three days----
[Laughter.]
Mr. Hobson. And they were saying, ``Oh, you must have
approved it because you did not squawk about it.''
Mr. Pirie. Do I have a date on the letter? [Laughter.]
Mr. Hobson. And so we need to have a better discourse
because we are going to look at this, as you know, and we are
going to--certainly on my watch and on John's watch, we are
going to look at these things, and we are going to make sure
that they do right, because we are setting patterns for the
future, and we need to make sure that we get the best for the
troops and the government as we go through this. And everybody
is searching around for the right formula. Each service is
looking at it a little differently, and that is not all bad,
because we need to figure out what is--each service has a
little different culture how they handle their people and what
they want to do. I think most of the services now have gotten
into the idea that privatization is here, and it is going to
happen. There are some services that are somewhat--have been
somewhat resistant to this effort, while I think the message is
out.
NAPLES, ITALY
I have got a number of specific questions. I want to switch
to one that I just think we need to do right away, because I
think John--I am interested in it. Let us just go to Naples,
Italy and get it out.
I will just read you the question, and then we will talk
about it. I want to bring us up to date on the events in the
past year and the current status of the Naples support site,
what action does the Navy intend to take in light of this
sequestration order to secure the current housing and
facilities which have been the current housing and facilities
completed at the support site and resolve the issue of the
hospital, commissary and PX. Is the Navy exploring all options
such as bankruptcy possibility of the contractor with his
current Italian law firm, and is it prudent to proceed with the
restructuring of the contract at this point? And has the--I am
going to add one other thing to this. Has the Navy considered
employing an additional--I hate to do this--expense, law firm
to look at this. If they are not going to get rid of the
Italian law firm that we have, had anybody who is familiar with
Italian law that we know, have a relationship with, look at
this problem there? And you know, many of us warned about this
problem, and I will be very frank, I think the Navy has been
very cavalier about this problem, because I was there well over
a year or so ago and looked at this, and I raised some
questions and I do not--I am going to be very frank with you. I
am not sure it is all your fault. I think there is some State
Department, Embassy stuff in this too, but this is going to be
a big problem, in my opinion, and it is not going to go away
easy.
Mr. Pirie. Well, Mr. Chairman----
Mr. Hobson. You can comment on what you can say about it.
Mr. Pirie. As you know, this is a criminal action which has
been brought against our contractor, Mirabella.
Mr. Hobson. Absolutely.
Mr. Pirie. Navy is not party to this, but because of the
criminal action brought against our contractor, Mirabella,
well, the court first ordered a stop work, and we persuaded
them to permit work to go forward. Now they have issued another
sequestration order, and I do not know where that goes. Now,
our reliance on our Italian firm is simply for advice as to
what is likely to happen. We are not involved in any
representations to the court or anything of that kind. But
perhaps as you suggest, it is time to get a firm in here with
expertise in Italian law to see what they think.
Meanwhile on the ground, anything that we have occupied and
taken over, we want to have continued use of, and the
sequestration order does not go to them. However, the hospital
is not completed, the commissary is not completed, the PX is
not completed, and work has stopped on that, and we will not be
able to resume until we get the court to back off its order.
Mr. Hobson. Has anybody briefed anybody on Italian law as
to bankruptcy and reorganization, and if that is a possibility,
you know, sometimes when you have a criminal action and you
have things of this sort, and you have sequestration of the
construction work, that puts great pressure on the
organization. They do not have the ability to continue this,
and somebody--I do not know whether you have all your lawyers
or whatever, but somebody needs to be thinking from a
management standpoint and from a legal standpoint, what are the
courses that the Navy is going to have to do to protect the
investment you have made in people that are there? I am not
talking about money in particular. I mean the investment you
have got in people in there now, and what are the contingencies
of this thing? This facility has great potential for you all,
but somebody needs to be thinking if this does not work, what
are we going to do or how do we make it work? Are there plans?
Are people looking at that?
Mr. Pirie. Well, this blew up just this week. I mean it is
very new. I do not have new stuff. Admiral Smith may have
better news than I do.
Admiral Smith. If I could, sir, my Naples office, of
course, is the lead on this through my Atlantic Division office
in Norfolk, and we do have Italian law firms under retainer
there to give us advice and counsel on that.
Mr. Hobson. I know you do.
Admiral Smith. We have long talked--since this is a lease,
it is not they are just building it, of course, and turning the
keys over to us--about what we do in a contingency situation. I
am happy to say that, despite the sequestration order, the
operation and maintenance part of the lease has continued, as
it did during the first sequestration order. And they are very
comfortable with them continuing to operate the facilities that
they have already turned over to us.
My understanding this morning was that they would allow
them to--where work was stopped, do work to protect things that
they had already done there, put sheeting over it or to cover
it to make sure there was no damage done to it.
So even though this order has been issued and it is wending
its way through the always interesting Italian legal system,
there has been a lot of what I call common sense involved in
how this process has flowed on site.
Mr. Hobson. What concerns me--and I will not be a party to
buying anything in this facility until it is totally completed,
and we bought--had we finished something and bought it, we
would have been in deep trouble now because the rest of the
facility might not be there, or not be there for many years,
based on how they go into loss.
I hope you all step back and somebody does how you do all
these planning things of what your options are, and I am a
little concerned. I expressed this over a year ago, and your
people in Naples just kind of pooh-poohed it when I expressed
some concerns about this project and about--I mean, not about
the construction, not about what we were getting, but about the
process and what we were dealing with here. And I still have
those problems. I think, unfortunately, I was proven correct on
what was going on.
I am still concerned about--and I don't know these people
in the law firm you are dealing with. There is some difference
of opinion. They have given you different opinions at different
times on different things relating to this project. I am
concerned about that.
I am concerned about some other aspects of this, which I am
not going to get into here. The messages have already been sent
from other places about it. And, again, the Navy kind of--and
another agency of this country kind of just said we are not
looking at this. And I think they need to take very seriously
what transpired in that situation. And I don't think they have.
I don't want to get into that any more here, but I think
that cavalier attitude is going to come back to hurt us again,
just as it is hurting us here now, because what is happening
now is we are not going to get these people into these
facilities, and we are depending on that.
So I don't know what you want to say in this forum about
this thing. I just want to tell you, I think this is a serious,
big-time problem, and it is bigger than just occupying
facilities. You know what I am saying.
Mr. Pirie. No, we take this extremely seriously, Mr.
Chairman, and we will keep you informed of what we are able to
develop on it.
Mr. Hobson. John, do you have any questions?
Mr. Olver. You have mentioned the PX and the commissary and
the hospital. Is all the housing done there?
Mr. Pirie. Some, but not all, of the second increment of
housing is done. The first increment, 500, are done and
occupied. How many of the second increment?
Admiral Smith. I don't remember.
Mr. Pirie. Some 380 houses in the second increment, some of
them, but we don't know----
Mr. Olver. There are two increments. That is the end of it?
Mr. Pirie. That is the end of the housing.
Mr. Olver. So it is 1,000 units of housing. How many people
in the Naples area other than those that would be in this set
of housing, how many total personnel would end up using this
hospital?
Admiral Smith. I can't remember the number.
Mr. Pirie. Members, plus dependents, it is on the order of
20,000.
Admiral Smith. It is about 20,000.
Mr. Olver. Twenty thousand, of which probably not more than
3,000 or 4,000 will be living in this set of units of 900, or
thereabouts, units. The others are billeted in various places
on the community in other housing.
What about is there a fire station? Is that complete?
Mr. Pirie. There is a fire station, and it is----
Mr. Olver. Is it complete and operating?
Mr. Pirie. Yes.
Mr. Olver. We visited a while ago. I don't think----
Mr. Pirie. And the day-care center.
Mr. Olver. And the day-care center. We were there a year
ago, and some things have gone on since that time. Things do
sometimes happen when we are not there. And I was just curious
whether those other pieces like that, public safety, were to be
done. And the day-care center, of course, that is useful since
probably 600 or 700 of the units of housing are, in fact, in--
some of the 380 second stage are occupied
Admiral Smith. Yes, sir.
Mr. Olver. I don't want to go on about this. I have some of
the same concerns about that particular thing. I don't think I
know how this is to be solved, but, anyway, I join with the
chairman.
Mr. Hobson. That is the problem we have got. I am concerned
about there being plans and contingency plans of where this
goes. Is somebody advising the Navy in Admiral Smith's office
and you, Secretary, of what our contingencies are, what we are
going to do in this if this, this, and this happens? What is
the law over there relating to possible reorganization and
bankruptcy, the sale, whatever happens here? I don't know that
anybody knows all of that or if anybody is really looking at
that.
I suggested about a year ago that people ought to be
looking at stuff over there because I didn't like the way it
was going. There were some other problems over there. I think
he and I want to send a message. I don't think certain agencies
in this country are looking at this in the way they should look
at it, and I think they are rather cavalier about it, and
people are afraid to do certain things they should be doing.
The upshot of this is going to be we could have a big mess
that we don't need to have. And if people will just grab hold
of this--I hope you go away with the message that somebody
needs to grab this thing and take a look at it.
HISTORIC PRESERVATION
I want to go on to another issue, and then I am going to
come back to the one you want to talk about. I want to talk
about historic preservation. I raised this to the Secretary of
Defense yesterday, and I sense this is a huge problem in our
bailiwick that we are dealing with here, and yours.
The Navy has under their control a large number of historic
properties and confronts the prospect of those numbers
increasing significantly as Cold War-era properties reach 50
years of age. I wish I could look at 50 again.
Operation and maintenance costs of historic properties are
on average 2 or 3 times the costs of non-historic properties.
If action is not taken, these costs eventually overburden the
housing and maintenance costs, and I guess I want to know that.
And I also want to know if you are making any proposal to the
change of the law, because I understand--and I didn't know this
when I took over this committee--that you can't build a general
officer's house in excess of 2,200 square feet.
Admiral Smith. 2,100.
Mr. Hobson. It is 2,100-something. That isn't very big, and
especially not for a general officer. They have egos kind of
like ours, John--maybe even bigger.
But I think that ought to be changed, and I think you all
ought to press the authorizers about changing it, not to build
Taj Mahal's either, but what I think that arbitrary limit has
done is cause you all to gravitate to maintaining some housing
for general officers that you would have been better served or
potentially would have been better served by building newer
houses for general officers. And some of the excesses that we
have seen and some of the testimony I was telling you about--I
do read some of that stuff, believe it or not--that I have read
about and, frankly, am concerned about. So I would like to talk
about that.
Then I would like you to tell me, Admiral Smith, about
Tingey House and where we stand after our little walk-through
on that. And I had dinner with the guy last night at the walk-
through.
Admiral Smith. Oh, really.
Mr. Olver. So you know that he knows all the answers
already. [Laughter.]
Him being a lawyer, this is a ``gotcha.''
Mr. Hobson. No, no. I don't know what they have done. We
gave them some suggestions, and I think we agreed on those.
Admiral Smith. Sure.
Mr. Hobson. And we saved, I think, a substantial amount of
money.
Admiral Smith. Some $20,000, I think.
Mr. Hobson. No. About half a million.
Admiral Smith. A lot of money.
Mr. Hobson. So that was good for an afternoon. I guess if
we can walk every afternoon and save that kind of money, we
would be----
[Laughter.]
Mr. Hobson. It potentially might be a little better. But
talk about historic preservation, because it is a big problem
for you, it is a big problem for the Army, and it is a
problem--a lesser problem for the Air Force.
Mr. Pirie. It is a big problem, and we need an aggressive
program of winnowing out properties that are over 50 years that
have really no enduring historic significance.
We have got, in fact, a memorandum of agreement with the
Advisory Committee on Historical Preservation, essentially a
programmatic agreement about categories of things that we can
dispose of without further action. So we are working to get
tools to dispose of these things more efficiently and faster.
Mr. Hobson. Is anybody looking at changes in the law as it
relates to military facilities?
Mr. Pirie. No, I don't think so, and in general, changes to
these kinds of laws that give deference to defense are
exceedingly unpopular and bitterly resisted by the enviro
community----
Mr. Hobson. Let alone pay for.
Mr. Pirie. I know. I know that. But certainly the
programmatic agreement will give us a lot of flexibility, and
Admiral Smith has got a very aggressive demolition program, and
we could not agree with you more that we need to get on top of
this program before these things acquire lives of their own, as
they tend to do. People tend to adopt certain structures.
Mr. Hobson. I don't mind them adopting them if they pay for
them.
Mr. Pirie. Well, that is the other thing.
Mr. Hobson. Apparently that gives you a problem. Have you
had some problem getting the separate working--trying to fund
some things another way?
Mr. Pirie. I have talked to Admiral Holloway, former Chief
of Naval Operations, who is Chairman of the Naval Historical
Foundation and so forth, about fundraising in this area, and he
tells me that the market is pretty, well--it is pretty tight.
There are lots and lots of people who want charitable
contributions to maintain historic properties and things of
that kind. So we have to have a pretty good story.
We do have some private funding sources for maintenance of
some of our historical properties. The Marines are doing well.
So we need to pursue that line as well.
Back to the square footage of general officer housing, I
could not agree more that that restriction has probably driven
us into old, larger, but really sub-standard kind of houses and
expenses to keep those places up when we don't need to. So I
don't know when we proposed the change in legislation, but we
certainly support the notion and I will pursue it with the
authorizers that we ought to back off square footage
limitations on these houses.
Mr. Hobson. I think one of the things you might do is, if
you are going to build--we have this rule now if it is $25,000
or more, you have to come back and ask us. Maybe we ought to
have some limitation on flag officer housing in a similar way.
If you are going to go over X number of square feet and it is
going to cost over X number of dollars, you have got to come
back to us and ask us to sign off on it.
You know, we seem to be the only one who squawks, but I am
hoping that chairmen in the future will squawk about it.
You wanted to add something about----
Mr. Pirie. It looks like we have made a proposal for the
change in legislation. We are ahead of the game.
Mr. Hobson. Well, I have been talking about it for a while,
so somebody must have been listening somewhere. But it seemed
to me an arbitrary thing. You might want to tell the committee
about Tingey House, and then you might want to tell them, sir,
about where you are on your facilities so that everybody here
knows what he is doing might be something--you probably have
some at Fort Hood, I would imagine, that are either close or
getting there. What they are doing is a little innovative,
hopefully.
Mr. Pirie. We hope so, sir. [Laughter.]
Mr. Hobson. But tell us about Tingey House.
Admiral Smith. Tingey House, sir, is going extremely well,
I say as the engineer of what I would call the health and
safety work, the first phase. You know, the structural work is
pretty much done. We are running it on the renovated HVAC
system right now. We are into now what I would call the
livability function things. Were you to go in the bathroom--I
went through it about 3 weeks ago, and the bathrooms were all
torn up and being made a little more modern and a little more
livable. We were getting things up to fire codes. We are
putting doors back where you had to have doors to get in and
out properly.
Again, we always invite you any time you would like to
drive down the hill and take a look at it. [Laughter.]
But it is going well, and the things you did, I mentioned
that smaller figure before because that was one that popped
into my mind on the cabinetry, which we have done. It is going
very well, and it is going to be very, very, very livable when
we are done, which I think----
Mr. Hobson. When do you think you are going to be done?
Admiral Smith. It should be done in--let's see. It started
March. By the end of next month we should be done.
Mr. Hobson. I will come and look at it.
Admiral Smith. Oh, good.
Mr. Hobson. There is another house there that I think
General----
Mr. Pirie. The superintendent's house.
Mr. Hobson. There is one there that if you are going to
preserve that house, which I think you have somewhat, somebody
needs to preserve it, first of all. Second of all, I think that
would be a good one because it does have historic interest to
these people.
Mr. Pirie. Yes, sir.
Mr. Hobson. And there could be a group that would take that
over, and you would have a nice little complex on that
facility.
I don't know whether they want to do it in the way he is
going to do his or not, but there are some innovative ways that
we need to look at. You know, there are other ways and what he
is going to tell you about, there are ways, I think, that in
some of these facilities you could use--I have talked to Boston
Capitol about this, and they haven't come back yet--of using
the tax credit law to--in some of these facilities you are
going to occupy, give the private sector the ability to put the
money up and they get the tax credits from it, they get the
lease from it, you get the benefit of using the housing, and
there is a residual that comes back to you later, or you keep
owning the ground and just do the building part.
Those are kind of outside-the-box things, I realize, but I
think we have to think outside the box.
General, do you want to tell them what you are doing at the
oldest, continually occupied house in the District?
General Mashburn. Yes, sir. We only have seven general
officer quarters that are historic: our two recruit depots at
San Diego and Parris Island, the Ranch House at Camp Pendleton,
of course, which is very unique because of the museum aspects
of it, and Thorpe, 8th and I.
The difficulty with general officer quarters that are
historic, where is the demarcation line between what is the
living quarters and what should be coded as a museum, as the
Ranch House, or the representational part of the house? In
other words, you can use O&M money, then the housing----
Mr. Hobson. Don't go there----
General Mashburn. Very difficult to do.
Mr. Hobson. Then we are going to get into something really
bad.
General Mashburn. I am just saying it is a problem,
particularly for the home of the Commandants. There is a
foundation called the Foundation for Friends of the Home of the
Commandants. They have raised money that they want to use to
make improvements, to add amenities, to really do anything that
the commandant and his advisers would like to have.
The problem is we have right now some money, but because of
the language in the 2000 legislation, we cannot use that money
because it was not appropriated.
Mr. Hobson. And that was unintentional.
General Mashburn. Yes, sir. We have that money, and it is a
very good program, and we are really looking at some type of
perhaps language that will allow not only for the home of the
commandants but for--and not only historic general officer
quarters, but for those quarters that require much more than
$25,000 a year, that, in fact, foundations can participate and
can enhance and it really creates a better bond between society
and the Marine Corps and the military.
Mr. Hobson. You are trying to use a 501(3)(c), I think is
the program, initially is what you were trying to do.
General Mashburn. Yes, sir.
Mr. Hobson. And that may work. The only problem I have with
that is, one, I don't want to lose the committee's control over
what happens at the general officer's housing. We have to be
awfully careful that these foundations are not the--whoever
makes the tank or the airplane that you are going to buy is the
guy who house it is. So it is not as simple as it looks, but I
think the one thing I liked about the tax credit thing is it
plays out--you know, anybody can play in the game.
But I don't know if it is a game that we can play in this
arena. Somebody has got to look at it. I am just trying to
think of ways that we can keep these things and people can live
in them. I mean, you don't want to get--the Marine Corps does
not--I mean, that house, the Marine Corps would die to keep,
putting guards around it and fight everybody in the world off.
General Mashburn. We have to do that now.
Mr. Hobson. And I want to tell you, we are not unwilling to
put money into that house in a combined thing to get it--to
make it right, to make the house correct. And the same way on--
there is another place down that whole parade route, and that
whole thing is probably historic area.
General Mashburn. Yes, sir.
Mr. Hobson. Chet, do you have anything you want to ask?
Mr. Edwards. No, Mr. Chairman.
Mr. Hobson. Well, I have got a couple more things here. The
Secretary would like to talk about----
Mr. Olver. I would just make one comment. I particularly
here, Mr. Secretary, your comment that you are using an
aggressive operation to make certain that we are trying to get
down to those that are really historic and not just allowing
everything that gets to be 75 years old to get into that
position where it somehow has to be preserved at enormous
expense to us.
Mr. Pirie. It is 50 years.
Mr. Olver. Fifty, whatever it is, fifty. And I certainly
think that should be done. I am all for preservation of our
most historic treasures. But some of these just really are
not--there is a time line that you have to help us with.
Mr. Hobson. Yes, like the barracks I went to in basic
training, I don't think they need to keep that. [Laughter.]
Mr. Hobson. But you might want to use one----
Mr. Pirie. And we do.
Mr. Hobson. For example, I was at Fort Bragg, and they have
got all these wooden structures. Well, they don't----
Mr. Olver. They seem to have a lot of historic preservation
in Korea. Think of it.
Admiral Smith. Absolutely.
Mr. Hobson. Well, we just had a big fire over the general
officer's house over there in the Air Force, which--well, that
is a whole other story. You don't want to hear it. But they can
tear down all these wooden buildings, and if they want to keep
one so you can take troops and say, ``Look how nice you have
it.'' [Laughter.]
But we shouldn't have to keep them all, and that is what I
am worried about, that somebody gets a hold of it and says,
Wow, that all looks so nice out there, let's keep all 50
buildings. I think Townsend's got something like that. You have
got a bunch of ugly stuff that I have seen out there that ought
to be gone. And you are trying to get rid of some of it, but,
in any event, we all know that it is a problem. But I don't
know that--I guess what we are trying to do as a committee is
raise the level of awareness of that, and that is why I started
talking about it about a year ago because I didn't see the
emphasis on that that you were going to get stuck.
Mr. Pirie. Message received.
COLD WAR MUSEUM
Mr. Hobson. All right. Let's go to the Cold War Museum,
Secretary Pirie. I see from the budget submission that the Navy
is proposing a $2.5 million project for a Cold War Museum at
the Washington Navy Yard. In view of the many unmet needs in
the military construction account for housing sailors,
rebuilding of inadequate piers, runways, hangars, and so on,
can you explain what is unique about this project and why the
committee should support the request? Secondly, are there any
private funding alternatives available to the Navy for
constructing the museum? And if so, are these alternatives
being pursued? Then I will get into something else with you.
Mr. Pirie. Well, in the Navy Yard, in fact, across the
street from the superintendent's house that you mentioned, and
across the street, also, from the existing Navy Museum, is
Building 70, and that building was the original David Taylor
model basin, and that is the original place where Admiral David
Taylor began to use a tow tank and tow hull forms to determine
hull flow dynamics and improve the building of our Navy's
ships. So that is a historic structure in itself of some
significance. We are going to have to, I believe, preserve that
building. It has great significance to the history of naval
engineering.
That is the building that the Navy Museum wants to use to
house the artifacts that they have from the Cold War that they
don't have room for in the present Navy Museum, which I am sure
you have been in down in the Navy Yard. If not, we should take
you to see that.
Mr. Hobson. I have been in the Air Force Museum.
[Laughter.]
Admiral Smith. It's a pretty museum.
Mr. Pirie. The Navy Museum in the Navy Yard gets 400,000
visitors a year. So essentially what we want to do is we want
to preserve this building that in itself has historic
significance, and we want to put in it artifacts that we can't
display elsewhere.
The Historic Foundation will pay considerably toward the
maintenance of the building once they are stored and fitting
out of the internals of the buildings. So this is not a purely
government-funded project. We are not asking a handout for a
new building. What we are asking is to properly restore a
historical gem and use it and expand the Navy Museum, more
outreach to the public, and I think, in general, a very worthy
thing for us to be doing.
Mr. Hobson. Well, first of all, I think your request is
very modest this year. I don't know what it would be over a
period of time.
Mr. Pirie. This is it.
Mr. Hobson. And I am not unsympathetic to it. I just got to
tell you, we killed the Army's deal that they wanted to do a
few years ago, which the Speaker at the time was for. So that
tells you somewhat the sentiment of the House when it comes to
these things. Actually, it is in Tony Hall's district, and mine
and his are right next to each other. And Wright-Patterson is
there, the Air Force, and they want to do a similar type--more
expensive--Cold War extension onto that facility and are
willing, I think, to raise a substantial amount of the money
for that.
I had hoped before I left this Congress someday to be able
to try to fund that, at least part of it. I am not sure where
we go. This is a very modest proposal, and I appreciate that
very much. I just wish we could call it some other museum
because it conjures up people's--you know, so we have to figure
out how we work this.
I am not unsympathetic to the fact of the building. I am
not unsympathetic to the fact that we need to preserve these
things. It is very difficult, and the priorities, when you have
the sailors who are not appropriately housed, you know, taking
even a modest amount, $2.5 million. So, you know, we will take
a look at it.
Mr. Edwards. Mr. Chairman.
Mr. Hobson. Yes.
Mr. Edwards. Can I ask about that?
Mr. Hobson. Yes.
Mr. Edwards. This is just a question I have had. I have
talked to members. You know, I don't know what the history has
been, if there has been any. But you talk about proudly, as you
should, 400,000 visits to the Navy Museum every year. But
Washington, D.C., gets 10 to 20 million visitors a year. The
National Air and Space Museum on the Mall is the largest, the
most visited museum in the world.
Go to London and they have a war museum. To me, a museum,
if it is done properly, would be a means of democracy education
for a lot of young people who don't know what war is all about.
The farther we get away from World War I and World War II, they
will know even less and less about the reality of world wars.
Has the Navy, the Army, the Air Force ever gotten together
and approached the Smithsonian Museum about the possibility of
somehow tying it in to the American History Museum or another
facility on the Mall where millions of kids go. Millions of
kids don't go over to the Navy complex. They do go to the Mall.
And we are missing a tremendous opportunity, and I am ashamed
that we haven't done this in years past. And I am sure we are
going to have a World War II memorial, but we need not just
memorials. We need museums that educate young people about this
democracy and the price that is paid to protect it and to give
them opportunities.
I mean, I get frustrated when I see the Army wanting to do
something in Rosslyn, the Navy over here, everybody wants to
have something in their home State, where a national war
museum, not to glorify war but to educate kids about it,and
educate people of all ages, for that matter, it ought to be
right here in the Nation's capital and ought to be on the Mall.
And if London can do it, the United States of America that
saved this world twice in the 20th century from the ravages of
world war ought to be able to do it.
My question to you, Mr. Secretary, would be: To your
knowledge--and you have been in Washington over a period of 20-
something years in your public service, which I respect--has
there ever been any serious discussions between military
leaders at the Pentagon and the Smithsonian Museum and
Congress, congressional leaders, about doing something on the
Mall where it ought to be, where millions not hundreds of
thousands of visitors would see these and learn from them?
Mr. Pirie. Not to my knowledge. The Smithsonian--I have
actually been around Washington for a rather long time. The
Smithsonian in the 1940s, the old building where the 1876
exhibit is now, was essentially a war museum and had dioramas
and models and all kinds of educational things and so forth. I
think the reaction of the 1960s and all that kind of stuff made
those kinds of displays hard to talk about and hard to do. I
don't know that we have ever had a concerted effort to do
something of that kind.
In Air and Space, there is a good section with respect to
what----
Admiral Smith. Aviation.
Mr. Pirie. And this is a good section about what the
trenches looked like in World War I and so forth. But no--
nothing systematic. I think it is a marvelous idea myself.
Mr. Hobson. I would concur with that.
Admiral Smith. Mr. Chairman.
Mr. Hobson. I would concur that there is an effort in
flight, I understand, to do something out at----
Admiral Smith. The Goddard Space Center.
Mr. Hobson. Is that where it is or is it--there is
something going on at Dulles. The Smithsonian----
Admiral Smith. We are building----
Mr. Hobson. Yes, Air and Space, Mach 2 is going out there.
But I am not so sure that either there or down here--I don't
know what we are going to have left on the Mall, but I think
Chet's educational part of this on both of these wars--my
father served in World War I, and most people don't even
remember it, of course. And, of course, Korea is something
that, you know, a lot of people don't really remember, and a
lot of people gave their lives over there, and it is kind of
just not thought of. We talk about World War II, but we had
Korea and then we had Vietnam. And we have a memorial to it.
But I don't know that we have any real educational thing, which
I think is something that maybe--I don't know. The Defense
Department ought to think about that, I think overall. I think
it would be good. You know, it would be a good healing thing,
if nothing else.
Mr. Edwards. Mr. Chairman, I don't know, have you ever been
to the London museum.
Mr. Hobson. Yes.
Mr. Edwards. I will never forget on the 50th anniversary of
D-Day we stopped there.
Mr. Hobson. It has a little office where Winston
Churchill--they have re-created that whole room.
Mr. Edwards. Yes, and people of all ages can walk into the
equivalent of an old World War I trench where even the lighting
is designed to simulate what it might have looked like in an
evening warfire situation.
But I would at least love to be part--Mr. Chairman, you
would be in a tremendous position to be a catalyst in this. I
would like to at least be part of a meeting of some leaders in
Congress, some leaders from the Department of Defense, and
somebody at the Smithsonian and have somebody tell us why that
is an impossible idea, because I think it would be a tremendous
education.
I would bet, what, 50 to 75 percent of American school kids
at some point in their lives come to Washington, D.C.
Mr. Hobson. A lot of students from our districts do.
Mr. Edwards. Maybe I could follow up with you, Mr.
Chairman, but who would be the appropriate person at the
Department of Defense to, you know, maybe prevent any
squabbling between the Army and the Navy and the Marines and
just bring everybody together and say is it possible to build a
broader--this doesn't prevent other smaller museums from being
there to honor the Navy and the Army. But there ought to be--I
think there ought to be a democracy education war museum, just
like I think having the Holocaust Museum near the Mall serves a
tremendous purpose to educate people about why we need a strong
military.
Tell me, who at DOD would be the appropriate person?
Mr. Pirie. Well, I would think that Secretary Cohen would
resonate to a suggestion of this kind.
Mr. Edwards. Marcy Kaptur has been interested in this for
years.
Mr. Hobson. Well, Ralph Regula is the chairman of the
committee that I think deals with the Smithsonian. He happens
to be a fellow Buckeye so maybe we can talk to Ralph and see
how we can----
Mr. Edwards. I would feel better when I leave this
institution if I knew we had just at least tried or pursued it
with the right people.
Thank you, Mr. Chairman.
FAMILY HOUSING MAINTENANCE
Mr. Hobson. I have got two or three quick questions I would
like to get through here. I notice that the Navy has
transferred $37 million from the family housing maintenance
accounts into the personnel accounts. Can anybody tell me about
that?
Admiral Smith. If we do new construction of houses
annually, we will transfer money in and out of what becomes the
BAH pot; whereas, we demolish houses for whatever reason to
balance that account for people who are on allowances living in
the community or for new construction.
Mr. Hobson. Yes, I don't think the intent of the
privatization deal was to switch those around like that. We
need to be able to talk about that.
Admiral Smith. Yes, sir. And I confess to being caught kind
of by surprise by that. It is not an uncommon occurrence, but
it is usually done to level the accounts for people living in
that housing.
Mr. Hobson. We need to talk about this because I don't----
Admiral Smith. Yes, sir.
BLOUNT ISLAND
Mr. Hobson. Blount Island, can you update the committee on
the status of the island's acquisition project, especially any
additional funding requirements and the status of required
environmental assessments?
Mr. Pirie. I will let General Mashburn give you the details
on this, Mr. Chairman, but we have a phased program of
approaching Blount Island, which we hope will ultimately result
in our purchasing the island and resolving any questions about
long-term leasing costs, things of that kind. It is a good
operation and I think quite worthy of support.
General Mashburn.
General Mashburn. Yes, sir. First of all, it is very
important to the Marine Corps, of course, for our maritime
prepositioning program, but I think foremost it is a national
strategic asset, as proven during the deployments for Desert
Shield/Desert Storm. It was the most heavily used port in the
continental United States.
Our leases expire in 2004. Business case analysis has shown
that it would be prudent to purchase the land that we currently
lease, plus to purchase easements because of fear of
encroachment and developments that might preclude the smooth
operation of the port facilities.
We have looked at two specific phases. One would be the
purchase of easements, Phase 1, which we anticipate would be
approximately $40 million, that is, $5 million that was
appropriated last year plus a request in 2002 for $35 million.
That is also our number one unfunded deficiency list of MILCON
priority which has been submitted by the Commandant, $35
million. And, again, in 2002 it is programmed.
Phase 2 would be the purchase of the land currently leased,
which it currently is estimated at about $119 million, and we
are putting that in our 2002 submission.
We are actively pursuing it. The environmental assessment
is in pre-final draft at this time. We hope to have the finding
of no significant impact by early June of this year.
We currently have working groups established to provide
communications not only to the community but to your staff, and
your staff will be briefed and the principals will be briefed
after that. We are using Marine Corps assets plus a contractor
to do initial surveys at this time. The dollar figures are
derived from 1995-96 appraisals. But once the surveys are
completed, we will conduct new appraisals.
The Commandant is actively engaged. We think, again, it is
crucial to our maritime prepositioning program, but, again, it
is a national strategic asset, not just a Marine Corps asset.
SIGONELLA, ITALY
Mr. Hobson. Okay. Any questions on that? I know it is a
priority. We got into it late last year.
Two final questions. What is the current status of
providing additional family housing at Sigonella?
Mr. Pirie. It is in the master plan. We have a master plan
for Sigonella, first class base. I do not know who----
Admiral Smith. Let me get that for you for----
Mr. Hobson. We have been there. We have looked at it. It
looks to me like it is going to be one of your places you are
going to be for a while.
Admiral Smith. Yes, sir.
Mr. Hobson. A lot of money in there.
Admiral Smith. Yes, sir, and we had a project this year for
the support site. I think you all saw it.
Mr. Hobson. Yes, okay.
Admiral Smith. A lot of personnel support.
CHILD CARE
Mr. Hobson. In the testimony submitted for our quality-of-
life hearing, child care was listed as a high priority of the
Navy, yet the budget request includes only one child
development center, which is for the Marine Corps. Are we
adequately funding the need for new centers?
Mr. Pirie. That is one of the areas in which we would like
to go to the private sector and get private sector support for
child care on our bases. And I know that my counterpart worked
quite hard on that for several years.
We have problems with the standards for----
Mr. Hobson. My sister said to me, I told her----
[Laughter.]
Mr. Hobson [continuing]. What we do in the military versus
in the private sector, and she said nobody in their right mind
could afford to do what you are doing here and compete with it.
She is right near Wright-Patterson and is constantly----
Mr. Pirie. Which is why this has proved to be very
difficult to do, but we are trying to work our way through this
problem.
Mr. Hobson. Well, maybe that is something you need to talk
to the author of. I am looking at the law. I wrote the day-care
law when I was in the legislature in Ohio. I tell everybody we
almost didn't have Thanksgiving over it because my sister was
so mad at me. She survived--it does cause some interesting
family situations. But it is something we need to do.
The housing, the day-care, the medical, if we are going to
keep these people in the services after we train them, then we
have got to adequately provide for them, make sure these
services are available to them, or you are going to lose them.
I talked to a young Navy guy the other day on the airplane.
I learn a lot of things flying back and forth. And he is
getting out after 10 years. He is concerned about the change of
life on board ship, and so is his wife. He is concerned about
how long he is going to be gone. I didn't realize how long
these people are gone before they are back home. He says he has
another baby coming. He says it is not going to happen what
happened with the last one. And they are getting paid bonuses.
He is in a technical field. Where we pay bonuses to them to
stay, companies are paying bonuses for them to get out and come
back in and work and do the work on the other side.
So we are in a tough situation. This quality-of-life thing,
we all give lip service to it, but we have got to do more than
that. We have got to--these are real priorities to have the
right young people there, or people, generally, that can do the
missions that we are asking them to do.
So I would encourage you to continue this focus. I know
Chairman Vucanovich, when she was the Chair, this was a big
push with her. I would like to continue that. And I really want
to thank you. I very much appreciate the service that all of
you do. We have jousted sometimes, but it is not done in any
way other than to accomplish the same goals that we all have,
and we look forward to working with you on things, and thank
you all for your service.
[Clerk's note.--Questions for the record submitted by
Chairman Hobson.]
OVERALL FUNDING
The Navy military construction budget is down $143 million, or 16
percent, from last year's enacted levels.
Question. What is the rationale for this reduction in funding and
will we see this trend continue?
Answer. This reduction in the Department of the Navy military
construction is due to a combination of factors. The Department of
Defense decided to remove contingency funds from all construction
accounts. This accounts for $39 million of the $143 million. Another
$20 million results from a Department of Defense decision to use prior
year unobligated funds to finance a portion of the Fiscal Year 2001
request. While we weren't able to fund the remaining difference, the
amount of funds included in the Navy's military construction budget
request to the Congress has generally increased over the last few
budget submissions. We are hopeful that this trend will continue.
2+0 WAIVER
The Navy's proposed Fiscal Year 2001 bachelor housing projects
reflect a 2+0 construction standard, rather than the 1+1 standard.
Question. Why has the Navy deviated from the 1+1 standard and can
this be viewed as a break in your commitment to the quality of life to
the Sailors?
Answer. In our continued commitment to improve the quality of life
(QOL) of our Sailors, the Navy is looking at ways to address one of our
most pressing QOL challenges--the large population of enlisted Sailors
who now live aboard ship when in homeport. We are developing a Homeport
Ashore program that will provide these Sailors accommodations, either
in a BEQ or in the community. We are already trying this at Pearl
Harbor. We plan to have a full implementation plan by this summer.
The Navy remains committed to providing housing that meets the 1+1
barracks construction standards. As a first step in providing ashore
living accommodations to shipboard Sailors, the Navy was granted a
waiver to construct/renovate permanent party enlisted barracks at the
2+0 standard. Once we have satisfied our housing requirement at the 2+0
standard, the Navy will proceed to construct facilities until all
permanent party Sailors are provided a private sleeping room.
LEMOORE NAVAL AIR STATION
Last year this Subcommittee expressed its concern about the living
conditions at Lemoore Naval Air Station.
Question. Can you please share with us how this budget request
addresses our concerns and any future plans or schedules for addressing
the critical quality of life conditions at Lemoore?
Answer. The Navy has accelerated an $8.3 million Bachelor Quarters
project that was originally planned for Fiscal Year 2002. The Fiscal
Year 2001 budget also requests $28 million for the replacement of 160
family housing units. The Chief of Naval Operations' Unfunded
Requirements List, submitted to the Congress in February 2000, includes
two Lemoore projects: a $10.1 million Bachelor Quarters (programmed for
Fiscal Year 2004) and an additional $20.1 million family for housing
replacement construction, that is not presently programmed.
The Future Years Defense Plan also contains a new Corrosion Control
Facility in Fiscal Year 2002. An aggressive planning effort is
currently underway to define additional requirements for submission as
part of the Fiscal Year 2002 budget request.
The Department is developing an infrastructure improvement plan for
NAS Lemoore based on Commander in Chief, U.S. Pacific Fleet's
recommendations and will submit a comprehensive report to the committee
no later than June 1, 2000.
GENERAL OFFICER QUARTERS
Question. What efforts have you taken to assure there is no further
abuse of operation and maintenance funding for maintenance and repair
of general and flag officer quarters?
Answer. We are updating instructions that tighten the controls and
reinforce existing policy on the management, operation, and maintenance
of general and flag officer quarters. We have also initiated a funds
management review to identify and correct systemic deficiencies that
contributed to this problem.
FAMILY HOUSING MAINTENANCE
Question. Why has the Navy transferred $37 million from the family
housing maintenance accounts into the personnel accounts?
Answer. The Navy transferred funds from the family housing
operations and maintenance account into the personnel accounts due to
the planned privatization of 3,941 Navy-owned homes through the end of
Fiscal Year 2001 as part of the Navy's family housing public/private
venture (PPV) initiative. The family housing funds will no longer be
needed to operate and maintain the privatized homes. The amount of the
transfer equates to the estimated Basic Allowance for Housing (BAH)
payment to the military families who will occupy the privatized homes.
BRAC FUNDING
The Navy's share of the BRAC budget has been declining annually
from a peak of $2.4 billion in Fiscal Year 1996 to $202 million in
Fiscal Year 2000. However, the Navy BRAC budget request more than
doubles to $477 million in Fiscal Year 2001.
Question. I understand that most of the Fiscal Year 2001 funds are
needed for environmental cleanup at closed bases. Please explain the
need for this sudden increase in BRAC funds for Fiscal Year 2001.
Answer. During the Fiscal Year 2000 budget deliberations within the
Department of Defense, Navy BRAC environmental funds were shifted from
Fiscal Year 2000 to Fiscal Year 2001 as part of a request for Advanced
Appropriation in the construction accounts. Congress did not approve
the Advanced Appropriation concept, and fully funded the Fiscal Year
2000 military construction and family housing construction accounts.
BRAC funding, however, was not similarly restored. Thus, the large
increase in Fiscal Year 2001 BRAC funding represents requirements and
funding, nearly all of which is to cleanup BRAC properties, deferred
from Fiscal Year 2000 and added to our Fiscal Year 2001 requirements.
These projects are closely tied to redevelopment and reuse of the
property by Local Redevelopment Authorities and need to be completed to
stay on schedule with redevelopment plans.
Our Fiscal Year 2001 request retains this higher level of BRAC
environmental funding. We consider this funding vital to support
redevelopment efforts by towns, communities and cities adversely
affected by base closures, and to keep the disposal of excess Navy
property on schedule so that the savings can be applied elsewhere in
Navy's budget. Fiscal Year 2001 represents the single largest year for
planned property transfers for the Department of Navy.
Although the four approved BRACs are to be completed by July 13,
2001, the Department will continue to incur environmental restoration
costs in the outyears.
Question. Do you have any estimate of the annual level of Navy BRAC
funding for this effort for Fiscal Year 2002 and beyond? Additionally,
how long will the Navy continue to incur these costs?
Answer. Fiscal Years 2002 and 2003 environmental restoration
funding estimates are $133 million and $62 million, respectively.
Fiscal Year 2004-2007 environmental restoration funding estimate is $37
million annually. Fiscal Year 2004 and beyond environmental restoration
funding is primarily for Long Term Monitoring (LTM) / Long Term
Operations (LTO) of environmental restoration sites achieving Response
Complete (RC). Annual costs for LTM/LTO will continue to be incurred
through Fiscal Year 2058 when the last monitoring operation is expected
to conclude.
CONTINGENCY REDUCTION
Question. If this reduction hinders program execution and projects
need to be deferred or canceled due to a lack of funds, how will the
Navy determine which project to defer or cancel?
Answer. If the contingency reduction hinders program execution and
projects need to be deferred or canceled, the Department of the Navy
will look at both projected award dates and mission priorities to
determine which projects will be deferred or canceled. To date no list
has been prepared.
BASIC ALLOWANCE FOR HOUSING (BAH) INITIATIVE
The Department proposes a Basic Allowance for Housing (BAH) plan
that will completely eliminate out-of-pocket housing expenses for
military members by 2005.
Question. How will this initiative impact the Navy's family housing
accounts?
Answer. The impact of this initiative on the family housing
accounts is uncertain at this time. We have initiated efforts to
analyze the long-term impacts of this initiative on the supply and
demand for military housing. Although we may be able to model outcomes
based on assumptions about supply and demand, the real effects will
only become apparent over time as we see how both individual
preferences and market forces react. Our objective is to strike the
appropriate balance between reliance on the private sector and, where
necessary, the provision of Government quarters through either public/
private ventures or traditional military construction.
Question. Increasing the BAH will reduce the demand for on-base
housing, what is the Navy's plan for re-evaluating its on-base housing
requirements and deficits?
Answer. The impact of this initiative on the Navy's on-base housing
requirements and deficits is uncertain at this time. We expect that
there will be a reduction in demand as families are better able to
afford private sector housing. We have initiated efforts to analyze the
long-term impacts of this initiative on the supply and demand for
military housing. We are also working with the Office of the Secretary
of Defense and the other Services to update the housing affordability
criteria that would be used to determine family housing requirements.
These criteria would be incorporated in housing requirement surveys and
market analyses that are the vehicles to identify housing deficits or
surpluses. Our objective is to strike the appropriate balance between
reliance on the private sector and, where necessary, the provision of
Government quarters, through either public/private ventures or
traditional military construction.
ENHANCED-USE LEASING
The Department is continuing efforts to reduce base operating
support costs. Enhanced-use leasing is one element of this effort.
The Air Force is currently working on a concept at Brooks AFB in
Texas to reduce infrastructure operations and maintenance costs through
internal business process engineering and land transactions with the
City of San Antonio.
Similarly, the Navy now has authority through special legislation
to develop Ford Island at the Pearl Harbor Naval Complex. The
envisioned proposal will comprise of both the selling and leasing of
land.
Question. Can you please bring us up to date on the current plans
and any estimated schedule for developing Ford Island?
Answer. One of the Department's goals under the Ford Island (FI)
initiative is to implement a business-like approach in completing the
development, based on input from private sector developers. Since
enactment of the Ford Island legislation in the fall of 1999, the
Department has been finalizing the FI facility requirements,
establishing guiding principles, and defining a process for acquiring
private sector input to complete the required Master Plan and begin the
development.
In the near term, the Department plans to issue a Request for
Expressions of Interest (RFEI), and to begin the preparation of a
programmatic Environmental Impact Statement (EIS). The EIS and REFI
processes will be used to acquire developer and community input for use
in guiding the overall development process. Construction under the new
legislative authority will commence after the Master Plan and EIS are
complete, and we have provided the required notification to Congress.
Question. What recommendations would you have for any new enhanced-
use leasing authority?
Answer. We concur with the legislation that OSD has proposed. We
recommend the expansion of the types of in-kind consideration that the
military departments may accept to include services both on and off the
leased premises. We also recommend that military departments be
authorized to retain the rents rather than the current requirement to
deposit rents into a special account and have them available for
expenditure only in the next fiscal year upon appropriation.
UTILITY PRIVATIZATION
The Department has undertaken and aggressive utility privatization
effort. The goal is to privatize all utility system unless uneconomical
or exempt for security reasons by September 30, 2003.
Question. What progress has been made by the Navy in achieving this
goal?
Answer. The Department of the Navy identified 998 Navy and Marine
Corps utility system at 123 installations worldwide to be examined for
privatization. As of March 1, 2000, we are proceeding with
privatization efforts on 888 systems, after having removed from
consideration overseas utility systems that are owned by the host
country or are otherwise precluded because of current treaties or
agreements. We have issued Requests for Interest (RFIs) for 78 percent
of our utility systems, and have so far received responses on 47
percent. We are on track to complete the RFI process by September 30,
2000. Actual solicitations, or Request for Proposals (RFPs), have been
issued for 20 percent of our systems, which puts us on schedule to meet
the second milestone of releasing all solicitations not later than
September 30, 2001.
Question. What assurances can the Navy provide that the conveyance
of utility systems will not result in a substantial increase in long-
term utility costs?
Answer. The Department of the Navy plans to use Department of
Defense economic analysis methodology to compare costs of ownership to
assure compliance with the requirements of the authorizing statute 10
U.S.C. 2688. We will include contract terms and conditions to protect
the Department's long term economic interest.
PRIVATIZATION OF UNACCOMPANIED HOUSING
In addition to family housing privatization, the Military Housing
Privatization Initiative provides for the privatization of
unaccompanied housing. However, no Service has yet launched a project
for unaccompanied housing. It is my understanding the Navy and Marine
Corps are considering privatization projects for unaccompanied housing
in the Washington, DC and Quantico, Virginia areas.
Question. Please bring us up to date on these efforts and any
estimated schedules?
Answer. The Navy is evaluating the feasibility of a Bachelor
Quarters PPV project for Naval District Washington (NDW). The proposed
scope is a 200 unit, apartment-style project intended for single
Sailors in paygrades E-5 and E-6 stationed in the Washington D.C. area.
The Navy is also evaluating the feasibility of a Bachelor Quarters
privatization effort at Mitchel Field, Long Island, NY as part of a
combined bachelor and family housing PPV project.
The Marine Corps is exploring the possibility of privatizing a
Bachelor Officer Quarters at The Basic School in Quantico, Virginia.
The Marine Corps is currently conducting industry interviews.
Question. What are the obstacles to the privatization of
unaccompanied housing?
Answer. The feasibility of unaccompanied housing privatization is
extremely dependent on location-specific variables, such as
installation requirements, housing allowances, local real estate
conditions, etc. One potential obstacle is the legislative distinction
between family and unaccompanied housing privatization. The separation
of accounts may limit Service flexibility in planning and executing
joint family/bachelor housing privatization projects when there is a
need for both types of housing.
Question. Are there any other unaccompanied housing privatization
projects planned? If not, why not? If projects are planned, what are
they, and what is the estimated schedule?
Answer. There are no other BQ projects planned at this point. We
are continuing to explore the potential use of unaccompanied housing
privatization in particular to support the Navy's new initiative to
berth shipboard Sailors ashore in homeport. Additional projects may be
developed if they are cost effective and meet policy objectives.
SIGONELLA, ITALY
Question. What is the current status of providing additional family
housing at Sigonella Naval Air Station in Italy?
Answer. A major lease-construction project was awarded in November
1997 near the town of Mineo. This project will provide 404 three- and
four-bedroom family housing units and a community center. A formal
groundbreaking ceremony was conducted on May 6, 1998. The first 140
units and a community center were completed in September 1999 and are
currently occupied. A second 140 units were accepted on January 17,
2000 and are currently being assigned to families stationed at
Sigonella. The final 124 units will be completed by March 2001.
A second lease-construction project near Belpasso was awarded in
September 1999. This project will build 526 three- and four-bedroom
family housing units and a community center, and should eliminate the
longstanding family housing deficit. The estimated completion for the
first 184 units is December 2001, with completion of all units by March
2003.
NAS Sigonella MILCON plan calls for the demolition of 88 of the 98
on-base family housing units and the replacement of the remaining 10
for occupancy by Key and Essential officers. The replacement project is
proposed for Fiscal Year 2002.
ARIZONA: CAMP NAVAJO NAVY DETACHMENT
MAGAZINE MODERNIZATION ($2,940,000)
The Form 1391 mentions Phase III of this project is planned in
Fiscal Year 2002, but the Form 1390 does not list it.
Question. When is Phase III planned and what is its projected cost?
Answer. Phase III was originally planned for Fiscal Year 2002.
However, C4 missile components are now being deactivated, thus reducing
the requirement for storage magazines. The Phase III project has been
deferred beyond the Future Years Defense Plan.
ARIZONA: YUMA MARINE CORPS AIR STATION
COMBAT AIRCRAFT LOADING APRON ($8,200,000)
The Form 1391 shows a contract award date of 8/01 with a design
completion date of 4/02 and a construction start date of 5/02.
Question. Why is funding requested in Fiscal Year 2001 when design
completion and construction award is not scheduled until Fiscal year
2002?
Answer. We expect to award this project in the second half of
Fiscal Year 2001. The project will be executed utilizing a Design Build
acquisition strategy.
The Form 1391 indicates ordnance is currently loaded and unloaded
along the flightline under a CNO waiver.
Question. How long have operations been conducted under the waiver?
Answer. MCAS Yuma has operated with this waiver since 1978.
Question. What is the estimate of savings in design costs by
accomplishing this project using a standard or definitive design? Where
was this design most recently used?
Answer. We will be utilizing the Design Build Acquisition strategy
vice a standard or definitive design strategy for this project. This
acquisition strategy, frequently utilized with Military Construction
projects, normally results in savings due to the reduced amount of
costly change order requests. The precise savings are not available.
CALIFORNIA: CHINA LAKE NAVAL AIR WEAPONS STATION
PROPELLANTS AND EXPLOSIVE LABORATORY
For several years, the Navy has planned to construct a propellants
and explosives laboratory at the China Lake Naval Air Weapons Station
to replace a series of 35 outmoded facilities. The planned construction
date had been changed a number of times already.
Question. What are the current plans for constructing this
facility?
Answer. The project is programmed in Fiscal Year 2003.
Question. Does the Department of Defense still regard this project
as consistent with China Lake's energetic materials mission?
Answer. Yes, the Naval Air Systems Command requires this facility
to provide energetic material support for timely research and
development through pilot plant operation supporting delivery of rocket
motors, warheads, bombs and submunitions to the fleet for current
weapon systems and new technology programs. This project will allow
NAWCWD China Lake to more efficiently carry out its existing energetic
materials mission.
Question. Would constructing the laboratory at China Lake now save
the Navy money? If so, how much?
Answer. The project will demolish buildings that are in extremely
poor condition, with a lifecycle cost of $40.6 million to repair,
maintain and operate over the next 25 years. Cost of the MILCON and
operation over the next 25 years is $27.6 million. Lifecycle cost
savings to the Navy is $13.0 million. Savings of constructing the
project in Fiscal Year 2001 versus Fiscal Year 2003 will depend on
inflation rates and construction industry trends.
CALIFORNIA: LEMOORE NAVAL AIR STATION
BACHELOR ENLISTED QUARTERS ($8,260,000)
Last year this Committee directed the acceleration of quality of
life projects at Lemoore NAS. The Form 1390 shows this project and
another Bachelor Enlisted Quarters project programmed after Fiscal Year
2002.
Question. What are the Navy's plans for other quality of life
projects at Lemoore NAS?
Answer. The Fiscal Year 2001 budget also requests $28 million for
the replacement of 160 family housing units. The Chief of Naval
Operations' Unfunded Requirements List, submitted to the Congress in
February 2000, includes two Lelmoore projects: the $10.1 million
Bachelor Quarters programmed for Fiscal Year 2004 and an additional
$20.1 million for family housing replacement construction, not
presently programmed. The Future Years Defense Plan also contains a new
Corrosion Control Facility in Fiscal Year 2002. An aggressive planning
effort is currently underway to define additional requirements for
submission as part of the Fiscal Year 2002 budget request.
The Department is developing an infrastructure improvement plan for
NAS Lemoore based on the Commander in Chief, U.S. Pacific Fleet's
recommendations and will submit a comprehensive report to the committee
no later than June 1, 2000.
Question. Does this project construct a new facility or replace an
existing facility? If replacement, will this project replace the worst
existing bachelor enlisted quarters at Lemoore NAS? If not the worse,
why were these barracks selected for replacement?
Answer. This project constructs a new facility to address a
quantity deficiency. It will not replace any existing barracks.
Question. After completion of this project, what will be the
remaining unaccompanied enlisted permanent party deficit at Lemoore
NAS?
Answer. One additional barracks will be required to accommodate 90
junior enlisted, permanent party personnel. This barracks is currently
programmed in Fiscal Year 2004 and included on the Chief of Naval
Operations' Unfunded Requirements List.
Question. Please explain the 2+0 modules. The Navy plans to
eventually reach the 1+1 standard. Will the 2+0 modules meet the 1+1
standard in the future or will they have to be renovated?
Answer. The 2+0 module consists of two rooms each with their own
bathroom and service area. Each room is designed to house two junior
enlisted or one senior enlisted Sailor. The 2+0 rooms will not need to
be renovated, except to remove the second walk-in closet, in the future
to accommodate only one occupant.
CALIFORNIA: NORTH ISLAND NAVAL AVIATION DEPOT
COMPONENT REPAIR CLEAN ROOM FACILITY ($4,340,000)
Question. What savings are realized by the use of prefabricated
insulated walls, floor and ceiling panels? Why aren't they used in more
projects?
Answer. The subject project is a high-end clean room that will
provide a clean area for testing hydraulic components. The use of
prefabricated walls, floors, and ceiling panels is an established clean
room industry practice. The savings realized by using the modular
system were anticipated when the cost estimate was developed. These
savings are significant, as clean rooms are very specialized;
therefore, construction of one from scratch would be much higher.
However, these savings are difficult to quantify.
The Navy normally evaluates applicability and cost of prefabricated
buildings, mezzanines, sound enclosures, wall panels, and other
building components. These are often specified, when appropriate, for
construction projects.
DISTRICT OF COLUMBIA: MARINE BARRACKS, 8TH & I
BACHELOR ENLISTED QUARTERS ($17,197,000)
The Form 1391 mentions the demolition of condemned apartment
buildings.
Question. What is the cost of this demolition?
Answer. The demolition identified with this project does not carry
a cost to the Marine Corps. In accordance with the March 1999
Memorandum of Understanding between the District of Columbia Housing
Authority (DCHA) and the USMC, the DCHA will demolish the buildings on
the site and convey to the United States, for $500,000, the site free
of buildings, structures, and debris.
There are three buildings to be razed. All are multistory apartment
buildings, currently vacant and unsuitable for continued use.
HAWAII: KANEOHE BAY MARINE CORPS BASE
BACHELOR ENLISTED QUARTERS ($18,400,000)
The Form 1390 mentions another Bachelor Enlisted Quarters project
programmed after Fiscal Year 2002.
Question. Will these projects replace all of the inadequate
Bachelor Enlisted Quarters at Kaneohe Bay MCB? If not, what is the
plan, by project and fiscal year, for their replacement?
Answer. Although these projects will not replace all of the
inadequate room configured enlisted quarters at Kaneohe Bay MCB, the
current President's Budget reflects the following MILCON projects:
[In millions of dollars]
------------------------------------------------------------------------
Fiscal year Project No. Amount
------------------------------------------------------------------------
2004............................... P-749................. 15.655
2005............................... P-748................. 21.906
2005............................... P-750................. 21.906
------------------------------------------------------------------------
Question. After completion of this project, what will be the
remaining unaccompanied enlisted permanent party deficit at Kaneohe Bay
MCAS?
Answer. Upon completion of this project, the deficit of adequate
space for permanent party will be 2,903 spaces.
HAWAII: PEARL HARBOR NAVAL COMPLEX
RELOCATE SEAL DELIVERY VEHICLE TEAM ($14,200,000)
The Special Operations Command currently has a construction project
programmed in the outyears to relocate Seal Delivery Vehicle Team
(SDVT) ONE from Ford Island to Pearl City Peninsula. This project also
relocates Seal Delivery Vehicle Team (SDVT) ONE from Ford Island to
Pearl City Peninsula.
Question. Why are there two separate projects planned and why
couldn't they be combined into one single project? What cost savings
would occur if they were combined?
Answer. These two projects were originally a single project
designed by the same Architect/Engineer but funded by two separate
sources: P-533 funded by Navy Military Construction and P-433 funded by
Defense Wide Military Construction. Although P-433 was deferred by one
year due to higher competing priorities, it will still be included as
an option to the contract for P-533, to be executed when funds are
authorized and appropriated. This approach will achieve the cost
savings desired.
HAWAII: PEARL HARBOR NAVAL STATION
BACHELOR ENLISTED QUARTERS ($16,500,000)
Question. After completion of this project, what will be the
remaining unaccompanied enlisted permanent party deficit at the Pearl
Harbor Naval Station?
Answer. Our present estimate of the long-term deficit is 210
spaces. However, the Navy is developing a plan to implement its
Homeport Ashore initiative to provide ashore living accommodations to
Sailors currently living on ships while in homeport. When we complete
that plan this summer, we will be able to better identify the total
unaccompanied housing deficit.
Question. What is the Navy's plan (by fiscal year and dollar
amount) to provide adequate living quarters at the Pearl Harbor Naval
Station?
Answer. Although not fully meeting our requirement, the President's
Budget Future Years Defense Plan includes replacement and modernization
barracks projects at Pearl Harbor as follows:
Fiscal year:
2001--P-593......................................... $16,500,000
2002--P-576......................................... 12,030,000
2004--P-351......................................... 22,040,000
2004--P-467......................................... 6,706,000
2005--P-444......................................... 20,034,000
ILLINOIS: GREAT LAKES NAVAL TRAINING CENTER
RECRUIT BARRACKS
There are two projects with the same contract award and
construction dates.
Question. Why weren't these projects combined into one large
contract?
Answer. It is the Navy's intention to package these two Recruit
Barracks projects into one construction contract.
Maryland: Indian Head Naval Explosive Ordnance Disposal Tech Division
joint service eod equipment support facility ($6,430,000)
The Form 1391 mentions this facility is projected to generate
annual savings resulting from improved efficiency.
Question. What are the projected savings?
Answer. It is estimated that an average of $2.0 million per year
will be saved by moving the equipment support functions from the
existing facilities into the new facility provided by this project.
NEW JERSEY: EARLE NAVAL WEAPONS STATION
Last year this Committee directed the project for Pier 2 to be
accelerated and included in this year's budget request.
Question. When is the project scheduled and why wasn't it
accelerated as directed?
Answer. This project is currently programmed in Fiscal Years 2002
and 2003. The cost of this project could not be accommodated within our
limited Fiscal Year 2001 budget.
NORTH CAROLINA: CAMP LEJEUNE MARINE CORPS BASE
BACHELOR ENLISTED QUARTERS ($14,300,000)
Question. After completion of this project, what will be the
remaining unaccompanied enlisted permanent party deficit at Camp
Lejeune MCB?
Answer. Upon completion of this project, the base-wide deficit of
adequate space for bachelor enlisted permanent party will be 12,358
spaces.
Question. What is the Navy's plan (by fiscal year and
dollar amount) to provide adequate living quarters at Camp
Lejeune MCB?
Answer. Although not fully satisfying our requirements, the
Marine Corp's plan, as presented in the President's Budget, is:
[In millions of dollars]
------------------------------------------------------------------------
Fiscal year Project No. Amount
------------------------------------------------------------------------
2003................................. P-101............... 16.674
2003................................. P-135............... 13.931
2003................................. P-893............... 8.846
2004................................. P-151............... 14.374
2005................................. P-963............... 18.370
------------------------------------------------------------------------
VIRGINIA: NORFOLK NAVAL AIR STATION
AIRCRAFT MAINTENANCE HANGAR ($13,300)
The Form 1391 states there are three additional projects to
complete the hangar plan for Norfolk NAS.
Question. When are these projects planned and what is the cost of
each one?
Answer. The three additional projects to complete the hangar plan
for Norfolk NAS are:
Fiscal year
2001--P-522......................................... $11,800,000
2002--P-523......................................... 9,624,000
2004--P-525......................................... 11,491,000
VIRGINIA: QUANTICO MARINE CORPS COMBAT DEVELOPMENT COMMAND
PHYSICAL TRAINING FACILITY ($8,590,000)
According to the Form 1391, the current physical training facility
is in a deteriorated hangar with inadequate heating and ventilation.
This hangar also houses the Marine Corps Air Facility Crash Crew and
Refueler Maintenance Shop, the Presidential Helicopter Squadron's
Ground Support Equipment Shops, and the Marine Corps Air-Ground Museum
Restoration Shop.
Question. What are the plans to relocate these functions out of
this inadequate facility?
Answer. The Physical Training Facility is incompatible with the
intended use of this facility and the existing condition of the
building. The other functions are more compatible with the original use
of this facility as an operational hangar, and they will remain in this
facility until other projects, currently in planning, are funded to
accommodate these requirements. Eventually, these functions will be
relocated and the hangar will be demolished.
Worldwide Various; Unspecified Minor Construction ($7,659,000)
(The Information follows:)
Provide for the record a ten-year history of amounts that have been
requested and appropriated for unspecified minor construction.
FOR THE DEPARTMENT OF THE NAVY
[In millions of dollars]
------------------------------------------------------------------------
Requested Appropriated
Fiscal year amount amount
------------------------------------------------------------------------
1991.................................... 13.3 13.3
1992.................................... 12.4 12.4
1993.................................... 5.0 5.0
1994.................................... 5.5 5.5
1995.................................... 7.0 7.0
1996.................................... 7.2 7.2
1997.................................... 5.1 5.1
1998.................................... 9.9 11.5
1999.................................... 8.9 9.9
2000.................................... 7.3 8.9
------------------------------------------------------------------------
Worldwide Various; Planning & Design ($63,335,000)
Question. Will this funding level meet the known requirements for
the Fiscal Year 2001 program, including the necessary work on projects
programmed for Fiscal Years 2002 and 2003?
Answer. Yes, we believe that we are adequately funded to support
the Fiscal Year 2001 program and upcoming Fiscal Years 2002 and 2003.
BARRACKS
Provide for the record a chart that will show the Navy's barracks
construction program at the time the 1+1 standard was approved, and the
current program through completion, broken out by locations in the
U.S., in Europe, and at other overseas locations.
NAVY BEQ CONSTRUCTION PROGRAM AT THE TIME THE 1+1 STANDARD WAS APPROVED
[In thousands of dollars]
----------------------------------------------------------------------------------------------------------------
Fiscal year--
------------------------------------------------------
1997 1998 1999 2000 2001
----------------------------------------------------------------------------------------------------------------
CONUS + HI............................................... 117,182 65,770 171,520 102,200 100,940
Europe................................................... 16,000
Other.................................................... 24,100 ......... ......... 30,280 15,900
------------------------------------------------------
Total.............................................. 157,282 65,770 171,520 132,480 116,840
----------------------------------------------------------------------------------------------------------------
CURRENT NAVY BEQ CONSTRUCTION PROGRAM
[In thousands of dollars]
----------------------------------------------------------------------------------------------------------------
Fiscal year--
------------------------------------------------------
2001 2002 2003 2004 2005
----------------------------------------------------------------------------------------------------------------
CONUS + HI............................................... 127,060 74,081 115,993 161,143 150,798
Europe................................................... 15,000 5,956 37,800
Other.................................................... ......... 2,510
------------------------------------------------------
Total.............................................. 142,060 82,547 153,793 161,143 150,798
----------------------------------------------------------------------------------------------------------------
When the Navy developed its plan to achieve the 1+1 standard, it
assumed a BEQ construction program that would average $120 million per
year between Fiscal Year 2006 and 2013, at which point the standard
would be met. The Navy is developing a plan to implement its Homeport
Ashore initiative that would provide ashore living accommodations for
shipboard Sailors. Therefore, the ending fiscal year and average annual
construction funding may change as that plan is finalized.
FAMILY HOUSING INVENTORY
Provide for the record a chart that will show the average number of
family housing units supported for Fiscal Years 1998, 1999, and 2000,
and those expected to be supported in Fiscal Year 2001, broken out into
government owned (U.S. and foreign), leased (U.S. and foreign), and
privatized under Public-Private Ventures.
------------------------------------------------------------------------
1998 1999 2000 2001
------------------------------------------------------------------------
Gov't Owned:
U.S......................... 80,205 77,639 73,256 70,745
Foreign..................... 8,048 8,040 7,870 7,913
---------------------------------------
Total Gov't Owned......... 88,253 85,679 81,126 78,658
=======================================
Leased:
U.S......................... 3,884 4,333 4,606 4,419
Foreign..................... 1,616 1,864 2,615 3,027
---------------------------------------
Total Leased.............. 5,500 6,197 7,221 7,446
=======================================
Privatized (includes existing 585 585 1,861 7,568
and new units).................
------------------------------------------------------------------------
NATO PRECAUTIONARY PREFINANCING STATEMENTS
Submit for the record a copy of the precautionary prefinancing
statements that have been submitted to the NATO infrastructure
committees for each European project for which funds were appropriated
for Fiscal Year 1999, and for each such project requested for Fiscal
Year 2000.
The Department of the Navy has not had European projects for which
funds were appropriated for either Fiscal Year 1999 or Fiscal Year
2000.
Question. Provide an explanation for any project for which
statements have not been submitted.
Answer. None of the projects in this year's Military Construction,
Navy budget are being considered for NATO funding.
BRAC ENVIRONMENTAL RESTORATION
Question. What is the Navy's current estimate of the annual funding
requirement for BRAC environmental restoration beginning in Fiscal Year
2002?
Answer. Fiscal Year 2002 environmental restoration funding estimate
is $133 million. Fiscal Year 2003 environmental restoration funding
estimate is $62 million. Fiscal Year 2004-2008 environmental
restoration funding estimate is $37 million annually. Fiscal Year 2004
and out environmental restoration funding is primarily for Long Term
Monitoring (LTM)/Long Term Operations (LTO) of environmental
restoration sites achieving Response Complete (RC).
CHILD CARE CENTERS PRIVATIZATION
Question. Bring us up to date with the Navy's efforts to outsource
child development center services in San Diego.
Answer. The goal of the San Diego outsourcing study was to
determine if the private sector could manage the current program
utilizing on- and off-base accredited centers and on- and off-base
certified, in-home care to expand the availability of top quality child
care within programmed resources. The basic premise was to expand
quality capacity within current budget in order to meet the Department
of Navy (DON) and Department of Defense (DoD) requirements.
In September 1998, the Commander, Southwest Region completed a
child care commercial activities (A76) study of 10 Navy and 2 Marine
Corps bases in California and Nevada. The government won the bid and
successfully implemented the most efficient organization (MEO),
resulting in substantial efficiencies. The findings were most
encouraging, showing that Navy's internally managed program was more
than competitive with outside child care agencies.
As a result of the successful competition, in December 1999, OSD
was notified that, like the Army and Air Force, the Department of Navy
intends to use strategic sourcing to streamline child development
programs and will exempt DoN child care programs from further A76
studies. MEOs will still be required but they will no longer have to
compete with the private sector. Savings will be applied to child care
expansion programs to meet DoD potential need requirements by Fiscal
Year 2003.
HOUSING DEFICITS
Question. What is your current worldwide family housing deficit?
Answer. As of September 30, 1999, the worldwide family housing
deficit was 10,500 homes for the Navy and 10,700 homes for the Marine
Corps.
Question.What are your three largest deficits, and how large are
they?
Answer. The Navy and Marine Corps locations with the largest
projected deficits are as follows:
Navy: Units
San Diego, CA................................................. 5,068
Norfolk, VA................................................... 1,883
Everett, WA................................................... 587
Marine Corps:
Camp Pendleton, CA............................................ 3,483
Camp Lejeune, NC.............................................. 1,836
Marine Corps Base, Hawaii..................................... 1,084
WAITING LISTS
Question. How many families are on waiting lists for government-
provided family housing, and what is the average waiting time?
Answer. As of September 30, 1999, there were approximately 18,500
Navy families on waiting lists for family housing. For the Marine
Corps, there were 3,732 families awaiting assignment to family housing.
The average waiting times for assignment to a family housing vary
from a few weeks to several years depending on a variety of factors.
The waiting list reflects the quality, cost and availability of
housing, commuting distances, surrounding support facilities, and
availability of good schools.
NAVAL AND MARINE CORPS RESERVE PROGRAM
GEORGIA: ATLANTA NAVAL AIR STATION--FITNESS CENTER ADDITION
($2,650,000)
Question. Are adequate physical fitness facilities currently
available for active duty personnel? If not, why isn't this an active
duty project?
Answer. Adequate physical fitness facilities are not currently
available for active-dury personnel. The active-duty personnel at NAS
Atlanta, however, are TARs (Training and Administration of Reserves)
and, therefore, Reservists.
NAS Atlanta is a Naval Reserve base, which is why this project is
programmed under the MCNR program.
[Clerk's note.--End of questions for the record submitted
by Chairman Hobson.]
Thursday, March 9, 2000.
DEPARTMENT OF THE AIR FORCE
WITNESS
RUBY B. DeMESME, ASSISTANT SECRETARY OF THE AIR FORCE (MANPOWER,
RESERVE AFFAIRS, INSTALLATIONS AND ENVIRONMENT)
STATEMENT OF THE CHAIRMAN
Mr. Hobson. The committee will come to order. This
morning's hearing will focus on the Air Force's military
construction program, including family housing, base
realignment and closures, and the Guard and Reserve.
Our witnesses this morning are Ms. Ruby DeMesme, Assistant
Secretary of the Air Force for Manpower, Reserve Affairs,
Installations and Environment, and Major General Ernest
Robbins, the Air Force Civil Engineer.
Madam Secretary, it is a pleasure to have you here. General
Robbins, this is your first time appearing as the Air Force
Civil Engineer but we have met a couple of times before, so we
welcome you to the committee.
General Robbins. Thank you.
Mr. Hobson. We look forward to your testimony on the
construction programs in the Air Force, the Air National Guard
and the Air Force Reserve.
John, do you have any comments that you would like to make
at this time?
Mr. Olver. Thank you, Mr. Chairman.
Very briefly, welcome, Madam Secretary, again. We
appreciate all of you being here to be with us today.
This looks like a difficult budget for the Air Force. You
have a serious backlog in a variety of ways that we have been
dealing with over time, a lot of competition through limited
resources and I am sure that some of the problem with this is
some of the excess facilities that still exist in place. I
imagine we will hear about that.
I am interested in the Air Force's progress on the housing
privatization and how, since we are having some proposals for
additional privatization, how you are evaluating the prospects
for projects for the privatization.
So those are my general interests and thank you for being
here today.
Mr. Hobson. Madam Secretary, we would appreciate it if you
would hit the highlights of what you want our committee to hear
and then, General, if you have anything you want to say and
then we will open it up for questions.
And before we go on, just in case I forget it, our next
hearing is going to be Wednesday, March 15 at 9:30. The subject
will be military housing privatization. For those members who
might want to leave early today, we hope you will be aware of
that schedule. I think this is something that almost
everybody--I know you have a keen interest in, Norm, and some
of our other members--as we look at it because you all have a
couple of things in your districts that are moving along.
Let me say one other thing before we start. I have received
a request from the Air Force, not at my bidding. I want to make
it very clear this was not at my bidding. As a matter of fact,
I had pushed it to the bottom because I did not want it to
appear that I was trying to do my own base at the expense of
anybody else's base, but there has been continued, in spite of
that, continued efforts on behalf of Wright Patterson and the
Air Force to include Wright Patterson, to the point of that the
Secretary discussed it with me.
Therefore I received a letter and I guess I am stating
publicly that I have objection to it since everybody else wants
to do it. I just want the committee to know that it was not
done--and I want the Air Force and the world to know that it
was not done at my bidding. As a matter of fact, I would have
probably held it off longer but the Air Force seems anxious to
continue to want to do it so I am going to accede to their
request.
Mr. Dicks. Mr. Chairman, we are glad to have you with us.
Mr. Hobson. I was trying to put off some of that for a
while.
Mr. Dicks. You are right in there with us.
Mr. Hobson. Yes, I know.
Mr. Dicks. How is the reprogramming doing, Mr. Chairman?
Mr. Hobson. We are not holding it up. We are not the ones
holding it up. There have apparently been some questions raised
about it but not by us.
Mr. Dicks. Thank you.
Mr. Hobson. That is an Army question. That is not an Air
Force question.
So with that, I am sorry, Madam Secretary. Go ahead.
STATEMENT OF HON. RUBY B. DEMESME
Ms. DeMesme. Good morning, everybody, Mr. Chairman and
members of the committee. We are pleased to be here this
morning to present our Fiscal Year (FY) 2001 military
construction (MILCON) program. And I especially want to thank
the members of the committee for your continuing support of our
uniformed members and their families.
Last year was a busy and eventful year. We were highly
successful in accomplishing our missions. Our airmen performed
superbly both here in the United States and abroad. We are
cognizant that we must have adequate facilities and programs in
place to take care of our people and we are trying to do that
by balancing the needs of the total force and minimizing any
adverse impacts on unit readiness, on our modernization and our
quality of life programs. I have submitted my written statement
for the record and will take just a few moments to highlight a
few areas of the FY 2001 total force program submission.
Our $1.65 billion MILCON budget request is necessary to
support our readiness objectives for our highly mobile force.
This request includes support for the F-22 fighter, for the C-
17 Airlifter, the B-2 bomber, construction of a training range
in Idaho and many more. We appreciate your support of last
year's Kosovo supplemental bill that enabled us to fund more
quality of life, force protection and environmental projects
for our overseas locations, as well. We will continue to work
with our European and Asian partners to burden-share the cost
of these facilities to the maximum extent possible.
We are doing a lot for our people but we need to do more in
the quality of life area to address recruiting and retention
challenges. Through various surveys and one-on-one discussions,
we know that our military family housing program is among the
top two reasons that our people stay with us. Our military
housing plan contains both additional MILCON and housing
project privatization initiatives. This year's housing program
includes six new privatization initiatives for a total of 6,921
additional units.
We are also making progress with our utility privatization
program. So far, we have identified 435 of our 640 systems as
potential privatization candidates and we have issued a request
for proposals for 34 utility systems in January of this year.
We will also complete evaluation of an additional 225 systems
by December and expect to award additional systems by 2001.
I also thank this committee for the support of the Base
Realingment and Clousure (BRAC) No-Cost Economic Development
Conveyance legislation. I have personally approved four
requests to date--for Lowry Air Force Base, Colorado, Myrtle
Beach Air Force Base, South Carolina, March Air Force Base,
California, and Kelly Air Force Base, Texas--and we estimate
that we will save these communities over $140 million.
Mr. Chairman, the Secretary of Defense has called for two
additional rounds of base closures and we really ask you to
support this request. We are continuing to work within our
existing authorities to reduce Air Force infrastructure but
there is no substitute for BRAC.
In conclusion, we realize the Air Force would not be the
world's premier aerospace force without your strong support
over the years. This budget submission provides a delicate
balance among our people, readiness and modernization needs,
and it also reflects our commitment to provide better working
conditions all over the world for our people. Our goal is to
establish quality Air Force installations around the world for
our total force personnel.
I thank you, Mr. Chairman and members of this committee,
and we are ready to answer any questions you might have.
Prepared Statement of the Honorable Ruby B. DeMesme
Mr. Hobson. Norm.
MC CHORD AFB
Mr. Dicks. I would just like to thank the Air Force for the
work that they have done at McChord Air Force Base on the
facilities for the C-17. I do know, and I will just make this
brief comment, that there is a mission support project that is
in the five-year plan, 2003, that is of significant concern and
I am going to try to talk to my colleagues on the committee
about whether we can move that project up. It is one that deals
with the headquarters facilities at McChord Air Force Base,
which will be the home of the C-17 on the West Coast. We
already have C-17s coming in there. And if we went ahead with
this project, I am told that there are three or four other
buildings that could be shut down that are very old buildings
and then the people could all be relocated into this new
facility.
So just for the record if you could just put in any comment
you have about this particular project, I would appreciate it.
Ms. DeMesme. We will, sir.
The information follows:
The Mission Support Center is a two-phase project that is
required in support of vital missions and community activities
at McChord AFB, WA, home of the C-17 on the West Coast. Many of
McChord's mission and community support activities are located
in substandard WWII and Korean wood frame buildings that are
widely dispersed, undersized, and functionally inadequate. The
existing Mission Support Center is a three-story masonry
facility constructed in 1940 as an open-bay enlisted barracks
with a dining hall. The building is sound and should be
preserved as a historic site on McChord, AFB.
Phase I renovates 11,750 square meters (SM) and adds 651 SM
at a cost of $15.3 million. Phase I is included in the
President's Budget Future Years Defense Program for fiscal year
2003, but could be awarded in fiscal year 2001 if authorized
and appropriated. Phase II renovates 11,272 SM at a cost of
$14.7 million and demolishes five one-story buildings. Phase I
and II are stand-alone, complete and useable projects. Overall,
this two-phased Mission Support Center project will modernize a
total of 23,022 SM in the existing facility. Also, this project
renovates 5,574, SM of currently unusable space in the existing
facility and demolishes five substandard (3,351 SM), WWII wood
frame buildings throughout McChord AFB.
Mr. Dicks. Thank you. And just one other quick point. One
thing we are doing on the B-2 is we are going to have
deployable shelters for them. Now that comes under the regular
defense bill. Will there be any military construction
implications to that in terms of housing of personnel when,
say, you have these shelters and you are going to deploy them
to England or you are going to deploy them to Guam and then you
have to move the people out there? How would that work? Or they
would just use existing facilities at the existing bases?
General Robbins. Sir, I recall seeing no additional
dormitories, for example, associated with those. At Andersen in
particular, Guam, we have sufficient billeting available.
Mr. Dicks. What is the place where we had the B-1s and the
B-52s in England?
General Robbins. Fairford.
Mr. Dicks. Fairford. So if we deployed B-2 to Fairford, you
would just use existing facilities there?
General Robbins. Right.
Mr. Hobson. Tell me a little bit about, since we are on the
committee, are these permanent shelters or do they take them up
and down? What do you do with them?
General Robbins. In theory, you put them up, take them
down. The folks in the logistics world are looking at off-the-
shelf modular-type structures, preengineered buildings,
basically.
Mr. Dicks. And then you would put them in the C-17 or C-5
or whatever and you would fly them out there. Say there is a
crisis in Kosovo. That way, then you could cut down----
Mr. Hobson. Flight time.
Mr. Dicks. Yes, you would only have a three- or four-hour
flight in and out of----
Mr. Hobson. The next thing, though, is you have to have a
repair facility to do some things----
General Robbins. And we have that, sir, in the '04, in the
FYDP, in the '04 program for Guam. There is, in fact, a MILCON
project for a shelter, for a maintenance facility that would be
more permanent.
Mr. Hobson. In Guam?
General Robbins. In Guam.
Mr. Dicks. So that would give you the ability to--you could
go from Whiteman to each theater. It is a tremendous way to
better utilize this airplane. But I just was interested to see
if there were any MILCON implications.
General Robbins. Right now the only MILCON is the '04
project at Anderson.
Mr. Dicks. Thank you.
Is there anything left we have to do on C-17 at McChord?
General Robbins. No, sir.
Factual error: There is one remaining McChord C-17 new
mission beddown project: FY02 $4.3 million, extend Nose Docks.
Mr. Dicks. All done?
General Robbins. All done.
Mr. Dicks. Thank you, Mr. Chairman.
Mr. Hobson. Allen.
Mr. Boyd. Thank you, Mr. Chairman. First of all, I want to
apologize. We have another--I have another subcommittee
hearing.
Mr. Hobson. Everybody does.
Mr. Boyd. I am sure I am not the only one.
Mr. Hobson. I think Norm and I have three at the same time.
Mr. Boyd. Well, I guess some of you that are more senior
members have that problem, Mr. Chairman. I long for that day
when I will have that problem.
TYNDALL AFB
Madam Secretary, General Robbins, thank you for coming. I
have a couple of questions. First of all, I want to thank you
for your cooperation and the work that you have done to help
prepare Tyndall for the F-22. I know that you have the last
piece of the puzzle, I think, in the current request, which is
the maintenance facilities and the training, simulator training
facilities.
Ms. DeMesme. Correct.
Mr. Boyd. Not simulator training; actual training
facilities.
I assume, with the runway work and the tower work that has
been done, that this will prepare Tyndall for the arrival of
the F-22 training squadron?
Ms. DeMesme. Yes, sir.
Mr. Boyd. Well again, thank you for helping us work through
that early.
I really wanted to shift gears and I am not sure, Madam
Secretary, that this would be under your area but there is a
report--it has come to my attention that the Secretary of
Commerce is looking at granting leaseholders the right to begin
drilling for oil and gas off the coast of Florida in the Gulf
of Mexico. The State of Florida has done a report which says
basically that the greatest, most significant impact of that
would be on the training ranges of Tyndall and Eglin Air Force
Base.
Are you aware of that issue or have you had any
conversation with the Department of Commerce on that issue? And
if so, what are your reflections on it?
Ms. DeMesme. Yes, sir, we are aware of that. A couple
members of my staff have met with some of the folks down in
Florida and they discussed what--we have begun to look at, what
some of the ramifications might be or the implications for our
training ranges. So we are not at a point yet of knowing
exactly what the impacts will be but we are going to continue
to work with them.
Mr. Boyd. Okay. If you will keep us----
Ms. DeMesme. We will keep you apprised of what is
happening.
Mr. Boyd. And how that comes along.
Ms. DeMesme. We have had a couple of meetings to date so
far.
Mr. Boyd. The implications are wide-ranging of that kind of
granting of a leasing right out there.
Ms. DeMesme. Well, we are going to keep a close eye on that
because we certainly do not want to negatively impact our
training capability.
Mr. Boyd. Thank you.
The only other issue that I have has to do with the
elimination of the contingency funds and I know one of the
things that we have to do at Tyndall, probably the next project
after this current round, will have to do with a weapons
control system, which would be hopefully a design/build, and
some of us are concerned about the elimination of the
contingency fund and the effect of that on those kinds of
projects.
Would you care to speak to that? We have asked the other
services who have come here about the elimination of the
contingency fund and I know that this Congress last year took
part of that money to get everything in balance at the end, but
we did not take all of it. But you guys took the rest of it to
meet the .38 percent across the board.
So is this going to hamper or hinder your efforts to do the
MILCON projects that you need to do?
Ms. DeMesme. Certainly, sir, it has the potential of having
a negative impact on our ability to complete our projects. As
you know, when you are working on a project you never know
exactly everything that is going to be needed until you get
involved in it. It is always good to have a contingency plan
and funds. We have used contingency funding in the past and
they have been necessary on many occasions.
I will let General Robbins tell you a little bit about how
we think this might impact us, and we know it is certainly not
the optimum way to do business. It leaves us vulnerable as we
are trying to complete our projects.
General Robbins. I am sure you heard the same thing from
the Army and the Navy when they testified. We did some research
on the past five-year history of our total program and found
that upwards of 90 percent of our projects experienced some
growth and therefore tapped into the 5 percent contingency. We
have benchmarked against industry and find that they actually
budget more than 10 percent for a typical construction project.
We will not be able to quantify the impact on a specific
project until it is awarded and under construction, and then
you find design deficiencies or you find changed site
conditions or you have bad weather, all those things that can
happen to make a project go south on you. But we think we have
been prudent in how we have used contingency dollars in the
past. We found that 80 percent of that cost growth was due to
the kinds of things I just mentioned and only 20 percent was
due to changes in mission or changes in the equipment that had
to go on the building, for example, the user-driven type
changes.
So we believe there will be an impact. We think downstream
there will be a rolling effect where we will find ourselves
unable to execute some projects because we have had to borrow
money from those appropriations to pay for changes in others.
So we do not think this is good business.
Mr. Boyd. Thank you very much.
Thank you, Mr. Chairman. That is all I have.
Mr. Hobson. Sam.
ECONOMIC DEVELOPMENT CONVEYANCES
Mr. Farr. Thank you, Mr. Chairman. I have very little Air
Force property in my district. I have one tracking station on
top of a mountain, but I do have a lot of Air Force men and
women who attend studies at the Defense Language Institute and
some attend classes at the Naval Postgraduate School.
The one thing I am very interested in is your statement
about the No-Cost EDCs. Are any of those economic development
conveyances made in California, do you know, on the bases in
California?
Ms. DeMesme. At March Air Force Base we made some, sir, and
we are looking at the other----
Mr. Farr. And do you have housing on the bases?
Ms. DeMesme. Yes, sir.
Mr. Farr. Are you having to clean up the housing?
Ms. DeMesme. We conveyed as is. We are not cleaning out any
lead-based paint or asbestos. We convey property as is.
Mr. Farr. Is any of this--I believe you mentioned the
construction of homes, private construction. Is any of that
housing on the bases that have been closed?
Ms. DeMesme. No, sir. We will not be putting houses on
bases that are closed.
Mr. Farr. Well, one of the things that I have been keen
about with the other services that have been here as each of
you deal with base closure with those respective communities,
with the authorities of those communities, which is proper. But
one thing that you all have in common in California is you have
to deal--all the services have to--with the California Office
of Toxic Substance, which is inventing their own standards for
what is clean.
Unfortunately, if you enter into agreements with that
office, I think that is going to be the most restrictive land
covenants anywhere in the United States. I have asked the other
services to develop boilerplate language that can be adopted
for these easements and covenants. I encourage you to work with
the other services, because a deal made by one will become the
boilerplate for all of them.
Ms. DeMesme. Yes, sir, we are. We are working very closely
with the other services and, of course, with the toxic waste
offices in California.
Mr. Farr. My point is do not work with that toxic office
independently of the other services.
Ms. DeMesme. No, sir, we are working in partnership on
these initiatives.
Mr. Farr. Because I do think we need to come up with some
kind of standard that California will accept.
See, the difficulty is that you are going to be liable for
the clean-up, particularly unexploded ordnances and whatever
other clean-up. You are liable, strictly liable forever. If
they set a standard of clean that is greater than the federal
or the military standard, then you are liable to their office
to their quality standards--forever. And there is a lot of
uncertainty in that.
I think that this is an area that is new ground, that has
never been tested before, where a state agency is essentially
trying to decide what is clean as far as unexploded ordnances
are concerned, and other clean-ups. You need to invent the
language so that all the services are going to be mutually
accepting, without one service doing it independently of the
others.
The Army has created a thing called Smart Team dealing with
unexploded ordnances. They seemed to have taken the lead and I
would just encourage you to work with them.
Ms. DeMesme. We accept that challenge and we will be
working with them, sir.
Mr. Farr. Okay. Ray Clark over there is in charge of that.
I thank you very much, Mr. Chairman. I also have to go to
the Agricultural Appropriations Committee and I want to
apologize for being late but thank you for having this hearing.
We all love our chairman in this committee and our ranking
member and we are going to be working closely together.
Ms. DeMesme. Thank you.
Mr. Hobson. Thank you, Sam.
John.
OVERALL FUNDING
Mr. Olver. Actually, it is nice that there are other
subcommittees meeting, as long as they are not mine, so that
one can kind of strip down to the essentials here after a
while. Thank you, Mr. Chairman.
You know, I suppose that in these kinds of hearings what we
discuss ends up sounding like a litany. Every year the request
is below the last year's enacted number by, in this case, quite
a large number. The request here is way down from what was
enacted last year for the Reserve, for the active Air Force,
for the Air National Guard. In each instance, I don't know. In
the Reserve and the National Guard, the request is like 20
percent or 25 percent of what last year's enacted was.
Even the active Air Force is down a considerable number.
The total number is more than half a billion, more than $600
million below the last year's enacted number.
And clearly you have some problems. You have stated in your
written testimony that the funds that you are asking for really
only come to something like a third of the need.
Ms. DeMesme. Yes.
Mr. Olver. And I suppose we cannot really cover all of your
intended need but, why are the requests so low here?
Ms. DeMesme. Well, sir, we are trying to effect a balance
with what our total needs are, dealing with our readiness
issues, with our quality of life programs, military
construction, and we just do not have enough money to fund all
of these adequately with the new missions that we face.
Military construction is the area unfortunately that we
felt that we could take a little risk with because some of the
other areas we could not. And, as a result, we are underfunded
to the tune of about two-thirds of what we really would need.
We have a reasonable program that we are going to try to make
work. It certainly would help if we had more to add to it, but
in today's constrained environment, there was not a lot more we
could do with the budget.
Mr. Olver. Well, one surely doesn't want to take risks with
readiness but, on the other hand, the risks one takes with
military construction have to do with quality of life of the
people involved and thereby goes to the retention aspect. So I
realize what happens when one has constrained numbers that you
have to deal with.
Ms. DeMesme. You are absolutely correct and that is why we
are hoping that we can get some base closures because if we
reduce the infrastructure, we are not continuing to spread our
meager funds across so many bases.
Mr. Hobson. You will get it because you will not have any
people left. They will all quit.
BASE REALIGNMENT AND CLOSURE
Mr. Olver. They will quit. They will not be retained.
Let me, since you have raised the base closure issue, your
testimony suggested there has been more than a one-third
reduction in total force but only a 20 percent or so reduction
in facilities, which means we have a lot of shell facilities, a
lot of fixed costs that are involved in those facilities. That
is always a controversy for us. That is why we have BRAC
commissions, to try to get us over the controversies.
If you were to get the Base Closure Commissions approved
and go forward in some time frame in the future, how much in
the way of savings would you be able to see in that and where
is that savings going to go? Are we going to see that back into
the budget in terms of really updating the places that finally
are kept in that process? And is your base closure proposal
supposed to balance out the reduction in force with the
reduction in facilities? What is the philosophy that is going
on here, both in savings and where it would go and where it
would reappear?
Ms. DeMesme. We would have to evaluate that at the time. We
do not really know what our new mission requirements are going
to be or what our deployment capability needs might be in the
future.
The intent would be to take the monies and to spread them
across--a balanced spread across our needs. I do not believe
that we could put it all into MILCON or that we could put it
all into infrastructure. It will be needs-based-dependent.
But what I can say is that it will go back into quality of
life maintenance, whether it is in modernization, readiness or
military construction.
HOUSING PRIVATIZATION
Mr. Olver. I would hope that would be the case but I am not
sure that--I am not confident that we will see identifiable
numbers in savings and then see those appear in other places.
I do commend you in this budget for, in the case of housing
privatization, in some of the other services the housing O&M
has been reduced as it would appear that they are beginning to
assume some savings out of housing privatization, or most of
those privatization programs are not yet occupied. You are
showing at least some small increase in the housing O&M numbers
here. That is the only part of the budget that seems to be
showing an increase.
I guess, after what I have just said, it cannot be really
because of any savings that have come from the housing
privatization because the housing privatization projects are
not complete.
Ms. DeMesme. Not yet.
Mr. Olver. So it is probably an artifact at the moment,
essentially, of this budgeting process. But that is the only
broad category in which there is any increase in this budget. I
really do not have much confidence that the savings you might
accrue from the BRACs is going to appear in other places to get
at the backlog of deficiencies that we see.
DEPLOYMENTS
Now, you did mention something about deployments and I
guess I would like to ask you in my area--it would appear that
there is a major amount of overseas deployment occurring out of
the Westover Air Force Base which is not in my district but
close by. And so we have had a number of crises--all the
Balkans issues, all the Middle East issues. Really it has been
a decade of Desert Storm and the follow-up that has continued
there and then the two crises in the Balkans with the Bosnian
deployment and the Kosovo deployments and so forth and it would
appear that a substantial amount of that flows through
Westover.
I assume that when we were involved in Haiti there must
have been some southern base or bases out of which deployments
are funneled when one is dealing with Latin America, with the
southern part of this hemisphere, and it leads me to the sense
that there must also be some structure whereby if you have
crises with China-Taiwan, God forbid, and North Korea as a
rogue state and things like that, that there must be
deployments that move through facilities that are under your
purview in the western part or in Alaska or something.
Can you give me some sense of how this is structured? And
does it always involve major reserve bases? In New England, for
instance, the only active base is now Hanscom in Massachusetts,
which does not have any planes there. It is active for the Air
Force but without planes. And all the other active ones, and
there were several over time in New Hampshire and Maine and so
on in earlier times, are now downgraded to Guard or have been
BRACed, one or the other.
Mr. Hobson. They are not downgraded anymore. They are part
of a total force. I think they would resent the fact that----
Mr. Olver. Reclassified.
Mr. Hobson. Yes.
Mr. Olver. That is fine. Please, I stand corrected. Please
take out ``downgraded.''
Mr. Hobson. They all winced.
Mr. Olver. Can you give me a sense of how these things come
up to deal with crises?
Ms. DeMesme. Generally, sir, the Commanders-in-Chief
(CINCs) request what it is they need to meet the contingency at
that particular location and our deployments to date have been
based on where our equipment is located, and where our weapons
systems were that we needed in that particular zone of
conflict.
As we get our Aerospace Expeditionary Force (AEF) concept
more functional--we have already started building our wings,
our Aerospace Expeditionary wings--we will have a rotational
base of units already ready and whenever the CINCs request a
unit for a specific mission, they will go from wherever that
location happens to be.
Now as far as logistics are concerned, we certainly like to
move a weapon system from the closest location to save on cost
when we can, but as we get the AEF concept really working, it
will be on a rotational basis, and that is a total force, as
comprised of our active and our Guard and Reserve forces. We
are all in this together in how we are going to work together
as a team. People will train together and they will rotate
together, serve together, and they will know exactly when they
are going to be deployed and how long they are going to be gone
and when they are going to come back. And that will determine
in the future where we leave from when we go overseas into
these areas of conflict.
There are some locations where we have certain types of
equipment that will be called on more.
Mr. Olver. As I remember, in the case of the Kosovo
operation, some of our B-2 bombers were based here well inside,
somewhere out in the center of the country--I do not remember
exactly which base--and were making flights, round-trip flights
with a period of whatever the bombing mission was along the
way. It seemed like an incredible waste of people's energy and
time by not having someplace where those could be functioning
from much closer to where our crisis areas are. I am surprised
we have not worked that one out.
General Robbins. The projects that were discussed earlier
by Mr. Dicks, the bomber follow-on at Andersen and in the
United Kingdom and the Indian Ocean addressed that very
requirement so that we would not always have to----
Mr. Olver. Diego Garcia?
General Robbins. Yes, sir. So we would not be flying 26-
hour round-trip missions from Whiteman Air Force Base.
Mr. Olver. Where is Whiteman?
General Robbins. In Missouri, right near Kansas City.
Ms. DeMesme. We try to forward-base as many as we can.
Mr. Olver. Well, that was perhaps a special sort of a case
but the others, if you are moving materiel and men for
operations in the Middle East and the Balkans, there must be
more. I would assume that I am only seeing what goes through
Westover, a great increase of activity, because I live within
10 miles or so of there, even though it is not in my district.
But what are the other bases that are particularly prominent in
those deployments, the reserve bases, for instance, that are
particularly dominant in that kind of an operation?
General Robbins. On the East Coast you have McGuire Air
Force Base in New Jersey, you have Dover in Delaware, and you
have Charleston in South Carolina. On the West Coast----
Mr. Olver. Are these active?
General Robbins. Oh, yes. Yes, sir.
Mr. Olver. McGuire and Dover?
General Robbins. Dover, Delaware. And Charleston.
Mr. Olver. And Charleston?
General Robbins. Which is the C-17 base.
Mr. Olver. Okay. So those three are active or reserve?
Ms. DeMesme. They are active.
Mr. Olver. Those are active.
General Robbins. But we have total force. We have associate
wings and my reserve friend can talk to this more than I can
but totally integrated air crews flying the same airplane. It
may be a reserve air crew one day, it may be an active duty air
crew the next, or it may be an integrated crew.
So that is the situation on the West Coast, also, where we
have McChord Air Force Base in Washington outside of Seattle-
Tacoma and Travis Air Force Base in California are the two
prime West Coast airports.
Then for the bridge, if you will, on the eastern side,
Lajes plays very prominent as we transit to Southwest Asia. On
the west side, of course, you have Hickam, Andersen, which is
much closer to Eastern----
LAJES AB
Mr. Olver. This committee believes it has been fairly
generous in helping to put into place some facilities at Lajes.
Is that going well?
General Robbins. It is going well and there is more
requirement for a transient facility there that is in the '02
FYDP.
Mr. Hobson. But the guy, when I was there, when we were
there, the guy said he never got anything until this committee
acted and we put something in. When we were there the guy said,
``We never get anything.''
Ms. DeMesme. Right.
General Robbins. And he may have been a little understating
it. For instance, they have just gotten a new clinic there.
They have had improvements to their housing. But I will have to
admit----
Mr. Hobson. You had a serious safety problem, I think, on
landing there at night, which was not being addressed.
Mr. Olver. We have funded now some lighting for that.
General Robbins. Yes, sir.
Mr. Olver. And I assume that that----
General Robbins. Part of the supplemental.
Mr. Olver. How far along is that project?
General Robbins. My guess is it will be--well, I know it
will be executed before the end of this year.
Mr. Olver. The end of this fiscal year?
General Robbins. This fiscal year.
Mr. Olver. That is good. So that when we get back to
traveling after the election we will at least be safe when we
land at Lajes.
MAJOR DEPLOYMENTS
I cannot expect you to follow my ruminations here but it
would be useful--we have had major deployments and we can
expect to have additional ones over in that area but you are
looking for facility closures. You are promoting out of the
Department of Defense facility closures and as you are
promoting these and advocating, it would be useful for me to
see where the flow in order to deal with crises in the Far
East, in Latin America, which we have fortunately not had
recently but we have had particularly flow going to the Middle
East and it would be very useful for me to see what has been
the flow, almost a flowchart of where materiel and personnel,
how those have been deployed through those locations, to see
where, in fact, are our key locations.
Presumably deployments, which we have more of them in the
Middle Eastern theater and in the Balkans and such or in
Africa, they are going to go through the same places, in
essence, and that would help me to see the picture as we go
forward here.
General Robbins. We can have the operational Point of
Contact (POC) come over and give you a briefing on, say, the
past five years if that is far enough back or maybe starting
with Desert Storm, how we have used the aerial port--the volume
going through and where they are going.
Mr. Olver. It would help me understand the operations. It
may not be so easy because we have not had many, but you might
be able to give a sense of what you think the operations going
in the other two major directions, where the flow would be
there. But we have a history of flow now for several operations
in the case of the ones to the Middle East and the Balkans that
allow that one to be looked at rather definitively, I would
say.
General McKinley. Sir, some of your total force bases, from
our perspective Bangor and Pease are part of our Northeast
Tanker Task Force. Niagara Falls is part of that task force
now. Your Barnes unit, A10, trains with those units day in and
day out. They deploy to Triponi, Italy with those tankers. That
is part of the air bridge that General Robbins mentioned.
It is a very intricate flow and I know the Air Force
Reserve is similarly equipped and based.
Mr. Olver. Well, I know, Mr. Chairman, that you are going
to want to talk about privatization but now that I have sort of
thrown out the deployment issue, we are hearing now that the
deployment policy is going to change so that nobody is being
deployed more than six months.
Ms. DeMesme. Yes, sir.
Mr. Olver. Had that been a problem for the Air Force? My
units from Barnes, which is in my district, they had been over
in the Kosovo operation on substantial deployments and that has
been reputed to be an issue for retention and so forth. The
long deployments were leading to a lot of people just opting
out or something.
Ms. DeMesme. That is our goal and we have been working for
this goal really now for a couple of years. Within the last
year we have gotten them down to six-month rotations and I
think----
Mr. Olver. The rotations on the parts of Reserve and Guard
people for the Air Force are now under six months?
Ms. DeMesme. Yes, sir.
Mr. Olver. There have been none that have been longer?
Ms. DeMesme. We have some people still there for nine
months but most of them are six months and below. We are trying
to get them all down to six months.
Mr. Hobson. What about the 123rd AC&W squadron deployed at
Kuwait City?
General Robbins. Ninety days.
Mr. Hobson. I bet you if you check, the 123rd is longer
than 90 days.
General McKinley. There are some high demand/low density
units that are that way, sir. I think General Ryan's commitment
for the Guard is to keep Active Duty Man-day (ADM) cycles at
90-day rotations. And anecdotally, most of our pilots spend 15
days on location. And the Barnes unit did a great job, combined
with Battle Creek----
Mr. Olver. They are a great unit.
General McKinley. A great unit. But they rainbowed.
Reserves and us are doing a great job of rainbowing our like
aircraft so that we minimize the impact on our employers and
our families.
So that is the goal.
Mr. Hobson. But you have not achieved that goal yet.
General McKinley. In some areas.
Mr. Hobson. Pilots? I do not want to take John's time but
let me tell you, there is still a problem with pilot retention.
There is still a problem with long deployments on employers and
it is something we have to look at.
I think General Ryan's plan of putting in place whatever
you call them----
Ms. DeMesme. AEFs?
Mr. Hobson. AEFs, is the right way to go, but I will resist
you telling me that it is not a problem with pilot retention
because I have had--and it is true in the regulars, and not
just the Guard. I have had pilots tell me and I have had senior
officers who have sons who are pilots tell me that the
uncertainty of these deployments, the uncertainty of the delays
puts real pressure on pilots.
You know, you guys all went through one time where you did
not need anymore pilots and we would let kids out of the
academy, and this is outrageous--we let kids out of the academy
after we had trained them because you all did not know how to
plan. Then we come around and we have to open back up bases--
one of them happens to be mine--that we are going to do pilot
training in now in F-16s and other things because we shut them
down. I do not consider that good cost management by people. I
get a little hot about that. John, I am sorry.
Mr. Olver. To go back, then is there a goal for the Guard
of three months and a goal for the Reserve of six months? Is
that a target or what are we talking about?
Ms. DeMesme. It depends on what the job is going to be
there. We have some 15-day rotations, we have 30-day rotations
are 60-day rotations, but we had some 90 days. When I was over
there in the fall we had some people who started with 120 days
and they were just serving those out but as they move out, then
it will be down to 90 and then to 60.
Mr. Olver. For Guard and Reserve?
Ms. DeMesme. Right.
Mr. Olver. I thought we were talking about six months on--
--
Ms. DeMesme. Well, we have changed that for the Middle
East.
Mr. Olver. Is the Air Force policy then 90 days for both
Reserve and Guard?
Ms. DeMesme. Yes.
Mr. Olver. That is what you are trying to get to?
Ms. DeMesme. We are trying to get to that.
Mr. Olver. What percent of the deployments now have been
over that?
Ms. DeMesme. I would say we are down under--I am really not
sure of the percentage but I think probably about a third. I
would say about a third.
Mr. Olver. Well, you may want to refine that. I am just
trying to understand here whether there is a substantive
difference between the policies for the Reserve and the Guard.
They are essentially the same?
Ms. DeMesme. They are the same, sir. And I will send you--
--
Mr. Olver. And the intent is to get those down under 90
days?
Ms. DeMesme. Under 90 days, sir. It is our intent.
Mr. Olver. Which sounds like a real good move.
General McKinley. The Army Guard is six months and I know
they are experiencing some significant problems.
Ms. DeMesme. And I think there is some confusion.
General McKinley. But the air side is different.
General Duignan. The AEF concept is a 90-day block and for
those of us in the Reserve program, for the operational units
and also for the combat support units, it is a 90-day window
but what we do is send them over in 15-day blocks. So we take
six people to fill that one slot for an individual that
deploys.
So the Air Force Reserve----
Mr. Olver. For a 90-day total.
General Duignan. Ninety-day total, six different----
Mr. Olver. Fifteens.
General McKinley. Correct.
Mr. Olver. Tell me what rainbowing is or is that it?
General McKinley. Well, that is it. In the instance of
Kosovo, Barnes rainbowed with Bradley--excuse me, with Boise
and Battle Creek.
Mr. Olver. Oh, yes, they called it the Killer Bees. That is
right.
General McKinley. Killer Bees. Like airplanes. Pilots can
fly each others' airplanes. They are trained exactly the same
as our Air Force counterparts. The Reserves can participate in
that, also, and it is really a wonderful program.
But as the chairman said, we have to do better, but that is
a goal that we are all shooting for in the Air Force.
General Robbins. So let me give you the total picture here.
Let's say you have a requirement for 10 people and the Guard
and Reserve have said they are going to pick up somewhere
between 10 and 15 percent of the requirement in Kuwait. Let's
just say you need 10 people.
The active duty people that will go there will be there for
90 days and there will be a rotation of Guard and Reserve
people over that 90-day period and they will know ahead of time
who they are and where they are going to go and they will go
over for two-week periods, back and forth. So about two people
are going back and forth all the time and eight are in place
for the full 90 days.
When the 90 days is up, the active duty group comes back
and new active duty group goes over. And you enter into this
cycle once every 15 months.
Mr. Olver. You always leave me with the impression that
this is a very clearly thought out pattern that I can
understand if I just saw the pattern, could look at it. That is
why I ask these questions about the flow of personnel and
manpower and so forth and I thank you for the general
explanation.
Mr. Chairman, thank you very much. I will ask more about
housing when----
Mr. Hobson. And it is not perfect because some people will
go longer, some people have different missions, so while there
is a goal of certain things, and it is not bad to give people
the experience of being on active duty and being deployed. It
is somewhat expensive to move those people----
Ms. DeMesme. Right, quite expensive, yes.
Mr. Hobson. But it is also expensive to lose those people
and have to retrain people, so there are some trade-offs there.
I want to ask something along what John asked. I had not
planned to ask this. I recently went down to Fort Bragg and
looked at some of their stuff on a quick in-and-out and there
is a runway at Pope Air Force Base that needs to be extended to
assist them with their deployments.
I do not see it anywhere. I do not know what you all are
doing but this is one of the things where the Army needs
something to do their mission and you are in support of them, I
think.
Ms. DeMesme. Yes, sir.
Mr. Hobson. So do you want to give us something for the
record?
Ms. DeMesme. I will give you something for the record, sir.
I know that Pope has been working with a local community group
because I think where they want that runway expanded it would
be an encroachment area.
[The information follows:]
RUNWAY AT POPE AFB
The Pope AFB, NC runway extension is necessary to
accommodate large bodied aircraft operations. The extension
will allow the C-5 and the C-17 to take off at maximum gross
weight to support the Army's Strategic Brigade Airdrop (SBA),
major theatre war, and en-route missions. The existing runway
is 7,500 feet and the extension will increase the runway to
9,500 feet.
This project is not yet included in the current President's
Budget Future Years Defense Program (FYDP) because we are in
the scoping/planning phase. It is a valid MILCON requirement
for the Air Force to support the SBA mission. The project
requires an Environmental Impact Study (EIS), land acquisition,
and relocation of occupants in the construction area and
airfield clear zone. The EIS is in progress and should be
complete in fiscal year 2001. These requirements make up the
first phase of the project at $22 million. Additionally, Ft
Bragg has allowed us to start planning for the use of 750 ft
into their property. The second phase, $26 million, will
construct the runway and taxiway extensions.
Mr. Hobson. I have talked to the mayor. The mayor is fully
in accord, as I understand it. We just need money.
Ms. DeMesme. We will get something for the record to you
but I took a look at that when I was at Pope a couple of months
ago and I know that we are trying to work with the Army and
with the local community to make that happen. We have to fund
it, as well.
Mr. Hobson. All I can tell you is that the mayor seemed
very receptive to moving forward with that.
Ms. DeMesme. There was a local citizen group against it at
the time when I talked with them but we will certainly try to
work through those concerns.
Mr. Hobson. He seems to be able to work them around. He
seemed pretty sharp about it.
I want to ask a few questions. I am going to throw you a
couple of curves because I had not planned to ask this but I am
going to ask it. How is the general officer house in Osan,
Korea? Is he in there yet?
Ms. DeMesme. Do you want to know if the roof is fixed yet?
Mr. Hobson. Well, I want to know about the water line, too.
Is anything done, started?
General Robbins. I assume it is but I really do not know,
sir.
Mr. Hobson. Well, you can get back to me. I just threw you
that curve.
General Robbins. I understand. I know where you are coming
from.
[The information follows:]
GENERAL OFFICER HOUSE IN OSAN, KOREA
All work on the Osan General Officer Quarters 1071 has been
completed except for some landscaping. Lt Gen Heflebower moved
in soon after the work was completed in November 1999. Lt Gen
Heflebower is pleased to report the plumbing is now rust-free
and the roof no longer leaks. He extends his personal
invitation for Rep Hobson to visit Korea soon so he may see
this house and also become familiar with the many other
challenging facility issues that directly impact readiness and
Qualify of Life for the 9,000 plus personnel and dependents
within his Command.
RAF MILDENHALL
Mr. Hobson. Also, I would like to know about the control
tower at Mildenhall, England and when we are going to get
moving on this stuff. You know, this, to me, took a little
whacking at the expense of the Senate and some other people
over this overseas MILCON and I want to see this money expended
and done because one of the things you say is the Air Force is
willing to take a risk of underfunding MILCON and spending
those dollars on other bills. Are we also taking a risk by not
funding operational facilities that we need? And how long are
we going to take this risk?
One of those operational problems is Mildenhall. Every time
those planes land over there you are running a real risk with a
1950s control tower there. It is not right to land a huge
airplane in there and not be able to see him all the way on the
ground when he is on the ground, to see him come around that
turn. That is just one area.
Are we doing the fire station at Ramstein in Germany?
General Robbins. Actually, there were three at Ramstein
that are not in the supplemental.
Mr. Hobson. They are supposed to be. At least one of them
is.
But again, I heard you guys messed around with that and I
thought we got it back in. When you say it is not in, it was in
from here. If it got taken out, it got put somewhere else. We
need to look at that because I particularly want to see that
one done. Again I am going to ask another question about
Ramstein later on.
BASE REALIGNMENT AND CLOSURE
I guess what I am really concerned about, and this is more
of a comment, for an administration that cares about people, I
do not think we are caring about people in this budget and I do
not think we are taking care of our people. And this has gone
on since we started the base closure stuff, so maybe it
precedes back even to the previous administration but I do not
think we do a good enough job of taking care of our people.
And I will tell you, frankly, to say that base closure is
going to take care of people, it is not because it has not so
far, and we have gone through three rounds of base closures and
as far as I can tell, when you look at these bills, we go down
on what we do for people. We do not go up in helping people. We
use closure as an example of saying we are going to help people
and then we do not.
And I am going to tell you I am not going to go into
another round of base closure and have what has happened so
far. Most of the money is used up with the bases that we are
giving away, later on, and it does not go for people. You look
at what we are doing for people and if it was not for
privatization, and I am not just blaming the Air Force, but the
Army did not have anything in for Continental United States
(CONUS) at one point.
I think it is inappropriate for people to come in and ask
about base closures and say that we are going to do more for
people after that, when we have not. And, you know, we raised
the pay. There was no offer from you all to raise the pay. It
came from this Congress. The Basic Allowance for Housing (BAH)
you guys raised but then messed up and destroyed much of the
good that came from that. It is still on people's minds that we
had to go back and force you all to come up with a proposal.
Now, to the credit of the Defense Department, they did,
when they realized they had messed up, change it and, as far as
I know, nobody has gone back and really looked at how that deal
was put together to begin with to make sure that the
contractor--I understand the contractor did not even go into
places where people lived. They just went into the community in
general. And there is a tendency for military people to live
together, whether it be on the base, which they have to do when
they are on the base--they cannot get away from it, but when
they are off-base, there is a commonality of community. People
do not tend to run off, and you have some requirements about
time there.
But I really will challenge, and I should have done this
the other day with the Secretary of Defense when he testified
and it is not fair to you to go into this now but I am going to
raise the question that I cannot support a base closure when I
do not see us doing enough for people and changing the quality
of life for people, when what we do is shut down bases.
Now, I will talk later on--hopefully we have Brooks worked
around to where Brooks is a better model for BRACing facilities
or preBRACing or getting the things that we do not need anymore
to a community, so that if we do move some things out of there
someday--10 years, five years, whatever--if it does move,
because we know the Air Force is going to change, that we do
have it so it is not such a trauma on the community and they do
not wait so long.
Good example of that, and I keep saying this so somebody
will look at it, is the facility at Gentile Air Station in
Kettering, Ohio, which has--but again, it took a long time to
get it to the mayor so the mayor could do his job. But once the
community got it, the community has done its job.
I am concerned that we look at the overseas MILCON and I
know that--and you all need to ask for it because there is some
resistance, as I found out, in the supplemental to doing
overseas MILCON, but if we are going to send these young people
over there, we have to give them decent housing; we have to
give them decent facilities. They cannot be using World War II
and previous to World War II buildings. Buildings previous to
World War II? That tower, I think, is previous to World War II.
And other facilities over there. We just have to find a way.
And I think the Air Force does a better job than some of
the services in taking care of its people but I do not think
you find enough. I mean this bill, the Air Force, you are down
$628 million or 43 percent from last year's enacted and it
looks to me like there is a tendency by the Air Force to say,
``Well, we are going to fund some of this other stuff, like
space-based laser and some other things, and hope that this
committee and the members of Congress will come through and can
save us again.'' I do not know how long we can do that.
I will give you another example. We took on a training
mission at the Springfield Air National Guard Base but I do not
see any money in there for the runways and the taxiways that
are needed. I had to do some stuff at his previous base, too,
because the Air Force was not doing it.
HOUSING PRIVATIZATION
I really want to get to housing privatization.
We have 15 minutes before we have to be there. I have some
I will give you for the record.
The budget request is $46 million for six new housing
privatization initiatives. Why is the Air Force requesting
funding for six additional projects when you have completed
only one to date and they are still working on the development
of nine pilot projects?
Additionally, why does the Air Force request the estimated
amount of the government contribution for these deals? Why not
ask for the full amount to construct X number of units under
traditional family housing financing in case privatization
fails at these locations? Because obviously you have identified
where you need housing.
So I know we have a certain time to get to certain places
but until we have done some things successfully, I get a little
worried about having so many out there that you do not do the
ones that you are planning on correctly.
Ms. DeMesme. Sir, we do have our military family housing
plan and these are laid out where the worst needs are, where we
can actually go in and make some changes.
We believe that it takes a mixture of privatized housing
and traditional MILCON to meet our needs if we are going to
leverage the dollars we have today and get housing available to
our people faster than traditional MILCON.
If we use the plan we have now, we should meet the majority
of the need by 2011 but if we do not use privatized housing as
well as MILCON, it will probably be 2030 and beyond before we
get to the same level of adequacy for our families.
So we are looking to leverage whatever we can to get things
available now where people really need it. If we could get the
monies for traditional MILCON, of course that would be the
preferred thing to do, but our track record shows that that is
not going to be possible in the near future.
Mr. Hobson. Well, it isn't because you guys do not fight
enough for it. If the bill has gone down, this bill--if this
bill would have been what you all asked for last year in the
incremental funding, you would be over $11 billion now. You
look back at the projections of what you all projected for this
year from last year and it would be $11 billion. I see $8
billion.
Ms. DeMesme. Yes, sir.
Mr. Hobson. So how in the world were we going--I mean what
a sham that was to come in with that deal last year. I do not
know whether anybody really meant what they said because if we
had done that, this year you would have been at 11. Why are we
not at 11? Because there is still the need there.
Ms. DeMesme. Well, traditional MILCON, of course, takes
longer to get. It is more difficult to execute than privatized
housing.
Mr. Hobson. But the bill was 11. You all said this year you
were going to ask--if we had done the incremental funding of
last year, you would have been in asking for $11 billion this
year. I do not mean you; that is not fair.
Ms. DeMesme. Right, and it goes right back to our whole--it
was not the preferred method.
Mr. Hobson. I know.
Ms. DeMesme. It still is not.
Mr. Hobson. I am just sending messages. It is not fair to
you.
Ms. DeMesme. I appreciate that.
Mr. Hobson. I am very frustrated. I am very frustrated with
what I see happening. The Air Force has a tradition of taking
care of its people over the years and we are having some
recruiting problems. I want to try to take care of that. I am
not trying to beat you up on this; maybe I am but I do not mean
to do that. But I am really frustrated with where we are going.
Robert, do you have anything you want to ask on any
subject?
Mr. Aderholt. I may later on. Go ahead right now.
Mr. Hobson. John, do you have anything you want to ask on
privatization?
Mr. Olver. Yes, on privatization I will throw something
out. We are going to have a whole hearing on this. It seems to
me you are asking for a whole bunch of new projects. At the
same time, we are embarking upon an increase in the BAH, a
phased increase in the BAH up to whatever we believe is the
market rent, unlike having our people have to put in 15
percent.
Now it seems to me that has to have some effect. If that
much more money is going to be out in the private market, then
we are going to have private developers who should, if market
forces work, begin to respond on this stuff.
Now, I do not know whether your new requests for
privatization or MILCON, either one, are reflecting that change
in the BAH and I will certainly want to know something about
that from you and all the other services when we have a
privatization hearing next week because it seems to me it is
perfectly reasonable to have a three-pronged way in which this
is happening on the community and in traditional MILCON and in
privatization, for the reason that privatization, at least in
theory, is going to get some housing into the market faster.
Now from the experience thus far, I am not sure that that
is the case. The case is that if we decide to give the money
for traditional MILCON, things get done pretty quickly.
Mr. Hobson. Relatively quickly.
Mr. Olver. Well, relative certainly to the privatization.
Privatization projects have kind of gone by fits and starts and
that may be because we are in the early stages of a program,
and maybe if they once begin to go smoothly, then they will go
more quickly. But at the moment, once we decide to do a MILCON
traditionally, it happens more quickly than certainly the
production under privatization seems to have done thus far.
But that third aspect of the new money going into the
private market and the fact that developers will be able to see
the BAH up at a level so that people can reach what is the
actual market rent has to have some effect upon it.
Ms. DeMesme. And it will, sir, but----
Mr. Olver. And I have to see how that is being taken into
account.
Ms. DeMesme. We are taking that into account. The
difference is on the traditional housing market, our people are
expected to incur a 15 percent out-of-pocket expense. Under the
privatized housing initiatives, we would make sure that, to the
extent possible, the utilities are included in the total
monthly charge .
And we are really not asking for additional privatization
efforts right now. We had a program in place for 10. These are
the same 10. We have substituted one or two here and there but
we have not expanded that program to date. We asked for 10 back
in '96.
Mr. Hobson. But you are only going to have a total of 10?
Ms. DeMesme. There will be 16.
General Robbins. This is for six more.
Mr. Hobson. So you will have a total of 16?
General Robbins. Total of 16.
Ms. DeMesme. Sixteen.
Mr. Hobson. So you have an increase of six.
General Robbins. That is correct.
Mr. Hobson. Now, is Wright-Patterson in that?
Ms. DeMesme. Yes, sir.
Mr. Hobson. That is one of the six?
General Robbins. That is one of the 10.
Mr. Hobson. That is one of the 10. That was one of the
original 10. We did not approve 10 starting out.
Ms. DeMesme. Right.
General Robbins. It was four and then six.
Ms. DeMesme. So it will be 16 total.
Mr. Hobson. But I think John's question is we have not done
four and we have not done the next six and we are already into
attempting to do another six and we do not know whether the
first four are going to be okay or not.
Mr. Olver. Nor at all the effect of the new BAH.
Mr. Hobson. We are going to get off easy today.
Ms. DeMesme. We are looking at all of that and next week we
will talk a little bit more about that.
Mr. Hobson. You may not believe this after what we have
gone through but you are going to get off easy because we are
going to terminate the hearing. We have six minutes and we
cannot come back, so think how lucky you are. You do not have
to put up with us anymore today.
Thank you very much for coming. We appreciate your
frankness and we hope we can all be frank as we work through
this stuff because it is important for us all to work together.
We have the same goals and we need to talk through some of
these things and we will get there.
Ms. DeMesme. We appreciate that and this is the only way we
can move forward, is to have candid discussions and find out
what our problems are and try to correct them. We appreciate
your help in that regard.
Mr. Hobson. That was the spirit in which we hope--
Ms. DeMesme. We appreciate your help in that regard.
Mr. Olver. Mr. Chairman, if I may make just one comment?
Mr. Hobson. Sure.
Mr. Olver. The committee also funded a tower at Westover
Base last year and that is ready to go. That should go into
construction very shortly. You do a great job. I am not sure
why we cannot get the ones out of the country, taking care of
the needs that are offshore, when these major deployments are
equally important and it ought to be possible to make them
happen more quickly.
Thank you very much.
[Clerk's note.--Questions for the record submitted by
Chairman Hobson.]
OVERALL FUNDING
Question. In your opinion, what can be done about the lack of
support and funding requested by the Air Force for badly needed
facility, infrastructure and quality of life improvements? When can we
expect to see a steady path of funding?
Answer. We recognize that continued reductions in our
infrastructure accounts are causing our infrastructure to deteriorate
at an unsatisfactory rate. While this is not the desired situation, we
felt in striking a balance between our priorities and our constrained
Total Obligation Authority (TOA), our infrastructure requirements were
one area we could risk deferring in order to address other urgent
priorities. Our Family Housing Master Plan provides a ``road map'' for
using military family housing funding (construction and O&M) combined
with leveraging private sector funding in order to revitalize, divest
through privatization or demolish inadequate housing. Unfortunately, at
our current level of investment, our housing requirements will not be
satisfied until 2018. We continue to support quality of life projects
(specifically dormitory and fitness center projects) in our MILCON
program, but TOA constraints may result in continued underfunding in
our infrastructure accounts. Without additional TOA, we will continue
to address our most urgent MILCON, Military Family Housing (MFH) and
Real Property Maintenance (RPM) requirements and defer the rest.
Divesting ourselves of excess facilities and infrastructure would also
allow us to fund other urgent requirements rather than allocating
scarce resources to maintain excess infrastructure.
OVERSEAS MILITARY CONSTRUCTION
Question. Can you share with us how short the Air Force is falling
from meeting its overseas MILCON requirements?
Answer. Based on a 100 year recapitalization rate (the industry
standard), the U.S. Air Forces in Europe require $97 million/year in
MILCON. The current fiscal year 2002-05 Future Years Defense Plan FYDP)
provides an average of $50 million/year, resulting in a shortfall of
$47M/year. The Pacific Air Forces require $59 million/year to achieve a
100 year recapitalization rate. The fiscal year 2002-2005 FYDP provides
an average of $17 million (excludes Alaska and Hawaii) which results in
a shortfall of $42 million year.
Question. Additionally, what progress is being made in the pursuit
of increased burden-sharing agreements with host nations?
Answer. Pacific Air Forces (PACAF):
Korea: The construction portion of the Korean cost sharing program
has grown from $70 million in 1991 to $131.7 Million this year (2000)
for all services. The 1999 contribution for U.S. Air Force construction
was $37.9 million, and we expect to receive $31.8 million in the
current year. For the next cost sharing agreement (2002 and beyond),
the U.S. will pursue further increases in Korean contributions.
Japan: the Air Force has received the following construction
funding in recent years: 1995=$262 million; 1996=$314 million;
1997=$285 million; 1998=$200 million; 1999=$119 million, 2000 and
2001=$144 million (anticipated). Burden sharing negotiations are
currently being conducted. The U.S. objective in these discussions is
to maintain the Japanese construction contribution at its current
level. Government of Japan officials have continued to associate the
state of their economy with recent reductions in construction
contributions Future years funding levels cannot be accurately
predicted at this time.
U.S. Air Forces in Europe (USAFE):
The NATO Security Investment Program (NSIP) has spent the following
on AF installations in recent years: 1995=$75 million; 1996=$122
million; 1997=$112 million; 1998=$137 million; 1999=$256 million. The
Air Force continues to aggressively pursue NSIP funding for eligible
projects and to work with NATO to expand project eligibility. Our
successful efforts led to NATO recognition of strategic airlift
requirements. The inclusion of strategic airlift elements into the
individual items such as runways and parking aprons is an important
change for the Air Force. These changes will extend NSIP eligibility to
more projects at U.S. installations in Europe.
GUARD AND RESERVE
Question. Why is there such an inequity in the funding requested
for these accounts? Is this proper balance to meet the needs of the
TOTAL FORCE?
Answer. In a period when we have many high priority programs
competing for scarce dollars, we fund the most urgent MILCON needs of
the Air Force. While we would like to see more dollars for
recapitalization of all our facilities and infrastructure, the MILCON
prioritization process we use today ensures that our highest priorities
are satisfied first.
We believe MILCON prioritization process is working for the entire
Air Force, given the limited resources available. We are currently
looking at adjustments to the process that will help us better target
our most urgent needs for Active, Guard and Reserve.
CONTINGENCY REDUCTION
Question. If this reduction hinders program execution and projects
need to be deferred or canceled due to a lack of funds, how will the
Air Force determine which project to defer or cancel?
Answer. For MILCON, the Air Force will fund its most urgent
requirements first. This includes new mission and weapon systems
beddowns and projects required by law or treaty. We will then award all
remaining projects in order of bid opening date until fiscal year 2001
funds are exhausted. If necessary, the Air Force would fund all
unawarded fiscal year 2001 projects as soon as fiscal year 2002 funds
are available.
For Air Force housing, the Air Force intends to award projects at
full scope. The scope within each project may be reduced at project
award or during construction to account for contingency requirements.
GENERAL OFFICER QUARTERS
Question. What efforts have you taken to assure there is no further
abuse of operation and maintenance funding for maintenance and repair
of general and flag officer quarters?
Answer. The Air Force rescinded the policy allowing the use of
regular O&M funds to maintain the general officer quarters (GOQs) at
the Air Force Academy. Our policies have been revised to comply with
Congressional direction that all maintenance and repair in family
housing will be funded from the family housing appropriation.
In addition, in October 1999, the Chief of Staff and Secretary of
the Air Force approved three GOQ initiatives that will improve our
management of the GOQ inventory. First, we are developing a GOQ
Facility Master Plan that will document the condition of every GOQ and
form the basis for short and long-range investment plans for each unit.
Second, we are building a Residents' Guide to explain, in plain
English, the complex rules and regulations governing GOQs. Finally, we
are developing a GOQ Management Course for our civil engineering,
housing, and resources personnel to ensure they have the resources and
information necessary to maintain and manage our GOQs. All three
initiatives will be complete by December 2000.
HISTORIC PRESERVATION
Question. What efforts are being undertaken by the Air Force to
reduce costs and improve the maintenance of historic buildings?
Answer. The Air Force stated in a 1997 Report to Congress that
major improvements and additions to historic housing units cost more
than the average per-unit cost for a non-historic unit. Usually, the
historic housing units are older, larger, and require construction
materials and architectural details typical of the historic period to
comply with the National Historic Preservation Act. However, over time
annual maintenance is not higher. The 1996 maintenance and repair cost
for historic housing was $1,633 per-unit. The average 1996 maintenance
and repair cost for non-historic housing was $3,593 per-unit. The lower
maintenance and repair cost for historic housing can be attributed to
the quality workmanship and durable materials usually built into these
units. The Air Force implements the following strategies to reduce
costs and improve maintenance of historic buildings:
Cost Avoidance: The Air Force recently resolved a dispute with the
Washington State Historic Preservation Officer (SHPO) regarding the
significance of 19 base facilities. McChord Air Force Base, WA
successfully challenged the SHPO's assertion that the facilities were
historic and secure a formal determination from the National Park
Service that the facilities are not eligible for listing on the
National Register of Historic Places. Successes such as this one will
give the base additional flexibility in their maintenance program,
reduce costs, and reduce their National Historic Preservation Act
compliance requirements. This strategy helps the Air Force to ensure
resources are not spent on facilities that are not historically
significant.
Historic Building Inventory Reduction: In 1998 the Air Force
completed a major Environmental Impact Statement to analyze the effect
of demolishing historic buildings at Wright Patterson AFB, OH. While
the buildings were historically significant the Air force demonstrated
they were no longer supporting the mission and in some cases not
structurally sound. The Air Force reached agreement with the Ohio State
Historic Preservation Officer to demolish 12 historic buildings by the
end of fiscal year 2002. Reducing the Air Force historic building
inventory though demolition, when appropriate, reduces our maintenance
responsibilities and costs
In addition to demolition, the Air Force historic building
inventory is reduced through excess property transfers and disposals.
for example, McConnell Air Force Base, KS determined Building 1, better
know as ``Wichita's First Municipal Airport Terminal'' no longer met
mission needs and was in need of extensive repairs. The building which
is listed on the National Register of Historic Places was excessed to
the City of Wichita and now serves as the Kansas Aviation Museum.
Conveying this property to the City of Wichita relieved the Air Force
of the maintenance responsibility while providing an opportunity for
the local community to reuse a historic building to the benefit of the
public.
Management Tools and Guidelines: The Air Force has developed a
variety of management tools and guidelines to assist installations in
managing historic buildings efficiently and cost-effectively. The
primary management tool is the Cultural Resources Management Plan. Each
installation is required to prepare a Cultural Resources Management
Plan that provides an inventory of all historic properties and a
general strategy for how the property will be maintained in accordance
with the National Historic Preservation Act. In 1998, the Air Force
completed the Air Force Historic Materials Source Book, which provides
an exhaustive list of maintenance and construction materials for use on
historic buildings. The Source Book includes a comprehensive list of
suppliers to help Air Force installations obtain the correct materials
for historic maintenance at the best possible price. Also in 1998, the
Air Force developed the guidebook Preserving a Heritage: Standards and
Illustrated Guidelines for Rehabilitating Historic Air Force Buildings
and Structures, to assist installations in applying the Department of
Interior historic preservation maintenance standards in compliance with
the National Historic Preservation Act. Additionally, we have recently
updated the air Force Family Housing Guide for Planning, Programming,
Design and Construction, to include a section on the proper management
of historic housing. Additionally, an analysis of historic buildings
will be included in the Air Force General Officers Quarter Survey and
the Family Housing Master Plan. One of the key indicators for
evaluation is the physical condition of the buildings in order to
perform a replacement in-kind analysis on how to best balance
maintenance and repair of historic Air Force housing with the
preservation requirements of the National Historic Preservation Act.
BASIC ALLOWANCE FOR HOUSING (BAH) INITIATIVE
Question. The Department proposes a Basic Allowance for Housing
(BAH) plan that will completely eliminate out-of-pocket housing
expenses for military members by 2005. How will this initiative impact
the Air Force's family housing accounts?
Answer. There is no impact to the fiscal year 2001 budget and we
anticipate minimal impact to the Future Years Defense Plan (FYDP)
because we have programmed for revitalization of our worst housing
first. Traditional MILCON projects in the fiscal year 2001 budget and
the FYDP typically revitalize housing units that will be retained
regardless of potential BAH increases or decreases. This includes
housing projects at overseas bases, where some of our worst housing
exists, and is needed due to unique force protection and/or quality of
life concerns related to living in foreign communities.
Our Family Housing Master planning process is responsive to any
long-term impacts and any changes to out-year requirements as a result
of BAH changes will be properly documented and future-year budgets
adjusted accordingly.
Question. Increasing the BAH will reduce the demand for on-base
housing, what is the Air Force's plan for re-evaluating its on-base
housing requirements and deficits?
Answer. We systematically update our Family Housing Master Plan to
address long term planning factors. The projected increase in BAH rate
does not change the scheduled updates to the Master Plan in December
2000 and again by December 2001. These updates ensure we have a current
plan that addresses how and when we will revitalize, divest through
privatization or demolish our 65,000 inadequate units by 2010.
Our Family Housing Master Plan is responsive to any long-term
impacts and any changes to out-year requirements as a result of BAH
increase will be properly documented and future-year budgets adjusted
accordingly.
UTILITY PRIVATIZATION
Question. What assurances can the Air Force provide that the
conveyance of utility systems will not result in a substantial increase
in long-term utility costs?
Answer. The Air Force can provide a measured assurance that the
conveyance of utility systems will not result in a substantial increase
in long-term utility costs.
The Air Force is evaluating the long-term economic implications of
utility system privatization through sound and thorough economic
analysis procedures. This evaluation, which will yield a certified
economic analysis, will support the best long-term option for the Air
Force. If the economic analysis indicates that an increased long-term
utility cost will result, privatization will not be pursued.
With regards to the long term cost controls, our contracts include
Federal Acquisition Regulation (FAR) provisions to control Price
Redeterminations.
With that said, the best long-term option for the Air Force may
still yield an additional annual funding requirement. Defense Reform
Initiative Directive (DRID) 49 instructs the Services to compare
privatization costs with what the installation should be spending on
its systems to maintain an industry operating standard. The Air Force
currently maintains its systems below the industry operating standard
using 1% of plant replacement value (PRV) as an allocation.
Subsequently, the Air Force accepts the associated risk from deferred
maintenance of the systems. We expect industry will not accept the same
risk.
Using DRID 49 rules of engagement, the economic analysis may yield
an outcome that is economically feasible when comparing what the Air
Force should be spending on its utility systems against the
privatization costs. However, comparing the privatization costs of
tomorrow with the current operating costs of today will yield an
anticipated additional funding requirement.
RHEIN MAIN PROJECT
Question. The Air Force has recently signed an agreement to
transfer the mission capabilities of Rhein Main Air Base to Ramstein
and Spangdahlem Air Base's in Germany. Can you bring us up to date on
the status of this transfer and the impact it will have on the current
facility and housing infrastructure at Ramstein and Spangdahlem?
Answer. The agreement between the U.S. and the Government of
Germany for the base closure settlement of Rhein-Main AB was signed on
23 December 1999. The closure settlement was based on the 1959 lease
agreement between the Federal Republic of Germany (FRG) and the
Flughafen A.G. (FAG) which allowed the U.S. Air Force exclusive use of
Rhein Main Air Base for ``Air Transport'' Operations. Under the terms
of the closure agreement, the German parties will provide funding not
to exceed DM 727.9 million for the construction of a specific set of
replacement projects (airfield pavements, fuel, operational facilities,
and infrastructure). As a result of the agreement, USAFE will return
its exclusive rights of land no later than 31 December 2005.
Negotiations of the closure agreement centered on the replacement of
facilities required to move the airlift/air transport mission from
Rhein Main to Ramstein/Spangdahlem. The German parties to the agreement
did not recognize reconstruction of housing as part of the direct
replacement of ``Air Transport'' activities. The housing requirements
are estimated to increase by 219 units (Ramstein--137, Spangdahlem--
82). These additional families must be absorbed within existing
Ramstein and Spangdahlem local housing communities. Similarly, facility
construction related to current operations at Ramstein/Spangdahlem was
not considered to be part of the closure agreement. Transferring Rhein
Main's mission to Ramstein and Spangdahlem will not have a significant
impact on their current facility and housing infrastructure.
ALASKA: CAPE ROMANZOF LONG-RANGE RADAR SITE GENERATOR FUEL STORAGE
($3,900,000)
Question. Why is this project requested in the Air Force's budget,
rather than that of the Defense Logistics Agency's? Isn't DLA the
``consolidated fuels manager'' of the Department of Defense?
Answer. The tanks at the Cape Romanzof Long-Range Radar Site are
requested in the Air Force's budget rather than that of the Defense
Logistics Agency's (DLA) because the tanks are owned and operated by
the Air Force and are not a part of a DLA operated system. DLA is the
``consolidated fuels manager'' of the Department of Defense for fuels
systems that provide fuel to multiple O&M customers (e.g., joint-use
systems used by the Air Force and Navy).
Question. This project is a Level 1 environmental compliance
project. How long has the tank been out of compliance with State
regulations, and why has this work not been performed in a previous
year?
Answer. The tank has been out of compliance since it failed a
structural integrity test in 1997. The tank does not presently leak and
is being monitored by site personnel until the compliance project is
accomplished. This work was not performed in previous years because a
project needed to be scoped, proposed in the MILCON process, and
validated by HQ USAF for programming in the fiscal year 2001 MILCON
program. Fiscal year 2001 was the first available program year after
project scope was determined.
ALASKA: EIELSON AFB DORMITORY ($14,540,000)
Question. Another dormitory project is programmed in the Future
Years Defense Plan (FYDP) at Eielson AFB. Will these two projects
provide adequate living quarters to accommodate all unaccompanied
enlisted personnel at Eielson AFB? If not, what will the remaining
permanent party unaccompanied personnel housing deficit be?
Answer. Yes, the fiscal year 2001, 120-room dormitory project and
the fiscal year 2003, 120-room dormitory project adequately address
Eielson AFB's current dormitory room deficit of 321 rooms. (Note: Per
our Dormitory Master Plan, we do not program projects to address
deficits less than 96 rooms.)
Question. What is the Air Force's plan (by fiscal year and dollar
amount) to provide adequate quarters at Eielson AFB?
Answer.
------------------------------------------------------------------------
Project Scope
Fiscal year description (rooms) Cost
------------------------------------------------------------------------
2001........................ Deficit......... 120 $14,500,000
2003........................ Deficit......... 120 16,100,000
Outyears.................... Critical 120 TBD
Replacement.
Outyears.................... Critical 120 TBD
Replacement.
Outyears.................... Critical 120 TBD
Replacement.
------------------------------------------------------------------------
Question. Does this project replace an existing dormitory? If so,
does it replace the worst existing dormitory at Eielson AFB?
Answer. The fiscal year 2001 dormitory project at Eielson AFB does
not replace any existing dormitories, but rather adds a new dormitory
to reduce the overall 321 dormitory room deficit at Eielson AFB for our
permanent party enlisted airmen.
Alaska: Elmendorf AFB Upgrade Hangar Complex ($11,600,000)
Question. The form 1391 indicates the existing hangar was
constructed in 1942. How far does this project extend the useful life
of the facility?
Answer. This project will extend the useful life 25 years.
Question. The form 1391 indicates a full economic analysis was not
performed because only one option met operational requirements. Please
explain in further detail why only one option exists and why a full
economic analysis was not performed. Additionally, why wasn't a new
hangar at a different location considered?
Answer. The existing maintenance hangar is structurally sound and
the primary purpose of this project is to provide fire protection to
protect aircraft, equipment, and people. The existing hangar is well-
located for its functions, and a new hangar sited in accordance with
current airfield criteria would not be as operationally effective to
meet the mission.
Question. What assurances can the Air Force provide the Committee
that this is the most economical option for the facility?
Answer. The primary facility cost of this $11.6 million hangar
upgrade, excluding supporting facilities, utilities, and overhead, is
$7.6 million. The primary facility cost of a new facility of the same
scope, excluding supporting facilities costs, would be over $20
million. Based on this comparison, upgrading is the most economical
option for the facility.
In addition, a new facility would be difficult to site properly
with adequate runway and taxiway clearance setbacks due to base
development since the existing facility was built. Higher site-specific
supporting facility costs for a new facility could result.
CALIFORNIA: BEALE AFB WATER TREATMENT PLAN & DISTRIBUTION LINE
($3,800,000)
Question. This project is a Level 1 environmental compliance
project. How long has Beale AFB been out of compliance with State
regulations, and why has this work not been performed in a previous
year?
Answer. Beale AFB has been out of compliance with a Safe Drinking
Water standard for manganese since 1996. Also, the base has had on-
going exceedances of Total Coliform since 1992, resulting in five
notices of violation. In response to an inquiry from Beale AFB, the
California Department of Health Services stated in a 1997 letter that
they would not grant a variance to Beale AFB for the Total Coliform or
manganese treatment standards. The Air Force subsequently programmed a
MILCON project to meet the treatment requirement and communicated their
intentions to the California Department of Health Services.
This work was not performed in previous years because interim
measures were taken to control the Total Coliform exceedances while a
long-term solution was developed for both the manganese and Total
Coliform problems. A corrective measures study was performed in 1997/
1998, a design/build project was scoped and proposed in FY00 and
rescoped and programmed in the fiscal year 2001 MILCON program after HQ
Air Force review. Fiscal year 2001 was the first available program year
after project scope was determined.
Question. Is Beale AFB a utility privatization candidate? If so,
why is this project needed?
Answer. The natural gas utility system at Beale AFB is a
privatization candidate. The rest of the utility systems at Beale AFB,
including the water system, are not privatization candidates as they
are exempt from privatization consideration due to readiness and
mission requirements. The Air Force needs this project to correct
ongoing exceedances of the Safe Drinking Water Act standard for
manganese.
CALIFORNIA: LOS ANGELES AFB FITNESS CENTER ($6,580,000)
Question. Will this project satisfy the total space requirement for
fitness centers at Los Angeles AFB? If not, are additional fitness
center projects programmed? If so, in what fiscal year and at what
amount?
Answer. Yes, this project satisfies the total requirement for core
fitness center space at Los Angeles AFB. There are no additional
fitness center projects programmed at Los Angeles AFB.
Question. Please describe in some detail the two facilities to be
demolished as part of this project.
Answer. The facilities to be demolished as part of this project
are: Building 215, an auto hobby shop (17,120 SF), and building 216, a
parking shed (616 SF). Both of these facilities were built in 1942 and
are located in the footprint of the new fitness center. These two
facilities are old and beyond economical repair. A replacement project
for the auto hobby shop will be programmed in the future years program.
CALIFORNIA: VANDENBERG AFB UPGRADE WATER DISTRIBUTION SYSTEM
($4,650,000)
Question. This project is a Level 1 environmental compliance
project. How long has Vandenberg AFB been out of compliance with State
regulations, and why has this work not been performed in a previous
year?
Answer. Vandenberg AFB has been unable to consistently maintain
compliance with residual chlorine requirements since 1993. Also, the
base has had on-going exceedances of the Total Coliform Rule resulting
in a Notice of Violation in 1997.
This work has not been performed in previous years because interim
measures were taken to control the total Coliform exceedances and to
maintain chlorine residual with portable chlorinators while a long-term
solution was developed. A corrective measures study was performed in
1998, a design/build project was scoped and proposed in the MILCON
process, and programmed in the fiscal year 2001 MILCON program after HQ
USAF review. Fiscal year 2001 was the first available program year
after project scope was determined.
Question. Is Vandenberg AFB a utility privatization candidate? If
so, why is this project needed?
Answer. Yes, Vandenberg AFB is a utility privatization candidate.
The Air Force needs this project to correct ongoing exceedances of
the Safe Drinking Water Act standard for Total Coliform. Because this
MILCON project is being executed as a design-build effort, the
construction start date is projected for January 2001. If the
construction were to be delayed and accomplished after the system is
privatized, the anticipated construction start date is September 2002,
based on the most optimistic privatization schedule. A delay would
subject the base to increased vulnerability to enforcement action,
including penalties and fines. The expenditure will also support the
privatization ensuring ultimate acceptance by the private sector.
COLORADO: PETERSON AFB DORMITORY ($11,000,000)
Question. After completion of this project, what will the remaining
permanent party unaccompanied personnel housing deficit be at Peterson
AFB? What is the Air Force's plan (by fiscal year and dollar amount) to
provide adequate living quarters at Peterson AFB?
Answer. After completion of the fiscal year 2001, 144-room
dormitory project at Peterson AFB, the permanent party deficit will be
481 rooms. To address this deficit, we have programmed a $11,300,000,
144-room dormitory for fiscal year 2002; a $12,400,000, 144-room
dormitory for fiscal year 2003; and a $12,200,000, 144-room dormitory
for fiscal year 2005. (Note: Per our Dormitory Master Plan, we do not
program projects to address deficits less than 96 rooms.)
COLORADO: U.S. AIR FORCE ACADEMY ADD TO ATHLETIC FACILITY ($18,960,000)
Question. How does the cost per square foot of this project compare
with the cost per square foot of other physical fitness centers in the
Air Force's fiscal year 2001 budget submission?
Answer. The estimated average cost of the fitness centers in the
fiscal year 2001 Air Force MILCON program is $140/square foot (SF).
This figure was adjusted to allow for differing scopes and area cost
factors. The Department of Defense Pricing Guide average fiscal year
2001 cost for fitness centers is $143/SF. The Academy athletic facility
is estimated to cost $147/SF. The Air Force Academy athletic facility
must provide many features not found in base fitness centers, such as
extensive sports medicine facilities and space for visiting teams and
officials. Additionally, this facility does not include large, open
areas such as gymnasiums, which tend to be less expensive.
Question. How is this project connected with athletic conference
facility requirements?
Answer. The National Collegiate Athletic Association requires
members to comply with the gender equity provisions of Title IX, the
educational amendments to the Civil Rights Act. This project is
necessary to bring the Air Force Academy athletic facilities into Title
IX compliance, meeting Mountain West Conference and ultimately the NCAA
Division I accreditation standards.
FLORIDA: EGLIN AFB PRECISION GUIDED MUNITIONS MAINTENANCE FACILITY
($3,340,000)
Question. The form 1391 for this project indicates the existing
facilities are outdated. How many facilities are currently used for
missile and PGM maintenance at Eglin AFB, and in what year was each of
the facilities constructed?
Answer. Currently three facilities are associated with the PGM
workload; building 1210 (9,556 SF, built in 1957); building 1212 (6,186
SF, built in 1953); and building 1279 (3,200 SF, built in 1979).
Question. Describe the economies that should result from the
consolidation of these maintenance facilities in a central facility.
Answer. The consolidation of these facilities in a central location
will improve productivity, safety, and morale of maintenance personnel.
The existing facilities are outdated, too small, dispersed, and were
not designed to support new high tech precision guided munitions (PGM)
and missile maintenance workloads. Safety hazards, constant delays, and
work-arounds are common, thus negatively impacting productivity, morale
and airman retention.
Question. Please describe in some detail the facility to be
demolished as part of this project. Is this demolition in the footprint
of the new construction?
Answer. Building 1207 (8500 SF, built in 1957), a single story pre-
engineered metal building, will be demolished as part of this project.
This facility was once occupied by the munition maintenance
administrative function. They vacated this facility in July 1998 due to
its high maintenance cost and poor condition (i.e., deteriorated
exterior metal facade, leaking roof, etc.). Since then, the Navy
Explosive Ordnance Disposal (EOD) office is using this facility as
inert storage. The Navy EOD office will move to building 1210, which
will be vacated by the precision guided munitions functions upon
completion of the new facility. This facility is not in the footprint
of the new construction.
FLORIDA: EGLIN AFB UPGRADE DORMITORY ($5,600,000)
Question. The form 1391 for this project indicates the dormitory to
be upgraded is 46 years old and contains numerous deficiencies. How far
does this project extend the useful life of the dormitory?
Answer. The structural components of this facility are concrete
masonry block and reinforced concrete columns and slabs. It is
estimated the facility structure will last another 50 years. This
project completely renovates one wing of a two wing dormitory and
provides a new standing seam metal roof for the entire facility.
Standing seam metal roofs are generally warranted for 20 years. The
utility components (mechanical, electrical, and plumbing) vary on life
expectancy from 20-30 years.
Question. Why wasn't the construction of a new dormitory a valid
option, and why couldn't it meet the mission requirement as indicated
on the form 1391?
Answer. This project is phase two of two. In fiscal year 1996
Congress appropriated funds to upgrade this dormitory. At that time an
economic analysis was conducted that determined renovation was more
cost effective. Mission requirement in this case refers to the Air
Force policy of providing one-plus-one dormitories for our airmen.
Based on this assumption, renovating this dormitory is the only
economical option available to meet mission requirements.
FLORDIA: EGLIN AUX FIELD 9 DEFENSE ACCESS ROAD ($2,360,000) UPGRADE
ACCESS ROADS ($5,600,000)
Question. The form 1391's indicate the requirement for these
projects is due to increased traffic resulting from Special Operations
Forces (SOF) revitalization. If so, why are these projects solely
funded by the Air Force?
Answer. A 1987 Memorandum of Agreement between the Air Force and
U.S. Special Operations Command (USSOCOM) establishes MILCON funding
responsibilities between the two organizations. Under this agreement,
the USSOCOM MILCON program funds mission-drive facilities and the Air
Force programs for base support facilities.
More recently, the fiscal year 1996 MILCON Appropriations Bill,
Senate Report 104-116, states, ``The Special Operations Command should
continue to budget for their own operations, training, equipment
maintenance, and storage facility requirements.''
Question.Why wasn't this work requested as a single project?
Answer. This project was developed as a single undertaking for the
purpose of obtaining the necessary approvals within the Air Force. The
project involves construction work on both Federal property and on
public roads under this jurisdiction of Okaloosa County, FL. The work
within the base will be executed as normal Military Construction by the
Corps of Engineers. The Defense Access Roads outside the base will be
accomplished by Okaloosa County. Apportionment of funds after enactment
must therefore be between two different construction agencies. The work
to be done on the public roads was submitted separately in the
President's Budget to facilitate separate apportionment to the Air
Force and Federal Highway Administration by the Office of Management
and Budget and the Treasury. This separation also facilitates
accounting for the separate appropriations during project execution.
Question. Will the Air Force award two separate contracts for this
work? If so, why?
Answer. Yes, because these projects involve construction on
properties under two different, mutually exclusive jurisdictions. The
work within the base will be executed as normal military construction
by the U.S. Army Corps of Engineers. The Defense Access Roads outside
the base will be accomplished by Okaloosa County. Apportionment of
funds after enactment must therefore be between two different
construction agencies.
FLORIDA: TYNDALL AFB F-22 BEDDOWN
Question. What is the future construction program (by fiscal year
and dollar amount) for the F-22 beddown at Tyndall AFB?
Answer:
[In millions of dollars]
FY base and project Amount
2001--Tyndall:
F-22 ADAL Maintenance Facilities.............................. 18.5
Operations Facility........................................... 6.8
______
FY01 total.................................................. 25.3
=================================================================
________________________________________________
2002--Tyndall AFB:
F-22 Squad Ops/AMU and Hangar................................. 10.6
F-22 Fuel System Maintenance Hangar........................... 2.3
______
FY02 total.................................................. 12.9
=================================================================
________________________________________________
2005--Tyndall AFB:
Flight Simulator, Phase II.................................... 2.2
Hangar Upgrade................................................ 1.3
______
FY05 total.................................................. 3.5
\1\ Projected requirement not included in current Future Years Defense
Program. To meet mission timing requirements, these projects will be
included in the applicable President's Budget request.
---------------------------------------------------------------------------
GEORGIA: FORT STEWART AIR SUPPORT OPERATIONS SQUADRON FACILITY
($4,920,000)
Question. Will the four existing structures used by the Air Support
Operations Squadron (ASOS) be demolished? If so, is the cost of
demolition included in this project? If not, why not?
Answer. The four structures will not be demolished. Army personnel
on Fort Stewart will retain the facilities for another use.
Illinois: Scott AFB Munitions Storage/Land Acquisition ($3,830,000)
Question. By what date must the land acquisition be accomplished in
order to execute the munitions storage project during fiscal year 2001?
Answer. If land acquisition is required, the acquisition needs to
be accomplished one month prior to award of the construction project.
Completion of land acquisition before August 2001 would ensure award in
fiscal year 2001. We anticipate no problems executing this project in
fiscal year 2001.
Louisiana: Barksdale AFB Dormitory ($6,390,000)
Question. After completion of this project, what will the remaining
permanent party unaccompanied personnel housing deficit be at Barksdale
AFB? What is the Air Force's plan (by fiscal year and dollar amount) to
provide adequate living quarters at Barksdale AFB?
Answer. After completion of the fiscal year 2001, 96-room dormitory
project at Barksdale AFB, the permanent party deficit will be 405
rooms. To address this deficit, we have programmed a $6.8 million, 96-
room dormitory for fiscal year 2004 and three additional 96-room
dormitories in the outyears. (Note: Per our Dormitory Master Plan, we
do not program projects to address deficits less than 96 rooms.)
Missouri: Whiteman AFB B-2 Conventional Munitions Igloos ($4,150,000)
Question. This project provides munitions storage igloos. The form
1390 for this project indicates a B-2 munitions storage project is
programmed within the next three years at Whiteman AFB. How do these
two projects differ, and why weren't they programmed concurrently?
Answer. In support of the B-2 mission expansion, the fiscal year
2001 MILCON project provides storage capacity for modern conventional
munitions such as GBU-28, Joint Stand Off Weapon (JSOW), Joint Air-to-
Surface Stand-off Missile (JASSM), and the Joint Direct Attack
Munitions (JDAM). The future igloos addressed in the Form 1390 are an
initiative to create a separate conventional munitions storage area.
Presently, nuclear and conventional weapons are stored in separate
igloos, but within the same secure area. Conventional weapons do not
require the same high level security as nuclear weapons, so Whiteman
AFB desires a separate area for conventional weapons. The outyear
project is not driven by B-2 developments.
Question. What is the future construction program (by fiscal year
and dollar amount) for the B-2 beddown at Whiteman AFB?
Answer. Specific B-2 driven construction at Whiteman is completed
with the fiscal year 2001 MILCON projects requested.
Fiscal Year 2001:
B-2 Conventional Munitions Igloos.........................$4,150,000
B-2 Munitions Assembly Area............................... 7,900,000
New Jersey: McGuire AFB Fitness Center ($9,772,000)
Question. Will this project satisfy the total space requirement for
fitness centers at McGuire AFB? If not, are additional fitness center
projects programmed? if so, in what fiscal year and at what amount?
Answer. Yes. This project satisfies the space requirement for
fitness centers at McGuire AFB. Therefore, no follow-on projects are
programmed.
North Carolina: Pope AFB Dangerous Cargo Pads ($23,570,000)
Question. This project includes the demolition of 24,000 square
meters of pavement. What is the cost of this demolition?
Answer. The pavement demolition cost for the Pope Dangerous Cargo
Pads MILCON project is $366,000.
Oklahoma: Tinker AFB Dormitory ($5,800,000)
Question. After completion of this project, what will the remaining
permanent party unaccompanied personnel housing deficit be at Tinker
AFB? What is the Air Force's plan (by fiscal year and dollar amount) to
provide adequate living quarters at Tinker AFB?
Answer. After completion of the fiscal year 2001, 96-room dormitory
project at Tinker AFB, the permanent party deficit will be 589 rooms.
To address this deficit, we have programmed a $8,600,000, 144-room
dormitory for fiscal year 2002; a $9,300,000, 144-room dormitory for
fiscal year 2003; a $7,500,000, 120-room dormitory for fiscal year
2005; and a 120-room dormitory project in the outyears. (Note: Per our
Dormitory Master Plan, we do not program projects to address deficits
less than 96 rooms.)
South Carolina: Shaw AFB USCENTAF Operational Weather Squadron Facility
($2,850,000)
Question. The form 1391 states, ``This facility will provide for
consolidation of weather personnel from Army and Air Force
installations.'' Why isn't this project jointly funded with the Army?
Answer. This project consolidates Air Force personnel that are
currently assigned at Air Force and Army installations. Army personnel
are not involved.
Question. If the personnel and equipment to support the beddown of
the weather squadron arrived at Shaw AFB in 1998, where do they
currently perform their functions? Please describe in some detail the
condition of the current facilities, and why they need replaced?
Answer. Operational Weather Squadron (OWS) personnel are operating
from temporary trailers originally purchased in 1992 to support the
emergency relocation of the Air Control Squadron from Homestead AFB
after Hurricane Andrew. These trailers are not permanent facilities and
are at the end of their projected useful life. They are in poor
condition and deteriorating rapidly, and they do not meet operational
requirements of the OWS.
Texas: Dyess AFB-Realistic Bomber Training Initiative ($12,175,000)
Question. The form 1391 for this project indicates that the land to
be acquired and the emitter sites to be constructed as part of this
project are in the proximity of both Barksdale and Dyess AFBs. How far
does this initiative take place from both Barksdale and Dyess AFBs, and
why is it being considered a Dyess AFB project?
Answer. Although the land being considered for the Realistic Bomber
Training Initiative (RBTI) is in the flying proximity of the bomber
training units of both Dyess and Barksdale AFBs, the land is in Texas
and much closer to Dyess AFB than to Barksdale AFB. The proposed
emitter sites range from 50 to 400 miles from Dyess AFB and 450 to 750
miles from Barksdale AFB. Thus, RBTI is considered a Dyess project.
VIRGINIA: LANGLEY AFB DORMITORY ($7,470,000)
Question. There are additional dormitory projects in fiscal year
2001, and in the outyears. Is this about the maximum rate of dormitory
replacement that can be accomplished at Langley AFB without disrupting
operations, roughly $7,500,000 of dormitory work per year?
Answer. The fiscal year 2001 and outyear dormitory projects at
Langley AFB do not replace any existing dormitories, but rather add new
dormitories to reduce the overall 667 dormitory room deficit at Langley
AFB for our permanent party enlisted airmen. These projects will not
disrupt any mission operations, nor do they represent any maximum rate
of dormitory work per year.
Question. Will the fiscal year 1999 project replace the worst
existing barracks at Langley AFB? If not, why were these barracks
selected for replacement this year?
Answer. The fiscal year 2001 dormitory project at Langley AFB does
not replace any existing dormitories, but rather adds a new dormitory
to reduce the overall 667 dormitory room deficit at Langley AFB for our
permanent party enlisted airmen.
Question. Submit for the record a list of the planned projects to
correct all existing barracks deficiencies at Langley AFB, by fiscal
year programmed.
Answer.
------------------------------------------------------------------------
Project Scope
Fiscal year description (rooms) Cost
------------------------------------------------------------------------
2001......................... Construct 96 $7,500,000
Deficit Dorm.
2002......................... Construct 96 7,800,000
Deficit Dorm.
2004......................... Construct 96 7,900,000
Deficit Dorm.
Outyears..................... Construct 96 TBD
Deficit Dorm.
Outyears..................... Construct 96 TBD
Deficit Dorm.
Outyears..................... Construct 96 TBD
Deficit Dorm.
------------------------------------------------------------------------
Note--Per 1999 Dormitory Master Plan, we do not program replacement
projects for dormitories that scored less than 49 points in project
ranking matrix, as these dormitories are not considered critical
replacement projects
Washington: McChord AFB--C-17 Add/Alter Nose Docks ($3,750,000)
Question. What is the estimate of savings in design costs by
accomplishing this project through a standard or definitive design?
Answer. This project does not lend itself to a standard/definitive
design because we are adding to and altering an existing hangar to meet
the C-17 aircraft hangar criteria. Therefore, no design cost savings
are projected.
Wyoming: F.E. Warren MMIII Missile Service Complex ($15,520,000)
Question. What are the Air Force's maintenance responsibilities for
these properties?
Answer. These properties were constructed in 1909 and are included
in the F.E. Warren National Historic Landmark District and listed on
the National Register of Historic Places. In accordance with the
National Historic Preservation Act and per the memorandum of agreement
between the Air Force and the Wyoming State Historic Preservation
Office (SHPO) of September, 1984, the Air Force is responsible for the
``appropriate maintenance, rehabilitation, restoration, or
reconstruction treatments of historic properties to be applied within
the mission and budgetary constraints of the Air Force.'' Appropriate
maintenance includes consideration of the Department of Interior
Standards and Guidelines for Rehabilitating Historic Structures and
Buildings, which instructs federal agencies to utilize maintenance and
construction materials that are consistent with the historic features
of the building.
Question. What is the estimated annual maintenance cost per
property?
Answer. The annual maintenance cost per property; Building 332,
$99,083; Building 336, $56,619; and Building 340, $21,232.
Question. What is the re-use plans for these facilities?
Answer. There is no specific function identified yet. A Planning
Assistance Team from the Air Force Center for Environmental Excellence
is scheduled to visit F.E. Warren AFB in May 2000 to study the reuse
potential for the historic structures that were originally constructed
as cavalry stables. These facilities are scheduled to be vacated in
December 2002 (dependent upon the construction schedule of the new
MMIII Missile Service Complex). The Planning Assistance Team
recommendations will be presented to the base leadership for
consideration. Currently, the base has identified three candidate
functions for re-use of these facilities including Temporary Living
Facilities for families being transferred to/from F.E. Warren AFB,
Visiting Quarters for official visitors, or a Consolidated
Communications Complex. The reuse plan must take into account that the
exterior of the buildings cannot be significantly altered due to their
historic nature.
ITALY: AVIANO AB DORMITORY ($8,000,000)
Question. After completion of this project, what will the remaining
permanent party unaccompanied personnel housing deficit be at Aviano
AB? What is the Air Force's plan (by fiscal year and dollar amount) to
provide adequate living quarters at Aviano AB?
Answer. After completion of the fiscal year 2001, 102-room
dormitory project at Aviano AB, the permanent party deficit will be 287
rooms. To address this deficit, we have programmed an $8,200,000, 102-
room dormitory for fiscal year 2002 and an $8,300,000, 102-room
dormitory for fiscal year 2004. (Note: Per our Dormitory Master Plan,
we do not program projects to address deficits less than 96 rooms.)
Question. Describe in some detail the readiness and force
protection concerns at this location, and how this project will address
those concerns?
Answer. This project constructs a 102-room dormitory to address the
current 389-room deficit at Aviano Air Base, Italy, to comply with Air
Force policy to house all unaccompanied junior airmen on-base.
Constructing this dormitory in the confines of the base will reduce
exposure to potential terrorist threats. This dormitory will be
designed in accordance with Commander-in-Chief, United States European
Command Operations Order 99-01, Army Training Manual 5-853-1 and Air
Force Manual 32-1071, Volume 1 force protection guidance. The salient
design considerations addressing force protection concerns include the
following:
(1) Separate government vehicle and personally owned vehicle access
and parking.
(2) Locate parking lot at least 25 meters from the building.
(3) Ensure ventilation inlets are not easily accessible and not
located in areas where large amounts of people will be congregating.
(4) Locate dumpsters at least 15 meters away from building.
(5) Ensure doors have glazing and windows have at least 6mm of
lamination. For double pane windows, ensure the inner pane has the
required 6mm of laminate.
(6) Ensure the facility is located 15 meters away from surrounding
dormitories.
(7) Plant trees and vegetation to block line of sight from
perimeter.
ITALY: AVIANO AB DORMITORY ($8,000,000)
Question. What is the design life of this dormitory project?
Answer. This dormitory is designed for a minimum service life of 25
years. However, with renovations and upgrades to components, the
structure will have an economic life of approximately 50 years.
Korea: Osan AB--Dormitory ($11,348,000)
Question. There are additional dormitory projects in fiscal year
2001, and in the outyears. Is this about the maximum rate of dormitory
replacement that can be accomplished at Osan AB without disrupting
operations, roughly $12,000,000 of dormitory work per year?
Answer. The fiscal year 2001 and outyear dormitory projects at Osan
AB do not replace any existing dormitories, but rather add new
dormitories to reduce the overall 1,258 dormitory room deficit at Osan
AB for our permanent party enlisted airmen. These projects will not
disrupt any mission operations, nor do they represent any maximum rate
of dormitory work per year.
Question. Will the fiscal year 1999 project replace the worst
existing barracks at Osan AB? If not, why were these barracks selected
for replacement this year?
Answer. The fiscal year 2001 dormitory project at Osan AB does not
replace any existing dormitories, but rather adds a new dormitory to
reduce the overall 1,258 dormitory room deficit (the largest in the Air
Force) at Osan AB for our permanent party enlisted airmen.
Question. Describe in some detail the readiness and force
protection concerns at this location, and how this project will address
those concerns?
Answer. Osan AB is the largest of two Air Force main operating
bases in Korea, and is crucial to immediate generation and employment
of airpower, strategic airlift and force reception in event of
hostilities in Korea. Warfighting mission, proximity to hostile forces
and importance of airpower to counter initial enemy attacks at outset
of hostilities require immediate availability of assigned personnel.
Separate 1997 threat assessment studies indicate that the principal
readiness and force protection issues concern hostile forces who will
attempt to disrupt force mobilization at the onset of hostilities. The
November 1997 Joint Staff Integrated Vulnerability Assessment
identified that vulnerability is especially acute where U.S. personnel
are concentrated, e.g., off-base leased facilities. The planned
construction of on-base dormitories, incorporating Department of
Defense force protection construction standards, through a combination
of host nation-funded construction and MILCON, will mitigate off-base
housing facilities as a lucrative target for terrorist/enemy action.
The salient design considerations addressing force protection concerns
include the following: Collective protection system (CPS) (chemical
protection); Emergency generator for CPS and emergency loads; 4-feet-
high window sills for bedrooms; Cast-in-place reinforced concrete
exterior walls; Laminated exterior windows; Trash containers minimum of
80 feet from the facility; Utility areas behind and next to the
dormitory fenced to prevent access; Thickened exterior end wall of the
dormitory facing the bicycle rack and street; No parking stalls within
80 feet of the dormitory; Steel exterior doors; and Air intakes located
high to restrict access.
Question. What is the design life of this dormitory project?
Answer. This dormitory is designed for a minimum service life of 25
years. However, with renovations and upgrades to components, the
structure will have an economic life of approximately 50 years.
SPAIN: ROTA NAVAL STATION--ENHANCED ROTA, VARIOUS FACILITIES
($5,052,000)
Question. The form 1391 for this project indicates that this
project is required to replace seven facilities. Please describe in
some detail the seven facilities to be replaced, including the year in
which they were constructed.
Answer. The Enhanced Rota Initiative is required to provide a
European Southern Region Hub to meet the strategic mobility throughput
requirements to Europe and Southwest Asia. The throughput requirement
necessitates the construction of 16 wide-body aircraft parking spaces
and associated fuel system.
The facilities listed in the table below are in the footprint and
siting area of the aircraft parking improvements and must be demolished
and reconstructed. Demolition of the existing facilities will be
included in the fiscal year 2002 and fiscal year 2003 Airfield
Improvement projects. The fiscal year 2001 Various Facilities project
designs and constructs the replacement facilities.
------------------------------------------------------------------------
Original
Facility Existing construction
square meters year
------------------------------------------------------------------------
Air Mobility Support Squadron Aircraft 534 1994
Maintenance Shops......................
Air Mobility Support Squadron Aircraft 1,301 1994
Forward Supply Warehouse...............
Aero Club Hangar........................ 576 1974
Morgue.................................. 328 1994
Aircraft Refueling Vehicle Maintenance 271 1962
Shop...................................
Fleet Post Office....................... 799 1994
Chemical, Biological, and Radiological 226 1991
Defense Equipment Facility.............
------------------------------------------------------------------------
The DD Form 1391 does not list the Morgue and Chemical Biological
and the Radiological Defense Equipment Facility. These facilities were
added to this project as necessary within scope modifications as design
and siting progressed. The Petroleum Oil and Lubricants (POL)
Operations Facility and the Fuel Filter Facility, that are on the DD
Form 1391, are now included in the Defense Logistics Agency fiscal year
2002 Fuel Hydrant System project.
Question. Is the cost of demolishing the seven facilities included
in the cost of this project?
Answer. The cost of demolishing these seven facilities is not
included in this project. It is included in the fiscal year 2002 and
fiscal year 2003 Airfield Improvements Projects.
The Enhanced Rota, Replace Various Facilities project is one of
five (three Air Force and two Defense Logistics Agency) projects
totaling approximately $95 million over the fiscal year 2001-2003
period that will expand the strategic parking ramp at Naval Station
Rota, Spain. The other four projects (fiscal year 2002 and fiscal year
2003) will construct a new ramp and associated fuel system for 16 wide-
body parking spots. This effort is collectively referred to as Enhanced
Rota.
Question. Why is this project not eligible for NATO funding?
Answer. The Enhanced Rota, Replace Various Facilities project is
one of five (three Air Force and two Defense Logistics Agency) projects
totaling approximately $95 million over the fiscal year 2001-2003
period that will expand the strategic parking ramp at Naval Station
Rota, Spain. The other four projects (fiscal year 2002 and fiscal year
2003) will construct a new ramp and associated fuel system for 16 wide-
body parking spots. This effort is collectively referred to as Enhanced
Rota.
The Enhanced Rota effort is potentially ``eligible'' for NATO
Security Investment Program (NSIP) funding; however, it will not be
known whether it will be supported (in part or total) by NATO until it
has undergone a rigorous operational and technical review, a process
commonly known as ``screening.'' This process could take up to five
years. Air Mobility Command (AMC) and United States Air Forces in
Europe (USAFE) both believe Enhanced Rota is a good candidate for NATO
funding (due to NATO coming online with a requirement for a Strategic
Mobility Hub in the Southern Region). However, due to the timeline,
funds will not become available until well after the need date.
This specific project, Enhanced Rota, Replace Various Facilities,
would be eligible for NSIP funding to the extent that the NATO
``screeners'' concurred that they need to be demolished to meet the
NATO mission requirements. In this case, the NSIP program has
historically replaced ``like for like''.
To secure the right to collect NSIP funds for this effort in the
future, it is necessary for the U.S. to file a Notice of Intent to
Prefinance (NIP). In accordance with OSD policy, the Government of
Spain (GOS) must endorse the NIP before the project can be submitted to
the NATO committee for recording.
Endorsing a potentially new NATO mission at Rota was too sensitive
for the GOS to address, prior to the 12 March 2000 elections. According
to OSD's Country Director for Spain, the GOS have informally told The
Office of Defense Cooperation (ODC) the U.S. will get a NIP
endorsement. The current popular party won the general election held 12
March 2000, and with a clear majority, so we should soon expect
negotiations for a release of this NIP by the Spanish to resume.
Worldwide Various: Unspecified Minor Construction ($9,850,000)
Question. Provide for the record a ten-year history of amounts that
have been requested and appropriated for unspecified minor
construction.
Answer. The active Air Force information follows:
[In thousands of dollars]
----------------------------------------------------------------------------------------------------------------
Including
Requested Appropriated reprogramming
----------------------------------------------------------------------------------------------------------------
Fiscal year:
1990..................................................... 7,000 7,000 7,240
1991..................................................... 10,272 10,272 10,272
1992..................................................... 11,500 11,500 20,203
1993..................................................... 12,000 7,000 7,000
1994..................................................... 6,844 6,844 8,555
1995..................................................... 7,000 7,000 8,750
1996..................................................... 9,030 9,030 11,288
1997..................................................... 9,328 9,328 10,477
1998..................................................... 8,545 8,545 10,681
1999..................................................... 7,135 8,135 9,622
2000..................................................... 8,741 11,341 11,341
----------------------------------------------------------------------------------------------------------------
WORLDWIDE VARIOUS: PLANNING AND DESIGN ($54,237,000)
Question. Will this funding level meet the known requirements for
the fiscal year 2001 program, including the necessary work on projects
programmed for fiscal years 2002 and 2003?
Answer. No. Although this funding level budgets adequate planning &
design (P&D) funds to complete design of fiscal year 2002 projects and
start fiscal year 2003 designs, it will not restore shortfalls caused
by the DoD directed $16,000,000 reduction to our fiscal year 2000 P&D
request and prior-year Congressionally added projects and directed
designs. Even after reprogramming $12,100,000 into the planning &
design account, the Air Force will be forced to use more fiscal year
2001 planning & design funds than budgeted to complete fiscal year 2002
designs, creating a shortfall in fiscal year 2003 design starts.
Question. Please explain why the Air Force's planning & design
request is $26.2 million, or 48 percent, above last year's level.
Answer. The Air Force's fiscal year 2001 planning & design request
budgets funds to complete fiscal year 2002 project designs and start
fiscal year 2003 designs. Our fiscal year 2001 request ($54.2 million)
is larger than the fiscal year 2000 request ($28 million) for two
reasons. First, DoD directed the Air Force to reduce our original
fiscal year 2000 planning and design request ($44 million) by $16
million and reprogram savings from prior year major construction
projects. Secondly, our design requirements increased by $10.2 million.
BARRACKS
Question. Provide for the record a chart that will show the Air
Force's barracks construction program at the time the ``one plus one''
standard was approved, and the current program through completion,
broken out by locations in the U.S., in Europe, and at other overseas
locations.
Answer. The Air Force did not have a line-item dormitory
construction program at the time ``one plus one'' was approved in 1995.
The Air Force plan in 1995 was based on a headquarters-level
requirements analysis; it did not contain specific construction
requirements. In 1995, the Air Force estimated that we would complete
``one plus one'' implementation worldwide (including host-nation
funding) by 2019.
After completion of the Dormitory Master Plan in August 1997, the
Air Force requirements became better quantified. We accomplished our
goal to buyout our permanent party central latrine dormitories by
fiscal year 1999. Now we are programming to buyout our deficit and most
critical existing dormitories by fiscal year 2009, guided by our
updated 1999 Dormitory Master Plan.
The attached chart depicts the Air Force dormitory MILCON programs
from fiscal years 1996 (the first year of ``one-plus-one'' dormitory
construction) through 1999--major emphasis in these years was on
eliminating permanent-party central latrine dormitories. From fiscal
year 2000 to 2009 we plan to buyout our deficit and our most critical
dormitories. The fiscal year 1996 through fiscal year 2000 programs
indicate appropriated MILCON projects. The fiscal year 2001 program
depicts the Air Force's dormitory MILCON requirements included in the
President's Budget. Fiscal year 2002 and beyond reflect projects in the
2002-2005 Future Years Defense Planning (FYDP) program and the 1999 Air
Force Dormitory Master Plan.
``Pipeline'' student and Basic Military Training Student (BMTS)
dormitories are not built to the ``one-plus-one'' standard, which
applies to our permanent party airmen.
DORMITORY MASTER PLAN
Question. Submit for the record the executive summary and
``Appendix A'' of the current Air Force Dormitory Master Plan.
Answer. Executive Summary and Appendix A (Comprehensive Dormitory
Project Lists) attached.
Family Housing Master Plan
Question. Submit for the record a copy of the current Air Force
Family Housing Master Plan.
Answer. Attached is copy of August 1999 Air Force Family Housing
Master Plan signed by Secretary Peters and General Ryan.
Question. Provide an explanation for any project for which
statements have not been submitted.
Answer. The projects for which NATO precautionary prefinancing
statements have not been submitted are described below.
FISCAL YEAR 1999
RAF Lakenheath, Dormitory (216 PN), MSET 953014, $15.8 million:
Dormitories are not NATO-eligible and are not likely to ever be,
therefore, a precautionary prefinance statement will not be filed.
RAF Mildenhall, Dormitory (144 PN), QFQE 973010, $10.9 million:
Dormitories are not NATO-eligible and are not likely to ever be,
therefore, a precautionary prefinance statement will not be filed.
Spangdahlem AB, Dormitory (108 PN), VYHK 993101, $9.5 million:
Dormitories are not NATO-eligible and are not likely to ever be,
therefore, a precautionary prefinance statement will not be filed.
FISCAL YEAR 2000
Aviano AB, Radar Approach Control Facility, ASHE013005, $3.7
million: Not yet filed. The requirement is to file the precautionary
prefinance statement before entering into a construction contract. We
will submit the prefinance statement before this project is awarded to
any contractor.
RAF Feltwell, Wastewater Treatment Facility, GPLS003014, $3.0
million: Wastewater treatment plants are not NATO eligible and are not
likely to ever be, therefore, a precautionary prefinance statement will
not be filed.
RAF Lakenheath, Child Development Center, MSET013001, $5.8 million:
Child development centers are not NATO eligible and are not likely to
ever be, therefore, a precautionary prefinance statement will not be
filed.
RAF Lakenheath, Consolidated Support Complex, MSET963002, $12.4
million: Administrative/support facilities are not NATO eligible and
are not likely to ever be, therefore, a precautionary prefinance
statement will not be filed.
RAF Mildenhall, Hazardous Material Storage Facility, QFQE966003E,
$1.0 million: Hazardous material storage facilities are not NATO
eligible and are not likely to ever be, therefore, a precautionary
prefinance statement will not be filed.
RAF Molesworth, Wastewater Treatment Facility, QNDR003002, $1.7
million: Wastewater treatment plants are not NATO eligible and are not
likely to ever be, therefore, a precautionary prefinance statement will
not be filed.
BRAC ENVIRONMENTAL RESTORATION
Question. What is the current estimate of the annual funding
requirement for BRAC environmental restoration beginning in fiscal year
2002?
Answer. The estimated annual funding requirement for the BRAC
environmental program based on the fiscal year 2001 President's Budget
is as follows:
[In millions of dollars]
Fiscal year:
2002.......................................................... 89.5
2003.......................................................... 83.2
2004.......................................................... 80.6
2005.......................................................... 78.5
PROGRAM EXECUTION
Question. Does the Air Force consider a project to be obligated
when NAVFAC or the Corps of Engineers accepts a MIPR or when the
contract is awarded?
Answer. The Air Force considers a project to be obligated when our
construction agent, NAVFAC or the Corps of Engineers, awards the
construction contract.
AVIANO, ITALY
Question. Bring us up to date with the current status of the Air
Force beddown at Aviano, Italy, which has a total facilities cost of
$404 million from all sources. When will this effort be completed?
Answer. The NATO beddown program at Aviano includes a combination
of $371,000,000 in NATO funds and $33,000,000 in U.S. conjunctive
funds. The $404,000,000 provides 24 operational facilities, nine
support facilities, seven infrastructure projects, and 17 quality of
life projects. $180,000,000 of these projects are in design;
$212,800,000 are in construction; and $11,200,000 are completed. The
Aviano 2000 program will be completed by the end of calendar year 2003.
Wednesday, March 15, 2000.
U.S. DEPARTMENT OF DEFENSE
WITNESS
RANDALL A. YIM, DEPUTY UNDER SECRETARY OF DEFENSE
STATEMENT OF THE CHAIRMAN
Mr. Hobson. The Committee will come to order.
This morning this Subcommittee will conduct a hearing on
the Implementation of the Military Housing Reauthorization
Initiative. Since the authorization of this program in fiscal
year 1996, this Subcommittee has carefully monitored the
implementation. We have all come a long way in determining our
best, as this initiative can work to meet our usual goal of
providing family housing.
We are pleased to have with us today the Honorable Randall
Yim, Deputy Under Secretary of Defense for Installations. Mr.
Secretary, we look to you to provide the OSD perspective on
this program. Following Secretary Yim, we will hear from the
individual services. Let me just say that I think this is
probably one of the most important hearings that we will have.
I hope it turns out that way. I view this as an extremely
serious subject that the Committee needs to understand, and the
services need to understand how deeply we all feel about this
issue, and about the patterns that we are establishing now in
these programs are what is going to carry on in the future.
If we do not do this right, starting out, then we could
harm what I think we all agree is probably the right way that
we should be going as far as the mix we should try to wind up
getting for housing, and provide the quality of life programs
that we want for the service people. So, we may take a little
more time today. If we do not get done today, and I have not
said this to anybody yet, but if we do not get this done in a
way that everybody gets a chance to express themselves, I am
willing to try to find some time to come back and do this. I
think this is probably as significant a thing as this Committee
is involved in.
So, I am going to yield to Mr. Olver for any statements he
might have. Then I would like you, Randall, to summarize your
statement. We will make the whole statement a part of the
record. Mr. Olver, do you have any comments that you would like
to make?
STATEMENT OF THE HONORABLE JOHN OLVER
Mr. Olver. Thank you, Mr. Chairman.
I do want to reiterate and support what you have said. This
is as important an initiative as this Subcommittee deals with.
The Administration, Mr. Secretary, and we will hear from you on
this, has asked for a further authorization, a 5-year
additional authorization.
We have talked a lot about this being a pilot program; 5-
year, I am not sure how far beyond pilot that gets us, or what
your intent here is, or whether you are thinking of this
process as a pilot, or a full steam ahead to do everything.
That then leads me to hope that I will learn from you and from
the Members from the services, but you particularly, whether we
have certain procedures for evaluating.
What are the criteria? How do we assess? How do we
evaluate? What are the proposals that we are going to go
forward with in different geographies? I need to try to get
that ever-clearer in my head in the context of how they are
chosen and how the evaluations go forward. Then I want to
ultimately hear how the whole issue of our now fully-funding
the bar, the Housing Allowance Program, how that may affect
what we are doing in this area.
I want and need to understand. I need to feel that OSD has
taken that into account. I think there must be some affect of
our now going to full funding, rather than people who are in
base housing having to pay 15, 19 percent in off-base housing;
having to pay 15 to 19 percent of their costs, which we will
now phase out. We have headed on a proposal to phase it out.
So, those are the things that I hope to get out of this area to
be excellent.
Mr. Hobson. I had a request from a fellow appropriator who
would like to make one comment. Then if anybody else has a
comment they want to say before we start, we will. Mr. Hoyer.
Mr. Hoyer. I thank you, Mr. Chairman. I want to thank both
you and Mr. Olver for your leadership on this issue. I agree
with you. This is a critical and important issue. I have a
hearing at 10:00 a.m. so I cannot stay past 10:00 a.m. I do
want to say that on behalf of Maryland and Ft. Meade, in
particular, we very much appreciate the focus, Mr. Chairman,
that you have brought to this, and the staff has brought to
this, and Mr. Olver has brought to it, and all of the Members
of the Committee who have been working with us.
We believe this, as you do, is a very, very important
issue. I thank you for your leadership.
Mr. Hobson. Any other Members?
Mr. Dicks. I would just like to say that I hope that we do
not, and I am not saying this about our Committee. I hope that
the Congress, after having given the authority to look at these
private sector partners here, in terms of this project, is
going to go forward with this. I represent the area near Ft.
Lewis, Washington.
I think when you look at the housing on the base, and you
look at the potential that this program can bring, in terms of
improving the quality of the housing, and getting more housing
more rapidly, I think it makes sense to do this. I think what
we have to do, in terms of the Congress is, now that we have
given you the authority, the Administration, to do this back in
1996, we have got to make sure that it works the way we all
intend it to work and provide good oversight.
I think that is what the Chairman is trying to do here
today. I hope we do not continue to hesitate on going forward.
I think we have got to do this. I know that in Texas and in
Washington State, we feel we are ready to go. We want to do
this. We hope that our colleagues will support us in that
endeavor.
Mr. Hobson. Mr. Edwards.
Mr. Edwards. Mr. Chairman, I will be brief. First, I want
to thank you for having this hearing. As we move forward, I
think it is important that we move forward in the right
direction with the questions that you, Mr. Olver, raised that
need to be asked about this. I would like, though, to emphasize
what Mr. Dicks has said. As I understand it, this Committee has
veto power at the end of the day.
So, what I do not fully understand is these roadblocks that
keep popping up, not necessarily on this Subcommittee, but
perhaps in the Senate. Frankly, it is like a Kafka trial. We
keep moving forward and there is a roadblock. We cannot figure
out who the roadblock is and where it is coming from. If we
have at the end of the day, as we all understand the right to
veto this, I hope we can have a pilot program at one or two
sites before we have to vote on reauthorization next year so
that we can move some dirt, and put it in place, and do it in
the right way.
Then at the end of the day, if we do not like the proposal
of the developers and the military at Ft. Lewis or at Ft. Hood,
then this Committee, as I understand through the leadership of
the Chairman, can say no. If we do not get a chance to move
forward at some point after this set of hearings, we will never
even get a chance to evaluate these proposals.
Mr. Dicks. Will the gentleman yield for one point?
There is one thing that is very obvious. For somebody who
has served on the Defense Subcommittee for 22 years, we are not
going to get there, providing the housing that is necessary for
the men and women in the military through traditional military
construction. It is not going to happen. So, we have got to
look at an alternative. That is why I think this approach makes
sense. So, I am eager to hear the witnesses. I appreciate the
gentleman yielding.
Mr. Edwards. I will just finish by saying that I think as
we ask these tough questions, and I am really genuine in saying
I appreciate the challenges that the Chairman has raised and
the questions he has raised, but I hope we will look at this in
the context that every witness today will also say, where are
we if we do not change directions? How far behind are we in
providing quality housing for the soldier today?
It is not much good to the young sergeant and his family,
or the young private and his family that we are trying to keep
in the Army today, if we tell them we have a 40-year turn
around on the renovation of Army housing at Ft. Hood, and
thousands of dilapidated facilities and facilities they should
not be forced to live in while they are willing to serve their
country. So, I hope this whole discussion day will also include
testimony from people saying, where are we if we do not take a
new approach.
Mr. Hobson. I think it is fair to say though that this law
was passed in 1996. So, the record starts. That is where we
are. The Army has no completed projects. As far as I know, it
only has one in the ground under this program. The Navy did
two, I think, two or three, some of which did not achieve the
goals that they were supposed to achieve, but may be getting a
little better.
The Air Force has done one. There are currently, just so we
know, 22 projects involving 27,911 units that are planned. We
keep receiving requests to do more on a program that has yet to
show that it is really working. I think the other thing we have
had to overcome is there was some resistance, I can tell you,
from some of the commands in the beginning. I think we have
overcome that pretty well now.
There would be a public statement that we are all for this
stuff. Then there would be little asides that, well, we are
being forced into this thing. Well, we are being forced into
this because we do not have the money. I will share this with
all of you, and I mean this to all of the people out here
working. Some of us have followed this. The Navy did a good job
in taking to heart some things when I went out a year ago and
talked about some things.
If we do not do this right, it will be really screwed up
for a long period of time. We will not be able to achieve the
goals. That is why I have tried to do some structure here.
Before we start, I want to commend you all because I know it
was a change from when we came in here and started looking at
this stuff. There was a change.
I think everybody has responded appropriately in getting
this done or we would not be as far along on these two as we
have been, had we not, and some others, had we not worked in
that. Mr. Yim has kind of gotten into the oversight in this,
which I really appreciate and I appreciate what you have done.
So, with that, we will let you start with what you came here to
do.
STATEMENT OF THE HONORABLE RANDALL A. YIM
Mr. Yim. Thank you, Mr. Chairman, Congressman Olver, and
Members of the Subcommittee. Let me also just begin by thanking
the Committee for its interest in improving the quality of life
for our dedicated military people and their families. I also
sincerely want to thank you for the very constructive
criticisms of this extremely important housing privatization
program.
They have been most helpful, particularly since I know that
you share the same goals that the Department and the services
share. Your concerns the past year, as well as the concerns
raised by GAO, and in its past reports and in its current draft
report, entitled Military Housing Continued Concerns For
Implementing Privatization initiatives, have really been a
catalyst for us to both examine our programs and our efforts to
significantly improve our performance.
My written statement is very detailed. It attempts to give
you a history of the program, what we have done in the past,
the various authorities, where we could use the authorities,
some of our theories, what we are trying to achieve, and what
we are doing to make our programs as cost effective as
possible.
Cost savings are a very important part of the program. It
is fundamental. It is fundamental about quality of life and
doing what is right for our dedicated people and their
families. Why am I here? What would I like to try to address? I
would like to address two areas of concerns about our program.
Roughly, why are we doing this? Why are we putting money on the
table for the private sector?
Second, what are we doing to ensure that, that is used for
what we are putting on the table? Can we get the best possible
deal, both now and in the long-run, deals that will not fall
apart in 5 or 10 years from now. But first, why are we doing
this? We are doing this because over two-thirds of our housing
inventory in the United States is sub-standard. That is about
180,000 housing units.
We are doing this program because we all agree that the
fixing the housing problem is a top priority, but an
unfortunate reality is that adequate military construction
money has not been available to fix this problem within any
acceptable period of time. We do not expect MILCON, as
Congressman Dicks indicated, ever to be sufficient. We have a
problem now that requires an attack from a lot of different
fronts.
We must have a substantial housing privatization program,
as well as increases in housing allowances, combined with
MILCON to fix these problems. I am not here to sell housing
privatization as the be-all or end-all solution. It is not, but
neither is MILCON. MILCON will take us about over $16 billion,
and then maybe about 30 years or more to fix the problem.
That is why they were really pleased when the Secretary of
Defense, Secretary Cohen, endorsed our three-part program.
First, by funding a plan and requesting legislation to increase
the housing allowances to eliminate the out-of-pocket costs
paid by service members for non-Government-owned housing in the
United States.
Second, by increasing the reliance on the private sector to
meet our housing needs, through increased use of these
allowances within the existing markets, and by stimulating an
aggressive housing privatization program. Third, by maintaining
military construction funding. We have established a goal of
fixing the family housing problem by 2010 and the barracks
problems by 2008.
The services are on track with sufficient budgets to meet
the 2008 barracks stall, but we have a very difficult path
ahead to meet the 2010 housing goal. We are going to give it
our best shot. It is precisely because we have to push very,
very hard to meet the 2010 goal that we have to have a strong
housing privatization program, and analyze and use all of the
tools given to us by Congress and the housing privatization
authorities.
These authorities fundamentally allow us to put some value
on the table to attract private sector innovation, cost
efficiency, best business practices to leverage what we are
able to put on the table, at least 3:1, but hopefully more like
8:1, which means we can fix the problem under housing
privatization eight times faster than we could under a
traditional MILCON Program.
This clearly raises justifiable concerns in Congress that,
one, we do not know what we are doing. And two, we do not have
the necessary expertise, we are putting too much on the table
too soon, or we are not watching sufficiently the back-end of
the deal, or we are not preventing the deal from falling apart
10, or 15 years down the road.
There is absolutely no doubt that the program has been
executed much more slowly than anybody would have ever wanted;
absolutely no doubt about it. This has been a function, I
believe not because people are dumb, but because this is a very
complex and new program. We are just not talking about a
construction program. We know how to do that. These projects
crash if they are going to crash not during the construction
phase, but later during the operation and maintenance, or the
care and recapitalization replacement phases.
So, we had both better get better expertise on board about
what these long-term financing and management issues are. What
we also have to figure out is what we really want to get out of
the program. That is what we needed to do. We had to figure out
what to ask of the private sector. What should we be asking
for?
Then, how to protect ourselves over the long-term on this
program. I believe that we have taken a lot of steps to figure
that out by now. The answer varies, depending upon the service
needs and the locations. When we answered these questions, we
figured out what we wanted out of the program; what we were
asking for.
What we really discovered is that we want more than what we
could pay for, using the housing allowance; what we pay our
people. We want more. So, we created a development gap. This is
kind of the classic American dream wish list type of a
development gap. Let me illustrate it if I could. There is a
chart on page 11 of the written statement.
I took the liberty of blowing this up a little bit. Let me
see if I can do the light thing for you all here about this
chart and give you some examples about it.
Simply stated, what experience has shown us is that the
total funds available by combining developer, equity, and the
available private sector financing is normally less than the
total development cost of what we want. We create this
development gap here. What we have to do is fill that
development gap. The difference between the developer's equity
and what they can get financed is the development gap.
We have to fill it by use of one of the 12 or a combination
of the 12 housing privatization orders that you have given us.
Now, we do not want to use all of the 12 tools everywhere. They
are not appropriate to be used everywhere. They are not even
appropriate to use them all at the same time. We have to use
them.
We have to analyze to use them, depending on what is the
most effective and the least scored cost to us for bridging the
development gap. So, let me just give you some examples. Let us
assume that we want a whole bunch of stuff. The developers
cannot do it on their nickel. There is a $6 million development
gap.
We can use a variety of tools. OMB scores these tools
slightly different for us. So, let us say that we have a $6
million development gap. We, of course, can put $6 million of
our money on the table. It is scored, of course, as $6 million.
We can put equity in it. It bridges the development gap. It is
not perhaps the most cost effective. It may be necessary in
certain circumstances. We can do as the Navy is doing, bridge
that development gap, and maybe supplementing the housing
allowances, these differential lease payments.
So when we pay our guys too little to be able to afford the
type of houses that the developer wants to build or we are
insisting they build, then we can supplement under the housing
privatization tools by adding to the lease payments, a
differential lease payment. OMB scores that as the net present
value essentially of that income stream.
For example, a $6 million development gap may be able to be
bridged by a $5 million scored amount. So, we are able to save
some of the up-front money. We could kick-start the program
with a less scored amount value. If we contribute real stuff
onto the table, we put in good houses, or houses that we convey
ownership over to the private developer.
Mr. Horn. What about, if I could just get in here; but you
do not use the land in there. We do not charge in any of these
deals. We do not give up the land and you do not charge them a
land lease cost. I do not see that when you talk about
conveying units. That would be probably about where it would be
or in equity. Do I see any underwriting of the fact that this
guy is getting the use of your land for nothing? They are not
supporting it. I realize that.
Mr. Yim. One of the reason we are putting the land into the
deal, for example, giving a very low rent lease cost, we are
actually giving them title to some of the units, not the
underlying land. We are giving them title to some of the
improvements on the property.
So, we have very favorable scoring from OMB to that effect.
To the extent you can give them that type of interest, that
helps with their income stream or their financing. It helps
them bridge the development gap. We have favorable scoring that
does not allow us to count that in the up-front MILCON scored
costs, which is a very effective way to leverage.
Mr. Farr. Mr. Chairman.
Mr. Hobson. Yes.
Mr. Farr. I was told that this scoring, by the way, was
being changed in the early 1990s. And that, that has really
been one of our biggest problems, being able to pencil this
out. It is a scoring problem, not a development problem.
Mr. Yim. That is partially the case. Partially, you know,
we have conveniently used the kind of magic of OMB scoring as
an excuse for a lot of the problems. It is a part of the
problem. A part of it is that we needed to understand how the
tools worked. We were not really fighting with OMB as much as
we did not really get, I think, how much value would be added
to the developer by throwing these things out on the table. So,
the tendency was to throw it out all on the table. If it was a
financial advantage, they would pull up all of the tools. When
we put it on the table and they might as well take it, as
opposed to being selective about what we really needed to put
on the table, understanding the scoring rules, and only putting
enough that was necessary to make the deal pencil out for them.
I believe a justifiable criticism is frankly we just put
too much out there. We did not understand the negotiating
leverage power that we had. We put too much out on the table.
Now, we have to be smarter about it.
Mr. Hobson. That is what I was going to say. I think that
is one of the reasons that the consultants that they hired have
been able to give them--they may not do the scoring side of it,
but they now understand the developer may handle it. If we put
the two together, I think we are getting little better results
today than we were 3 years ago or so. Is the scoring still a
problem? Do we need to work on that?
Mr. Yim. There are a couple of the authorities that we have
unfavorable scoring. As a result, we have not used them. We
have certain rental guarantees, for example, certain lease to
build type of situations where the scoring is very unfavorable
and none of the services have used it. The theory is that if it
looks, feels, and walks like a Government project, he gets
scored up-front with the whole value of the subsidy.
So, there is no advantage for us to go down that path. So,
to the extent that we have retained too much control and OMB,
unfavorably scores it. There are two of the 12 authorities that
kind of have that problem. They are not prime time players,
Congressmen. So, I do not believe we currently have a scoring
problem. It is really getting our act together to understand
the scoring words and what the private sector guys need to make
the deal pencil out.
Mr. Edwards. Can I ask, Mr. Chairman, is the thought that
it was not the scoring part of the problem of getting private
developers to build more 801 Projects? I am not sure of the
exact number, but if the scoring change in the 1990s created a
part of the housing shortage today because of the scoring.
Mr. Yim. Now, 801, for example, became a Government
project. So, as a result, because you were not leveraging with
other capital coming in on your project, you got scored up-
front with all of the cost.
Mr. Edwards. Thirty years of lease payments.
Mr. Yim. Right. So, it was very unfavorable timing for it.
This is a different concept. What we are saying to them is we
are conveying over to the private sector an interest, for
example, ownership of the units that they are building. It is
not a Government project. We are not guaranteeing that our guys
are in that project, even if the project is sub-standard. That
is a significant difference than a Government project.
As a result, if it is not a Government project, then we do
not have to get scored about all of the costs of all we have
put into the deal over the time life of the project. That is
the leverage. That is fundamentally the explanation of a
leverage effect. So, If we can get favorable scoring, we do not
have to put so much money on the table. We do not have to do
off-sets somewhere else to justify that money.
We can bring in the private sector capital. It multiplies
our money without us having to take it from some other program.
We do not have to take it out and off-set it against some other
program that is a priority for us. That is why the contribution
of land, for example, reduces the developer's cost, which in
essence bridges that development gap for us.
The contribution of good houses to provide a positive
income stream reduces this cost for the same reasons being that
it comes in. It bridges the development gap. We can also do
direct loans, for example. We can give lower interest loans.
OMB does not score it on the total value of the loan. They
score it kind of on a budget. They have funny budget rules that
do not require you to count the total value of the loan.
It depends upon the interest rate and the repayment terms
of the loan. So, you get favorable scoring. So, we are using
all of those tools to really fix the fundamental problems. We
want more than what our bar rates allow us to bill. That is why
MILCON has never allowed us to fix the problem within a
reasonable period of time.
We just want more for our people than what the funding
stream. So, this development gap, and let me move onto that.
Let me explain that. Does it always exist? No. It does not
always exist. Most of the time it does and really for three
reasons. I am going to stop being Vanna White here and I am
going to put it down in 2 seconds.
Mr. Hobson. I would like to have a copy of that.
Mr. Edwards. It is in the testimony.
Mr. Yim. We actually took the liberty of making some copies
of it. So, let me talk about the development gap because this
is really a crucial concept for us. It exists most of the time
for three primary reasons. First, to protect our people. We are
requiring that the private sector guys do the whole deal
without charging our people more than the housing allowance is.
Since housing allowances are statutorily limited currently
at 15 percent market rate, 15 percent below market rates, a
development gap is immediately created from the structure of
our current housing allowance structure. We pay them
statutorily 15 percent less that is what it really would cost
them to rent the type of houses out on the private market.
Now, Secretary Cohen's plan is to gradually eliminate this
between now and 2005. We need Congress' support for legislation
because the 15 percent cap is a legislative cap. What we put in
the President's budget is the funding plan to gradually
eliminate that out-of-pocket cost between now and 2005. We hope
that you will support that legislation.
It will go very far to bridge this development gap, but it
is not going to solve the whole problem for two other reasons.
The gap is also created by kind of a traditional on-base
housing assignment pattern. For example, junior enlisted people
on base for on-base Government housing built with traditional
MILCON typically get single family houses with bedrooms
sufficient to handle the number of dependents.
Now, the same junior enlisted living off-base using his
basic allowance for housing could not afford that type of
house. He could not afford the same product with his housing
allowance. So, they typically can only afford to rent an
apartment, for example. You know that privatization can occur
on-base and off-base. The problem that we created on-base for
privatized housing is that it would look unfair.
It would look discriminatory. It would be bad for morale.
It would just look bad. The same junior enlisted guy in a
military constructed house had a single family, and we were
building all of these apartments for these E-4s or whatever
under privatization it was just unfair. Now, a lot of things
are unfair that you cannot afford. But that is a reality of how
we do assignments on-base.
So, our own type of assignment patterns created a
development gap. We wanted more, even though the housing
allowances could not support us getting that because it would
only support an apartment for these guys. We wanted to build
them a single family type of home. This historic gap, we kind
of have to get our act together about how we are going to solve
that. It is a problem.
Finally, the gap is created by a risk of doing business on
a military base. I do not want to argue that it is a real risk.
The fact is that it is a perceived risk by the private sector.
That may be just as bad as an apparent risk. The apparent risk
is that they are worried about future Governmental actions that
are going to disrupt or screw up the flow of income coming to
the base.
Mr. Hobson. It is not everybody.
Mr. Yim. Not everybody.
Mr. Hobson. We assumed going in, I think, that everybody
was going to be worried about that. I have seen instances where
people said, I would be happy if you walked because I could
rent these in the future to other folks. There are certain
parts of the Country where that is true. I think in San Diego,
for example, they would die to get that property because land
and units are high. There are other places like that.
One of the other problems I had is we tend to assume that
there is going to be this development staff everywhere, until
we threw all of these things on the table. Sure, if they are on
the table, and I am a developer, I am going to take every one
of them. If they are not on the table, then I have got to be
creative in how I do my deal, or how I transact the deal. That
is one of the things that we have learned as we have gone
through this.
Mr. Yim. I think that is exactly right. That was the point,
Mr. Chairman, that you made over and over again to us. I
finally think it is sinking into our heads that we did not need
to do all of these things. The gap does not exist all of the
time. It does in some locations and that is why we need to use
these privatization tools. We have to pick and choose the
combination or when we put them out on the table.
I think that what we are doing is really the unique risk
problem is that it affects the availability of capital for
these guys. So, if they think that there is going to be a
deployment, or there is going to be a potential base closure,
they have to kind of budget for or finance around the risk. It
may be an unreasonable risk. We see this all of the time. You
are in private sector stuff where the people in California are
worried about earthquakes or something like that.
Sometimes it is a perceived risk. Sometimes I think there
is a real risk. Sometime there is not. But it is a finance. It
is an aspect of the financing. So, I am not arguing rightly or
wrongly that the risk should be taken into account under
reporting. But the risk is a factor in the financing decisions.
We have to be able to bridge that.
That contributes the development gap. It is because that
gap exists for these reasons, that we have to put something on
the table, even though I think we would all agree that the best
deal is the deal where you do not put up any of your own money.
I do not think we can get that in all places however.
So, if we have to put up some money, then what we have to
do, and the burden is on us, is to assure that we get the best
deal about whatever we are putting out on the table and to
minimize the risk that we are going to have to keep putting
money into a bad deal. Keep pushing fundamentally an unsound
position.
That is really the big task that we have ahead of us. So,
are we doing a good job about looking after our money wisely? I
think so, but I think clearly we can do better. The focus of
the draft GAO Report that I signed out a response to last
Friday, I signed out a response concurring with each and every
one of the basic recommendations of the report, the GAO Report.
Let me briefly go through them. First, the GAO said, okay.
You guys have to get your act together and have a privatization
evaluation plan. We have one. It needs to get better. We have
used private sector experts since 1996 to help us develop these
evaluation tools. They are good. They need to get better. They
are going to get better. This is what we are doing on it.
We have established this, what I am terming a peer review
type of audit evaluation board with many of the gentlemen here
in the room. The Deputy Assistant Secretaries of the services
in charge of housing programs and probably more importantly,
the senior service engineers who really know what is going on,
and the key financing and programming guys.
What this board essentially serves is a board of directors
for the services, DoD-wide, for installation matters, for
housing being a strong and important component of all
installation management. We are augmenting it by our own
private sector experts. We are going to vet the draft
evaluation plan that is in progress down through this board.
I have been very pleased with the use of this board over
the past 6 to 9 months. We have been able to vet a lot of major
issues and raise them to senior decision makers. When we needed
a policy choice that was above our pay grade, very quickly, it
has been very effective. It is going to get better.
This evaluation plan is going to be in coordination with
the services later this spring. I hope to have it out and
vetted by this board in the summer. We are going to get better
on those. The second GAO criticism is that you guys need to
have a life-cycle cost analysis of these housing projects. You
have got to project it out over the 30- or 50-year life of
these projects; absolutely.
We have one. It needs to get better. It is going to get
better. Our primary plan identified not only differences in
methodology used by the services, and how to do these life
cycle cost analyses, but how these specific costs are being
derived. We have expanded our requirements to include items
such as the consultant costs, construction inspection, long-
term management.
We are going to issue new guidance, again in coordination
with the services through the Installation Policy Board later
this spring. We are going to get better. The third GAO
criticism is you need to get an integrated strategy, including
a way to get some consistency among the services in determining
the housing requirements, and what the housing really are. I
agree; absolutely; no question about it. The services have
taken different approaches.
That is right. I applaud and I encourage the services to
take different approaches to solving the housing shortage
problem for them because it is very site-specific. It may be
typical in very high cost areas. It is different than the
larger bases faced by the Army. They should not have markedly
different ways of calculating the requirement itself.
The approaches should be innovative. The requirements, we
should have some consistency in how we build them up. It is an
OSD burden. We need to get together with our Personnel and
Readiness people because it is divided a little bit. My shop is
installations, logistics, and environments. We handle MILCON.
We handle housing privatization, housing requirements.
Housing allowances are actually set by another shop in OSD
under Secretary Rudy DeLeon now on the Personnel and Readiness.
We have got to integrate these two things because obviously
they relate to each other. Just your question, for example,
Congressman Olver, we increase the bar. It should reduce the
housing requirements.
It is going to make more stuff immediately available off-
base for people to be able to afford. It is going to strive
better housing privatization. It should reduce the
requirements. Can I give you an algorithm right now how it is
going to do that? No. I cannot. I am going to need to see what
that relationship is, but it should. So, I need to sync up with
the guys who are doing their allowances to be able to disrupt.
Mr. Olver. Mr. Chairman, may I break in here?
With what you have just said, you have talked about the
development gap and it is 15 percent, plus or minus I take it.
It obviously is not in all cases. It floats. But if we are
going to move the bar and we adopt this 5-year plan, which of
course the Congress has to do, if we adopt the 5-year
equalization here, I guess what I hear you saying there is it
should eliminate the development gap, not totally because there
are these other two factors that come in.
It is more complicated. I must say, when I have you here
before us, Mr. Secretary, I begin to think that I understand
this process. That is very dangerous I suspect.
Do you feel that you can do privatization in any and all
places within this context that you are describing of the
development gap and the pieces that have to fit into it; any
and all places or not? Or is this just an evaluation way to
tell you which ones you cannot do through privatization?
Mr. Yim. I think that there are going to be some cases
where it just is not going to work. We are going to have to
just gut it out with traditional MILCON. I mean, I think that
is absolutely the case that some of the services are going to
give us housing master plans that have on-base requirements
they want to maintain, even though the private sector could
handle that because they have other values they want to
preserve.
They need to mobilize quickly on force protection issues or
some other types of reasons. So, that is why I said that I do
not believe that housing privatization is the panacea. It is
not everywhere it is going to work. I believe, Congressman, it
would work in most places. I will go out on a limb. I firmly
believe most places it will work. When GAO looks at the cost of
DoD or the services owning their house, it is significantly
less.
It is something like $5,000. Let me remember the numbers.
It was like $11,200 a year, I think they said in 1998, that it
cost the Government to own and operate houses. It was like
$9,000-something for the private sector. A part of it was
because they are just smarter, better. This is what they do.
They are more efficient in how they manage it and they get
economies of scale. They build to standards. They use like
standard size houses and plans and construction material
because they have a larger market that they can amortize those
materials over. What we tend to do is really specific need type
buildings that make fixtures more expensive, for example.
Mr. Olver. Well, it seems to me that the pattern that is
described here, if you had the evaluation plan, and it is
common. It has guidelines that allow a certain amount of
creativity by the services, but it is basically an evaluation
plan that takes into account the right criteria. If you have
life cycle costs over the lifetime of the deal, you put them
in, and there is some sort of consistency in requirements, it
seems to me that one could have a context which is a kind of
context in which you could make all of the decisions that need
to be made.
Without that, it is complicated. That is true. Without
that, I am going to try to look at this in a sort of a linear
kind of way. On the one hand, you might have a site which has
no housing, no local housing market which is out there in a
very isolated place on the one end of the scale. There it seems
to me you have got to use MILCON with maybe the possibility
that you can use privatization.
The private market, that 15 percent change in the bar rate,
is not going to make a world of difference on the creation of
housing. Privatization in that instance is going to need a
considerable amount of incentive along the way to take care of
the risks, one of the other factors in what your gap is. At the
other end of the scale, you have got places where there is an
extensive housing market. And where you could do absolutely
nothing but let the private market provide.
Then you have got sitting there a huge amount of housing
that has been how we have provided it in the past, as
inadequate as it may be; some of which is so inadequate, so
substandard that it ought to be torn down. Some of which is
good enough to be a part of an asset that can make a deal work,
I would imagine at the other end of the linear scale. So,
within that then you get into this what are the features that
get brought together?
An operable plan, an effective plan would begin to tell you
when there is so much substandard where you do not even try and
let the private market come in or you do much less than the
whole amount of housing that is there in the area.
Mr. Yim. I agree. I think that is right. It is a function
of the kind of the classic OSD way of handling a problem. We
hammered the services a year and a half ago and said you are
going to fix this housing problem, 3 years ago, come hell or
high water, by 2010. We do not care. You are going to fix it.
So, that required then people to say the only way that it would
pencil out is that we were on an entire housing privatization
program.
We are going to have to achieve and 8:1 or a 12:1 leverage
effect because there is no way we can get to 2010 without that
type of thing. So, they tried to apply the deal across the
board to every location. I think it was your Committee that
came back and said, now, time out. It was not supposed to be an
all or nothing program. It was supposed to be a pilot. It is
not going to work everywhere.
We saw, for example, the Army scale back an entire housing
privatization program to a mix, and appropriate mix. Military
construction with privatization is not going to work, and
privatization where we think it should work. I think that is
the approach.
Mr. Olver. Okay. I did not want to focus on a specific one.
I guess I will not. The Chairman has already mentioned one
where I think that we would all believe that there is an
enormous private market there. It happens to be the largest one
in the Navy's whole plan. It happens to be more than half of
the Navy's whole plan.
Mr. Hobson. If the Navy would have started, it would have
been all of the Navy's whole plan because they were going to do
it in one year. The initial thing I saw was 11,000 units in one
year, which was not achievable. To the Navy's credit, once we
all got down on their heads, they revisited it. The initial
program was 11,000 units in one year.
Mr. Olver. Okay. I do not remember what the initial program
was. It strikes this member that if we cut back to about \1/3\
of that, then it is the one area where the change in the bar,
which we are doing, probably could have solved that and maybe
ultimately, depending on how much is substandard and so forth,
I do not know which 3,300 are involved there in San Diego.
Everybody knows what we are talking about at this point.
So, we were originally going to do 11,000, it strikes me
that, that would violate almost any rational plan, overall
plan, for where the privatization were going, especially if we
are going to remove that bar gap that we are now doing. That
would not be allowing for the market to kind of drive things in
the number of different directions at once.
Mr. Yim. I think that is right. I am not disagreeing with
what you said. I think what you saw, for example in the Navy in
San Diego, is that although there is a very strong housing
market, that housing market was driving up the rents and
getting it out of sync with increases in the BAH rates. So,
there was a problem with our sailors in that area. We were
losing the beauty contest out in those areas about people
renting to our sailors as opposed to jacking up the prices and
rented it to somebody else.
That is why they were investigating the need in a high cost
area like that of putting differential ease payments on the
table to make our guys look more attractive to the private
sector market. That is a problem in certain areas. Now, we have
to win the beauty contest in a high-competitive market, house
market, and get our guys in this good stuff, as opposed to if
they lose, they are at the bottom of the totem pole and they
get the bad stuff that is available.
That is kind of the lower third of the quality of the
houses out there. So, what we are trying to do is not have a
linear approach, but an approach that actually kind of looks
ahead, projects 5 or 10 years down the road, anticipates the
bar increases. I think that we are all hopeful that we are
going to get the legislation that allows us to implement this
program and take out the out-of-pocket costs.
Look ahead, look at available other funding streams,
budget, the up-front costs to do the deal correctly. Figure out
what the market really can give us so that we do not put too
much out on the table. That is why they do need to have pros
out there that are familiar with the local housing market
condition. It is very difficult for people just in Washington
to really understand the housing boom in San Diego or say, the
Silicon Valley in the San Francisco area.
It is hard to imagine the guy is making $60,000 cannot get
a house anymore because of the .com millionaires have raised
the housing rates to the extent that they have. Those are the
types of problems.
Mr. Farr. It is obvious that you are going to be
convenient to the military----
Mr. Yim. That is right. The fact there is the availability
of some of the housing. One of the problems that we have that
we need to work through is the BAH rates. Our market surveys
pros, go out there and make market surveys. It is not the old
system where you ask people what they paid, because that was
notoriously inaccurate.
They actually go out and do market surveys. But they are
not factoring in as much of the availability or the temporal
aspects of it. How long is it going to take for the increases
involved really to kick in for these guys. So, you can get into
an immediate problem. That is why sometimes we have to maintain
on-base housing to handle that type of stuff.
The Navy has another problem too for some of the guys that
are on their end, just to give another analogy of just how
complex it can be in non-linear thinking. They have these guys
living on ships all of the time. When they go into a home port,
they cannot let these guys keep living in this little cramped
ship quarters. They can see the guys at the same grade living
in an apartment, in barracks, and things.
They have to get them out of the ship or they are going to
go a little stir crazy. So, they are taking, as an interim
standard, the 2 plus zero standard for barracks, even though we
are insisting on a 1 plus 1 barracks standards eventually, just
to do some interim fixes to some unique operationally-caused or
location caused housing problems. So, it is that timing in this
match that sometime causes us some grief in this, and why we
need to do some of this housing privatization.
We really liked the focus on BAH, frankly. The bar did a
couple of things for us. One, we think we can get Congress to
support the increase in legislation. Once it is there, frankly,
in the pay accounts, it is less of a target for future
reductions. Bluntly, that is the case. Secondly, it gives us a
little bit more flexibility than investing in long-term MILCON
housing privatization programs because the BAH can be adjusted
much more rapidly, if there are deployments or whatever.
You have not entered into a long-term deal by letting
people live off of the existing market economy for available
housing. So, it is almost a self-executed program. We thought
it was really a very good way to directly attack the housing
problem long-term for us. But we also need to really supplement
that with the other two prongs of the three-prong plan:
housing, privatization, and military construction. We are
really pleased. We put in $3 billion over the fit-up to fix the
housing allowance problem.
Mr. Farr. Mr. Chairman, on the BAH, is the bar adjusted? Do
you get a higher BAH in San Diego than you would in someplace
else? Is it adjusted for inflation as well?
Mr. Yim. It is adjusted for areas, yes. I believe it is
adjusted for inflation.
Mr. Hobson. Yes.
Mr. Yim. It is computed every year. So, it is adjusted.
Mr. Farr. So, in higher cost areas, the BAH will be higher.
Mr. Yim. Yes. That is correct. It is done on market
surveys. What was done before we went to this new Runsheimer,
is that they would ask people. They would send out a survey.
Some people that were living beyond what they should have, or
they were given bad deals would report really high housing
costs. It would be notoriously inaccurate. They would say, I am
going to try to save some money.
I am going to consciously decide that I am going to live in
less adequate quarters. You know, I am going to suck it up and
live in bad stuff. They would report then inaccurate numbers
about what the costs really were. So, it was notoriously bad. I
should not say bad. It was notoriously inaccurate in certain
locations. So, the market guys were sending some pros out to do
a market survey, which is much more effective.
Mr. Farr. Have you ever worked this with HUD? There is the
same thread of issues. Is there any dialogue with HUD on what
they are doing?
Mr. Yim. Housing Authorities can participate in our
privatization program. I think that what some of the typical
public housing programs do not do is they do not take into
account the military's unique situations very well for us. So,
we are not trying to create a public housing project. What we
are trying to create is something that takes into account some
of the force protection needs, the military's values of having
people together.
Mr. Farr. But in that, I think there is a misunderstanding
that public housing is not done that way. We do not build
public housing. The private sector builds it and we rent it
from them with vouchers.
Mr. Yim. There are other lessons that we are making.
Mr. Farr. The reason I asked is because the authority--has
been very interested and thinks they can build better housing
to the needs of the military and at a cheaper cost. They can
maintain them. They are very into this. They have a former
military fellow who is the head of the Housing Authority. He
has done pretty well. He is convinced that if the military
contracts with him, he will do a better job for the same amount
of money.
Mr. Yim. Right now, there is no prohibition in the Housing
Authorities either teaming or actively bidding on the housing
privatization projects. So, we are trying to remove the
roadblocks.
Mr. Farr. One of the things I am very interested in is the
project that was built in Fort Ord before it closed. It was
called Sunbay Apartments Privatization. It was really good
quality. The Chairman visited it. He could not believe that
this was done. I had been told that, that project could not be
repeated because of the scoring issue. Could you have somebody
just check on that and explain why. Maybe I am not getting the
whole story about Sunbay, but it is a famous apartment complex
at Fort Ord on military land.
When the base closed, the guy walked off with a gold mine.
Anyway, the deal he went into was a win-win. Everybody really
loved the project. They were wondering why more of those
projects cannot be done on a national level. Please check that
out and get me back a memo on the pros and consensus of Sunbay?
Mr. Yim. I will do that.
[The information referred to follows:]
The question refers to the Sunbay Apartments at Fort Ord.
That project was accomplished under 10 U.S.C. 2667, which at
that time allowed the Army to outlease land at Fort Ord to a
private developer. As consideration for the lease, the
developer constructed the Sunbay apartments as a mixed-use
development and gave priority occupancy to military members,
including family, unaccompanied members and transients. Scoring
was not an issue because no long-term government obligations
were involved. Rents were based on size and amenities, as well
as military housing allowances, and they were indexed for
inflation. However, rents were still greater than a member's
housing allowance. The authorities granted under the Military
Housing Privatization Initiative provide much greater
flexibility (including a leasing authority), and are more
advantageous and easier to use than 10 U.S.C. 2667. The same
type of project could be created using these authorities under
the same conditions, specifically high demand for housing and
expensive land costs. Most of the current housing privatization
projects include leasing of government land as part of the
project.
Mr. Yim. Really, in conclusion of my statement, what we are
asking for is an extension in the housing privatization. They
actually expire in February 2001. We would need action this
legislative session, Congressmen, to do this. So, we cannot
wait until next year. It is this legislature. We would like
your support of not only maintaining MILCON, but especially
this session, we need to extend it. It expires February 2001.
We are going to be putting projects in front of you. We are
going to work with you cooperatively. All of the services have
heard loud and clear last year. It was very constructive and I
mean that not there has been favor with you guys. It was very
constructive for us really to have us analyze what needs to be
done and make the program the way it should be.
Thank you.
Prepared Statement of the Honorable Randall A. Yim
Mr. Hobson. Thank you. I want to say that I very much
appreciate, and I know the Committee does, your personal
response to what was suggested. I thank you for your very very
thoughtful memo that you put here in your lessons learned and
the programs you have set forth. You have really attempted, and
I think have, tried to intellectually approach this
opportunity.
I do not see it as a problem. I see it as an opportunity. I
think you have done that. Sometimes we beat everybody up. I
want to tell you, this is a good way to start this. Based upon
some of this, what you have talked about here today, and talked
about with the Members, I would urge all of you to sit down
with the authorizors and figure out how. We can only do
legislation for a year. So, I do not want to do it every year.
The proposals that we are learning, or I think that we are
learning, I think we need to get the extension so that
everybody does not panic. We are starting today. So, we can
talk to about what we have learned to date and give us the
leeway to adjust ourselves as we go through this. Each one of
these is going to be a little different. We will not have a
full set of plans that we can duplicate.
Community standards are different in different places. The
military, though, will have some standards that they want
throughout. Some people will want to be on base for certain
mission and cultural things that they have. I think you will
see as we get less certain about where all of these things are
going to be, we are going to want to have the flexibility built
into these, whether we ever use it or not, that we can change.
Some people have always tried to have all of their people
inside the parameter fence. You can still continue to do that,
as long as someday we might have to move that fence. The
ability to move that fence is there. Some people want to have
their people off the base. That has been their tradition and
their history. That is fine. We just need to understand that we
are not using that or they can give it up.
When you give us things in their community, whatever
community they want, not some things that have no residual
value. Again, I really appreciate the nature in which you have
approached what has been some difficulties we were having
trying to help us intellectually get through these and help the
services move forward.
Do any of you have any additional questions because we want
to move on?
TAXES
Mr. Edwards. Mr. Chairman, I will try to be brief. I
without want to reiterate what the Chairman said. I thought
this was a very thoughtful presentation. If you need an
apologist for the program, suggest that it was a panacea,
realistic about the challenges, and the need to keep asking
tough questions. I appreciate that, as well as the contacts of
where we go if we do not have this program. Let me just ask
about the quest of taxation. Has that issue been addressed? How
would these housing units that the Government still owns the
land, the developer owns the property for tax purposes, say,
local school property taxes? How would these units be handled?
Mr. Yim. My preference is that the Government retains the
land and that they transfer ownership of the housing units to
the private sector. They really have to transfer the units to
be able to get some favorable--and to kick in the bond as an
interest. What it does, is if we retain ownership of the land,
our Counsel is saying that we can pay the higher impact aid to
the school districts because the Government owns the land.
To the extent that you privatized them and somebody else
owned the land, then the property taxes are going to be paid at
the school. We will pay at the lower end of the school impact
aid. Many people think that is not sufficient. So, the
preference is to try to just give up the stuff on the property,
and keep the grounds, and pay the higher taxes.
Mr. Edwards. I hope someone will really watch that very
carefully. For example, that would go to Part A to Part B for
impact aid, if it had a devastating impact on the school
district. I appreciate your sensitivity. Thank you for your
testimony.
LOCAL BUILDING CODE STANDARDS
Mr. Farr. Every time you talk I learn something. I really
appreciate you being here today. The one question I was going
to ask some of the others--that we have been told here in
several hearings, that from now on you are going to build to
State and Local building code standards.
Mr. Yim. That is correct.
Mr. Farr. Is that going to be for property that the
military builds on military land as well or is it just going to
be in the privatization side of it?
Mr. Yim. We wanted to see it on the privatization side.
That is a problem for us. So, we are looking forward to do that
on the stuff that we are going to continue to own. I mean that
is a problem. In theory, we should be using private sector
standards. We should be taking advantage of private
standardized floor plans that they have, the type of fixtures
they put into it.
We have this really bad tendency to ask for military-unique
goods and services to be provided to us. Not only does it
increase the material cost, because they cannot spread it over
a larger market, but some of the labor costs are increased
because people just are not familiar. You cannot have workmen
that are familiar with building this type of house that we
want, or this type of wiring, or this type of stuff in it. You
can find the guys that can do it out in the local economy
because they are putting up whatever.
Mr. Farr. You are not suggesting that the military housing
is shoddy housing?
Mr. Yim. No, not shoddy. But sometimes we traditionally
maintain construction practices that are no longer used in the
private sector.
Mr. Farr. Some of this stuff does not make sense. I think
that you are sensitive that your projects have to fit local
needs. You ought not to be building anything in California that
does not meet earthquake standards.
Mr. Yim. Right.
Mr. Farr. What happened was a brand new hospital was built
seven stories high, a 400-patient bed hospital during the
Vietnam War. Seven of them were built around the United States.
It was the same blueprint for every one of them. The one in
California was abandoned. Nobody in the world could pick it up
because the cost of retrofitting it was so great. It is now a
Federal office building.
If you ever abandon that building, the Federal Government
does not own it. You are going to have a cost of tearing it
down and retrofitting it. Then it becomes a cleanup problem. It
was dumb to do that. I hope you will never go into places like
California again and build buildings that do not meet
earthquake standards.
Mr. Hobson. I would like to make one suggestion. As you
review the future of the MILCON housing, rather than living
with the old idea of building them close for villages, just
like I would like a change, I hope that you go forth and listen
to--a general officer's housing numbers are 2,200 square feet.
That should be changed. I keep saying that because I hope
somebody talks to me.
We ought to try to see if we cannot change the culture to
see if it is not pretty close to building the way that we would
like to do the square footage standards that are more common.
The residual value of what we would do would be much better
long-term. If we build to MILCON, the MILCON is to this old
standard. I mean, we shut that base down. Then we have hampered
the ability of that community to utilize that facility and the
residual value.
It acts as a negative rather than a positive. You guys have
gone through two more BRACs. We should not be building
anything. We should be very careful about what we build in
those areas. That we build things that are to have some
residual value or we are just throwing money down the tube
again, which I do not want to do.
We may get some economies that I know sometimes when you
deal with engineers, and they have been in a box or building
military types of things, there is a little resistence
sometimes to thinking outside the box on, you know, that type
of thing or a modular type of stuff that you can do. I just
would encourage all of you to just have the engineers or poke
at the engineers. It is a little hard sometimes. My father-in-
law was an engineer. It is a little hard to talk to engineers
sometimes, but just to get them to think beyond the tradition
that we have been doing.
I think you are beginning to do that. I really applaud the
diversity that we have done in these things, but also the
ability to think of cross services to begin to come to some
commonality understanding which I think was needed. I think you
have done this. I mean this in a positive way. This has been
moved down to each of the individual services. They were all
running around.
OSD had not abandoned it, but kind of in a way let them go
and that is okay. I think now what we have is you all are
watching more closely what they are doing and bringing some
understanding of each other of what works and what does not
work. I think that is very positive.
John is going to be our last speaker.
Mr. Olver. I want to again support what the Chairman has
just said. Before I completely yield myself to your three
dimensional thinking, and maybe it is more than that, where one
of those dimensions is the different services. Before I yield
completely to that, I want to just hand onto one little piece
of linear and see how it fits into the multi-dimensional matrix
that you are developing here for this set of evaluations. Do
you expect that there are always going to be new net units in
these plans? Is that something that developers would have to
have to make them go?
Mr. Yim. Some of the projects are renovations.
Mr. Olver. Solely renovations?
Mr. Yim. Right.
Mr. Olver. They may be new net units.
Mr. Yim. That is right. It may be if there is a
requirement and they need to build more units. That is right.
But some of them can be just straight-up renovations.
Mr. Olver. Is there any inherent difference between active
bases and reserve bases?
Mr. Yim. Usually reservists are living in the community.
So their housing requirements are much, much, much less. So
that is a difference. But it should not be, in theory.
Mr. Olver. Is there any reason why it cannot fit into your
multi-dimensional matrix?
Mr. Yim. Typically, when we call upon the Guards and
Reserves, they are mobilizing from the community. So, it is
really not a housing problem for us. It is different in that
sense. If we are stationing somebody overseas, that is a
different program. I mean, we are building temporary houses for
them because they are on deployment. That is a different deal
than what we are looking at on the housing privatization.
Mr. Olver. Do you anticipate in this that there would be
an occasion where you would actually privatize more units
because there are a lot of existing there, more units than the
present or projected need on the military side for housing for
permanent personnel would occur?
Mr. Yim. I think that will be a subject of sometimes
heated discussion between us and the services. I believe that
we are going to see some master plans from the services that
want to do that to look at future requirements. We are not
convinced that, that is the way to go.
Mr. Olver. They anticipate future requirements. So, they
might go up.
Mr. Yim. I can see that. It is just the methodology of how
they are getting there. We are a little bit, and I should not
say cynical. We will look very closely at whether they really
are accurately projecting or are they really just kind of
warehousing houses. I am being as blunt as I can. My task is to
be sure that the services do not overdo it.
Mr. Olver. You were, I think, headed in a different
direction than I asked in that question. I was going toward a
situation where you got a base, that because of our force
structure reduction, where we have a lot of islands sitting
around. Some of it may still have some good asset value. Some
of it may not. Whether or not under those circumstances you
would deliberately create a deal where you would solve that
problem as it is sitting there that is not really going to be
needed, nor can we expect it would be needed by the actual
force structure that you can anticipate for the area.
Mr. Yim. I think that is what we are talking about on
getting our act together on housing requirements. We have to
project the current and future. It is difficult. It really is.
This is a problem not just unique to housing privatization.
Now, if you are trying to project a MILCON project, straight-up
MILCON, traditional MILCON, you have to kind of project all of
these things into the future.
It is hard for the services now to do that. Frankly, it is
harder because we do not have, and I am really thinking about
whether my self-preservation instincts are kicking in. Since we
do not have BRAC authority, it is much harder for us to do
this. We do need BRAC authority to be able to really think
about what is the future force structure going to look like and
what type of installation reshaping needs to occur.
Mr. Olver. If you build them to community standards, then
you are much less at risk of having wasted taxpayers' dollars.
Mr. Yim. Yes.
Mr. Olver. If you built them in a configuration where the
fence can be moved, then I think you are better. I think
everybody can look at that without the worry.
Mr. Yim. I just got the feeling that the Secretary is like
a painter here who has put a big canvas in pastels. I am still
imagining how those pastels are going to turn into vivid, vivid
colors that can allow one to look at this context and matrix
and evaluate these plans as they come in.
Mr. Olver. Until we get something done, we are not seeing
a lot of real bright colors. I hope they are all brilliant nice
colors and not colors that we are ashamed to look at, at some
point when we get done. It is my theory that when we get done,
and I think that is one of the reasons why we are moving this
way, when we get done, I want to look at them and be proud of
the painting when it is finished, and not want to cover it up.
Mr. Yim. That is why we really need your support on two
things. We have a hearing in front of the authorizors tomorrow
on exactly the same issue. The two things that we need are not
only reauthorization, extension in housing privatization
authority for another 5 years, but also we have in our package
the elimination of the space by grade limitations.
That is exactly your point so that we can build to
community standards. Right now, we are in a waiver type mode.
We just think that the space limitation should be eliminated so
that we can build to community standards.
Mr. Hobson. I thank you very much for your candor and your
hard work in this area.
Mr. Yim. Thank you.
Mr. Hobson. We are going to take a 5-minute break. We are
going to come back at 11:00 a.m. We are going to move some
chairs around. We will have the three remaining witnesses.
Thank you.
[Recess.]
Mr. Hobson. The Committee will come to order.
We will, without interruption I hope, we will allow the
three Assistant Secretaries to make their statements. Then we
will ask questions. There could be a vote about 11:30 a.m. I
have to be out of here by 11:50 a.m. So, if we have a lot of
questions, we might ask Members to submit them to you in
writing.
We have some other questions that we will probably have for
you. I do not know how to proceed. Mr. Apgar.
----------
Wednesday, March 15, 2000.
U.S. DEPARTMENT OF DEFENSE
WITNESSES
MAHLON APGAR, IV, ASSISTANT SECRETARY OF THE ARMY
DUNCAN HOLIDAY, DEPUTY ASSISTANT SECRETARY OF THE NAVY
JIMMY DISHNER, DEPUTY ASSISTANT SECRETARY OF THE AIR FORCE FOR
INSTALLATIONS
STATEMENT OF HON. MAHLON APGAR IV
Mr. Apgar. Mr. Chairman and Members of the Subcommittee.
It is a pleasure to be here before you to discuss the Army's
housing privatization initiative. Let me also begin by thanking
you, sir, and the Committee for your strong support of our
efforts to improve the quality of life for our soldiers.
Privatization, in a word, is essential to the Army's
installations and facilities strategies. As the Army transforms
for fiscal year 2001 and beyond, we must also take giant
strides to ensure that Army installations keep pace with that
change. We intend to help the Army achieve its overall new
vision by implementing a complementary vision for our
installations.
It reads, ``By the year 2020, Army posts will fully support
and satisfy our war-fighting needs, while providing soldiers
and their families with the quality of life that equals that of
their peers in civilian communities.'' No single quality of
life issue in the Army is as important as safe, attractive, and
convenient housing for our soldiers and families.
Family housing provides a major and essential incentive for
recruiting and retaining Army soldiers. Yet, when we asked them
about their quality of life, the lack of adequate housing is
one of their deepest concerns. We have long waiting lists at
nearly all of our major posts in the United States. Soldiers
living off-post are finding it increasingly difficult to rent
or buy adequate housing. Today's soldiers are career soldiers.
They are no longer driven by a mandatory service obligation,
but are dedicated professionals, mature, stable, well-educated,
and focused on the long-term.
More than half are married. Their family housing
expectations are similar to the expectations of their civilian
counterparts. Contemporary living standards in civilian
communities, especially around most of our posts, consider more
than a functional shell, square footage, and bedroom count.
The American Homebuilding Industry is highly sophisticated
and consumer driven. Features like family rooms, well-equipped
kitchens, landscaping, and extra bathrooms mark civilian
housing, even in affordable housing for the lowest income
groups. In short, Army families need more than quarters, as we
provided for many years. They need a place to call home in
communities that are safe, supportive, and attractive.
Without the Military Housing Privatization Initiative
authorities, the Army cannot meet the Department of Defense
goal to eliminate inadequate family housing by 2010. As an
example of what can be done, we recently awarded DoD's largest
privatization project to date at Fort Carson, Colorado. I am
pleased to report that Fort Carson's housing privatization
effort shows real promise and has already produced visible
results.
Even after a few months, we are using lessons learned from
this project to improve the process and maximize opportunities
for interchange between developers, the local community, and
the Army in our Residential Communities Initiative or RCI. We
transformed the former Army Capital Ventures Initiative, the
first stage of housing privatization after the 1996
legislation, to RCI in July 1998.
Using the new authorities, the Army intends to privatize
approximately 12,000 on-post family housing units by the end of
fiscal year 2001, in addition, to more than 2,000 units at Fort
Carson that have recently been privatized. The three RCI pilot
projects, by agreement with this Committee and our other
Oversight Committees, are Fort Hood, Texas; Fort Lewis,
Washington; and Fort Meade, Maryland.
They are being developed and solicited using a new
procurement methodology, the request for qualifications. For
each of these posts, we will select, through open competition,
an experienced master developer to work closely with the Army
and affected stakeholders to prepare a Community Development
and Management Plan or CDMP. We are seeking not only capital
from these developing partners, essential as private capital is
to the program, but also what I call the four-E's of the
private homebuilding and real estate industries--The
entrepreneurship, the efficiency, the effectiveness, and the
expertise that mark the best of private enterprise.
Their capabilities will leverage our assets to the benefit
of Army soldiers. After we review the deal structure with this
Committee and others, the Army will implement the CDMP through
a lease, contract, or a limited partnership type agreement with
the developer. The Community Development and Management Plan is
not simply a blueprint to build housing. It sets family housing
in the context of its neighborhood and adjacent communities,
both on post and off post.
That is the genius of large-scale master planned
communities in the private sector, and it is one of the most
powerful levers of housing privatization for the long term. We
are also taking a number of steps to strengthen the oversight
and management of the program. Among them, first we are
introducing a program management information and reporting
system along side the Army's standard accounting and budgeting
system to better reveal our true costs and our performance
measures, outcome, and results-based measures in privatization.
Second, we are designing a policy issue process to more
rigorously analyze the dozens of policy issues that are already
apparent as we anticipate the first CDMP planning and
negotiating agreements at Fort Hood, Fort Lewis, and Fort
Meade. Third, we have set up an Integrated Process Team, or
IPT, based on the model of DoD's weapons systems and a
management committee which I chair to include three other
Assistant Secretaries, whose policies affect our program, the
Commanding Generals of the two major commands in our pilot,
FORSCOM and the Military District of Washington, the Chief of
Engineers, the Director of the Army Staff, and several others.
Fourth, we are deepening our analysis and our analytical
capabilities to evaluate not only life cycle costs and
economics, as Mr. Yim mentioned, but also the full
capitalization of debt and equity as the project moves through
a long-term life cycle. It is not a rigid uniformed template.
Also, to be able to relate intangible costs and benefits as
well as intangibles.
Fifth, by example to Mr. Farr's comment earlier, we have
begun a formal dialogue with HUD on how their lessons learned,
particularly in affordable housing, which is a substantial
portion of our true mix, can help us. As a footnote, coming
into this office from the private sector, it was ironic to me
that our Department, our housing specialists, and those in HUD,
have rarely, if ever, talked with each other about the very
issues that we confront daily, and for which they have enormous
experience and expertise, notwithstanding the mythologies about
public housing in general.
The Army fully supports DoD's proposal to extend the MHPI
authorities beyond February 2001. Without them, quite frankly,
we will not be able to meet our goal to eliminate inadequate
housing by 2010, or to fully engage the talents and resources
of private enterprise. At the same time, we will continue to
use a combination of privatization initiatives and traditional
military housing construction funds to modernize our family
housing as a part of our three-prong strategy: privatize onpost
wherever it is feasible, increase housing allowances to
eliminate the soldiers' housing costs offpost, and apply MILCON
in those locations where the private market will not support
adequate housing.
This is an exciting and intensely busy time for the Army as
we address our inadequate housing shortage and strive to
provide quality housing and other community facilities to
soldiers and their families. Our goal is to work with you and
your staff to provide the best program possible. In doing so, I
hope you will also help us to place housing privatization into
a broader perspective. Because we have to begin now, in concert
with the Army vision, to manage our posts as a portfolio of
strategic assets, not simply as a collection of facilities and
projects. To do that, we must fix a fiscal model that is not
suited to the long-term investments you make through the Army,
and for which we are stewards, to create unique and valuable
military real estate assets.
In summary, we in the Army are pursuing privatization with
vision and vigor and, frankly, confronting the many hurdles
that privatization does face. We want to partner with the
private sector, harnessing its entrepreneurship, efficiency,
effectiveness, and expertise wherever we can. These must be
true partnerships, recognizing the benefits that derive from a
balanced relationship with shared goals and expectations, not a
them and us contract.
They must also be partnerships that yield best value, not
lowest cost to the Army, protecting our military culture,
priorities, and capabilities, even as they strive to improve
cost efficiency and cost effectiveness. Mr. Chairman, this
concludes my opening statement. I look forward to our
discussion. Thank you, sir.
Prepared Statement of Hon. Mahlon Apgar IV
Mr. Hobson. Thank you, Mr. Apgar.
STATEMENT OF HON. DUNCAN HOLADAY
Mr. Holaday. I submit my written statement for the record.
I will briefly summarize. I appreciate the opportunity to
discuss the Department of the Navy's housing program with the
Committee. As my boss, Secretary Pirie, said when he appeared
before you, there is much to applaud in the area of housing
this year.
First, the Secretary of Defense has proposed reducing out-
of-pocket expenses for members who own or rent their homes in a
local community; a reduction from 19 percent down to 15 percent
in 2001, and with the Congress' consent, to zero by 2005. This
will be a particularly welcome improvement for the three-
quarters of our Marines and Sailors who live in private sector
housing, most of whom are located in high-cost coastal
communities.
This year's budget also demonstrates the Department of the
Navy's continuing reliance on traditional military construction
and improvements to help meet our on-base military family
housing requirements. We are asking the Committee to approve
over $360 million to renovate or replace over 3,100 homes, with
2,800 of them within the United States.
This is more funds than enacted by Congress last year. We
are also proceeding with our housing privatization program, or
as we refer to it in the Department of the Navy, Housing Public
Private Ventures, or PPVs. We have seven previously authorized
and appropriated projects under procurement that we expect to
provide us with about 6,100 new, replacement, or renovated
homes for our Marines and Sailors at a cost of about $105
million.
All funding for these projects will come from prior year
appropriations. We are not requesting any new PPV funds this
year. The Department of the Navy has developed a carefully-
considered fiscally-responsible acquisition and management
strategy that will allow us to not only make wise choices of
development partners, but also properly participate in the
long-term management of these ventures.
That way, we can ensure that our Sailors and Marines
continue to receive the quality housing they deserve at an
affordable price throughout the life of the project. These PPV
projects, and the authorities that enable them, are a vital
part of the Department's housing strategy. We will not be able,
as with the case of the Army, we will not be able to meet the
2010 goal unless the PPV authority is reauthorized.
I ask your support in extending the Military Housing
Privatization Act for another 5 years. On the bachelor housing
front, we are exploring an initiative that would dramatically
improve housing for about 25,000 junior Sailors that are
presently assigned to ships. When deployed at sea, away from
home port, all Sailors must endure bunk beds, sharing cramped
living space with dozens of their shipmates, and living out of
a small locker.
When the ship returns to home ports, the peers of these
Sailors who are married or assigned to Aviation Squadrons or
Submarines get housing ashore, as do all Sailors who are
assigned to shore duty. The shipboard E-1s through E-4s, the
single shipboard E-1s through E-4s, however, are now required
to continue living aboard ship in those cramped quarters. We
are working out the details of a Home Port Ashore Program that
will provide these Sailors quarters ashore either in a BE
theater or in a local community when their ship is in home
port.
While the program is not fully developed, we believe that
the portion of the Housing Privatization Authority, as it
applies to bachelor quarters, will also be an important adjunct
to the Home Port/Ashore Program. I urge you to help us re-
authorize those authorities also. Although not directly related
to the Home Port/Ashore Program, the Department of the Navy is
already in the initial stages of developing two bachelor PPVs;
a BET at the Marine Corps Basic School in Quantico, and a BET
at the Naval Base in Anacostia.
It has been a pleasure working with the Committee to
improve living conditions for our Marines and Sailors. Whenever
we ask, they perform their duties admirably, and often in
difficult and dangerous conditions. Ensuring that they and
their families have adequate quality housing when at home is
one of our most rewarding tasks.
I look forward to continuing to work with the Committee to
accomplish our goals. Thank you, sir.
Prepared Statement of Hon. Duncan Holaday
STATEMENT OF HON. JIMMY G. DISHNER
Mr. Hobson. Mr. Dishner.
Mr. Dishner. Mr. Chairman, my prepared comments are
submitted for the record. Let me just touch on four or five
items that I would like to share with you on housing. In the
area of housing privatization that the Committee and others
approved in 1996, the Air Force is proud, along with the Navy,
to cut the ribbon on the first project at Lackland Air Force
Base, 420 units, at the Frank Tejeda estates, of a Congressman
we named the project that after.
Indicative of that was the accolades that we received, not
for the Air Force, but for the airmen that now live in those;
E-3 through E-7, specifically who those houses were targeted
for and the market rates. We are very pleased to be a part of
that. As you know, based upon the quarterly reports that we
give you from the Air Force, that the initial 10 projects are
under various stages of review and approval.
So, we continue to move along. I would say somewhat
lethargically, but the 1996 law was a pilot test. Now, we are
to a point where the maturation of the program can move into
some additional areas, but only using privatization as a
balancing board along with MILCON. Both of them were to be used
to shorten the time from 30 years to 15 years to repair those
65,000 units that the Air Force has. We just need to work very,
very hard.
I might mention in Mr. Yim's testimony, I draw the
Committee's attention to market housing done by MILCON and the
requirements of the local community for Bolling Air Force Base.
They are townhouses. They were just completed. We will be happy
to set up a view of those for the Committee because that
answers the question that was voiced before, are you building
through MILCON market housing? I would like to draw your
attention to those.
Another issue that was brought up before, too, that I might
just touch now was that the Air Force did sit down with HUD in
1996. In 1997, particularly their corporate drains on
mortgages, how we process, et cetera, because they have been
there before. That, in addition to having consultants to help
us, I think was very, very helpful to that. In the area of
utility privatization, in 1998, as you recall, the law allowed
us to enter into privatization of utilities.
The Air Force looked at over 600 individual utilities at
over 160 or 170 bases. We now have about 435 utilities left at
a little bit over 30 bases which we are looking at. The
schedule that we are on, that we have submitted to the
Committee, shows that we will have those through the process
and privatized to meet the 2003 time line target that OSD has
requested that we meet.
We do not see a problem with that at all. One comment on
utility and housing privatization. Obviously, there is a
symbiotic relationship there. What the Air Force has worked out
to ensure that where we are privatizing utilities, that is not
in deference to the housing privatization that may be coming
around to create a problem, if two of them are working at the
same time.
Finally, in unaccompanied housing, the Air Force, along
with the housing privatization would certainly like to see that
extended. We have not done any unaccompanied housing, yet. In
concert with the Navy and the two projects that they are
starting, we do share between the services, we would certainly
want to extend, in case something does come up that we can look
at those and see if in fact there is a need, both in--and also
from a financial standpoint, but also how we run our
dormitories with our first shirts.
That, to us, is very, very critical as to how that would be
done. Finally, we will talk more specific later on, but we want
to share with you where we are with the Brooks Project. That
continues to go forward. We are very, very happy with that
asset management project. We are very pleased that this
Committee has been very supportive of that as a new way for the
Government, in this specific case for the Air Force, to do
that.
Mr. Chairman, I stand ready to answer any questions that
you may have. Thank you very much.
Prepared Statement of Hon. Jimmy G. Disher
BASE REALIGNMENT AND CLOSURE
Mr. Hobson. I want to talk about a couple of things.
I hope that the Brooks thing worked out to be successful.
All of the services that every committee that I have been in
have talked about two more rounds of BRAC. Congress is somewhat
resistant to that, naturally, given our history on it. I think
most of us would all agree that we do need to look at bases we
cannot keep and be cost effective at the same time having all
of these bases.
I would like to suggest that all of you look at the
concept. I initially was just totally opposed at the Brooks
because I thought it was a way to BRAC proof a base, which I
did not want to do. I worry about privatization in the same
vein. Communities and Members can figure out ways. I like to
know that because I kind of know what my Committee has done in
a base that I have to try to do the thing. So, I am a little
suspicious of what everybody else does too.
So, I would like to suggest that as we go through the
Brooks thing that the Army, the Navy, and the Marine Corps
figure out and think about that maybe this helps us, even
without a BRAC, if we never get to the BRAC, manage some of
these facilities better, and help these communities. There are
assets in those communities. If we get them over to them
faster, and they can utilize them, then if a BRAC does occur,
there is less harshness happening in that community all at
once.
Right now, it is a big hammer that comes down. Overnight
practically, you lose this asset in the community. People lose
jobs and it is a terrible thing what we do. This may be a way
of lessening that. So, I try to look at it from it from--I
tried to take what I thought was a negative deal and turned it
around to where I think it is a positive for the community and
a positive for the services.
So, I hope you will all look at that. I am pleased to hear
that you are sharing. There is a tendency, and I mean we all
have differences and cultural differences, the people, and
things of that sort. I think the sharing of the ideas, and of
the financing, and what works and does not work is important to
achieve the success.
Besides HUD, and I know I have criticized these people.
Some of their staffs I think they make too much money. Maybe
they pay huge salaries. I would like for you to look at Fannie
Mae, talk to them, and see if there are not some other types of
financing sources out there. Maybe even talk to some of the big
real estate investment trust areas, some of the large
institutions that are out there.
They may have an appetite as we change our configuration.
There may be a change in appetite or product that some of them
may wish to have, which in turn could become advantageous to
you if you have creative people and they are thinking about
what you do. I also think at some point, I have talked about
this in my mind, that we should have a symposium someplace at
one of the big institutes or the universities that are
particularly good in real estate and challenge some of their, I
mean, maybe it is too late for this, but you could challenge
some of their bright young minds to look at what we are doing
and say, is this the right way to do it or how would you do it?
Maybe we do not get anything out of it, but we get some
people who understand. Very few people, outside of the culture
you are in, understand your problem. They know housing. They
know how to build up their communities. When you interface, the
types of mobilizations, the types of facilities that you have,
for example the PX or the commissary concept into this, and the
gas stations that are active on the facility and the other
types of housing.
Most people from the outside do not have this concept. So,
I was thinking maybe at some point, and maybe now is not the
time to even discuss this, but if you can all think in a
broader context of how we educate the people in the real world,
and not that this is not the real world, but there is another
world. Maybe the other world is a better way of saying it, as
to what our concepts are.
We may get better advice from the banking and institution
firms. We get better advice from some of the traditional real
estate organizations, and get some of them more interested in
what we are doing. While I am on that, and I am going to stop.
At our next hearing, just so everybody knows, we are going to
have some people in from the private sector. I am sure you will
all monitor that to see what they have to say.
They are going to be primarily what I will call providers.
I would like to get beyond that in this more intellectual
discussion, after we get these projects done as to what was
learned, what was not done, and how we can educate some people
on the outside to look innovatively at what all you are doing.
You have some good lessons learned too, just as Secretary Yim
talked about. You have all learned some things.
We have all learned some things. I want to thank you for
your testimony. We are going to be on a pretty tight schedule.
I want to let John and Chet ask any question that they might
have. Let me start with John and then I will come back to you.
Mr. Olver. Thank you, Mr. Chairman.
LACKLAND AIR FORCE BASE
You folks, thank you for being here. You have the advantage
of having someone to deflect much of the discussion here
because I think we aired a lot of the issues rather fully with
Secretary Yim. Let me just ask a couple of things here. Mr.
Dishner, you had said that you ribbon cut. What did you ribbon
cut; Lackland? Lackland is not yet in usage. What did you
ribbon cut?
Mr. Dishner. Yes, sir. They have opened up the first 92
units of 420.
Mr. Olver. I see. When will they be complete?
Mr. Dishner. They will be completed in December of this
year.
Mr. Olver. December, I see. So, you have actually moved
into the first.
Mr. Dishner. Yes, sir.
Mr. Olver. You will finish it up in December of this year.
Mr. Dishner. Yes, sir.
Mr. Olver. Thank you.
Mr. Dishner. Now, they are tearing down the barracks that I
went through basic training.
FORT CARSON HOUSING PRIVATIZATION
Mr. Olver. Mr. Apgar, at Fort Carson, which you have now
let the contract, at what time will you have a ribbon cutting
for the first group to be moved into and when do you expect to
be finished with that? That is the only other one that I am
pretty sure under the authorization that we have been working
under that is actually in construction.
Mr. Apgar. Well, in fact the first one occurred within
about a month after signing because the development partner,
very shrewdly, and certainly with our strong support, took 200
units that had been empty and were in poor repair for a part of
our backlog, and renovated them. Within several weeks had
opened them for 200 families to occupy just before the holidays
and before one of the major unit's deployment to the Balkans.
That was, frankly, both symbolic and real. The symbolism
was that this program can produce visible immediate results, if
it is well-supported and if the commitment is there on both
sides.
Mr. Olver. So, you are into 200 of them already.
Mr. Apgar. Already, and many more now. The entire pipeline
is 1,823 renovations, 840 new construction because of the poor
condition of the existing units within the first 5 years of a
long-term partnership agreement.
Mr. Olver. Well, I see. This is phased over a several-year
period so that you cannot really, unlike the Lackland with its
400 that are going to be all into by the end of this year, you
cannot give a date. The date is several years away.
Mr. Apgar. There are multiple stages essentially. Each of
our projects will run through a stage of renovation in the
first instance where they are renovatable. Then demolition and
new construction where renovation does not make sense. That is
where our planning process, at the point we signed the
agreements takes place. Defining those milestones, how many
units, at what period of time, and multiple ribbon----
Mr. Olver. Any other deal, they will just take over the
operation of a facility and they will collect the rents and do
everything. That may be doing a whole lot.
Mr. Apgar [continuing]. That is true. Each post is
different. On average, 75 percent of our total stock needs
renovation or replacement. At Fort Hood, there is a substantial
backlog. Over 90 percent will need remediation and major
treatment. On day one of the agreement, effectively they become
asset managers receiving the revenues from the allowance
stream. Then embarking on this multi-year, multi-phase, and
multi-function program.
Mr. Olver. Okay. Thank you. Since I know we are in somewhat
of a hurry, I wanted to explore one thing. I have a couple of
questions that I am going to put into the record for specific
ones. I had asked the question about Secretary Yim as to
whether there was an inherent difference between Reserve and
Active. Then there was this sort of a corollary whether they
would ever do, because I was really thinking more in terms, I
do not know what the needs are in each of the places.
NAVY AND AIR FORCE RESERVES
This is really a question to Mr. Holaday and Mr. Dishner.
You are the only ones that I think are operating with Reserve
bases in the plan as it is. Robins has 670 units in development
in process. Mr. Holaday, there is the Naval Air Station in New
Orleans which has 763. Then the Stewart Army Sub-Post which has
a couple of hundred. I am surprised at that. What triggered the
question in part was that my experience with the Reserve bases
is that there are not that many permanent people on them.
The permanent population of, I do not know what there is at
Robins, and at the Naval Air Station at New Orleans that would
lead us to be doing nearly 800 units in both cases of family
housing in those places. Can either of you explain?
Mr. Dishner. Robins is not a Reserve base.
Mr. Olver. It is not a Reserve base. Okay, my
misinformation. Am I also misinformed then on New Orleans?
Mr. Holaday. No. In New Orleans, we actually have two
bases. There is the Naval Base in New Orleans and we also have
an air station in New Orleans. New Orleans is the Headquarters
of the Naval Reserve. Both the Navy and the Marine Corps
Reserve have their Headquarters there. So, the requirement we
have is for any personnel who are on active duty.
They could be Reserve personnel. We have a number of
Reserve personnel who serve on Active duty. It could be Active
duty members who are assigned to the Reserve Headquarters. The
situation would be familiar at Fort Stewart, and at Chicopee in
Westover.
The requirement is to take care of not only Reserve people
who are on Active duty or Active duty members who are serving
with the Reserves, but also members from other services, and
members who are on independent duty; people like recruiters, or
people who are assigned to ROTC units as Active duty personnel
are authorized to get housing. We would look at all these
requirements as we evaluate our need for family housing. I hope
that answered your questions, sir.
Mr. Olver. In part. It is sometimes difficult to have
enough detail with a chart like this. I think this is a chart
that has been put forward by OSD that gives us a summary of
these things. Anyway, I will defer and ask you at some point to
give me a little bit of information about the Stewart one and
we will get into the Chicotee one in that process probably.
Mr. Holaday. Yes, sir. I will be happy to give you the
details.
Mr. Olver. Thank you.
Mr. Hobson. Mr. Tiahrt.
QUALITY OF LIFE
Mr. Tiahrt. Thank you, Mr. Chairman.
I thank you for coming to the Committee. Just recently, the
Chairman and I went down to Fort Bragg, along with
Representative Robin Hayes. We toured some of the housing. In
one of the housing areas is a new facility. The first soldier
who was there was a private. He had been a corporal before.
He was there with his wife and two little children. I wish
you could have seen the smile on his face. He had come from a
very cramped quarters. He was moving into a place that actually
had a garage, which he had turned into a family room. He
thought it would give the kids more room to play. He is going
to spend probably 20 to 24 years in the military because he
really appreciated what the Government had done.
He thanked us. He thanked us several times as we walked
through the facility. I was amazed. Of course, I did not see
where he had moved from. This effort of providing housing for
troops is, very essential in any long-term commitment for
people to participate in a voluntary service.
So, I want to add my support and put my shoulder to the
wheel and do what we can to improve the quality of life. One
thing that I would request is when you evaluate, or when you
give us information to evaluate new units, if you would give us
a cost per square foot as sort of a benchmark. I can go to
Wichita, Kansas, to McConnell Air Force Base in my home
District.
If it is a three bedroom house or a five bedroom house, I
can figure out what in the private market it cost to provide
housing in a cost per square foot ratio. When we go to a lot of
these facilities, it is really difficult for us to dig down
because that is not the criteria that is usually available. It
is a good benchmark for all of us, the cost per square foot.
If it is $65 per square foot, that is a pretty good deal.
If it is $150 per square foot, it is probably something to be
looked into. It should not make a big difference; so, if you
could use that for a benchmark. My question to you is when you
look at all of the housing departments across the United
States, and at our bases overseas too, how do you determine
where to study? How do each of the services make a decision by
selecting a facility?
Is it based on need? Is it based on political? Is it the
last phone call you got from the Secretary of the Air Force or
the Secretary of Defense? Just tell me whatever it is for you
to select?
Mr. Apgar. Well, in the Army's case, we have a global
analysis, all installations; both for the U.S. and abroad,
based on condition, as well as requirements; numbers of
soldiers assigned both currently and in the future. That
evaluation is our objective measure or set of measures for
setting priorities. In all of our current analysis, we are
looking to the private sector where privatization was to look
at our own analysis and either validate it or challenge it, as
the case may be.
There may be a difference between our view and the
``market'' view. We need to know that and you need to know
that. That is a global portfolio view, without any question.
Where political influence may apply, it is only in the case
where there are specific individual posts and issues are
brought to our attention, which for some reason we may not have
picked up adequately. Obviously, we depend on Congressional and
other input for that purpose.
Mr. Holaday. In the Department of the Navy our policy is to
fix up what we own first. That has been our policy for the last
6 or 7 years: to focus on improving the condition of the houses
that we already have. Under that broad guideline, we also look
at the condition of the housing with the intention of fixing up
the worst first.
We have to balance, of course, whether we are going to be
doing renovations or replacements. Some of the housing is in
such bad condition that the only way we can fix it is to tear
it down and rebuild new. Other housing, we can fix by doing
renovations.
We take the condition of the housing and work it into the
budget that we have available. We also try to show some
progress on different bases throughout the Country, so we are
not just focusing on one particular location to the exclusion
of all others. We think it is important for service members,
wherever they are stationed, to see some improvement in the
conditions on the base.
AIR FORCE FAMILY HOUSING PLAN
Mr. Dishner. The same with the Air Force. In fact, we have
completed the Air Force Housing Master Plan. We look at the
worst house first right down to the last. We assess the budget
that we think is needed to do that. Directs whether that is
going to be privatized housing or MILCON. In the case of
Europe, could it be an extension of a lease? We have two
programs underway there, to build houses under the new build-
lease program.
Congressman, let me give you a copy of the Housing Master
Plan because we used the same thing. It is written down, so
that as we go over year-to-year, there is still a game plan to
do that. We adjust that based upon what we did get in the
previous year. So, the plan, once a year they go back and do
it. So, I would be happy to provide that to you. It is not a
thick document. So, it would be very easy for you to look at.
[The information referred to follows:]
FAMILY HOUSING PRIVATIZATION
Providing a single cost benchmark is complicated by the fact that
privatization projects usually include a mixture of renovation and
construction of new/replacement units. We typically renovate a unit
unless these costs exceed 70 percent of the replacement cost, at which
point we program a replacement unit. Replacement or new construction
costs are easier to benchmark by locality. The Air Force uses the Tri-
Service Cost model to estimate and program projects. This model uses
cost factors that are updated using construction industry trends and
published annually. The OSD average unit cost for new construction in
fiscal year 2001 is $64 per gross square foot/$79 per net square foot,
and varies by area cost factor and project size. For comparison, the
Lackland AFB, Robins, Dyess, and Elmendorf have unit renovation costs
that range from $32 to $37 per square foot, and new construction at $52
to $75 per square foot. Of course unit costs are only part of the
overall project cost. A total project will include infrastructure,
demolition, landscaping, community playgrounds and facilities, and
related project inspection and overhead costs. In the future, when we
notify Congress of our intent to solicit a project or make an award, we
will provide government and the developer's estimated cost per square
foot.
Our pilot projects were selected based on a number of criteria.
Because no funds were identified for privatization project scored
costs, each candidate first had to have a MILCON project to offset any
scored costs. Next, candidate submittals to the Air Staff had to be
accompanied by a preliminary performa that reflected a minimum of three
to one MILCON dollar leverage, and life cycle costs had to show an
advantage in privatization over MILCON. Finally, those candidates
selected for the pilot program had to have the lowest financial
development gaps as determined by the estimated income stream as
compared to the expenses required to execute the project.
Candidate projects in fiscal year 2001 and beyond have been
identified in the Air Force Family Housing Master Plan. The Air Force
developed a privatization predictive model that relies on readily
available data such as local economic indicators, BAH rates, and
revitalization requirements. The model provides projections of the OMB
``scored'' costs. The Air Force used this model to screen installations
by determining privatization potential and cost.
Mr. Tiahrt. Thank you very much.
Mr. Hobson. Mr. Edwards.
Mr. Edwards. Thank you, Mr. Chairman.
FORT HOOD HOUSING PRIVATIZATION
Secretary Apgar, I planned the leadership of this
Committee, encouraged the Army, and the Army is proving to
follow that leadership to say, well, it would be premature to
go to a 100 percent privatization program. We ought to continue
until we test these pilot programs and make some additional
MILCON, as well as some privatization funding. You said 90
percent of the housing on post at Fort Hood is in need of major
repair. Is that correct; significant repair?
Mr. Apgar. Either light repair, major repair, or demolition
and replacement.
Mr. Edwards. Somewhere in that mix.
Mr. Apgar. That is a sad commentary on the management of
the Army for the last 15 to 20 years, and their budget
requested their commitment.
Mr. Edwards. I would agree with that. We in Congress often
want to do the budget as well. So, the blame, you know, we will
accept it too. I wish the Pentagon had been more aggressive on
that front. The point is the significance of that 90 percent
figure is that 20 percent of all of the active duty Army
division in the world are located in Fort Hood. Two-thirds of
those or 44,000 soldiers are married. So, by my numbers, there
are about 30,000 married families.
I can assure you from riding in Saturday morning parades,
that there are a lot of little kids running around. I
appreciate Mr. Tiahrt putting a human face on this situation.
That is the vital reason why I like the pilot program approach.
Let us experiment. Let us see what works and then move ahead,
if that works, or stop the program if it does not.
I am getting to the point where I think to test a pilot
program, you have got to get a pilot program on the ground.
When you came before this Committee several weeks ago, I think
it was requested of you to provide information to this
Committee and its staff so that we could move ahead with both
Fort Lewis and Hood. I know Mr. Dicks feels as I do. He is
ready to move ahead and thinks now is a prudent time to do so.
Did you provide this Committee, to the best of your
knowledge, the information requested for this Committee to
review what was needed in order to move ahead with Fort Lewis
and Fort Hood?
Mr. Apgar. As far as I know, sir.
Mr. Edwards. Since providing that information, have you had
any response from the staff of this Committee or the
authorizing committee to say the information was inadequate, or
it was incomplete, or we need additional information, or we
have concerns?
Mr. Apgar. Well, now. It has been like pushing a pillow. We
have provided a good deal of information. On the other hand, it
is not clear if there is more needed.
Mr. Edwards. It sounds to me as if you are going to get a
response, which would be productive. I would like to just know
the answer to my question.
Mr. Apgar. Some material came forward last night.
Mr. Edwards. It states that there is a request for certain
dollars amounts which we have, both Committees, and elsewhere
have some question about the amounts, the total amounts being
used. I frankly do not have a lot of problem with the amount
that is asked for. I just found out what that number was about
5 minutes ago.
There is a question that has now arisen as a result of the
request of how much money the Army is using in this
privatization program, which I really do not want to get into
right now. If you look at those numbers, they are substantial
numbers.
Mr. Apgar. Sure.
Mr. Edwards. On basically it was three or four projects. I
did not see this. This just came to me. There was some mixup on
how the money went the first time after you came to see me. You
have to go to OSD. You had to go back to OSD again. But we are
going to get there. We are not quite there yet. So, that is
where we are.
Mr. Chairman, what I would like to recommend is rather this
back and forth, and I do not know if you knew this information
came over last night. I do not know if the staff asked for
additional information, subsequent to our last meeting with
Secretary Apgar. I want to cut through all of the back and
forth. I would like to ask the Chair if we could sit down
together, not appropriate at this meeting, but sit down
together and let us figure out what the Congressional staffs
and our Committees need to review this.
Frankly, the staffs and the Committees ought to have the
information they need to evaluate it. I am afraid this process
is going to go on for another year back and forth. I would like
to sit down. Plus, there does not seem to be consistency as to
who is just holding up the show. One week, I hear it is the
Senate. The next week, I hear it is the House.
So, somewhere maybe one 1-hour meeting could cut through
all of this. Mr. Secretary, you need to be giving the
information we need from you. Then your staff needs to get it
to us. If we can do that, then maybe we can cut through this.
Mr. Hobson. Let us cut through it.
Mr. Edwards. What we need is a detailed expenditure of the
$14 million. We do not have that. This does not really do it.
This is only staffing summary. I think both Committees, the
House and the Senate, need some detail on the amount of money,
how it is being used, and where it is going. This is a
substantial amount of money. You do not have to do it now. But
we need to do it before we have another meeting so we can get
this done. I think the staff has been working on that. Maybe I
need to say it more bluntly. That is what we need.
Mr. Apgar. May I ask, Mr. Chairman, because this is a real
dilemma and serious difficulty for us. If the Committees
concerned could agree and simply produce a chart, instead of
having a table, a matrix, and whatever it may be, a spreadsheet
laying out the data, as well as the soft information or
explanation to give us, we would be more than happy to respond.
We have spent hundreds of hours on this specific issue. I
have applied every policy and management question I could to
get below the data. Every time we submit something, there seems
to either be another question, or it is incomplete, or it is in
the wrong format. If we could simply have a format, or a
framework, or a set of definitions, it would be very helpful.
We would, of course, respond and we would be happy to.
Mr. Edwards. Well, I guess what we need to do is each
service is a little different on how they compose this. I guess
what we need is from each of you, what you are paying for
consulting; a breakdown on consulting services. This is the
first time I have been asked for a reprogramming for additional
consulting costs. I did not think the original number, the
number that you asked for was that bad. When you added to the
number overall, then I have to come back and we had some
legitimate questions about the detail as to how those resources
are being utilized and how much more is going to be needed
because this is a funding source that we are now using up
dollars in and I do not know whether it is real or not.
I think that is what we need to get at. We need to stop
sparring about it and get it done. I want you to get on with
the program. I want to get on with Fort Hood. I want to get on
with Fort Lewis. When you came and met with me, I said I have
no problem with the money. That it did not come over. I do not
know whose fault it was, but in the process, it did not go
through who it should go through.
So, it had to go back and that took about a month to go
back through that. I mean, it was not us. It was OSD looking at
it. Then Friday before the recess, something else arose. So, we
need to get our processes down. I think you all need to look at
it. You do not have to answer it now. Just get it to us.
Mr. Apgar. Mr. Chairman, how much is it?
Mr. Edwards. The Chairman, while he is looking, if I could
just say that I think the information you are requesting today
is very reasonable. Frankly, I believe it is your
responsibility that we should get that information. We should
evaluate it. I think what Secretary Apgar said is also fair.
That is that perhaps we ought to formally send him a letter
saying this is the information we need.
You provide this information. This is what we need. I think
it has been a confusing process. My interest is not to point
the finger anywhere. I do not care about what has happened in
the past. I do care about what happens in the future. The
people that Mr. Tiahrt talked about reside in my Congressional
District.
They represent 20 percent of the active duty Army Division.
So, perhaps with the Chairman's leadership and the staff we can
do that. I think that would be very helpful.
Mr. Holaday. The Department of the Navy has spent $5.4
million through 1999 from 1996. It is about 1.2 percent of our
total development costs, which is about one-quarter of what we
would spend on a MILCON project.
Mr. Apgar. Since 1995 when the program costs began to be
incurred, Fort Carson, about $5.8 million was committed in
direct costs. The anticipated costs for Forts Hood, Lewis and
Meade--are approximately $4 million each. The reprogramming of
some that we are requesting covers the consultant costs to
support all three of the forthcoming pilots; the total program
costs which are outside the $6.1 million and a part of the
$14.8 include oversight now for Carson, as well as the next
three. So, that is the year's total. I think, Mr. Chairman, I
must say as an analyst by profession that it is important for
the Committee to recognize that the data to manage and support
this program was not collected directly for a long time in a
systematic and specific way.
So, when one goes back to history, you are pulling data out
of a system that was not designed to report it. It is a
traditional accounting methodology, not a reporting or
management methodology. We have, since October when you first
identified the need for the next few years, began to do that.
Now, we have quite a rigorous framework. We are basically
imposing a new information and data analysis request on a
system that was not designed to produce it. I would appreciate
the Committee's forbearance in working with us to make that
happen.
Mr. Hobson. We will work on that. We have got to go.
The meeting is adjourned.
[Clerk's note.--Questions submitted for the record by
Chairman Hobson.]
EVALUATION OF PROGRAM
Question. How does the Department intend on evaluating the
effectiveness of the program in eliminating inadequate housing more
economically and faster than traditional military construction housing?
Answer. The Department is developing an evaluation plan to address
the overall effectiveness of the program in eliminating inadequate
housing faster the more economically than military construction. As
part of the effort, the plan will evaluate (1) the effectiveness of
individual projects, (2) whether program goals are being met, (3)
program questions and concerns, and (4) recommended program
modifications. Private sector consultants and assisting the development
of the plan, which is scheduled for completion in summer 2000.
Question. When will a formal plan for evaluation to answer key
quesetions such as: if the housing will be needed over 50-year terms,
if they are operated and maintained properly, and are actual costs and
savings in line with original estimates, be created?
Answer. The evaluation plan should be completed in summer 2000.
INDIVIDUAL PROJECT SUCCESS
Question. When do you anticipate a fair review of the effectiveness
of an individual project will be possible (at the five-year mark)?
Answer. Review of project effectiveness will vary from project to
project and at various stages of implementation. For each project we
will evaluate the effectiveness of our solicitation methodology,
leveraging of military construction dollars and projected life cycle
costs at the time of project award. We will continue to review project
performance over the entire course of the program and term of each
project individually. Some specific long-term concerns are construction
quality and timeliness, tenant member satisfaction and occupancy rates,
long-term maintenance and repair, sound financial practices and return
on investment, especially for projects involving joint venture
arrangements. However, within the first five to ten years, we expect to
establish a fair review and a good understanding of the overall
effectiveness of individual projects.
ADDITIONAL PROJECTS
Question. Currently 22 projects involving 27,911 units are planned.
At what pace do you believe this program should continue until we are
able to have a fair review?
Answer. The current pace and diversity of the projects which are
planned and being implemented should allow a fair review of
effectiveness of the program. We expect the current projects, due for
completion in late FY2000 and FY2001, to provide a sufficient knowledge
base to allow an increased pace beyond FY2001. If the Department is to
meet its 2010 goal to eliminate its inadequate housing, it will have to
implement privatization at a faster pace.
COST ANALYSIS
Question. How do you intend on standardizing a method for the
services to use in performing life cycle costs analysis?
Answer. Draft guidance on life cycle costs already exists; however,
as a recent GAO report indicates, there continues to be inconsistencies
in how the Services calculate specific inputs to these analyses.
Therefore, the Department's life cycle guidance is being revised to
standardize the cost estimations used by the Service. Also, we have
expanded the costs considered to include consultant support and other
costs such as construction inspection. The revised guidance will
require that the Services examine their costs in a uniform and
comprehensive manner.
Question. How will the value of land and current housing units be
figured?
Answer. The value of land and existing housing units is based on
appraised value of the property. Where the land is conveyed without
restrictions on its use, that value will reflect the fair market value
of the highest and best use of the property. Where the use of the
property is restricted to the rents based upon the housing allowances
of the tenant members, the value will reflect the restricted income
producing potential of the property.
Question. Are details provided on how to estimate each type of
cost?
Answer. The current draft life cycle policy provides general
guidance on estimating privatization costs. The revised guidance we are
developing will provide more detailed guidance on estimating each type
of housing privatization cost.
BAH
Question. In your opinion, how will the 100% BAH affect the need
for on-base housing?
Answer. The Department believes that eliminating service members'
out-of-pocket expenses will decrease the demand for on-base housing.
While only a detailed Housing Market Analyses, which is a long-term
effort, can provide specifics on the effect of this initiative, we
believe that the elimination of out of pocket costs will relieve
pressure for on-base housing, reduce the need to maintain older, high
cost units, and allow resources to be devoted to improving and
maintaining needed on-base housing.
Question. How do you anticipate this (100% BAH) to impact the
privatization program? Will we find it to be more costly?
Answer. The increased housing allowances recently announced by the
SecDef should immediately make privatization a more viable tool in
satisfying the Department's housing requirement. Increased allowances
will increase the income stream available to the projects, which in
turn, increases their debt capacity and reduces the necessary
government contribution to close the development gap. Thus, upfront
scoring costs will either be reduced or, if required, private
developers will be able to build more housing. In the long run,
increased allowances will make private sector housing more affordable
and should reduce the need to maintain high-cost units on the
installations.
However, we must ensure that, with increasing allowances,
developers do not reap ``windfall profits,'' since many projects will
be negotiated prior to the full increase taking effect. Under any of
the scenarios for deals which are not yet awarded, there will be
mechanisms, such as reinvestment accounts, revenue sharing accounts, or
increased rent for leases of government property, which will ensure
that the long-term costs of the projects are not increased.
Question. How will this change (100% BAH) be reflected in the
housing plans, which are due this summer?
Answer. The housing master plans required by P.L. 106-32 to be
submitted to Congress by July 1, 2000, will reflect housing
requirements identified at the beginning of FY 2000. Therefore, these
plans will not have taken into consideration the full impact of the
Secretary's initiative to eliminate the out of pocket costs. Once the
Services are able to conduct detailed Housing Market Analyses, which
project housing requirements out five years, at each installation, the
master plans will be updated.
SCORING
Question. Does OMB scoring drive the choice of privatization
authorities used in project and in the related funding decision?
Answer. No, OMB scoring, alone, does not drive which privatization
authority the Services choose for a specific project. However, because
it allows the Department to better leverage its appropriations and get
more housing for its contribution, OMB scoring does make some
authorities more attractive than others. Financial leverage is one of
the key elements we consider in structuring our housing privatization
projects. Other key elements are ensuring good housing for military
members, minimizing government risk, protecting our financial
contributions, and maximizing any return on our investment. All these
factors, including OMB scoring, are taken into consideration in
planning a project.
HOUSING REQUIREMENTS
Question. With the new policy to providing in a100% BAH, what
efforts are taking to require that housing requirement assessments are
updated prior to proposing privatization?
Answer. It is DoD policy that when the Services submit projects for
renovation or replacement, The request must also include the
appropriate Housing Market Analysis identifying the requirement for the
project. The Department has also extended the requirement for current
Housing Market Analysis for all privatization projects.
HOUSING NEEDS
Question. What steps are you taking to improve the methods used to
estimate housing needs and the ability of local communities to meet
these needs?
Answer. The Department has been criticized in various audits
regarding the different processes used by the Services to determine on-
base housing needs. We believe there is merit in developing a more
consistent requirements process and have begun a ground up review of
the different Services methodologies. Additionally, a Housing Policy
Panel has been established to review, validate and/or develop housing
related policies and this will facilitate the development of a more
standardized system for assessing our on-base housing needs. The
Housing Policy Panel is comprised of subject matter experts from the
Office of the Secretary of Defense, Services, and Defense Agencies
responsible for housing management, budgeting, auditing, and
allowances. We anticipate having draft guidance developed by this
summer.
WHEN PRIVATIZATION COSTS EXCEED CONSTRUCTION FUNDS
Question. Is there a policy in place for determining whether to go
forward with a privatization project if its cost exceeds traditional
construction?
Answer. A life cycle analysis is performed for each privatization
project. Under existing policy, the life cycle cost of a privatization
project should be less than or equal to the cost of the military
construction alternative. Additionally, the Department does not solicit
a project unless we believe we can leverage appropriations by at least
a factor of three to one, compared to traditional military
construction.
LEGISLATIVE PROPOSAL
Army:
Question. The current statutory authorities for the Military
Housing Privatization Initiative (MHPI) expire on February 2001. The
Department is requesting the authorities be extended for another five-
year period with no amendments to the current legislation. In your
opinion, why should the MHPI authorities be extended?
Answer. Privatization is essential to provide the best housing for
our soldiers in the most cost effective way. It will also permit the
Department to meet its goal of providing adequate housing to our
soldiers and their families by 2010.
The authorities given to the Department of Defense in 1996 have
been invaluable tools to pursue alternative means of providing adequate
housing to our soldiers.
Without this authority, we will fall further behind in our goal. We
concur with the DoD initiative to extend the existing authorities for
an additional five years. This will allow us to incorporate lessons
learned from our current privatization projects into future projected
and offer suggestions to refine the authorities.
Question. If the Act were to be made permanent, what amendments
would you recommend to the current authorities? Why?
Answer. We support the request submitted by the Department of
Defense to be able to credit any reimbursements (e.g., for fire and
police protection provided by the government in privatized housing
areas) received by the Services into the account from which the
services were funded and not into the general treasury.
We also support the DoD position not to add any new privatization
authorities or restrictions. This will allow us to continue with the
pilot projects and institutionalize/formalize our privatization
program.
Navy:
The current statutory authorities for the Military Housing
Privatization Initiative (MHPI) expire in February 2001. The Department
is requesting the authorities be extended for another five-year period
with no amendments to the current legislation.
Question. In your opinion, why should the MHPI authorities be
extended?
Answer. Improving the living conditions of Sailors, Marines, and
their families is a top priority within the Department of the Navy.
Extension of the MHPI authorities is essential in order for the
Department to eliminate the unsuitable family housing units in its
inventory. We are also seriously pursuing the use of the MHPI
authorities to help provide housing for single Marines and Sailors.
LEGISLATIVE PROPOSAL
The current statutory authorities for the Military Housing
Privatization Initiative (MHPI) expire in February 2001. The Department
is requesting the authorities be extended for another five-year period
with no amendments to the current legislation.
Question. If the Act were to be made permanent, what amendments
would you recommend to the current authorities? Why?
Answer. One change that may merit consideration would be to
eliminate the legislative distinction between family and unaccompanied
housing privatization projects. This would facilitate Service
flexibility in planning and executing joint family/bachelor housing
privatization projects when there is a need for both types of housing.
Another change would be to allow the use of proceeds that are
transferred into the Family Housing Improvement Fund, as a result of
either income derived from other privatization projects or from the
conveyance or lease of property, to be reused without the need for
``reappropriation.'' This would allow the use of proceeds by the
Services without an offsetting reduction elsewhere in their
``topline.'' Congressional notification requirements associated with
housing privatization would ensure congressional oversight over the use
of these funds.
Air Force:
Question. In your opinion, why should the MHPI authorities be
extended?
Answer. The Military Housing Privatization Initiative (MHPI)
authorities should be extended as they benefit Air Force members and
their families. The MHPI authorities are essential for meeting Defense
Planning Guidance to revitalize, divest or demolish all inadequate
housing units by 2010. Without MHPI authorities, we will not make the
2010 goal. This could mean our military members and their families will
continue to live in deteriorated housing, negatively impacting their
quality of life and overall Air Force readiness and retention.
During the first years of the program, the Air Force focused its
efforts on learning the responsibilities of the public and private
parties in such initiatives and screening Air Force bases for
financially feasible privatization candidates. The Air Force also took
the time necessary to learn and understand the financial and business
relationships of such endeavors and develop the detailed financial,
real estate and legal documents necessary to request and evaluate
proposals. Without extension of the legislative authorities, the work
and resources already committed to the development and execution of
these initiatives will be lost.
Question. If the Act were to be made permanent, what amendments
would you recommend to the current authorities? Why?
Answer. We recommend amending section 2883 of title 10, USC, to
allow funds to be transferred from the Department of Defense Family
Housing Improvement Fund (FHIF) to the Air Force Housing MILCON
appropriation. Military Housing Privatization Initiatives are market-
timing sensitive in nature, subject to the swings of the economic
market and the community viability of a geographic area. As such, a
housing privatization initiative that appears to be financially
feasible and realistic when advertised could be financially
unachievable before award due to a shift in the real estate and/or
financial market trends. Should this occur, execution of an Air Force
(MILCON) project to improve the military housing originally targeted by
the privatization initiative would be highly desirable. This can only
be accomplished if the funds appropriated and/or previously transferred
to the FHIF can be transferred to the Housing MILCON account to fund
the substituted MILCON project. If not amended, funds cannot be
transferred from the FHIF to the Housing MILCON account and
opportunities to improve military family housing through MILCON would
be lost.
LIFE CYCLE COSTS
Army:
Question. How big of an impact will Secretary Cohen's Basic
Allowance for Housing (BAH) initiative have on housing privatization
life cycle costs?
Answer. First, the higher allowances proposed by the Secretary of
Defense will enhance housing privatization projects and therefore
improve the Service members access to quality housing. The increase in
BAH will increase the revenue flow to the private sector developer and
they in-turn will be able to accelerate the quantity and quality of the
housing being provided to our soldiers and families.
Second, the Army has always planned and programmed for the life
cycle costs of its housing at all installations. However, the funding
has never been sufficient to keep pace with the deteriorating
facilities.
The benefit of privatization is the delivery of adequate housing
that improves the quality of life and well being of all soldiers. The
increases in allowances will make the projects more financially viable,
thereby reducing the need for an up front budget contribution by the
government.
The Army is working with OSD to incorporate the GAO's
recommendations to refine the methods used for establishing life cycle
costs, and this new guidance is expected to be available in late
spring.
Question. Do you expect life cycle costs under privatization will
be more than traditional MILCON? If so, do you believe it still makes
good financial sense to pursue housing privatization at those
locations?
Answer. No, we do not expect life cycle costs under privatization
to be higher than Military Construction. Over the years, the life cycle
cost for each installation's requirements have far exceeded the Army
MILCON budget and the Army has not been able to keep up with the
continued deterioration of its housing.
The Military Housing Privatization Initiatives (MHPI) authorities,
along with MILCON dollars provides the Army with the methods to reach
our goal of providing adequate family housing by Fiscal Year 2010. One
of the important advantages associated with privatization is the
ability the Army will have to tap into the expertise and efficiencies
the private sector possesses in the areas of construction, renovation
and property management. We believe that these efficiencies will
translate into lower life cycle costs than traditional MILCON for
projects of similar scope and duration.
Additionally, the ability to provide a consistent funding stream
under the MHPI authorities will serve to eliminate much of the funding
uncertainty associated with traditional MILCON projects. This will
enhance the life cycle cost savings associated with privatization.
Navy:
Question. How big of an impact will Secretary Cohen's Basic
Allowance for Housing (BAH) initiative have on housing privatization
life cycle costs?
Answer. Preliminary analysis indicates that the full implementation
of the BAH initiative would increase the life cycle costs of most
privatization projects. However, privatization projects currently
underway continue to be less expensive than military construction. It
is important to note that the Department of the Navy's equity approach
to privatization would result in the Service and the developer sharing
any increased cash flow generated by additional BAH revenue.
Question. Do you expect life cycle costs under privatization will
be more than traditional MILCON? If so, do you believe it still makes
good financial sense to pursue housing privatization at those
locations?
Answer. In general, it would not make good financial sense to
pursue the project if a life cycle analysis showed that a proposed
public/private venture project would cost more than the comparable
MILCON project. We are not pursuing any projects with a negative life
cycle cost. However, there might be an occasion where a small negative
life cycle cost could be outweighed by the ability to renovate,
replace, or construct more homes faster through the leveraging of
funds.
Air Force:
Question. How big of an impact will Secretary Cohen's Basic
Allowance for Housing (BAH) initiative have on housing privatization
life cycle costs?
Answer. The Air Force estimates that Secretary Cohen's BAH increase
will have a moderate impact on housing privatization life cycle costs.
Increasing the BAH will bring additional income stream to the project
reducing the need for a government second mortgage or reducing the
percentage of contribution to an equity (limited liability company)
deal.
The relationship between life cycle costs of MILCON and
privatization will be different for each project. The Air Force plans
on pursuing those projects where the life cycle costs of privatizaiton
are less than or comparable (considering benefits) to MILCON. Those
projects with the greatest projected cost savings will be favored.
Question. Do you expect life cycle costs under privatization will
be more than traditional MILCON? If so, do you believe it still makes
good financial sense to pursue housing privatization at those
locations?
Answer: The comparison of life cycle costs between traditional
military construction (MILCON) and housing privatization is, has been,
and will continue to be part of the decision making process for
determining the vehicle used to bring revitalization and/or
construction of housing to our service members. The Air Force seeks
housing privatization initiatives where the privatization life cycle
cost is less than or equal to the MILCON life cycle cost before giving
approval to proceed with a project.
Recent OSD direction is to proceed with projects only if the
preliminary, estimated life cycle costs of privatization are less than
that of MILCON. However, prior to the new guidance, the Air Force
followed guidance found in OMB Circular A-94, which states that
``benefit-cost analysis is recommended as the technique to use in a
formal economic analysis of government programs or projects.''
There has only been one Air Force pilot project where the
preliminary estimate showed the life cycle cost for privatization was
higher (5%) than the MILCON life cycle cost. In this case, the benefits
analysis performed on the project pointed out a significant benefit in
getting more units renovated and constructed faster than through
traditional MILCON while achieving greater than the required three to
one leverage of MILCON funds, using privatization as the execution
vehicle. Additional, history has shown that the level of funding
necessary to execute the same scope project using traditional MILCON
would not be available for such a project in any one fiscal year. While
on the other hand, the private sector can, in fact, obtain the required
level of funding within the first few years of a project and thus
realistically be able to execute a very large scope project.
Furthermore, analyses of the slightly higher (5%) privatization life
cycle cost was negligible in terms of present value cost to the Air
Force. Therefore, Air Force leadership agreed the additional life cycle
cost for privatization over the life cycle cost of traditional MILCON
over a 30 to 50 year deal was justified. For this project, and all
others, final life cycle cost comparisons will be accomplished prior to
award.
LESSONS LEARNED
Army:
Question. Have the Services conducted ``lessons learned'' seminars
with developers and potential developers after project solicitations?
What has been learned? What will be changed?
Answer. The Army is in the process of consolidating the lessons
learned from its Fort Carson project and will use those lessons learned
as we progress through the other three sites.
Some of the lessons learned include: the procurement process could
be streamlined to be user friendly and less expensive to bidders and
the Army; a much greater emphasis is being placed on identifying and
resolving issues with key stakeholders (i.e., local governments; school
districts; businesses; employees; and, soldiers and their families); it
is important for the selected developer to make immediate and visible
progress in improving the housing community; and it is essential that
both the developer and the government be involved in resolving all
issues of mutual interest.
All lessons learned from the Fort Carson project will apply to RCI
projects because the overall intent of both are to improve housing. The
difference between these approaches is in the solicitation and
negotiation processes, not in the desired results.
Navy:
Question. Have the Services conducted ``lessons learned'' seminars
with developers and potential developers after project solicitations?
What has been learned? What will be changed?
Answer. Discussions with developers have been conducted as a part
of debriefs in the Request for Qualifications/Request for Proposals
negotiation process and at other points in the acquisition process.
The following ``Lessons Learned'' emerged from forums with
developers:
The importance of defining proposed construction sites early in the
process to identify environmental considerations, availability of
utilities, and zoning issues. Recent public/private venture projects
have required developers to identify proposed sites at the Step 1
Request for Qualifications stage, thereby providing more time to
complete environmental reviews, and to achieve any local public
approvals that may be required.
Local governmental jurisdictions have a role to play in most
public/private venture projects. We need to work with local government,
starting early in the process, regarding a range of issues likely to
affect development.
Financial risk and return analyses must be accurate, and must be
kept current throughout the process. Full and careful attention must be
paid to each detail of the deal as final agreements are drafted and
negotiated.
An active residual management/stewardship function is essential to
the overall, continuing success of public/private venture projects.
Detailed processes and procedures for every aspect of our residual
management responsibility have been established, and are continually
being updated and fine-tuned.
Air Force:
Question. Have the Services conducted ``lessons learned'' seminars
with developers and potential developers after project solicitations?
What has been learned? What will be changed?
Answer. Following the completion of the Lackland AFB housing
privatization initiative in August 1998, the Air Force hosted a lessons
learned conference in January 1999 for Air Force personnel at the major
commands and installations where housing privatization was planned for
the future. Then in February 1999, the Air Force presented lessons
learned to private industry and hosted discussions at the annual
Professional Housing Management Association's Industry Day in
Louisville, KY.
Lessons learned include:
Implement shorter solicitation periods so that offerors' financial
packages are not as susceptible to mortgage rate changes.
Capitalize on industry's contractor expertise to further reduce
time but keep the Air Force as the decision maker.
Limit design reviews to the 50% and 100% completion and check the
design against the solicitation requirements.
Create Project Oversight Plans and work issues relating to the
transition from government housing to private sector housing early in
the process.
Partner with the successful developer immediately after project
award in order to establish better working relationships.
Don't specify floor plan layouts and sizes; industry of-the-shelf
designs are generally better than government maximum authorizations.
To ensure lessons learned are incorporated in future privatization
ventures, the Air Force is establishing The Air Force Center for
Environmental Excellence as our implementation focal point for housing
privatization.
Project solicitations for the remainder of the Air Force pilot
projects and the fiscal year 2001 projects take these lessons learned
into account to achieve the most efficient and best value projects.
FEDERAL ACQUISITION REGULATION
Army:
Question. It is our understanding the Services are not precluded
from applying the FAR or parts of the FAR to a contract if it is in
their interest. What is your position on the use of the FAR with
respect to housing privatization?
Answer. The Army looks at each privatization project on a case by
case basis. We applied the Federal Acquisition Regulation (FAR) to the
Request For Proposal (RFP) solicitation process and contracting
procedures used to privatize family housing at Fort Carson, Colorado in
1999.
In addition, the Army has used the FAR to solicit, by a Request for
Qualifications (RFQ), for the privatization of the family housing at
Fort Hood, Texas and Fort Lewis, Washington. The FAR applies to the
first phase of the RFQ privatization, which includes the solicitation,
evaluation and selection of the developer/partner.
Before the implementation of the project begins, the Army will make
a further determination on the application of the FAR to project
execution, based on the structure of the project.
Question. Has the use or non-use of the FAR posed a problem in any
of the privatization projects?
Answer. As the Army developed its first Request for Qualifications
(RFQ) project at Fort Hood, Texas, there was a slight delay while the
Army ascertained if the FAR fully applied and what sections were best
suited to the RCI RFQ housing privation effort. Since the completion of
this analysis, there have been no unusual problems. The FAR provides a
time-tested structure to the competitive solicitation for and selection
of a partner, and the Army has managed within its parameters to
successfully award Fort Carson, and will soon select a partner for Fort
Hood, Texas.
Navy:
It is our understanding the Services are not precluded from
applying the FAR or parts of the FAR to contract if it is in their
interest.
Question. What is our position on the use of the FAR with respect
to housing privatization?
Answer. The Department of the Navy uses FAR provisions when they
promote our objectives and ease the procurement process.
It is our understanding the Services are not precluded from
applying the FAR or parts of the FAR to a contract if it is in their
interest.
Question. Has the use or non-use of the FAR posed a problem in any
of the privatization projects?
Answer. No. Selectively using FAR provisions to provide structure
to the selection process has not created any problem in any of our
privatization projects.
Air Force:
Question. What is your position on the use of the FAR with respect
to housing privatization?
Answer. The determination on applicability of the FAR to a housing
privatization project is made on a case-by-case basis. This position is
supported by a Department of Defense Office of General Counsel
memorandum dated March 5, 1997. The FAR applies if there is an
acquisition by contract with appropriated funds of supplies or services
by and for the use of the Federal Government through purchase or lease.
In the transactions to date, the Air Force is making real property
available to the selected offeror to construct facilities that they
will own and that they can rent to individual military members and
their families. The Air Force will not own the housing and therefore
the FAR does not apply.
Question. Has the use or non-use of the FAR posed a problem in any
of the privatization projects?
Answer. The Air Force has approached their housing privatization
projects as real estate transactions (non-use of the FAR) and have not
experienced problems with any of the four projects we have solicited to
date. However, we do use principles and practices of the FAR that have
proven successful in the past.
BASIC ALLOWANCE FOR HOUSING (BAH) INITIATIVE
Army:
Question. In your opinion, how will BAH increase impact the future
of housing privitization?
Answer. Overall, there would be minimal impact on the Army's RCI
program if BAH were raised to cover 85% of housing costs. Raising BAH
to cover 100% would likely impact demand for on-post housing, but we do
not know to the extent at this time.
Question. What is the impact on the privatization projects that
have been completed and the projects currently in the solicitation
process?
Answer. It is too soon to fully evaluate the impact of the new BAH
initiative on our projects. For the recently completed Fort Carson (CO)
family housing privitization project, the contract has a provision
creating escrow accounts. All revenue flows into the first of the five
cascading escrow accounts. The escrow accounts are all dual signature,
so the Fort Carson Directorate of Contracting controls, jointly with
the contractor, all expenditures from these accounts. Funds from the
escrow are drawn for necessary construction costs, operational expenses
and agreed upon profits. This system should preclude excess revenue
from flowing to the contractor. Should excess funds ever buildup in the
escrow accounts, Fort Carson may authorize that they be expended on
items from an agreed list of amenities.
Navy:
Question. In your opinion, how will BAH increase impact the future
of housing privatization?
Answer. The impact of the BAH increase on housing privatization is
uncertain at this time. We have initiated efforts to analyze the long-
term impacts of the BAH initiative on the supply and demand for
military housing. Although we may be able to model outcomes based on
assumptions about supply and demand, the real effects will only become
apparent over time as we see how both individual preferences and market
forces react. When the private sector cannot meet our housing needs, we
will strike an appropriate balance between public/private ventures and
traditional military construction.
Question. What is the impact on the privatization projects that
have been completed and the projects currently in the solicitation
process?
Answer. The privatization projects previously executed for Corpus
Christi and Everett both use differential lease payments to bring the
member's out-of-pocket costs down to zero. As Basic Allowance for
Housing increases, the amount of differential lease payments required
for these projects should decrease. The extent to which the Basic
Allowance for Housing, rent levels, and average utility costs change
will affect the amount of the differential lease payment.
For projects in the acquisition process, preliminary analysis
indicates that all remain viable, meet applicable statutory thresholds
for Government participation, and have lower life-cycle costs than
military construction.
Air Force:
Question. In your opinion, how will BAH increase impact the future
of housing privatization?
Answer. The Basic Allowance for Housing (BAH) increase may give the
Air Force the opportunity to use fewer authorities and possibly reduce
the amounts of loans or guarantees to developers. This would decrease
scored costs for the Air Force and reduce our ``up front'' expenses
required to implement a privatization deal. Our initiatives will be
designed such that developers will not receive a windfall as a result
of major BAH increases. BAH increases excess to project needs will be
directed to a holding account and ultimately to the Family Housing
Improvement Fund. The BAH impact on future privatization initiatives
will be addressed in updates to the Air Force Family Housing Master
Plan. We intend to annually update our Master Plan to address the
effects of long term planning factors, such as BAH, on future military
and privatized housing requirements. The Master Plan is scheduled to be
updated in December 2000 and December 2001.
Question. What is the impact on the privatization projects that
have been completed and the projects currently in the solicitation
process?
Answer. Developers in these housing privatization initiatives must
confront the possibility of either an increase or a decrease in the
Basic Allowance for Housing (BAH). They definitely take a risk in
continuing to operate the housing in the event of a downturn in the
BAH. The Air force has awarded one project at Lackland AFB. There are
no provisions in this project to have the Air Force bring additional
funding to the project in the event of a BAH downturn. In most of our
future privatization initiatives including those in the solicitation
process, there are provisions contained in the solicitation that allow
the offeror to pledge a percentage of ordinary and/or excess profits
(e.g., those resulting from unexpected increases in the BAH) to be
shared with the Air Force. The amount each offeror is willing to pledge
is one of the evaluation factors considered by the source selection
authority when making their best value determination.
JOINT SERVICE PROJECTS
Question. Is there any consideration being given to joint-Service
projects, which would allow economies of scale in housing
privatization? If so, where and when?
Answer. The Army is currently participating in a supporting role
for the military family housing privatization project at McGuire Air
Force Base in New Jersey. The Army plans to contribute the family
housing units at the adjacent Fort Dix. When added to the 1,950 Air
Force units, the 750 Army units should provide sufficient economies of
scale to significantly reduce the Government per unit contribution. The
Army and Air Force are negotiating for a project to start in late
Fiscal Year 2001.
Navy:
Question. Is there any consideration being given to joint-Service
projects, which would allow economies of scale in housing
privatization? If so, where and when?
Answer. The Department of the Navy has a joint Navy/Marine Corps
project underway in San Diego and is receptive to other Joint-Service
projects. We also consider the requirements and assets of other
Services in the analysis of a project.
Air Force:
Question. Is there any consideration being given to joint-Service
projects, which would allow economies of scale in housing
privatization? If so, where and when?
Answer. The Air Force and the Army are working a joint housing
privatization initiative for Fort Dix and McGuire AFB, NJ. This is one
of the Air Force's 10 pilot projects planned for study in fiscal year
2000 and execution in fiscal year 2002.
JUNIOR ENLISTED INPUT
Army:
Question. What input do junior enlisted have to privatization
project development?
Answer. During the pre-Community Development and Management Plan
(CDMP) phase of each project, a detailed survey of soldiers of all
ranks will be conducted to elicit input for the development of the
CDMP.
Of particular importance are the types of services and amenities
the soldiers and their families believe are most important in any
community development plan. As the CDMP evolves, there will be two-way
communication with soldiers of all ranks through the installations
Mayors program.
Navy:
Question. What input do junior enlisted have to privatization
project development?
Answer. The Department of the Navy's housing privatization program
concentrates primarily on providing shelter to junior enlisted
families, since this group is often ill equipped to secure adequate
housing in the private sector. Therefore, senior enlisted
representatives of the junior enlisted personnel are involved in the
development of a public/private venture project from the beginning.
Their most significant input occurs in the definition of the
requirements, objectives and priorities that will be stated in the
solicitation document, and subsequent membership on the Quality
Evaluation Board during the developer selection process. As an
installation approaches project execution, typically a ``town hall''
meeting is held to answer concerns and solicit inputs directly from
junior enlisted families and others.
Air Force:
Question. What input do junior enlisted have to privatization
project development?
Answer. Views from all ranks including junior enlisted are sought
out in the early stages of developing pilot privatization projects.
Surveys, town meetings, and other forums are used to collect inputs
which are integrated, to the maximum extent possible, into housing
privatization projects.
OMB SCORING
Army:
Question. In your opinion, does OMB scoring drive the choice of
privatization authorities used in project and in the related funding
decisions?
Answer. No, OMB scoring does not drive the choice of privatization
authorities used for projects. However, it may have an impact on the
available tools used in conjunction with Army housing privatization
projects.
Each agreement entered into by the Army, in accordance with the
Request For Qualifications (RFQ) process, will be ``scored'' by OMB for
budget purposes prior to approving the CDMP. Sufficient appropriations
must be available to cover the ``scored'' amount for each agreement.
Navy:
Question. In your opinion, does OMB scoring drive the choice of
privatization authorities used in projects and in the related funding
decisions?
Answer. OMB scoring is one of the variables the Department of the
Navy takes into consideration when choosing privatization authorities.
Air Force:
Question. In your opinion, does OMB scoring drive the choice of
privatization authorities used in project and in the related funding
decisions?
Answer. Yes, however, OMB scoring is only one of the numerous
variables that determine which authorities the Air Force will use in a
given project. The primary goal is to select a project that offers the
best value to the Air Force. The best value determination needs to take
numerous related factors into consideration. Some of these factors
include risk to government resources (land, property, financing), long
term financial viability of the project, low cost (OMB scoring),
desirable housing for our airmen, etc. There are some authorities, such
as the rental or occupancy guarantee, which the Air Force will not use
due to the extremely adverse scoring implications tied to them. There
are other authorities, such as Differential Lease Payments and Equity
Contributions, which also have adverse scoring implications but still
will be considered by the Air Force.
LAND AND UNIT VALUATION
Army:
Question. Under the current housing privatization authorities, DOD
may convey or lease land, existing housing and ancillary facilities to
an eligible entity for privatization deals. How does each Service value
land and units with respect to the conveyance or lease of Government-
owned property in privatization projects?
Answer. The U.S. Army Corps of Engineers (USACE) provides real
estate appraisal analyses for Army family housing privatization
projects.
For the Fort Carson (CO) project, the USACE Omaha District
estimated the fair market value of the improvements to be conveyed
through an analysis evaluation, which included multiple regression of
sales data and income capitalization.
In the Army projects, the underlying land is not conveyed but is
leased to the private sector for a nominal value, as allowed by the
MHPI authorities. The value of the land and improvements is determined
by its income producing potential and comparison to the existing
market. The value determination is essential in order for the Army to
ascertain the value of the government contribution to the deal.
From the developer's perspective, the ability to obtain financing
will depend upon the level of project costs the developer is required
to finance and the value of the revenue stream. Further, the residual
value of the assets at the end of the contract is considered during the
economic analysis for each project since the units are conveyed back to
the government.
Navy:
Under the current housing privatization authorities, DoD may convey
or lease land, existing housing and ancillary facilities to an eligible
entity for privatization deals.
Question. How does each Service value land and units with respect
to the conveyance or lease of Government-owned property in
privatization projects?
Answer. There are two different categories of Government-owned land
utilized in Department of the Navy public/private venture projects.
Category 1: Existing Navy land that will be transferred in fee to
the private sector, with the proceeds from that transfer used to carry
out Military Housing Privatization Initiative activities. The appraised
land value has been used in this situation. It is valued at ``highest
and best use,'' as preliminarily determined by third party appraisals
and validated in the market place.
Category 2: Existing Navy land that will be used for the siting of
new public/private venture units. The value of such land is determined
by the use restrictions, limitation, encumbrances and requirements
imposed on the property by the Government as described in the lease and
associated business agreement. The restrictions, limitations and
encumbrances define the ``highest and best use'' of such land. The
economic contribution of existing Navy land is a ``cost avoidance'' to
the project and, therefore, a benefit. The Navy use of Government-owned
assets will most often be to ``seed'' the project and strengthen its
financial feasibility in light of the Department's objectives,
including the availability of the housing to military families at
reduced rents and on a preferential basis. The value of the land is a
function of the income stream produced by the project.
The valuation of existing units to be privatized is a function of
the income streams that can be generated from the units. The income
streams are based on occupancy at prescribed rents. The use to which
the units can be put during the term of the deal is limited by the
contractual agreement. Accordingly, value is calculated as the
supportable debt generated by the income streams from the units less
the renovation to the units that must be carried-out to bring them up
to an acceptable standard.
Air Force:
Quesiton. How does each Service value land and units with respect
to the conveyance or lease of Government-owned property in
privatization projects?
Answer: The Air Force contracts for a fair market appraisal of all
government assets to be included in the privatization deal. The U.S.
Army Corps of Engineers has final approval authority on all appraisals.
The fair market value of the government assets are then used in the
development of the government estimate for the revitalization and the
demolition/construction that will need to be accomplished on the
privatized housing. In the majority of the Air Force's privatization
projects, the land will be leased to the successful offeror so we
maintain the future use of the land. If the land is conveyed as is
projected in the Robins AFB and Dover AFB projects, then the fair
market value of the land is taken into account in the estimate. Units
that are included in the deal which will require little if any
reconstructive effort add value to the government contribution to
offset the cost of revitalizing deteriorated housing units.
USE OF CONSULTANTS IN MHPI PROJECTS
Army:
Question. Since the Military Housing Privatization Initiative was
authorized in 1996, OSD and the Services have used consultant firms
extensively in all phases of privatization proposals. To what extent
does each Service rely on consultant support for design, development
and finalization of MHPI projects?
Answer. The Army uses consultants to provide products and services
that are not available in the government in situations where the Army
does not possess the requisite skills or is not adequately staffed to
handle all of the tasks associated with such a new, large, and complex
undertaking.
We believe the products and services provided by our consultants
will protect the interests of the government during the preparation
for, and execution of, our agreements with selected developer partners,
and will increase the value and benefits of the program to the
government.
We expect continued use of consultant expertise, which is critical
in obtaining the maximum value at each RCI site in terms of quantity
and quality of residential communities and services.
Navy:
Since the Military Housing Privatization Initiative was authorized
in 1996, OSD and the Services have used consultant firms extensively in
all phases of privatization proposals.
Question. To what extent does each Service rely on consultant
support for design, development and finalization of MHPI projects?
Answer. The Department of the Navy uses development consultants to
provide support during the concept development, developer solicitation
and selection, and negotiation and contract execution phases. Examples
of the support they provide include: preparation of pro forma and life
cycle analyses; assistance in preparation of source selection plans;
support in the evaluation of developer qualifications and technical and
financial proposals; and assisting the source selection authority in
negotiating terms and conditions and business agreements with the
preferred offeror. Consultants do not determine project requirements or
program objectives.
While the current role of our public/private ventures consultant is
to support both field and headquarters personnel in specific technical
and financial issues, we are developing greater in-house expertise on
all phases of the privatization program. We expect that consulting
expertise will still be required to support operational and financial
due-diligence efforts on the executed projects.
Air Force:
Question. To what extent does each Service rely on consultant
support for design, development and finalization of MHPI projects?
Answer. In order to ensure the Air Force protects its investment
and interests in such long-term endeavors, we have hired consultants
from industry to help us with concept identification, financing,
development, and documentation. Additionally, documentation for loan
guarantees, direct second mortgage loans, OMB scoring, as well as some
environmental, surveying and economic analysis have been performed by
consultants. By using consultants we have leveraged our manpower to
help us get through these resource intensive efforts. However,
consultants have not been directly involved in intrinsic government
functions such as Source Selection.
LOAN GUARANTEES
Army:
Question. The Army has provided a BRAC loan guarantee for the
housing privatization project now under contract at Fort Carson, and
the Air Force has provided a BRAC guarantee for the project under
contract at Lackland AFB. The Army and the Air Force are also proposing
BRAC guarantees for their other pilot projects. Why is the Army and Air
Force providing loan guarantees for base closure, downsizing and
deployment for these projects?
Answer. Since the recently completed project at Fort Carson (CO)
was the Army's first family housing privatization, we offered a loan
guarantee, up front, in order to be sure to attract sufficient
qualified developers to bid on the project.
One of the lessons learned from the Fort Carson solicitation and a
subsequent analysis of the market place was that developers may bid on
follow-on projects, without having the loan guarantee offered up front.
Subsequently, the Army has solicited both Fort Hood (TX) and Fort Lewis
(WA), without an up-front offer of a mortgage guarantee.
The Army understands that the Government may more appropriately
address non-market risk factors than the private sector. The possible
use of these guarantees will be evaluated separately at each
installation based on the local market conditions and in the context of
concluding a project structure that is most beneficial to the Army, and
soldiers and their families.
Air Force:
Question. Why is the Army and Air Force providing loan guarantees
for base closure, downsizing and deployment for these projects?
Answer. When a developer secures financing for an Air Force housing
privatization initiative, he or she is signing up to 30 years of
payments back to the financial institution. The developer is planning
to have an income stream to cover the mortgages of anywhere from 500 to
1500 housing units. In exchange, the developer is giving first right of
refusal for the service members to occupy those units. Should the Air
Force close the installation or have major military unit moves or
extended deployments that downsize the number of service members at
that installation, then the developer can go to sources outside the
military to try and obtain tenants to keep the income stream necessary
to cover mortgage costs.
Many of our military installations are not in heavily populated
locations that could provide a secondary market for the developer.
Without this secondary market, the developer could fail financially
should the Air Force execute a base closure, mission drawdown or extend
deployment that reduces the project income stream. Therefore, in order
to generate interest in getting developers to bid on our projects, we
find it necessary in some cases to offer a closure, drawdown or
deployment guarantee to protect the developer financially due to an Air
Force adverse action.
Having this guarantee offered by the Air Force can help the
developer obtain a lower mortgage interest rate meaning less income
stream would need to be spent on interest payments. The guarantee may
also result in a lower debt service coverage requirement meaning the
developer can borrow more money from the private sector and less from
the government. These combined savings could be used to reduce the
necessary subsidy or to provide better or larger housing units. There
is a scored cost associated with this guarantee that the Air Force
would have to pay. However, this is taken into account in the life
cycle cost analysis to determine project feasibility. More importantly,
in many cases the Air Force will make the guarantee optional. Since the
developers are competing on price (among other factors), they will only
ask for the guarantee if its cost (OMB score) is more than outweighed
by savings in interest payments. In essence, the Air Force is putting
market forces to work and letting the developers bring forth their best
proposal.
UNSOLICITED PROPOSAL
Army:
Question. In fiscal year 1999, the Army received an unsolicited
proposal from an adjacent county to construct and manage housing under
the Military Housing Privatization Initiative (MHPI) authorities at
Fort Meade, Maryland. The Air Force also received an unsolicited
proposal for Goodfellow AFB from the City of San Angelo, Texas to own,
operate, and maintain privatized housing units. Have the Services
received unsolicited proposals at any other bases? How are unsolicited
proposals evaluated? How have the total costs of unsolicited bids
compared to the Department's estimated cost?
Answer. No, we are not aware of any unsolicited proposals received
at other bases.
Question. How will such proposals be considered under the
privatization initiative? Do the current statutory authorities allow
the Services to waive competition in contracting for housing?
Answer. The Army considers open competition is a cornerstone of our
housing privatization initiatives. We want to ensure the broadest
possible competition; therefore, we are not considering unsolicited
proposals for the RCI program.
Navy:
In fiscal year 1999, the Army received an unsolicited proposal from
an adjacent county to construct and manage housing under the Military
Housing Privatization Initiative (MHPI) authorities at Fort Meade,
Maryland. The Air Force also received an unsolicited proposal for
Goodfellow AFB from the City of San Angelo, Texas to own, operate, and
maintain privatized housing units.
Question. Have the Services' received unsolicited proposals at any
other bases? How are unsolicited proposals evaluated? How have the
total costs of unsolicited bids compared to the Department's estimated
cost?
Answer. The Department of the Navy has received several unsolicited
proposals dealing with the privatization of family and bachelor
housing. In order to be considered, without competition, these
proposals must possess certain unique features or characteristics that
could not be otherwise obtained through the competitive process.
In our review of such proposals, we have found that while project
costs may be lower than we would have otherwise estimated, there are
concerns about the quality envisioned in the proposal and the ability
to protect our interests during the term of the deal.
In fiscal year 1999, the Army received an unsolicited proposal from
an adjacent county to construct and manage housing under the Military
Housing Privatization Initiative (MHPI) authorities at Fort Meade,
Maryland. The Air Force also received an unsolicited proposal for
Goodfellow AFB from the City of San Angelo, Texas to own, operate, and
maintain privatized housing units.
Question. How will such proposals be considered under the
privatization initiative? Do the current statutory authorities allow
the Services to waive competition in contracting for housing?
Answer. Department of Defense policy favors competition and the
Department of the Navy strongly supports that policy. The Department of
the Navy would only seek a waiver to competition if the proposed
project possessed certain unique features or characteristics that could
not be obtained through the competitive process.
Air Force:
Question. Have the Services' received unsolicited proposals at any
other bases? How are unsolicited proposals evaluated? How have the
total costs of unsolicited bids compared to the Department's estimated
cost?
Answer. Yes, the Air Force has also received unsolicited housing
privatization proposals for Wright-Patterson AFB and Maxwell AFB.
Unsolicited proposals are evaluated against a number of criteria.
First, we review for existing legislative compliance, and adherence
with DoD and Air Force policy. Then, we check to ensure the proposal
fulfills base housing requirements, as determined by the Air Force
Family Housing Master Plan, and is financially feasible. Finally, we
ensure life cycle costs don't exceed government cost to construct, own
and operate the unit.
If Air Force review determines the proposal has merit, the next
step will be to solicit the general public for competition. A Request
for Interest would be published to determine if additional entities are
interested in a similar proposal. If there is additional interest, then
the project will be handled on a fully competitive, Request for
Proposal basis.
The Air Force has not progressed to the point of comparing the
Department's cost estimate on any unsolicited proposal.
Question. How will such proposals be considered under the
privatization initiative? Do the current statutory authorities allow
the Services to waive competition in contracting for housing?
Answer. Unsolicited proposals are evaluated against a number of
criteria. First, we review for existing legislative compliance, and
adherence with DoD and Air Force policy. Then, we check to ensure the
proposal fulfills base housing requirements, as determined by the Air
Force Family Housing Master Plan and is financially feasible. Finally,
we ensure life cycle costs don't exceed MILCON equivalent costs.
If after Air Force review it is determined the proposal has merit,
the next step will be to solicit the general public for competition. A
request for interest (RFI) would be published to determine if
additional entities are interested in a similar proposal. If there is
additional interest, then the project will be handled on a fully
competitive, Request for Proposal basis.
The current legislation does not address competition as a
requirement for housing privatization initiatives. However, it is Air
Force and OSD policy to ensure competition is prevalent in all our
projects to ensure best value.
USE OF PRIVATIZATION AUTHORITIES
Army:
Question. The Military Housing Privatization Initiative provides a
number of authorities which may be used individually or in combination
in privatization agreements: direct loans or loan guarantees, rental
guarantees and leases, investments, differential lease payments,
conveyance or lease of land or facilities. Which privatization
authorities does each Service use, and why? Which authorities don't
they use, and why?
Answer. For the recently completed Fort Carson (CO) family housing
privatization project, the Army used these authorities: mortgage
guarantee against base closure, downsizing, and deployment (sec 2873);
convey the existing units and outlease the land (sec 2878); units built
and revitalized to local standards for similar units (sec 2880);
includes the provision of ancillary supporting facilities (sec 2881);
housing occupants must pay rent by allotment, not to exceed housing
allowances (sec 2882); and, appropriated construction funds transferred
to the DoD Family Housing Improvement Fund (sec 2883).
In regards to RCI, the determination as to which authorities are
most appropriate will be made during the Community Development and
Management Plan process at each installation. The Army will evaluate
each of the MHPI authorities in the context of the market conditions
and the requirements of each installation. The value of each tool will
depend on the advantages it offers to a specific negotiation and its
impact on the scope of a project.
Rather than put all of the authorities on the table initially, the
Army will listen to the ideas and the vision of the selected partners
and strategically use those MHPA authorities that best meet the Army's
goals. It is entirely possible that each installation in the pilot
program will make use of different elements of the MHPI legislation. It
is also possible that some installations will make use of very few of
the authorities.
Navy:
The Military Housing Privatization Initiative provides a number of
authorities which may be used individually or in combination in
privatization agreements: direct loans or loan guarantees, rental
guarantees and leases, investments, differential lease payments,
conveyance or lease of land or facilities.
Question. Which privatization authorities does each Service use,
and why? Which authorities don't they use, and why?
Answer. While we have not used all the authorities, we believe they
are all valuable and should remain in the legislation for potential use
in the future. The Department of the navy uses ``Investments in Non-
Governmental Entities'' (Section 2875) as the primary authority for our
public/private venture projects. In some project concepts, we expect to
use the differential lease payments authority (Section 2877) in
combination with the investment authority. In such instances,
differential lease payments are applied only in small amounts and are
secondary to use of the primary tool, the investment authority. When
existing Government-owned assets are transferred, we also use Section
2878 (Conveyance or Lease of Government Assets). The Department has
selected this combination of authorities because it offers the best
opportunity to achieve our stated requirements and objectives while
protecting Government-owned assets (land and/or facilities) over the
long-term. In two cases, we have used the loan authority (Section 2873)
either as the primary vehicle or in conjunction with the investment
authority.
We have chosen this approach because we feel it optimizes the
balance between the leverage of Departmental assets, meets our
investment objectives, provides the desired degree of Government
control over key decisions over the life of the project, and affords
flexibility to adapt to changes in conditions.
Air Force:
Question. Which privatization authorities does each Service use,
and why? Which authorities don't they use, and why?
Answer. The Air Force has used or will use the following
authorities in the ten pilot projects and the six projects scheduled
for fiscal year 2001 as outlined in the attached chart:
2873--Direct Loans and Loan Guarantees--Based on the generally
below-market rental rates that the service members will pay for top-
quality housing, the anticipated income stream will not be sufficient
to allow the developer to obtain full first mortgage funding.
Therefore, the developer may need a direct loan to help offset the
below-market rental rates. A loan guarantee may help the developer
obtain a lower mortgage interest rate and thereby provide a decrease in
the overall cost of the project.
2875--Investments in Governmental Entities--The Air Force may
choose to use this authority for those cases where large profits are
anticipated from the project such as Patrick AFB.
2877--Differnetial Lease Payments--These may be required for brief
periods of a project's life when the income stream is not sufficient to
offset operating expenses due to the overall costs of a project.
2878--Conveyance or Lease of Existing Property and Facilities.
2879--Interim Leasess--This authority may be used to bring
completed units on line prior to the overall construction completion
and final financing of housing units.
2880--Unit Size and Type--This authority aims to match the proposed
privatized housing to that in the surrounding community.
2881--Ancillary Support Facilities--The Air Force intends to have
the successful developer provide non-revenue generating ancillary
support facilities that do not compete with the Army and Air Force
Exchange Service, Defense Commissary Agency and Morale, Welfare and
Recreation activities for the benefit of the housing occupants.
2882--Assignment of Members of the Armed Forces to Housing Units--
This authority allows our members to live in privatized government
housing while receiving a housing allowance.
2883--Department of Defense Housing Funds--The Air Force intends to
use the Family Housing Improvement Fund established by the Office of
the Secretary of Defense.
2884--Reports--Reports are required by Congress.
The authorities not used by the Air Force are:
2874--Leasing of Housing to be Constructed--This authority has not
applied to any of the Air Force projects to date and probably will not
be used in the future because of the high up-front cost required by
scoring.
2876--Rental Guarantees--The OMB scored cost associated with this
authority would make the up-front cost of the privatization project
equal to or more that the cost of equivalent military construction. If
we had these funds to pay such a scored cost, the Air Force would have
funded the military construction project in the first place.
Army:
Question. According to the Services' data, there are approximately
250,000 Government-owned family housing units in the United States,
whose average age is about 34 years. Based on criteria established by
the Services', approximately 157,000 units, or 63 percent, are deemed
inadequate and need to be renovated or replaced. In your opinion, what
led to the current number of inadequate housing units?
Answer. The condition of existing housing units is a result of
three factors. Quality of the unit when it was constructed; most
military housing was built to minimum standards to keep initial costs
down. Wear and tear over time; on average the units turn over every two
years. A sustained level of funding over the years to keep units from
deteriorating with a major revitalization about the 35 year point to
bring it up to current standards including internal utility systems.
Most Army family housing has met or exceeded the point of time in its
life for revitalization. The existing funding program still leaves an
approximate $4.9B backlog to reach the DoD goal of eliminating
inadequate housing by FY2010.
Question. What is the plan to address this backlog, and what is
being done to prevent the recurrence in the future?
Answer. The Army is developing a 2010 Plan to meet the DoD goal. In
order to achieve the goal the Army must use a combination of
privatization and increased funding for those locations not privatized
and BAH increases. Once units have been made adequate then sufficient
funding must be available over their life to prevent deterioration.
Navy:
According to the Services' data, there are approximately 250,000
Government-owned family housing units in the United States, whose
average age is about 34 years. Based on criteria established by the
Services' approximately 157,000 units, or 63 percent, are deemed
inadequate and need to be renovated or replaced.
Question. In your opinion, what led to the current number of
inadequate housing units?
Answer. Funding levels that were insufficient to arrest, let alone
reduce, the growing backlog associated with an aging, deteriorating
inventory led to the large number of inadequate units in the family
housing inventory.
According to the Services' data, there are approximately 250,000
Government-owned family housing units in the United states, whose
average age is about 34 years. Based on criteria established by the
Services', approximately 157,000 units, or 63 percent, are deemed
inadequate and need to be renovated or replaced.
Question. What is the plan to address this backlog, and what is
being done to prevent the recurrence in the future?
Answer. The Department of the Navy's goal is to ensure Sailors,
Marines, and their families are able to obtain suitable, affordable
housing. In recent years, we have made a significant investment in
revitalizing unsuitable military family housing. There is visible
evidence of improved living conditions at Department of the Navy
installations throughout the world. For Fiscal Year 2001 the Department
is requesting funds to revitalize 2,292 homes, build 18 new homes, and
replace 843 homes. We plan to eliminate the backlog of unsuitable homes
by the end of Fiscal Year 2010 through a combination of increased
housing allowances, privatization initiatives, and replacement
construction, improvement, and repair projects.
Air Force:
Question. In your opinion, what led to the current number of
inadequate housing units?
Answer. Over 65% of the Air Force housing units were constructed in
the late 1950's and 1960's. The repair requirements driven by this huge
bow wave of units nearing the end of their economic life, exceed
available funding and has resulted in the number of inadequate units.
Question. What is the plan to address this backlog,and what is
being done to prevent the recurrence in the future?
Answer. To address this backlog and insure units are adequately
maintained after they are improved or replaced, the Air Force developed
the Family Housing Master Plan. This plan provides a corporate housing
investment strategy that integrates and prioritizes traditional
construction and operations and maintenance funding with private sector
financing within a ``single roadmap''. This plan outlines the funding
required to meet the OSD goals to revitalize, divest through
privatization or demolish inadequate units by 2010. It identifies the
most cost-effective and time efficient investment option at each
installation. Within current funding levels the Air Force will not meet
the 2010 goal until 2018. This is an affordability issue that will have
to be addressed in the coming years.
Army:
Question. Although the Military Housing Privatization Initiative
does not require competition, OSD draft policies and procedures state
that projects must be solicited in a manner that promotes competition
to the maximum extend possible. However, projects are currently being
considered which could result in sole source awards, such as the
proposal from Boston Capital Holdings Limited Partnership for Patrick
AFB, and the Navy's proposed project with the Virginia Housing
Authority in Norfolk. Can you bring us up to date on any potential sole
source awards?
Answer. We have not awarded, and do not plan to award any sole
source privatization contracts.
Navy:
Although the Military Housing Privatization Initiative does not
require competition, OSD draft policies and procedures state that
projects must be solicited in a manner that promotes competition to the
maximum extent possible. However, projects are currently being
considered which could result in sole source awards, such as the
proposal from Boston Capital Holdings Limited Partnership for Patrick
AFB, and the Navy's proposed project with the Virginia Housing
Authority in Norfolk.
Question. Can you bring us up-to-date on any potential sole source
awards?
Answer. The Department of the Navy is exploring a potential public/
private venture project in the Hampton Roads, Virginia area that would
be executed through a partnership with the Virginia Housing Development
Authority. The proposed concept is for the construction of 80 family
housing units. OSD staff is currently reviewing the project. We are not
considering any other sole-source projects.
Air Force:
Question. Can you bring us up to date on any potential sole source
awards?
Answer. The Air Force had signed a non-binding letter of intent
with Boston Capital to explore ways of providing housing for our people
quicker, better, and cheaper. Boston Capital and the Air Force were
using Patrick AFB as a test of one new way. The non-binding letter of
intent has been rescinded by mutual agreement, and we are moving
forward with housing solicitations--including Patrick AFB--in more
conventional ways.
IMPACT OF UTILITIES PRIVATIZATION
Army:
Question. The Department has undertaken an aggressive utility
privatization effort. The goal is to privatize all utility systems
unless uneconomical or exempt for security reasons by September 30,
2003. How are utilities and housing privatization being coordinated?
Answer. Both programs must be fully coordinated at the installation
and the Major Army Command (MACOM) level to obtain the best value for
the government. The MACOMs have the discretion to schedule the
privatization of their utility systems to coincide with AFH
privatization.
Question. What is the impact of utility privatization on housing
privatization?
Answer. During the Community Development and Management Plan (CDMP)
process the Army will reexamine the current and projected status of
utilities privatization initiatives, in order to anticipate any effects
on housing project development plans. There is the potential that
privatization utilities will change utility rates, which in turn could
impact the project's economic structure and projected timeline.
However, the actual impacts will have to be determined during the
development of the CDMP.
Navy:
The Department has undertaken an aggressive utility privatization
effort. The goal is to privatize all utility systems unless
uneconomical or exempt for security reasons by September 30, 2003.
Question. How are utilities and housing privatization being
coordinated?
Answer. The Department of the Navy is closely coordinating the
privatization of housing and the privatization of utilities systems.
There are 3 interface scenarios for utilities in public/private venture
housing projects:
1. Utilities for new housing units on private land will be provided
by the developer through private utility companies.
2. Existing government owned housing located outside base confines
that currently relies on private utility providers would continue to
rely on those providers. Those with utilities we manage will eventually
transfer utility operation to the local utility company, as we normally
would do for family housing built with construction funds.
3. Utilities for on-base housing units will continue to be operated
as part of base infrastructure up to the point of the utility meter.
The Limited Liability Company the Department uses has the flexibility
to facilitate privatization of the utility distribution system in
concert with other utility privatization initiatives.
The Department has undertaken an aggressive utility privatization
effort. The goal is to privatize all utility systems unless
uneconomical or exempt for security reasons by September 30, 2003.
Question. What is the impact of utilities privatization on housing
privatization?
Answer. The offices within the Department of the Navy responsible
for utilities and housing privatization are working closely together to
coordinate their efforts. No problems have arisen so far. The housing
public/private venture management structure being used by the
Department has the flexibility to accommodate privatization of the
utility distribution; there should not be any significant impact.
Air Force:
Question. How are utilities and housing privatization being
coordinated?
Answer. The Air Force Utilities and Housing Privatization Programs
are coordinating their efforts to privatize utilities in housing areas.
On-going housing privatization efforts differ in their conceptual
approaches with regards to the disposition of real estate )conveyance
versus lease) and the inclusion of utilities.
The Air Force has issued policy to ensure the conveyances of
utility systems for the following on-going initiatives are not
duplicated in both programs, but rather a concerted and measured
approach is taken:
Dyess AFB: Utilities in new geographically separated housing area
will be owned by the developer as part of the housing privatization
program. The developer is bringing land/utilities to the deal.
Lackland AFB: New utilities in severable housing area will be owned
by the developer as part of the housing privatization program. Raw land
within confines of Medina Annex is being developed and existing land is
being leased.
Patrick AFB: Utilities in geographically separated housing area to
be conveyed to the developer through the housing privatization program.
Robins AFB: Utilities and land in geographically separated housing
area to be conveyed to the developer through the housing privatization
program.
Dover AFB: Utilities in the on-base housing area to be conveyed
through utilities privatization program. Utilities in the
geographically separated housing area to be conveyed through the
housing privatization program.
Wright-Patterson AFB: Utilities in geographically separated housing
area (Page Manor & Woodland Hills) to be conveyed through the utilities
privatization program. Land will be leased. Utilities in other housing
areas (not privatized) to be conveyed through the utilities
privatization program.
Elmendorf AFB: Utilities in three housing areas will be conveyed
through the housing privatization program. Land will be leased.
Utilities in other MFH areas will remain AF-owned and will be conveyed
as part of the utilities privatization program.
Kirtland AFB: Utilities in all housing areas will be conveyed as
part of the utility privatization program. Land will be leased.
Tinker AFB: Utilities in severable housing areas will be conveyed
as part of the utilities privatization program.
Future housing privatization efforts (i.e., fiscal year 2001 and
beyond) which seek to convey units and land will include the underlying
utilities. Future housing privatization efforts which seek to convey
units, but lease the land, will not include the underlying utilities;
these utilities will be included in the Utilities Privatization
Program.
Air Force:
Question. What is the impact of utilities privatization on housing
privatization?
Answer. None. The Air Force has issued policy to ensure the
conveyance of utility systems are not duplicated in both Utilities and
Housing Privatization Programs.
ALTERNATIVE FORMS OF HOUSING
Army:
Question. Are any of the Services considering alternate forms of
housing to maximize housing privatization funds? If so, what is being
considered, and where?
Answer. The Army is open to alternative forms of housing that our
qualified developers propose during the Community Development and
Management Plan process. On the other hand, the Army will not consider
any form of housing which doesn't bring the privatized housing up to a
standard at least as good as the private sector housing in the area.
Our first privatization site, Fort Carson, received a plan that
included traditional housing.
Navy:
Question. Are any of the Services considering alternative forms of
housing to maximize housing privatization funding? If so, what is being
considered, and where?
Answer. The Department of the Navy uses a mix of reliance on the
private sector, military construction, privatization, and leasing to
meet its housing needs. Specific housing strategies are based on the
specific conditions at an installation.
Air Force:
Question. Are any of the Services considering alternate forms of
housing to maximize housing privatization funding? If so, what is being
considered, and where?
Answer. Yes, we are considering several forms of housing to include
single-family, duplexes, multi-plexes/townhouses, and apartments. For
example, the project at Dyess AFB has apartments and townhouses planned
for the junior enlisted members. At Lackland AFB, we have duplexes and
multi-plexes under construction. The privatization initiative at
Elmendorf AFB has townhouses and multi-plexes planned.
HOUSING POLICIES
Army:
Question. DoD Housing policy requires reliance on communities near
military installations as the primary source of housing for military
personnel. Military housing may be programmed to meet needs in areas
where the local community cannot support military housing needs. What
is the Service policy on housing eligible military families?
Answer. The Army's policies to first rely on the local community
surrounding Army installations as the primary source for housing. If
the local community is unable to provide the necessary housing, the
Army programs acquisition of housing to meet its need.
Question. DOD Housing policy requires reliance on communities near
military installations as the primary source of housing for military
personnel. Military housing may be programmed to meet the needs in
areas where the local community cannot support military housing needs.
How will the Military Housing Privatization Initiative (MHPI) affect
military families housing status? Will privatized housing be used in
place of local community or military housing?
Answer. The Military Housing Privatization Initiative (MHPI) will
accelerate the Army's program to provide adequate housing to its
soldiers and families by Fiscal Year 2010.
However, privatized housing will not replace the housing available
in the local community. The local community/private sector is relied
upon as the primary source of housing.
Question. What is the Service policy on assignment of military
families to military housing? To privatized housing?
Answer. The Army's policy on assignment to military housing is that
the soldier has a choice to accept or turn down on post family housing.
The policy will be the same for privatized housing. This structure is
both fair to soldiers and provides incentive to the developer to create
and maintain attractive housing communities for Army families.
Navy:
DoD housing policy requires reliance on communities near military
installations as the primary source of housing for military personnel.
Military housing may be programmed to meet needs in areas where the
local community cannot support military housing needs.
Question. What is the Service policy on housing eligible military
families?
Answer. In compliance with DoD policy, the Department of Navy
relies on the private sector to provide housing. We build military
housing only when the private sector is unable to satisfy our housing
requirement.
DoD housing policy requires reliance on communities near military
installations as the primary source of housing for military personnel.
Military housing may be programmed to meet needs in areas where the
local community cannot support military housing needs.
Question. What is the Service policy on assignment of military
families to military housing? To privatized housing?
Answer. The local housing office maintains a waiting list for
Department of the Navy-owned military housing and Service members are
assigned from that list to the appropriate units as they become
available.
For bases with privatized housing, local housing offices will
maintain a public/private ventures waiting list. Military families on
that waiting list will be referred to the public/private venture
property manager as units become available. Service members have
priority placement rights for any vacant units and are referred based
on their standing on the waiting list.
DoD housing policy requires reliance on communities near military
installations as the primary source of housing for military personnel.
Military housing may be programmed to meet needs in areas where the
local community cannot support military housing needs.
Question. How will the Military Housing Privatization Initiative
(MHPI) affect military families housing status? Will privatized housing
be used in place of local community or military housing?
Answer. The Department of the Navy will continue to rely first on
the local community to meet its housing requirements. Where the
community cannot meet those requirements, we will use either
traditional military construction projects or public/private venture
projects.
HOUSING POLICIES
Air Force:
Question. What is the Service policy on housing eligible military
families?
Answer. All military members are eligible and may apply for
assignment to government controlled quarters. The Air Force relies on
the civilian community first for housing. Where the local community can
not meet military needs, the Air Force will provide suitable housing at
installations if available.
Question. How will the Military Housing Privatization Initiative
(MHPI) affect military families housing status? Will privatized housing
be used in place of local community or military housing?
Answer. The MHPI will not affect the military families' housing
status. The Air Force depends first on the local community to house its
military members in accordance with OSD policy. When there is
insufficient, adequate housing available, the Air Force depends on both
military family housing and privatized housing for its members. If both
Air Force owned and privatized housing exist at one installation, the
military member will be given the choice as to which of these he or she
will choose to live in.
Question. What is the Service policy on assignment of military
families to military housing? To privatized housing?
Answer. All military members with dependents are eligible and may
apply for assignment to government controlled quarters. The Housing
Office maintains a waiting list by rank and family composition of
members that are eligible to live in government controlled family
housing. When a house becomes available, the housing staff determines
the category of the unit (officer, enlisted, number of dependents/
number of bedrooms? and offers it to the first person on the
corresponding list. Our goal is to place the family that has been
waiting the longest into a house as quickly as possible. Time spent on
the waiting list is the determining factor for establishing priority.
The policy for privatized housing is similar. When a privatized
unit becomes vacant, the Air Force Housing Office refers an eligible
service member (based on rank) to the privatization manager to allow
the member the opportunity to choose to live in privatized housing. The
Air Force does not assign members to privatized housing.
[Clerk's note.--End of questions submitted for the record
by Chairman Hobson.]
[Clerk's note.--Questions for the record submitted by
Congressman Farr.]
Army:
Defense Language Institute Housing at Presidio of Monterey
Question. In your testimony you have suggested that housing
projects at Fort Ord are not viable. I actually believe that there is
an agreement between the Army and the City of Marina to enter into a
lease/lease-back arrangement to accommodate a portion of the Army's
housing needs there. Has something happened to this lease/lease-back
arrangement that I am not aware of?
Answer. There have been discussions with the City of Marina
regarding housing for soldiers, however, there is no agreement between
Army and the City of Marina for the Army to lease/lease-back renovated
housing units from the City of Marina. Instead, the Army will
temporarily lease housing units to the Fort Ord Reuse Authority (FORA),
who then will sub-lease to the City of Marina, who will in turn, lease
to Mid-Peninsula Housing who will rehabilitate the units and rent them
directly to service members.
Question. Is not the problem at Fort Ord less one of available
housing stock and a willingness on the part of the community to assist
the Army, and more so a problem with Army clean-up of the base there?
Answer. While negotiations of the economic development conveyance
memorandum of agreement and environmental issues have prevented the
Army from transferring the property to the Local Redevelopment
Authority as projected at the start of the BRAC process, there remains
a shortage of available housing stock. However, a recent Department of
Justice decision to allow the Army to lease housing to FORA, based upon
the completion of our environmental requirements, has made interim
housing an option which will help to alleviate, but not solve, the
housing shortage in the area.
Question. What is the projection of housing needed to accommodate
serivcemen and the families at the Defense Language Institute (DLI) in
Monterey and the Presidio of Monterey? Other than the housing currently
on line to be leased from the City of Marina, where else does the Army
expect to obtain the necessary units?
Answer. The Defense Language Institute and Presidio of Monterey
currently have a requirement for approximately 500 additional family
housing units. It is DOD and the Army's policy that the primary source
of housing is the local community surrounding military installations.
The recent increase in Basic Allowance for Housing (BAH) coupled with
the Secretary of Defense's initiative to reduce out of pocket expenses
to zero percent should make community housing more affordable in the
Monterey, CA area.
There is a potential for a privatization project for the Defense
Language Institute and the Presidio of Monterey. This project could
accommodate the growth in student load and the transfer of the 787th
Explosive Ordnance Detachment to the Presidio. The contractors involved
in the privatization project at Fort Carson, Colorado have recently
visited the POM and had positive comments on the feasibility of such a
project there.
Question. What sort of assurance can you give that housing that is
renovated or constructed in partnership with the private sector will
abide by local preference regulations in choice of contractors?
Answer. The Fort Ord Reuse Authority (FORA) and City of Marina will
receive the property in its present condition. BRAC law prohibits the
Army from making any improvements in its present condition. BRAC law
prohibits the Amy from making any improvements to surplus property. The
City of Marina is the agency that will secure the services of
contractors for the housing renovation. The Army does not participate
in this process and therefore is not in position to provide any
assurance that local contractors will receive preference.
Navy:
Question. My question for you is similar to the one I asked
Secretary Apgar: What is the projection of housing needed to
accommodate servicemen and the families at the Naval Postgraduate
School in Monterey?
Answer. The Navy projects that approximately 1,100 families will
require housing at Monterey. There are 603 Navy-owned units at the
Naval Postgraduate School available for these families. In addition,
through an Interservice Support Agreement, Navy families have access to
476 homes at the Defense Language Institute. Through a combination of
private sector and military family housing, the Navy expects that its
projected family housing needs will be fully met.
[Clerk's note.--End of questions for the record submitted
by Mr. Farr.]
Thursday, March 16, 2000.
Housing Privatization Outside Witnesses Hearing
ERNST AND YOUNG KENNETH LEVENTHAL REAL ESTATE GROUP
WITNESS
WALLACE LITTLE, PARTNER; PHOENIX, ARIZONA
STATEMENT OF THE CHAIRMAN
Mr. Hobson. The Committee will come to order.
We had a very good meeting yesterday discussing where the
services are in the privatization effort. We are going to do
something a little different today, which I hope will be
illuminating. Unfortunately, our time constraints are such that
it is not going to be as long as I would like to be.
What we are trying to do today is kind of a learning
session for all of us. We have people who have done projects on
this list. We have people who have not done projects on this
list. We have people who are consultants. We have all kinds of
stuff on here. We would like you, in the time allotted, to very
succinctly, and this will I hope be the end of this because we
are engaged in a long-term situation with housing
privatization.
The culture is such, in my opinion within the military,
that this is a change in doing business. Whenever you have
change, there is a certain catharsis that goes on within the
system. Some things work and some things do not. We are trying,
in this Committee, to allow the services some degree of
flexibility as they move through this. Each of them has a
little different culture and a little different way of
approaching things.
As we go through it, it is a learning experience for all of
us. It is a learning experience for the Members of the
Committee. It is a learning experience for the services. It is
a learning experience for many of you, and some of you not
having dealt with the public sector before this thing. So, we
are going to give you each a very short period of time to
summarize your testimony.
What I would like to do is go through each of your
testimonies. Have you then return to your seats. Then, during
this period, the Members can revise any questions that they
want to ask and then we will get into that. If we have to do
this again, or we have to have some private meetings where we
can get ourselves a little better on the knowledge base, then
we will do that.
So, we are already 7 minutes behind, which is kind of not
unusual for this mode of operation. We will start off with
Ernst and Young Kenneth Leventhal Real Estate Group. If you
will just summarize the base of your testimony and give us
enough that we can get some questions for you. So, just kind of
do that.
If you guys keep growing together, we will not be able to
get your names on a page anymore. It used to be Ernst and
Ernst. Then Arthor Young. Then Kevin Leventhal. When I was in
business, they were all out there some other way. Now, there is
just you. Would you identify yourself?
STATEMENT OF MR. WALLACE A. LITTLE
Mr. Little. My name is Wallace Little. Good morning,
Chairman Hobson, Ranking Member Olver, Members of the
Committee, I appreciate this opportunity to testify before you
today. Again, my name is Wallace Little. I am a partner with
the Real Estate Advisory Services Group of Ernst and Young.
I have been in the real estate consulting profession for 20
years. Ernst and Young is one of the premiere real estate
advisory groups in the Nation. We have been involved with the
military housing privatization since its inception in 1996. I
have been a partner in charge of that work on this project
since that time.
Ernst and Young has helped to build the entire financial
infrastructure for privatization transactions. In addition, we
served as non-voting advisors to the Source Selection
Committees at Fort Carson, Colorado, and Lackland Air Force
Base, Texas. Today, we are providing a similar service to four
other privatization projects.
We are also working with the DoD to conduct a program-wide
evaluation of the initiative, while studying and acting on the
lessons learned during this implementation. This work has been
our privilege. We know that behind these facts and figures,
there are families and faces. Those are the men and women who
serve our Country in uniform, and their loved ones who depend
on them.
In these brief remarks, I hope to convey four points
regarding the Military Housing Privatization Initiative. First,
privatization works. Second, the Government's interests in the
program are strongly protected. Third, competition is
generating creative ideas for improving military housing in a
cost effective manner. Finally, there are a variety of areas in
which the program can be improved.
Mr. Chairman, privatization does work. It delivers more and
better housing, in less time, and at less cost. The substantial
up-front investment of time and resources necessary to build
the infrastructure for privatization is now yielding results.
As projects move forward, the Government is getting at least $3
of housing for every $1 appropriated to the Privatization
Initiative.
For example, at Lackland Air Force Base, the Government
received $55.8 million in construction for $6.3 million of
appropriation. At Fort Carson, for example, the Government
received more than $229 million in construction for its $10
million appropriation. Privatization also enables the
Government to receive a tangible asset in exchange for its
investment.
Every dollar the Government invests in privatization, goes
directly to improving the quality of housing in the Armed
Forces. When existing units and land are conveyed for
redevelopment, their value is captured by military families in
the form of new and renovated housing units, rather than simply
being passed onto developers as a part of cash transaction. The
Government's interest in these transactions is strongly
protected.
Construction is financed by private mortgages, and the
developer assumes all economic risks on them. The Government's
financial exposure is confined to the so-called political risks
of base closure, downsizing, or long-term force deployments. A
reserve has already been set aside to cover these limited
situations.
The developer bears the burden of proof in any assertion of
political risk. A variety of other contractual arrangements,
such as leases, lock boxes, and cash reserves, ensure the
Government's interests are provided for before the developer
sees any profit. Privatization has also unleashed the power of
competition and the efficiency of the capital markets to
improve both the cost and quality of military housing.
Privatization projects have attracted wide participation
from the private sector. That participation has, in turn,
spurred rigorous competition, forcing developers to craft
creative strategies for financing, design, and construction
rather than simply bidding on preordained Government
specifications.
The program has seen considerable progress, Mr. Chairman,
but none of us should rest on it. We believe the Privatization
Initiative can be improved. We are even prouder to help improve
the quality of life of our families and faces behind it. First,
we believe some standardization of approaches and documentation
between the service branches would enable the private sectors
to meet the military's needs more effectively.
Second, some bidders have been deterred by the length of
time required to close a deal after an RFP has been issued.
Generally, that process takes approximately one year. We
believe it can be completed in half that time. Finally, we
recommend lifting legal restrictions on the Government's
ability to reinvest proceeds of the initiative and further
privatization efforts.
Mr. Chairman and Members of the Committee, I close by
restating the particular satisfaction Ernst and Young takes in
our work on this initiative. We are proud of the facts and
figures that underlay this program. As I have said, we are even
prouder to improve the quality of life of the families and
faces behind it.
Thank you for your attention. I look forward to answering
your questions.
Prepared Statement of Mr. Wallace A. Little
Mr. Hobson. If you will return to your seat, then we will
get on to Jones Lang LaSalle, Inc.
You are John Anderson.
----------
Thursday, March 16, 2000.
JONES LANG LASALLE, INC.
WITNESSES
JOHN ANDERSON, MANAGING DIRECTOR; WASHINGTON, D.C.
CHARLES WILSON III, VICE PRESIDENT, GLOBAL CONSULTING
STATEMENT OF MR. JOHN ANDERSON, JR.
Mr. Anderson. Mr. Chairman and Members of this
Subcommittee, it is an honor to appear before you today to
discuss Jones Lang LaSalle's involvement with the Army's
Housing Privatization Program.
Mr. Hobson. You have 5 minutes.
Mr. Anderson. I have provided you with a more detailed
written statement for the record, but would like to take just a
minute to tell you about my company and our involvement with
the Army. Jones Lang LaSalle is a leading real estate services
and investment firm, across 96 T-markets, 34 countries, and 5
continents.
We are the largest global manager of properties with 700
million square feet under management, and are the second
largest investment advisor with $22 billion under management.
We provide a broad range of real estate products and services,
bringing extensive knowledge of local, national, and
international markets.
Jones Lange LaSalle was built on serving our client's best
interest, which is a result in the development of longstanding
relationships with many of this Country's in its judicial
issues. In February of last year, we entered into a contract
with the Army, to all but attract, and then negotiate
relationships with private developers and management companies.
We have done this before for the Government.
In the early 1990s, we represented the Resolution Trust
Corporation by establishing a $1.7 billion national land fun,
attracting both capital and expertise from the private sector,
and then forming partnerships with the Government. Here in
Washington, we managed the redevelopment of Union Station, on
behalf of a partnership lead by Jones Lang LaSalle, working
closely with Amtrak and the Department of Transportation.
We have, and continue to represent the GSA, the Department
of Veterans' Affairs, and the State Department, to name a few
more. This is an exciting and busy time for the Army as it
works to address the housing shortage and provide quality
communities for the soldiers and their families. We have been
serving the Army as it is linked to the private sector, while
conducting due diligence in preparing for negotiations at Forts
Hood, Lewis, and Meade.
We look forward to continuing to help the Army build its
residential communities. Mr. Chairman, this concludes my
statement. I look forward to your questions. Thank you.
PREPARED STATEMENT OF MR. JOHN ANDERSON, JR.
Mr. Hobson. Thank you. I look forward to your questions
and your answers. Now, Basil Baumann Prost and Associates, Inc.
----------
Thursday, March 16, 2000.
BASILE BAUMANN PROST AND ASSOCIATES, INC.
WITNESS
WIL BAUMANN, PRESIDENT; ANNAPOLIS, MARYLAND
STATEMENT OF MR. WIL N. BAUMANN
Mr. Baumann. Good morning, Mr. Hobson, Members of the
Committee, the Committee staff, ladies and gentlemen, my name
is Wil Baumann. I am principal and owner of Basile Baumann
Prost and Associates, Inc. in Annapolis, Maryland. BPP is a
real estate development consulting firm that is often thought
of in the industry as a niche firm. We work exclusively for
public sector clients, cities, counties, state and federal
agencies, local development authorities, transit authorities,
and the like.
We specialize in structuring and implementing complex
public-private development projects to accomplish public sector
objectives. My partners and I have been together doing this
type of work for 22 years. In that time, we have undertaken
assignments for 800 clients in 43 states, resulting in an over
$3.6 million in private investment, leveraged by about $900
million in public investment.
BBP has been assisting the Department of the Navy's efforts
to privatize family housing since the program's inception in
1995. We worked closely with the naval facilities engineering
command, in the first two Navy pilot projects in Corpus
Christi, Texas, and Everett Washington, under the original
legislation.
Since that time we have remained actively involved in the
Navy's efforts to develop additional projects under the 1996
legislation. I think the family housing privatization
legislation is brilliant. If properly applied, it can
effectively be used to meet or exceed all expectations. At the
same time, however, I think that the privatization initiative
presents considerable danger for the services and DoD. If not
prudently applied, implementation of projects using the
legislation can put our current inventories of family housing
assets at risk, and lead to huge windfall profits for private
developers.
The Department of the Navy's strategy is driven by a
continuing long-term need for family housing, and its fiduciary
obligations to protect our valuable Government assets. Navy PPV
projects typically include the privatization of existing
Government-owned housing, and may include the use of
Government-owned land for the construction of the new units.
These valuable assets were purchased over the years, at
great expense to the taxpayers, and maybe policy dictates that
we not sell them, and we dare not risk losing them in some
failed attempt to privatize.
Mr. Hobson. Go back. Read that back to us one more time.
Mr. Baumann. Navy PPV projects typically include the
privatization of existing Government-owned housing, and may
include the use of Government-owned land for the construction
of the new units. These valuable assets were purchased over the
years, at great expense to local taxpayers and maybe federal
taxpayers, and maybe policy dictates that we not sell them, and
we not risk losing them in some failed attempt to privatize.
Mr. Hobson. Continue.
Mr. Baumann. The Navy could convey its land and units
directly to an independent private developer over which we will
have little or no long-term control. Alternatively, the Navy
could contribute or invest its land and units in a public-
private business entity or partnership that includes the Navy.
Given our long-term need for family housing, and our
consequent commitment to high quality operations, and periodic
recapitalization of these units, that maybe families are going
to continue to live in them. The Navy intends to stay actively
involved. The investment authority, in general, and the limited
liability company, in particular, is an effective and efficient
means for accomplishing Navy goals and objectives for family
housing in most of our regional projects.
The LLC is a well-understood and clearly defined
partnership entity currently available in all 50 States and in
the District of Columbia, regulated by an established body of
law designed to protect the smaller passive investor; in this
case, the Navy. Early in the process, Congress and Navy
officials expressed particular interest in the question of the
Navy's liability in the business entity selected to carry out
privatization. As the result, the details of the Navy's LLC
strategy and plan were presented for examination and evaluation
to the major law firms of Holland and Knight, and Hillman,
Brown and Darrow, as well as the Big Five account firm, Price
Waterhouse Coopers.
All three confirmed that the LLC affords the liability
protection sought by the Navy, while still allowing the Navy
the active participation it must have. Good business sense
dictates the financial structure of Navy deals. Very early in
the PPV Program while the Navy was implementing the first two
pilot projects at Corpus Christi, Texas and Everett,
Washington, under the 1995 legislation, the authorities
provided under the 1996 legislation were reviewed.
It was concluded that the Federal Treasury had made direct
loans to developers under Section 2873, and that OMB would
likely score those loans at a lesser amount than the amount of
cash actually loaned to a developer, if it could be
demonstrated that fixed repayment of at least the principal
amount of the loan back to the Treasury was a certainty.
As the result of this scoring benefit, projects could be
planned to loan more to developers than was actually available
in MILCON funding for those same projects. Government stake, or
participation went up, often approaching 80 percent, and
private investment went down. Essentially, projects were being
conceived, not based on achieving specific project objectives,
the particular merits of the business deal, or normal
expectations about risk in return, but rather based on the
likely budget impacts of scoring.
While scoring is recognized as an important factor, the
Navy realized early on that it is not the only factor to be
considered in the development of PPV projects. Scoring does not
determine our basic objections, our drive, our decision-making
process. The Navy continues to plan its projects utilizing the
investment authority. As such, it is scored by OMB at 100
percent of the face amount invested.
We understand that an up-front scoring benefit might be
achieved using the direct loan authority, but conclude that the
downside cost to the Navy and risk to the Government would be
far greater than any short-term budgetary benefit realized. The
Navy believes its primary responsibility is to establish sound
and prudent business deals.
Accordingly, our focus is on establishing a business
approach that best accomplishes stated objectives and then
scoring it, rather than first determining the lowest score, and
then backing into the requisite business deal. In closing, I
would like to say how very honored and flattered I am to be
invited to speak with you today.
As proud as I am of the work done by my staff at BBP, with
respect to this initiative over the years, development of the
Navy's strategy and plan for privatization of the family
housing is truly a team effort with Navy personnel. BBP is just
a small cog in the wheel.
Thank you very much.
PREPARED STATEMENT OF MR. WIL N. BAUMANN
Mr. Hobson. Thank you.
One comment that I want to make, and it is not a question.
One of the things that you all should know, and I assume most
of you know that the law is going to expire. One of the things
that we need to do is talk to our counterparts and say, hey,
you know, these are some things that need to be changed or to
be done in the law.
We have already started to see some things. I think you
either need to tell us, and you need to tell the authorizors as
to what you see in the law that needs to be changed and redone
to make these transactions better, easier, faster, and cost
effective to the Government. It does not mean that you cannot
make a profit.
We just do not want excess profits. Any deal has got to
have profits in it. We understand that. We do not want them
back either, after you have them.
Boston Capital.
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Thursday, March 16, 2000.
BOSTON CAPITAL CORPORATION
WITNESS
JEFF GOLDSTEIN, VICE PRESIDENT OF PUBLIC AFFAIRS; BOSTON, MASSACHUSETTS
STATEMENT OF MR. JEFFREY H. GOLDSTEIN
Mr. Goldstein. Chairman Hobson, Congressman Olver, Members
of the Committee, good morning. My name is Jeff Goldstein. I am
Senior Vice President and Director of Real Estate for Boston
Capital. I appreciate the opportunity to share with you Boston
Capital's observations on the Military Housing Privatization
Program.
Boston Capital is a real estate company that has for 25
years specialized in providing quality affordable housing
throughout the country. Boston Capital and our affiliated
companies employ a staff of more than 200 technical
professionals and administrative personnel. Our company
underwrites debt and equity financing, and establishes
partnerships with local developers and builders to develop and
asset-manage quality housing, regulated and in compliance with
various agencies, such as Housing and Urban Development and the
Department of the Treasury.
Boston Capital has provided financial, professional, and
technical assistance to our developer partners in the design,
construction, and property management, compliance monitoring,
and asset management of approximately 100,000 apartment units
located in 48 States. Last year alone, we invested in
properties representing 5,000 apartment units in 40 different
States.
Since its inception, our company has raised almost $2
billion from among individual and institutional investors.
Currently, we have a portfolio in excess of 2,100 residential
properties. We currently manage a nationwide portfolio in
excess of $5 billion. Early in 1999, Boston Capital was
approached by individuals of the Air Force who, based upon our
reputation and experience in affordable housing, felt we would
be willing to assist in the privatization effort.
Following conversations with the Air Force, Boston Capital
proposed to develop an optimal approach to more expediently
construct, rehabilitate, and operate alternative housing on or
nearby various Air Force bases throughout the country. We
envisioned our role as that of a development and asset manager,
in close partnership with the Air Force, coordinating all of
the elements required to provide Air Force families with cost
effective, market fit housing in attractive neighborhoods.
In concert with the command and leadership, we would be
responsible for assembling a team of regional and nationally
recognized organizations to demonstrate strong design,
development, construction, and property management
capabilities, and the ability to function together as a
cohesive team.
Boston Capital would be responsible for arranging
competitive and dependable financing, and overseeing
development. Following completion of construction, we would
manage the assets on behalf of the Air Force to ensure the
quality of the third party property management entities. We
have compared the Air Force housing privatization process to
that which is typically used in the private sector.
I would like to briefly share with you some of our
thoughts. The existing process by which the military selects a
development team to undertake housing privatization is both
long and complicated. A request for proposal must be developed
and advertised. Respondent's professional history and
qualifications are reviewed and scored.
The respondent is ultimately rewarded a contract. At that
point, negotiation begins. Because the housing construction
management is not the military's core competency, this entire
process often takes in excess of 3 years before construction
starts. After all of that time, frankly, we are not convinced
the military always receives the greatest efficiency and the
greatest value for its investment.
The process I just described is an example of why the
private sector is better equipped to manage the entire
development process. The private sector is much more
streamlined in its approach to the development. What a private
sector firm would do is identify those groups in the region
that are qualified and capable of undertaking the work required
to complete the transaction. A request for qualifications is
sent out to the three or four most appropriate candidates.
Their qualifications are confirmed. They are asked to bid
appropriately. The process would occur amongst the major
contracts.
This methodically and relatively expedient process leads to
the selection of the final development team. In our industry,
we routinely select, underwrite, finance, approve, and close
the transaction within 12 months and begin construction. This
is just another example of how the private sector can better
serve that role for the military.
We also understand that a premium is placed on getting the
best value for the taxpayers and, to a large extent, that is
the reason for the RFP process. This in fact is very similar to
our role as fiduciary to our investors. I would like to
emphasize the priority that we all put on due diligence, cost
management, and value.
As we studied the housing problem, we employed guidance
derived from the Air Force Market Fit Study recently conducted
at the Wright-Patterson Mountain Home and Lackland Air Force
Base. We surveyed a sample of housing unit sizes and residences
surrounding localities and found, for example, that a
comparable housing unit in the surrounding market was, on
average, about 36 percent smaller than the units that were
required for military housing standards.
We concluded that by applying market fit criteria to those
military housing units, the result would be quality, affordable
housing while, at the same time, substantial cost savings to
the Government. Mr. Chairman and Members of the Committee, the
private sector can design and build attractive housing quicker
than is currently happening.
We can be cost effective. We can finance the majority of
this with private funds. We can and should be held to the same
level of accountability that we must work with now as it
relates to our role as fiduciary to our investors, as well as
to the markets that we are currently building. What we need is
flexibility and creativity on behalf of our clients, the
military. We need the ability to conduct a more market approach
to competition. We need mutual trust gained through successful
projects.
In closing, Mr. Chairman, I would like to thank you and the
Members of this Committee for providing Boston Capital with
this opportunity to speak. We are confident that utilizing this
experience with the private sector in the early identification,
specification, development, and asset management of market
comparable housing, we can provide the Armed Services with the
assistance it seeks to achieve its privatized housing
objectives.
Thank you.
PREPARED STATEMENT OF MR. JEFFREY H. GOLDSTEIN
Mr. Hobson. Landmark Organization from Austin, Texas.
----------
Thursday, March 16, 2000.
LANDMARK ORGANIZATION
WITNESS
SAM KUMAR, SENIOR VICE PRESIDENT; AUSTIN, TEXAS
STATEMENT OF MR. SAM KUMAR
Mr. Kumar. The Honorable Chairman and Honorable Members,
good morning. My name is Sam Kumar and I am Senior Vice
President of Landmark Organization. I want to say thank you on
behalf of our organization and our President, Mark Schultz, for
giving us the opportunity to speak before you today.
Landmark Organization is an Austin, Texas based company
specializing in the design and finance of public and private
ventures. We are very proud to say that we were the developers
on the first military housing project, the 400-unit limited
partnership project in the Corpus Christi area built to house
Navy sailors and their families.
Also, we are currently the developers on the 420-unit
privatization project at Lackland Air Force Base in San
Antonio.
Mr. Hobson. You still have the barracks that I went to
basic training in. You built that; did you not? Go ahead.
Mr. Kumar. Twenty-five percent of the project is complete
and military families have moved into their homes. As a matter
of fact, Secretary Cohen visited the project last month and
helped a family move into one of the homes. We are also in the
process of building military guest houses for Fort Bragg, Fort
Erwin, and Fort Hunter; projects awarded using the Military
Housing Privatization Initiative authority.
We commend the Members of Congress for creating the MHPI
authority. Your vision to provide great quality homes for our
military members with minimum Government spending has come to
fruition. At Lackland Air Force Base, every dollar of
Government subsidy has bought $8 worth of quality homes for the
Air Force families.
In Corpus Christi, $9.5 million of Government contribution
has provided 400 homes worth $32 million, not counting the
return to the Government at the end of the partnership term.
This is a win-win-win situation for the Government, the private
sector, and military families. As businessmen, we believe there
is always room for further improvement.
We would like to show you the amount of work that goes on
in the procurement process. The procurement process is lengthy
and extensive to everyone involved. I had actually brought some
proposal books from Austin, Texas just to show the length of
proposals that we have to submit. This is an ongoing
procurement project that is going on.
I have stacked those books up there. That is just one
project. It is just one copy of the amount of paperwork that we
are submitting.
Mr. Hobson. Before you leave, we will get a picture of
that.
Mr. Kumar. One of the stations that we have been
responding to was originally issued in December of 1998 and is
still ongoing. Favorable interest rates included in the
original proposal have since risen, and construction prices
also have gone up while the procurement process continues. We
believe the procurement process should be simple and efficient,
consistent with the spirit and goals of the MHPI.
Although the MHPI authority was created to minimize
Government participation and maximize private sector
participation, we still see a lot of Government involvement in
the process. The MHPI authority can work better, faster and at
a great deal more efficient if the private sector is allowed to
work the way they have proven to be effective.
The private sector must be allowed to perform in the manner
that has distinguished us and made our participation in this
process desirable in the first place. Although the MHPI
authority was created as common law for all branches of the
military, we have found that the Air Force privatization
process is different from that of the Navy's privatization
process or the Army privatization process.
There may be more economies and efficiencies achieved for
the Government, if the process becomes more standardized and if
more efficient practices are adopted by all branches. For
example, although we have successfully developed some
privatization projects for the Navy and Air Force, there are a
few projects of the same size with the Army that we do not
qualify because of subjective requirements. Again, with a more
standardized solicitation process we, in the private sector,
will be able to demonstrate that we are competitive and ready
to work for all military forces.
We are an entrepreneurial organization and we love
competition. It is our opinion that the solicitation process
for these projects should be based upon qualifications as well
as price. Once these factors are established and a credible
contractor is selected, the project can move forward and the
mission will be achieved, which is providing quality housing
for the unique needs of military families.
Among other issues that affect us, the recent announcement
regarding some of the military bar rates going down at Lackland
Air Force base and some other bases sent shock waves through
the investing community. These rates had not gone down in 15
years at Lackland and other bases. While investors and
developers were willing to take the risk that the bar may not
rise at the same rate as inflation, they were shocked when they
found that the bar could actually go down when inflation
occurred.
The investing community and the developers will want
protection against bar rates going down on future MHPI
projects. Although the processes may need some improvement, the
results have always been excellent, the successful projects
that fulfilled your vision.
Honorable Chairman and Members, we are very proud of the
MHPI legislation, and we commend every one of you for preparing
this unique and unsurpassable legislation to house military
families. We would like for you to continue supporting it. Once
again, thank you for giving us the opportunity to be here.
PREPARED STATEMENT OF MR. SAM KUMAR
Mr. Hobson. We will now hear from GMH Associates, in Wayne,
Pennsylvania.
----------
Thursday, March 16, 2000.
GMH ASSOCIATES, INC.
WITNESS
GARY M. HOLLOWAY, PRESIDENT AND CEO; WAYNE, PENNSYLVANIA
STATEMENT OF MR. GARY M. HOLLOWAY
Mr. Holloway. Mr. Chairman, distinguished Members of the
Committee, I am honored that you invited me to be here today
and I thank you. My name is Gary Holloway. I am the owner and
founder of GMH Associates. I started the business 15 years ago.
We are a national real estate development and operations
company.
Our two largest financing sources are Goldman Sachs and
Company, and GE Capital. Today, we are the largest owner of
student housing in the Country. It is through that initiative
that we had the interest and saw the interest to get involved
in the military housing. I started an LLC company with GE
Capital as our financial partner to do military housing.
We have been involved since the late part of 1999. I
personally have traveled and visited every branch of the
military and have seen different ports and bases, so far, to
get a feel for what we are dealing with. I truly believe that
the only way to understand real estate is to get out, kick the
tires, and talk to the people.
We have found by doing that process, that our Country is in
sad, sad shape regarding our housing. I know the Chairman
recognizes this fact from previous conversations that we have
had. I do believe that this Committee and your opening
statements regarding continuing this process is very important.
It is not to be done in a 5-year program. It is a much longer
program than that. All of the great developers in the Country
that are here, any one of us can step us and build this
product.
There are a lot of truly great people that can come and
bring the construction. It is all of the other things that are
needed and necessary to make sure that this product continues.
If you look at our housing today, most of it is 40- to 50-
years-old throughout the country. It is in very deplorable
condition.
The reason for that has become more the maintenance than
anything else. The key to any developer in building any of this
product is to make sure that we maintain it on a consistent
basis so that our economic value in the future is not flushed
down the toilet. It is important that we recognize the fact
that we are here protecting our Country's dollars.
The most important thing to this housing, in my opinion, is
to make sure that we are affording our soldiers to a
comfortable lifestyle that they do deserve. We are in
competition to make sure that these soldiers, every day, are
trying to keep themselves in the military to protect our
country.
Today, I think that we are truly, as a country, at a great
disadvantage in trying to retain and maintain these people in
the military because of the substandard living conditions we
provide. I think it is important that we follow several
processes. Number one, we truly believe that the time frame
that it takes to get through this process is way too long.
Number two, the standardization process we believe through
all branches of the military can be standardized down to one
format so that everybody follows the same. I am not
recommending that each branch of the military cannot negotiate
their own contracts. I truly believe that, that is an important
part of this at the end of the day.
I am recommending that the process come together. I know in
talking with most of these individuals that we can form a
process that makes sense for us and gets us to it quickly in a
quicker time frame. We truly believe in our company that this
process can be cut down to 120 days. It is done in the private
sector. There is no reason to believe that it cannot be done in
this sector.
We believe that the help that we can be given by the
military and the United States Government will afford us that
capability. The one other thing that we believe in looking at
is the economic feasibility that must take place. It is hard.
You cannot separate the married family housing from the
bachelor housing.
When you try and work your economics out, you cannot be
sitting there with your BAH rates from an E-1 to an E-4,
anywhere from $600 to $650, and provide the same housing for a
married couple that has to live in a three bedroom where your
allowances might be $740. That economic scale must come
together. You must be able to blend those two.
So, some of these points that we point out, as a developer
and owner of real estate, it is important for you to maintain
that process. It is important for the economic feasibility. We
know that everything else can be worked out in the private
sector. The private sector is there to make sure that housing
is the problem for us to take care of and that the military
should focus on protecting our Country.
Thank you, sir.
PREPARED STATEMENT OF MR. GARY M. HOLLOWAY
Mr. Hobson. Next, we have the National Association of
Homebuilders.
----------
Thursday, March 16, 2000.
NATIONAL ASSOCIATION OF HOMEBUILDERS
WITNESS
ROBERT LAWSON, PRESIDENT; LAWSON COMPANIES, VIRGINIA BEACH, VIRGINIA
STATEMENT OF MR. ROBERT A. LAWSON, JR.
Mr. Lawson. Thank you, Mr. Chairman and Members.
I am pleased to provide you today with the views of the
200,000 members of the National Association of Homebuilders on
the privatization initiative by the Department of Defense. My
name is Robert Lawson. I have been in the business of providing
quality residential properties in Tidewater, Virginia to both
military and civilian families since 1965.
Mr. Hobson. That is about when I was there. Go ahead.
Mr. Lawson. I am President of the Lawson Companies, a
parent corporation for a group of companies that owns, manages,
constructs, and develops real estate, homes, and apartments. I
also served on the Urban Land Institute Panel that advised the
Secretary of Defense in the development of the legislation that
was ultimately passed.
So far, the experiences we see with the privatization
initiative are really varied throughout the services. Different
services have made different progress in the matter of
implementation. The Navy and the Air Force have implemented
some smaller projects, where the Army seems to have focused on
much larger projects.
We have communicated the Association's concerns to the Army
that their projects are so large that they are beyond the
capacity of maybe all but 1 or 2 percent of the Members of the
National Association of Homebuilders. If the scope of those
projects could be reduced to make them smaller, they would
receive more competition, and it would be a more sensible
approach where smaller more localized firms could have a
consistent replacement or revitalization of homes year-after-
year.
For example, in the Fort Hood project where maybe 6,000
units are involved to revitalize, I would say within a hundred
mile radius, there may be 50 carpenters. Something does not
match and they are going to call us.
Mr. Hobson. I want you to repeat that. Chet, I want you to
hear what he said. Go back to that because I had heard this
before.
Mr. Lawson. Okay. One, the large projects like the Army
has proposed looking, for example at Fort Hood, there are some
I think 6,000 units to ultimately be built or revitalized.
Probably in the surrounding 100 miles, if you look at the
demographics, there may be 150 to 100 carpenters. There are
some specialty projects that are going to cause big problems.
They are problems for everybody to accomplish.
Mr. Farr. Can I ask a question?
Mr. Hobson. Yes, real quick.
Mr. Farr. The problem we have is those 100 carpenters want
to be employed in that project, but if you bring in a developer
from out of town, they usually bring their own.
Mr. Lawson. That is his point.
Mr. Hobson. That is my point, plus the fact that generally
when you move around or do military housing, you do not move
other than supervisory employees. You do not take the crafts
with you.
Mr. Lawson. You do not take the crafts with you.
Mr. Farr. I guess that is not true. In California, in the
Monterey Bay area where the military is contracting out, the
people come in from other cities and brought all of their crew.
Mr. Hobson. That is his point. His point is that if you
get one of the national developers to come in, you do not
necessarily get the local guys. Now, the National office will
tell you that they hired the local guys.
Mr. Lawson. I guess the other basic problem to say is it
is going to be very tough on the military, just because labor
resources are not available in the locality. In Tidewater,
Virginia that would not be the case or in the Southeast where
primarily I have operated.
The most critical issue for the NHB member participation is
that if you have master developments to have it broken down
into components, in smaller pieces, that could be handled by a
broader portion, a larger number of developers, be less risky,
and have less impact on the local housing market.
We have seen it in the Tidewater, Virginia area where if
the Navy contracts for a huge project, then the labor is almost
in too much demand. Prices rise, both for the normal
homebuilder and for the project the Navy is doing. We need to
improve the procurement process so that we can create
communities that families are proud to live in. That is what
our membership does; especially to serve the needs of the
military that need more affordable housing.
We know that the ``one size fits all'' approach will not
work. Mr. Chairman, NHB members are ready to fully participate
in offering decent homes and suitable living environments for
American families. We would like to work with you to refine and
perfect the current program to allow greater participation.
If possible, we would like to work with you and your staff
to create a pilot program to test our assumptions and
recommendations for reducing product size. DoD and its private
sector partners want to provide additional military family
housing. It can be done if we work together.
Thank you very much for your time.
PREPARED STATEMENT OF MR. ROBERT A. LAWSON, JR.
Mr. Hobson. Thank you.
We did not do bad. We are only 20 minutes behind. For the
Government, that ain't all bad. We have a little more time than
we thought. I am going to pose a question and I do not want you
to answer it right now. It seems to be a common thread that is
going through here. It goes back to those books over there a
little bit.
Each of you stated that the private sector could speed the
process. However, I have not seen any results of that yet of
all of the guys that are working on this stuff. I assisted all
of these consultants. I will go back to my favorite project. We
could have been in the ground and had housing by now on one
that I wanted the Government to speed up on, but they did not
naturally take my advice. So, it is not done.
I would ask all of you to say what gives, what is the
problem, and why do we not fix it? I will tell you. Randall Yim
who was in there, I think, is trying to do a good job, if you
heard him yesterday. He is listening. I think some of the
services are listening, obviously from some of the testimony
yesterday. Some of them are trying to get with it.
I think maybe we need a little better input from all of
you. So, I am just going to challenge you to do that. With
that, John, do you have any questions that you would like to
ask?
Mr. Olver. I have some thoughts here. This is an enormous
amount of material to try to sort out and make sense of at one
time. One thing that comes through here from everyone is, is
that we ought to be able to cut the time and the paperwork by
half or more than half, and that would be great. We ought to
try to figure out how to do that.
Of course, in the beginning of a program like this, I think
that one is especially careful in the relationships that you
evolved because you are afraid, and partly for the reason that
Baumann has expressed here. I will get back to it a little bit
later.
The Baumann statement that it presents considerable danger
for the services and DoD. It is not prudently applied
implementation of projects using the legislation with regard to
current inventories of family housing assets of risk that lead
to windfall profits to private developers. That was a statement
that clearly was one of the things that were deeply concerned
about here on our part.
Really, you have got to get this stuff done. You cannot end
up, our privatization authorization, which is 5 years old. We
have only one unit, one project which is actually fully in
occupation now, and one other project, of all of the lists of
projects that are started, that we have actually got some
occupation on, a partial phased occupation, of one other one at
this point.
The other thing that comes through from several of the
testimonies is that there needs to be a standardization of the
procedures and mechanisms that are involved here. Now, that is
one that we have focused on. It became clear that the
procedures were quite different really and not particularly
standardized.
Each service was going off and doing what it wanted to do.
Now, Secretary Yim, as the Chairman has mentioned about
yesterday, has been trying very hard, partly because of the
push from the Chairman, substantially because of a push from
the Chairman and also myself, that we needed to have better
rationalization of those procedures.
So, I think that they are moving toward a common set of
planning a framework; a common planning framework,
documentation and so forth that is needed, and how the choices
will be made for what makes sense. I had hoped that, that will
allow us, if we go through and have another 5-year
authorization and indeed there is a comment that maybe it ought
to be a much longer process.
If you take the history of what we have been able to
accomplish and get into in the first 5 years, we are not doing
that well. We have really got to do a good deal better. I
wanted to ask more specifically from Baumann, are the comments
that you made about the risks and so forth, you started out, I
would prefer to have someone here from the Navy to confirm
this, but are you the primary consultant? Do you have a role in
all of their planning, in the case of Baumann, for all of what
they are into right now?
Mr. Baumann. I am Baumann, and I have been involved with
the Navy in all of their family housing projects since 1995. In
the first few pilot projects in the Corpus Christi effort, I
assisted.
Mr. Olver. Well see, if we had known that Boston Capital
had been hired on by the Air Force to be their primary overall
manager of the process, they were not--projects, but they are
the overall manager of the process. If we had known that Jones
Lang was to be the primary consultant for the Army, may I
assume that you play that role?
Mr. Andersen. Yes, sir.
Mr. Olver. Even though a couple of the others had said,
for instance, Mr. Kumar has indicated that he has built both
for the Navy and for the Air Force at Corpus Christi and at
Lackland. We have another instance of someone else who said
that they were involved in several places, I think.
Now, are the comments that you make about those risks in
relation to what the situation was then? Has it evolved towards
a better situation? Do you see, in fact, all three of you as
the primary consultants, do you see the evolution of a more
standardized process here that is going to give us some
security from the very risks that you identified? You
particularly identified those as risks to the Government, which
we are legitimately concerned about.
Mr. Baumann. Yes, sir. I do think that those risks still
apply to our program, but the manner in which the projects are
being packaged and put together present these risks. The
process itself can be streamlined. In the first Corpus Christi
deal, Mr. Kumar worked very closely with us and other Navy
officials. We were 10 months start to finish. The RFP out on
the street to a signed deal in 10 months.
Mr. Olver. I know that the Corpus Christi deal ended up
with a 4:1 benefit for the Government. Lackland was built for
it.
Mr. Baumann. Yes, sir, that is quite true.
Mr. Olver. I realize it was not under the current
authorization. It has just been pointed out again that it is an
earlier thing.
Mr. Hobson. But it did not wind up with the mix initially
that it was supposed to get.
Mr. Baumann. Yes, sir. When the first Corpus Christi deal
was packaged, our instructions was to develop 400 units at
MAHC. The maximum affording housing cost was the rent that we
could not exceed, and we did that. Since that time, all of the
service branches and DoD have gone to a zero out-of-pocket.
Meaning that the rents in our first Corpus deal were too
high. So, the military families, the E-4s and E-5s, chose not
to live there because they were a couple of hundred dollars
out-of-pocket. The Navy has since come back and used the
differential lease payment authority and brought those rents
down to zero out-of-pocket.
Mr. Hobson. With this data in your mind, why would the
Navy then go to 11,000 units in one year in San Diego?
Mr. Baumann. We did not, sir.
Mr. Hobson. I know you did not because I went out and
visited it and you broke them in part. What I am saying is why,
if you had only done 400 units, would anybody in their right
mind conceive of doing 11,000 units in one shot? That is mind-
boggling; is it not? You do not have to get into that. I mean,
that is the kind of stuff that drives us nuts when we deal with
this.
That is why when we get into this, we wonder what the heck
is going on out there; not just with the Navy. I can show you
things in other services that are just as mind-boggling as we
go through this. A part of it is the reason that John and I
insisted on having some people like you and some other people
in consulting with these services.
In my opinion, and I do not know if you had the authority,
but I was wondering if Randall is back in it too from OSD.
Nobody was minding the store from OSD as everybody went off and
started running around doing their thing.
Go ahead, John.
Mr. Olver. The 4:1 with what the Chairman has already
indicated as sidelines to that, is up to 8:1 in the case of
Lackland, the two that Mr. Kumar spoke to. Then in the case of
Carson, the number is 23:1. Now, I do not know what the
differences are there, in terms of the numbers of new units to
be provided in the process, and how much was relatively high
quality that did not require an enormous amount of money in
reinvestment in order to put it up to standard.
That is an enormous variability from 4:1, to 8:1, to 23:1.
That is the order of the ones that have been evolved over time;
whether we are going to have a lot of them to get up in the
23:1.
Mr. Baumann. Well, I want where somebody pays us to do the
deal.
Mr. Olver. There may well be some where that ought to be
done. I am not sure, because we are guaranteeing a certain
amount of money in the bar.
Mr. Baumann. That was the point that I was trying to
raise, sir. That I think that there are still considerable
risks in the program, and that some of these projects that get
up to 20:1, we have to scratch below the surface a little bit
and see whether or not our units are really at risk.
Mr. Hobson. How many times does the owner of a property
come to you, or a developer and say, hey guys, have I got a
deal for you. I am going to give you the ground. You do not pay
me anything for the ground, and I am going to give you, going
in, cash flow because I am going to give you my existing units
where you get cash flow.
Believe me folks, you are not going to con me on that. That
does not happen very often in the real world. You have got an
owner here who says to you, and not only that, but he says to
you, hey, do not worry about the equity. We are going to make
you put up a little, but you know. Not only that, we are going
to give you a second mortgage, which we are going to guarantee,
not you.
We are going to give you occupancy guarantees that you
cannot get anywhere else. I mean, these can be fantastic deals.
What I am worried about is our guys are so desperate to get
this housing that we end up in deals that down the road, and I
think you all have expressed this, that we all regret that we
have done.
My problem is that I do not think the military understands
the value of what they are giving or what they are making
available in these transactions to all of you.
Mr. Kumar. I am very concerned that we are giving away our
assets. Unless we do it absolutely right, I believe we are in
great danger of giving them away or risk losing them.
Mr. Olver. At the other end of that, Mr. Chairman, Mr.
Kumar, at the end of his testimony, made some comments here
about the announcement of changes in the military bar rates
going down at Lackland. Well, that was done after a market
study. I mean, you are all people involved in the market.
Saying that we ought to do housing closer to the market, well,
if the market study says that the bar rates were too high for
the market, and someone else said that there ought to be
flexibility on size because the market says that the size of
units actually could be considerably smaller, but we have had
others testify yesterday that they need more flexibility to
make larger units.
So, that was going in the opposition direction, at least,
as I remembered it. It is pretty hard to keep this stuff all
peculating in some proper context. The comment that I was
quoting from you, Mr. Kumar, and you made it in your testimony,
at the end of it, was that the investing community of
developers would want protection against bar rates going down
on future MHPI projects.
I am not sure why, in all of this process, one has to
protect against the market. If the market rates are going down,
you should not need a protection against that, it would seem to
me.
Mr. Hobson. Identify yourself.
Mr. Kumar. My name is Sam Kumar of Landmark Organization.
The market in this case in Lackland and other bases that we are
talking about actually went up.
Mr. Olver. So, that was an inaccurate market study.
Perhaps you would say that there was an inaccurate market
study?
Mr. Kumar. I think in this case, the members of the
Department came out and said this was a one-time adjustment
because all of this time they had been adjusting the bar rates
on the members out-of-pocket costs. But this time they went and
did a survey and based the bar rates based on what a comparable
member in the civilian society will be paying for a similar
home.
Mr. Olver. Basically, I would think that you, as a group,
would say if the market survey is correct, then following that
ought to be adequate protection.
Mr. Kumar. We would like for her to be indexed with the
CPI. We are okay with that, sir.
Mr. Olver. But there are adjustments that may have been
made incorrectly or correctly. I do not want to dwell on that.
It just was a feature that puzzled me. One other thing I wanted
to comment, and Mr. Chairman you were with the representative
from Baumann that commented about the San Diego case in the
Navy.
I had brought it up yesterday. I was wondering about the
size of that one. I was told that, that had originally been
three times as large. In fact there was an effort to basically
privatize the whole thing at once; 11,000 brought down to one-
third. That satisfied me. Three thousand no longer strikes me
as a great problem.
The gentlemen over here from the Homebuilders, Mr. Lawson,
really addressing I think the Fort Hood situation, is concerned
about the fact that we are doing 6,000. In the case of Fort
Hood, the number of people who are stationed at Fort Hood is
about six times that or some number like that. My colleague
from Texas would be able to say it.
If you get down to doing 300, or 600, or 500, you are never
going to meet, you are never going to get where you have got to
be. I think that there is a scale in what we are doing here,
depending upon the needs of the particular location, which
ought to be doing 20 percent, 30, 25, 33, something like San
Diego, which is now at one-third, even though that may get you
to 1,000.
In the case of out there, I think we are at or less than 20
percent. There is no way, if you wanted to put six smaller
deals together, that puts you through all of that process for
six smaller deals to get 500 out of each, or 1,000 out of each,
but you still only have 50 carpenters anywhere close by. You
are still going to have to import a lot of personnel to do it,
if you want to get at what is the need, the demonstrated need,
at a major base where there is a large number of people.
So I am skeptical about the process. I mean, there is good
reason. I would hope that the standardization process that
Secretary Yim is trying to do among the organizations would
bring these forward in some more reasonable way. I do not think
that just automatically we should cut them down to 500, 1,000,
or 300, or 400 Lackland-size units.
Mr. Hobson. Chet.
Mr. Edwards. Thank you, Mr. Chairman.
Just a couple of comments and then I would like to ask Mr.
Andersen some questions. First, for the record, as maybe all of
you know now, the bar reductions are history. That is done to a
large extent because the Members of this Committee, on a
bipartisan basis, worked on that.
Secondly, the Department of Defense has committed $3
billion of additional dollars in the next 5 years to increase
bar reimbursement rates. I think you made a very good point. If
all we are going to get out of this is the military gives away
free lease on land, virtually free lease on land, for 30 or 50
years, and we turn over the title of property built at
taxpayers' expense to private developers, and all we get is fix
some light bulbs and clean up the kitchen floor, then obviously
this is a horrible deal. We would not want to be a part of it.
I would hope that, and assume, a part of any major deal,
the developer goes in and builds parks for military school
children, of which there are a lot, and bicycle paths, and
build communities. I would hope that the structure on these
deals is such that the developer does not get immediate
positive cash flow. Frankly, from my laymen's perspective,
amateur perspective, I want the cash flow to be in such a way
that you have to be in this deal for quite awhile to see real
positive cash flow.
I do not want an incentive to have cash up-front and then
get out of the deal and leave the taxpayers and military
families holding the bag. Can I ask Mr. Andersen to come sit at
the table?
Mr. Andersen, for the record, you are with LaSalle Partners
I understand?
Mr. Andersen. Yes, LaSalle Partners and Jones Lang merged
last year. So now it is Jones Lang LaSalle.
Mr. Edwards. Like the Chairman, I am trying to keep up.
Mr. Andersen. I have a hard time myself with the new name
being 15 years as LaSalle.
Mr. Edwards. For the record, you worked as a consultant to
the Army, particularly on the Fort Hood RFP. Is that correct?
Mr. Andersen. Yes, sir.
Mr. Edwards. Then let me focus on Fort Hood, since that is
one of the major potential pilot projects here.
Mr. Hobson. Chet, this is the first RFQ that has been
offered. This is a major change in a policy. We are trying
something different here.
Mr. Edwards. This is a Request For Qualification v. and
RFP.
Mr. Hobson. Carson was not that.
Mr. Edwards. One of the things this Committee has said
over and over is that we have got to get this right. I agree
very strongly with that, for all of the reasons, including the
fact I represent the 44,000 soldiers at Fort Hood. Mr. Baumann
touched on something that I think is important to a lot of us
on this Committee.
I think it is important that we have assurance that we not
only have a quality project in the first 12 months, but 47
years out, if it is a 50-year deal. It seems like Mr. Baumann
suggested that if we just turn the property over to a private
developer, the military loses control. What if you have a fight
between the military commander at Fort Hood and 40 years from
now the property owner says, no, I am not going to fix this or
that. That is not a part of our contract?
Have you looked at the limited liability company structure
that Mr. Baumann referenced. Is that a part of the potential
structure in the deal with Fort Hood, as you perceive it, or is
that one of the serious options that you have looked? Whether
the answer is yes or no, tell me how we guarantee the military
families and the military commander, quality maintenance 40
years from now.
Mr. Andersen. I assume we are talking about a typical
limited liability corporation as a form of combining a couple
of entities earlier, but there are many ways to structure
partnerships. In any partnership agreement or document that
ties the Army to the private sector, one will need to stipulate
certain responsibilities that developer will have for the
ongoing development and maintenance of the property over a long
period of time.
I think it was your point earlier that it is imperative
that we tie that developer into the success in the project and
their deliverable responsibilities before they share in the
lucrative profits that they anticipate by participating and
contributing to resources and capital. One of the benefits of
the Request For Qualifications that we expect to achieve is
that we go into a situation with a highly qualified entity,
very capable, that can lead this effort from the private sector
standpoint.
I think some very good points have been made from my
colleagues here today. They will likely, I would expect, leave
that. It gives space for many people in the local community. I
would expect with the Homebuilders as well. It is typically an
approach that a master developer takes when they come in to
lead and engage a major program of this magnitude.
So, we would structure that partnership to make sure that
they did not take their cash flow in the early days and leave
the Army. This is very different from an RFP. An RFP, in my
experience, is very well-suited to a straightforward, more
narrow set of circumstances. For those of you who are familiar
with when you have a very clear user need, and that is
presented to a number of developers to meet that user's need.
They can respond specifically to those specifications.
Typically when you are tying together land owners and
developers, it is a complex situation. It demands flexibility.
The landowners typically have various interests. Clearly, here
the Government has certain interests that traditional private
sector landowners might not.
Even in the private sector, the landowner may want to
participate in the development, participate in certain risks
and rewards. So, one typically engages in a communication to
understand each other's objectives, and crafts the partnership
to address those objectives.
Mr. Edwards. So, when you focus on the Fort Hood project
in particular, you have focused on the idea of structuring this
in a way where the military commander and the taxpayers still
have a major voice in saying that we have quality maintenance
x-number of years from now.
Mr. Andersen. In terms of the quality of housing that is
developed provided, there will be certain standards that will
be set that the development entity will need to deliver upon.
There will be certain remedies that will be structured in there
to accommodate any mishaps along the way. There will also need
to be some provision made for changes in the private sector
that may not enable them to remain qualified to continue. So,
we will have to talk about exit strategies.
Mr. Edwards. I think that is important. The military
commander will not sign off on this deal, and also may this
Committee have the right to veto any deal made. So, to see that
the military has a voice, ensuring long-term continuation of
maintenance, quality maintenance.
Just one quick question and answer. I want to respect other
Members' questions on this. In terms of a response, what would
be your response about magnitude of size on the Fort Hood
project, and not enough carpenters in the area to make that
deal work? Even the possible suggestion of dividing it up among
five or six different smaller companies.
Mr. Andersen. My perspective, I would love to go back to
my local homebuilders and tell them that they can all have a
piece of this. I am not sure about economies of scale and
whether structurally that would work.
Mr. Edwards. How would you respond to the comment?
Mr. Andersen. I think it is important to stay focused on
what the Army's objectives are at Fort Hood, in terms of the
period upon which they want to deliver new housing stock into
the marketplace.
It is our job to track the private sector in a competitive
fashion to make sure we deliver. That is going to be the job of
the private sector partner. They are going to have a mission,
in terms of a time line and a certain number of units that need
to be developed or reconstructed over a period of time.
Their job is going to be to go out and get the appropriate
resources, capital, and expertise from wherever it can best be
delivered to meet the Army's objectives. My responsibility is
in serving the Army and meeting their housing needs at Fort
Hood.
It will therefore attract and create a competitive
situation for that same talent pool or same carpenters that may
be drawing up other projects, whether they be brought from the
outside. Again, my mission is to serve the Army and make sure
that their objective is to get that housing built on time and
on budget.
Clearly, it will have an impact. By the way, I would expect
that this will be a staged development. Things will have to
happen in an orderly fashion. There are other operating
requirements that will be taking place. First and foremost,
that is an Army base. It needs to operate.
So one needs to marry the real estate objectives with the
operating mission of the Army there with the financial
objectives of both the Army and the private sector. Those three
things will govern I think our relationship with guiding that
structured contract.
Mr. Edwards. Thank you, Mr. Chairman.
Mr. Scribner. Could I just make one other comment, if I
could please, to some comments that were made here to a
question that you bought up, Mr. Chairman?
Mr. Hobson. Yes.
Mr. Scribner. Standardization, speed, we are all trying to
get to a faster program. Standardization, of course, takes
time. We are learning, like the natural world.
Mr. Hobson. You had 6 years.
Mr. Scribner. I think it is wonderful that we are
experimenting. We need to learn from each other. When I worked
at the RTC, the Resolution Trust Corporation, for example, the
partnership structure we negotiated for the National Land Fund
was replicated many times thereafter. There was some
flexibility into it, but it became a standardized document for
partnerships.
I think we need to share amongst ourselves. We will find, I
think, that certain issues will become standardized. Other
issues will need to remain customized elements to meet the
objectives. So, I think where we are, we need to drive toward
standardization, but maintain some flexibility to customize the
program. It is a very natural process. I think we will all see
great acceleration in this program.
The last comment on speed is we are doing our best to
respond. We believe in 6 months to negotiate. Maybe as my
colleagues suggested earlier, negotiate the program at Fort
Hood. That is something we have in our control to do and to
deliver to you. Then we look to you, of course, to help us
streamline the approval process.
Mr. Hobson. The problem is I only have right now the
current law. You guys take 6 months. I have got 30 days, with a
very limited staff, to try to review what you guys have taken 6
years, maybe sometimes, to get to. I do not think that is quite
fair. So, we are going to try to change that a little bit.
Mr. Scribner. Those are difficult stacks to go through.
Mr. Hobson. I cannot read those. Well, I read pretty fast,
but I am not going to read them. Let me just say one thing that
I wanted to attack. One of the things, and I do not mean this
to Fort Hood or anyplace else. The Army officer has a different
objective than we do. His immediate objective is housing.
I do not care what it cost, I have got to get it done. Our
goal is a little different than that. We have to meld those
things together. We have to get him that housing. We have to
also get it to him within the constraints of what we are doing.
That is one of the reasons they have gone to the private
sector. I do not mean that as a lecture.
The officer's mind-set and what he has to do is different.
He is a war fighter. He has got to prepare his people for
battle. We have to prepare his housing. It is just different.
The economics of it makes it different. If he could, he does
not care about the economics because his job is to get that
housing. On the other side of it, you guys have to guide them
into the right program. Todd.
Mr. Tiahrt. Mr. Andersen, do you have to comply with
Federal Acquisition Regulations as a part of the process? When
you get a request for a portfolio or a quote, do you have to
comply with the FARs? I assume that is why you are having all
of this paperwork here.
Mr. Andersen. That is not my paperwork, by the way. That
is paperwork on the RFP.
Mr. Tiahrt. In going through the Request For Qualification
process, do we have to comply with the FAR?
Mr. Andersen. No. I actually completed a project.
Mr. Tiahrt. What are the requirements that you have? If
you build a house in the private sector, you have to abide by
the building standards. You get a set of blueprints and you
have a one- or a two-page contract to build a house.
Mr. Andersen. I expect these homes were built to market
standards.
Mr. Tiahrt. What are the requirements that you have to fill
when you do 3,000 housing units?
Mr. Andersen. From a regulatory standpoint, Barry, I am
going to ask you clarify that.
Mr. Tiahrt. Well, you are asking to streamline the process
here. There is something that drives the length of time.
Mr. Andersen. It is a set of requirements.
Mr. Tiahrt. What are those requirements?
Mr. Andersen. What I would like to do from a regulatory
standpoint is to get back to you because I am not sure that I
can answer that accurately. So, I apologize, but one of my
colleagues here would be better able to respond to that if you
would like. Why don't you, Barry, because you will be accurate.
I do not want to misstate something. This is Barry Scribner, by
the way.
Mr. Scribner. Barry Scribner from Jones Lang LaSalle.
In terms of the Request For Qualification process, it is
under the FAR for the procurement piece of that. Once you
finish the procurement end of that, and you have selected the
partner, then the negotiation begins. The requirements, unlike
the RFP, are not nearly as severe as they are under the RFP.
Mr. Tiahrt. Well, the RFP is probably structured so that
you have to make certain sections that come out of the FAR. It
probably goes A through I, or A through U, or the certain
sections that apply, plus addendums. I think that is a part of
the process that you face that causes this to be ten-fold. That
is probably one of the biggest ten-folds in the response. You
have got to go through all of those requirements.
We have heard several suggestions that we cut down the
time. It was Mr. Holloway who suggested that we cut down to a
120 days.
Mr. Scribner. It was 120 days.
Mr. Tiahrt. It is going to take a different set of
requirements to meet 120 days. I would be curious, what would
those set of requirements look like in comparison to the
Federal Acquisition Regulations? If you have these cumbersome
regulations to try to build a house, and you looked at the
private sector, and you get a set of blueprints.
You know what the building standards are. The County has
them. Every contractor has to pass a test to use them. So, you
have got a set of blueprints and a two-page contract. Then you
go build a house v. 8,000 pages of Federal acquisition
regulations, plus blueprints, plus standards, plus military
standards, and we could go on forever. So, I would be curious
at what it would look like to meet 120 days. What set of
requirements would you expect the Government to use.
Mr. Hobson. You do not have to do it now, but that would be
interesting for all of us to see just some sort of mark process
about what that would be. I am sorry.
Mr. Tiahrt. Let me just say this. I have watched Northwest
Wichita develop 8,000 family housing units, individual homes,
over the last 5 years. It was multiple contractors. It took a
long time. It progressed in a logical manner because of zoning
and other reasons.
Mr. Scribner. I do not know how you can go with 11,000
units, one developer, and expect them to go in some type of
smooth process. I think that segmenting this makes a lot of
sense to me. Four hundred living units set in one effort I
think is sort of stretching. I do not know you can get 3,000 in
a logical manner without involving multiple builders.
I think that is what we were looking at with the National
Homebuilders. It is very difficult to get one guy to lead a
bunch of independent businessmen like that. So, I think that
sort of limits who can provide the services. So, I would agree
that we need to break it down into small units. So, I would
agree that we need to break it down into smaller units.
Mr. Tiahrt. My real question would be how do you make a
120-day bid process? I would like to see how we do that and
still get some kind of confidence that the system is going to
work.
Mr. Andersen. Well, just a brief comment. The FAR, when you
go with an RFP process, the FAR says you have to lay out all of
the requirements. With the RFQ, still operating under the FAR,
but a different section, we have a document about 50 pages
thick that establishes the qualifications that we expect for
the developer.
Once that procurement phase is done, then you can apply the
market standards. It is not that the FAR so restricts you in
that piece of it, it is more that the FAR, in order to produce
an RFP covering all contingencies, that requires a lot of time
to prepare, and it is very costly for developers to ensure that
they have answered each one of those specifications. It has
more to do with the specifications required under an RFP.
Mr. Tiahrt. We are going to have to try one. There are a
couple of them. That is why we are looking.
Mr. Andersen. And in fact, it is the local building codes
and zoning. I just wanted to clarify, of course, every
community has their own building codes and zoning regulations
which govern the private sector. I would expect that would be
the main governing party to the quality, the construction, et
cetera that we are looking for in the marketplace.
So, I just wanted to clarify that there is ongoing out of
these governments in the local communities that will keep the
stands to wherever you expect them to be.
Mr. Tiahrt. Yes.
Mr. Holloway. A couple of comments, please, if you would.
Mr. Hobson. Your name?
Mr. Holloway. Gary Holloway, thank you. We are talking
about the size of the projects. One of the things that we have
to focus on in true privatization is that in order to have a
cohesive agreement, not only between the military and the
developer, it is important that somebody take over that
project. Meaning, somebody is going to maintain those units.
A part of the problem is not so much in the development, as
to whether you are going to develop 11,000 new units and how
that process goes, but it is more important as to who is going
to run the show while those units are in place today; whether
it is a redevelopment program, whether it is a new construction
program.
A part of the things that the Chairman pointed out, which
is the thing that baffles me a little bit, the ground is
already there. The revenue stream is already there. It exists.
The question is why are private developers, such as myself and
some of the other large developers in the country, and even the
small developers for that standpoint, we can go out and do what
we do. We can build thousands of units a year. That is not a
problem. We can do it efficiently. We can do it at a high rate
of speed.
Mr. Tiahrt. All of that garbage and it goes under this
stuff.
Mr. Holloway. Well, a part of the problem is that the red
tape that is created, whether it is created between the
military, the consultants, or the Government itself is a part
of the problem that you have to look at. In the private sector,
when we go out and we buy a piece of ground, we can be in the
ground, if we are moving at the right pace, probably within 4
to 6 months. That is a question going through zoning and
everything else.
Mr. Tiahrt. Four to 6 months, you must really know how to
do it.
Mr. Holloway. Well, we do it pretty well, sir.
Mr. Tiahrt. A part of the problem is that it would last 100
years. Every time somebody tried to do something wrong
according to the Government, they wrote a regulation to prevent
it from happening again. So, we have 100 years' worth of
regulations for millions of instances of something that could
have gone wrong.
The Wright Brothers' contract is a two-page contract to
build airplanes for the Federal Government. Just to hang
engines on the tankers right now is a 5,000-page contract. It
has gotten out of control. So, that is why I am trying to find
out how do we streamline the process? Is it waivers or new
legislation? That is what I want to get to.
Mr. Holloway. Two things. It is very important. The process
has been an on-again, off-again process over the last 5 years.
I think that has been a part of the problem for all of the
people trying to get into the business. They have had a hard
time adapting and changing, and making a true commitment to
this.
I think what you have to realize is we are looking at
probably somewhere between a $30 billion and $40 billion
program here to really go and do what has to be done to our
housing across the Country. To do that, you cannot do that with
pilot projects with 400 units at a clip. We have to realize
that these are big initiatives.
These are big programs. The people from the private sector
are used to dealing with big projects. They can step in. They
can maintain. They can operate. They can do the things that
need to be done. What we have to do is kind of clear the red
tape a little bit and make room for people do business. Thank
you.
Mr. Tiahrt. Thank you.
Mr. Hobson. Sam.
Mr. Farr. Thank you, Mr. Chairman.
First of all, I want to thank you and Mr. Olver for having
this meeting. I think that this is really essential that we
spend a lot of time this year trying to deal with the issues
that Mr. Tiahrt just talked about. There is a process going on
now about reinventing Government and trying to figure out how
we make it more effective and efficient.
Mr. Chairman, let me tell you how I got interested in this.
I was a County Supervisor and developed all of these zoning
laws. I was very involved in a lot of environmental issues
because that is what my history is about. One thing we never
knew anything about, from the Monterey Peninsula, was this
great big piece of real estate, 28,000 acres, called Fort Ord,
which had 33,000 people on it.
They way the military did it is that just did it all in-
house. Essentially, they have built--where the contracting is
left from here in Washington, D.C., to some contractor who
would come in and build the housing there, and not do anything
local because the Federal Government owned the land. The
Federal Government is exempt from zoning.
The Federal Government is exempt from local code standards.
The Federal Government built some houses. Do you know what?
During the 1980s they built more housing at Fort Ord than at
any other base in the United States. Then the BRAC closed it.
So, all of a sudden, the local communities got in and looked at
it. They said, my God, look at all of this stuff out here.
Guess what they also said?
We could have built this housing a lot better, a lot
cheaper, because of the same reasons that you talked about. The
Government owns all of the land. You have got all of these
exemptions from everything. You can do it anyway you want. I
think what is coming is a sense of guess what? The military is
stuck with it.
It is a thing now I have got to pay for all of the
incredible clean-out. They have all kinds of asbestos and lead.
You cannot even hook up a house with water because the pipes
are different. You cannot get fire insurance because the
windows are the wrong size. Now, these are houses built in the
1980s. They look like the houses right up there.
Mr. Holloway. They are still sitting there; right?
Mr. Farr. They are still sitting there vacant some 8 years
later, with the windows all broken in them. Now, what the
private sector has come in and said, because with base closure,
all of the local contractors say, we want some of the work.
Now, some of the things that have come out of this is we have
been able to go out to every contractor in a 100- mile region
and say, are you interested in any Federal contracts? Put
yourself on a list.
And if you need the upgrading skills in order to bid on
this, guess what? We got the community involved to say, we will
train them. Just tell us what kind of skill level you want to
train to. So, we have got all of the labor unions. We got all
of the community colleges. We got all of the contractors.
Everybody is in love. We think, why did we not ever do this in
the first place? So, my interest in this, and I think it goes
to this whole discussion.
Mr. Holloway just opened up my net. We did not think about
it. We are not the only Committee that deals with housing.
There are governments out there that builds student housing.
The Federal Government out there builds housing for Forest
Services, for Park Services. We have HUD that builds housing.
We go out to the private sector and have HUD do it. We
ought to look at all of these tools that the Federal Government
is using in their different agencies and figure out what is the
best tool? Housing is housing, regardless of who you are
building it for. You ought to build it, one, to local
standards.
You have to have the quality of life that Mr. Edwards
talked about. You developers know that. You are willing to put
in trade-offs. In this case the trade-offs are really cheap
because, again, we own the land. I think what you are on to,
Mr. Chairman, is we have to create a system that is less top-
down oriented, where ``one size fits all.''
I do think we have to have some standards. I agree with
you, but you have to also allow local control. You are not
going to want communities with higher building standards, and
higher quality standards. They are going to require that the
Government be a good partner, a good neighbor, and build to
those same standards.
What strikes me is if you add this all up, we ought to be
building the best housing in America for the military. We have
more to offer than the private sector has. There is no reason
why we cannot turn this system into where we are looking, we
are apologizing for the kind of housing for our military, where
we cannot be the envy of the housing market.
I think you are capable of doing that, Mr. Chairman. I do
not have any specific questions. I just want to follow-up on
Mr. Tiahart. How do we get there from here? I would love for
the panelists to come together with this group, and maybe
others can get into more specifics. Mr. Yim, yesterday, I hope
you all get a copy of his testimony.
In fact, maybe we can provide it for you. He has some
lessons learned in here. He quotes right out, 12 authorities
that are given to the military, Department of Defense, through
existing law, which are up for reauthorization. He points out
that these tools, these are incredibly effective tools and
incentives.
I think we need to review those along with all of the other
regulations to see how we can reinvent housing for the military
that will lead us to a path of having the best of housing in
this Country, rather than the apology for housing in this
Country. Thank you, Mr. Chairman, for doing that.
Mr. Hobson. The other thing that is troublesome in this too
is this idea that the residual here, I mean, is a problem to
lenders and stuff. If you build this right, for example, San
Diego. If you built to the community standards that he is
talking about, this may not be true in every place, but in a
lot of these places, the residual is probably the greatest
value you have got, if you built it right.
You are not going to be stuck with a bar. You will really
at the community. That will have gone up probably dramatically
as it is more difficult to build things some places. So, this
idea, and I have had people tell me, oh, we have got to have
everybody's guarantees because of the residual, that is just,
you know, guys, that does not pass the smell test in some
places.
I guess that is what troubles me and one of the reasons I
try to get consultants in here along the way is to make sure
that because of the officers deal is get it. The problem is we
have to look beyond that and say, well, when we got it, where
did we get it? Where do we go when it does not work, or when we
are out of it, or when we want to get out of it. So, we have to
look broader than he looks or she looks at her current command
situation. Mr. Boyd.
Mr. Boyd. Thank you, Mr. Chairman.
I would just like to say that the hearing was very helpful
and informative for me. I probably knew very little about the
tales of this issue. It has been very helpful, very
informative. Maybe you could help me to understand. I am
interested in this whole discussion about the maintenance.
That is a key. I think several of you addressed that issue.
Maybe you can help me understand the structure we have here. I
know we have asset managers or managers that the services
contract with, like Mr. Andersen and your firm, and Boston
Capital.
My question is when those folks contract with a developer,
for instance, Mr. Baumann, you are the developer and Mr. Kumar.
And you guys ultimately are responsible for the maintenance, I
assume. Is that correct? I got a nodding of heads here, Mr.
Reporter.
So, Mr. Goldstein, why do you not take the mike? I was
interested too in this discussion that has gone on here today
about the size of the development; that we can manage it in the
private sector. Mr. Andersen certainly addressed that. Mr.
Holloway did.
What is your idea about the effect in size of that
development? If you got 11,000 units, how do we break it down
in a way to get done?
Mr. Goldstein. Jeff Goldstein at Boston Capital.
Congressman, would you allow me to answer your first
question first with regards to upkeep? I think it is an
important issue to hit on and I do not want to lose sight. What
an organization like Boston Capital would do would in fact be
an asset manager.
In essence, our thought on this whole concept is that there
would be a property manager; people who would be responsible
for collecting rents, and ensuring that the properties are kept
up. The role of the asset manager, in essence, would be the Air
Force or the military's representative to ensure that things
are happening correctly. That the property is in fact being
kept up.
Mr. Boyd. What about the reserve accounts? What I mean is
who controls the reserve accounts for repairs, maintenance,
rehab that has to be setup? Is that you, as an asset manager,
or is that the guy down here, the developer?
Mr. Goldstein. Well, I think the ongoing maintenance of the
property is controlled by what I will call the lower tier, by
the property manager. The ongoing maintenance, the reserve
accounts, the long-term capital needs are controlled by the
asset manager.
Mr. Boyd. I am sorry to interrupt. Did we, or the Air Force
in this case, and then ultimately the Department of Defense
looks to?
Mr. Goldstein. Correct. I would like to add two things to
that. One is I think it makes a lot of sense for an asset
manager to be compensated on a performance basis. That in fact
if the things that the Air Force has contracted out for do not
happen, then the asset manager does not receive compensation.
Furthermore, to a question that I think some of the other
Members asked earlier, a partnership agreement or the agreement
that governs a limited liability corporation would in fact
specifically state how cash flow would be distributed.
In fact, a partnership agreement can clearly state that
unless the following things happen, no cash flow is distributed
in any given year. So, there are many ways to build in
protections from within any transaction to ensure that.
Mr. Boyd. You might say, you have done a good job. We might
give you a little reward.
Mr. Goldstein. Right.
Mr. Boyd. So, would you like to tackle the second question?
That is the size or would you prefer somebody like Mr.
Holloway?
Mr. Hobson. He already said it.
Mr. Holloway. I have a comment on the maintenance too, if
you get a chance.
Mr. Hobson. Let me just stay around for a second.
I would like to let this go and I would like to come back.
If the Members want to come back, I think this is a good
learning experience for everybody. If you all do not mind, why
do we not go vote. I think it is just one vote. I would like to
suggest we go vote on the rule. Then why do we not come back
just as fast as we can and let everybody get their questions
answered, if you all do not mind.
I think this is good for us and I hope it is good for you
that we do it. Is it all right with you guys?
[Chorus of ayes.]
Mr. Hobson. All right, we will do that.
We will go vote right now and then come back.
[Recess.]
Mr. Hobson. The Committee will come to order.
Is there anybody looking at, I do not think these are
particularly creative findings and techniques, but reads his
possible owners, investors conduit financing techniques, loans,
Fannie Mae? There are all institutions out there. Some of those
are getting a little more inventive.
There are pension funds. There are companies who buy, for
some long-term investments that are a little lesser than what--
used to do in some of their pension or investment funds, that
might have an interest in the product. They might make some
different thoughts to it than what we have been doing. I know
we tend to look at civic cases.
The other thing I would like to throw out to you all is
there are some, and this is one of my pets, historic
preservation, the tax stuff that I think is still there. There
are a number of historic properties that the military has. When
you went around and looked at some bases, there were a whole
bunch of buildings. This is different than what we are talking
about here.
There is a whole number out, but since you all are here, I
am going to use the opportunity to get this out. There are
70,000 buildings in the Army alone that could become available
to get on the historic register. If those all get on the
historic register, well, they all will not get on. It is a
major problem that the military is going to have to begin
looking at.
The Navy has a number that is not as high as that. The Air
Force has a few less. They inherited them mainly from the Army,
but it is a real problem that is out there. A problem is an
opportunity for creative business persons. So, we need to look
at that.
Mr. Little. Mr. Chairman, can I respond?
Mr. Hobson. Sure. Come up and tell him who you are, because
he gets upset if you do not get on the record. And he is the
big guy. You do not mess with him.
Mr. Little. I am Wallace Little. I am with Ernst and Young.
I just wanted to respond briefly to the Chairman's comments
about financing and our responsibilities and our work with the
Department of Defense, and working on the overall designs of
programs and the legal documents. That is one of the things
that we pay a lot of attention to. That is the efficient access
to capital. The primary purpose of accessing capital
efficiently is simple.
Bring down the cost of money, which translates into lower
cost housing or more housing for the Government's dollar. In
terms of the techniques, there are a number of techniques that
we have been looking at. We have seen transactions that have
gone through the secondary mortgage markets, through single
asset securitization transactions.
We have looked the REET, as you mentioned, the potential
for REET structures which is a securitization of equity,
capital coming from the markets.
Mr. Hobson. What about the housing authorities.
Mr. Little. Using local housing authorities to use their
financing and legal capabilities to provide finance. That is
another opportunity. Their taxable; there might be
opportunities to tax exempt the laws, if the rules allow tax
exempt financing in that connection.
Again, there are a number of ways to skin a cat and to
finance these transactions. What you have been talking about,
for example, the Fannie Mae transaction, using a secondary
mortgage market institution, is to sort of cut out the middle
man, the traditional retail lending commercial banks and going
right to the capital markets and accessing the capital, the
pension funds, the life insurance companies, the banks, and
other large financial investors who are interested in this type
of funding, housing.
Housing has become more and more the preferred financing
and investment vehicle, not only within the United States, but
throughout the world. Just to close my remarks there is that
yes, indeed, financing is very important. There are extremely
creative, efficient, and low cost capital methods of bringing
financing to this dramatic program. We have paid a great deal
of attention in conjunction with our team membership with the
Department of Defense to make that happen.
Mr. Hobson. Thank you.
John, when we left, you were talking.
Mr. Boyd. Yes, sir.
Mr. Hobson. Go ahead. Do you want to finish your questions?
Mr. Boyd. Did you finish?
Mr. Hobson. He was in a second question. Maybe he did not
want to, but we are going to make him anyway.
Mr. Goldstein. Jeff Goldstein, Boston Capital.
Just as I sat down before, would you mind if I go back one
and answer your question, Mr. Chairman?
Mr. Hobson. Yes.
Mr. Goldstein. One of the financing techniques that we have
been looking at that we think makes a lot of sense is utilizing
bonds with credit enhancement. By using a taxable bond with a
credit enhancement, in essence we can do two things. We can
lower the cost and we can stretch out the amortization.
By stretching out the amortization, we reduce the annual
debt service payment. It would allow us to, in essence, finance
more. Secondly, as it relates to historic credit, it is a
wonderful opportunity because, in essence, we can bring in a
whole other class of investors whose only economic benefit is
the receipt of this tax credit, and will not share in things
like cash flow, appreciation, and things like that.
Mr. Boyd. Well, they actually cannot.
Mr. Goldstein. Absolutely.
Mr. Boyd. I have never liked deals that just rely upon tax
credit. I like cash flow.
Mr. Goldstein. And to be perfectly fair, as a partner in a
partnership, they have to have some economic interest in the
partnership.
Mr. Boyd. Right.
Mr. Goldstein. So, thank you for allowing me to answer that
question. To get back to, I think, the last question on the
table, some of my colleagues here have answered very well the
question as to how big or small a development can or should be.
I think John Andersen made a good point. Really, it is up
to the Armed Forces to tell us what in fact it needs. If I have
a need to get 11,000 done, that is fine. In fact, maybe we
should not do it all up-front, but we do have to master plan it
up-front. We do have to understand what the ultimate goal is
and let us decide how quickly we can do it. Maybe that means
parceling it out to four or five different developers or
development companies.
Mr. Boyd. And that is not all bad because you get some
competition from those people.
Mr. Goldstein. That is right.
Mr. Boyd. They are going to present their product a little
better than the other guy, a little faster.
Mr. Goldstein. That is right.
Mr. Boyd. A little more quality and things of that sort.
So, it will vary. I guess somebody said it before. These are
not going to be cookie cutters, but we can standardize some
methodology, some semantics, and some procedures to make it
more efficient. Each one of these is going to be different.
The base is located in a different location. For example,
you are not going to build in San Diego the same type of
facility that you are going to build at Fort Hood, although
they are going to both be substantial projects. The communities
are different. You have different pressures in each community.
Some of them will be the same. It is hard to find anybody to
get all of the crafts done in San Diego because they have so
much business.
Mr. Goldstein. Right.
Mr. Boyd. It is hard to get them to do it. If you go to
Fort Hood, it may be a different story that they have got all
of the business for the local community, if they need it. Where
do you find the crafts for the subs to come in to do that work.
When you start importing subs from elsewhere, then that creates
another problem.
So, these are all things. So, it can be cookie cutter to an
extent, but I do not want to get cookie cutter to something I
just, you just brought me a couple of reprogramming, that where
some people in the military tried to use cookie cutters and I
sent them back because the cost almost doubled in some of these
cooker cutter approaches. I said, I am not going to approve
that until you explain to me how you screwed up.
Your answer was it was a cookie cutter. I said, it is not
his fault, because that is what they gave him. I said, I want
more on that before we sign off. Now, it is not a big deal, but
it sends messages. Thank you.
If I could use Mr. Holloway.
Mr. Hobson. Yes.
Mr. Boyd. I wanted him to speak to the maintenance issue.
Mr. Hobson. He takes care of student dormitories. He has
got big maintenance problems.
Mr. Holloway. That is true. Fortunately I can say that
student housing today is a lot different than when you lived in
it and certainly when I lived in it. Addressing the maintenance
issue I think is the key factor to everything about
privatization. As I mentioned earlier in my testimony, there
are a thousand developers that can build this, from small
homebuilders, and then you could put a 50-unit project, two
large developers coming in and doing 300, 400, 500 units to
thousands of units.
It is not a problem finding that. The problem is the
cohesiveness of making sure that once you go to a privatization
and those assets are moved to a central bank that, that central
bank is knowing what to do in protecting those. I agree with
Jeff 100 percent that a master plan should be put in place, but
it should be put in place with one owner/developer who can then
sub out different sections of the project to bring other
developers in.
In fact, when it gets into cash flow and asset management,
it is one team's responsibility for them to oversee. We
nationally manage student housing, as I mentioned earlier, at a
level unlike anybody else. We will see close to 200,000
maintenance requests a year. We respond to those requests, and
complete 94 percent of them within 7 hours. That is an
unbelievable number.
We complete 99 percent of those within 24 hours. What I
personally saw just at Fort Lewis was unbelievable. Sitting and
talking with all of the different groups on every base that I
have been to and every Fort that I have been to, I take the
time to sit down and hear what the soldiers have to say. Their
response time on average to get a toilet fixed is 60 to 90
days.
Remember, they are out there, now deployed, and their
spouse is sitting at home worrying about this. Who are they
calling? Who are they getting to? It is that piece of the
business that is so important. Maintaining a good quality of
life to them is more important than anything else. Creating a
community for them is really the key.
We believe in our business that we are not developers. We
are long-term owners of properties. One of the statements that
came up here earlier was that we are looking at projects that
are 50 years old. You cannot be in a project for 50 years and
not have your people be a part of that community and be a part
of understanding where this thing is going.
I mean, you are there for the long-haul. Most of the assets
we have owned since I started my company and are still on my
company's books. Granted, we did sell some a couple of years
ago when the market was very hot, but it was a good time to
take some money off the table. For the long-play in our student
housing business, and that is a long-play for us, we understand
that maintaining that asset is the key to the game.
We do it better than anybody. We have proven it in the
marketplace and we understand it. The Chairman is right. If you
can maintain student housing, then you can maintain anything in
the country. We, on average, will turn over 75 percent of our
rooms in a 2-week period in the month of August. We totally
repaint, recarpet, refurnish everything that has to be done in
those units to bring them back up to the same quality and
standards that we will accept around the country.
If you can think about the magnitude of that, it is almost
near impossible. But in a 2-week time frame, we turn around 75
percent of the 33,000 beds that we now own. So, that is in a 2-
week time frame. So, maintenance is the key. We stress it. We
believe in it. Unlike just being a developer, we are long-term
owner, and that is the key. Thank you.
Mr. Hobson. Thank you.
Mr. Boyd. Mr. Chairman, I have one. I really would just
ask Mr. Lawson. Mr. Lawson, you opened a can of worms about the
size of the units. Do you have anything that you want to add
after both the asset managers and developers or are you
comfortable?
Mr. Lawson. No. I am a lot more comfortable when I hear
they are looking at timing and involving other people, maybe in
smaller parcels, over a long-term period of time. I am also a
little uncomfortable in one answer that I heard. In recognizing
that the properties and the projects could get so large that
they cause an apparent conflict in your economy or your
locality between your current builders and the fellow coming in
from out-of-town paying big Government wages.
Mr. Hobson. But that is just the nature of the beast.
Mr. Lawson. And that is the nature of the beast.
Mr. Hobson. We have got a facility, for example, in Chet's
district that has got 40,000. It is a city. It is going to
have, whatever it does, it has an impact upon that community. I
do not think they want it pulled out. They may complain about
certain parts of it from time-to-time, but it is just the
nature of it.
I do not know. It is going to be different again in each
one. There are some in the 400-unit deal. There is question in
my mind that there are a lot of builders that can build that.
In the 1,000-unit a year, that is a big deal in any town.
Any major community, 1,000 units by a developer is a lot of
units. So, I do not know. We just have to watch how we do it. I
think most of us come from communities where we like to see
local input into it. But you are right, it does have an affect.
Mr. Lawson. If I could take just a minute, there is
another, I think, inherent issue that ought to be put on the
table.
Mr. Hobson. That is why we are here. We want to hear it
all.
Mr. Lawson. When I heard Mr. Baumann talk about the Navy
wanting to protect its assets, which I am quite sure it does,
but when I have discussed the housing issues in my area, I find
that the people that the Navy is most interested in housing are
certainly the lower rates where, in essence, even with the new
increased housing allowances, they cannot go out and rent, at
market rates, for those allowances the decent housing they
need.
So, if in fact I am in to work with the Navy to product
that housing at this rent level, it is not economic. It becomes
economic because into this partnership, the Navy has to put an
asset in. In essence, it has to put it in at less than its true
value because we have got to subsidize these sailors because we
do not pay them enough. That is the core of this issue.
In given market areas, it is impossible for some of our
younger rates to afford decent, sanitary housing on what we,
the U.S., pay them.
Mr. Hobson. That is why they buy down. I call it a ``buy
down.''
Mr. Lawson. A ``buy down.''
Mr. Hobson. That is basically what they do.
Mr. Lawson. Yes, sir.
Mr. Olver. In the case of Fort Hood, my recollection is
that in this 6,000-plus project, that there is actually only a
net of 400 new houses in that; a net of about 400. I do not
know what the net is. It varies all over the place in different
instances. The other 6,200 or thereabouts are rehab,
reconstruction of existing housing where the housing is base an
asset that is worth doing.
So, it is not as if this new builder is coming in. I
recognize that you and your comment about the wages that are
being paid. It is not as if there is a huge new amount of
housing in any of these, I think. There will be some in a
number of them, but not primarily. Primarily, what we are
trying to do is to find a way of maintaining and upgrading
housing that is there, which we are not able to do on the
regular market.
Mr. Lawson. I am not aware of the details, and just how
much construction, and how much rehabilitation there is to go.
It is just the question of most of our membership is national
association. Even if it is rehab, that is probably way beyond,
unless it is broken up by a ``master developer,'' way beyond
where many of our members would be able to participate. Our
membership, when you drive around your community and you see
the 6,000 houses that got produced, that is who did it. They
did not do it in one big 6,000-unit deal that somebody
mentioned. There was a series of them doing that portion of it,
which they did best.
Mr. Hobson. Why do not you guys from the old Ernst and
Ernst, E&E, come back up. Mr. Baumann, Boston Capital, and
Jones Lang LaSalle. I am going to read the questions and I want
you to answer.
What is the timetable from conception to ground breaking
under the RFQ process? That is for Boston Capital and LaSalle.
Mr. Goldstein. Jeff Goldstein of Boston Capital.
The process obviously would vary from base-to-base
depending on size, specifications, et cetera, and so forth. But
I think what I had said in my testimony is that it is certainly
conceivable to, from the day of inception of the idea, to a
construction closing to be 12 months or less.
Mr. Hobson. What is the timetable from conception to
ground breaking for the RFP process?
Mr. Little. Our experience is based upon two transactions
that have been awarded and gone to final contract closing, and
then other projects that are in progress. From the start of the
RFP process to actual award, we are talking about a 1-year
period. Our experience tells us, however, as I have indicated
in my prepared remarks that we think that particular period of
time can be cut in half with improvement in the process.
Mr. Hobson. Who could consult on Fort Carson? What was
their experience with the FAR at Fort Carson.
Mr. Baumann. That was a project for which we had an
involvement. The experience with FAR was that the initial
procurement, and again I am not a FAR expert and I was not
involved in the actual underlying procurement issues, but there
were two basic procurements.
The first, Fort Carson I, if you will, there was a protest
by an unsuccessful bidder. He raised certain objections to the
process. I am not familiar with the details of course. His
protest withstood in the Court of Claims and the process had to
be started all over again. Then we had Fort Carson II, if you
will, and that process took a little less than 1-year from
start to finish.
Mr. Hobson. As I understand it, Fort Carson II is doing
pretty well.
Mr. Baumann. Fort Carson II we think is an extraordinary
success, yes.
Mr. Hobson. I just want that all understood. Fort Carson
is a different program than what is being proposed for Fort
Hood and for Fort Lewis. So, we are trying some different
things here to see which is the way to go. Some indication was
given I think earlier, that the RFP process, or it is the RFQ
process could be more expeditious I think, or less problem
because you did not have to mess with the FAR as much.
My only concern in that is that one of the reasons why I
want to go through it is that I do not truly, well, I want to
be sure at the end of the day when we do this. I do not know
how are we going to have the expertise to do this. This is the
problem that I discussed with the members here. I have got to
keep the numbers in front of me.
In the RFQ process, and we are trying to find patterns
again. I am not sure at the end of the day, at that level, that
we know what our numbers are. We have some thoughts. We have
had a beauty contest in which we evict somebody. In the RFP
process, we know at the end of the day what our numbers are.
Whether we got the right deal or not is another story.
At least we know where we are. If we are taking the same
amount of time, again, I want to go through this. I am trying
to lay out what my concerns are, or what our concerns are, so
that when we get done with all of this and we begin to look
back at what we do, we have some concept of where we are. I am
pretty satisfied now that Mr. Griffin took to heart some things
that we talked about, about a year ago.
Mr. Lawson. I am Lawson.
Mr. Hobson. Yes. And I can tell from your testimony that
you two have talked to each other.
Mr. Lawson. Yes, sir.
Mr. Hobson. But I was concerned about the limited
liability corporation and its ability not to become an owner.
Now, I think you have satisfied that. So, I am pretty satisfied
with that. I am not set on how we are going here. I just want
to be sure that we are not buying into something that we all
later say, gee, we messed up on that one.
So, I am going to be a little concerned as we go through
this because I know where we wind up with RFP. I am not sure
where we wind up with the RFQ. I am worried about delaying
getting into things because of the RFQ. We all hope it works.
That it gets it done faster, but I am not sure about that.
Mr. Andersen. Just a report on the timing today on the RFQ
process, the first phase is the solicitation of interest. That
is a 60-day period. That is what we experienced at both Fort
Hood and Fort Lewis. You get the responses. So, 60 days for the
first phase.
Then we go into the evaluation phase wherein those
responses are evaluated to select the entity that we would go
forward and negotiate. That is from tentatively a 60- to 90-
day period. While currently the party has been selected, we
have not announced it.
Mr. Hobson. What do you mean you have not announced it?
Somebody did.
Mr. Andersen. Apparently, there was an article on it, but
it had not been formally announced. That is intended to be a
60- to 90-day period. It is very important that we stay on
schedule. One of the messages that was of this old meeting when
we started the initiation of it, was the reliability and trust
we build with the private sector. That we stay on schedule when
we tell them we are going to do something.
So, I just wanted to make that point. When you go from the
solicitation to the evaluation and you select someone, then we
are going to the CDMP or Community Development and Management
Plan where we negotiate and settle upon the partnership
structure and engagement. That is intended to be wrapped up
within 6 months, at which time you can begin, assuming there
are no more hurdles with your approval, constructing homes and
going forward.
Mr. Hobson. So, we will not start the homes for 6 months.
Mr. Andersen. We would be beginning the development
process.
Mr. Hobson. But you will have a specific plan that has
been negotiated in place. I think one of the benefits we hope
to achieve is when we sit down first with the selected party,
we anticipate spending some good time listening and learning
their vision, their plans, and that will help us understand
what their objectives are as we get into the negotiations.
Through that period, we will have very specific development
and management plans negotiated, contracted, and then
implemented. After that, what will be then, a 1-year period
about from the original letting of the solicitation to the
selection and negotiation. We also do not know exactly where we
are going. That is what happens when you get into a negotiating
process.
Now, when you get done with your part, where does OSD sit?
Do you have to go back to them? Are you going to come to us? Do
we have to wait until you get through them? I mean, I do not
want to slow it down, but if you have to go to OSD and we do
not know what is going on, then after OSD gets done, then we
have to do it. Then it takes awhile.
I think we need to figure out how we, I think, Mr. Apgar
and I talked one time about we have some briefings along the
way of us.
Mr. Andersen. You offered for that and we think that is a
wonderful idea to meet with this group every couple of months
or as frequently as you would like to meet to keep you informed
and engaged, so we do not have any surprises.
Mr. Hobson. Right.
Mr. Andersen. So that what we negotiate is, you know, we
will benefit from your ideas, your insights. We welcome
approaching us as a team. We do not want to get to the end of
the stage and have people be surprised. That would be a bomb.
Mr. Hobson. Well, if we turn it down, then we have to
start all over again. I do not want any misconceptions. If it
is not right, if we do not have the comfort level, we are going
to turn it down. My goal is not to turn it down. But I want you
to understand that as we go through these things, if they do
not pass, not only the numbers test but the smell test, we are
not going to do them.
We want to do them because we need to get on with this
program. We have to do it in a way that makes sense. I want to
try every different approach that we can to make it work. I am
glad that Fort Carson is working well. Anybody else want to
comment?
Mr. Kumar. Yes, Mr. Chairman.
Mr. Hobson. This is Mr. Kumar.
Mr. Kumar. A couple of comments that were going around the
table. I will not take more than a couple of minutes here. As
far as the maintenance goes, Congressman Boyd has addressed
that. With the projects we are doing, we are a one-stop shop.
Meaning, we are responsible for the development. We are
responsible for the financing of the project. We are
responsible for the property management. We are responsible for
the maintenance. We have taken on all of those responsibilities
and obligations within our firm.
We do have some contractors that work for us to maintain
the units. On the Navy and Lackland projects, there was a
question about a windfall for private developers. The
Government is very skeptical about the private developers not
able to get a windfall. I just wanted to say on the Navy
project, I think our cash flow is about $100,000 a year for 400
units, out of which the Navy gets about one-third of it.
So, realistically in the private development sense, the
cash flow that comes out is substantially significantly lower
than what you would see in private development.
Mr. Hobson. Do you give tax benefits from the way you
built that project?
Mr. Kumar. On the Kings World project, we had a little bit
of a property tax abatement that was negotiated with a local
city for 5 years, but that was plowed into the development end
of it. We even mortgaged that.
Mr. Hobson. Where does the depreciation go for the
buildings? Does that go to you?
Mr. Kumar. The depreciation goes to the developer, yes
sir, on that particular project.
Mr. Hobson. They just want to get it all.
Mr. Kumar. Definitely.
Mr. Hobson. You get the nice part. I want to get the other
part.
Mr. Kumar. Okay. On the Navy project, like it works out to
be about $20 per month per unit. It is $13 per unit per month
is what the developer is getting. On the Lackland project, we
will not see any positive cash flow for at least 8 years, but
we are okay with it because we have committed to the long-term
success of the program and the long-term success of our firm,
with respect to this program.
Mr. Hobson. I want to talk about what you mean by ``cash
flow.'' You are not talking about a return on equity. You are
going to have a negative after you pay the water bills and the
taxes? Do you have to come out-of-pocket on those for 8 years?
Mr. Kumar. On year-1 and year-2, definitely we will have
to come out-of-pocket. But for years 3 through 8, it will just
be adequate enough to pay the mortgages.
Mr. Hobson. So, you will have cash flow. You just will not
have a return on equity.
Mr. Kumar. That is right. That is exactly correct.
Mr. Hobson. That is different.
Mr. Kumar. There will not be any positive cash flow until
after the mortgages have been paid out. There will not be any
cash coming out of the project.
We have worked with E&Y, a couple of folks from E&Y, Joe
Faccone, Jay Polis, and Wil Baumann with the Department of Navy
on several of these projects. They all have the same mentality,
to bring the best value to the Air Force or the Navy, to the
Department they are working with.
The reason why some of the projects do get extended, like
one of the projects that we are working got extended for about
13 or 14 months primarily because there were cities that the
military had to make agreements with. So there were very unique
legal agreements that had to be done for those projects.
We understand those. It was just if there was a way we
could channel the process so that it works a little better. I
think it will be beneficial for all of us. On a project like
Fort Hood, we are a $200 million company. We only do $200
million worth of work every year. Our net worth is
approximately about $30 million.
On a project like Fort Hood, most probably when you go the
RFQ route, when they select a participant, they are going to
select somebody with $100 million net worth. That is what
happens for Mr. Larson and developers like theirs. There is not
going to be a home developer that has got a net worth of $25
million in probably a 200-mile radius around that base.
Actually, Fort Hood is pretty close to Austin also.
We are about 40 miles away. We knew if we proposed on that
solicitation, our qualifications, we would not get selected
because we were only $30 millionnet worth. $30 million net work
is even though a large net worth for construction companies, we
just thought we were not going to be a player. That is how it
evolved.
Mr. Hobson. Is that a result of our RFP process or RFQ
process?
Mr. Kumar. RFQ process.
Mr. Hobson. If it were an RFP process, would you have bid?
Mr. Kumar. Yes, sir, we would have.
Mr. Hobson. That is interesting. John.
Mr. Olver. You are going to have to explain that one for
me. Why is an RFP process, if the project is the same, 6,000
under an RFQ process, why would you not be able to come into
the process in an RFQ, but you could come into an RFP? I do not
understand that.
Mr. Kumar. The reason is in an RFP process, Congressman,
they have qualification concepts, a price component, and a
value component. So, when we submit our qualifications and we
are selected to proceed to the next phase, at that stage, all
of the proponents are equal. After they have been qualified,
they are all equal and the Government selects the company that
has the best value, price-wise, quality-wise, technical
capability-wise, and so forth. We have a better chance of
winning a proposal or a qualification like that, rather than
just an RFQ process where we do not advance to the next stage.
Mr. Holloway. That is true with the public housing ones.
They would not be able to procure that.
Mr. Olver. Well, all right. This is going to lead me into
sort of a sorting out in my head of who does what here. As I
understand it, Mr. Holloway, you have not done a military
privatization. Is that correct?
Mr. Holloway. That is correct.
Mr. Olver. You have a lot of experience with student
housing, let us say, and a lot of other things. I was really
stung by your comments about maintenance and how you do
maintenance. I can imagine why that would be, if you have got
colleges that are going to have parents calling in every day to
the colleges. All hell would break loose, if a toilet was not
fixed in 90 days. Whereas, the people in the Armed Forces are
viewed as captive audience, I think is something like that.
Mr. Holloway. That is very true, sir.
Mr. Olver. Mr. Kumar, you have done two. You were the
developer, the property manager, and I suppose one might say
the asset manager as we evolve. You are all of those things for
two modest-size projects which were Corpus Christi and Lackland
Air Force Base.
Mr. Kumar. Yes, sir.
Mr. Olver. You are now describing that you cannot qualify
under the RFQ process, under the Army's procedure. Let me just
make certain that I understand. Mr. Little, for Ernst&Young,
you were a part of the selection committee that chose Mr.
Kumar, Landmark, for Lackland. You were also a part of the
selection committee for Carson.
So, you are not in any way involved in the actual
development of any of these projects that we have been talking
about yet, of those that have actually been up and given out.
Mr. Little. For both Lackland and Fort Carson, we were
involved in the concept design of the projects, the use of
facilities. We advised, on a non-voting basis, the Source
Selection Committee, and helped close those transactions.
Mr. Olver. Who is the developer for Carson?
Mr. Little. For Fort Carson, the developer is J.A. Jones,
I think. Some of the information is sometimes procurement-
sensitive. I am just thinking about, before I answer, as to
whether or not I should be answering in a public forum, but
J.A. Jones is the developer of Fort Carson.
Mr. Olver. The Carson one is a batch of 2,500 or
thereabouts, 2,600 units. Yes, it is already in construction.
Some of them are already being lived in. Some of them are
completed. It is a 5-year phase-in, which goes, Mr. Lawson, to
your comment in part. That one at the 2,500 level is about a 5-
year phase-in. So, it is not doing a huge amount each year. It
is according to how big the contractor is, the one to be on. He
is no little guy.
Mr. Little. J.A. Jones is a sizeable developer. I do not
quite recall what his net worth is, but let me comment on the
criteria in the underlying process. As indicated, there are
certain specifications that are required; the requirements of
the RFP process. A part of the underlying process includes a
look at the developer in terms of its corporate capabilities,
his track records.
There is a review of financial statements. There is a
review of its corporate net worth and the resources it can
devote to the project over its entire life, including the
ownership period. We are totally satisfied and we feel
confident that the developers that were selected for these two
projects have the corporate capabilities to maintain and
operate those projects.
Mr. Olver. Well, Lackwood is totally in. Presumably, it
was able to do it. In the long-run, we will see how it turns
out.
Mr. Little. Right.
Mr. Olver. In the case of Carson, at least the contractor
is out there. It is in process. They are living in some. It
will be phased in over time.
Mr. Little. Yes.
Mr. Olver. I was asking you, Mr. Little, well maybe you
can tell me. Is there anything inherent in your understanding
of the RFQ and RFP process? Is it correct just to confirm that
the RFQ is going to automatically eliminate Mr. Kumar and
Landmark from this?
Mr. Little. That is a question that I would have to say
that I cannot respond to because I have not been a part of the
RFQ process. So, I do not know of its workings and its
requirements.
Mr. Olver. Then let me go back and ask, are you a primary
developer, the primary developer doing the job that Landmark
was doing on any of the projects you talked about?
Mr. Kumar. No, no.
Mr. Olver. You were doing?
Mr. Kumar. Consulting and financial advisory. We are not
developers.
Mr. Olver. Right. Now, the goal that Jones Lang is playing
for the Army is picking up some of the roles that you, and
apparently some others on a selection committee were doing in
going through the process of seeing who should be the
developer.
Mr. Kumar. Right.
They picked up that with a contract from the Army to these
three big projects at Lewis, Hood, and Meade.
Mr. Kumar. Yes.
Mr. Olver. Okay. Are the Navy and the Air Force both using
RFP processes?
Mr. Baumann. The Navy uses a two-step RFP-to-RFP, all in
one document.
Mr. Olver. In one document.
Mr. Baumann. Yes, sir, and the process takes about 11
months, start-to-finish.
Mr. Olver. To two ``NP'' in one document.
Mr. Baumann. Yes, sir. We even make them first respond to
the qualifications section, but they get to read the real deal
in the RFP to determine whether or not it is something that
they want to propose on. Then we ask them to submit their
qualifications in response to step one. The Navy reviews short
lists, four to five players that they want to have respond to
the RFP.
Then those four or five respond to the RFP. The Navy again
reviews and makes their selection, negotiates the deal, and the
whole process, start-to-finish, is 11 months.
Mr. Olver. Could Mr. Anderson come up and also Mr.
Goldstein? I am now, I think, talking to the three who are
managing the three major processes here. Are you using a simple
RFP or is it also more complicated?
Mr. Goldstein. Jeff Goldstein, Boston Capital.
Previously the Air Force, up until now, has always used,
well, I should not say ``always''. In my experience, it has
been an RFP process. Our goal, quite frankly, in order to
simplify, would be to move to an RFQ process. I guess I would
like to, and I am not sure if this is a statement or a
question, but if you are going with an RFQ process, and in
essence the Air Force or whatever branch specifies what
qualifications they are looking for, I am not sure why you
would necessarily cut out those that do not have large net
worth.
Mr. Olver. Well, that is what I want to know.
Mr. Andersen. I would just like to comment that I am not
sure Landmark was actually cut out. I think Landmark decided
competitively not to bid because it was your perception that
they would be cut out.
Mr. Olver. That you would be cut out.
Mr. Andersen. Everyone needs to decide which game they are
going to play. They decided this was not the ball game they
were going to play.
Mr. Olver. Okay. Now, we are getting into what I want.
Mr. Andersen. That has been the comment of a lot of
people, though, on the RFQ, is that they cannot play. That it
is structured in such a way internally. That is why I am
letting this go because I think this is a good exercise for all
of us to listen and hear. We tend to hear all of these things
behind the scene someplace. That nobody ever gets out in an
open forum.
Mr. Olver. So, we got a ``Q,'' a ``PQ,'' and a ``P'' going
toward a ``Q.'' In the case of the Air Force, the biggest
proposals that you have coming in to us is for Offutt Air Force
Base, which has 2,500 or thereabouts. The largest one that I
know of, that the Navy is involved with, is San Diego at 3,000-
plus.
The list that I see has the one I mentioned. Offutt is not
one that we have yet approved. Kirtland is the largest, which
is just under 2,000. Your big one, you have got a couple, two
of them, Lewis and Meade, which are in the 3,000, 3,900 range.
You also have Hood. You did not have anything to do with
Carson.
Mr. Andersen. That is correct.
Mr. Hobson. And we did not have anything to do with
Offutt.
Mr. Olver. Not yet, but presumably they would like you to
at some point, whether they have told you that or not. I am
assuming that to be the case.
Is there any reason why you, as the primary asset manager,
whatever here. It is first process manager and then, as you
have described in your testimony, you end up in the long-haul
as being asset manager. I am curious about that relationship.
For the moment, is there anything that precludes any of you
in the position of process manager deciding this one is too
big. We want to bring in a group of developers that might do
each of them a third, or more in your case, or something. Is
there anything that would preclude that from being the case in
your role as process manager here?
Mr. Andersen. I would just say that in the RFQ process, it
is my belief that people were fully able to team up with each
to submit responses. So, what we enabled the private sector to
do, and encouraged them to do through our forums, was
communicate with each other, understand their best practice
capabilities, how they could complement each other as it
relates to capital raising; and the facilities management side
and the development side.
Mr. Olver. Would you even encourage that within the
Request For Qualifications?
Mr. Andersen. Yes.
Mr. Olver. Is it written in there in the guidelines that
they can collaborate to put forward a proposal, which allows
for some degree of competition in the way the thing gets cut
up?
Mr. Andersen. It is in the Navy, sir.
Mr. Olver. It is.
Mr. Andersen. I know in our comments in the public forums
that it was in fact encouraged that people meet with each other
and decide how they could best for a strong team to compete. It
may have been within our documents themselves, but it was
certainly a part of our communication in the marketplace.
Mr. Olver. One of the things that my colleague, within
whose district Hood lies, would be concerned about cutting
something into too small slices. It is that you lose the
capacity to get amenities into the development. Whereas, if you
are working with a fairly large unit, you can get parks,
playgrounds, and other things like that.
Think of it in terms of a whole community for the 6,000
units. Maybe we ought to be thinking about community for a much
smaller group of units, in the first place, of putting
amenities into this, which leaves you with economies of scale
problems. I guess. Now, is there any inherent reason why we
cannot get those amenities? How would we make certain that they
are in there in the smaller projects?
Mr. Andersen. If I could answer it, Congressman. I think
it is important. I have a picture of these forums in the
process. We have had wonderful turnouts in Fort Hood and in
Fort Lewis, with parties from all elements of the industry.
They come and they meet with each other. Just like we were
chatting earlier.
They meet each other in the breakout sessions and they
share business cards. They can go on the web and find out who
else is participating there and contact each other. There is a
rich dialogue that takes place from various specialty members,
I would say, in the community that want to team up with other
lead developers.
Some people, obviously, cannot lead the response to the
RFQ. So, they will try to establish a relationship and attach
themselves to a lead entity to provide, for example, an
amenities focus, if that is their strength. So, from what I
have witnessed, I see in fact a community dialogue taking place
in a team spirit to respond. Now, we will see as we get into
the next stage whether in fact we find a very balanced RFQ
team.
Mr. Olver. Again, I am trying. If a ``P'' worked at
Carson, which it seems to me, do it. And if a ``P'' has worked
before, and if the ``QP'' worked before, what is the reason for
going to a ``Q,'' which the perception in the community,
whether it is right or wrong, is that we only wind up with the
big guys, or one big guy?
Let me tell you in the vernacular I hear. It is a beauty
contest. You have heard this. I mean, I am not telling you
anything. This is the first time we could do it in a forum
where we can all discuss it. It is a beauty contest by people.
They feel that at the end of the day, and there are some
suspicions about it, that not everybody can play in the game,
or at least gets a fair shake.
I do not care whether everybody plays in the game, but I
think everybody who can ought to be able to play and get a fair
shake in the game.
Mr. Hobson. I think it might be interesting to hear Mr.
Goldstein comment on why he is headed toward a ``Q'' process.
Maybe it will evolve into one which is ``P,'' or ``Q,'' or
``PQ.''
Mr. Olver. I want to know first, why he got to one. Then I
want to know how he got to his. Then why you are going where
you are. Then that ought to get it all out by then for sure.
Mr. Goldstein. Sure. The RFQ process enables two parties
to engage, when you have a very complex situation, in a
flexible environment bringing creativity to structure
something. You asked the question earlier about the capital
markets, which I did not address at that time, but I will now.
There is a lot to tackle here, in both providing quality
housing at an advantageous cost. One of the ways to do that,
for example, is to stratify the different tiers of the capital
and the debt markets it will bring. Having capital market
forums and learning from the rating agencies, and other equity
debt players, what their ideas are.
We will learn further as we identify this leading
development management partner or team, their own ideas on how
best to raise capital and capitalize this project. We will work
with them. We will bring our ideas and their ideas together. We
will go out and meet with the capital markets and drive home a
very cost efficient structure to benefit this process.
Now, if the process manager already knows how best to
structure this to capitalize it, the right master plan
development plan to put in place, the right ongoing management
plan, I mean if you have that so that you can put the
specificity into an RFP so people have an even understanding of
what you are trying to create here, how you are trying to
capitalize it, and then they can respond against RFP, then that
may be the right approach.
I believe that there is sufficient uncertainty and
complexity, if you want flexibility to come to the RFQ process.
That is why I feel comfortable working in the existing
governance that you provided to us. That would be my response.
Mr. Olver. I do not know if you would like to add further
to that?
Mr. Baumann. Well, sir, we in the Navy think that we know
exactly what it is we want. We have a specific requirement,
number of units, that grew in size, quality, amenities,
community, playgrounds. We know exactly what we want. We are a
little shaky on our requirements section sometimes on exactly
how many units we want.
We have a very good picture in our mind of the quality
level that we hope to achieve. We developed the RFQ/RFP process
primarily because we think it fosters competition. It builds
the most competition amongst the most players or spreads the
net the widest we can to involve small regional developers, who
often bring incredible creativity to the party in the manner in
which they finance these deals.
So, we tried to setup our process so that we do not just
look at the huge national and international developers. The RFQ
is designed to be quick, easy, short, and simple for the
development community to essentially materials off-the-shelf to
describe to the Navy what their qualifications and experience
are to participate in this project.
We do not want to energize them to spend great deals of
money chasing our projects, because the history in the last few
years has not been so great. We are trying to make it easy for
the best developers in the country, those that are interested
in our projects, to respond and to get involved in the
competition.
Naturally, we gravitate towards an RFQ process, but we
cannot just stop there because of the concerns that you raised
earlier. We do not know what the numbers are at that time. We
just had a beauty contest. We know we have got a good qualified
developer, but we have no idea whether or not he is willing to
put the assurances on the table that we think we need when
dealing with the Government assets. So, we developed the RFQ
and then added to that the RFP where we tell them what the deal
is. We tell them exactly what we want them to do. Give them
room to be creative. Give them room to finance the project
using pension funds, or conduit financing, or credit
enhancement, or taxable bonds as we have heard today.
All of those are good things and we want to give that
ability to the development community, but we do not want to
dictate to him exactly how he is going to finance it. We do
want to dictate to him exactly what the product looks like at
the end because our guys have got to occupy them.
If the base gets closed, you have got to be able to deal
with them on the market at a later point. That is the major
thing on quality, it seems to me, which we never really worried
about.
Mr. Goldstein. Well, this is the other end of the
spectrum. I think I can probably best describe our view by
describing what we looked at out at Patrick Air Force Base down
in Florida. In essence, the Air Force spent a tremendous amount
of time and effort putting together an RFP process.
It was a wonderful document that got down to incredible
detail, with respect to what it is they wanted, how it is they
wanted this to look. Our feeling is that if you are truly going
to go to a privatization concept, that the Air Force or any
branch should say, look, this is the piece of land I have.
This is the amount of money I have to put in or not. This
is how many units I need, and these are the grades. This is
what you guys do for a living. You tell me what it should look
like. You be creative and you come back to me and propose to me
how big the two bedroom units should be and how big the three
bedroom units should be.
Prove to me why it makes sense. So, that is why we believe
that it makes much more sense to go to an RFQ process where we
get qualified participants to come in and be creative, within
the guidelines set by the military, and propose.
Mr. Olver. But you get some numbers with that. Is that
what you are saying?
Mr. Goldstein. Absolutely.
Mr. Olver. I was beginning to think that ``Q'' was the
process that you pretty much had to use when you were talking
about the very largest things. Then you like pulled people
together within that, by the chosen developer pulling them in
or by the process manager pulling them in. But you, of course,
under the Air Force, are not dealing with huge projects. Even
Patrick is under a thousand. So, that sort of makes me stand
back on that.
Let me ask this. How many people applied for qualification
in the case of Hood? Ballpark.
Mr. Andersen. That is being administered by the Army and
Price, Waterhouse, Coopers as their advisors. The selection
process is being involved by others. We are not leading the
selection process at all.
Mr. Hobson. We need to make that request at some point
because I think we would like to know.
Mr. Olver. I guess then, what I would like to then ask is
how many deals have each of you gone through which involved a
qualification process?
Mr. Andersen. I would be happy to answer that.
Mr. Olver. Yes.
Mr. Andersen. At some point, qualification is critical at
almost every response that we do. I have been there for 15
years at our firm. Often times people will lead; whether they
lead with a qualification and they go to an RFP or not. The
qualification is a part of any selection process. So, I just
wanted to make that clear.
As I mentioned earlier, I am on our investment committee,
Lang and Development Investment Committee, and I lead our land
services practice. We do agency advisory investment development
work. So, my main practice at Jones Lang LaSalle is
development-driven. So, I am working on development product all
of the time.
Development is a complex asset class. So, it is more
typical in that category not to respond atypically to an RFP,
in my experience, but to find out which horse you want to ride,
so to speak. Who is the developer who can get the job done
through the entitlement phase, through the planning phase, and
negotiate with that party.
I, in many cases, put together land development
partnerships with land owners where they just selected us when
we were the developer, with Amoco, and our award-winning
project in Chicago. We worked with the land owner and major
corporation, our own development company, to put together the
right development plan, partnership, structured the economics,
et cetera, and then managed that going forward.
Mr. Olver. Maybe it was not a very useful question; I am
not sure.
Mr. Andersen. Well, I am sorry that I did not answer it
correctly.
Mr. Olver. No, no, no.
Mr. Andersen. The point is, I am very comfortable in my
environment responding to the RFQ process because it is a
complex assets class that I principally deal with. It takes an
engagement of people to drive out the right solution for the
complex problem. That is my environment.
Mr. Hobson. I sort of sense that there is no right answer.
Mr. Olver. There may not be a right answer. There is no
necessity for us trying to separate ``P'' and ``Q.'' You use it
kind of jointly.
Mr. Andersen. I do believe that the Navy's comments on
competition are very valid comments. We intend, by the way, to
drive a very competitive cost efficient solution with the party
that is selected in the RFQ, or we will not recommend going
forward. It is our job, as your advisor, to know what that is
and to negotiate from a position of strength. We fully intend
to do that.
Mr. Edwards. Can I follow-up, John?
Mr. Olver. Yes.
Mr. Edwards. Just to be clear, is the end result the RFP
process that you negotiate with one person, one entity
selected? You do not end up with two or three? It is for all of
you, if each of you could answer.
Mr. Andersen. The way our process is set it is different.
We are operating under different guidelines.
Mr. Edwards. You are dealing with the Army.
Mr. Andersen. With the Army. The development management
entity is identified to us. We are to sit down and engage in
the development of this development and management plan, and
structure the partnership, and hopefully put together a great
comprehensive plan for the Army. Then agree on the legal
documents, and with your approval, go forward.
Mr. Edwards. If I may, we can come back. I understood
that, that development entity could be a collaborative. It
could be a team of several, if they would not be able to
capitalize the whole project, or had that experience with doing
as a single the whole 6,000 or something. Then you could have a
team that had collaborated to put forward the RFQ.
Mr. Andersen. At the end of the RFQ process, the Army
would have one team. Regardless of the entities, the number of
entities on the team, you would have one team.
Mr. Edwards. How about the Navy? How about the Air Force?
Mr. Baumann. In the Navy, sir, we put out an RFQ. It is a
short list of four to five of the major players that have
responded to us. We asked all four of those to prepare
proposals and then select our one.
Mr. Goldstein. Well, I think that there will always only
be one team. There can be multiple developers within a team,
but there has to be one oversight.
Mr. Holloway. Sir, I have been doing this for about 20
years, mostly for cities and counties. We put out RFPs all of
the time trying to do downtown redevelopment projects. I am
strictly a public-private partnership representative. I solely
represent the public sector on all of these projects. That is
where this process came from. The cities have been using the
RFQ/RFP quite successfully for years.
Mr. Edwards. Very good. Thank you.
Mr. Hobson. Ask him why. If this is being done out in the
real world all of the time, why is this so difficult when the
services do it? I mean, it does not make sense to me that we
have created this huge system of reinventing the wheel. Maybe
all this hearing comes down to this. It is being done every
day.
Why is it so darn difficult? And I was going to use another
word, but why is it so difficult to get Fort Hood going? To
have gotten Fort Carson done and all of these other places,
when in the real world, people do this every day?
Mr. Olver. May I answer that, Mr. Chairman?
Because we put together huge sets of long regulation around
the thing in the first place.
Mr. Hobson. No, no. Cities have huge, huge bureaucracies
to deal with in these major cities. Obviously, you have worked
through them. Is there some game going on here in the military
that we do not have in the other structures. You have the same
dominant kind of people that you deal with in the military.
They just do not have bars on their shoulders. They may
have worse. You have city councils. Good God, dealing with
those people. What is the difference here from your
perspective? If anybody wants to join in, what is the
difference?
Mr. Baumann. I believe it is a new program. We have got
growing pains. We do not have a lot of core competencies. Some
branches and services have not done this before. We are used to
going out and buying our milk on units, and own them and
operate them ourselves. So, this is kind of a new way of doing
business. Cities and counties have been doing this for years.
It should not be that hard.
Mr. Andersen. Sir, I do not know the answer other than the
FAR that we have to deal with, and the level of oversight that
we have to go through, and the chain of command that we have to
go up on every issue and every order. I will say that I think
the Navy has got it down.
We have put out two projects. We have five in solicitation
right now, and hopefully more coming, with your approval. We
think we have figured out the right way to do it.
Mr. Olver. My only comment would be that obviously the
more parties that get involved, constituents and stakeholders
are involved, that exponentially the communication demands go
up and slow down enterprises. It is not just unique to the
Government sector, in any business or operation. Because you
are working with multiple constituencies, Federal, big
agencies, local municipalities, and the private sector. It has
to do with the numbers of people that care about the process. I
think it is very simply that. To the extent that you can
streamline your governance of it, we will do the best to do the
same.
I think some of it may be too. There was a resistance I
think in some level of services, and maybe even in the Congress
to do privatization. I think hopefully now that we are in the
boat, that we are going to do it. It is just a question of how
we do it, when we do it. Get the dollars right. I think maybe
some of this will go away.
I think there has been some behind-the-scenes over the type
of new--in certain areas of the Government, then to have
repeated the process. I think one of the things that we are
trying to do at this hearing and at other hearings is to say,
it is here. We are going to have it. We are going to deal with
it. There is no other way to get around the problem that the
services have housing their people and the appropriate quality,
without going to privatization.
I noticed that people that wear uniforms have been somewhat
resistant to that. I think those days have got to be over.
Mr. Baumann. I would say the resistence is falling as we
build trust out in the field.
Mr. Olver. But as you build projects, we get projects that
way, that we can all live with.
Mr. Hobson. Chet
Mr. Edwards. Mr. Chairman, could I have Mr. Baumann to
stay there, and Mr. Holloway come up? I would like to just
shift gears a little bit, back to the structure of the
partnership, whatever you might want to call it, between the
military and the private partner to make this work.
First, Mr. Holloway, I wish you were the property
management of some of my Congressional Offices in Billings in
which I live. I would like to have that kind of response.
Obviously, not every company, and certainly over a 50-year
period, would even want a company to always be committed to
that level of quality.
So, we have got to have a legal structure in place for the
military commander to continue to have influence and a lot of
control over ensuring the quality of the maintenance for 10
years, 30 years, 40 years out. Mr. Baumann, you referenced
this.
I guess I would like to ask first, Mr. Baumann, are there
specific deals that are structured out there today that are
examples in your opinion about a good structure to maintain
Government control over quality assurance, and also badly
structured deals where you think maybe we have given up control
and will not have the influence we should have, since your
quality houses are 30 years from now.
Mr. Baumann. Sir, I have very little knowledge of the
other deals; how they are doing. I really cannot say whether
that is a bad one or that is a good one. I know in the Navy
what we do is take a portion of the bar, a bi-rent, and pardon
my being cavalier, drop that into a recapitalization account.
It flows through, pays rent, pays operating expenses, drops
money in an escrow account for future recapitalization of the
units. The Navy has control of that account. It is not a
developer account. He cannot pull money out of there without
the Navy's permission. Now, that money sits there. Our deals
are 50-year deals. We bill them on day-1. In year 11, we take 5
percent of the units and we recap them, every year for the rest
of the project.
So, from 11 to 30, we do all of the units, 5 percent per
year. Years 30 to 50, we do them again, 5 percent per year. The
first time we recap them, we spend $20,000 per unit. We are
setting aside enough money dropping into this account to do
$20,000 per unit in today's dollars; not the future year
dollars of when we are actually recapping them, but in today's
dollars.
Then we do the same thing again in years 30 through 50.
Again, this time at $40,000 because the units are declining.
That is where people are going out in time. So, what we are
doing in the Navy is ensuring that the money is there for the
recapitalization of these units. Now, my crystal ball is not
very good at 5 years. It is certainly not very good at 30
years. So, it would be impossible for us to say now whether or
not $20,000 in today's dollars in the right number for that
particular unit.
We have done a lot of studies based on the age of the unit,
when we start with it, the locale that it is in, the manner in
which it is being kept up along the way, to feel comfortable
that we have enough money or we do not. Then when the time
comes when that unit needs remodeling, we do not rely on the
private developer, just by himself, to go out and decide what
needs to be done to that unit.
Left to his own devices, he might want to spend $5,000
instead of the $20,000 that has been set aside. So, we are
partner in a partnership. So, we go out with the developer as a
team and we look at each unit. Then we say that unit needs a
new bathroom, needs counter tops, needs this, needs that. Cost
it out for me, Mr. Developer. He is with us on this trip.
He costs it out; $21,000. We pull $20,000. We say, gosh, we
have only got $20,000 in the recap account. You have got to
change something. All we have is $20,000 to spend. Then we pull
that money out of the recap account and spend it.
Mr. Edwards. Could I ask that as a follow-up to this
meeting today that you send the Committee a letter through the
Chairman's Office outlining what you think the key criteria,
whether it is 3 or 33, criteria for us evaluating at the end of
the day whether the relationship, the structure of the
partnership protects the interest of the military and the
taxpayers so that we do not realize the concern, the risk that
you mentioned in your opening testimony?
Mr. Baumann. I would be flattered, sir.
Mr. Edwards. If you would include in that how we structure
it, so that in the case of a private entity wanting to sell out
its interest, or in the case of bankruptcy, how we would
protect the military families and the military's interests over
that.
Mr. Baumann. I would be delighted.
[The information referred to follows:]
Mr. Edwards. Mr. Holloway, again, I know you have not done
military housing, but quality control is quality control.
Obviously, you have it in your company. From your perspective
as an owner and a manager of a huge number of student housing
units, what do you think the key components of the structure
should be between the military and a private entity to ensure
both an interest for the project for the private entity and
fairness there, but also to protect the interests of the
military and the taxpayers, to ensure quality and maintenance
years out, knowing that not every employer in the world, over a
period of 50 years, is going to make a commitment to quality
and maintenance that you have?
Mr. Holloway. Well, sir, a couple of things on that issue.
Number one, I believe that the Government is our partner going
in. So, if you take that aspect, the ground is not owned by us.
It is already owned by the U.S. Government. To every business
deal, the ground is worth something. It does not matter what
cost you put in.
Over, above, and beyond that I believe that joint ventures
are the way to go for the Government. They should be a long-
term owner in this situation with us on the private side. Only
by having that ownership interest does it guarantee the same
aspects for them as far as the asset value at the end of the
day. One of the comments that has been made here, if you dig
down in it and pay attention as to what is happening, no
private investor in today's economy, and I heard my colleague
here talk about having negative cash flows in the first 2
years, and then barely making it in the next 8.
I guess if that is the game, I know I certainly cannot
afford to play because I am not in this game to be sitting and
getting an ``at-a-boy'' on the back and the Government saying
thanks for helping us out, but you did not make any money. If
that is the game, I think most of the people in the room here
should learn that we should not be here, and the Government
housing that got there today is pretty much going to maintain
itself at the pace that it is.
When you go out and you study what is out there, you look
at the assets and the values of what we are paying on these BAH
rates, and you recognize I just visited not only Fort Lewis,
but Fort McGuire. At both of those I just saw new bachelor
housing. When I was told the price construction for that, I was
totally blown away.
Mr. Edwards. It is good to hear somebody else say that.
Mr. Holloway. I will just put a couple of numbers that I
heard. We saw one building that was $8 million, with 108 beds.
So, your average cost per bed is somewhere around $75,000. In
our college housing today, we build brand new, stick out of the
ground, we buy the land. Remember that land is already
included.
We buy the land. We include full swimming pools, tennis
courts, basketball courts, full community centers with high
speed Internet access to every unit. We provide telephone
service in every unit. The base telephone is provided to the
occupant when they move in. We make money in telephones. My
belief in everything that we do here with the Government, the
Government should make money in every part of this process.
That is why they should be a partner with us. They should
make money on the Internet. They should make money in the
telephone system. They should make money as we make money
driving down the operational cost.
Mr. Edwards. What is your cost per bed?
Mr. Holloway. Pardon me?
Mr. Edwards. What is your cost, your average cost per bed?
Mr. Holloway. On construction?
Mr. Edwards. Yes.
Mr. Holloway. Brand new, out of the ground we run
somewhere around $27,000, brand new. Now, what we are providing
that you are not, in the newest housing that I saw at Fort
McGuire the other day which was called one-on-one, which is a
bedroom, a bedroom, and a bathroom in between, and a so-called
kitchenette.
Now, the amazing thing to me is people have not figured
this out. The bachelor getting housing and a kitchenette does
not get a food allowance, but they do get a meal ticket to eat
over in the mess hall. So, why in God's Name would I, as a
bachelor who is having a tough enough time living on the income
that I am getting from the Government today, not be eating my
meals in the mess hall?
So, we built these kitchenettes that really do not service
anything. Do I think it is a good idea to have a kitchenette
with maybe a microwave and a small refrigerator. But a full-
blown stove so that these people coming in can cook their meals
when they cannot afford to buy the food did not make a lot of
sense to me.
More importantly, when you get inside of this room and you
look at the square footage, it is clostrophobic. Our units are
1,250 square feet. We have four bedrooms, four baths, or two
baths as the case may determine, full kitchens, full living
rooms, full dining rooms, fully furnished. We are fully
furnished at that price as to what we are putting out.
Here is the scary number. If you want to go to our actual
bedroom, I guess our actual bedroom today is probably somewhere
in the 15X20; 10X11, 10X12. That is just the bedroom. So, what
I saw, I do not think that whole room was 10X11, to be quite
honest with you. The cost to construction, remember we are
dealing with college students. There is nobody more destructive
in the Country than college students. I say that, but in a very
affirmative way. What we are dealing with in the barracks
housing is exactly the same thing that we are dealing with in
college. We are dealing with 19-year-olds that are in there.
For the most part, it is their first time away from home.
When I see the over construction that we have built, I mean
these things are going to last not 50 years, but 100 years. The
problem with that is lifestyles change. Nobody is here for the
next 100 years. I am certainly not here for the next 100 years.
There is no reason. Assets have a depreciable life. In that
depreciable life, they should be paid off over that depreciable
life.
That is where your investment occurs. The investment for
the Government is the ground. In a true partnership, the ground
should be paying a ground lease back at a minimum, with some
kind of forced savings going back in. As you construct it and
they are saving, we should share in the savings. If we can
accomplish that, it becomes a partnership for everybody.
Mr. Edwards. Let me ask you this. One way to ensure
developer commitment to long-term quality maintenance is a
structure where you do not have positive cash flow until the
out-years. You are saying in this day and age, in this economy,
you cannot expect to get a lot of quality developers competing
on a deal like that.
You suggested we have a joint partnership or a joint
venture. How do you structure it? If you were sitting where we
are, knowing the knowledge that you have, how would you
structure it to be sure that the Government or the military
always has the ability for their commander to say, you have got
to fix up these houses?
Mr. Holloway. Well, that is under a separate contract,
Congressman. What happens, you have to separate a business deal
into various pieces. On the first side of the business deal,
you have your equity. The equity is what I am going to put in
as a private developer, and also the credit to what the
Government may also put in as a private owner, be it the value
on the ground or be it a cash supplement that they may loan in.
Mr. Edwards. You are right. That is what we do.
Mr. Holloway. When you take those things and you put them
in, as the case may be, that becomes the equity side of the
transaction. The equity side of the transaction is done totally
different than the management and maintenance of the program.
At any time, we can be fired. If we do not meet certain
standards, if we do not live up to certain standards, anybody
should be able to be removed from that situation.
That does not remove them from the equity portion because
they still have invested money. They still deserve to get a
return on their money. Now, the way to ensure that beyond one
more point is also to tie-in probably a penalty clause that
even affects their equity side, so that they are geared to stay
in.
Remember, a truly great property management company is
going to make money from the property management. You want them
to make money from the property management. If they are not,
you are going to get exactly the same results that you are
getting out in the field today. People do not care. The biggest
problem that I see out there today when you talked about on-
base is that it is truly paid for by the Government.
So, at no point in time does the resident living there
really care about what is happening. They do not jump up and
down about their maintenance because they do not pay the rent.
I am not saying that they should pay the rent, but it has to be
credited through the system. As a private developer, I would
much rather have the check coming from the Government than I do
from all of the soldiers coming in and out.
I do not want to be chasing somebody who has moved from
Fort Carson to Fort Hood trying to collect my money. That is
not what I am recommending. That is where the partnership works
very well for both the Government and us. Some of the things
that we have looked at, and some of the biggest problems of the
community, when you get out there and certainly in some of the
forts, maybe in even more than I recognized, a lot of the
spouses cannot get jobs, and I mean meaningful jobs.
The reason that they cannot get meaningful jobs is because
everybody is concerned as to when their next appointment
somewhere else is or when they are going to be pulled out of
that environment. So, it is hard for an employer in the
community to say this is what we are willing to do. A part of
our process incorporates that.
We have created a training facility that we would like to
train a lot of these people and get them involved in the
community. What we recommend and what we need are community
assistance, community residents, people that are interested in
taking care of the swimming pools, the tennis courts, and
watching over.
Now, if we do that with our own people, from a property
management standpoint, that becomes cumbersome and expensive.
Whereas, if we can do that with people already on the base,
then we can do several things. We can train them in the mode of
property management, which allows them the flexibility when
they move from base-to-base that they can setup and pickup a
job in that community, and more importantly, be an asset to the
community itself.
There is one thing in the real estate business today, there
is a shortage of great property managers. There is a shortage
of great technicians. There are things that, from a training
skill standpoint, they are easy to setup and work in every
community. So, it is those things that if we work together and
we understand where this is all going.
There is so much more money. The ancillary money that is
not even mentioned today that is going through the cracks is
incredible, and just from phone systems alone. So, there are a
lot of things out there that I think working together as
partners I think makes more sense.
If I can comment one minute on the RFQ/RFP process, and the
``P'' process, and the ``Q'' process. It goes back to my
opening comments. Why in four branches of the military do we
have four different systems versus let us pick one that we
like? Whether it is Mr. Baumann's, which I happen to agree with
to a large degree, because why should we be scrutinized in
either an RFP process or an RFQ process, and not be able to get
in front of these people and tell them our story?
Who are we? How can you make a decision based on somebody's
numbers and their facts and say this is a great company? What
is your vision? When I sit here in front of you, I can tell you
what my vision is. I think you can read it and you can
understand it. I think it is important for the decision makers
to understand what it is we are trying to accomplish. If we sit
here and we believe that we are not going to be out here making
a profit, then we are kidding ourselves, because I would rather
take my money and put it in the stock market and at least hope
that Yahoo goes up tomorrow. Where it is today, I cannot sit
here and tell you that I am willing to take an 8-year stretch
and not make any money.
Then what I am really telling you is, I am either hiding it
in my development phase, or I am hiding it in my construction
phase, or I have it in my management phase, but somewhere out
there--pardon me?
Mr. Edwards. All of the above.
Mr. Holloway. All of the above. Well, that is true because
every one of them is a separate business. So, that is our view.
Mr. Edwards. Thank you. Thank you both. Thank you, Mr.
Chairman.
Mr. Hobson. Just let me make a couple of comments.
Property management looks easy to a lot of people. It is
not easy. You can make money in it, but it is something that
you have got to watch. It is like the restaurant business.
Everybody thinks that everybody gets rich being in the
restaurant business. There are a lot of property management
companies.
It is hard to find people that are skilled in doing certain
types of work. The Navy does a limited liability corporation in
which they setup a lot of reserves and controls. In some
situations there have been some deals where if there are
profits made, that they are shared both with the Government and
the developer. So that there is an encouragement for him to
make money and not to try to hide things so that everything can
be, as you would, if you were in a private deal with one of
your developers, the guy who is developing for, say, Arco, or
whoever.
There are probably some incentives for them to get certain
efficiencies, certain rents, and things of this sort. I guess
the one thing that comes out of here to me that I had not
really thought about before, but when you discussed about the
way the communities, the cities, which I think are awfully hard
and difficult.
Just going out trying to re-zone something today is, you
know, somebody said in a couple of months. I never got one. I
think it went faster than I thought it would and then that
scared me because then I owned the piece of ground for about a
year before I could get in the ground. That answers your cost,
except if you are dealing with the Government.
It is somewhat frustrating to me to see the way we do. This
is probably the reason why we are having these hearings. It is
somewhat frustrating to me. I try to look at these things and I
am hoping our Committee does. I think from the question you
heard today, is that we are trying to look at this as if we
were the owner of the property, which we are.
We have a client that we want to provide something for,
which is the military. We are trying to get value in our
dollars and in our assets the same way you would do it as if
you were in the private sector. Now, there is somewhat a
difference in this in that the military has very little history
in what we are undertaking. That is a part of the problem.
There has been some resistence to this. I am hoping that,
and I appreciate all of your willingness to sit through all of
this because none of us have had lunch yet. I am on a diet. So,
it does not make any difference to me, but to others it does. I
want to shut this down. John has got one more question. I will
let him ask his question, and then I want to let any of your,
our witnesses, if there is anything that you want to say before
we go, I want you to feel comfortable in saying that.
Then if there are any comments that you want to submit for
the record or off the record afterwards in writing, we will be
happy to take those too. John.
Mr. Olver. Thank you again, Mr. Chairman.
I just realized that while I had the three of them up here
before the three service managers. By the way, the Navy is
also--the Marine things come under you. Is that right?
Mr. Olver. Okay. There was one other question that I
wanted to ask. Actually, it comes from the testimony of you,
Mr. Goldstein. I will read the sentence that I am focusing on.
It reads from your testimony, ``Boston Capital would be
responsible for arranging competitive and dependable financing,
oversee development, and following completion of construction,
we would manage the assets on behalf of the Air Force and
assure the quality of the third party property management
entities.''
So, in your consulting role, you would arrange for the
financing and choose a developer and so on, which is now
clarified because we have gone beyond that. Then you have a
process after the construction where you are still in I guess
what you call asset management. Who owns this property?
I am curious whether this is different in any significant
way, which is why I wanted to ask rather than putting it in
writing because I would like for you to respond to each other
on the role that each of you plays. Is it similar or different
than the way it is conceptualized with the particular services?
Mr. Goldstein. I do not believe it is significantly
different from what anybody else is talking about. The
ownership in our view, the land would still be owned by the
military. In essence, there would be a ground lease. In
essence, what we would do is at as--if an organization, for
instance, like Gary's was the property manager's, and they were
collecting rents, and they were taking care of the ongoing
maintenance, there would be things like rent rolls and incoming
expense statements generated on a monthly basis.
This is something that we would not expect the Air Force to
necessarily receive, go through, and do an analysis on, and
make decisions on. That is what an asset manager's role would
be; to aggregate all of these various reports that are coming
from all of these various properties and, in essence, be the
owner's representative in terms of telling them what is good,
what is bad, what is positive, what is negative, what
recommendations we have with respect to actions moving forward.
Mr. Olver. So, you are serving the service that you are
contracted over the life of the lease.
Mr. Goldstein. That is correct.
Mr. Olver. Essentially as a management company during that
time.
Mr. Goldstein. That is correct.
Mr. Olver. For which you will continue to get a fee.
Mr. Goldstein. Presuming that certain hurdles are met,
correct.
Mr. Olver. Is there any difference in how your
relationship to your services, Mr. Baumann, and Mr. Anderson?
Mr. Baumann. Nobody has offered me a 50-year custodial
arrangement in the Navy yet, no, sir. I figure when we sign the
deal with the private developer, BBT, my firm, leaves. Now, the
Navy still has a continuing responsibility. In our program we
call it residual management.
Mr. Olver. They are to do the residual management,
apparently with their arrangement with the Air Force. I have
not seen the arrangements. So, you are out the door once the
project is done; once the development is complete.
Mr. Baumann. That is correct.
Mr. Olver. You have some oversight through the development
and completion of the construction.
Mr. Baumann. Yes, sir, and actually my role in the
construction completion is minimal, if at all. We have outside
architects that are exposed to make sure that the construction
is proceeding in accordance with the final working drawings
that are a part of our contract.
Pretty much I am gone when we sign a deal. Now, we do have
EFDs and field officers in all of our divisions. We have guys
in the fields on all of these bases, not BBP, but the Navy
does, that are perfectly capable of checking the reports on
operations, handling the day-to-day function of the property
that was spoken about earlier. I, as a consultant, am gone.
Mr. Olver. Okay. For Jones Lang; your understanding of the
relationship.
Mr. Andersen. Well, we presently--
Mr. Olver. You would just like to get something off the
ground.
Mr. Andersen. Yes, we would. The management function that
we have been discussing is very familiar to us in our business.
The way I would frame it is that the Armed Services need an
advocate, and advisor, on an ongoing basis to represent their
ownership interests. That is what we refer to as the asset
manager, managing the ownership and operating issues that the
Army would receive.
We have not yet been asked to play that, but I--as a major
role, but I believe it is a very important and necessary one.
That is to protect the Army's interest. So, I support that as a
structure issue.
Mr. Olver. So, Jeff, we had three different things. We
have you who seems to think that, that is an arrangement as a
part of your relationship as it was contracted. The Navy says,
no, we are out. But obviously then it is back to the Navy who
has got to do the oversight.
Mr. Goldstein. There may be four. There may be another one
because I do not know what Carson, what do you do at Carson?
Mr. Olver. Do you have an ongoing relationship to Carson?
Mr. Andersen. I would just add that it is a major business
that many of us provide. We would expect that as we grow our
relationships to earn that right, or to have somebody come in
who is very qualified to provide that.
Mr. Olver. I am not sure that if we were talking about the
reason we are getting into privatized housing is that we have
not been able to fund that and properly maintain it. So, we
probably ought to have somebody who is in that relationship on
the part of the services. I would think I would tend toward the
Air Force's role.
I am sorry, Mr. Little.
Mr. Little. Just to clarify our role as consultants and
financial advisors. We are not owners. We are not operators. We
are not project managers or property managers. After a contract
has been awarded and closed, and construction has started, our
responsibility is now engagement. That typically involves
advising and working with the Department of Defense or the
services in terms of oversight.
Mr. Olver. Who is doing the Air Force ones that are
finished? Who is running Lackland. Is the Air Force running
Lackland or is the developer still there?
Mr. Little. The developer, and that would be Landmark.
Mr. Olver. So, you are running it?
Mr. Kumar. Right. We are running it.
Mr. Little. They own the property. They are the owners and
the operators.
Mr. Edwards. I would just like to make a very brief
comment. I think all of us in this room are committed to
wanting to make this project work. We all understand, of
course, the credibility of this as we start to move forward and
get projects up.
One thing I want to say, having been out of the commercial
real estate business for I guess 15 years now, I do not know
who all of the players are. I do not know what all of the
interconnections are between the capital sources, the
developers, the property managers. I used to work with the
Trammel Company in the early 1980s and these things have
changed the industry dramatically since then.
I do think, Mr. Chairman, it is important that if there is
ever any potential conflict of interest that a Washington Post
reporter could put in the front page of the paper, we need to
be sure that all of the players involved understand the
sensitivity of that and get that out front, even if it might
bring criticism.
We can undermine the credibility of this entire program, if
there is ever an attack in the Wall Street Journal, the
Washington Post, or the New York Times on somehow this process
being self-served in any way. I think that credibility is
crucial. Listening to the experts here today, I am thrilled
that you have been brought into this process.
You brought creativity, innovation, and expertise that
frankly we would not have had, just dealing with the full-time
military personnel. So, I am thrilled with the expertise in
this room today. I guess I would say that when I was in the
private sector, that kind of conflict of interest question
might not have been that big of a deal, but in the public
sector, it is just crucial that we ensure that there are fire
walls and no potential suggestion about anybody who would like
to undermine this whole process against all of our interests.
The firewall is an insurance if there is complete integrity
and no conflict of interest. That is with no suggestion. I do
not have any reason to believe there has been a conflict of
interest, but I just wanted to get that on the table. Thank
you, Mr. Chairman.
Mr. Goldstein. As I said, I am still involved with this
just a little bit, but I do not think there is anybody here
that audits me or I deal with that I do not do any, I do not
want to even fool with the public sector stuff, especially
after sitting through all of this stuff. I do not know.
Mr. Olver. There had better be big dollars in it someplace
because an awful lot of folks are looking at it, but I sure do
not want to mess with them. I think this has been a very good
hearing. We have had 2 days of good hearings on this subject. I
think it is good for our Members to understand what you all do.
I think it is good for you to hear the discourse that goes
on here and the questions that we have, because I think that we
can be better stewards and you will be better stewards of what
we are all trying to get by working together, listening, and
understanding each other together.
This is not to be an adversarial situation. It is designed
to get this product out there to the young people in the
services in the right way. If we go forward with that attitude,
we are going to get where we need to all be. If we have
secondary agendas or other things, it is not going to work.
I want that understood. We are going to make it work, but
we need you all to work with us to make it work. This is going
to get bigger, not smaller. The military may change and get a
little smaller, but that just makes our job a little more
crucial that we have this stuff in the right place, and that
the residual value of this is there, so that we do not create
another problem when we go down the road.
So, I thank all of you for coming. Wait a minute. Do any of
you have anything that you want to add? Yes, sir.
Mr. Andersen. I would like to make two quick comments. One
is on your scale point. There are tremendous efficiencies, both
in the operating level from scale, in terms of getting cost
efficiencies. When you have one sub-component that needs to be
subsidized by another, you can accomplish that to meet the
overall community's mission.
Also, from the public forums we heard from our capital
markets. There is tremendous potential for this overall group
as we look at the cash flow streams that can be created and
segmented. If you can reach scale and not work on a base-by-
base basis, but work across the Department of Defense's overall
asset pool, and tap into the capital markets, you will get a
deeper, broader playing field that accesses lower cost capital.
So, people should begin thinking creatively about how we do
that in a collective fashion. The second point, the last point
I would like to make is that I have enjoyed all of the comments
on the ``P v. Q,'' the ``P,'' and the ``Q,'' and the comment
that was made earlier from Mr. Holloway about wanting to state
his vision and enabling the decision makers.
We are not, by the way, the selection party for our
process. That is the Army and Price-Waterhouse. But I think it
is important in the selection process to receive not only the
detailed qualifications, in terms of deliverables, but to be
able to receive the man and the team with the vision and listen
to them. In effect, we have in our process that capability to
go to a few select parties, as we select the winning bidder, to
sit down and listen to the plan and your vision, and assess
that.
We will not be doing that. I am very much used to doing
that in the practice of selecting parties. I think that is a
very strong point. It gets a little bit to the combination of
the ``Q'' and the ``P.'' Their points are well-made. Thank you.
Mr. Hobson. One point I want everybody to remember. He
said one thing that I hope all of you remember. Look at his per
square foot cost. Look at the private sector per square foot
cost. Then you go look and see what our per square foot costs
are and it drives me nuts. It is like buying the hammer, in the
procurement of one of the services, you know, you buy an $800
hammer when you can go down to the grocery store or the
hardware store and buy one for $9; a pretty good one for $9 to
$12. I bought one the other day. I have actually bought one
cheaper than that because I did not need a very good one.
Those are the things we have got to look at as we go
through this. We get driven into these huge per square foot
costs that I do not know how you can all justify them when we
look at these deals. I think that is one of the things that
when we look at the simplicity of this, especially if we are
giving you the land, and we are giving you the income stream
up-front and all of this other stuff. Why the per square foot
costs cannot be more reasonable to me is stuff that I will look
at. That is what worries me in the deals that go through. I
cannot see the numbers soon enough. Then all of a sudden, we
have wasted all of this time.
Mr. Andersen. You would not commit to go forward unless
you expected there would be a substantial cost savings. That is
a metric that goes to the core of the whole privatization
program. That is the metric that will be used in negotiating
the CDMP.
Mr. Olver. A part of that difference though is as you have
pointed out Mr. Chairman, the nature of the beast. We could go
into the details of that, but it is also partly, as I think you
and I have seen some of these cases where, as Mr. Holloway has
suggested, they look as though they are being built for 100
years, and the whole scheme of things may be quite different.
Mr. Hobson. That is why we need to put all on those. We
need to look at all of these criteria as we go through it to
make sure that we get more realistic private sector numbers. It
will be more. I do not expect that any time you deal with the
public arena the costs seem to go up. I want to make everybody
aware that we are not going to let them go beyond reasonable
stuff.
Thank you all. The hearing is adjourned.
[The following testimony was submitted for the record.]
WITNESSES
----------
Page
Anderson, John................................................... 632
Apgar, Mahlon, IV..............................................203, 556
Baumann, Wil..................................................... 638
Calkins, C.L..................................................... 762
Cotton, Rear Adm. John........................................... 305
Deegan, Dr. J.F.................................................. 736
DeMesme, R.B..................................................... 371
Dishner, Jimmy................................................... 556
Finch, F.J....................................................... 121
Goldstein, Jeff.................................................. 645
Hall, R.E........................................................ 121
Herdt, J.L....................................................... 121
Holiday, Duncan.................................................. 556
Holloway, G.M.................................................... 664
Kumar, Sam....................................................... 655
Lawson, Robert................................................... 671
Little, Wallace.................................................. 627
Lizarraga, D.C................................................... 739
Lokovic, J.E..................................................... 771
Lynn, W.J., III.................................................. 1
Mashburn, Gen. Harold............................................ 305
McMichael, A.L................................................... 121
Pirie, R.B....................................................... 305
Plewes, Maj. Gen. T.J............................................ 203
Robbin, Maj. Gen. Ernest......................................... 371
Smith, Rear Adm. Louis........................................... 305
Squier, Brig. Gen. M.J........................................... 203
Van Antwerp, Maj. Gen. R.L., Jr.................................. 203
Wilson, Charles, III............................................. 632
Yim, R.A......................................................... 511
I N D E X
----------
OVERVIEW
Page
Advanced Appropriations.......................................... 53
Average Age of Facilities........................................ 58
Barracks......................................................... 56
Base Operating Support........................................... 46
Base Realignment and Closure Funding History..................... 91
Base Realignment and Closure............................22, 31, 54, 105
Base Structure and Force Structure............................... 16
Basic Allowance for Housing (BAH) Initiative..................... 102
Basic Allowance for Housing.................................26, 33, 106
Bidding Process.................................................. 119
Bosnia and Kosovo................................................ 24
Breakage and Design.............................................. 89
Chairman, Statement of........................................... 1
Chemical Demilitarization........................................ 52
Contingency Construction......................................... 92
Contingency Reduction............................................ 102
Davis-Bacon and Privatization.................................... 24
Davis-Bacon: Costs............................................... 89
DoD Environmental Project List................................... 89
DoD Life Safety/Health Project List.............................. 90
Environmental Levels............................................. 90
Execution Rates.................................................. 91
Facilities Reduction........................................44, 55, 106
Family Housing--Annual Maintenance and Repair.................... 59
Family Housing--Average Age of Units............................. 59
Family Housing--Deficit.......................................... 59
Family Housing--Maintenance Costs................................ 59
Family Housing--Replacement Value................................ 59
Family Housing Integration....................................... 103
Family Housing Maintenance....................................... 109
Foreign Currency Exchange Rates.................................. 88
Fort Ord, California............................................. 109
Forward Operating Locations in Ecuador and Aruba................. 30
Forward Operating Locations...................................... 40
Funding Levels................................................... 28
General Officer Quarters........................................41, 103
General Provisions: Deletions.................................... 55
Historic Houses.................................................. 41
Historic Preservation--Cooperative Agreements.................... 49
Historic Preservation--Coordination with Housing Privatization... 51
Historic Preservation--Costs..................................... 51
Historic Preservation--Feasibility Studies....................... 51
Historic Preservation--Historic Property Inventory............... 50
Historic Preservation--Private Funding........................... 49
Historic Preservation Activity Accounts.......................... 48
Housing Allowances............................................... 59
Housing Privatization.......................................16, 43, 107
Incrementally Funded Projects.................................... 43
Inflation........................................................ 60
Lost Design...................................................... 89
Lynn, Prepared Statement of the Honorable William J., III........ 7
Lynn, Statement of the Honorable William J., III................. 2
National Missile Defense......................................... 46
NATO Security Investment Program................................. 52
Non-Appropriated Funds........................................... 60
Overall Funding.................................................. 102
Planning and Design.............................................64, 100
Privatization of Unaccompanied Housing........................... 109
Real Property Maintenance........................................ 100
Shift in Costs................................................... 102
SOUTHCOM Housing................................................. 54
Summary and Reconciliation......................................86, 100
Troop Housing--``1 Plus 1''...................................... 56
Troop Housing--Average Age....................................... 58
Troop Housing--Budget Request.................................... 57
Troop Housing--Cost to Buy-Out Troop Deficit..................... 57
Troop Housing--Deficit........................................... 57
Troop Housing--Inadequacies...................................... 57
Unaccompanied Personnel.......................................... 58
Unobligated Balances............................................. 53
Unspecified Minor Construction................................... 90
Utilities Privatization.......................................... 105
QUALITY OF LIFE
``1 Plus 1''--Status of.......................................... 185
``1 Plus 1''..................................................... 184
Basic Allowance for Funding...................................... 175
Basic Allowance for Housing...................................... 179
Chairman, Statement of........................................... 121
Family Separations due to Affordable Housing Shortages........... 200
Finch, Prepared Statement of Chief Master Sergeant Frederick J... 160
Finch, Statement of Chief Master Sergeant Frederick J............ 159
Hall, Prepared Statement of Sergeant Major Robert E.............. 123
Hall, Statement of Sergeant Major Robert E....................... 122
Herdt, Prepared Statement of Master Chief Petty Officer James L.. 139
Herdt, Statement of Master Chief Petty Officer James L........... 136
Housing Privatization............................................ 177
McMichael, Prepared Statement of Sergeant Major Alford L......... 148
McMichael, Statement of Sergeant Major Alford L.................. 146
Military vs. Civilian Community.................................. 186
Overall Funding.................................................. 174
Quality of Life.................................................. 178
Recruitment and Retention........................................ 181
Retention......................................................178, 187
TRICARE.......................................................... 186
Working Conditions............................................... 191
Alabama--Redstone Arsenal........................................ 287
Alaska--Fort Wainwright.......................................... 288
Apgar, Prepared Statement of the Honorable Mahlon IV............. 207
Apgar, Statement of the Honorable Mahlon IV...................... 203
Arizona--Fort Huachuca........................................... 288
Arkansas--Pine Bluff Arsenal..................................... 289
Army MilCon Budget............................................... 263
Army National Guard Program...................................... 303
Balanced Program................................................. 287
Barracks.......................................................274, 297
Base Realignment and Closure Restoration......................... 299
Basis Allowance for Housing....................................268, 286
Buy-Out Programs................................................. 285
California--Fort Irwin Land Acquisition.......................... 289
Chairman, Statement of........................................... 203
Chemical Demilitarization........................................ 299
Clean-up Operations at Closed Bases.............................. 259
Contingency Reduction.....................................267, 272, 285
Enhanced-Use Leasing............................................. 286
Exit Strategy.................................................... 262
Family Housing Construction Improvements......................... 298
Family Housing Inventory......................................... 297
Family Housing Maintenance....................................... 285
Family Housing................................................... 267
Family Reduction Program......................................... 287
Fire Safety...................................................... 284
Fire Suppression Devices in Family Housing....................... 274
Fort Carson--Housing Privatization............................... 265
Fort Hunter-Liggett.............................................. 258
Fort Lewis--Housing Privatization................................ 260
Fort Ord--Facilities Demolition.................................. 279
Fort Ord Family Housing.......................................... 256
General Officer Quarters......................................... 278
Georgia--Fort Stewart............................................ 289
Hawaii--Schofield Barracks....................................... 290
Historic Preservation............................................ 275
Housing Deficits and Waiting Lists............................... 299
Housing Privatization--50 Year Leases............................ 269
Housing Privatization--Meeting Local Standards................... 270
Housing Privatization--Taxation Issue............................ 262
Housing Privatization..........................................254, 273
Indiana--Newport Army Ammunition Plant........................... 290
Kansas--Fort Riley............................................... 291
Kentucky--Blue Grass Army Depot.................................. 291
Kentucky--Fort Campbell.......................................... 292
Maryland--Aberdeen Proving Ground................................ 292
Military Construction Account to Military Personnel Account...... 266
NATO Precautionary Prefinancing Statements....................... 298
New Hampshire--Rochester U.S. Army Reserve Center................ 303
New York--Fort Drum.............................................. 293
North Carolina--Fort Bragg....................................... 294
Ohio--Defense Supply Center Columbus............................. 294
Oregon--Umatilla Depot Activity.................................. 294
Overall Funding.................................................. 284
Pennsylvania--Carlisle Barracks.................................. 295
Presidio of Monterey--Additional Housing Needs................... 259
Previously Authorized and Appropriated Funds..................... 298
Texas--Fort Bliss................................................ 296
Texas--Fort Hood................................................. 296
Total Army....................................................... 284
Utilities Privatization........................................279, 285
Van Antwerp, Prepared Statement of Major General Robert L........ 207
Van Antwerp, Statement of Major General Robert L................. 205
Worldwide Various--Host Nation Support........................... 296
Worldwide Various--Planning and Design........................... 296
Worldwide Various--Unspecified Minor Construction................ 296
NAVY
2+0 Waiver....................................................... 359
Arizona--Yuma MCAS............................................... 363
Arizona--Camp Navajo............................................. 363
Barracks......................................................... 368
Base Realignment and Closure Environmental Restoration........... 369
Base Realignment and Closure...................................336, 360
Basic Allowance for Housing (BAH) Initiative..................... 361
Blount Island.................................................... 357
Calfornia--China Lake Naval Air Weapons Station.................. 364
California--Lemoore Naval Air Station............................ 364
California--North Island Naval Aviation Depot.................... 365
Chairman, Statement of........................................... 305
Child Care Centers Privatization................................. 369
Child Care....................................................... 358
Cold War Museum.................................................. 353
Contingency Reduction............................................ 361
District of Columbia--Marine Barracks............................ 365
Elimination of Contingency Funding.............................335, 338
Enhanced-Use Leasing............................................. 361
EPA and California Office of Toxic Substance..................... 331
Family Housing Inventory......................................... 368
Family Housing Maintenance.....................................357, 360
General Officer Quarters......................................... 360
Georgia--Atlanta Naval Air Station............................... 370
Hawaii--Kanehoe Bay Marine Corps Base............................ 365
Hawaii--Pearl Harbor Naval Complex............................... 365
Hawaii--Pearl Harbor Naval Station............................... 366
Historic Preservation............................................ 348
Housing Deficits................................................. 369
Housing.......................................................... 340
Illinois--Great Lakes Naval Training Center...................... 366
Lemoore Naval Air Station........................................ 360
Maryland--Indian Head Naval Explosive Ordnance................... 366
Naples, Italy.................................................... 345
NATO Precautionary Prefinancing Statements....................... 369
Naval Post-Graduate School....................................... 331
New Jersey--Earle Naval Weapons Station.......................... 366
North Carolina--Camp LeJeune Marine Corps Base................... 367
Overall Funding................................................344, 359
Overall Funding.................................................. 359
Percolation Plan and Fort Hood................................... 335
Pier Space....................................................... 337
Pirie, Prepared Statement of the Honorable Robert B, Jr.......... 309
Pirie, Statement of the Honorable Robert B, Jr................... 306
Privatization of Unaccompanied Housing........................... 362
Sigonella, Italy...............................................358, 363
Utility Privatization............................................ 362
Virginia--Norfolk Naval Air Station.............................. 367
Virginia--Quantico Marine Corps Combat........................... 367
Waiting Lists.................................................... 370
Worldwide Various--Planning and Design........................... 368
Worldwide Various--Unspecified Minor Construction................ 367
AIR FORCE
Alaska--Cape Romanzof............................................ 423
Alaska--Eielson AFB.............................................. 423
Alaska--Elmendorf AFB............................................ 423
Barracks......................................................... 433
Base Realignment and Closure Environmental Restoration........... 509
Base Realignment and Closure...................................405, 414
Basic Allowance for Housing (BAH) Initiative..................... 421
California--Beale AFB............................................ 424
California--Los Angeles AFB...................................... 424
California--Vandenberg AFB....................................... 424
Chairman, Statement of........................................... 371
Colorado--Peterson AFB........................................... 425
Colorado--U.S. Air Force Academy................................. 425
Contingency Reduction............................................ 420
DeMesme, Prepared Statement of the Honorable Ruby B.............. 373
DeMesme, Statement of the Honorable Ruby B....................... 372
Deployments...................................................... 406
Deployments, Major............................................... 409
Dormitory Master Plan............................................ 440
Economic Development Conveyances................................. 403
Family Housing Master Plan....................................... 453
Fiscal Year 1999................................................. 509
Fiscal Year 2000................................................. 509
Florida--Eglin AFB............................................... 425
Florida--Tyndall AFB...........................................401, 427
General Officer Quarters......................................... 420
Georgia--Fort Stewart............................................ 427
Guard and Reserve................................................ 420
Historic Preservation............................................ 420
Housing Privatization..........................................406, 416
Illinois--Scott AFB.............................................. 427
Italy--Aviano AB...............................................430, 509
Korea: Osan AB................................................... 413
Lajes AB......................................................... 408
Louisiana--Barksdale AFB......................................... 427
Missouri--Whiteman AFB........................................... 427
New Jersey--McGuire AFB.......................................... 428
North Carolina--Pope AFB......................................... 428
Oklahoma--Tinker AFB............................................. 428
Overall Funding................................................404, 419
Overseas Military Construction................................... 419
Pope AFB Runway.................................................. 413
Program Execution................................................ 509
RAF Mildenhall................................................... 414
Rhein Main....................................................... 422
South Carolina--Shaw AFB......................................... 428
Spain--Rota Naval Station........................................ 431
Texas--Dyess AFB................................................. 428
Utility Privatization............................................ 422
Virginia--Langley AFB............................................ 429
Washington--McChord AFB........................................400, 429
Worldwide Various--Planning and Design........................... 432
Worldwide Various--Unspecified Minor Construction................ 432
Wyoming--F.E. Warren AFB......................................... 429
HOUSING PRIVATIZATION--DEPARTMENT OF DEFENSE
Additional Projects.............................................. 303
Alternative Forms of Housing..................................... 622
Apgar, Prepared Statement of the Honorable Mahlon IV............. 560
Apgar, Statement of the Honorable Mahlon IV...................... 556
Base Realignment and Closure..................................... 594
Basic Allowance for Housing....................................604, 610
Chairman, Statement of........................................... 511
Cost Analysis.................................................... 604
Defense Language Institute Housing at Presidio of Monterey....... 624
Dishner, Statement of the Honorable Jimmy G...................... 579
Dishner, Prepared Statement of the Honorable Jimmy G............. 581
Evaluation of Program............................................ 603
Family Housing Privatization..................................... 599
Federal Acquisition Regulation................................... 609
Fort Carson Housing Privatization................................ 596
Fort Hood Housing Privatization.................................. 600
Holaday, Prepared Statement of the Honorable Duncan.............. 573
Holaday, Statement of the Honorable Duncan....................... 570
Housing Needs.................................................... 605
Housing Policies................................................. 623
Housing Requirements............................................. 605
Individual Project Success....................................... 603
Joint Service Projects........................................... 611
Junior Enlisted Input............................................ 611
Lackland AFB..................................................... 595
Land and Unit Valuation.......................................... 612
Legislative Proposal............................................. 605
Lessons Learned.................................................. 608
Life Cycle Costs................................................. 606
Loan Guarantees.................................................. 614
Local Building Code Standards.................................... 552
Navy and Air Force Reserves...................................... 597
Olver, Statement of the Honorable John........................... 511
OMB Scoring...................................................... 612
Privatization Authorities, Use of................................ 616
Privatization Costs Exceed Construction Funds.................... 605
Quality of Life.................................................. 597
Scoring.......................................................... 604
Taxes............................................................ 551
Unsolicited Proposals............................................ 615
Use of Consultants in MHPI Projects.............................. 613
Utilities Privatization, Impact of............................... 621
Yim, Prepared Statement of the Honorable Randall A............... 527
Yim, Statement of the Honorable Randall A........................ 514
HOUSING PRIVATIZATION--OUTSIDE WITNESSES
Andersen, Prepared Statement of Mr. John, Jr..................... 633
Andersen, Statement of Mr. John, Jr.............................. 632
Baumann, Prepared Statement of Mr. Wil N......................... 641
Baumann, Statement of Mr. Wil N.................................. 638
Chairman, Statement of........................................... 627
Goldstein, Prepared Statement of Mr. Jeffrey H................... 648
Goldstein, Statement of Mr. Jeffrey H............................ 645
Holloway, Prepared Statement of Mr. Gary M....................... 666
Holloway, Statement of Mr. Gary M................................ 664
Kumar, Prepared Statement of Mr. Sam............................. 658
Kumar, Statement of Mr. Sam...................................... 655
Lawson, Prepared Statement of Mr. Robert A....................... 673
Lawson, Statement of Mr. Robert A................................ 671
Little, Statement of Mr. Wallace A............................... 628
Little, Prepared Statement of Mr. Wallace A...................... 630