    [Senate Hearing 116-641]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 116-641

     THE CURRENT CONDITION OF THE MILITARY HOUSING PRIVATIZATION INITIATIVE

    =======================================================================

                                    HEARING

                                   BEFORE THE

                           SUBCOMMITTEE ON PERSONNEL
                                      AND
                         SUBCOMMITTEE ON READINESS AND
                               MANAGEMENT SUPPORT

                                     OF THE

                          COMMITTEE ON ARMED SERVICES
                              UNITED STATES SENATE

                         ONE HUNDRED SIXTEENTH CONGRESS

                                 FIRST SESSION
                                   __________

                               FEBRUARY 13, 2019
                                   __________

             Printed for the use of the Committee on Armed Services

                      [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                     Available via: http://www.govinfo.gov

                                   __________

                        U.S. GOVERNMENT PUBLISHING OFFICE

    54-809 PDF                 WASHINGTON : 2024

                          COMMITTEE ON ARMED SERVICES

        		  JAMES M. INHOFE, Oklahoma, Chairman
    ROGER F. WICKER, Mississippi		JACK REED, Rhode Island
    DEB FISCHER, Nebraska			JEANNE SHAHEEN, New Hampshire
    TOM COTTON, Arkansas			KIRSTEN E. GILLIBRAND, New York
    MIKE ROUNDS, South Dakota		RICHARD BLUMENTHAL, Connecticut
    JONI ERNST, Iowa			MAZIE K. HIRONO, Hawaii
    THOM TILLIS, North Carolina		TIM KAINE, Virginia
    DAN SULLIVAN, Alaska			ANGUS S. KING, Jr., Maine
    DAVID PERDUE, Georgia			MARTIN HEINRICH, New Mexico
    KEVIN CRAMER, North Dakota		ELIZABETH WARREN, Massachusetts
    MARTHA McSALLY, Arizona			GARY C. PETERS, Michigan
    RICK SCOTT, Florida			JOE MANCHIN, West Virginia
    MARSHA BLACKBURN, Tennessee		TAMMY DUCKWORTH, Illinois
    JOSH HAWLEY, Missouri			DOUG JONES, Alabama

                       John Bonsell, Staff Director
                   Elizabeth L. King, Minority Staff Director

                                   __________

                           Subcommittee on Personnel

                     THOM TILLIS, North Carolina,Chairman
    MIKE ROUNDS, South Dakota		KIRSTEN E. GILLIBRAND, New York
    MARTHA McSALLY, Arizona			ELIZABETH WARREN, Massachusetts
    RICK SCOTT, Florida			TAMMY DUCKWORTH, Illinois

                Subcommittee on Readiness and Management Support

                       DAN SULLIVAN, Alaska, Chairman
    DEB FISCHER, Nebraska			TIM KAINE, Virginia
    JONI ERNST, Iowa			JEANNE SHAHEEN, New Hampshire
    DAVID PERDUE, Georgia			MAZIE K. HIRONO, Hawaii
    MARTHA McSALLY, Arizona			TAMMY DUCKWORTH, Illinois
    MARSHA BLACKBURN, Tennessee		DOUG JONES, Alabama

                                      (ii)

                                C O N T E N T S

                                   __________

                               February 13, 2019

                                                                       Page

    The Current Condition of the Military Housing Privatization           1
      Initiative.

                               Members Statements

    Statement of Senator James M. Inhofe.............................     1

    Statement of Senator Jack Reed...................................     2

    Statement of Senator Thom Tillis.................................     3

    Statement of Senator Kirsten Gillibrand..........................     4

    Statement of Senator Dan Sullivan................................     5

    Statement of Senator Tim Kaine...................................     6

                               Witness Statements

     Cornwall, Crystal...............................................     7

    Wanner, Jana.....................................................     9

    Driver, Janna....................................................    12

    Williams, Christopher, President, Balfour Beatty Communities.....    26

    Picerne, John G., Founder and Chief Executive Officer, Corvias       31
      Group.

    Ehle, John, President, Hunt Military Communities.................    35

    Hickey, Denis, Chief Executive Officer, Americas Lendlease           41
      Corporation.

    Bliss, Jarl, President, Lincoln Military Housing.................    47

    McMahon, Hon. Robert H., Assistant Secretary of Defense for          71
      Sustainment.

    Beehler, Hon. Alex A., Assistant Secretary of the Army for           76
      Installations, Energy, and Environment.

    Bayer, Hon. Phyllis L., Assistant Secretary of the Navy for          80
      Energy, Installations, and Environment.

    Henderson, Hon. John W., Assistant Secretary of the Air Force for    83
      Installations, Environment, and Energy.

    Questions for the Record.........................................   100

                                     (iii)

     THE CURRENT CONDITION OF THE MILITARY HOUSING PRIVATIZATION INITIATIVE

                                  ----------

                          WEDNESDAY, FEBRUARY 13, 2019

                      United States Senate,
                  Subcommittee on Personnel and
                        Subcommittee on Readiness and
                                    Management Support,
                                   Committee on Armed Services,
                                                        Washington, DC.
        The Subcommittees met, pursuant to notice, at 2:04 p.m. in
    room SD-G50, Dirksen Senate Office Building, Senator James M.
    Inhofe (Chairman of the Committee) presiding.
        Subcommittee Members present: Senators Inhofe, Wicker,
    Fischer, Rounds, Ernst, Tillis, Sullivan, McSally, Scott,
    Blackburn, Reed, Shaheen, Gillibrand, Blumenthal, Hirono,
    Kaine, Warren, Duckworth, and Jones.

              OPENING STATEMENT OF SENATOR JAMES M. INHOFE

        Senator Inhofe. Good afternoon.
        The Subcommittees on Personnel and Readiness meet jointly
    today. This is kind of an unusual thing. This does not happen
    very often, but there is a very good reason that should be
    evident to everyone right now that this is the right way to
    handle this.
        Today we are going to have three panels of witnesses. We
    will hear from the families, those who are seated at the table
    right now, of Active Duty servicemembers, representatives of
    privatized housing, and the military leaders responsible for
    overseeing military housing. I welcome all of our witnesses and
    thank them for being here today.
        In the future, this will be conducted at the full committee
    level, but due to the scheduling conflicts that we have, we
    were unable to do that today. I believe that we needed to have
    this hearing as soon as possible.
        It is important for everyone to understand why on-base
    housing is privatized. In the late 1990s, on-base housing,
    which was managed by the Department of Defense (DOD), was in
    disrepair. We privatized the system, putting our faith and
    trust in the private sector to give our families a better
    quality of life while the contractors received fair
    compensation. That was the goal.
        Here is the fact. Our servicemembers and their families
    deserve high-quality, affordable housing. Period. One mistake
    is too many. We hear the argument that this is a rare thing,
    but even if it were, one is too many.
        After hearing from the servicemembers and their families in
    Oklahoma and across the country, it is clear that is not
    happening everywhere. The Military Family Advisory Network
    (MFAN) received nearly 17,000 responses in just 7 days to a
    survey about privatized housing experiences. Of the close to
    15,000 families who currently or recently lived in privatized
    family housing, almost 45 percent responded that they have a
    neutral or a favorable privatized housing experience. That
    leaves 55, however, or at least 8,000 residences, who are
    currently dissatisfied with where they are living.
        There are some out there who try to minimize this problem
    by saying this only happens in 1 percent of privatized housing.
    Even if that is true, that would still be 2,000 military
    families having problems, and this survey shows otherwise.
        Now, we are not going to be able to resolve this issue in
    one sitting. Today's hearing is just the beginning. We need
    necessary reforms to ensure accountability and excellence in
    privatized on-base housing so that we are going to keep on this
    issue. This is not going to be over with today.
        We need to look at three things: the care for the
    servicemembers and their families, accountability in the
    contracting process, and examine what, if anything, the chain
    of command is doing to address the families' concerns.
        You know, we were talking this morning, several of us who
    had been in the United States Army in this case. The chain of
    command was the final decision, and things actually were
    working pretty well at that time.
        Ranking Member Reed and I will work with our Government
    Accountability Office (GAO), as well as the DOD Inspector
    General (IG), to thoroughly investigate and report back to the
    committee on steps, whether administrative or legislative, that
    can be taken to ensure our military families have housing they
    deserve. I remind both the industry and the Department to fully
    cooperate in these investigations.
        I would also like to put on record today that our witness
    testimonies and other conversations that they have had with
    Members of this Committee are protected communications. That is
    very important. As such, any form of reprisal or threat thereof
    should be immediately reported to this Committee and will be
    immediately referred to the DOD Inspector General for swift
    action. Make no mistake about it. I will take any report of
    reprisals on our military families directly to the Secretary
    and Chief of that specific service.
        We are going to get to the bottom of this, and today's
    hearing is the right first step to take.
        Before I turn to Senator Reed, I would like to remind our
    Members that we have three panels today. So we will have 3-
    minute rounds for the first panel and 4-minute rounds for the
    others to ensure that we try to get everyone satisfied and who
    wants to participate.
        Senator Reed?

                     STATEMENT OF SENATOR JACK REED

        Senator Reed. Thank you very much, Mr. Chairman.
        First and foremost, I want to sincerely thank the panel of
    military families who are here today to speak up and speak out
    for their families and for the families of all military
    personnel. I extend that thanks to a dozen more families who
    are not here, but they have submitted written testimony that
    brings to life the painfully inadequate living conditions that
    some of our servicemembers and families are enduring as we
    speak.
        I also want to thank the panels of housing companies and
    DOD witnesses for agreeing to appear today. We have a real
    problem here. Everyone needs to acknowledge that reality, and
    everyone here needs to work constructively and quickly to
    ensure our military families have the housing they deserve in
    the minds of the American people.
        The Committee has received scores of heartbreaking
    testimonials with equally disturbing photos of rampant mold,
    poor water quality, contamination from lead-based paint, carbon
    monoxide, radon, faulty construction, infestations of kitchens
    and other living areas. The impact of these conditions leave
    residents fearful for their families' health and well-being.
        Equally alarming is a recent survey from the Military
    Family Advisory Network, which found that more than half, 55.5
    percent, of families had a negative or very negative experience
    with privatized military housing across 35 different companies.
    I think it is fair to say that generally military housing has
    improved upon where it was in the 1990s when this program
    began. However, here we are 20 years later. There is a clear
    disconnect between what has been promised by the companies as
    permitted by the DOD and the reality of what has been provided
    to military families.
        I understand several families have traveled here today at
    their own expense. Would all the military families in the
    audience please stand up so we can recognize you and thank you?
        [Applause.]
        Senator Reed. Thank you very much.
        A servicemember's commitment extends beyond the missions
    they complete. They dedicated their entire families' lives to
    serving this country, serving this Nation. This Committee is
    similarly obligated to ensure it meets the needs of
    servicemembers and their families once they return home. It is
    our commitment today that this hearing will be the first step
    towards doing just that.
        With that, Mr. Chairman, I thank you.
        Chairman Inhofe. All right. We will now hear from the
    Chairs and ranking Members of the Personnel and Readiness
    Subcommittees. We will start with Senator Tillis.

                    STATEMENT OF SENATOR THOM TILLIS

        Senator Tillis. Thank you, Mr. Chair. I will be brief.
        By the way, I noticed you all were talking when he said 3-
    minute rounds, and what he meant by that is multiply the number
    of Q&A [questions and answers] by the number of members up
    here. We will each have 3 minutes to ask you questions. It does
    not seem like a lot of time, but you need to understand that
    these committee hearings are kind of like the tip of the
    iceberg. This is where you get information to the members. I am
    from North Carolina. I have a vested interest in making sure
    that we get this right. But the real work happens after the
    hearing when the staff and members get together.
        What I am interested in--I am going to be brief so that we
    can get to your testimony--is just back to what Senator Reed
    said. When we did this in the mid-1990s, it was because the
    Department was doing a very poor job. We tended to improve, but
    we seemed to have back-slipped.
        As we go through your personal testimonies--and I have
    spent a fair amount of time this week and I have seen the
    pictures that have come to me in different forms--I will be
    asking other members of the panel how did we get here. How did
    we not have the governance in place to identify this? How did
    we not have a safety valve for the military families to
    actually solve a problem?
        I will leave you with this. There is a variety of reasons
    why we should all be concerned with this. Some of it is just at
    the human level. You see the pictures of children with
    respiratory problems. You see mushrooms growing out of upstairs
    bathrooms, all of these kinds of things. But think about it
    also as something that affects readiness because if you have a
    man or woman deployed and all of a sudden they are calling home
    and they have their spouse talking about these problems and
    worried about the health and well-being of their children, they
    are not as ready, they are not as focused, and they are not as
    capable as we want them to be to protect their lives and the
    lives of their colleagues.
        I look forward to your testimony. Thank you.
        Senator Inhofe. Thank you, Senator Tillis.
        Senator Gillibrand?

                STATEMENT OF SENATOR KIRSTEN GILLIBRAND

        Senator Gillibrand. Thank you, Senator Inofe and Senator
    Reed, for calling this very important hearing as quickly as
    possible so that we can start to address these issues and find
    solutions for our servicemembers and their families.
        This hearing will rightly begin with the testimony from
    military families. We will hear the stories of toxic mold, lead
    paint, pest infestation, and other health risks present in
    their homes. We will hear how these terrible conditions are
    harming the health of our military families, and we will hear
    about the long-term consequences they are actually having on
    their children.
        We will also hear about contractors and their military
    partners completely failing our military families and not
    responding to the crisis in an adequate or timely way. It is
    yet another example of corporate profits coming before the
    health of our military families.
        The committee has received dozens of testimonies from
    families beyond what we will hear today on our first panel. The
    nonprofit Military Family Advisory Network has compiled the
    stories of many of these families and concluded that, ``the
    concerns of families are ignored and families are expected to
    tolerate these conditions.'' This is completely unacceptable.
        In most cases, it is not just a single exposure to mold
    spores or lead-based paint that causes health issues or birth
    defects, but rather the sustained exposure over many weeks and
    months. There should have been a prompt and professional
    response to the initial call for help. We should have been able
    to avoid the situation.
        For example, the Committee received testimony from a family
    in Oklahoma with five children that not only suffered long-term
    health problems because of black mold, but put themselves in
    tens of thousands of dollars of personal debt trying to
    remediate their situation. Yet, the company apparently tried to
    hide the problems from the family.
        A family in Texas called their management company when they
    found mold following the mother's hospitalization. The company
    sent an unqualified technician who failed to diagnose the
    problem. The company refused to send an expert to test for
    mold. When the family paid out of pocket for their own
    inspection, which confirmed the presence of mold at dangerous
    levels, the company denied their request for reimbursement.
    That family continues to experience health issues today.
        When a family in my home State of New York noticed the
    uninhabited house connected to theirs flooding from a water
    leak, their management company shut off the water and told them
    not to worry. When their walls started to buckle from water
    damage, the company told them, quote, the house was settling.
    When bubbles formed on their ceilings, they were told it was
    just humidity. In order to move from the residence, the
    management company required a letter from a doctor attesting to
    the family's health issues. Adding insult to injury, the
    company ultimately denied their claim for all the personal
    items and furniture that had to be destroyed due to mold.
        When a family from New Orleans detected mold in their house
    after experiencing health issues, the management company did
    not believe them and did not test or remediate. When the
    pregnant mother's Ob-Gyn [obstetrician-gynecologist] requested
    mold testing and duct cleaning after becoming concerned that
    the mother could lose her child, the management company
    scheduled the work and then canceled it. They said they were
    not responsible for resident health. The family paid for their
    own test, which revealed six types of mold in the house. That
    family and that baby continue to experience health issues
    today.
        Thank you, Mr. Chairman, for the time.
        Senator Inhofe. Thank you.
        Senator Sullivan?

                   STATEMENT OF SENATOR DAN SULLIVAN

        Senator Sullivan. Thank you, Mr. Chairman, for calling this
    important hearing today.
        I want to make sure that as we listen to the families and
    recognize their service and courage, that we have our other
    witnesses, the DOD witnesses, the contractors, who are intently
    taking notes and thinking about how they will fix this problem.
        As I have dug into this issue, I am hopeful that we can all
    agree, everybody here, all the Senators, all the witnesses, on
    three things. We should have the best possible housing for our
    military families. Period. There is a lot of talk about the 1
    percent in America. Well, guess what. We are looking at a lot
    of the 1 percent in America. It is the less than 1 percent that
    actually raise their right hand to support and defend the
    Constitution of the United States and die for this country and
    their families. They should have the best housing. Period. That
    should not be in dispute.
        Second, we need to fix the lack of accountability and
    oversight that has come from this, whether it is DOD or chain
    of command or contractors. What to me is so appalling as I have
    dug through a lot of these issues is how people, families,
    military families, were not being listened to either within the
    chain of command, the Department of Defense, or the
    contractors. We have to understand why and fix it.
        Finally, we need to fix the program for today and for the
    future. There are things in this hearing that I think are going
    to likely shock many Americans, that we are going to hear about
    military families who are living with things like black mold
    and rodent infestations and raw sewage. We need to look at this
    program, not scrap this program. There are a lot of good homes,
    including in my State in Alaska, that provide quality and
    affordable housing for our servicemembers. But something has
    gone terribly wrong with the system and how to fix it.
        I think if we can agree on these three things, Mr.
    Chairman, it will be an important start.
        I do want to thank the servicemembers and their families.
    It takes a lot of courage for you to be here, those who have
    traveled to be here, and we are looking forward to hearing your
    testimony.
        Thank you.
        Senator Inhofe. Thank you, Senator Sullivan.
        Senator Kaine?

                     STATEMENT OF SENATOR TIM KAINE

        Senator Kaine. Thank you, Mr. Chair, and thanks to all the
    witnesses who will appear and everybody who is with us today.
        I am proud to be on this Committee. I am proud to represent
    a State that has such a proud military history and has so many
    current Active, Guard, Reserve, DOD civilian, military
    families, military contractors. I am proud to have a child in
    the United States Marine Corps.
        I am not proud to be here today. This is the kind of
    hearing we should never have to have. One of the occupational
    hazards of being in the line of work that many of us are in is
    it gets harder and harder to shock me. We all see a lot of
    stuff, and our standards of what will shock or outrage us kind
    of change over time. This is shocking. I look forward to the
    questions.
        I want to offer two sets of thanks to people who are not
    going to be at the witness table today. First, to the Military
    Family Advisory Network for doing this survey. Everyone in this
    room should read the survey. You should read the summary of
    what has happened, but you should especially read the
    narratives of the families and the photos that they submitted
    that are at the end of the survey. It is very, very important
    work that you have done, and you have been very, very helpful
    in encouraging action by the Committee.
        Second, I want to thank Reuters. This first came to our
    attention in our office by Reuters reports. There is a school
    of thought sadly expressed from people even in high offices
    these days that the press is the enemy of the people. The press
    does what they need to do in this country. We put it in the
    First Amendment for a reason. The reason that freedom of the
    press is in the First Amendment is because of hearings like
    this one. It has been accelerated and brought to more attention
    more quickly than it would have because of the diligent efforts
    of journalists to interact with families and tell their
    stories. I want to thank the press for doing a good job on
    this.
        Thank you, Mr. Chair.
        Senator Inhofe. Thank you, Senator Kaine.
        What we are going to do now is hear from the three young
    ladies who are representing many, many families. We are going
    to ask you to try to keep your opening comments down to 5
    minutes. However, your entire statement that you have submitted
    will be made part of the record. Then our questions from the
    panel here.
        We will start with you, Ms. Cornwall. You are recognized.

                     STATEMENT OF CRYSTAL CORNWALL

        Ms. Cornwall. Mr. Chairman and members of the committee,
    thank you for the invitation to participate in today's hearing.
        I am Crystal Cornwall, the proud spouse of a marine of 11
    years, a passionate military family advocate, and founder of
    the nonprofit Safe Military Housing Initiative. I am currently
    a finance professional, a former police officer, and have a
    bachelor's in public administration and am working towards a
    master's degree.
        In many ways, I am like every other military spouse. We are
    at our fourth duty station and are anticipating a geo-batch
    tour in the fall. For the next 3 years, my husband will serve
    away from our family. Our three children have only known their
    father preparing for or deploying to war, a war that has
    endured 18 long years.
        I am here today on behalf of military families of every
    branch and rank. We ask that you act on our testimony and
    ensure military families receive safe, habitable, and
    functional housing and a better, more accountable way to
    resolve problems that arise.
        I first became aware of the crisis-level military housing
    issues at Keesler Air Force Base where termites fell out of
    light fixtures into our beds. Later, at Camp Pendleton, we
    lived with pervasive mold issues and unjustifiable move-out
    charges. At Keesler, the housing office staff told me,
    ``Termites in your home are to be expected because of the
    region.'' At Camp Pendleton, we were inexplicably charged
    almost $700 for carpet replacement. The housing rep used a
    black light and moisture stick to find stains unseen by the
    naked eye. When I disputed the validity of these charges, I
    found no path to resolution with the housing company, Camp
    Pendleton, or my husband's former command. In the end, various
    agencies and local attorneys advised us that military families
    living on the bases are essentially powerless in these
    disputes.
        During my 2 years of research and advocacy, I received
    hundreds of reports from military families of mold growth,
    rodent and pest infestations, moisture intrusion, lead and
    asbestos exposures, radon concerns, base contamination, and
    cancer clusters in their housing. All of this was too often
    compounded by defensive, sometimes abusive housing staff.
        With other military families, I have witnessed the peeling
    paint inside and outside of the homes at Fort Belvoir. I have
    felt the helplessness of a fellow Marine Corps spouse as she
    held her new baby and sobbed while we stood under a collapsing,
    moldy ceiling in her home at Camp Lejeune. I listened in horror
    as families at Camp Pendleton told of mice eating through
    pacifiers in their babies' cribs and electrical outlets
    catching fire due to wiring issues. I have crawled into an
    attic at Keesler Air Force Base and measured the moisture
    intrusion from a roof leak. And I have been to the town halls
    where families were dismissed and they also feared retaliation
    for reporting their concerns.
        Today you will hear from the corporate housing company
    executives testifying that they were unaware of these problems
    and that their own surveys show they are fulfilling the terms
    of their government contracts. They, and some of those in
    command, will also say military families are not reporting
    housing issues through official channels. That is just not
    accurate in my experience and in those of other military
    families. In fact, that is what military families do: we follow
    the rules.
        Until recent media reports and today's hearing, our efforts
    to fight for safe housing were too often met with intimidation,
    personal attacks, and strategic attempts to discredit us and
    silence our voices. We are appalled by this response.
        Looking ahead, we offer three recommendations to address
    the military housing crisis: amend or cancel the 50-year
    privatized contracts to allow for competition, proper
    oversight, and accountability; provide a clear and accessible
    path to administrative or legal recourse when necessary; as
    with civilian counterparts, military families should be able to
    withhold their basic housing allowances until their homes are
    safe and habitable.
        Military families understand that quality housing does not
    mean entitlement to elegant mansions. We simply ask for homes
    free of mold, pests, lead, and other hazards. We expect homes
    free from the stressors of deployments, work-ups, training, and
    the day-to-day Military Service. As parents, we want safe
    places for our children to sleep at night.
        Thank you for your time today and commitment to resolving
    the military housing crisis. We look forward to working with
    you to create solutions. As military families, we do our part.
    We ask that those who are paid to support us do theirs.
        [The prepared statement of Ms. Cornwall follows:]

                     Prepared Statement by Crystal Cornwall
        Mr. Chairman, and Members of the Committee, thank you for the
    invitation to participate in today's hearing.
        I am Crystal Cornwall, the proud spouse of a marine of 11 years, a
    passionate military family advocate, and founder of the nonprofit Safe
    Military Housing Initiative. I'm currently a finance professional and
    former police officer, and have a bachelor's in Public Administration
    and am working toward a master's degree.
        In many ways, I am like every other military spouse. We are at our
    fourth duty station and are anticipating a geo-bach tour in the fall.
    For the next 3 years, my husband will serve away from our family. Our
    three children have only known their father preparing for or deploying
    to war--a war that has endured 18 long years.
        I am here today on behalf of military families of every branch and
    rank. We ask that you act on our testimony and ensure military families
    receive safe, habitable, and functional housing and a better, more
    accountable way to resolve problems that arise.
        I first became aware of the crisis-level military housing issues at
    Keesler Air Force Base where termites fell out of light fixtures into
    our beds. Later, at Camp Pendleton, we lived with pervasive mold issues
    and unjustifiable move-out charges. At Keesler, the housing office
    staff told me, ``Termites in your home are to be expected because of
    the region.'' At Camp Pendleton, we were inexplicably charged almost
    $700 for carpet replacement. The housing rep used a black light and
    moisture stick to find stains unseen by the naked eye. When I disputed
    the validity of these charges, I found no path to resolution with the
    housing company, Camp Pendleton, or with my husband's former command.
    In the end, various agencies and local attorneys advised us that
    military families living on the bases are essentially powerless in
    these disputes.
        During my 2 years of research and advocacy, I received hundreds of
    reports from military families of mold growth, rodent and pest
    infestations, moisture intrusion, lead and asbestos exposures, radon
    concerns, base contamination, and cancer clusters in their housing. All
    of this was too often compounded by defensive, sometimes abusive
    housing staff.
        With other military families, I have witnessed peeling lead paint
    inside and outside of the homes at Fort Belvoir. I have felt the
    helplessness of a fellow marine spouse as she held her new baby and
    sobbed while we stood under a collapsing, moldy ceiling in her home at
    Camp Lejeune. I listened in horror as families at Camp Pendleton tell
    of mice eating through pacifiers in their babies' cribs and electrical
    outlets catching fire due to wiring issues. I've crawled into an attic
    at Keesler Air Force base and measured the moisture intrusion from a
    roof leak. I've been to the town halls where families were dismissed
    and feared retaliation for reporting their concerns.
        Today you will hear from the corporate housing company executives
    testifying that they were unaware of these problems and that their own
    surveys show they are fulfilling the terms of their government
    contracts. They, and some of those in command, also will say many
    families are not reporting housing issues through ``official
    channels.'' That's just not accurate, in my experience and in those of
    many other families. In fact, that's what military families do: we
    follow the rules.
        Until recent media reports and today's hearing, our efforts to
    fight for safe housing were too often met with intimidation, personal
    attacks, and strategic attempts to discredit us and silence our voices.
    We are appalled by this response.
        But, looking ahead, we offer three recommendations to address the
    military housing crisis:

          Amend or cancel the 50-year privatized contracts to allow
    for competition, proper oversight, and accountability.

          Provide a clear and accessible path to administrative or
    legal recourse, when necessary.

          As with civilian counterparts, military families should
    be able to withhold their basic housing allowances until their homes
    are safe and habitable.

        Military families understand that quality housing does not mean
    entitlement to elegant mansions. We simply ask for homes free of mold,
    pests, lead, and other hazards. We expect safe homes free from the
    stressors of deployments, work-ups, training, and the day-to-day
    Military Service. As parents, we want safe places for our children to
    sleep at night.
        Thank you for your time today and commitment to resolving the
    military housing crisis. We look forward to working with you to create
    solutions. As military families we do our part, we ask that those who
    are paid to support us do theirs.

        Senator Inhofe. Thank you very much for the excellent
    statement, Ms. Cornwall.
        Ms. Cornwall. Yes, sir.
        Senator Inhofe. Mrs. Wanner?

                        STATEMENT OF JANA WANNER

        Ms. Wanner. My name is Jana Wanner. I am an Army spouse of
    9 years, and we are currently stationed at Fort Meade in
    Maryland. My husband is a sergeant first class, and we have two
    children.
        We are enrolled in the Department of Defense's Exceptional
    Family Member Program (EMFP), which means the Department helps
    us with adaptive housing, proper medical care, and educational
    needs for our daughter who has a rare genetic condition that
    causes both physical and educational issues. While it is not a
    perfect system, we are extremely grateful for the EFM program,
    as it allows my spouse to train and deploy without worrying
    about our safety and welfare at home.
        Five months before we moved to Fort Meade, we contacted the
    Corvias housing staff to select a home. Due to our daughter's
    medical condition, we needed and requested a single-story home
    without stairs. We verbally made the housing staff aware over
    the phone that our daughter has knee problems associated with
    her medical condition. Corvias assured us that since we were
    placed on the waitlist 5 months prior to our report date, that
    they would have plenty of time to accommodate our request.
    After selecting from the choices that were provided by the
    housing staff, Corvias committed to providing us the single-
    story home that we selected. We packed for our move, had our
    household goods delivery set up, confident that the house we
    selected would accommodate us and our special needs and be
    ready upon our arrival.
        Five days before our move from Fort Gordon, 600 miles away,
    we received a phone call from Corvias that the home we had
    secured with a lease was no longer available. The explanation
    that we were given from Corvias was that the current family in
    the home was no longer moving out, and now we only had one
    option to choose for housing.
        It was the height of moving season, known as PCS [Permanent
    Change of Station]. With no time left, we decided to take the
    only house that Corvias offered that would be available upon
    arrival. We accepted a multi-story townhome on the base rather
    than risk not having any home at all. This meant that when our
    daughter dislocated her knee or when she required surgery on
    her knee again, she has to go up and down the stairs to get to
    her room.
        Before we moved into housing, we were quoted a fixed-rate
    rent for the house. Upon arrival, we were given a slightly
    higher rate, but we felt powerless in arguing the difference in
    rent prices. A few months later, Corvias claimed that they had
    miscalculated their own move-in costs and demanded that we pay
    them an additional $14, even though this was their own mistake.
        In January, when the housing allowance pay was adjusted,
    Corvias also took it upon themselves to disregard our fixed
    market rate lease and increased our pay deduction by $177
    without our consent or informing us. Once we provided them
    proof of our market rate addendum, which was attached to our
    lease, we were given the burden of proof. Shortly after
    correcting the housing allotment, Corvias staff informed us
    that they would increase our rent again in July, despite their
    initial promise to continue to renew our lease at a market
    rate.
        Shortly after moving in, we began to notice issues with our
    home. The linoleum floor around our first-level toilet started
    to get large black matter visible underneath and it continued
    to grow. After our first work order, Corvias did not send any
    workers or inspectors, so we submitted a second work order.
    Housing finally came to our home after an unexplained 2-week
    delay. They took out our toilet and placed it in our laundry
    room, and it sat there for 2 days. They also pulled up the
    bathroom floor and exposed the house to extensive black mold
    for the next 2 days. Maintenance did not properly clean the
    concrete below and placed new linoleum over the mold-covered
    concrete. The contractors Corvias sent to our home to repair
    the bathroom even stated that the work that they had completed
    was a band-aid.
        Shortly after the first-floor bathroom issue was addressed,
    we began noticing issues with our second-floor bathroom. Mold
    was growing out of the wall of our shower. When Corvias
    maintenance came to address our work order for this, they told
    us--and this is a direct quote--``let the mold just fall out.
    If we seal the area, the moisture will just be trapped
    inside.'' Meanwhile, the area that we can see behind the shower
    wall is black and actively growing mold because it continues to
    get wet.
        We also requested an air quality check from housing due to
    our daughter's frequent nosebleeds and the bathroom mold issues
    that we have encountered. Corvias, however, has not committed
    to checking our air quality, and it has been more than 2 weeks
    since we have heard from the housing office. Meanwhile, we
    still live in these conditions.
        Our story is not unique, nor is it the worst. Almost 17,000
    military families responded to a survey by the Military Family
    Advisory Network with testimonials of unhealthy living
    conditions in privatized housing on military bases. And many
    more were given to other military family nonprofits.
        Thank you, Senators, for the opportunity to testify and for
    addressing the serious issues of the health, safety, and
    welfare of our military families.
        [The prepared statement of Ms. Wanner follows:]

                       Prepared Statement by Jana Wanner
        My name is Jana Wanner, an Army spouse of 9 years, and we are
    currently stationed at Ft. Meade in Maryland. My husband is a Sergeant
    First Class and we have 2 children.
        We are enrolled in the Department of Defense's Exceptional Family
    Member Program, which means the Department helps us with adaptive
    housing, proper medical care, and educational needs for our daughter
    who has a genetic condition that causes both physical and educational
    issues. While not a perfect system, we are grateful for the E-F-M
    program as it allows my spouse to train and deploy without worrying
    about our safety and welfare at home.
        Five months before we moved to Fort Meade, we contacted the Corvias
    housing staff to select a house. Due to our daughter's medical
    condition, we needed and requested a single-story home without stairs.
    We verbally made the housing staff aware over the phone, that our
    daughter has knee problems associated with her medical condition.
    Corvias assured us that since we were placed on the waitlist five
    months prior to our report date, they would have plenty of time to
    accommodate our request. After selecting from the choices that were
    provided by the housing staff, Corvias committed to providing us a
    single-story home that we selected. We packed for our move, had our
    household goods delivery set up, confident that the house we selected
    would accommodate us and our special needs and be ready upon our
    arrival.
        Five days before our move from Fort Gordon, 600-hundred miles away,
    we were told that the home we had secured with a lease was no longer
    available. The explanation we were given from Corvias was that the
    current family in the home was no longer moving out in time, and we now
    only had one option to choose for housing.
        It was the height of moving season, known as P-C-S. With no time
    left, we decided to take the only house Corvias offered that would be
    available upon arrival. We accepted the multi-story townhome on the
    base, rather than risk not having any housing at all. This meant that
    when our daughter dislocated her knee or when she requires surgery on
    her knee again, she has to go up and down the stairs to get to her
    room.
        Before we moved into housing we were quoted a fixed rate rent for
    the house. Upon arrival we were given a slightly higher rate, but we
    felt powerless in arguing the difference in rent prices. A few months
    later Corvias claimed they had miscalculated their own move in costs
    and were demanding we pay them an additional $14, even though this was
    their own mistake.
        In January when the housing allowance pay was adjusted, Corvias
    also took it upon themselves to disregard our fixed ``market rate''
    lease and increased our pay deduction by $177 without our consent or
    informing us. Once we provided them proof of our market rate addendum
    attached to the lease, we were given the burden of proof in this
    matter. Shortly after correcting the housing allotment, Corvias staff
    did inform us they will increase our rent again in July, despite their
    initial promise to continue to renew the lease at a market rate.
        Shortly after moving in, we began to notice issues with the home:
    the linoleum floor around the first-level toilet started to get large
    black matter visible underneath and it was growing. After the first
    work order, Corvias did not send any workers or inspectors so we
    submitted a second work order, Housing finally came to the house after
    an unexplained two week delay. They took out the toilet and placed it
    in our laundry room, where it sat for two days. They also pulled up the
    bathroom floor and exposed the house to extensive black mold for the
    next two days. Maintenance did not properly clean the concrete below,
    and just placed new linoleum over the mold covered concrete. The
    contractors Corvias sent to our home to repair the bathroom even stated
    that this work they had completed was just a band-aid.
        Shortly after the first floor bathroom issue was addressed, we
    began noticing issues with the second floor bathroom. Mold was growing
    out of the wall of the shower. When Corvias maintenance came to address
    our work order for this, they told us, and this is a direct quote,
    ``let the mold just fall out. If we seal the area, the moisture would
    be trapped inside'' Meanwhile, the area we can see behind the shower
    wall is black and ly growing mold because it continues to get wet with
    every shower.
        We requested an air quality check from housing due to our
    daughter's frequent nosebleeds, and the bathroom mold issues we have
    encountered. Corvias, however, would not commit to checking our air
    quality, and it has been more than two weeks since we have heard from
    the housing office. Meanwhile, we are still living in these conditions.
        Our story is not unique, nor is it the worst. Almost 17,000
    military families responded to a survey by the Military Family Advisory
    Network, with testimonials of unhealthy living conditions in privatized
    housing on military bases, and many more were given to other military
    family nonprofits.
        Thank you, Senators for the opportunity to testify, and for
    addressing the serious issues of the health, safety and welfare of
    military families.

        Senator Inhofe. Thank you, Ms. Wanner.
        Ms. Driver?

                       STATEMENT OF JANNA DRIVER

        Ms. Driver. My name is Janna Driver, and my husband is
    currently Active Duty Air Force stationed at Tinker Air Force
    Base in Oklahoma.
        We lived on base in privatized housing managed by Balfour
    Beatty. We had numerous ongoing issues in our home, including
    maintenance issues that were neglected over the less than 2
    years we lived there, which ultimately resulted in making my
    family very sick. Our housing company has known about these
    issues for years and is taking advantage of young military
    families who are not educated on how to properly treat mold and
    the health effects it causes. They are covering up, painting
    over mold, threatening military members with their command,
    using scare tactics and intimidation, lying to us, and making
    the problems worse, and now it is out of control. They have
    been banking on the fact that we would likely PCS to another
    base before what they covered up would reappear. On the
    surface, these homes appear to be flawless. But inside, the
    walls tell a different story.
        On August 19, 2018, after lengthy and constant illnesses,
    my husband and I began to discover the real cause of all of our
    symptoms. I spent the weekend deep cleaning because we had all
    been so sick for so long. The utility room in our house was
    also my children's playroom where they played daily. In the
    utility room, I moved their small card table that was leaning
    up against the wall. The wall was solid black. I never thought
    mold. I thought it was residue from the padded side of their
    table. I wiped it off and continued cleaning.
        The symptoms we had included constant sore throats,
    nosebleeds, brain fog, blurred vision, numbness, fatigue,
    debilitating headaches. Even the 4-year-olds complained daily
    of these headaches, along with dizziness. Knowing headaches are
    not normal for a child of that age, I was concerned they may
    have cancer. One of my twins suffered numerous times from
    respiratory distress that required emergency room visits.
        On Monday, August 20, we called maintenance to repair a
    leak in the utility room. This was the ninth leak we had had in
    less than a year and a half. Maintenance came, cut a large hole
    in the sheetrock and repaired the leak. Upon completion, he
    asked if we wanted the hole repaired or if we were okay to
    leave this large hole in our wall. There were numerous large
    discolored spots on the same wall. We asked if those were from
    that same leak. He said no. He then told us he wanted to go out
    and look at our mechanical room, which is directly behind this
    utility room. This is a locked room attached to our homes that
    house hot water heaters and our HVACs [heating, ventilation,
    and air conditioning]. We are not allowed access to these rooms
    by housing. I told my husband to follow him. He walked up
    behind him and overheard a frantic phone conversation between
    him and the housing office about how our mechanical room needed
    to be repaired immediately.
        When he noticed my husband standing behind him, he
    frantically began saying, ``You cannot be in here. I am not
    allowed to let you see in this room.'' My husband said, we pay
    for this house. I am coming in. Upon entering, he saw black
    mold covering the walls, floor to ceiling. He immediately
    called housing maintenance. The housing office told him they
    had known about the mold since March and had been treating it
    by scrubbing it with bleach and water. When he asked why we
    were not notified, she stated she assumed the technicians had
    already told us.
        We have verified with numerous experts that this process is
    only acceptable when the area of focus is very small and never
    use bleach on a porous surface. Doing this only feeds the mold,
    causing it to grow faster, spread, and multiply. We have shared
    this information with the housing company numerous times. To
    this day, they continue to use this process.
        The next morning, my husband and his command met with our
    military housing liaison and our local housing community
    manager at our home. We were told by this manager that they had
    actually been documenting the mold since February, not March,
    and had she known how bad the room was, we would not have been
    allowed to continue living there. We told her we wanted mold
    testing done by a company of our choosing before any
    remediation began. That was refused. One week later, this
    manager no longer worked for that company.
        Balfour Beatty then moved our family into a Patriot Home.
    These are homes used to temporarily house families while work
    is being done to their own homes. We were told it had no mold,
    that it was clean and safe. The first day we were there, we
    found mold. The home was filthy, dirt on the floors, stains on
    the couch and carpets, bugs in the drawers in the kitchen.
    There were leaks in the Patriot Home, water pouring into a
    light fixture in the ceiling from an upstairs bathroom. We
    called housing. They came and cut a 2-by-2 inch square in the
    ceiling and left it, causing water then to pour into the floor
    of the utility room instead of into the light fixture.
        We began to feel worse in this home and requested to be
    moved to a hotel. Initially housing would only commit to one
    night at a time, leaving us each night to wonder where we would
    go the next day and the next night after that with five
    children. We had to borrow a credit card from my parents so
    that we at least had the security of a roof over our heads for
    more than one night at a time. Eventually, the company agreed
    to go back and pay for those, and finally, upon hiring an
    attorney, we were extended in the hotel for over 2 months. All
    total, we were out of our home for approximately 3 months with
    five small children, spending approximately 80 days in a hotel,
    which cost $17,000.
        We had to hire our own mold company to come test the mold
    at our home. The test results showed all five of the toxic
    molds present inside our home. We believe the mold was
    contained to our utility room and maintenance closet initially.
    Air samples of our living room were clean. We had to pay out of
    pocket to see a doctor in Midwest City who specializes in toxic
    mold exposure. We have tested positive for the presence of
    mycotoxins in our bodies.
        Housing subcontracted a company to remediate the mold. We
    know for a fact that the remediation was done improperly. Vents
    were not covered and contaminated items that were in the
    utility room were put inside my garage, as well as my kitchen--
    --
        Senator Inhofe. Ms. Driver, try to bring your comments to a
    close, if you would.
        Ms. Driver. We will likely suffer from the effects of this
    for the rest of our lives, physically, financially,
    emotionally, and mentally. My family has gone from zero to
    $40,000 in debt in a 3-month period. I suffer daily from
    chronic breathing issues and blurred vision due to the mold in
    my brain. We take an enormous amount of binders and
    prescriptions daily with no end in sight. It did not have to be
    this way. Our military families do not deserve this after all
    the sacrifices they make. It is criminal. It is unbelievable
    the extent of this coverup.
        Thank you again.
        [The prepared statement of Ms. Driver follows:]

                       Prepared Statement by Janna Driver
        My husband is currently Active Duty Air Force stationed at Tinker
    AFB in Oklahoma. We lived on base in privatized housing managed by
    Balfour Beatty. We had numerous ongoing issues in our home including
    maintenance issues that were neglected over the less than 2 years we
    lived there which ultimately resulted in making my family very sick.
    Our housing company has known about these issues for years and are
    taking advantage of these young military families who are not educated
    on how to properly treat mold and the health effects it causes. They
    are covering up, painting over mold, threatening military members with
    their command, using scare tactics and intimidation, lying to us and
    making the problems worse. Now, it is out of control. They have been
    banking on the fact that we would likely PCS to another base before
    what they covered up would reappear. On the surface, these homes appear
    to be flawless. But inside the walls tell a different story.
        On August 19, 2018 after lengthy and constant illnesses, my husband
    and I began to uncover the real cause of all of our symptoms. I spent
    the weekend deep cleaning because we had all been so sick, for so long.
    The utility room in our home was also my children's play room where
    they played daily. In the utility room, I moved their small card table
    that was leaning up against the wall. The wall was solid black. I never
    thought mold. I thought it was residue from the padded side of their
    table. I wiped it off and continued cleaning. The symptoms we had,
    included: constant sore throats, nose bleeds, brain fog, blurred
    vision, numbness, fatigue, debilitating headaches, even the 4 year olds
    complained daily of these headaches along with dizziness. Knowing
    headaches are not normal for a child of that age, it even caused me to
    worry that my they might have cancer. One of my twins suffered numerous
    times from respiratory distress that required emergency room attention.
        On Monday, August the 20th, we called maintenance to repair a leak
    in our utility room. This was the ninth leak we had had in less than a
    year and a half. Maintenance came, cut a large hole in the sheetrock
    and repaired the leak. Upon completion, he asked if we wanted the hole
    repaired or if we were ok to leave this large hole in our wall. There
    were numerous large discolored spots on the same wall. We asked if
    those were from that same leak, he said no. He then told us he wanted
    to go out and look at our mechanical room which is directly behind the
    utility room. This is a locked room attached to our homes that we were
    not allowed access to by housing. I told my husband to follow him. He
    walked up behind him and overheard a frantic phone conversation between
    he and the housing office about how our mechanical room needed to be
    replaced immediately!
        When he noticed my husband standing behind him, he frantically
    began saying, ``You cannot be in here! I am not allowed to let you in
    this room!'' My husband insisted that because we pay for this house
    that he was coming in! Upon entering, he saw black mold covering the
    walls, floor to ceiling. He immediately called housing maintenance. The
    housing office told him they had known about the mold since March and
    had been ``treating it'' by scrubbing it with bleach and water. When he
    asked why we were not notified, she stated that she assumed the
    technicians had told us. We have verified with numerous experts that
    this process is only acceptable when the area of focus is very small
    and NEVER use bleach on a porous surface. Doing this only feeds the
    mold, causing it to grow faster, spread and multiply. We have shared
    this information with the housing company numerous times, to this day,
    they continue to use this process. The next morning, my husband and his
    command met with our military housing liaison and our local housing
    community manager at our home. We were told by the manager that they
    had actually been documenting the mold since February and had she known
    how bad the room was, we would not have been allowed to continue living
    there. We told her we wanted mold testing done by a company of our
    choosing before any remediation began. That was refused. One week
    later, this manager no longer worked for the company.
        Balfour Beatty then moved our family into a Patriot Home. These are
    homes used to temporarily house families while work is being done to
    their own homes. We were told it had no mold, that it was clean and
    safe. The first day we were there, we found mold. The home was filthy,
    dirt on the floors, stains on the couch and carpets and bugs in the
    drawers in the kitchen. There were leaks in the patriot home. Water
    pouring into a light fixture in the ceiling from an upstairs bathroom.
    We called housing, they came and cut a 2 x 2 inch square in the ceiling
    and left it causing water to then pour into the floor of the utility
    room instead of into the light fixture. We began to feel worse in this
    home and we requested to be moved to a hotel. Initially, housing would
    only commit to one night at a time. Leaving us each night to wonder
    where we would go the next day and the next night after that, with 5
    children. We had to borrow a credit card from my parents so that we at
    least had the security of a roof over our heads for more than one night
    at a time. Eventually, the company agreed to go back and pay for those
    and finally upon hiring an attorney, we were extended in the hotel for
    over two months. All total, we were out of our home for approximately 3
    months with 5 children spending approximately 80 days in a hotel
    costing Balfour Beatty $17,000.
        We had to hire our own mold company to come test the mold at our
    home. The test results showed all 5 of the toxic molds present inside
    our home. We believe the mold was contained to our utility room and
    maintenance closet initially. Air samples of our living room were
    clean. We had to pay out of pocket to see a doctor in Midwest City who
    specializes in toxic mold exposure. We tested positive for the presence
    of mycotoxins in our bodies.
        Housing subcontracted a company to ``remediate'' the mold. We know
    for a fact that the remediation was done improperly. Vents were not
    covered and contaminated items that were in the utility room were put
    inside my garage as well as my kitchen and living room. They did not
    take walls out that should have been taken out and they did not remove
    boards that had mold growing on them between the walls. When this
    nightmare started for us, my husband revoked the authorization we had
    given them to enter our home without permission and signed that they
    were no longer allowed to enter without notifying us. We caught them in
    our home on numerous occasions, they left our home unlocked for lengthy
    periods of time and gave the keys to our home to outside contractors
    without them being present or us being notified. They performed several
    air sample tests without telling us but we found them in our home doing
    this twice.
        We have requested in writing the results for those tests and they
    refused to give them to us. We waited for 2 weeks, with nothing being
    done to our home. We paid to have testing done again after they
    completed their work. Our testing shows the situation was far worse now
    than it was to begin with. We had Stachybotrys in our air samples in
    our living room that were only present in tape samples in our utility
    room and mechanical room previously. The last air sample was done on
    10-16-18 by a company hired by the company housing had subcontracted to
    do the remediation. This is a huge conflict of interest. Housing sent
    us their final report which showed Stachybotrys present in a bedroom.
    Despite this, they scheduled a final walk through of the house stating
    it was safe for us to move back in to. We went through the house with
    the project manager for Balfour Beatty and pointed out all of the mold
    they left during remediation and informed him that we had pictures and
    videos proving it had not been remediated properly and we would not be
    taking possession of the home back.
        I found out just two days ago, Balfour Beatty has moved another
    family into this contaminated home. Over the next week, we began to
    move out. We were only able to save metal and glass items from our
    home. I was forced to part with antiques given to me by my
    grandparents, as well as keepsake items from my children because they
    had all been contaminated with mold spores due to improper remediation.
    We turned in a 7 day written notice to terminate our lease based on it
    being uninhabitable on November 15th but Balfour Beatty continued to
    withhold our BAH for another month. They sent us a letter through our
    attorney charging us $1,100.00 in fees (we never received an itemized
    statement of those charges) and that they would trade us a month of BAH
    for all our inconveniences and we could then call it even. We did not
    accept this offer.
        We will likely suffer from the effects of this for the rest of our
    lives. Physically, financially, emotionally and mentally. My family
    went from zero to $40,000.00 in debt in a 3 month period. I suffer
    daily from chronic breathing issues and blurred vision due to the mold
    in my brain. We take an enormous amount of binders, supplements, and
    prescriptions daily, with no end in sight. It didn't have to be this
    way. Our military families do not deserve this after all the sacrifices
    they make. It is criminal. It is unbelievable the extent of this cover
    up.
        Thank you again for allowing me the opportunity to testify.

        Senator Inhofe. Thank you, Ms. Driver.
        For the benefit of my fellow Senators, she has put together
    some pictures to fortify her statement, one of her 4-year-old
    twin daughter.
        Before we start our 3-minute rounds, the Committee has
    received dozens of testimonies from families, as well as
    statements for the record from a number of military family
    organizations. I move that these be submitted into the public
    record and that the record stay open for 48 hours for any other
    families who wish to submit a statement, and without objection,
    that is so order.

        [Family testimonies are on file at the Senate Armed
    Services Committee for viewing upon request.]

        Senator Inhofe. Nothing is more important than taking care
    of our families so the Americans who volunteer to fight on
    behalf of us know that the ones that they love are cared for.
    That is very basic.
        Ms. Driver, do you believe that you have an advocate
    fighting for safe housing for our military families?
        Ms. Driver. I know our military housing liaison has fought
    tirelessly to help families at Tinker, but that is about as far
    as it goes.
        Senator Inhofe. Yes.
        I would say this to all of the military families that are
    represented here, do you believe the military families'
    experiences in the base housing will impact their decision to
    remain in the service? Each one of you?
        Yes. See that is one of the problems we are having right
    now. We are trying to rebuild a force that needs to be rebuilt
    for all of our safeties. This does have a negative effect on
    that, I am fearful.
        Thank you very much for your testimony.
        Senator Reed.
        Senator Reed. Thank you very much, Mr. Chairman and,
    ladies, thank you for very compelling testimony and being here
    today.
        Just very quickly starting with Mrs. Cornwall, what is the
    one immediate change you would like to see, something on the
    order of giving the housing facilitator more power or something
    that we can do or the military actually, the Department of
    Defense, can do right away?
        Ms. Cornwall. Thank you for your question, sir.
        One of the things that I think is important to do right
    away is give the military families an ability to stop their BAH
    [Basic Allowance for Housing] until the problems are fixed.
    That might mean putting their BAH in escrow and/or giving the
    government housing offices a little bit more power to address
    those issues and being able to look at the PPV [Public Private
    Venture] and say you will do this or X, Y, and Z is going to
    happen.
        Senator Reed. Very good.
        Ms. Wanner?
        Ms. Wanner. There is more to do than what I have time to
    say, but I will echo what she says. They need to withhold the
    BAH payments to housing. Clearly, the money that they are
    receiving is not going to provide us with stellar housing and
    the conditions that we deserve. All they are doing is profiting
    off of families moving in and out constantly. I feel like if
    their payments are withheld, then maybe it will entice them to
    do more to protect our families and keep us safe.
        Senator Reed. Thank you.
        Ms. Driver, please, your comments.
        Ms. Driver. I believe this has been going on and that
    people have been aware of these problems for a very long time.
    I believe as well that they should not be being funded their
    management fees if they are not in compliance.
        Senator Reed. Thank you all again. Thank you, ladies, for
    your very compelling testimony.
        Senator Inhofe. Thank you, Senator Reed.
        Senator Tillis?
        Senator Tillis. Thank you, Mr. Chairman.
        Ms. Driver, you were talking about having a housing
    advocate for you that is working, but not getting a result. Let
    me just say for the benefit of anybody in this room and anybody
    watching that every single Member on this Committee is behind
    you, and every single one of us loves doing casework. As we are
    trying to solve this problem, as you know of families that are
    going through what you are going through right now, find out
    who your Senator is, and if you are at Fort Bragg or Camp
    Lejeune or Cherry Point or New River, you call my office, and I
    will guarantee you we will help your housing liaison and we
    will at least deal with that while we are trying to solve the
    systemic problem.
        I am not going to ask you all a lot of questions because we
    have a lot of testimony, and I have got a whole lot of
    questions for the next two panels.
        Thank you all for being here, but please communicate
    through your organizations and others. We do casework. We will
    help you. Just let us know you need the help. Thank you for
    being here.
        Senator Inhofe. Thank you, Senator Tillis.
        Senator Gillibrand?
        Senator Gillibrand. Based on your experience with the
    privatized housing program, are you more or less likely to
    recommend Military Service to a friend or a relative and their
    family?
        Ms. Cornwall. Based on what I have gone through as a
    military spouse, I have become very disenfranchised by what has
    happened and my research over the last 2 years. I would not
    recommend my own children to join the service, and my husband
    has been a marine for almost 12 years.
        Senator Gillibrand. Jana?
        Ms. Wanner. I would not recommend it after everything that
    we have been through, especially health-wise. When our
    accommodations were not met for our EFMP child, I think that
    pretty much solidified the decision that we will never live in
    base housing again, and we will never recommend it to anyone
    ever again. I think it would be difficult to recommend joining
    the service to anyone if they wanted to live in base housing.
        Ms. Driver. I agree. I would never recommend anyone to live
    in base housing. I enjoyed my time living on base until I
    discovered that our home was making us very sick. The amenities
    of living on base are wonderful, but the homes are definitely
    making people sick.
        Senator Gillibrand. What was your experience in trying to
    raise this with the chain of command? Do you believe that they
    responded appropriately? Do you believe they have enough
    authority to intervene on your behalf to hold the contractors
    accountable? Are you aware of any actions that the military or
    the Department of Defense took to hold the companies
    financially accountable when these problems were exposed?
        Ms. Cornwall. Thank you for your question.
        In my personal experience going through the chain of
    command, we had no help even though I had volunteered over
    1,300 hours with that chain of command.
        Further, my family readiness officer had actually been
    retaliated against for standing up for our family against
    Lincoln Military Housing (LMH).
        Ms. Wanner. We did not have the opportunity to reach out to
    my husband's chain of command because everything happened so
    quickly. Honestly we did not know that it was an option. We
    thought that maybe since it was a private company, that maybe
    the military's hands were tied and the chain of command would
    not be able to be as effective as our own voices, so we just
    dealt with it on our own.
        Ms. Driver. My husband's command, his direct command, was
    very helpful to us, provided things we were not able to afford
    after this happened to us. But that is about as high up as it
    went. We did not get help from the base commander. It seemed
    like lip service. We received letters and we had a town hall
    meeting that he was actively a part of. I have put links to
    that town hall in my binder. I hope you have a chance to look
    at that.
        The military housing liaison that we have at Tinker is
    exceptional in my opinion. That is not the case at most bases.
    They do not have help from their military housing liaisons
    there. I wanted to clarify that.
        Senator Gillibrand. Thank you.
        Thank you, Mr. Chairman.
        Senator Inhofe. Thank you, Senator Gillibrand.
        Senator Sullivan?
        Senator Sullivan. Thank you, Mr. Chairman.
        I want to thank again the witnesses for having the courage
    to testify and for your service to our country. Whether you are
    serving in the military or not, you are serving--right--because
    your family is so you are.
        I am a colonel in the Marines. I have three daughters. I
    have told my girls and my wife they all serve their country.
    Right? You are all serving our country. Thank you.
        First, I want to reiterate Senator Tillis' point. I think
    that is really important. These are the kind of things that you
    can come to your Senator or Congressman about and we will get
    involved and we will ask questions. So continue to pass the
    word on that, whether it is in Alaska for me or North Carolina
    or Oklahoma.
        I want to unpack a little bit more of this chain of command
    issue that Senator Gillibrand just asked about in terms of the
    details. For example, Ms. Cornwall, you said they were not
    helpful. Were they just saying, hey, you know, suck it up? You
    are a marine. Get over it. Or were they maybe trying to and
    then there was a disconnect between what the military chain of
    command can do and then over to the housing authority or the
    private company? I mean, what was the experience really for all
    of you. Some said you had a better experience with the chain of
    command. But to me, this is a huge issue, and can you give me a
    little more detail on your experience?
        Ms. Cornwall. Yes, sir.
        The issue with the chain of command with the Marine Corps
    at Camp Pendleton was I think they just simply took the word of
    the PPV over their family. Then when we had a family readiness
    officer step in and advocate on our behalf, we had already left
    the unit as it was. He still took the time to advocate on our
    behalf, and even he was retaliated against by the base command
    and had no support from the colonel at our MEU [Marine
    Expeditionary Unit]. Unfortunately, he has actually left the
    family readiness program because of this issue.
        Senator Sullivan. Ms. Driver, you had mentioned something
    that to me was very disturbing if it is true and systematic. I
    have no reason to doubt that it is true because you stated it.
    But did you or did others see examples of--you mentioned young
    military families. You got a young guy, a young spouse coming
    in. He is a lance corporal or a PFC [private first class]. Do
    you think they were taking advantage of young military families
    because they are young and inexperienced and maybe do not want
    to question authority?
        Ms. Driver. Absolutely, 100 percent I believe that is what
    is happening. My neighbors who we share a wall with were moved
    into a home that we visually saw they were pressure washing
    mold off of the wall in their house before they moved in. This
    young family moved in. They just got married, first home they
    have ever lived in. They do not know the toxic effects of this
    type of mold. We are not talking about just a little bathroom
    mold in your shower. We are talking mold growing through the
    walls. I just think young people are not aware of how toxic it
    is and the health effects that come from it.
        Senator Sullivan. Thank you. Thank you again for your
    testimony.
        Thank you, Mr. Chairman. On that, I think that certainly
    merits follow-up questions for our next panel. If that is
    happening, that is outrageous. Outrageous.
        Senator Inhofe. Thank you, Senator Sullivan.
        Senator Kaine?
        Senator Kaine. Thank you, Mr. Chair.
        You know, over the course of our history, it has been sad
    that often military members and their families have kind of
    been viewed as profit centers to soak. President Truman came to
    attention first as a Senator when the Curtiss Aeronautical
    Company got caught sending defective engines into theater war
    during World War II, and it was an unholy alliance between
    people at the plant and military officials exposing people's
    lives to make money. We have had payday lenders and other kinds
    of aggressive and predatory lenders kind of cluster around
    military members and their families. We have had low quality,
    for-profit educational institutions view GI Bill benefits as a
    place where they can go to try to make a lot of money without
    offering a quality product.
        I think one of the things that we are going to try to do in
    this work and in the NDAA [National Defense Authorization Act]
    is to make sure that this is not what is happening here, that
    the quest for a profit is not blinding people to the reality of
    the service that you provide.
        Ms. Cornwall, I want to this retaliation incident because
    if you have got a problem--to me, the most shocking part of the
    survey that Military Family Advisory Network did is actually
    not the physical conditions. It is the way you get a run-around
    when you try to get help. So you have got a housing liaison
    officer in the Marines. You have a family readiness advocate.
    You have a chain of command through your spouse's unit. You
    have the private housing provider. There should be multiple
    places where you can go for help. But as I read the stories, it
    sounds like there is a lot of finger pointing. We cannot do it.
    It is somebody else's. I am particularly interested in this
    retaliation incident because since I am a little bit familiar
    with the Marine program having these family readiness
    specialists.
        What did your family readiness specialist do? Describe the
    retaliation.
        Ms. Cornwall. Upon leaving the unit, I let him know that
    this was happening to us, and I was concerned about what was
    happening to other military families within the unit. Again, I
    volunteered very heavily there. So we had a very good
    relationship.
        Essentially I went to him and told him what happened. He
    knew that there was another spouse on the general officer side
    of the house who was also investigating issues in that housing
    area, including mold. He put me in touch with her, and then her
    and I kind of teamed up to sort of address it on a whole scale
    in Camp Pendleton.
        When the base command found out about that--and base
    command, like the base general officer. When he found out about
    that, the family readiness officer was told to stand down, that
    we had left the unit, that there was nothing else that they
    could do.
        Senator Kaine. Why would the base command be more loyal to
    the housing provider than to you?
        Ms. Cornwall. That is a really great question. We have not
    been able to figure that out.
        I believe that the marriage between the PPVs and the base
    commands is the biggest detrimental part to this issue. For
    example, the government housing offices are inside the PPV.
    Like for Lincoln Military Housing, our government housing
    office is inside that building. There is a marriage there, and
    there is a certain loyalty there that supersedes loyalty to
    military families.
        Senator Kaine. My time is up, but thank you for that
    answer.
        Senator Inhofe. Thank you, Senator.
        Senator Ernst?
        Senator Ernst. Thank you. I am just sitting down in the hot
    seat.
        But I want to thank all of the families for being here
    today. I am a former military spouse as well, having lived on
    Fort Benning and Eglin Air Force Base and Fort Jackson. So I
    can commiserate with some of the instances, but certainly not
    all of the things that you and your families have had to
    endure. Thank you very much for being here and for shedding
    light on something that so many families have had to suffer
    through. Thank you very much.
        Again, I am really sorry about all of the issues that you
    have experienced in military housing. We know that you deserve
    and have earned much, much better than what you have received.
        Based on your personal experience, can you discuss some of
    the challenges like with getting the termite and mold issues
    fixed, what steps you have taken? I know you have probably
    answered some of those already, but if you would, just go ahead
    and please express those again and then where you think we need
    to be going in the future. What would be your perfect solution
    to making sure that our military families have safe housing
    that is conducive of raising healthy families and kids that are
    able to learn and grow? What is your perfect environment?
        Ms. Cornwall. Well, to answer your first question, I think
    that--so there is a marriage between the PPVs that is hard to
    get past and the military. In my personal experience, I went to
    Philip Rizzo, who is the VP [vice president] of operations
    nationally for Lincoln Military Housing. We had many
    conversations. Each one of those conversations was met with a
    very dismissive tone. We would go to him and tell him about
    these families on Camp Pendleton. He would dismiss it and blame
    the families.
        I sent a package to Secretary of Defense James N. Mattis
    when he was there, and their office had to send it down to The
    Honorable Robert H. McMahon, Assistant Secretary of Defense for
    Sustainment. They told me they had to stay in their lane. They
    have one lane. That is military readiness.
        Senator Ernst. Right. Thank you.
        Any other thoughts, ladies? What would your perfect
    environment be? What is the solution?
        Ms. Driver. One problem I see is that they have been
    allowed 50-year contracts. I do not know of any contract that
    you could make with somebody for that long of a period of time.
    I believe they have been given chance after chance after
    chance, and they have known about these issues. I struggle to
    understand why they are allowed to be able to hold onto these
    contracts.
        Senator Ernst. An exceptional point.
        Jana, do you have any other thoughts?
        Ms. Wanner. I feel like one of the most important things
    they need to do, instead of putting band-aids on issues, they
    need to actually correct the issues. I think they need to pay
    more attention to what the families are saying instead of just
    dismissing us every time we come up with a concern and telling
    us that they cannot fix it or they have already fixed it. I
    think that they need to listen to the families more and not
    their pockets.
        Senator Ernst. Very good. I wish we had a lot more time,
    ladies. We might have to get together offline and commiserate
    together. Thank you all very much. I appreciate you.
        Senator Inhofe. Thank you, Senator Ernst.
        Senator Jones?
        Senator Jones. Thank you, Mr. Chairman.
        I again want to echo what I heard Senator Tillis and
    Senator Sullivan say about contacting Senators. Every base has
    two United States Senators and one Member of Congress. If you
    cannot get through to the local person, call the office. If you
    cannot get through calling, come. Get families to come. Trust
    me. We pay attention when people show up at our doorstep.
        I would go one step further. If anybody has a family member
    and you feel like is being retaliated by the military, call
    somebody on this Committee and call the House Committee as
    well. Go straight to the source.
        So with that, I am almost at a loss for questions. You
    know, Ms. Driver, in the interest of time, we had to kind of
    cut you off a little bit. Are there any things that you would
    like to add that you did not get to in your statement? We are
    happy to hear that now in the remaining 2 minutes.
        Ms. Driver. We caught them numerous times inside of our
    home after we had signed a statement that they were not allowed
    to enter our home without letting us know.
        We requested in writing results of two tests that we caught
    them doing, and we still have not received those tests. We paid
    to have our own testing done after they completed the work, and
    our tests show that the situation was far worse after they did
    their own remediation. We had stachybotrys in our air samples
    in our living room that were only present in tape samples in
    the utility room before. The last air sample was done by a
    company hired by the company housing had subcontracted to do
    the remediation. This is a huge conflict of interest. Housing
    sent us their final report showing stachybotrys present in a
    bedroom. Despite this, they scheduled a final walk-through of
    the house, stating it was safe for us to move back into. We
    went through the house with the project manager for Balfour
    Beatty and pointed out all of the mold they left during
    remediation and informed him that we would not be taking
    possession back of the home.
        Senator Jones. I think that may be about out of my time. Is
    that correct, Mr. Chairman?
        Senator Inhofe. That is correct.
        Senator Jones. Okay. I am sorry. But rest assured, all of
    your statements are going to be entered in full into the
    record, and we are all looking at them and reading them. Thank
    you very much.
        Senator Inhofe. Thank you, Senator Jones.
        Senator Rounds?
        Senator Rounds. Thank you, Mr. Chairman.
        I have only one question and will try to be very brief with
    it.
        There has been a discussion about the possibility of a
    tenants bill of rights. Have you considered that, and would you
    give me about the possibility and whether or not that would
    have helped any of you in your situations?
        Ms. Cornwall. Thank you.
        Just like a tenants bill of rights or any kind of
    legislation that you put forth, if there is not an enforcement
    mechanism to that, it is not going to work. There has to be an
    enforcement mechanism to any kind of legislation or bill of
    rights. I support a bill of rights. There needs to be something
    like that in place. But there has to be an enforcement and
    accountability mechanism, which is what we are lacking.
        Senator Rounds. Thank you.
        Any other thoughts on it?
        Ms. Driver. I agree. I feel there is no accountability and
    they are running all the way to the bank however often they are
    getting paid, knowing nobody is watching and nobody is speaking
    up and nobody cares enough to stop paying them, and that is the
    only way this is going to stop in my opinion.
        Senator Rounds. Thank you.
        Mr. Chairman, I will stop right there. I think other
    members have questions as well. Thank you, sir.
        Senator Inhofe. Thank you, Senator Rounds.
        Senator Duckworth?
        Senator Duckworth. Thank you, Mr. Chairman.
        Ms. Cornwall, can you speak a little bit to whether--or any
    of the ladies--if any of your spouses were retaliated against
    from the military side or were spoken to by their chain of
    command? Or you said the GOs [general officers] said that they
    were going to stay in their lane. Can you talk a little bit to
    that?
        Ms. Cornwall. Upon leaving my husband's MEU, he did receive
    a phone call from his major that he was very upset that my
    husband had not kept him in the loop, which was actually not
    true because we had a conversation with him about what was
    happening on the base. So while my husband did not have
    anything in writing, my husband did receive a phone call.
        Senator Duckworth. Either one?
        Ms. Wanner. My husband was never retaliated against, but I
    do want to say that his chain of command has been extremely
    helpful for the families coming forward now that everything has
    come out in the media and they are aware of the issues. They
    have encouraged families to come forward and have said that
    they would help if there were families that needed the help.
        Ms. Driver. My husband was never personally retaliated
    against. However, during the midst of our situation--and this
    happens numerous times. I have heard several people attest to
    the same situation. The housing communities will call our
    husband's command and tell lies, things that are completely
    untrue trying to get our spouses in trouble. That happened to
    us personally. My husband's command did take our side in that
    situation, but that happens a lot where these housing companies
    reach out to command in order to try to get command in
    trouble--or to get the military person in trouble.
        Senator Duckworth. So they are outright either lying--not
    just intimidating but outright lying to the chains of command?
        Ms. Driver. Yes.
        Senator Duckworth. That is absolutely unacceptable.
        Can any of you speak a little bit--in the amount of time I
    have left, a little over a minute--to any type of disability
    accommodations or issues that you might have with disability
    issues? One of you has a daughter with a hurt knee I believe.
        Ms. Wanner. My daughter has a rare genetic condition, and
    it affects her ability to walk sometimes. She has issues with
    her knees. Before we moved to Fort Meade, the Corvias staff
    assured us that since we were placed on the waitlist in time,
    that we would be able to be accommodated with a one-level home.
    Just a few days before we arrived to Fort Meade, they told us
    that the house was no longer available. When we explained to
    them the issue, we told this when we signed for the house, when
    we signed the lease the first time and also when they called us
    5 days before arrival that we did need a one-story home, but
    they said they did not have anything left, and if we wanted a
    home, we had to take what was being offered, which was the
    townhome.
        Senator Duckworth. Did the chain of command or the military
    families with special needs office do anything to help you in
    this case?
        Ms. Wanner. We did not reach out to anyone because
    everything was happening so quickly, and we were already in the
    height of PCS season. It was the middle of the summer, and we
    did not think that we would be able to have our needs
    accommodated. We did not even sign into my husband's unit yet,
    so we did not know who really to reach out at the time.
        Senator Duckworth. Thank you for your very brave testimony,
    ladies.
        Thank you, Mr. Chairman.
        Senator Inhofe. Thank you, Senator Duckworth.
        Senator McSally?
        Senator McSally. Thank you, Mr. Chairman.
        Ladies, I also like many on this panel served. I served 26
    years. I never did live on base. But as a former commander, as
    a former fellow patriot as you are, I am infuriated by what I
    am hearing today. This is disgusting. When your spouse has
    raised their right hand to make the sacrifices and serve for
    our freedoms and our way of life, you also stood up to
    sacrifice. You knew there were going to be some sacrifices to
    your careers and to moving around and all that comes with it.
    But not this. They were maybe going to go live in austere
    circumstances when they deployed, but this is in America and
    American families that are putting up with health risks and
    sickness and harassment.
        We went to the private sector because the private sector,
    unlike the bureaucracy of the government, is supposed to be
    better. It is supposed to be more innovative, more responsive,
    more able to do customer service for our troops and their
    families. Instead there are people that I hope look at
    themselves in the mirror tonight and say--instead of being
    partners with our troops to make sure that our way of life is
    kept safe and free, they left you hanging. They put you in
    harm's way. This is so wrong and so angering to so many of us,
    and we have a lot of questions for the next panels in follow-
    up.
        If anyone in Arizona who is listening is having issues like
    this, I want you to please immediately call my office, 602-952-
    2410. But for those of you, even though your Senator may not be
    up here, we have your backs. This is just the beginning. We are
    infuriated. I am speaking on behalf of everybody here. This is
    wrong.
        On top of everything else you have been through, the
    emotional sacrifice, the inability--I cannot even imagine your
    husband coming to work in my squadron every day wondering if
    his family was going to be homeless the next day and the impact
    that has on readiness and safety and everything.
        How much money are you all each out for the costs that you
    had to pay financially for tests and medical and everything
    else, on top of everything else?
        Ms. Driver. I have not totaled medical because it is not
    covered. We have had numerous families that have tried to go to
    the MFTs [military treatment facilities] to get referrals out
    to mold specialists. They are being refused referrals to get to
    a mold specialist.
        With little, tiny children--you asked if we have sick
    family members. We have a 5-year-old on base with lung cancer
    right now who will probably never be able to have children of
    his own some day. His house tested positive for aspergillus.
    The counts inside their home were six times higher than they
    were outside.
        Just our bedding and mattresses and replace essential--my
    home is basically empty. We have beds and we have pots and
    pans, but that alone has cost my family $40,000.
        Senator McSally. Oh, my gosh.
        I just want to know how much are you out.
        Ms. Wanner. Personally we are not out costs yet.
        Senator McSally. Ms. Cornwall?
        Ms. Cornwall. I ended up settling with Lincoln Military
    Housing for a mere $300. But I can say as an advocate for other
    military families, the cost to them has not been just in money
    but to their health, which is long-term effects.
        Senator McSally. Right, exactly. I realize that is not the
    only cost.
        I am out of time, but I just want to say the chain of
    command has got to be involved in this. Somehow we need the
    chain of command who is responsible for our troops, responsible
    for the readiness, responsible for our families to be able to
    poke their finger in the chest of these companies and say fix
    it now or you are done.
        I yield back.
        Senator Inhofe. All right. Thank you, Senator McSally.
        We will now dismiss our first panel. Thank you very much
    for the testimony that you have shared with us. We apologize on
    behalf of those who are the responsible parties, and we will
    correct it. Thank you very much.
        [Applause.]
        Senator Inhofe. We will now ask the next panel to come
    forward. I will probably pronounce some of these wrong here,
    but it would be Mr. Christopher Williams, President of the
    Balfour Beatty Communities; Mr. John Picerne, founder and Chief
    Executive Officer of the Corvias Group; Mr. John Ehle,
    President of the Hunt Military Communities; Mr. Denis Hickey,
    Chief Executive Officer of Americas Lendlease Corporation; and
    Mr. Jarl Bliss, President, Lincoln Military Housing.
        We are going to start over here on your right and our left,
    and we are going to ask you to confine your comments to 3
    minutes so we will have a chance to get to all of those who
    want to ask questions. Mr. Williams?

     STATEMENT OF CHRISTOPHER WILLIAMS, PRESIDENT, BALFOUR BEATTY
                              COMMUNITIES

        Mr. Williams. Good afternoon, Chairman Inhofe, Ranking
    Member Reed, Chairman Sullivan----
        Senator Inhofe. You need to put your mic on there. There we
    go.
        Mr. Williams. Sorry.
        Good afternoon, Chairman Inhofe, Ranking Member Reed,
    Chairman Sullivan, Ranking Member Kaine, Chairman Tillis, and
    Ranking Member Gillibrand, and distinguished Members of this
    Subcommittee. Thank you for your invitation to testify today.
        Today's first panel touched me deeply. I know at Balfour
    Beatty we want every servicemember and their family to have
    only positive experiences in housing. We are constantly working
    to meet that duty, and when we fall short, we try to make
    things right.
        Balfour Beatty Communities consider it is an honor to serve
    those who serve our country. We strive to deliver quality, safe
    housing to provide responsible maintenance and create
    communities that support the unique housing needs of our
    families. Our employees pride themselves in promoting a true
    sense of community throughout programming thousands of resident
    events, as well as modern amenities that did not exist before
    privatized housing.
        Balfour Beatty is responsible at 55 installations with the
    Army, Navy, and Air Force across the United States. Through
    these projects, we have delivered over 20,000 new homes and
    renovated over 20,000 existing homes. To ensure the replacement
    needs are met, approximately 93 percent of all net cash flows
    from our projects are deposited into a Government-controlled
    project reinvestment account. To date, that amounts to more
    than $700 million.
        I will not forget my first experience in privatized
    housing. It was 16 years ago when my team met with General
    Blunt, at the time the commanding general of the Army's 3rd
    Infantry Division. He had just returned from Kuwait earlier in
    the day and was meeting to provide us input on how he wanted
    his soldiers and their families to be treated at Fort Stewart.
    It hit home to me and our team to know that in a few weeks'
    time, he would be sending our troops into harm's way with the
    Thunder Run up into Baghdad.
        From that day forward, I have maintained a deep respect and
    appreciation for the challenges faced by military families. We
    are constantly learning from our experiences, both good and
    bad, and we are always looking for ways to improve our service.
    To that end, we recently had our mold and moisture inspection
    policies reviewed by a nationally renowned environmental firm,
    and we are implementing those recommendations with our routine
    maintenance practices.
        We are also adding resources. We have created a new
    position of resident engagement specialists. This is dedicated
    to on-site staff who engage directly with the customer to
    ensure those residents are being heard and getting prompt and
    complete answers to their questions and concerns.
        We have also engaged a third party firm to provide
    preventative maintenance of our HVAC systems and central air
    systems. This will allow our maintenance technicians to focus
    on delivering greater levels of responsiveness in other
    maintenance areas.
        On behalf of the Balfour Beatty Communities, including the
    hundreds of proud veterans and military family members who we
    employ, we are committed to listening to our residents and
    working with our DOD partners and committee to make privatized
    housing better. Thank you.
        [The prepared statement of Mr. Williams follows:]

                      Prepared Statement by Chris Williams
                                  introduction
        Balfour Beatty Communities is a diversified real estate services
    company focused on the acquisition, management and renovation of
    residential assets in the multifamily, student and military housing
    sectors. As one of the earliest partners participating in the Military
    Housing Privatization Initiative (MHPI), we consider it an honor and
    privilege to serve those who serve our country. From the delivery of
    new and renovated housing, to the provision of responsive property
    management and maintenance support, we strive to create thriving
    communities that fully support the unique and evolving housing needs of
    our U.S. servicemembers and their families. We also pride ourselves in
    delivering dynamic resident event programming, community gathering
    spaces, playgrounds, parks and other amenities.
        The Balfour Beatty Communities team has been a leader in the U.S.
    residential real estate market for more than 20 years. Currently, our
    residential portfolio consists of more than 50,000 units and $6 billion
    in real estate assets under management. We were awarded our first MHPI
    project in 2002 for the privatization of military family housing at
    Fort Stewart in Hinesville, GA. Today, we are responsible for military
    housing operations at 55 Army, Navy and Air Force installations in over
    30 states across the U.S., encompassing more than 43,000 military homes
    and 150,000 residents. Through these projects, we have partnered with
    the Department of Defense to oversee the construction of more than
    20,000 new military homes and renovation of 20,000 military homes. In
    addition, approximately 93 percent of all net cash flows from our
    projects have been reinvested back into project reinvestment accounts
    (amounting to more than $700 million to date) that are controlled by
    the Services in regards to timing and scope of use.
        Servicemembers and their families may choose to live either on or
    off an installation, and it is only by offering quality homes on the
    military installations we serve that we effectively compete for their
    business. In coordination with the Services, our MHPI projects are
    required to undergo significant monitoring procedures, which includes
    compliance checklists, management review committees, site visits and
    resident satisfaction surveys. Through these processes, we are
    constantly evaluating our performance to better understand and address
    resident challenges and concerns. Balfour Beatty Communities also
    maintains a Resident Bill of Rights that is provided to our residents
    and outlines the level of quality and customer service they should
    expect, as well as avenues of recourse residents have if they feel we
    are not meeting their needs. We also have looked for ways to make our
    maintenance process better, such as creating the position of Resident
    Engagement Specialist to our military on-site teams, to provide
    dedicated customer engagement and ensure our residents are being heard
    and getting prompt and complete answers to their questions and
    concerns. This position also is intended to focus on resident education
    efforts, ensuring that our residents know how to effectively manage
    their home, identify any safety or maintenance issues, and notify our
    facilities team so we can deliver a prompt response. In addition, we
    have contracted with a third-party firm to perform regular preventative
    maintenance evaluations on our military homes, allowing our day-to-day
    maintenance teams to focus solely on ad hoc service requests and
    provide even greater responsiveness.
                    benefits of privatized military housing
        Prior to MHPI, typical service request response times were weeks
    and even months. Residents were required to handle much of their own
    home maintenance, such as snow removal and lawn care. There were
    limitations on the number of bedrooms a family could qualify for,
    forcing them to `double up' dependents in a single bedroom if they were
    within certain age ranges. Expectant families also could not qualify
    for a home until a more advanced point in the pregnancy. This is why
    the transformational change that has occurred in military housing
    communities as a result of MHPI has been called the single largest
    Quality of Life effort ever in the Department of Defense and we are
    very proud to be a leading partner in that effort.
        Today, the new and refurbished inventory of military homes allows
    military families to receive homes that provide one bedroom per
    dependent as the standard. And families who are expecting qualify for
    their new home early in the pregnancy, allowing time to get comfortably
    settled. Military housing under MHPI also offers significantly elevated
    features, including upgraded flooring, appliances and HVAC systems, as
    well as the addition of extensive community amenities, from
    playgrounds, pools and dog parks to community centers, athletic courts
    and fitness centers.
        Another key facet of MHPI has been our focus on creating community
    through resident events. Our award-winning
    LifeWorks@BalfourBeattyCommunities program provides a busy calendar of
    engaging events and activities for residents of all ages, from fitness
    clubs and seasonal crafts, to community gardens and cooking classes. A
    core offering at all of our military communities, this program allows
    residents to meet their neighbors, socialize and make memories to last
    a lifetime. In 2018, Balfour Beatty Communities hosted more than 4,700
    community events across our military housing portfolio, entertaining,
    engaging and educating more than 160,000 resident attendees.
        Servicemembers have many choices and options regarding where they
    want to live, and are not required to live in our on-base housing. In
    fact, approximately 70 percent of military families reside off-base.
    Just like landlords in the conventional housing sector, we must compete
    for renters by offering quality homes, modern amenities and providing
    robust support services designed specifically for the needs of military
    families. While we always strive to improve our performance, the
    average resident satisfaction score across our MHPI portfolio is
    approximately 84 percent, which is classified as ``Very Good'' by an
    independent third party survey company that is directly engaged by the
    Department of Defense to monitor property management services of the
    MHPI projects. In addition, 119 out of approximately 310 neighborhoods
    within our portfolio achieved awards for ``Outstanding'' service (based
    on 85 percent or above scores).
        Notwithstanding our successes in building our housing communities,
    we believe there is always room for improvement--and to that end, we
    have implemented procedures to ensure that we both hear and address
    resident feedback and concerns. Processes are in place for
    servicemembers living in privatized military housing to escalate issues
    to our local and regional managers teams, and ultimately the local
    Army, Navy or Air Force housing officers and base leadership. Balfour
    Beatty Communities works closely with the housing offices for our Army,
    Navy and Air Force housing partners and local commanders to proactively
    provide them with regular reports on maintenance activities, keeping
    them involved in our day-to-day project operations and working through
    resident issues at each installation. We meet and collaborate on a
    regular basis to discuss resident well-being and concerns to ensure we
    are consistently delivering to expected standards and meeting our
    contractual obligations.
                    maintenance, health and safety processes
        During 2018, Balfour Beatty Communities performed more than 490,000
    maintenance work orders throughout our military homes. Of those, 5
    percent involved water leaks or moisture-related issues, and less than
    0.5 percent of resident maintenance requests involved reports of mold.
    When a resident does report a mold or moisture-related concern, it is
    considered a Priority Urgent Work Order, which means our Community
    Manager and/or Facility Manager will visit the home within four hours
    to perform an initial assessment. Additionally, we invite our local
    Army, Navy, and Air Force housing partners to accompany our staff when
    inspecting the home to ensure any problems are being adequately
    addressed with input from the Services partners. Our teams are trained
    on how to inspect for and assess mold in homes, as well as determining
    when appropriate remediation, repair and restoration procedures must be
    followed. When needed, we enlist the services of certified
    environmental, engineering and scientific consulting firms to perform
    and assess air quality and other environmental-related testing; and we
    engage licensed mold remediation contractors in compliance with all
    applicable laws and regulations. Where extensive or disruptive repairs
    are required in a home, residents are provided temporary housing in one
    of our Patriot Homes (furnished homes in the community used for
    temporary lodging needs) or an area hotel suite.
        With regard to health and safety issues, under the MHPI project
    agreements, there are requirements to comply with all applicable state,
    local and federal health and safety laws and regulations. In order to
    meet these requirements, we have extensive policies and procedures in
    place (which are reviewed and approved by the Services) that identify
    the handling of all hazardous materials and environmental-related
    matters. For example, we have many historical homes in our inventory
    that contain lead-based paint. As required by law, we advise residents
    moving into a home constructed prior to 1978 during the lease signing
    process about the potential presence of lead-based paint in the home.
    Residents also are given detailed information about how to identify
    compromised (chipped/peeling) painted surfaces in the home and
    instructions regarding immediate notification to our team. All pre-1978
    construction homes are subject to visual inspections of both the
    exteriors and interiors on an annual basis (as well as upon change of
    occupancy), to ensure the integrity of the painted areas of the home
    and any required repairs are made in accordance with applicable federal
    EPA, state and local regulations.
        Balfour Beatty Communities also maintains a preventative
    maintenance program that is designed to proactively identify
    maintenance issues, and ensure homes are monitored on a continuous
    basis. As part of this program, our team conducts the following
    procedures:

          Comprehensive check of all life safety systems (smoke
    detectors, fire extinguishers, range hood fire suppression canisters)
    as part of every work order/service visit to the home;

          Annual inspection of painted surfaces in pre-1978 homes
    to identify compromised areas in need of repair/remediation;

          Annual checks of all housing components and systems,
    interior/exterior; and

          Review of repeat work orders to identify any systemic
    issues.
                            incentive fee structures
        In commercial real estate, property management firms typically
    fixed management fees that range anywhere from 3.5 percent to 5 percent
    of gross revenues of the property. Under the MHPI program, management
    fees were negotiated with two components:

          the first component is a fixed fee (base management fee)
    based on gross revenues (which average 1.79 percent throughout our
    portfolio); and

          the second component is an incentive-based management
    fee, or performance bonus, or approximately 2.02 percent of gross
    revenues.

        These incentive fees are based on agreed upon metrics, or
    performance hurdles, that must be met in order to obtain the fee, which
    is a unique fee structure not common within the real estate industry.
    The incentive metrics (which are approved by the Services) are based on
    objective and measurable data points, including response time on
    service requests and resident satisfaction scores, as well as command
    satisfaction on select projects. The determination of the base line for
    these metrics was motivated by the desire to improve pre-MHPI average
    resident satisfaction scores of 60 percent and extended wait times for
    completion of maintenance repairs. The incentive management portion of
    our fees is an effective tool for our military partners to use when we
    are not meeting resident expectations.
                           broader challenges of mhpi
    How the Private Sector Partners Can Help
        Balfour Beatty Communities believes there are many ways that we can
    work together with the Services to enhance the MHPI program. This
    includes the potential to meet more frequently with members of the
    Senate Armed Services Committee, the House Armed Services Committee,
    and other members of Congress, to ensure an open and transparent
    dialogue can occur regarding areas of interest and concern raised by
    their constituents. We believe we also can focus on developing
    additional best practices to improve the quality of life of our
    servicemembers and enhance their living experiences in our housing. As
    part of this process, the following areas can be developed to further
    educate residents:

          how the MHPI program works in general (i.e., under a
    public-private partnership with the Services sharing in the economic
    returns on the projects);

          Basic Allowance for Housing (BAH) collection processes
    (i.e., for servicemembers, monthly rent is collected in arrears);

          the presence and management of environmental hazards in
    ``legacy'' homes (i.e., older homes conveyed by the government into the
    MHPI projects), such as lead-based paint and asbestos; and how
    residents can continue to feel safe in these homes; and

          how residents can communicate housing concerns and
    identify the proper housing advocates available to them.
    How Congress Can Help
        When MHPI was initially conceived, over 20 years ago, the program
    was structured to successfully leverage private sector investment and
    deliver military family housing more efficiently and effectively than
    previous government-run housing models. The servicemember's BAH was
    identified as a core component and primary source of revenue for the
    program. Over the years, changes to scoring requirements and BAH
    calculation have significantly hampered MHPI projects.
        OMB Scoring of New Projects and Project Refinancing: The underlying
    legislation permitted the Services to enter into these transactions
    without severely and negatively impacting their annual operating
    budgets by leveraging private sector debt. However, changes to OMB
    scoring rules in 2012 but officially implemented in fiscal year 2015
    hamper the ability of the housing partners to leverage private sector
    debt. Financial tools available in the commercial real estate space
    (refinancing, restructuring, adding equity, extending terms, etc.) are
    not available or are extremely difficult and time consuming to enact
    under the post-2015 OMB scoring rules. Reinstating the original scoring
    methodology for MHPI would provide the housing partners and the
    Department of Defense with greater flexibility to optimize and expand
    privatized partnerships. In particular, it would allow the housing
    partners to potentially accelerate renovations and improvements to
    existing housing.
        Basic Allowance for Housing (BAH): BAH is the financial engine and
    major revenue source for the MHPI program. Congress and Department of
    Defense have from time to time revised how the BAH rates are
    calculated. There have been significant swings in the BAH rates in some
    areas as established by the Defense Travel Management Office. GAO has
    conducted several reviews on BAH as it relates to its accuracy in
    determining accurate rates for these data collection areas and has
    called for more transparency in the BAH data collection and rate
    calculation process (GAO-11-462: Published: May 16, 2011). BAH rate
    stabilization would allow MHPI projects to better budget, plan, program
    and execute both short- and long-term capital improvement expenditures.
        Military Services End-Strength: Following the 2005 BRAC round,
    there was significant realignment of forces between installations and
    two closure actions that impacted bases with MHPI projects.
        Additionally, there was a decrease in Service end-strength that
    also affected the financial condition of the projects. Lower than
    expected occupancy results in decreased funds flowing into the
    reinvestment accounts, limiting available funds for recapitalization
    and restoration projects (GAO-18-218).
                                   conclusion
        Delivering an exceptional living experience for servicemembers and
    their families who call our military communities their home is Balfour
    Beatty Communities' top priority. The partnerships we have formed
    through the MHPI program have created jobs, more resilient and
    sustainable communities, and a means to increase resources for housing
    and infrastructure programs within budget constraints. Most
    importantly, our partnerships have nurtured a true sense of community
    and improved living experiences for military members and their
    families.
        As a vested stakeholder in our communities, we look forward to the
    continued feedback from military families, our Department of Defense
    partners and the findings of the Senate Armed Services Committee as we
    follow our core mission of delivering an exceptional living experience
    to every resident we serve. We are providing our full support to the
    Government Accounting Office (GAO) and Department of Defense Office of
    Inspector General investigations into environmental issues and
    oversight of the privatized military housing program. We look forward
    to their observations and recommendations and understanding ways we can
    improve our operations. On behalf of Balfour Beatty Communities,
    including our 312 employees who are proud veterans or spouses of Active
    Duty servicemembers, we remain committed to working with Congress to
    ensure a more proactive and informed approach to the MHPI program going
    forward.

        Senator Inhofe. Thank you.
        Mr. Picerne?

       STATEMENT OF JOHN G. PICERNE, FOUNDER AND CHIEF EXECUTIVE
                         OFFICER, CORVIAS GROUP

        Mr. Picerne. Thank you, Mr. Chairman. Thank you, Senators.
    I will be brief.
        My name is John Picerne, and I am the founder and CEO
    [chief executive officer] of Corvias. We are a mid-sized
    company made up of approximately 850 dedicated, hardworking
    people who, alongside of our hundreds of small, minority-owned,
    disadvantaged subcontractors, take very personally our
    commitment to servicemembers who defend our Nation.
        It is in that spirit that I am here to say on behalf of
    everyone at Corvias that we let down some of our residents. I
    am sorry and we are going to fix it. We will get to the bottom
    of this problem, and once again, we will return to the gold
    standard of customer service that we once had.
        First, we are making life better for our residents today
    with a focus on customer service.
        Secondly, we are making organizational changes to ensure
    that our gold standard resident service is built in our
    operation by adding staff to be in the neighborhoods, by
    reopening several neighborhood centers and amenities, by
    retooling our entire mold and mildew standards and policies,
    and by starting a major construction push. While working with
    the Army and the Air Force leadership, we are tapping into more
    than $140 million worth of formerly trapped by reserve accounts
    by our investment groups. We are also investing $323 million in
    new dollars. This will provide for improving more than 2,600
    homes in our communities.
        I know that we will get back to that gold standard place.
    We are proud to serve our military members as we believe there
    is no higher calling in our business.
        I thank you for this time and look forward to your
    questions and thoughtful dialogue.
        [The prepared statement of Mr. Picerne follows:]

                     Prepared Statement by John G. Picerne
        Thank you for the opportunity to appear before you today.
        My Name is John Picerne and I am the Founder and CEO of Corvias.
        We are a mid-sized company made up of approximately 850 dedicated,
    caring, hardworking people, who, alongside our hundreds of small,
    minority-owned, disadvantaged subcontractors, take very personally our
    commitment to the woman and men who fight for and serve our Nation.
        Our company has three core principles: best place to work; best
    provider of service; best community partner. That is the standard the
    American people should expect from those whose job it is to serve those
    who serve in the military.
        It is in that spirit that I come here to say, on behalf of everyone
    at Corvias: we want to do right by servicemembers who choose to live in
    our homes. Any let down of any of our residents is unacceptable. And we
    are making every effort to fix it.
        We're returning to the ``gold standard'' level of resident care
    that defined our company, from the start.
        Let me share with you what we're doing.
        First, we're taking steps to do a better job at resident service.

          We are living the ``Corvias Commitment''--a series of
    specific commitments, to our residents, that we will respond promptly
    to a request, actively seek their feedback, and make changes when we
    need to do better.

          We launched a ``service surge,'' to reduce the backlog of
    work orders, improve our response time to service requests. We shifted
    resources, authorized overtime, worked on weekends. More people,
    handling more calls, more quickly.

          We eliminated annual rent increases on our lower demand
    homes and eliminated fees that may be common in the multifamily real
    estate market, but aren't right appropriate for the special audience we
    serve here.

          We're re-opening playgrounds, paving roads and making
    other investments in community amenities.
        Second, we're making a number of structural changes, to ensure that
    ``gold standard'' resident service is built into our operation:

          We're hiring 25+ resident service specialists for support
    across Fort Polk, Fort Bragg and Fort Meade. These people will focus
    100 percent on local resident needs.

          We're moving our resident call centers back to the local
    installations--and out of a remote third-party call center. During
    regular business hours, residents will once again speak to a local
    Corvias team member, down the street, when they have a problem.

          We hired a world-renowned specialist--at no cost to the
    government--to review our mold and mildew procedures, so that here,
    too, we are living up to the gold standard.

          We're looking at every part of our resident care
    operations to see where we can do better. Everything is on the table.
        Finally, we're getting much closer to the community. . .and to
    local installation command.

          We took the proactive step to provide our military
    partners with a detailed Weekly Work Order Situation Report (SITREP)--a
    summary of our overall performance, work order details and specific
    resident cases. If we fall behind, we'll all know it. Full
    transparency.

          We're spending more time with garrison commanders at Army
    installations and senior level command at our six Air Force bases. We
    want them to know everything we're doing. We want to hear what's on
    their minds.

          We're getting out there, in the communities, listening to
    residents--town halls, Community Information Exchanges, Executive
    Councils, focus groups. There's no better way to put our residents
    first.
        One of the biggest challenges: residents can feel that it's hard to
    be heard, that there is no way for them to raise an issue outside of
    the chain of command. In the era of social media, where everyone has a
    voice, our residents expect and deserve better.
        We're forming resident advocacy groups--at each installation--to
    speak for the community's interests and give us ongoing, direct
    feedback. If a resident has a problem, they'll have a fellow resident
    voice to contact, someone who can act on their behalf.
        It is vital that residents can easily contact us--currently we have
    five different ways, within the housing community and up to Corvias
    headquarters. Residents have asked for ways to get help, and we hear
    them. So we are exploring how to bring in 21st century technology to
    make it even easier, to give our residents more ways of being heard.
        We have a lot underway, and a lot to do. But we are seeing results.
    Our renewed commitment to resident service is starting to pay off.

          In January, our work order completion rate reached 95
    percent across our Army installations.

          Ninety-seven percent of 3,645 total emergency work orders
    at our Army communities were responded to within eight hours . . . and
    completed within 24 hours.

          The average work order survey score was 4.24 on a 1-5
    scale.

        Looking ahead, we're starting a major construction push--new homes,
    renovations, energy efficiency upgrades. Working with Army and Air
    Force leadership, we're tapping more than $140 million in a formerly
    trapped reserve account and a new investment of $323 million. Work
    begins this year.
        As part of this initiative, Corvias will eliminate any lead-based
    paint hazards in every home undergoing renovation.
        We are also working with our Air Force partners on a long-term
    housing solution for single unaccompanied airmen at Edwards Air Force
    Base, beginning in early 2019. Corvias will invest approximately $100
    million: the cost impact to the Air Force is zero.
        To get ahead of rising utility costs, we're working with our Air
    Force and Army partners to install roughly 50 megawatts of solar arrays
    across Fort Polk, Fort Bragg and Eglin AFB. This will complement the
    existing 30 megawatts already installed across our military portfolio.
    Lowering utility costs keeps more money in the program to fund new
    homes, renovations.
        So how did we get here?
        Supporting a resident community--within the confines of an Army or
    Air Force installation--is at once unique and, at the same time, no
    different than a ``civilian'' neighborhood.
        We have weather issues--like the record rains that soaked the mid-
    Atlantic last summer, sending water into some of our homes. Our
    servicemembers move more frequently, meaning we must expend project
    funds to address the normal wear and tear on a home so they are ready
    for the next family to occupy. We have competing demands for repairs,
    investments.
        In the past few years, several developments put downward pressure
    on the partnership--the funds available for resident service,
    improvements, new construction:

          Sequestration and force structure downsizing reduced
    demand for on-base housing. Fewer residents.

          Utility costs increased by 11 percent from 2015 to 2018--
    more than anticipated.

          A litigation matter across all the partnerships, now
    resolved, froze the reserve fund--the money used for construction and
    major improvements--for several years.

        If we did nothing to address the financial stress on our projects,
    the model would eventually collapse. Operational costs would be
    increasingly difficult to cover. There would not be nearly enough funds
    to pay for future construction and renovations.
        To get us back on the right path, we looked for ways to make the
    numbers work. We tackled utility costs and how we could limit future
    increases--by replacing failing ground source heat pumps at Fort Polk,
    installing solar panels. We pursued new funding avenues--bringing more
    money into the program, sooner rather than later, to move ahead on
    improvements.
        And, we looked at the service operation. We centralized our call
    center and maintenance operations. We reduced our local resident
    support presence, shortened the operating hours for our community
    centers and even closed a few centers. We adopted a number of customer
    service practices that are common in the civilian real estate world.
        To be clear: we have nothing, financially, to gain from changes to
    resident service. In fact, investing less in resident service makes it
    more difficult to attract new tenants.
        Changes in resident service operations were one way to ensure
    adequate support for the reserve fund--money used to support new home
    construction and renovations. We, Corvias, do not make any more money
    when less is spent on customer service. This is all about one thing:
    how does the program have enough funds for the future?
        These moves made financial sense . . . but they took us away from
    the ``gold standard'' of resident service that Corvias was known for.
    This is not the civilian real estate world: we serve a special
    audience.
        In our joint governance, Partnership structure, we--Corvias--and
    the military leadership are always trying to strike the delicate
    balance of how to satisfy today's residents and their families . . .
    and still preserve adequate dollars to serve and satisfy 100 percent of
    future residents.
        That is why the MHPI model was designed to be a flexible program vs
    a rigid contract--so that the government and private partners can make
    adjustments over time, in the best interests of the program and the
    residents we serve.
        The MHPI partnership model keeps the vast majority of funds where
    they belong: in the community. For a typical military housing project,
    a dollar in basic allowance for housing (or BAH) is spent along the
    following lines:

          Approximately 30 cents of the BAH dollar are for the
    direct costs supporting the communities--including payroll, supplies,
    marketing to attract tenants, repairs and home maintenance.

          Utilities, taxes and insurance account for about 17
    cents.

          Debt service accounts for about 34 cents.

          About 15 cents is deposited in reserve--to be invested
    back in the community in the form of new construction, renovations,
    major improvements. This reserve fund is among the most important parts
    of the model: it represents the future.

        Corvias is paid a property management fee and--if we achieve
    certain performance goals--an incentive fee. Together, these fees
    account for approximately four cents of every BAH dollar.
        With our partners in the Army and Air Force, we've been on a nearly
    20-year journey to improve the quality of life in military residential
    communities.
        In 2001, the U.S. Army selected Corvias to partner with it for a
    pilot program at Fort Meade. We wanted to see if the partnership could
    make a meaningful difference in the availability and quality of housing
    on post.
        When Corvias first assumed responsibility for Fort Meade housing,
    occupancy was in the low 70 percent range and there was a maintenance
    backlog of nearly 37,000 work orders. Corvias cleared the backlog
    within 60 days. Occupancy rates soared above 93 percent.
        That pilot project helped confirm the partnership model works . . .
    and that high-touch resident service must be our top priority, our most
    important measure of success.
        We also learned a few things--both in the Fort Meade pilot and in
    subsequent projects. We learned that many factors influence the
    direction and long-term viability of these partnerships.
        Occupancy rates falling below what was originally forecast; higher
    construction costs after 9/11; soaring utility costs: these and other
    issues would pose an ongoing challenge in the years ahead. They affect
    the economics of the partnership, requiring us, in collaboration with
    our military partners, to make adjustments and, at times, tough
    choices.
        The partnerships have come a long way from that first pilot at Fort
    Meade. MHPI is delivering on its promise to provide higher quality
    housing to servicemembers and their families.

          In the nearly 20 years since Corvias first partnered with
    the military, we've built or renovated more than 25,000 homes. More
    than 9,600 new homes built; 16,000+ homes completely renovated.

          All homes in our portfolio--more than 27,000 in total--
    will undergo significant renovations and/or replacement during the
    lifecycle of each partnership.

        When it comes to building or renovating homes, we're not talking
    about a new version of the same old thing. We install amenities
    available in the conventional rental market outside the installation--
    pools and splash parks; computer labs; dog parks, fitness centers;
    walking trails, picnic areas, fire pits and pavilions--to attract
    residents. We build community centers--35+ to date.
        Our homes are built 100 percent in compliance with Federal
    regulations, with third-party inspectors. No exceptions, no cutting
    corners.
        Together with our partners in the Army and Air Force, we're proud
    of what we've accomplished--though we know we need to do better. The
    thousands of new or renovated homes available to servicemembers. The
    care, commitment and hustle of our employees who are out there, every
    day, in communities on 13 Army and Air Force installations nationwide.
        Our work with the military is the largest, continuously operating
    public-private partnership in U.S. history. This partnership has helped
    to improve--substantially--the standard of living at those
    installations where we manage homes
        In addition to our work with the U.S. military, Corvias applies the
    same public-private partnership model to other areas.
        We work with local governments and government stakeholders to help
    them tackle tough environmental, energy and infrastructure challenges
    like storm water management.
        We partner with universities to help them meet on-campus housing
    needs for the students of today and tomorrow.
        Our name today, Corvias, is rooted in the Latin phrase, ``by way of
    the heart.'' It represents the commitment we bring to our partners. The
    passion we bring to making a real difference. Our name serves as a
    daily reminder to lead with our hearts and do right by our communities.
        Earlier, I mentioned our three core principles--best place to work;
    best provider of service; best community partner. With the opportunity
    to serve the military comes the importance of supporting the
    community--beyond providing a home.
        Corvias employees live by this principle, giving time and money to
    help the communities we support. Our national giving back program has
    enabled more than 33,000 hours of community service, and our foundation
    has awarded $13 million in scholarships to servicemembers' sons and
    daughters, and grants to military spouses.
        Throughout our history, we've kept Corvias a small, privately-owned
    and founder-led company--for good reasons.
        First: it enables us to make decisions for the long-term, not just
    the next quarter. Second: when we see a problem, we can move quickly,
    go the extra mile. That's what we're trying to do here.
        We have always taken pride in being the best at what we do.
    Although we have slipped, we will get back to that ``gold standard''
    place.
        There remain a number of longer-term issues we must address--issues
    that stress the service model, upset that delicate balance, and will
    only get tougher over time. We need to keep working with our partners
    to understand and meet these challenges.
        Let me close with where I began--what we, at Corvias, believe.
        We believe that our fellow countrymen who serve the Nation deserve
    our best--nothing less.
        We believe in the partnership model--to tackle major infrastructure
    projects, help governments meet citizen needs, make a better quality of
    life.
        And we believe in doing the right thing--in living and working ``by
    the way of the heart.'' That's where we came from, and where we're
    going.
        Thank you.

        Senator Inhofe. Thank you.
        Mr. Ehle?

      STATEMENT OF JOHN EHLE, PRESIDENT, HUNT MILITARY COMMUNITIES

        Mr. Ehle. Chairman Inhofe and distinguished Members of the
    Subcommittees, good afternoon. My name is John Ehle, President
    of Hunt Military Communities. Thank you for the opportunity to
    be here.
        At Hunt we provide more than just housing. We are entrusted
    to build and sustain quality communities that meet the needs of
    those in uniform and their loved ones. We take that
    responsibility seriously.
        We are also committed to being a responsible partner to the
    Department of Defense.
        At Hunt, we have built approximately 15,000 new homes,
    renovated another 8,300 homes, and built 83 community centers.
    We have invested more than $5 billion in our communities and an
    additional $181 million in capital improvements in recent
    years.
        Today we own interests in approximately 52,000 homes on or
    near 49 military installations in 21 States and the District of
    Columbia. Of that number, we manage about 32,000 units and
    serve more than 165,000 residents.
        We recognize that there is no such thing as maintenance-
    free housing and that issues will arise that must be remedied
    with both our historic and newer homes. When that happens, we
    strive to address the situation in a timely and transparent
    manner, and we hold ourselves accountable. We are not perfect,
    and we aim to learn from our mistakes.
        I want to be clear. There is no acceptable percentage of
    unhealthy homes. Every resident deserves our best. Keesler
    family housing in Biloxi, Mississippi has been one area of
    special focus for us, so I would like to speak directly to
    that.
        The military homes at Keesler were largely destroyed by
    Hurricane Katrina in 2005. After the homes were rebuilt, we
    found that residents were consistently identifying moisture-
    related issues. Addressing these issues proved difficult. We
    took ownership of the situation and have executed a multi-phase
    moisture remediation project. We have visited every one of the
    approximately 1,100 homes, assessed each home for moisture-
    related issues, developed a plan for each home as needed, and
    performed remediation work for each of those homes. I am proud
    of the work we have done at Keesler, and we will continue to
    monitor and address any new issues with the utmost diligence.
        To the families that live at Keesler, we appreciate your
    service and we are here to serve you.
        At Hunt, we do not succeed unless we provide our residents
    with safe and healthy homes. We agree with you that more can be
    done to accelerate the improvement of housing stock. We would
    start with promoting common standards and sharing best
    practices. We also support the continued availability of
    housing allowances that facilitate options for our
    servicemembers.
        Finally, let me say a word about the future. Over the next
    5 years, we plan to invest over half a billion dollars in
    additional capital improvements across our portfolio. This
    includes constructing 230 new homes to replace houses for
    residents in Hawaii. This project is expected to create
    hundreds of good paying jobs.
        Again, thank you for the opportunity to testify today. I
    look forward to hearing your views and answering your
    questions.
        [The prepared statement of Mr. Ehle follows:]

                        Prepared Statement by John Ehle
                                i. introduction
        Chairmen Tillis and Sullivan, Ranking Members Gillibrand and Kaine,
    and distinguished Members of the Subcommittees: Good afternoon, and
    thank you for the opportunity to be here today to discuss the current
    condition of the Military Housing Privatization Initiative (``MHPI'').
        My name is John Ehle, and I am the President of Hunt Military
    Communities (``Hunt''), a subsidiary of Hunt Companies, Inc. Among
    other things, I am responsible for overseeing the ongoing management,
    operations, and partner relationships associated with Hunt's military
    family housing portfolio.
        Hunt welcomes the subcommittees' interest in military housing, and
    we share your commitment to promoting the safety, health, and well-
    being of America's servicemembers and their families. We also
    appreciate the efforts of the committee staff in facilitating our
    participation in this hearing.
        At Hunt, we aim to provide more than just housing. We have been
    entrusted to build quality communities that meet the needs of those in
    uniform and their loved ones, and we take that responsibility very
    seriously. We are also committed to being a responsible partner of the
    Department of Defense, playing an important part in the military
    mission.
        I look forward to providing you with an update on Hunt's work and
    hearing your views as we continuously seek to improve the housing
    experience of our military families.
    ii. hunt is proud to provide quality communities to america's military
                                   families.
        Hunt is honored to serve those who serve us. As a company, we have
    strong and longstanding ties to the military community. Indeed, as a
    naval officer who served from 1942-1947, Jack Hunt, one of the founders
    of Hunt Companies, experienced life in military family housing while
    stationed in North Africa, Italy, and Guam, and that experience
    provided a major impetus for the company's first military housing
    construction project starting in 1969, long before the MHPI program.
    Today, at Hunt military communities across the country, our employees
    include members of military families living in the housing we manage.
    In a recent survey of 798 Hunt Military Communities employees, more
    than half indicated that either they or their spouse served in the
    military or they grew up in a military household.
        We take great pride in providing quality homes to those who
    sacrifice so much for our country. Prior to the creation of the MHPI,
    military housing was subject to a cycle of investment and subsequent
    neglect that led to the necessary rebuilding of homes well before what
    should have been the end of their useful life. The MHPI paved the way
    for partners like Hunt to provide the expertise, efficiency, and hands-
    on oversight needed to break that cycle.
        Hunt has proudly partnered with the Department of Defense since the
    inception of the MHPI. We greatly value the relationship we share with
    our military partners, and we appreciate the oversight they provide.
        In service of our partnerships under the MHPI, we have built
    approximately 15,000 new homes, executed major renovations of another
    8,300 homes, and built 83 community centers, in addition to the
    construction of other community amenities. A total of more than $5
    billion has been invested into the transformation of the communities
    that comprise Hunt's MHPI portfolio. Since the conclusion of the
    Initial Development Periods at our projects, we have invested an
    additional $180 million in capital improvements across the Hunt
    portfolio.
        We have also performed full LED conversions in three of our
    communities, which involved converting the lighting in 2,466 of our
    homes, 718 street lights, and six of our own facilities to LED light
    bulbs, resulting in an estimated annual electric savings of $873,000.
    We have similar plans in place for LED lighting conversions at three
    additional communities in 2019. As part of that work, we expect to
    retrofit another 1,444 of our homes, 839 street lights, and five of our
    own facilities with LED lighting, which will result in an additional
    $953,000 in estimated annual electric savings. Also, we have installed
    solar panels on 1,510 rooftops in four of our communities and a 1.2-
    megawatt ground-based solar array resulting in estimated solar savings
    of $3.4 million annually. Finally, we have installed 3,962 low-water
    fixtures in homes at six of our communities, thereby saving 33,329,920
    gallons of water to date and resulting in $540,000 in estimated annual
    water savings. All cost savings associated with these energy
    sustainability initiatives inures to the benefit of the projects and
    their reinvestment accounts, thereby building additional capital
    reserves for future property improvements.
        Today, we own interests in approximately 52,000 homes on or within
    close proximity to 49 Air Force, Navy, Marine Corps, and Army
    installations located in 21 states and the District of Columbia. Of
    that number, we manage about 32,000 units across 44 installations and
    serve more than 165,000 residents.
        Our housing stock is made up of a variety of properties. We have a
    large number of historic houses mixed with many newer homes. Our
    properties have dedicated community centers for resident activities,
    and many have additional features such as sporting fields, playgrounds,
    fitness centers, club houses, pools, and splash pads.
        Hunt is committed to supporting our residents, employees, and our
    neighboring communities through efforts that are focused on military
    issues. We recognize that servicemembers and their loved ones face a
    wide range of challenges, from frequent moves and deployments to
    financial difficulties. Hunt's deployed spouse program centers on
    improving the quality of life for all residents, even in the most
    difficult times. For example, in contrast to pre-privatization,
    residents in our communities receive landscaping services outside of
    any fenced area around their homes, and for those families with a
    deployed spouse, we will service the entire area, including any fenced-
    in areas around their home.
        Unlike most conventional housing properties, we do not require
    security deposits or application fees from our servicemembers. And
    where pet deposits or other fees are required by location, they are
    typically much less than one would find at comparable conventional
    housing. In addition, we offer other services and benefits for our
    residents that may not always be offered in a conventional setting,
    including:

          Relocation Benefits: If a resident is required to be out
    of their home during a repair, we will secure temporary alternative
    accommodations and may provide financial support to ensure that the
    resident is not out-of-pocket during this time.

          Service Order Response Times: All of our service requests
    are documented and categorized as ``emergency,'' ``urgent,'' or
    ``routine,'' and each have required response and completion times
    associated with them. We monitor these requests on a regular basis and
    include them in a monthly report to our government partner. Residents
    also have the opportunity to address a concern with the government
    partner directly, if needed. When such concerns are raised, we will
    work with the government partner to ensure it is resolved.

          Self-Help Supplies: We provide supplies and equipment for
    our residents such as light bulbs and air filters, as well as tools and
    gardening equipment, which they may use at no cost.

          Resident Events: We host regular social events for our
    communities, such as fall festivals, spring carnivals, and movie nights
    under the stars as well as more regularly scheduled events throughout
    the year. These events, which include ice cream socials, holiday hot
    cocoa events, pizza pick-ups, games, and contests, encourage our
    military families to bond and form a community.

          Smile Bucks: Hunt developed the ``Smile Bucks'' program
    to empower its employees to make decisions that serve to brighten a
    resident's day. Hunt property management employees can each use up to
    $100 in any one month (up to $500 per year) to do something for a
    resident that goes above and beyond what is required, such as sending a
    greeting card and a plant to celebrate a birthday or delivering
    balloons and coloring books to cheer up a sick child.

          Community Advisory Boards: Our Community Directors
    organize and lead a Community Advisory Board consisting of military
    residents who meet on a monthly basis to discuss and plan social events
    for the community. This group will also organize support for families
    with deployed spouses such as meal assistance, dog walking, or other
    light maintenance or chores to pitch in during a time of need.

        Further, we seek to establish a bridge between our military housing
    properties and the civilian communities that surround them. In this
    regard, we welcome community groups and services, such as local
    scouting troops or public libraries, to visit our properties and engage
    with our residents, all with an eye toward raising the quality of life
    for those we serve.
        We formed a nonprofit organization, Hunt Heroes Foundation, to fund
    projects that address challenges related to servicemembers and those
    who support them, particularly in the areas of health, education, and
    housing. Hunt Heroes has supported military families and their
    communities through strategic partnerships with organizations like wear
    blue: run to remember, a national nonprofit running community dedicated
    to honoring fallen military members and their families, and Stop
    Soldier Suicide, the first veteran-founded-and-led nonprofit focused on
    military suicide prevention.
        It is a privilege to be part of the public-private program that
    provides homes to our military families, and our commitment to ensuring
    safe and healthy living conditions is fundamental to our business. We
    recognize that there is no such thing as maintenance-free housing and
    that issues will inevitably arise that must be remedied with both
    historic and newer housing stock. When that happens, we consistently
    strive to address the situation in a timely and transparent manner. We
    are not perfect, of course, so we also aim to learn from our mistakes
    in order to provide a better experience for our residents going
    forward.
    iii. the health and safety of military families is hunt's top priority.
        There is no higher priority for us than the safety and health of
    our resident servicemembers and their families. When we receive reports
    of an issue that could put that at risk, or that otherwise impairs the
    quality of the housing provided, we take prompt action.
        Hunt has an extensive inspection and preventative maintenance
    program at all of its properties. We also have systems in place to
    respond to reported concerns, issue work orders, and follow up in a
    timely manner. Hunt tracks work orders for maintenance requests and
    issues work order satisfaction surveys for every visit. Moreover, our
    maintenance response times are dictated by our MHPI engagements with
    our military partners, and we provide monthly reports to the government
    detailing our response and completion times.
        Hunt is committed to providing a safe environment for its
    residents. Its management and maintenance teams are focused on
    assisting residents and addressing their concerns every day. Hunt
    strives to keep its residents informed of important environmental and
    safety matters that may affect them.
        This is why we created the Hunt Safety Zone, an online library of
    information relevant to residents' safety, which is regularly updated
    with new information. In the library, one can find information
    concerning home safety, seasonal safety, children's safety and other
    useful tools. The topics are all presented in a user-friendly format
    and include fire and mold prevention, window safety, and others. In
    addition, seasonal safety topics are available by month such that a
    resident can visit the Safety Zone at a particular time of year and
    learn about a seasonally relevant safety topic. These topics range from
    water, grilling, and bicycle safety to crime and poison prevention and
    even Halloween safety.
        In addition to the Safety Zone, we affirmatively provide our
    residents standard safety information upon move-in. This includes the
    EPA pamphlet, ``A Brief Guide to Mold, Moisture In Your Home,'' and
    information on lead-based paint, asbestos, radon, and/or pesticides. We
    have a vested interest in maintaining a safe environment for our
    residents.
        We value transparency and are committed to maintaining regular
    communication and an open dialogue with all resident families and base
    leadership. We proactively interact with our residents and military
    partners via routine electronic and written messages, monthly Mission
    Support Group Commander or Asset Management meetings, regular
    conversations with military housing offices, and updates on the company
    website and Facebook page. We hold town hall meetings and conduct
    ``open office hours'' or smaller meetings within a community where
    residents are able to ask questions on a more personalized one-on-one
    basis.
        Also, as mentioned, each of our communities has a Community
    Advisory Board, which serves as a liaison between community members and
    the Hunt property management team. Residents are able to voice concerns
    directly to the command of their respective military units.
        Hunt's ultimate goal is to provide our servicemembers and their
    families with quality homes that foster their safety, health, and well-
    being. When we fall short on this, we need to know about it, and we
    work to fix it.
       iv. where challenges have arisen, hunt has undertaken substantial
                              remediation efforts.
        Hunt acknowledges that exceptional challenges occasionally occur at
    its properties, and we embrace our responsibility to address such
    issues when they arise. We are committed to being responsive to the
    needs and concerns of our residents. The situation at Keesler Family
    Housing (``Keesler'') in Biloxi, Mississippi has been one area of
    special focus for us, so I would like to speak to that and, in
    particular, the remediation effort that Hunt has undertaken there.
        The military homes at Keesler were largely destroyed by Hurricane
    Katrina in 2005. In the years following, the homes were rebuilt, owned
    by the Air Force, and then placed under the management of Forest City
    Military Communities via the MHPI program. After the reconstruction,
    residents at Keesler began identifying issues, including, in some
    instances, moisture build-up.
        Addressing these issues proved difficult. However, we took
    ownership of the situation and have, in consultation with independent
    consultants, executed a multi-phase Moisture Remediation Project
    (``MRP''). As part of this MRP, we have:

          Visited every Hunt-owned residence located at Keesler
    (approximately 1,100 units);

          Assessed each home for condensation-related issues;

          Developed a tailor-made plan to address the specific
    issues identified in each home where such issues were found; and

          Performed all necessary remediation work required for
    each impacted home.

        The remediation work varied from home to home. This was not a one-
    size-fits-all solution. It was a complex plan that varied given the
    circumstances. In some cases, issues were able to be addressed in a
    matter of hours. In others, the work was more extensive. In the latter
    situations, Hunt worked to relocate residents into alternative housing
    and minimize the impact on affected families by providing various means
    of financial support. Nevertheless, some residents opted to remain in
    their homes during remediation. We recognize that this process has been
    intrusive and inconvenient at times, and we are grateful for the
    collaborative spirit in which residents have worked with us.
        As of May 2018, we have completed all required work for the MRP,
    including accessing and analyzing more than 1,100 homes at Keesler, and
    repairing issues when we found them. In addition, we recognize that
    sustainment of remediation is an ongoing process, and that we need to
    maintain our investment in order to sustain long-term solutions to meet
    the needs of our residents. We launched the Sustainment Phase of our
    program to address any potential moisture issues that may arise in the
    future.
        The Sustainment Phase of our program was designed to be robust and
    custom-tailored to each home. In the Sustainment Phase, we have used an
    industrial hygienist to analyze certain units, and we have conducted
    inspections along duct lines as needed. We have also begun two
    different pilot programs to study ventilation in the homes, and we have
    increased the number of hospitality suites to allow for shorter waiting
    times for those families that may need temporary accommodations while
    work is being completed in their homes.
        To date, a total of $12.2 million has been spent on our remediation
    and sustainment efforts at Keesler, and I am proud of the work we have
    done to address the root cause of the condensation issues reported
    there. Nevertheless, we understand that Mississippi's Gulf Coast
    climate lends itself to high levels of moisture and humidity,
    particularly in the summer months. Indeed, every warm season brings a
    new set of challenges. Accordingly, we will continue to vigilantly
    monitor conditions in our Keesler homes, and we fully intend to
    approach any future moisture issues, should they arise, with the utmost
    diligence.
    v. hunt's compensation incentives are aligned with the interests of its
                                   residents.
        At Hunt, we do not succeed unless we provide our residents with
    safe and healthy homes that meet their needs. This goal is not only
    part of our corporate philosophy but also built into our engagements
    with our military partners.
        Each year, Hunt residents receive a satisfaction survey, which
    gives them the chance to express their views on the job we are doing.
    The survey is administered by a third-party company and disseminated to
    residents electronically in order to increase response rates.
        The results from these surveys guide us in our work. Hunt
    representatives meet with our military partners to discuss the survey
    results, and Hunt provides an action plan to address any areas in need
    of improvement.
        Further, in our industry, resident satisfaction scores are a key
    metric that can directly impact a company's bottom line. Under the
    terms of our engagements with our military partners, Hunt stands to
    collect an additional fee for the properties it manages based on the
    achievement of performance benchmarks. Resident satisfaction is a
    substantial component of these incentive fees, which can be reduced or
    even forfeited completely if certain goals are not met. Other metrics
    that can impact incentive fees, depending on the particular agreement,
    include service order response times, preventive maintenance
    achievements, commander's evaluations, and occupancy rates. Thus,
    Hunt's incentives are aligned with the interests of its residents, and
    resident satisfaction is our overarching goal.
         vi. hunt continues to reinvest in and improve its properties.
        Finally, I would like to share with you some information about how
    Hunt reinvests in its properties and works to improve them.
        Hunt's management revenue is generated primarily through the
    receipt of rent payments from residents who opt to live in a Hunt
    property. These rent payments are in large measure covered by a
    servicemember's Basic Allowance for Housing (``BAH''). Hunt receives
    the BAH as gross revenue. It then uses portions of the BAH to cover
    operating expenses, service debt payments, pay asset management and
    property management costs, and contribute prescribed amounts to
    reinvestment accounts, which fund long-term sustainment.
        Only then is any remaining cash divided between Hunt and its
    government partner. On average, this permits Hunt to retain between one
    and two percent of the total monthly BAH dollars it receives, assuming
    the property is performing financially. In short, this means that the
    vast majority of each BAH dollar Hunt receives goes to supporting our
    military housing communities and, by extension, the servicemembers that
    reside there.
        Likewise, Hunt periodically dedicates significant reserve funds to
    replenishing parts of its housing stock. When it entered into its
    partnership with the Department of Defense, Hunt was aware that many
    housing units would need to be replaced during the span of the
    relationship, and it takes this responsibility seriously. Over the next
    5 years, Hunt plans to invest nearly $530 million in capital
    improvements across its portfolio, including the construction of 230
    new homes in replacement of existing housing stock.
        One exciting development is currently underway in Hawaii, where
    later this year we will begin the process of replacing existing homes
    in our Nani Ulupau neighborhood with 40 new houses at a total cost of
    $32 million. That project will be followed about 2 years later by
    replacement of the homes at the Hokulani neighborhood with 190 new
    houses at an estimated cost of $100 million.
        At their peak of activity, the combined projects are expected to
    create 200 jobs and ultimately improve the quality of housing offered
    to our Marine Corps and Navy residents. Both projects demonstrate our
    steadfast commitment to addressing challenges posed by aging housing
    structures and providing homes that serve the safety and health of our
    residents.
                                vii. conclusion
        Thank you for inviting me to testify today. I appreciate the
    opportunity to discuss Hunt's work with you. I have done my best to
    share what we know about the important issues you have raised.
        Above all, what I hope I have conveyed is that Hunt remains
    committed to providing quality communities that meet the needs of
    America's heroes and their families. We recognize the responsibility
    placed upon us, and we do not take it lightly. We are dedicated to our
    relationship with our military partners, and we look forward to
    continuing to work with them in this critical endeavor.
        Likewise, we welcome the opportunity to hear your views and hope to
    address any concerns you may have. In that spirit, I would be glad to
    answer any questions you may have to the best of my knowledge. Thank
    you.

        Senator Inhofe. Thank you.
        Mr. Hickey?

     STATEMENT OF DENIS HICKEY, CHIEF EXECUTIVE OFFICER, AMERICAS
                         LENDLEASE CORPORATION

        Mr. Hickey. Thank you, Chairman Inhofe, Ranking Member
    Reed, distinguished members of the joint subcommittee. My name
    is Denis Hickey and I am Chief Executive of Lendlease Americas.
    Thank you for inviting me here today to testify on our
    contribution to the military housing program.
        Lendlease is a global property company founded in Sydney in
    1959, but we have been operating in America since 1970. As an
    Australian, I can attest that Australia, as the only country to
    have stood side by side with America in fighting every major
    conflict since World War I, is very proud to be a part of this
    program since its inception.
        Mr. Chairman, I would like to touch on the issues that are
    brought here today. This afternoon, we have heard from several
    families who have outlined the examples in a very material way
    of the serious problems that have arisen across some of the
    portfolios. The situation is clearly not acceptable, should
    have been avoidable, and I personally have great empathy for
    their cause. No family, much less a military family, should be
    subject to these conditions.
        We have 130,000 people living in our communities, and I can
    assure the Members that we try extremely hard not to let these
    type of issues arise. However, unfortunately, we are human and
    mistakes do happen. I can assure the Members that we are very
    focused on trying to learn from the stories that we hear today
    and learn from the Committee's input to fix these situations
    moving forward.
        Despite many successes and the strength of the military
    housing program, the program itself does bring some challenges.
    For example, the continued funding to continue with the
    remediation and continued betterment of the housing stock
    across the portfolios. Currently Lendlease's communities have
    invested $7 billion into new construction and development
    across the portfolios, and we think that there is another $16
    billion to invest over the life of the program. However, those
    funds are not evenly distributed across the projects. So the
    challenge for us is to actually find a way to get those funds
    to the areas it needs to be invested.
        Secondly, the safe and timely management, rectification,
    and repair work of some of the environmental issues that
    existed on the base from pre-existing conditions is a real
    challenge, and we try very hard to address this every day.
        There is also the challenge of meeting occupancy levels.
    When military decisions are made around troop deployments that
    affect demand on the base, it is a challenge for the project
    companies to manage through those.
        Finally, there are challenges of managing various natural
    disasters that occur. Mr. Chairman, a case in point is our
    Hurricane Florence at Camp Lejeune project in September of
    2018. This was an unprecedented natural disaster and of the
    6,200 homes on Camp Lejeune, 3,800 were affected. The repair
    bill alone for that project is over $150 million. Whilst we
    were slow to start, we have made good progress, and we have
    repaired over 40 percent of the homes. Earlier this week, I met
    with Secretary Spencer of the Navy and other leaders of the
    Navy and Marines, and we talked about this specific issue. We
    are working together collectively, and our goal is to have all
    of the homes repaired by the end of November.
        Mr. Chairman, finally, we are proud of the many
    accomplishments that we have achieved across our portfolio to
    date, but we are also very aware of the issues that have been
    brought here today. The issues have my personal and full
    attention, and I can assure you we are very focused on
    improving every aspect. We want the people who live in our
    communities to be proud, as our people are proud to serve them.
    Thank you.
        [The prepared statement of Mr. Hickey follows:]

                       Prepared Statement by Denis Hickey
        Chairmen Tillis and Sullivan, Ranking Members Gillibrand and Kaine,
    and distinguished Members of the Armed Services Committee, my name is
    Denis Hickey, Chief Executive Officer of Lendlease Americas. Thank you
    for inviting me to testify today.
        I represent Lendlease, and I am here to provide the Subcommittees
    with information regarding Lendlease's contributions to the Military
    Housing Privatization Initiative (MHPI) program.
        Lendlease is a leading global property company founded in Sydney,
    Australia in 1959, and we have been operating in the United States
    since 1970. Lendlease Americas is a full tax paying U.S. corporation
    directly employing more than 1,700 people across the United States, 895
    percent of which are American citizens. We are proud of our long
    history in America, and our goal is to increase our presence here in
    future years.
        In 1972, our founder Dick Dusseldorp, famously remarked that ``the
    time is near that companies must start justifying their worth to
    society, with greater emphasis placed on environmental and social
    impact, rather than straight economics.'' This belief is at the core of
    who Lendlease is today. It guides our efforts and ensures we remain
    committed to delivering long-term sustainable value to the communities
    we create and serve.
        As an Australian, I can attest to the fact that Australia -the only
    country to have stood and fought beside America in every major conflict
    since World War I -is very proud of the strong military ties between
    our two countries. As a partner to the Department of Defense (DOD)
    since the early days of the MHPI program, we at Lendlease are also
    humbled by the opportunity to serve military personnel and their
    families by providing quality, healthy, safe, and sustainable
    communities.
        We take this responsibility seriously.
        Our military housing business is headquartered in Nashville, TN. We
    oversee and manage more than 40,000 single-family rental homes across
    28 installations in 12 states, from Upstate New York to Alaska and
    Hawaii. Many of our managers and employees live in the local
    communities we serve, managing day-to-day operations for our residents.
    They are part of these communities. Many are also veterans or military
    spouses who have lived on military installations and experienced first-
    hand the sacrifices our military and their families make every day.
        Before I address the MHPI initiative and Lendlease's role in this
    program, I would like to touch on the recent news reports and the
    issues raised that have brought us here today. The media reports
    outline examples of some serious shortcomings that have arisen across
    the program, and they are clearly not acceptable.
        I empathize with the families that have been affected by these
    issues, as they should not be subjected to these conditions.
        I can assure the members of the Subcommittees that Lendlease is
    dedicated to creating and maintaining safe, healthy and sustainable
    communities for our servicemembers and their families. As such, we are
    committed to doing everything we can to resolve these types of issues
    should they occur on our projects.
                                the mhpi program
        The MHPI program was enacted out of a critical need to modernize
    old and dilapidated housing on military bases that, after decades of
    deferred maintenance, had fallen into disrepair. The DOD did not have
    enough appropriated funding to undertake this renewal program.
    Partnering with the private sector to unlock much needed capital and
    capabilities was seen as an innovative and effective way to remedy this
    problem.
        Exercising its authority under the MHPI legislation, after a full
    and open public procurement process, each Military Service selected a
    private sector developer to access the expertise and private sector
    funding that was deemed critical for the construction, refurbishment,
    operations and ongoing sustainment of their housing facilities.
        Lendlease implemented the privatization initiative under a basic
    structure in which a Project Company is formed to own, develop, finance
    and operate family housing on military installations. Often, the
    respective Military Service elects to become a member of the Project
    Company. Regardless of structure, the Military Service retains
    governance oversight and control over major decisions of the Project
    Company through the project agreements. This Project Company then
    contracts with various parties to deliver the asset management,
    property management and development management services. In our case,
    Lendlease is engaged as the asset manager and the development manager,
    and partners with Winn Corporation to perform the property management.
        Lendlease works closely with the DOD and the leadership of the
    individual Military Services, both at the Pentagon and local
    installation level, to determine appropriate development and
    operational plans to meet the objectives of the program. Generally,
    Lendlease, the DOD and Military Services share approval authority over
    annual operating budgets and capital expenditures, and the DOD
    maintains regular oversight of the overall performance of the Project
    Company and its service providers through the contractual and funding
    structure.
        One of the great successes of the MHPI program has been the
    creation of new housing on military bases throughout the U.S. On these
    bases, older homes were torn down and replaced with new, modern ones
    that conform to the latest building codes. In addition, many of these
    older homes have undergone significant renovation and have been brought
    up to current standards.
        Despite this investment in new homes, a significant number of older
    legacy homes remain including some that may have potential
    environmental issues that need to be carefully managed. Maintenance
    plans are developed and administered for these homes until
    modernization and/or replacement can occur.
                            project funding sources
        Initial funding for the development scopes was generated from
    leveraging the forecast income from the Project Company to secure
    financing from the capital markets. Together with investments made by
    the Military Services and the private sector developer, this financing
    was used to fund the initial period of development, construction and
    renovation of a select tranche of homes at each installation (known as
    the Initial Development Period or IDP).
        Ongoing funding for the Project Companies comes in the form of the
    rent they collect from the residents, which is capped at the Basic
    Allowance for Housing (BAH). The revenue is deposited into secured
    accounts and is used to pay operating expenses, service debt, fund
    approved management fees and agreed investment returns, with the
    balance of the net operating income (NOI) deposited into the project's
    ``reinvestment account.'' These funds are not distributed to the
    developers, but remain within the project to fund future development
    and maintenance work.
        As the reinvestment account balance grows, the Project Company, in
    consultation with the Military Service and the local installation,
    assesses how those funds can be utilized to best improve the quality of
    housing on the installation. Generally, the Military Service, as a
    member of the Project Company, shares authority for approving plans
    and/or funds to be expended from the reinvestment accounts.
        To date, Lendlease's MHPI projects have invested more than $7.2
    billion to fund new construction and major renovation activities to
    improve the quality of life for our residents. Our current forecast is
    that a further $16.4 billion of surplus NOI will be generated for
    deposit into the reinvestment accounts across our MHPI portfolio over
    the remaining balance of the ground leases, subject of course to
    continued project occupancy. Funds in the respective projects'
    reinvestment accounts are intended to be used for further upgrades and
    new facilities over the remaining term of the projects, conditional on
    direction and mutual approval by the Project Manager and the Military
    Services.
                    customer service is critical for success
        Except for a small fraction of command-designated personnel who are
    required to live on base, every other eligible servicemember has the
    choice to live either on or off base. They receive their BAH and are
    free to use that BAH to pay for housing wherever they choose to live.
    As such, the MHPI program is an entirely free market program with
    consumer choice, and has absolutely no occupancy or rental guarantees
    from the Government.
        As a result, we need to compete very hard with the homes off base
    to be seen as the housing provider of choice. For an MHPI housing
    project to thrive, it must consistently provide the best value and
    customer service to its residents, or it will lose occupancy and
    receive lower rental income. If lower rental income is received, then
    there is likely to be less NOI to be invested in the project's
    reinvestment account, thereby impacting what can be done to improve the
    housing and the facilities within that project.
        We are very focused on customer satisfaction and train our
    employees on how to deliver high standards of customer service. We
    measure the quality of our customer's experience using independent
    resident surveys conducted by CEL & Associates and SatisFacts. These
    objective reviews are designed so that our local property management
    teams can promptly address residents' feedback, questions, issues or
    concerns.
        In 2018, we received more than 36,000 completed resident feedback
    surveys and averaged a score of 4.45 out of 5. Whilst these were good
    scores, there is obviously room for improvement and we use these survey
    results as learning opportunities for our and our property managers'
    operations teams to focus on areas where we can improve our level of
    service and performance. These results are also reviewed in detail with
    Military Service leadership, both at the Pentagon and local
    installation level. They closely monitor our performance and they form
    part of the basis for the asset and property management fees.
        To provide a measure of scale of the annual activity that happens
    on the installations that we manage, our front-line property management
    personnel perform more than 18,000 changes of occupancy annually. Each
    resident change brings with it a requirement to conduct environmental
    assessments, refresh the home and repair any cosmetic issues which can
    include flooring replacements, painting, fixture and finish upgrades,
    appliance upgrades and minor structural renovations. In addition, our
    maintenance teams performed over 400,000 service requests in 2018,
    ranging from fixing mold issues, flaked paint, blown light bulbs,
    clogged toilets to broken screen doors. These are cataloged and
    recorded in our project databases.
        All in all, our success depends on providing exceptional customer
    service and, as such, we invest significant time and resources trying
    to continuously improve and raise our performance in all areas.
                           environmental stewardship
        Lendlease understood that many of the houses acquired through the
    MHPI projects would not be demolished as part of the IDP, and came with
    both known and unknown conditions including lead-based paint, asbestos
    and contaminated soils. The set up of the projects was not and could
    not be designed to address all the legacy homes in the initial
    development. Rather, it was envisioned that these legacy homes would be
    addressed over time and funded out of the project reinvestment
    accounts.
        For example, our portfolio of over 40,000 homes includes more than
    14,200 legacy homes built prior to 1978, when the use of lead-based
    paint was banned. Until these conditions can be successfully eradicated
    through major renovations or housing replacements, they require active
    management. Accordingly, at the time of a project's inception, each
    home in the project is inspected for these conditions, and in cases
    where the conditions are not addressed and require continued active
    management, it is noted on our housing registers.
        In these instances, any known presence of lead-based paint,
    asbestos, or contaminated soils in/or around a house are all clearly
    documented and disclosed to all residents prior to occupying their
    home. Every resident at move in receives a home walk through, covering
    all aspects of the home, including discussions around the existence of
    these environmental conditions, and receives material regarding how to
    live safely in the home. All residents are encouraged to report any
    suspected lead-based paint flaking, mold or other environmental
    concerns that may arise during their tenancy directly to the Property
    Manager. All reports are treated very seriously, and we strive to
    rectify these issues as soon as possible.
            driving innovative, sustainable and community solutions
        Consistent with Lendlease's commitment to improving the
    environmental and social impact to the communities we create, we have
    been focused on implementing strategies across our portfolio that
    support the DOD's objectives of reducing energy, water and waste
    consumption. These include:

          The development of 34.77 megawatts of ground and rooftop
    solar arrays across our portfolio. In the past 12 months, our projects
    have generated over 43 gigawatt hours of solar electricity, enough to
    power 5,303 homes for 1 year.

          The delivery of industry leading green building practices
    with 15,000 homes built to Energy Star or LEED Silver standards.

          The design, construction and monitoring of the first two
    Zero Energy Homes (ZEH) on any DOD military installation at Fort
    Campbell, and the first Net Zero Energy Home on a Navy/ Marines
    installation at Camp Lejeune.

          Implementing resident education and engagement programs
    around consumption and conservation best practices. This includes home
    energy audits and educational walk throughs to help residents operate
    their homes more efficiently.

          Incorporating the use of Building Energy Management
    Systems (BEMS) resulting in approximately 7,206,697 kilowatt hours or
    $684,636 million saved over the last year.

        In addition to these environmental initiatives, Lendlease is also
    focused on giving back to the people and communities we serve. For
    example, in 2007, Lendlease established the Lendlease (U.S.) Community
    Fund, a 501(c)(3) fund designed to give back to military communities.
    Through a combination of Lendlease contributions as well as other
    fundraising initiatives, the Lendlease Community Fund has raised over
    $4.2 million. This money has been distributed to various organizations
    such as Wounded Warriors, Operation Shower, Boot Campaign, K9s for
    Warriors, Veterans PATH, Fisher House Foundation and many more
    grassroots organizations working tirelessly to serve Active Duty
    servicemembers, veterans and their families. The Lendlease Community
    Fund's BlueStar Scholarship program has also awarded $704,000 in
    scholarships to high-school age military dependents.
        We will continue to focus on these areas and are committed to
    piloting new initiatives. Our efforts have reshaped industry practices
    and have helped design and achieve better outcomes for our communities.
                             meeting the challenges
        Despite delivering tangible benefits to the respective communities,
    the MHPI program brings a unique set of challenges, including, but not
    limited to:

          The timely rectification and replacement of historic
    environmental conditions, including lead-based paint, asbestos and
    pesticide impacted soils.

          Ensuring the Project Companies can individually generate
    sufficient NOI to fund the continued modernization of the on-base
    legacy homes.

          Maintaining occupancy levels through troop deployment and
    other military decisions that can dramatically affect the housing
    demand.

          Managing various natural disasters and unforeseen events
    that periodically occur.

        We will continue to do our best to manage and mitigate these issues
    so they do not adversely impact our military families. Our leadership
    and operational teams will continue to work with local installation
    command, Military Service leadership and community representatives to
    review these issues as they arise and develop and implement appropriate
    solutions to mitigate their impact.
        The most recent example of managing one of these issues was the
    natural disaster of Hurricane Florence that hit our Atlantic Marine
    Corps Communities (AMCC) project in North Carolina in September 2018.
    This hurricane was unprecedented in size and impact with significant
    effect on both the AMCC base facilities and the broader community.
    Damages from the hurricane have resulted in major logistical and
    construction challenges. On the AMCC project alone, 3,818 of the 6,182
    homes were damaged, and the estimated repair bill for housing on the
    base is over $150 million. Although progress on the recovery was
    initially slower than envisaged, after recent meetings with the local
    Commander and his team, as well as meetings with other high-ranking
    officials in both the Navy and Marines, we have collectively
    implemented several improvements that have helped AMCC to accelerate
    recovery in a collaborative manner. We are making solid progress and
    have currently rectified 1,478 homes (40 percent of the total damaged).
    Our aim is to have all of the recovery work substantially completed by
    November of this year.
                               concluding remarks
        Lendlease's MHPI portfolio is a cornerstone of our business in the
    United States. The company is committed to the MHPI program and to
    continuing to work with the DOD and Military Services to make it
    successful.
        While we are proud of many of our accomplishments across our MHPI
    portfolio to date, we are also keenly aware of the issues that have
    been brought before the Subcommittees today and see these as critical
    areas that have our full attention. We will continue to focus on
    improving our services for the benefit of the military families who
    reside in our communities. We want them to be as proud to live in our
    communities, as we are to have them.
        Mr. Chairman, this is of the highest priority to Lendlease. We want
    to make sure that every military family on all our bases receives the
    highest level of service every day. They deserve nothing less.
        To that end, we look forward to the dialogue the Subcommittees have
    initiated and remain receptive to any and all constructive advice for
    improvements to our projects and the MHPI program. We also welcome any
    Senators or their staff who wish to visit our facilities and see first-
    hand the status of our operations.
        I thank you for the opportunity to represent Lendlease and to tell
    the story of MHPI from our perspective.

        Senator Inhofe. Thank you, Mr. Hickey.
        Mr. Bliss?

      STATEMENT OF JARL BLISS, PRESIDENT, LINCOLN MILITARY HOUSING

        Mr. Bliss. Chairmen Inhofe, Tillis, and Sullivan, Ranking
    Members Reed, Gillibrand, and Kaine, and members of the
    subcommittees, on behalf of Lincoln Military Housing, thank you
    for the opportunity to testify before your subcommittees today
    on the Military Housing Privatization Initiative (MHPI).
        My name is Jarl Bliss and I am the President of LMH.
        I realize time is short, but I would like to recognize the
    servicemember families who just testified for sharing their
    experiences with you.
        The men and women of LMH work every day to serve all of our
    families with honor and integrity. I regret when even one
    servicemember family feels like we have come up short.
        I am sincerely and personally committed to working with our
    military families, our DOD partners, and your subcommittees to
    address any concerns with our operations and to foster better
    communication and understanding with those we serve.
        Obviously, one of the reasons we are here today is because
    there are families who feel like we did not perform up to
    expectations. Whatever the source of that frustration, whether
    it was a service problem or whether we did not communicate well
    with the family, I deeply regret that any of our residents feel
    this way.
        While I believe the MHPI program is a true success for many
    thousands of military families, it is clear in the testimony of
    the families here today that not every family feels the same
    way. I want to change that. I want to regain the trust of these
    military families.
        As your subcommittees look at how LMH and other PPVs are
    performing, I look forward to working with you and our DOD
    partners to explore new and creative ways to improve our
    military families' experience in our housing. I look forward to
    your questions and, more importantly, to working with you to
    address the concerns of the military families.
        [The prepared statement of Mr. Bliss follows:]

                        Prepared Statement by Jarl Bliss
        Chairman Tillis, Chairman Sullivan, Ranking Member Gillibrand,
    Ranking Member Kaine, and Members of the Subcommittees:
        Thank you for the opportunity to testify before you and your
    subcommittees this afternoon concerning the Military Housing
    Privatization Initiative (MHPI), and, specifically, Lincoln Military
    Housing's (LMH) provision of residential property management services
    to our women and men in uniform through that program. LMH welcomes your
    subcommittees' oversight of the MHPI to ensure that all of the public-
    private ventures (PPVs) are delivering the highest level of service to
    military families with a level of integrity that reflects our Nation's
    gratefulness for their sacrifice.
                                  introduction
        LMH is an affiliate of Lincoln Property Company (LPC), a Dallas-
    based residential and commercial property management company with a 54-
    year history of outstanding customer service. LMH, formed in 2001 to
    participate in the MHPI, is extremely proud of our nearly two decades
    of partnership with the Department of Defense (DOD) and our service to
    the military community through the program.
        As your subcommittees are aware, in the mid-1990s, military family
    housing was in serious disrepair; residents at that time rated their
    satisfaction at around 60 out of 100 and DOD estimated that
    rehabilitating the housing stock would cost taxpayers at least $16
    billion over 30 years. Through the MHPI, private sector investment in
    military housing has exceeded $20 billion over the past 16 years, and
    military families have experienced a marked improvement in the quality
    of housing, as evidenced by a 20-25 point increase in their self-
    reported satisfaction scores across the portfolio of homes.
        Today, LMH manages around 37,000 residential units through the
    MHPI, of which approximately 7,000 are at Camp Pendleton and 4,300 are
    in the Hampton Roads area of Virginia. Over the last 16 years, the PPVs
    in which LMH participates have invested about $4 billion, of which
    amount almost $1.125 billion in private capital has been invested in
    the Camp Pendleton/Quantico Housing project alone. Over the next
    decade, LMH, with the approval of and in consultation with our DOD
    partners, plans to spend at least $450 million more in this project and
    over $2 billion more across our entire portfolio.
        While LMH is proud of our record, we acknowledge that one of the
    reasons for this hearing is a series of published media reports
    implying that LMH has cut corners and failed to provide quality housing
    to servicemembers. LMH welcomes and encourages military families to
    raise complaints about their housing and we regret when even one
    servicemember family is dissatisfied with our performance. We recognize
    that some issues have become compounded due to some servicemembers'
    feeling like there is a breakdown of trust and communication with LMH.
    We are committed to fixing those issues in a manner that puts the
    readiness of military families first. As your subcommittees conduct
    oversight of this issue, however, we wish to highlight the following
    points:

          LMH has strong ethical and economic incentives to deliver
    the highest level of customer services to servicemember families
    because the success of the PPVs established under the MHPI depends
    wholly on LMH's ability to maintain satisfied residents and high
    occupancy rates in its housing. If LMH were to cut corners and provide
    lower quality housing, many servicemembers may choose to use their
    Basic Allowance for Housing (BAH) to live in non-military housing.

          Both in policy and practice, whenever LMH's online or 24/
    7 telephone customer service center receives a service request relating
    to moisture or mold in a home, a trained LMH technician responds to the
    family within 30 minutes--an ``emergency'' level of response because
    mold usually indicates water intrusion. Once at the residence, the
    technician assesses the type of repair or remediation needed and works
    with the family to schedule the service. Every mold or water intrusion
    service request generates three follow-up visits in the days and weeks
    after service is performed to confirm the repair or remediation worked
    and the family is satisfied. On an annual basis, mold work orders
    constitute less than one percent (0.6 percent) of service requests,
    even at coastal installations where relative humidity levels are
    naturally high.

          LMH is proud of our service to our special class of
    residents. Servicemember families sacrifice greatly in service of our
    national defense; they deserve to have complete confidence in the
    condition of their housing, which contributes to readiness. While we
    disagree with the characterization of our property management services
    in recent media stories, the important issue is how the MHPI
    community--Congress, the DOD partners, and the PPVs--moves forward to
    improve upon past success and to ensure the level of program integrity
    our servicemember families expect and deserve.

        LMH recognizes that there is always room for improvement. To that
    end, LMH has commissioned an independent review of our mold policies
    and procedures, training and communication to determine how we can
    improve the experience of our military families in the housing units we
    manage. We look forward to partnering with Congress, DOD, and
    especially our residents to restore residents' trust and improve upon
    our ability to deliver the highest quality property management services
    to the families that wear the Nation's uniform.
              background on lincoln military housing and the ppvs
        As your subcommittees review LMH's performance as a MHPI private
    partner, it is important to understand the details of how our PPVs work
    so that you can assess the parties' relative incentives and
    performance, along with the existing DOD oversight mechanism for the
    PPVs. A PPV is essentially a base-specific public-private partnership
    under which DOD enters into a joint venture with a private sector
    company. At all times, the PPV holds title to the housing stock on the
    base. DOD retains the underlying land and provides a ground lease to
    the PPV for a 50-year term. At the expiration of the lease, the PPV
    must return the land and housing stock to DOD in the same or better
    condition than at the beginning of the lease. Additionally, all
    monetary assets are distributed to DOD at the end of the partnership.
    The PPV contracts with a property management company for management
    services.
        The PPV is financed primarily by securitizing the BAH of the
    military families that live in military housing. As you know, each
    servicemember's BAH is set by DOD according to rank and cost of living
    in a given geographic location. LMH plays no role in setting a
    servicemember's BAH. Each servicemember receives a BAH and at all times
    has the choice whether to live in military housing (which is typically
    but not always on-base), in which case the servicemember family's BAH
    is paid to the PPV as rental payment, or whether to take the BAH as a
    check-in-hand and seek housing in an off-base community. Currently,
    over 70 percent of military families do not live in military housing
    for a variety of reasons. Sometimes it is for a particular school
    district; other times it is because they find housing off-base for rent
    lower than their BAH so they are able to save part of their BAH for
    other expenses.
        By the MHPI's design, the PPV's responsibilities fall into three
    main categories: managing the military housing, servicing the PPV's
    debt, and saving for (and actually making) capital improvements
    necessary to preserve or improve the condition of the housing stock as
    required by the 50-year ground lease. As shown in the diagram below,
    each BAH dollar that flows into LMH's PPV portfolio is allocated across
    these three accounts in the average percentages shown below.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        As you can see, nearly half of every BAH dollar is invested in
    operating expenses, which includes property management services, all
    related maintenance, community services, resident events and tax
    obligations. Unlike a traditional P3 where the private investor's
    primary pecuniary interest is in residual equity, LMH's revenue is
    derived primarily from providing property management services to
    military families. Some of our fees are earned only when we meet
    certain performance standards, of which customer satisfaction is one.
        The next quarter of every BAH dollar goes to debt service--paying
    interest on the private capital borrowed against future BAH revenue
    streams. The next quarter goes to a capital ``reserve account,'' which
    are funds that may only be used for larger and strategic improvements
    (large-scale renovations and, when appropriate, replacement of existing
    military housing) pursuant to the operating agreement. This long-term
    sustainment fund is security for DOD, i.e. to ensure that the housing
    stock is maintained in a high-quality fashion and will be returned at
    the end of the 50-year lease in good repair. It is important to
    understand that any and all decisions regarding the use of these funds
    must be made jointly by DOD and LMH. The segregation of these funds is
    a key feature of the MHPI and is meant to ensure that necessary
    improvements to military housing are not sacrificed for other DOD
    priorities, as was sometimes the case prior to MHPI.
        Finally, on a portfolio-wide average basis, there is a 1.1 percent
    LMH Managing Member distribution. LMH's primary interest in a MHPI
    transaction is fee-for-services, which are based upon LMH's performance
    and accountability as measured through benchmarking and resident
    satisfaction scores. LMH can also be dismissed if we fail to maintain
    performance above certain standards.
        Given this structure, it is clear that LMH has zero economic
    incentive to cut corners on quality property management. Beyond
    economics, LMH has a strong ethical commitment to servicemembers and
    their families. LMH's employee workforce, over 60 percent of whom are
    veterans or have Active Duty military in their families, would find it
    offensive to treat fellow servicemembers with anything but respect and
    dignity. The vast majority of LMH's military housing is offered in very
    competitive housing markets. The success of the PPV depends entirely on
    LMH's ability to offer and continuously provide quality housing to
    military families because high occupancy levels are needed to sustain
    the PPVs from BAH revenue. If LMH were to provide substandard property
    management services, military families would consider moving out of
    military housing and into residences in communities surrounding the
    base.
        To the contrary, the military installations LMH services have some
    of the highest occupancy rates in the country. As mentioned, our
    overall resident satisfaction scores, as measured by an independent
    surveyor, are more than 20 points (on a scale of 100) higher than the
    resident satisfaction scores before the MHPI was enacted. At Camp
    Pendleton alone, LMH has invested $1.125 billion in private capital in
    building new homes, renovating existing homes, and constructing club
    facilities, pools, playgrounds and dog parks. As an example, prior to
    MHPI, the families at Camp Pendleton had just one community swimming
    pool for over 7,000 families. Today there are 17 for the same number of
    families.
        Finally, in LMH's experience, the PPV model works only when all of
    the parties--LMH, the DOD partner, and the residents--work together and
    keep an open line of communication to address issues that arise from
    time to time in the community. LMH offers regular town halls and ``meet
    the manager'' days where residents can learn more about how LMH is
    investing in the community or can tell us if they believe their voices
    are not being heard through normal channels. Every resident has many
    tools to redress concerns. In the first instance, residents can contact
    LMH to resolve an issue. Most do just that, primarily by calling our
    24/7 customer call center to report maintenance and other issues. If,
    however, a resident believes that he or she is not receiving an
    adequate response from LMH, the PPV model allows the resident to raise
    the concern with the military housing office on base, which then
    intercedes on the resident's behalf as the local representation for the
    installation Commander. This process is communicated when residents
    move-in, and it is shared again (known as the 3-Step Process) quarterly
    when residents are invited to our ``Meet the Manager'' events. Finally,
    every resident also has the right to complain to state and local
    housing authorities, which, under our resident lease agreements, have
    jurisdiction to enforce state and municipal laws housing codes.
                 lmh's mold and moisture remediation procedures
        This section describes how LMH handles mold and moisture issues
    when they arise. In general, the subcommittees should know that LMH
    regularly reviews and updates all of our management policies and
    procedures on a regular basis. This testimony, however, will focus on
    mold remediation.
        Mold and mold spores are naturally occurring in virtually every
    environment. It is in every hearing room in the Senate complex and in
    all of our homes. The common mildew that forms on the caulk or grout in
    a shower is mold. While mold spores are invisible to the naked eye,
    what most people refer to when they say they see ``mold'' is actually
    mold growth. Mold growth occurs when spores combine with sufficient
    moisture and a nutrient source, like dust, soil, paper, or other
    organic materials.
        Mold growth in buildings is not readily preventable except by
    controlling the source of moisture needed for mold spores to grow.
    According to the State of California, ``[o]rganic matter is almost
    always available, so whether mold grows depends mostly on whether there
    is moisture.'' \1\ Excessive moisture can be caused by a number of
    factors, including plumbing or roof leaks or through inadequate
    ventilation in shower and bath areas, crowded storage areas, and other
    causes. Humid areas of the country--including the coastal areas where
    Hampton Roads and Camp Pendleton are located--are more prone to mold
    issues than drier areas.
    ---------------------------------------------------------------------------
        \1\ CAL. DEPT. OF PUB. HEALTH, INDOOR AIR QUALITY SECTION,
    FREQUENTLY ASKED QUESTIONS ABOUT MOLD, https://www.cdph.ca.gov/
    Programs/CCDPHP/DEODC/EHLB/IAQ/Pages/Mold-FAQs.aspx
    ---------------------------------------------------------------------------
        Mold growth can occur quickly when conditions are right. Mold is a
    symptom of excessive moisture--a common problem in the property
    management world that must be remedied promptly because unaddressed
    water intrusion can result in extensive damage. An area with no
    observable mold growth can develop into a problem in less than 48
    hours. While LMH does annual preventive maintenance visits on every
    home to check for signs of mold, water intrusion or other issues,
    unless we are inside a home every 48 hours (which would be unduly
    disruptive to residents), mold spores may turn into mold growth without
    us being aware. As such, LMH and other property managers rely to a
    significant degree on residents to report mold and water intrusion in a
    timely way so the issue can be addressed.
        LMH's procedures for mold assessment and remediation exceed what is
    recommended by the State of California and the U.S. EPA. Under LMH's
    management plan, mold and water intrusion are considered the most
    urgent type of maintenance issue and LMH responds to every call about
    mold or water intrusion within 30 minutes. \2\ A trained technician
    contacts the resident to get more information on the type of issue (for
    example, a roof leak or HVAC concern) and schedules a repair visit with
    the resident. The technician visually inspects the area and if needed
    uses a moisture meter to determine if any materials have been water
    damaged. If there is mold growth on a nonporous surface like an HVAC
    register or a metal window frame, the technician will follow the EPA
    guidelines and clean the surface using an appropriate cleaner. If there
    are signs of water damage or mold growth on porous materials like
    drywall paper or wood flooring, the technician will schedule
    replacement of the damaged material as soon as possible in consultation
    with the family's schedule. If there is a larger area of mold, LMH will
    contract with a qualified third-party mold remediation company to
    perform the work. In such cases, LMH offers the family temporary living
    accommodations at a guest suite or local hotel at no cost to the
    residents until the work is complete.
    ---------------------------------------------------------------------------
        \2\ Other ``emergency'' issues include fire, gas leaks, carbon
    monoxide hazards, broken windows, and sewage backups.
    ---------------------------------------------------------------------------
        After the remediation is complete, a LMH technician comes back to
    the resident's home three times over the next few weeks to confirm that
    the source of the moisture has been fixed and that mold growth has not
    returned. LMH tracks these visits in property management software
    called Yardi, to which the DOD housing office has access and can
    monitor LMH's follow through on a house-specific basis. Additionally,
    in many instances the local military housing office is notified of the
    mold issue and participates in communications and planning with the
    residents.
        Even in higher humidity areas like Camp Pendleton and Hampton
    Roads, mold work orders account for less than one percent (0.6 percent)
    of LMH's call center work orders. In preparation for this hearing, LMH
    asked LPC, our conventional property management company which manages
    140,000 plus homes throughout the country, to provide the percentage of
    mold and water intrusion tickets for non-military housing residential
    properties, and the percentage was generally the same as it was for
    military housing.
          the path ahead: how can lmh better serve military families?
        LMH takes very seriously whenever any resident family feels like
    their concerns have not been remedied in a professional and
    satisfactory way. Every day, we work with servicemember families and
    try to go above and beyond to serve their needs because we understand
    the unique nature of their residency and their contribution to the
    readiness of our Armed Forces. We regret that some residents feel that
    their concerns have not been adequately addressed.
        At Camp Pendleton alone, we accommodate about 7,000 families each
    year. While we are proud of our track record and resident satisfaction
    scores, it is impossible for any enterprise to deliver 100 percent
    satisfaction all the time. One unsatisfied customer is one too many and
    we do everything we can to prevent it. But when issues inevitably
    arise, we work hard to engage all the stakeholders, including our
    military partners, to address the issues and try to mitigate them in
    the future. Working with the on-base Government Housing Office, we try
    to do whatever it takes to earn the resident's trust and satisfaction.
        LMH believes that no matter how well we serve military families
    today, we can always do better tomorrow. No property management
    company--especially one that serves our Nation's military--should ever
    feel so satisfied in its performance that it ceases to strive to
    provide better service. Each year LMH reviews the results of the annual
    Resident Satisfaction Survey, together with over 20,000 individual
    surveys completed on work orders and has actively sought to partner
    with DOD to continue to improve how the PPVs can further increase
    customer satisfaction and the quality of the housing stock we manage.
    In addition, LMH has hired an independent third-party expert to review
    our entire moisture and mold management program, including our
    prevention and remediation procedures. We are eager to see whether
    there are new methods or best practices that we can employ to make our
    program more effective and efficient.
        LMH is exploring new ways to communicate with residents about mold
    prevention and remediation and any other issues that are of concern to
    our residents. Even when there is a mold or water issue in someone's
    home, we never want a family to feel that they have to go somewhere
    else to have their concerns heard. LMH commits to doing more to foster
    better lines of communication with residents. Most important, we
    welcome residents' input into how we can improve our responsiveness to
    their concerns in a productive way. We understand the urgency with we
    need to act to regain the trust of the servicemember families we serve,
    and we look forward to partnering with your subcommittees to ensure
    more positive outcomes for our men and women in uniform.

        Senator Inhofe. Thank you, Mr. Bliss.
        We will now have rounds of questions not to exceed 4
    minutes.
        The witnesses in the first panel singled out three
    organizations. They happened to be your organization, Mr.
    Williams; yours, Mr. Picerne; and yours, Mr. Ehle. I would like
    to have you make any comments or responses to those statements
    that were made concerning your organizations, if you would take
    those 4 minutes to do it, the three of you, starting with you,
    Mr. Williams.
        Mr. Williams. Thank you, Chairman.
        I heard loud and clear the Drivers, Mrs. Driver in her
    comments, and I take them extremely serious.
        At Tinker Air Force Base, we experienced a product failure
    with a plumbing system in 398 homes that were built several
    years ago. It was a manufacturer's product defect, and at one
    point, we had over 500 water leak calls in to our offices. I
    will never make an excuse. We need to do better. We were
    managing in a crisis situation. We worked with the local
    command, as well as AFCEC [Air Force Civil Engineer Center], to
    develop a plan to go in and replace all of the plumbing
    systems. I realize it was a major inconvenience, as well as a
    true hardship to the residents that had to experience that,
    especially the Drivers and the other families that were named
    in the article.
        Senator Inhofe. We are running out of time here. So I will
    leave it with that. Mr. Picerne?
        Mr. Picerne. Thank you very much for the question.
        Again, to all three of the families that presented earlier,
    we are at what I would call a critical inflection point in
    where our program is, and we know we need to get to the bottom
    of the challenges that we are facing. We have some new homes.
    We have some older homes that need major renovations. We have
    had some challenges in dealing with that.
        But specifically to the family that moved to Fort Meade
    expecting to have their child brought into a single-family or
    single-story home, it is unacceptable. My company will stand up
    and will help and support that family and every family going
    forward in trying to make these things better. There was a time
    and place when that would never have happened, and again, we
    have made some shifts and changes with our governance partners,
    the United States Army, and those changes were not good. We owe
    a debt of gratitude to their families and we need to help them.
        Senator Inhofe. Thank you.
        Mr. Ehle?
        Mr. Ehle. Senator, we heard the families loud and clear. It
    is a heartbreaking story, and no one should ever have to go
    through that. Like I said, no percentage of unhealthy homes is
    acceptable to Hunt.
        We have got processes and procedures and protocols that we
    follow to work closely with our residents. Our goal every
    moment and every day to work in partnership with our residents
    to resolve their issues to completion and satisfaction--we do
    sometimes fall short. Whenever we do, we look back at those
    situations, try to learn from them. We are an accountable
    organization. If we find weaknesses in our organization, we
    tend to those. We will continue to do so, but we have got room
    to improve. We do not shy away from that. We own that. We want
    to work with the stakeholders here to achieve a better MHPI
    program for all.
        Senator Inhofe. Thank you.
        Senator Reed?
        Senator Reed. Well, thank you very much, Mr. Chairman.
        I have three questions which I will direct individually
    beginning with Mr. Williams, and I believe they require yes or
    no answers.
        First, do you affirm today that you will do everything in
    your power to immediately address the issues raised today by
    our military families, not just those who testified but also by
    each of those who submitted testimony and information to the
    Committee, Mr. Williams?
        Mr. Williams. Absolutely, 100 percent.
        Senator Reed. Mr. Picerne?
        Mr. Picerne. Yes.
        Senator Reed. Mr. Ehle?
        Mr. Ehle. Yes, sir.
        Senator Reed. Mr. Hickey?
        Mr. Hickey. Yes, sir.
        Senator Reed. Mr. Bliss?
        Mr. Bliss. Yes, Senator.
        Senator Reed. Second question is following up the
    chairman's remarks. Communication with Congress in any form is
    a protected communication under whistleblower statutes. Do you
    affirm today that you will do everything in your power to
    protect the military families who appeared here today, as well
    as those who have submitted testimony and information to the
    Committee, Inspectors General, or their chain of command from
    reprisal, including threats or reprisal from your employees?
    Mr. Williams?
        Mr. Williams. Yes, Senator.
        Senator Reed. Mr. Picerne?
        Mr. Picerne. Absolutely, Senator.
        Mr. Ehle. Yes, Senator.
        Mr. Hickey. Absolutely, Senator.
        Mr. Bliss. Yes, Senator.
        Senator Reed. Finally, as you know, the GAO is conducting
    an ongoing review of the MHPI program. Do each of you guarantee
    complete cooperation with the GAO in their effort to obtain
    information and issue findings? Mr. Williams?
        Mr. Williams. Senator, we have and will continue to.
        Mr. Picerne. Absolutely, Senator, we will.
        Mr. Ehle. Senator, we are happy to work with GAO.
        Mr. Hickey. Absolutely, Senator.
        Mr. Bliss. Yes, Senator, we will continue working with the
    GAO as we have in the past.
        Senator Reed. Thank you.
        I think the testimony today, including the first panel and
    your comments, suggests the system is broken. These problems
    were obvious to the military families, but they were not
    obvious enough to you to take effective corrective action. So
    we have to think collectively, working with the Department of
    Defense and the service departments, to come up with
    appropriate incentives and disincentives so, once again, you do
    not take your eye off the target. The target is very clear. As
    we have all stated--and we have to not just talk about it, but
    do it with deeds--we owe an obligation to these families
    because of their service so that they live in the best possible
    housing, not the type of housing that was described today. I
    know working with the Chairman, we will do all we can and do
    whatever we must to ensure that every military family in
    military housing does not have to worry about the health of
    their child, the safety, or their warmth in the winter or their
    comfort in the summer.
        Thank you.
        Senator Inhofe. Thank you, Senator Reed.
        Senator Tillis?
        Senator Tillis. Thank you all for being here.
        I have got a couple of questions. Number one, sometimes
    when you see bad behavior--you guys I know are in the C-Suite,
    the executive levels of your very large organizations that
    constitute about 80 percent of all the housing that is
    provided. I guess probably another couple of dozen other firms.
    But one time in my past experience, when I have seen bad
    behavior on the part of people further down the chain of
    command, it had to do with incentives and how they were
    compensated. Is any of your review of how this broke down going
    to go back to how the people in the chain of command that
    actually touched these homeowners actually behaved because
    maybe they had some of their own personal livelihood at stake?
    Is that possibly a factor? Is that something you are going to
    look at? Just go down the line.
        Mr. Williams. Yes, Senator, we are looking at that right
    now. First, we do not compensate on how we earn our incentives
    to our employees. But, yes, we are looking at better ways to
    make sure that that----
        Senator Tillis. Yes. Because I am just trying to figure out
    why on earth anybody who is working in this organization would
    have heard these stories and not move heaven and earth to try
    and get the right resource on site.
        Mr. Williams. I agree, Senator.
        Senator Tillis. Mr. Picerne?
        Mr. Picerne. Yes, Senator, I totally agree, and we are
    going to dig into it. We want to work closely with you and with
    the service branches to dig in deep and get to the bottom of
    this.
        Senator Tillis. Thank you.
        Mr. Ehle?
        Mr. Ehle. Senator, we do have an incentive structure in our
    organization from top to bottom that already ties into things
    like resident satisfaction and maintenance service. We are
    already there, but we are willing to take a continued look.
        Senator Tillis. Yes, because I am looking at unit managers
    or other managers that may be compensated by bottom line
    impacts and how that could force a bad behavior. I am not only
    talking about the customer-facing role. I am talking about the
    people who are trying to balance the books and dealing with
    various issues.
        I am going to assume you are going to give me a similar
    answer. So I want you to look at it.
        Mr. Hickey, you said something that I am curious--you
    seemed to refer to funds being locked which would be used to
    reinvest and hopefully up-fit or address some of these
    problems. Can you explain that to me briefly?
        Mr. Hickey. Thanks, Senator.
        In short, each project company is set up that the revenue
    that comes in from the BAH pays all the operating----
        Senator Tillis. And there are some 82 of these agreements
    over various stages, and I think you all constitute about 80
    percent of them.
        Mr. Hickey. Something like that.
        The revenue comes in from the BAH collection. It pays all
    of the operating costs for running the base and fixing any
    capital improvements, et cetera. It then pays the debt service
    that is actually being used to do the first IMP [impression]
    round, and then the surplus account sits at the bottom, stays--
    --
        Senator Tillis. And it is the surplus that you could not
    get back into----
        Mr. Hickey. The surplus NOI [net operating income] stays at
    the base level. And therefore, if the base gets into a
    situation, it really only has the capacity to access its own
    surplus NOI. There are some agreements where they can share,
    but it is not uniform across the services.
        Senator Tillis. Okay.
        Have things changed? When you first started this process--
    many of you have a couple of decades under your belt. Others
    are newer to the process. Have the rules or the agreements
    changed between you and the DOD? I mean, what else could have
    possibly changed that is creating stress on what would seem to
    me to be no-brainer business behaviors that for some reason
    fell down on some of these installations.
        Mr. Picerne. Senator, I would describe it as this is the
    largest and longest standing PPP, or public-private
    partnership, in America to this point. The challenge that we
    faced 20 years ago was daunting and systemic, truly systemic.
    The solution that we came up with with the Department of
    Defense and with you folks was something that would be able to
    solve--not just fix for building new houses, but solve--for the
    50-year period.
        The challenge has been over the last several years, we have
    been moving in a direction of making sure that budgets are run
    at a very tight level, not as much focused on customer service
    and more about the NOI, net operating income, or the revenue
    account so that we have the dollars for the future. I think we
    just tipped the balance too far, I know we tipped the balance
    too far, so we need to move it back to the middle, and we are
    all pretty much----
        Senator Tillis. Right.
        We will look deeply into these contracts in my role of the
    Personnel Subcommittee. But I am just trying to figure out some
    of the basic safety valves that did not appear to be in place
    in terms of service-level agreements, general satisfaction,
    escalation paths. The sorts of things that I did in a very
    different context in business seem to be missing here. I am
    looking forward to really drilling down on this.
        I am also serious when I tell you we are going to reach
    out.
        Let me just say one other thing in advance of the next
    panel. First off, do not be surprised if you get a call from my
    office if I get a lot of constituent requests, and I think I
    speak for most of my members. Expect to be on auto-dial.
        But I will tell you there is a problem in DOD that we have
    got to address as well because at Camp Lejeune you could
    actually have a family having a mold problem in their home.
    Then you can turn right back around and that marine goes on
    base and they are working in offices that have mold, that have
    plastic on top of the roofs, and we have got our own facilities
    to deal with. I mean, we have got marines coming in on weekends
    fixing the roofs and trying to fix their offices. We have got
    serious problems here, and that is why I do not want anybody to
    leave this meeting thinking it is any one entity that is at
    fault.
        Every single one of you have work that you have got to do,
    and we have got to do a top to bottom review to get it done. I
    hope I have your commitment and the commitment of the other few
    dozen firms that are not here before the Committee but do the
    same thing for the whole DOD.
        Thank you.
        Senator Inhofe. Thank you. Senator Tillis, presiding, and
    Senator Gillibrand.
        Senator Gillibrand. Let me begin by reiterating how
    frustrated I am by the experience of the families we have heard
    from today who live in houses under the management of your
    companies.
        In choosing to participate in the Military Housing
    Privatization Initiative, your companies did not just land
    another real estate deal. You assumed responsibility for the
    safety, health, and wellbeing of military families who make
    incredible sacrifices each and every day in support of our
    national defense.
        In response to the recent reporting on problems in your
    housing units, many of you have pointed to satisfaction numbers
    showing resident approvals as high as 70 or low 80 percentage
    ranges. However, those satisfaction surveys are clearly at odds
    with the heartbreaking testimony that we have heard today and
    even then would still put somewhere between 20 and 30 percent
    families in average or below average conditions.
        In written testimony submitted for this hearing, the
    Military Family Advisory Network states that they have
    conducted a survey with nearly 17,000 respondents and found,
    ``more than half, 55.53 percent, of respondents had a negative
    or very negative experience with privatized military housing.''
        I would like each of you to answer the following questions.
    What percentage of military families do you believe deserve to
    live in excellent on-base housing?
        Mr. Williams. Senator, 100 percent.
        Mr. Picerne. We agree, Senator. One hundred percent.
        Mr. Ehle. One hundred percent, Senator.
        Mr. Hickey. Everybody, 100 percent, Senator.
        Mr. Bliss. One hundred percent, Senator.
        Senator Gillibrand. How many military children deserve to
    be exposed to mold, lead, or other health hazards as a
    consequence of living in privatized housing units?
        Mr. Williams. Senator, none of them.
        Mr. Picerne. I agree, Senator. Zero.
        Mr. Ehle. Zero, Senator.
        Mr. Hickey. I agree, Senator. Zero.
        Mr. Bliss. I also agree, Senator. Zero.
        Senator Gillibrand. Do you think it is easier or harder for
    a servicemember to focus on their military duties while also
    worrying about the health and safety of their families?
        Mr. Williams. Harder, Senator.
        Mr. Picerne. It is always harder, Senator.
        Mr. Ehle. It is much harder, Senator.
        Mr. Hickey. No doubt, much harder, Senator.
        Mr. Bliss. It is harder, Senator.
        Senator Gillibrand. In so many of the stories that we have
    heard today from these families, the maintenance procedures
    that you have put in place have failed to ensure quality in
    housing units. In your written testimony, many of you pointed
    to quick response statistics for work orders in military homes.
    But if those issues are not addressed properly, if mold is
    painted over or water damage misdiagnosed, families remain in
    danger.
        Further, many of the families have experienced cold and
    insensitive treatment from the local representatives of your
    companies, subsidiaries, and partners responsible for
    addressing the problem.
        Do you expect your staff working on installations as
    technicians to be capable of both remediating work orders and
    showing genuine concern for the families impacted?
        Mr. Williams. Absolutely, Senator.
        Mr. Picerne. We would expect nothing less, Senator.
        Mr. Ehle. We absolutely agree, Senator.
        Mr. Hickey. Absolutely agree, Senator.
        Mr. Bliss. Yes. They should be able to do both, Senator.
        Senator Gillibrand. How many contractors or service
    technicians have each of your companies fired for
    unsatisfactory performance in completing work orders in
    military housing?
        Mr. Williams. I do not have that exact number, but it is
    multiple.
        Mr. Picerne. I also do not have the exact number, but it is
    significant.
        Mr. Ehle. Senator, we are a company of accountability, and
    if someone is falling short of expectations, we take action.
        Mr. Hickey. Senator, I do not have the exact number on
    hand, but similar to the other organizations, we take it very
    seriously and we will move people on if they are not doing
    their work.
        Mr. Bliss. Senator, I do not have the exact number either,
    but we have made that decision to separate from personnel when
    they do not do the right thing and follow our policies and
    procedures.
        Senator Gillibrand. Thank you for your testimony. From your
    answers, I can conclude that you agree this is something we
    must fix. It is an urgent issue. It does not represent our
    values to the country, and it does not sound like it represents
    your values as companies. So I expect your 100 percent
    commitment to solving this problem. Thank you.
        Senator Tillis [presiding]. Senator Sullivan?
        Senator Sullivan. Thank you, Mr. Chairman.
        I just want to get from the panel a couple things. I am
    assuming, as you all indicated in your testimony, you believe
    this is not just an opportunity to make money, and there is
    nothing wrong with making money in this capitalist society of
    ours, but it is also an opportunity to serve the men and women
    in the military--correct--and their families. Is that correct?
        Mr. Williams. Yes, sir.
        Mr. Picerne. Yes, Senator.
        Mr. Ehle. Correct.
        Mr. Hickey. Correct.
        Mr. Bliss. Yes, sir.
        Senator Sullivan. There is one kind of overriding in some
    of the DOD responses, in their testimony--it is a bit of a
    subtlety. Actually when I was reading it, it really kind of
    ticked me off. But this notion that, well, the servicemembers
    have a choice where they are living. They can always go off
    base. I think one of our witnesses essentially says that in his
    written testimony, which I find ridiculous. I just want to make
    sure that each of you are not saying in your testimony or your
    belief is that, well, they have another option. If they do not
    want to live in a rat-infested home, they can just go off base.
    That is not the attitude here. Is it?
        Mr. Williams. No, Senator.
        Mr. Picerne. Absolutely not, Senator.
        Mr. Ehle. No, Senator.
        Mr. Hickey. No, absolutely not, Senator. I mean, the
    livelihood of all of our businesses rely on great customer
    service. We want people living in our bases. So customer
    service is at the heart.
        Mr. Bliss. That is not our attitude.
        Senator Sullivan. Okay, good. Because again, one of the
    things I mentioned in my opening statement is I think we can
    all agree that our military members, whether they have a choice
    to live off base or not, should have the highest quality of
    military housing when they are on base. So I think let us just
    all agree to that.
        But let me ask--and this is more kind of a how this works.
    You build the housing, and then your contracts--you are also in
    charge of all the maintenance and the upkeep and keeping the
    housing in a good living condition. Is that not your
    responsibility as well?
        Mr. Williams. Yes, Senator.
        Senator Sullivan. So that is part of the contracts. You do
    not have to all say yes, but that is part of the contracts.
    Correct? It is not a base housing official at Camp Pendleton or
    something. It is you. Right? You are responsible for that. So
    when you read about the mice and the mold, it is your
    responsibility to keep that up. Correct? To get rid of it.
        Mr. Williams. That is correct.
        Senator Sullivan. Let me ask this. I mean, we live in this
    uber society. What would be wrong with having the military
    members be able to grade you on how well you do? Do you think
    that would be a good idea to maybe kind of somehow relate your
    contract performance to--it would empower the members a bit,
    right, to be able to say, hey, here is what I think is going on
    with my home. I got a bunch of mice in it. Nobody is coming. I
    think your service stinks. Do you think that would be a good
    reform maybe that we could actually empower these courageous
    families who testified earlier to let them know that we can see
    that? Would that be a good idea, more direct kind of responses?
        Mr. Picerne. Senator, we do survey. Our surveys----
        Senator Sullivan. But I am not talking about the surveys.
        Mr. Picerne. I think we need to find a better way to get
    real touchpoints from the residents on a more real-time basis.
    That is one of the things we need to----
        Senator Sullivan. But maybe tie it to your compensation.
        Mr. Picerne. Absolutely. Yes, correct.
        Senator Sullivan. Would everybody agree that has potential?
        Mr. Hickey. Yes, Senator. I think there is an opportunity
    to kind of get the residents on the base having a collective
    voice that can sit at the table with us and the services----
        Senator Sullivan. They do not have to go through their
    chain of command to be heard by----
        Mr. Hickey. They can sit collectively and we can do that
    as----
        Senator Sullivan. Let me ask one final question. One thing
    that came up in the testimony before was this idea that somehow
    you or people who work for you might be taking advantage of a
    young lance corporal and his wife who just came on base and do
    not really know what is going on. I want each of you to
    definitively say that that is not the policy, you do not have
    people doing that, and if you do, you fire them.
        But maybe here is another suggestion. Maybe you look and do
    it the opposite way. Maybe have a program to help the young
    lance corporal and his wife who are coming on base and maybe do
    a proactive program to help these young guys. I mean, heck,
    they are barely teenagers, some of them, and their spouses. So
    can I get from each of you that you are definitively not doing
    that, and if you found people in your company who were doing
    that, you would fire them?
        Mr. Williams. If we found somebody doing that, we would
    fire him. We are committed to making sure that that is not
    happening.
        Mr. Picerne. Senator, I agree wholeheartedly. We would
    never do that, and we would fire people if they did do that.
        To answer your second question, we absolutely believe that
    in a proactive plan, helping our young soldiers as they first
    come on base is the right thing to do. We used to do it, and we
    are committing to going back to it.
        Senator Sullivan. Great.
        Mr. Ehle. Senator, at Hunt, if anyone were to do that, it
    would be against, first of all, our employee code of conduct,
    and yes, they would have to be dealt with up to termination.
        Mr. Hickey. Yes, likewise, Senator. It goes against every
    value that our company stands for. So it is totally
    unacceptable.
        I think your suggestion of finding a way to help the
    younger people more proactively is a good one.
        Mr. Bliss. I agree, Senator. That is totally against our
    character. If anybody at Lincoln is acting that way, they will
    be terminated.
        Senator Sullivan. Thank you.
        Thank you, Mr. Chairman.
        Senator Tillis. Senator Kaine?
        Senator Kaine. Which of you served in the military? Did any
    of you serve? I did not either. So there is no shame in that.
        But how about this. Have any of you ever lived on a
    military base as a military dependent like when your mom or dad
    were in the military?
        Mr. Williams. I have never had an experience living in
    family housing.
        Senator Kaine. Is that the same for all of you? I think
    that is pretty important. I mean, I think that is an obvious
    really important sensitivity issue. This is a really important
    hearing. So each of these companies--you are sending a really
    important person here who is a person with some authority and
    responsibility to answer our questions. If at the top of these
    institutions, we do not have people who understand the lives
    that folks are leading in the military, I think that is maybe
    the beginning of an issue.
        In your government contracts, are you required to do
    surveys of your military tenants?
        Mr. Williams. It is part of our incentive program.
        Mr. Picerne. Yes, we do, along with our government
    partners, multiple surveys.
        Mr. Ehle. Yes. Our compensation program is tied to resident
    satisfaction surveys.
        Senator Kaine. Do you do those on your own? Do you write
    the survey yourself?
        Mr. Ehle. There is a third party, independent company that
    provides those surveys, and we have no access to it other than
    we get the final report.
        Mr. Hickey. Likewise, Senator. We do in-depth customer
    surveys with a third party. We review the output of that with
    our respective service partners.
        Senator Kaine. Is that third party--it is not the military.
    It is some third party.
        Mr. Hickey. No, no, no. It is a third party organization.
    We produce that and review that with our military partners.
        Senator Kaine. Mr. Bliss?
        Mr. Bliss. Yes. We also have an independent third party
    survey company. Additionally, we have another independent
    survey company that surveys after each work order service
    request.
        Senator Kaine. I think there should be kind of a SOP
    [standard operating procedure], of a template that would be a
    survey that military families and dependents who live on bases
    would be given the opportunity annually to do a survey and that
    would go to the requisite office with the military so that
    groups like MFAN would not have to do their own survey to
    figure out what is going on. I think a customer satisfaction
    survey that would be an annual for everybody living in military
    housing, that would be a template, apples-to-apples questions
    would be really important. You could see who were the better
    landlords and who were the worst ones. You could see are their
    particular bases that are unusually bad, and that might suggest
    there are some infrastructure needs on the base that we could
    address that are not purely yours. I think an apples-to-apples
    template, regular survey with the information going directly to
    the military so we would not have to rely on outside groups to
    tell us what is going on with families would be a good idea.
        Let me ask you this. You would agree with me, would you
    not, that somebody living on a military base should not have
    worse housing or have housing that is substandard compared to
    housing in the community where they live with respect to
    building codes, environmental standards, et cetera. Right? The
    military families' should not be worse than the surrounding
    communities'. Is that a fair statement?
        Mr. Williams. I think it should be better.
        Senator Kaine. Should military housing not have to comply
    with building and environmental codes? Say, Fort Belvoir is in
    Fairfax County. Why should military housing on that base not
    have to comply with local building and environmental codes,
    including inspections by Fairfax County building and
    environmental inspectors? If these folks want to call and
    complain, should there not be--I am thinking like a mayor. I
    used to be a mayor. We had a code compliance section. I think
    they ought to be able to go into housing in Fairfax County
    whether it is on a military base or not and determine whether
    something complies with codes or is in violation of codes.
    Would that cause any challenges for you all?
        Mr. Picerne. I think there is a wide variety of challenges,
    and I think that is an issue that we need to look at. We do it
    here to all of the national standards, and we do have, again,
    the best we could find, third party inspectors who do all of
    that inspection work. However, the challenge I think that may
    be presented is at a place like Fort Bragg where Fayetteville
    is not a large place, if we were to do a large--we are about to
    do a couple hundred million dollars worth of work, we may
    overwhelm the Fayetteville office for inspection and code
    compliance.
        I think there is something there. As we start to dig into
    the bottom and get to kind of where the real challenges are, I
    think there is a way to do that in a very meaningful and
    significant way that adheres to or gets to the heart of what
    you are trying to get to, which is----
        Senator Kaine. I am over my time, but I am just thinking if
    these folks cannot get an answer out of a private housing
    provider, if they feel like their family readiness specialist
    is being intimidated against, if they cannot get the chain of
    command to help them, where can they go? Most people in a city
    would call a local building officer and they would come out and
    somebody would do an inspection that would validate or verify
    whether in fact the property was sub-code. It would seem to
    me--since you have agreed with me that somebody should not be
    subjected to housing worse than the sets of rules in the
    community where the housing is, it would seem to me to be an
    obvious potential solution.
        Thanks, Mr. Chair.
        Senator Tillis. Senator Rounds?
        Senator Rounds. Thank you, Mr. Chairman.
        Gentlemen, first of all, I am just curious. It seems to me
    that should never have gotten to the point where it required a
    congressional hearing to get to the bottom of it. I think you
    all have been notified in advance of the need to come and speak
    to us. How much time did you have to prepare for this meeting
    today? If you could just go down the line, how much time did
    each of you have?
        Mr. Williams. Less than a week.
        Mr. Picerne. Several days, Senator.
        Mr. Ehle. Just about that.
        Mr. Hickey. The same.
        Mr. Bliss. About the same time, Senator.
        Senator Rounds. A few days anyway.
        Was there a sense of panic when you were asked to come and
    testify?
        Mr. Williams. Senator, no. I welcome the challenge. We need
    to do better as a provider, and we want to work with the
    Committee.
        Senator Rounds. Mr. Williams, here is the reason why I ask.
    It would appear to me that either you knew that you had a
    problem to begin with and it had not been resolved or this came
    as a complete surprise to you. It would appear to me--that is
    part of the question here is were you had a problem and you
    just could not figure out a way to fix it. Or did this come as
    a surprise to any of you?
        Mr. Picerne. Senator, it came up as partly a surprise about
    8 months ago, 9 months ago, and as we peeled it back and peeled
    it back and peeled it back, it became a bigger and bigger
    challenge. I am not panicked to be here today, although I will
    not say this is the happiest experience of my life. This is not
    where I ever wanted to be getting into this business. I felt
    like we were here committed to taking care of the
    servicemembers who defended our Nation. Again, the idea that we
    have let them down is deeply disturbing to me, and I am here to
    try to make sure----
        Senator Rounds. Okay. Look, let me just ask this of all of
    you then. After you found out a couple of days ago that you
    were going to be in front of us, if there was one critical
    issue that you said I know we got to fix it, I know they are
    going to hit us on it. What is the issue that has got to be
    fixed that is in front of us today? Just very quickly, what was
    top of mind on got to be fixed now?
        Mr. Williams. The interface with the resident.
        Mr. Picerne. I would agree. Interface with the command and
    the resident.
        Mr. Ehle. Yes. Communications with our residents and our
    partners.
        Mr. Hickey. Yes. The sharing of communications so that
    everybody is informed and everyone is operating on the same
    information set.
        Mr. Bliss. I think for me it was allowing a voice for the
    residents, a place to go. I think Senator Kaine hit on it. They
    do not feel like they have a place to go. We need to figure out
    a process that allows them where they feel they are aptly
    represented when issues come up.
        Senator Rounds. The damage that has been done out there--
    how much of it has been because of construction that was of
    poor quality to begin with and you are managing products that
    have a poor quality in the construction itself from day one?
    Mr. Williams?
        Mr. Williams. I think it is twofold. We have had an issue
    with some product that we bought to build some of the houses
    that have failed. It is a manufacturer's defect. But we also
    have an inventory. Our inventory ranges from the early 1800s to
    2016. When we took on a lot of that legacy, those historical
    homes were quite the challenge. As we look at those historical
    homes, they become harder and harder and harder to pay for that
    type of work while continuing to balance to provide the
    services for the other residents.
        Senator Rounds. Thank you. That should be noted.
        Mr. Picerne?
        Mr. Picerne. I think the same holds true for our portfolio
    as well. Once we realized that you could not replace and build
    brand new all of the homes, then trying to find a way to
    balance maintenance and care on the existing program, as well
    as saving up the dollars to rebuild--we do not have a systemic
    construction problem. We have a systemic maintenance problem.
        Senator Rounds. Mr. Ehle? I am running out of time, but if
    you could quickly.
        Mr. Ehle. Senator, except for Keesler where I cannot speak
    to the MILCON [military construction] of those houses, we did
    find that we had to do some repair to the HVAC ductwork in
    those for the condensation. But elsewhere, if we are having
    problems, it is generally not in the newer homes. It is in the
    legacy homes that have yet to be replaced.
        Senator Rounds. Thank you.
        Mr. Hickey?
        Mr. Hickey. Yes, Senator, likewise. We have demolished
    15,000 homes and we have built new 16,000 homes. We still have
    25,000 that are legacy homes. They are the majority of the
    issues, almost all of the issues are contained within those set
    of homes.
        Senator Rounds. Mr. Bliss?
        Mr. Bliss. Similar, Senator. It is legacy homes, the age.
    Our homes also range from the 1800s to the 2010s.
        Senator Rounds. Thank you.
        Thank you, Mr. Chairman.
        Senator Tillis. Thank you, Senator Rounds.
        For the record, the Committee reached out to the government
    relations counterparts and each of your organizations on
    January 28. The official notice of this hearing was on January
    31.
        Senator Warren?
        Senator Warren. Thank you, Mr. Chairman.
        Since we do not have much time, I will just go straight to
    it. I sent letters to each of you last week to learn more about
    how you make your money and what recourse tenants and taxpayers
    have if you failed to uphold your side of the bargain. Your
    agreements were not transparent. They are not publicly
    available. But basically you make your money in two ways:
    management fees and distributions based on performance.
        You all stressed in your written testimony that your
    management fee is partially based on resident satisfaction and
    quality of service. I want to unpack this.
        Mr. Williams, I will use you for the example. Say there is
    mice and mold in all of your units and the tenants are unhappy.
    Do you still get paid a base fee?
        Mr. Williams. Yes, Senator.
        Senator Warren. You are going to get paid that, and then
    how much more you get paid is going to be your performance fee.
    Right? The idea is the performance fee will be withheld if the
    place is filthy, if it is overrun with rats, and so on.
        Mr. Williams, Balfour Beatty manages 43,000 homes across 55
    military installations. Across that portfolio, how many times
    has this performance-based fee been completely withheld in the
    last 5 years?
        Mr. Williams. Senator, I do not have that specific data,
    but I can tell you that we have had our incentive fees or a
    portion of our incentive fees withheld.
        Senator Warren. I know, but what I want to know is how
    often. This is why I sent the letters to ask about this. Have
    you ever had them withhold and just say you do not get your
    performance fee because the place is full of rats?
        Mr. Williams. We have had our incentive fees withheld.
        Senator Warren. Completely withheld?
        Mr. Williams. I do not have that----
        Senator Warren. You are not sure if they have ever been
    completely withheld.
        Mr. Williams. At this point, no, but when we answer your
    letter, I will give you that.
        Senator Warren. Mr. Picerne?
        Mr. Picerne. Senator, our incentive fees have never been
    100 percent withheld.
        Senator Warren. Okay, so never.
        Mr. Ehle?
        Mr. Ehle. Senator, there are multiple components to our
    incentive fees.
        Senator Warren. I am asking if they have ever been
    completely withheld.
        Mr. Ehle. Not 100 percent.
        Senator Warren. Never. So you guys have still been getting
    incentive fees and all these stories going on.
        Mr. Hickey, have yours ever been completely withheld?
        Mr. Hickey. Senator, they are calculated on a base-by-base
    basis, and we have been withheld on some of the bases, but
    never across----
        Senator Warren. Never. So that is just no. You have never
    had them completely withheld.
        Mr. Bliss?
        Mr. Bliss. Yes, Senator. They have been reduced, but they
    have never been completely----
        Senator Warren. That is not a yes. That is a no. Okay, you
    have never actually had any of them completely withheld.
        The way these deals are structured, you are also guaranteed
    a return on your investment in the project every year. If
    operating expenses are high 1 year because a house needs a new
    roof or the place is full of mold, DOD authorizes you to raid
    the reserve fund for the project instead of cutting into your
    profits. Is that correct, Mr. Williams?
        Mr. Williams. Senator, I do not believe that is how it
    works. We do not raid the operating expenses to pay for other
    things. After all the bills are paid, it goes into----
        Senator Warren. No. I said the reserve fund. That is the
    whole point. If 1 year you have to put up a bunch of roofs, you
    have a reserve fund and you use that, which is how it is that
    year after year after year after year, you manage to make a
    profit in this.
        I look at your annual reports and what I see is that all in
    about 3 percent of the taxpayer-funded rent that you collect
    from servicemembers goes straight into your pocket even if the
    homes are disgusting and that usually that number is closer to
    5 percent.
        I just want to understand--I will try to do this as quickly
    as I can--what that adds up to in dollars, and I sent you a
    letter to ask you this. I am sure everyone has the number
    ready, and that is, what is your company's annual profits,
    including the base fee and the performance fees and any other
    fees you collect for your agreements with DOD on privatized
    housing? Mr. Williams?
        Mr. Williams. Our net profits for our military housing
    business are around $33 million.
        Senator Warren. A year.
        Mr. Williams. A year pretax.
        Senator Warren. Mr. Picerne?
        Mr. Picerne. Our net profits are closer to $12 million to
    $14 million.
        Senator Warren. Twelve million dollars to fourteen million
    dollars.
        Mr. Ehle?
        Mr. Ehle. Senator, as a privately held company, Hunt does
    not disclose those, but I can take that back to my team and we
    can get you something afterwards.
        Senator Warren. Mr. Hickey?
        Mr. Hickey. Senator, the same. We will give you that
    information in response to your letter.
        Senator Warren. All right.
        Mr. Bliss?
        Mr. Bliss. Yes, Senator. As a privately held company----
        Senator Warren. All right. So thank you.
        I apologize for running over, Mr. Chairman, but I think
    this is important. This is not right.
        Senator Tillis. Senator Rounds, briefly before we go to
    Senator McSally.
        Senator Rounds. Mr. Chairman, I just make the point. Think
    about this if we actually issued notices out between the 28th
    of January and the 1st of February and you only had a couple of
    days, that means someplace within your organization somebody
    had that information. If it takes that long for that
    information to get to you from a congressional request, think
    about what that says about how tough it is for a young enlisted
    man or their family to get to you with a problem. I think that
    is part of the problem.
        [Applause.]
        Senator Rounds. Thank you, Mr. Chairman.
        Senator Tillis. Senator McSally?
        Senator McSally. Thank you, Mr. Chairman.
        The stories we heard today and those that represent many
    other families that were not heard today and their similar
    horror stories of living on base in privatized housing by
    several of your companies are disgusting, as I have said
    earlier.
        From my view, having been in the military, they do not just
    represent a one-off situation or a rare situation that just was
    not handled well by one employee, by one situation, whatever,
    one family, one house, one contractor, but systemic issues. I
    think back to when I was a commander. You have a culture in
    your team of how you are going to deliver and partner with our
    military. You are all talking about being partners. But you are
    in charge of the culture of that team, how they respond to our
    military families, how they respond to customer service, how
    they make sure the contractors that go out there are
    identifying whether something is a health hazard, how they
    notify the individuals, how they get them out of the house fast
    to make sure their kids are not sick. Like that is all like a
    whole chain of events that needs to happen in how you are
    executing these contracts and partnering with the DOD to serve
    our military men and women and their families. This is multiple
    layers of failure for these incidents that we heard today,
    multiple layers that to me comes down to like cultural issues,
    and there have been many failures here.
        I hope all of you can look these servicemembers and their
    families in the eye and tell them that you are sorry, but then
    do the right thing, starting now. I hope you feel embarrassed.
    Starting now, do the right thing, the next right thing in order
    to take care of this.
        Mr. Williams, when did you find out about the Drivers'
    situation?
        Mr. Williams. Right after the Drivers moved out, I found
    out about the Drivers' situation, and then once the Reuters
    article came out, I really dug into what was going on there.
        Senator McSally. Now I understand. I do not expect you to
    know about every single situation of every single house. I get
    that. But the fact that the story was told like we heard today
    somehow did not rise up to the level of like we got a problem,
    and this is a situation of a family, but man, what else is
    going on in this organization?
        Since this has been brought to your attention, what else
    have you done immediately in order to address the culture to
    hold people accountable? Who has been fired? Who has been held
    accountable? What else are you changing in your team in order
    to fix this?
        Mr. Williams. Senator, we have gone back and looked at
    everything where it broke down, and as I stated earlier today,
    one of the challenges that we had was the failure of the
    plumbing system. As we do that audit, when I find out where the
    breakdown happened, there will be ramifications to everybody
    who failed to inform us about this situation.
        Senator McSally. Mr. Williams, I get that there was a
    failure of the plumbing system, but do you hear the story? They
    find mold. It is time to alert them there is mold. This is
    dangerous to your family. Let us get the family out. Let us get
    them into a safe circumstance. That is more than just a faulty
    pipe. It is what happens next.
        So, can I ask, are you committed now that if any of you
    hear of anything that comes in any of your units or anyone on
    your team that is a hazard or is dangerous to any of these
    families, that they are going to immediately be notified and
    they are going to be put into safe housing, sustained, safe
    housing, until it is resolved? Can I get that commitment?
        Mr. Williams. One hundred percent.
        Mr. Picerne. Absolutely, Senator.
        Mr. Ehle. Life safety issues are our number one priority.
        Mr. Hickey. Absolutely.
        Mr. Bliss. Absolutely, Senator.
        Senator McSally. All right. Thank you.
        I yield back.
        Senator Tillis. Senator Hirono?
        Senator Hirono. Thank you, Mr. Chairman.
        I think that a lot of the questions that I asked have
    probably already been asked. I apologize that I had to go to
    another hearing.
        I would like to ask from you folks, because basically you
    are on the hot seat and you manage, among you, hundreds of
    thousands of units of military housing. Correct?
        Do you all acknowledge that you can do more to make sure
    that the military housing you provide is safe, clean, and
    habitable?
        Mr. Williams. Yes, Senator.
        Mr. Picerne. Yes, Senator.
        Senator Hirono. Let us go down the line.
        Mr. Ehle. Yes.
        Mr. Hickey. Yes.
        Mr. Bliss. Yes.
        Senator Hirono. That you want to be part of the solution.
    So that is good.
        You have to have a reserve fund, right, to take care of
    things like fixing roofs and getting rid of persistent mold and
    all of that. Who determines how much is in that fund?
        Mr. Williams. That fund is determined by the cash flow that
    flows through the project and down into the waterfall that then
    is deposited into a government-controlled fund. Then we and the
    services determine what the long-term plan is to spending that.
        Senator Hirono. Is it basically that you all decide how
    much should be in the reserve fund?
        Mr. Hickey. No, Senator. The reserve fund is the result of
    the net cash flow that comes out over a period. The revenue
    comes in, operating expense, then the debt service. Everything
    goes into the reserve fund and that accumulates. And then we
    put recommendations to the Military Service, and together we
    will work out where those funds get spent.
        Senator Hirono. How much of those reserve funds go for
    things like repair and maintenance?
        Mr. Ehle. One hundred percent.
        Senator Hirono. Debt service is for repair and maintenance?
        Mr. Hickey. Debt service comes out before the reserve fund,
    Senator.
        Senator Hirono. Okay.
        Mr. Hickey. Debt service comes out, balance into the
    reserve fund. The reserve fund is used for repairs and
    maintenance and new construction and----
        Senator Hirono. What percentage of your reserve fund, once
    you do the debt service and all the other things that you have
    to do--how much is left for the reserve fund for the repair and
    maintenance of your units?
        Mr. Picerne. On most of our projects, it is somewhere
    between 16 and 18 percent.
        Senator Hirono. Do you think that is adequate?
        Mr. Picerne. I do not actually think it is adequate, and I
    think that is what has driven us partly to the place that we
    are in today. So as we try to create smaller expense accounts
    to try to be more efficient in how we serve the families and
    maintain the families, which is directly related to how much
    money would go into the reserve accounts----
        Senator Hirono. I think I am running out of time.
        Mr. Picerne. So let me just quickly.
        Senator Hirono. Yes.
        Mr. Picerne. On a daily basis, the families that we are
    dealing with who have issues in their homes--that would come
    out our operating expenses. The reserve accounts are to deal
    with the rebuilding, modernization, or revitalization of the
    homes.
        Senator Hirono. But including things like eliminating
    persistent rodent infestation, all of those things, that comes
    out of the reserve fund. There is no law that requires all of
    you to have a certain percentage in the reserve fund. Is that
    correct?
        Mr. Picerne. Correct.
        Senator Hirono. What do you think if we impose such a
    requirement? You would not like it.
        Mr. Ehle. Senator, there is a minimum amount of deposit
    that needs to go into the reserve accounts before anything else
    can happen. So it is in our documents. It was agreed upon with
    our military partners at the outset.
        Senator Hirono. We may need to revisit the adequacy of the
    reserve fund in light of all of this testimony.
        I do thank all of the people who have shone the light on
    this.
        I was looking at--you know, part of the concern is, of
    course, the disclosure that goes to the homeowners. I am
    looking at one. This is two pages, single-spaced, and it talks
    about pesticide impacted soil, and the residents have to sign
    this form. There is such a thing as forms that are easy to
    read, and I do not think this is an easy-to-read form. So I
    would ask that if all of you have--I assume you all have to
    have these disclosure forms that cover the various kinds of
    dangers and hazards that may be in the home. I would ask you to
    review these forms because if I were wanting to get into
    housing, I would probably just sign this form and not
    necessarily read it as carefully as one should. Simplifying
    your form is something that I think would make a big difference
    in terms of meeting any notice requirements.
        I see I am out of time, so I do have a few other questions
    that I can submit for the record. Thank you.
        Senator Tillis. Thank you.
        Senator Jones?
        Senator Jones. Thank you, Mr. Chairman.
        First of all, Mr. Ehle, you have got a couple of properties
    in Alabama at Redstone and Montgomery. Following up what
    Senator Rounds said, I am assuming for a moment that you cannot
    express surprise about any of this coming out today since 2
    years ago, Lieutenant Governor of Alabama, now Governor of
    Alabama, Kay Ivey, sent a letter to the Secretary of the Air
    Force complaining about the complaints in the standard housing
    at Maxwell.
        This past year, 2 years later, the same newspaper ran an
    article that was titled ``Substandard Maxwell Gunner Base
    Housing has Military Families up in Arms.'' Now, I recognize
    from that article that there have been some improvements there,
    but obviously, there is still a long way to go. I am not going
    to ask you to take the time today to go into those.
        What I would like for you to do is to commit to, within a
    couple weeks, getting me a full report on what you have done
    and where you are planning to go because 2 years is a long
    time. Some of those houses are older. I get that. But those
    families are suffering. So will you commit to do that for me?
        Mr. Ehle. Yes, Senator.
        Senator Jones. All right. Thank you.
        I want to follow up just--you may want to explain this, you
    may not--for each of you, Ms. Cornwall--and I think it was
    backed up by our other two witnesses--said one of the things
    that could be done quickly to try to help alleviate this
    problem--and you have all identified and talked about
    communication, and I agree with that. But one of the things
    that she said that was backed up by everybody is withholding
    the housing allowance until things are corrected. Now, I
    recognize--I am a lawyer and so I understand that you cannot
    just do that on a complaint. But would you oppose the
    withholding of that allowance if a system is in place that
    would give you, one, adequate time to correct the problem, but
    also correct a problem that has been documented? Would you
    oppose that for each of these families that are having so much
    problems? If so, I would like to know why.
        Mr. Williams. No, Senator.
        Mr. Picerne. No, Senator. I think there is a reasonable
    mechanism that will withhold dollars until things are fixed. I
    think that makes sense.
        Mr. Ehle. No, Senator.
        Mr. Hickey. No, Senator, we would not. But I think it is
    also a part of trying to actually install an arbitration or a
    type of a regime that gives people a voice that can actually
    sit and adjudicate over these issues that most of the families
    have raised that they have not been able to do today.
        Senator Jones. Good. We will come right back to that.
        Mr. Bliss. No, Senator.
        Senator Jones. All right. That is great.
        Again, I am going to make another request. I would like
    each of the five of you to give us something of what you think
    that that would look like so that this Committee can consider
    it and talk to your military partners about implementing that.
        Going back, Mr. Hickey, to what you just said, what would
    you see would be a good mechanism? I agree with you completely
    because if there is no ability to redress and you complain and
    complain and complain, there is just not much going to happen
    when money is involved. So let us find a way. What would you
    suggest would be a good way for these families to be able to
    seek some redress, whether it is arbitration, mediation, or
    whatever?
        Mr. Hickey. Thanks, Senator.
        I think on a base-by-base, you need to establish a forum
    for the local people to be able to come and express their
    concerns and to work with us, plus the service partner, plus
    the community and the residents. I think what that structure
    looks like--we can work on that. I think we can use best case
    examples from other industries in other areas. But I think if
    we can create that environment, I think that goes a long way to
    actually giving people a----
        Senator Jones. I do not disagree with you. Your concept
    would be to establish an overall framework, but let the
    individual base and their commanders work with the communities
    and others that are interested to come to some resolution
    agreement that can come forward. Something along those lines?
        Mr. Hickey. Yes. I think it is important to bring it back
    to a base level because I think if you introduce something too
    high up, it becomes cumbersome, et cetera. So I think there may
    be scales of----
        Senator Jones. I do not disagree with that because,
    obviously, it has not gone too far up with each of your
    companies right now. So we got to figure that out.
        Thank you all for the commitments, and I look forward to
    getting your responses in the very near future, in the next 2
    or 3 weeks. Thank you very much.
        Senator Tillis. Gentlemen, thank you for coming and
    testifying today. For certain people that come before us, they
    have an obligation to respond to questions for the record. You
    do not have an obligation, but we would ask that if you receive
    questions from the Senate Members, that you try to respond to
    them promptly over the next 2 weeks. We thank you for being
    here.
        I particularly look forward to solving these problems and
    seeking your feedback on the interface to government and other
    things that need to be made better so you can do your job
    better. But we have got to do a better job.
        In the meantime, as I said before, I speak for every Senate
    Member when I say if you are living in military housing
    anywhere in this country and you are not getting satisfaction
    from any of these vendors, call your Senate offices and we will
    be in touch.
        You may now step down. Thank you very much again.
        We are going to seat the next panel.
        [Pause.]
        Senator Tillis. Thank you all for being here.
        In the interest of making sure we can get to questions, I
    would ask you to try and keep your opening comments to about 4
    minutes, submit written statements to the record. We will start
    with Secretary McMahon.

      STATEMENT OF HON. ROBERT H. McMAHON, ASSISTANT SECRETARY OF
                        DEFENSE FOR SUSTAINMENT

        Secretary McMahon. Good afternoon, Mr. Chairman, Ranking
    Members, thank you for the opportunity to testify on this very
    important topic.
        I would like to begin by thanking the family members that
    were here for bringing and having the courage to come forward
    and talk about what they did in a very difficult environment.
    We appreciate not only what do they do, but more importantly,
    what they do in support of their spouses.
        What we heard from them reinforces what we already knew and
    that we collectively have to do significantly better.
        For those of us that have lived in military housing before
    privatization--and I lived in nine different base homes during
    my 34-year military career--we know that privatization was the
    right decision and that the quality of privatized housing is
    significantly better than when DOD managed it.
        However, for more than 80 percent of our current military
    population who did not experience the poor housing conditions
    of the past, this is all they know, and they expect us to get
    it right 100 percent of the time.
        As you all know, 70 percent of our military members live
    off base. For the 30 percent that live on base, our goal is to
    offer them a safe, high quality, and affordable home where they
    want and choose to live. Although our current independently
    generated satisfaction rate with privatized housing runs
    approximately 85 percent--and those are 2017 numbers--we, as I
    said before, must and will do better.
        I had the opportunity to meet with our partners, as well as
    my service counterparts, on the 1st of February and talk about
    the issues that we face. It became clear to me from that
    meeting that we need to focus in three areas, and it is much of
    what our family members said. We need to improve upon
    communication, we need to improve upon engagement, and we need
    to improve upon responsiveness. Both groups are fully in sync,
    and that is where we intend to go.
        At the same time, we have to work to ensure the long-term
    viability of our privatized housing projects. Integral to that
    responsibility is ensuring the fiscal structure of our current
    projects assures us that these projects will be just as healthy
    in 15 to 25 years.
        In closing, the Department of Defense and our industry
    partners are fully committed to the complementary goals of,
    first, ensuring that today's residents of privatized housing
    have a safe, high quality, and affordable home where they want
    to live and choose to live, and second, ensuring the long-term
    viability of our privatized housing projects so that our future
    residents 20 years from now have exactly the same thing.
        I look forward to your questions
        [The prepared statement of Mr. McMahon follows:]

                  Prepared Statement by Hon. Robert H. McMahon
                                  introduction
        I want to thank you, Chairmen Sullivan and Tillis, Ranking Members
    Kaine and Gillibrand, and distinguished members of the Subcommittees.
    I'm honored to appear before you this afternoon in my new capacity as
    Assistant Secretary of Defense for Sustainment to discuss the Military
    Housing Privatization Initiative and the Department's commitment to
    supporting the housing needs of servicemembers. Having lived in on-base
    family housing nine times during my Active Duty career, I understand
    the importance of safe, quality housing to our military families.
        In return for the sacrifices they make in service to our nation,
    servicemembers and their families expect a safe and secure place to
    live, good schools for their children, access to good medical care, and
    a viable relocation process that respects their household goods. You
    have my pledge that the Department of Defense is committed to
    fulfilling this sacred contract with servicemembers and their families,
    to include ensuring they have access to safe, high quality, and
    affordable housing where they will want and choose to live. I look
    forward to working with the Committee to support the priorities of the
    Department and the quality of life for our military members and family
    members who are called to sacrifice so much for public service.
               military housing privatization initiative overview
        Under the Military Housing Privatization Initiative (MHPI)
    legislation established in 1996, the Military Departments have
    privatized 99 percent (more than 200,000 units) of installation family
    housing in the U.S., with more than 80 MHPI projects currently in place
    across approximately 150 installations.
        The Department is confident that housing privatization was the
    right thing to do. Privatization has dramatically improved the quality
    of on-base housing and has facilitated long-term investment necessary
    to maintain high quality housing. The MHPI allowed the Military
    Departments to leverage private sector expertise and funding to improve
    the quality of installation housing in the United States much faster
    than DOD could have done through traditional military construction and
    ongoing operation and maintenance funding. Before privatization, the
    housing on our U.S. installations had a $20 billion maintenance
    backlog, which the Department of Defense (DOD) estimated would take
    more than 30 years to address using traditional military construction.
    The lack of sufficient Military Department funding to adequately
    maintain quality housing severely impacted servicemember quality of
    life, creating recruitment and retention challenges, thereby impacting
    readiness. These realizations contributed to DOD's conclusion that
    housing management, not a core DOD mission, needed to be addressed
    through privatization.
        Under the MHPI, Military Departments conveyed their existing
    government housing units to competitively selected privatization
    entities (i.e., the MHPI projects). MHPI projects operate under long-
    term (850-year) ground leases and associated legal agreements with a
    Military Department, with one 25-year option period. In return, the
    MHPI projects assumed responsibility for operation, maintenance,
    construction, and replacement of the housing during the lease term, in
    accordance with the MHPI authorities as defined in Title 10, United
    States Code.
        At present, 99 percent of the construction and renovation planned
    for the 5 to 10-year initial development phase (IDP) of the individual
    MHPI projects has been completed, to include construction of more than
    75,000 new units and major renovations of more than 50,000 units. This
    represents more than $32 billion in total development achieved with
    less than $4 billion in government funding as authorized under the MHPI
    authorities.
        A crucial part of the housing privatization model is that
    servicemembers, except for a small number of key and essential
    personnel, are not required to live in privatized housing.
    Servicemembers who choose to live in MHPI housing receive BAH, sign a
    lease, and use their BAH to pay rent just like servicemembers who
    choose to rent housing in the local community. The fact that
    servicemember chose where to live (on or off-base), incentivizes MHPI
    projects to maintain quality housing to attract and retain tenants.
        Although the Military Departments retain certain rights under the
    project's legal documents MHPI partners are not DOD or Military
    Department contractors. The main role of the Military Department is to
    monitor the MHPI projects to ensure adherence to the terms of the
    project documents, as well as applicable legal and regulatory
    requirements. Additionally, the Military Departments monitor MHPI
    projects to ensure project financial performance can sustain quality
    housing over the life of the ground lease. To this end, the Military
    Departments monitor housing occupancy and resident satisfaction, as
    well as revenue, operating expenses, operating budgets, and the overall
    financial health of each MHPI project, to include the project's
    sustainment and recapitalization funding as compared to pro forma
    expectations and project needs. Depending on the particular structure
    of a given project, the Military Departments may also have approval
    authority for project budgets, certain major project expenditures,
    changes in property management companies, or other key project
    oversight decisions.
             the office of the secretary of defense oversight role
        The Office of the Secretary of Defense (OSD) provides portfolio
    management of the MHPI program, meaning policy oversight, long-term
    program monitoring, and ensuring that the projects comply with the
    requirements of Office of Management Budget (OMB) Circulars A-11, A-
    129, and budget guidance. My office issues MHPI policy and program
    guidance, including guidance on MHPI project requirements for OSD and
    OMB review and approval, policy on financial restructuring involving
    federal credit or otherwise impacting budgetary scoring, and
    implementation guidance for legislative requirements such as section
    606 of the John S. McCain National Defense Authority Act of Fiscal Year
    2019 (Public Law 115-232) which requires payment to MHPI projects to
    make up for reductions in housing allowances as part of incorporation
    of an out-of-pocket component. My staff reviews and provides scoring
    documents and consultation necessary to obtain OMB approval of new MHPI
    projects or changes to project deal structures that could potentially
    impact project budget scoring or federal credit subsidies. These
    changes, that could revise government financial contributions or
    property conveyance or impact federal credit instruments, include
    restructures of government direct loans; changes to private loans
    covered by government loan guarantees; and sales of projects or project
    assets and use of sale proceeds.
        A key aspect of OSD's oversight is long-term monitoring of the
    financial health of the individual projects and MHPI portfolio as a
    whole. This includes implementing new or improved procedures to provide
    enhanced housing privatization reports on an annual basis to the
    congressional defense committees, to include an assessment of project
    sustainment; establishing and monitoring performance metrics and key
    project data elements; and conducting periodic program reviews to
    identify project or program issues that necessitate increased
    monitoring, additional guidance or assistance from OSD or by the
    Military Departments, or potential resolution through some other change
    to the project such as a financial restructure.
        Under my leadership, OSD is increasing its oversight to ensure the
    Military Departments fully and effectively exercise their
    responsibilities to ensure that privatized housing is managed in a
    manner protective of human health and the environment. This includes
    OSD establishing new reporting requirements and programmatic reviews
    regarding Military Department monitoring of potential hazards in
    privatized housing, such as reporting on the number of child falls from
    windows in MHPI (or military-operated) housing.
        Additionally, OSD is increasing its participation in meetings with
    MHPI partners to focus on privatized housing management, housing
    conditions, and project financial health from a portfolio perspective.
    On February 1, 2019, I hosted a meeting with MHPI partner and Military
    Department executives to review their oversight of housing conditions
    and discuss how we can work together to better ensure local
    privatization project housing managers are responsive to tenant
    concerns, remedy identified health or safety hazards, inspect housing
    for hidden hazards in need of resolution, and keep residents informed
    regarding any safety risks and associated mitigation or abatement
    measures. As a result of this summit, the DOD participants and MHPI
    partners collectively agreed that a way forward in addressing resident
    concerns will focus in three key areas . . . communication, engagement,
    and responsiveness.
        The Department and our housing privatization partners are committed
    to working together to increase our collective communication with
    military families to better ensure they have a positive experience
    living in privatized housing. This includes increasing our engagement
    with military families throughout their entire residency in privatized
    housing. For example, meeting with residents within 90-days after their
    lease signing to ensure they are satisfied with their home and overall
    housing experience, hosting more frequent townhall meetings, and
    providing other opportunities to solicit feedback besides annual
    resident satisfaction surveys.
        Through increased engagement, we will better educate military
    families about their roles and responsibilities to help identify any
    issues with housing conditions, and the roles and responsibilities of
    the privatized partner and the installation housing teams. Our
    commitment to increase engagement also extends to Military and Veteran
    Support Organizations and advocacy groups such as the Military Family
    Advisory Network.
        In all cases, we commit to work with our housing privatization
    partners to ensure any and all resident concerns are addressed in a
    highly responsive, timely and professional manner, with emphasis on
    expediting resolution of any concerns involving potential health or
    safety issues. We want our military families to know that we truly care
    about their experience living in privatized housing and that we want to
    collectively do better in delivering safe, high quality, affordable
    housing where our military members and their families will want and
    choose to live.
                       overall health of the mhpi program
        The overall health of the MHPI program is measured in three
    distinct phases: Initial Development, Sustainment, and
    Recapitalization.
        Initial Development Phase (IDP): This phase is typically planned
    for the initial 5 to 10-year period after project financial closing.
    With 99 percent of the initial development complete, more than 62
    percent of the MHPI portfolio is either newly constructed or has
    received a major renovation with the remaining housing receiving some
    investment (e.g., new cabinets, paint, new flooring) to ensure the
    housing is in good condition. The MHPI program has leveraged private
    sector capital by a ratio of eight to one, achieving more than $32
    billion in development scope with just $4 billion in government
    funding. While the majority of IDPs are complete, the resulting
    leveraging of private sector investment is far in excess of the
    original internal DOD requirement to achieve projects with a three to
    one leverage, and represents a highly successful and a very healthy
    foundational start to the program.
        Sustainment Phase: This phase begins after the IDP, concentrating
    on operation of the asset and planned capital repair and replacement is
    the norm as the project pays down the initial financing and begins to
    save for the next major recapitalization development period which will
    likely occur around year 25 to year 30 of the project. While the MHPI
    program is in the early stages of this phase, the program remains very
    healthy with strong occupancy across the portfolio, positive resident
    satisfaction and, for the most part, strong cash flows to support the
    initial debt taken down by the projects.
        The projects of the most concern at this point are those that were
    highly leveraged at the outset, most notably the projects with
    government direct loans (GDL) in addition to their private debt. This
    government financing is generally subordinate to the third-party
    financing and results in the greater risk that the project might lack
    sufficient cash flow to cover project debt in the event that project
    revenue is lower than expected. This can occur if housing occupancy or
    BAH rental income is lower than expected, for example, due to
    deployments, and/or if operating costs are higher than projected, for
    example, due to significantly increased utility rates. The focus of
    oversight in situations where the GDL is at risk is on restructuring or
    modifying the GDL to ensure, first and foremost, repayment of the
    principal and secondly to preserve as much of the original interest
    return anticipated at the outset of the loan.
        Recapitalization Phase: Recapitalization of the assets at the
    appropriate time in the life cycle is a bellwether measure of the
    overall success of the MHPI program. At this time, it is too early to
    determine if a project is able to meet recapitalization objectives as
    there is significant time remaining in the Sustainment Phase. Further,
    there are other changes occurring or affecting each project that impact
    the funds available at the time Recapitalization Phase begins. That
    said, prudent management of the projects includes frequent forecasting
    of funds available in relation to anticipated costs of the
    recapitalization. In addition, the MHPI authorities and the existing
    project structures provide tools to address potential funding
    shortfalls. As such, we cautiously, but reasonably, assert that the
    program will remain healthy as we approach and proceed through this
    phase.
        To ensure continued health and success, long-term government
    oversight of the program and individual MHPI projects is critical. The
    private sector brings exceptional experience and expertise to perform a
    non-core function for the Department of Defense. However, we must
    recognize that the Government's interests are not always aligned with
    the private sector; oversight and engagement is required and expected
    in a public-private partnership over the long term to ensure success.
               health and safety conditions in privatized housing
        Although privatization has dramatically improved the quality of on-
    base housing, there is room for improvement, including in those areas
    raised in recent media coverage. DOD, the Military Departments, and our
    privatization partners take seriously any concerns about unsafe or
    unhealthy conditions in privatized housing and are committed to
    addressing such concerns. The health and safety of our servicemembers
    and their families is a top priority of the DOD. With that said, in
    some cases, we lost focus on delivering a positive experience to our
    residents.
        While MHPI resident satisfaction surveys by an independent third
    party (with occupancy rates that exceed 93 percent for all MHPI
    projects) suggest the recently raised issues are not indicative of a
    systemic problem across the MHPI portfolio, the Military Departments
    and MHPI project partners continue to work together to review housing
    conditions. They are working together to address health and safety
    hazards, and to evaluate policies and procedures to ensure that any
    health and safety issues are addressed in a manner protective of human
    health and the environment, in compliance with all applicable federal,
    state, and local laws and regulations, and applicable DOD and Military
    Department policies. In all cases, it is my expectation that the
    Military Departments and housing privatization partners keep residents
    informed about lead-based paint, mold, or other hazards, and associated
    mitigation or abatement measures. The Military Departments will
    continue to assess privatized housing tenant satisfaction through
    resident surveys obtained using an independent third party contractor
    and will incorporate the survey results into their reviews of partner
    performance.
        MHPI project ground leases and associated legal documents address
    the requirement for projects to provide safe, quality housing and
    define required project compliance with Federal, state and local
    environmental and health standards. MHPI projects must comply with the
    same regulatory standards and inspection requirements as off-base
    rental housing and tenants of privatized housing have the same rights
    and protections as residents living off-base. While there are Federal
    regulations and standards related lead based paint, there are no
    Federal standards for mold. The Military Departments and their housing
    privatization partners consider all housing maintenance requests
    including those involving lead-based paint or mold as ``urgent'' and
    therefore requiring rapid response.
        Each Military Department has procedures in place, supported by
    their respective housing offices, through which military tenants may
    seek assistance to resolve issues with their landlords, whether they
    live in private housing off-base or privatized housing on-base.
    Residents of privatized housing are encouraged to report any concerns
    to the housing property management office or the on-base, government
    housing office so that their concerns can be addressed in a timely
    manner. All resident complaints will be taken seriously and acted upon
    in a timely manner. Residents of privatized housing also have the
    option of filing an anonymous complaint with the Inspector General. In
    all cases, the installation commander is the resident advocate for any
    issue involving privatized or government-owned or leased housing and is
    always to act on behalf of the resident, without resident fear of
    reprisal.
        Prospective tenants of any privatized (or government-owned or
    leased housing unit) built before 1978 are notified in writing of the
    health risks associated with damaged or deteriorating lead-based paint
    and what to do if any damage to paint occurs, consistent with EPA
    requirements. Before signing a lease and accepting residency,
    prospective tenants are: 1) provided with EPA-required information
    about the presence of lead-based paint, health risks associated with
    lead exposure, the steps they must follow to minimize those risks, the
    requirement to notify maintenance if any damage or deterioration to
    paint occurs while they are living in the home; and 2) required to
    review and sign a lead paint addendum that is consistent with EPA
    requirements. Because servicemembers are not required to live in MHPI
    housing, they can opt not to rent privatized housing, or a specific
    unit of privatized housing, for any reason. For example, a
    servicemember might decline to rent a privatized housing unit that was
    built prior to 1978 due to concerns regarding potential lead-based
    paint.
        Unfortunately, we are seeing anecdotal information indicating that
    not all residents fully understand or appreciate the need for their
    vigilance that these standard documents seek to convey; but rather view
    them as one of a litany of forms they must sign in the chaos of a
    Permanent Change of Station (PCS) relocation. Accordingly, the Military
    Departments are exploring a variety of educational programs, including
    90-day post move-in visits and interviews to impress upon residents, in
    a time of more calm, the need to be watchful for and promptly notify
    management of any damaged or deteriorating lead-based paint.
        The Government Accountability Office (GAO) has initiated a review
    of hazards in privatized housing. We welcome this review and stand
    ready to work with the MHPI partner companies to provide GAO with the
    data needed to make informed judgments on the management and benefits
    of this critical program.
                                   conclusion
        The Department of Defense understands that family is important and
    honors the sacrifice that servicemembers and their families make to
    serve our nation. The Department recognizes we have a moral obligation
    to military families to provide safe and quality housing, and we take
    that obligation seriously. We are committed to the long-term success of
    the MHPI projects and MHPI program, and will continue our oversight of
    the MHPI portfolio to ensure delivery of quality housing for
    servicemembers and their families over the life of the projects. Bottom
    line, this includes a twin focus . . . ensuring our residents have a
    positive experience living in privatized housing, and ensuring the
    long-term viability of the MHPI projects.
        Thank you for the opportunity to testify on the Military Housing
    Privatization Initiative and for your continued support of Department
    of Defense's efforts to make sure that military families have safe,
    quality housing. Again, I look forward to working with you to support
    the priorities of the Department and the quality of life for our
    military members and family members who are called to sacrifice so much
    for public service.

        Senator Tillis. Thank you.
        Secretary Beehler?

     STATEMENT OF HON. ALEX A. BEEHLER, ASSISTANT SECRETARY OF THE
            ARMY FOR INSTALLATIONS, ENERGY, AND ENVIRONMENT

        Secretary Beehler. Mr. Chairman, Ranking Members, and
    distinguished members of the joint Subcommittee on Personnel
    and Readiness and Management Support, thank you for this
    opportunity both to testify on the current state of the Army's
    Military Housing Privatization Initiative and to answer any
    questions you may have. I look forward to working with each of
    you to achieve our mutual goal of providing safe and secure
    housing on all of our Army installations, which directly
    impacts the readiness, welfare, and quality of life for our
    soldiers and families.
        First, I want to address the concerns of our Army family
    members heard during the first panel. The Army and its leaders
    at every level down to each Army installation are taking your
    concerns seriously. All levels of command are actively working
    to address the problems you have highlighted. Their focus and
    mine is to ensure the safety and wellbeing of the soldiers and
    their families who choose to reside in privatized housing. We
    are all committed to providing a safe, secure living
    environment. The Army's number one priority continues to be
    readiness, and that very much begins with our families,
    including exceptional family members.
        I would like to introduce for the record at this point a
    statement on behalf of the Secretary of the Army and the Chief
    of Staff of the Army. We are deeply troubled by the recent
    reports highlighting the difficult conditions in some of our
    family housing. It is unacceptable for our families who
    sacrifice so much to endure these hardships in their own homes.
    Our most sacred obligation as Army leaders is to take care of
    our people, our soldiers and family members. We are fully
    committed to provide a safe and secure environment on all of
    our installations. We have directed an Inspector General
    investigation and have taken other actions. We will hold our
    chain of command and private contractors accountable to ensure
    they are meeting their obligations to provide safe, high-
    quality family housing. We are going to Fort Meade tomorrow
    with Army senior leaders to get to the bottom of the situation
    at Fort Meade.
        With that, I welcome any and all of you to visit an
    installation with me to engage directly with the garrison team
    and visit family homes and servicemembers.
        Thank you for the opportunity to come before you today and
    for your continued support of our soldiers, civilians, and
    families. Your oversight is always welcome in order to provide
    the best service to our soldiers and families. I look forward
    to your questions.
        [The prepared statement of Mr. Beehler follows:]

                  Prepared Statement by Honorable Alex Beehler
                                  introduction
        Chairmen, Ranking Members, and distinguished members of the joint
    subcommittee on Personnel and Readiness and Management Support, thank
    you for this opportunity to testify on the current state of the Army's
    Military Housing Privatization Initiative, and to answer any questions
    you may have. I want to begin by thanking the committees for their
    continued support and commitment to our soldiers, families, and
    civilians. I would also like to take this opportunity to welcome the
    new Members on these two subcommittees. Your continued leadership and
    guidance were instrumental in the successes we achieved last year. I
    look forward to working with you to achieve our mutual goal of
    improving the condition of the housing on all of our Army
    installations, which directly impacts the welfare and quality of life
    for our soldiers and families.
                  providing safe, quality army family housing
        First, I'd like to emphasize that the safety and well-being of our
    soldiers and their families is paramount. On all of our installations,
    the Army is committed to providing safe and secure family housing that
    meets or exceeds health and safety standards, which includes preventing
    exposure to environmental hazards.
        With more than 102,200 homes (11,000 Army-owned, 87,000 privatized
    and 4,200 leased), the Army is the seventh largest provider of housing
    in the United States. The vast majority of our homes in the United
    States are owned and managed by private companies. Housing is an
    extension of how our installations contribute to soldier and family
    readiness, and regardless of who owns the homes, we are committed to
    providing safe, quality, affordable housing to our soldiers and their
    families on all of our installations, both CONUS and OCONUS.
        We recognize that no matter how well we and our privatized partners
    are managing our housing assets, we can always improve. I appreciate
    hearing from the witnesses called in the previous two panels. Oversight
    and scrutiny of inventory management, along with customer satisfaction
    surveys, provide continuous feedback, which is essential to identifying
    issues or areas we can improve. Whether in Army-owned or privatized
    housing, preventative maintenance programs proactively identify areas
    of concern. The Army and our private partners endeavor to promptly
    respond and resolve all problems whenever they occur.
        Although Army-owned and privatized homes are built and maintained
    to high standards, they are affected by weather, just like all other
    homes in the world. In areas of high humidity, after heavy rains, or
    when a hurricane or tornado strikes, additional maintenance and
    unanticipated repairs will inevitably be needed. The maintenance
    departments for our Army-owned and privatized homes strive to quickly
    address residents' problems through well-established policies and
    procedures, and to follow up to ensure that our residents are
    satisfied. Nonetheless, in some cases we and our partners have let
    residents down by failing to completely resolve problems in a timely
    fashion. We want to know when this happens and encourage residents to
    escalate concerns. By looking into each occurrence, we and our partners
    are able to learn from our mistakes and engage in process improvement.
                             environmental hazards
        I would like to take this opportunity to address some recent news
    reports on a small fraction of our Army-owned and privatized homes. We
    take these reports very seriously, and acknowledge that there is room
    for improvement. The Army's greatest asset is our people, and we are
    committed to ensuring that our soldiers and their families experience a
    high quality of life while they serve our nation.
        After investigating these reports, we have determined three key
    facts regarding the number of children in Army housing had elevated
    blood lead levels: 1) children on Army installations were five times
    less likely to have elevated levels than the national average, 2) out
    of 83,517 Army children tested between 2010 to 2018, less than 1
    percent (690) showed elevated levels, 3) more than 70 percent of
    soldiers and their families live off post in non-Army housing.
        Furthermore, additional analysis that the Army conducted into
    specific cases noted in news reports regarding Fort Benning show that
    historic homes are not a likely source of elevated blood lead levels.
    Fort Benning determined that 19 of the 31 children who tested positive
    there lived off post and just four lived in historic homes on the base.
    Similarly, of the 3,400 children tested at Fort Riley since 2012, 11
    had elevated levels, and seven of them lived off post. Fort Hood's
    medical center tested 11,181 children since 2011, and 12 of the 15
    children with elevated results lived off post.
        Nonetheless, out of an abundance of caution, the Army recently took
    immediate action to address soldier and family concerns pertaining to
    environmental hazards in homes. We began by identifying approximately
    13,000 pre-1978 government-owned/leased/privatized homes with aged six
    or under because they are most at risk to environmental hazards. We
    tasked the U.S. Army Corps of Engineers (USACE) to conduct an
    Environmental Hazard Screening in Army-owned, leased, and privatized
    housing; consolidate and analyze findings; and prepare a report of
    results addressing concerns related to potential hazards. We conducted
    1,360 visual inspections between September 2018 and December 2018, and
    identified over 833 (60.5 percent) homes with one or more positive
    visual indicators of lead-based paint, both inside and outside the
    home, requiring further investigation. We also reviewed the records of
    these same homes for evidence of Asbestos Containing Material (ACM).
    The records review and limited visual checks indicated that all
    existing asbestos was correctly encapsulated and in locations where
    daily activities would not disturb it.
        In addition, the Installation Management Command (IMCOM) and the
    Army Public Health Center (APHC) implemented a plan to sample water at
    the tap in 20 percent of the Army-owned and leased homes annually.
    Since 2016, this potable water testing has been completed in 60 percent
    of these homes, with most issues corrected through routine maintenance
    measures such as the replacement of faucets, filters, or aerators. The
    Army will test the drinking water on the privatized homes following the
    IMCOM and APHC established regimen beginning the second quarter of
    fiscal year 2019, and, based on the test results, the private partners
    will replace fixtures as required per EPA lead-free standards.
        We are also working with both Army garrison staff and private
    partners to ensure a more rigorous check is being implemented during
    preventive maintenance inspections of homes to verify proper
    ventilation is occurring, especially in bathrooms. If there are mold
    issues, the Army housing staff or the private partner will promptly
    respond. In response to resident concerns regarding communication
    between them, the housing manager, and the installation, the Army is
    also developing a standardized template for communications that can be
    shared among all installations.
        Our approach to the Environmental Hazard Screening results has been
    comprehensive. We reinforced resident and leadership education to
    ensure communication is ongoing at every echelon, from HQDA and Senior
    Leader engagements, to garrison-level resident education. We believe
    these efforts will lead to proactive reporting of potential hazards
    that will greatly reduce risk from environmental hazards including
    lead-based paint.
        Additionally, the USACE report provided several key
    recommendations: 1) increased staff for Director of Public Works (DPW)
    and the housing offices and seek resources to support as needed;
    establish programs for monitoring environmental hazards in housing to
    include continual inspections, 2) reporting and oversight, and
    replacement of all non-lead free plumbing fixtures; 3) increase
    training and develop communication plans for garrison commanders, DPWs,
    Army asset management staff and residents; 4) follow up with all
    residents to reinforce the importance of previously provided
    educational materials, with an emphasis on possible environmental
    hazards; 5) codify and emphasize change of occupancy protocols to
    include using certified risk assessors to inspect the homes.
        We believe these recommendations are valuable and are creating an
    implementation plan that, pending Army Senior Leader approval, will
    address them.
                                 mhpi oversight
        Where the Army has privatized the management of our housing
    inventory by transferring ownership of the assets to a partner, we
    continue to retain an essential oversight role to ensure that the
    partner meets its obligations.
        Day-to-day oversight of both Army-owned and privatized housing is
    performed by the installation garrison commander and his or her housing
    support team. Our garrison commanders play an important role in the
    day-to-day execution of housing operations at their installations. By
    working daily with the installation housing offices, their own
    maintenance staffs, and on-base private housing management
    representatives, they ensure residents' housing concerns are addressed
    in the most expeditious and appropriate manner. Residents play an
    equally important role by bringing issues to the attention of the Army
    or privatized-property managers. Additionally, garrison commanders
    regularly hold town hall meetings or forums at every Army installation
    to engage with local residents. When we have identified instances where
    customer service expectations were not met, we have worked with our
    partners to correct the situation and continue to do so as issues
    arise.
        An additional aspect of the Army MHPI program is its development
    and construction oversight. Typically, a private partner develops a
    development and construction plan in conjunction with the garrison
    commander and installation support team (DPW, Safety, and Army housing
    staff), and then the Army approves proposed plans, including the
    budget. The installation support team overseas the development and
    construction activities, along with a third-party Independent
    Construction Consultation (ICC) contractor. The ICC contractor inspects
    any development and construction work to ensure compliance with
    building codes, and before a home is occupied, it is certified for
    occupancy.
        We have found that as the MHPI program matured, we identified the
    need to improve our training program for garrison commanders, Army
    leaders, and soldiers.
        In addition, we and our partners will improve communications with
    residents. For instance, when news outlets reported that some work
    orders were not being processed in a timely manner, we examined the
    records related to each. While we found a number of these claims to be
    inaccurate, there were instances where our partners could have done
    better. We will direct our garrisons to make a regular review of local
    work order records to identify opportunities for continuous
    improvement.
        It is also essential to note that our military and civilian tenants
    have the exact same protection available to anyone living on the local
    rental market under the Fair Housing Act, without having to face any
    fear of reprisal. Dissatisfied residents have several avenues for
    recourse, including a process for escalating their concerns to the
    private project company, the Government Housing Office, or both in some
    cases. In fact, we strongly encourage residents to take advantage of
    this process, as their satisfaction is the goal of the Army and our
    private partners. Residents always have the option to ``vote with their
    feet'' and live off post, as two-thirds of Army families currently do.
        Our goal for housing occupancy rates is 95 percent. Our overall
    occupancy rate from fiscal year 2016 to fiscal year 2018 increased from
    91.3 percent to 93.3 percent, and as of 30 November 2018 was at 94.9
    percent. While we find this encouraging and tangentially indicative of
    satisfaction, satisfaction surveys themselves range from only 77
    percent-86 percent of residents satisfied. Our stretch goal is 90
    percent. Clearly, there is room for improvement.
        Our partners have sufficient incentive to make these improvements.
    Military Housing Privatization Initiative (MHPI) ground leases are
    typically for 50-year periods and their main streams of revenue (from
    Soldiers' Basic Allowance for Housing and rent from civilians living on
    post) are not guaranteed. A rigorous funds-allocation waterfall process
    dictates how the net operating income is allocated. This includes
    annual operation expenses (maintenance, capital repair and replacement
    expenses), as well as long-term reinvestment in properties. Our
    partners' main objective, which coincides with the Army's expectations,
    is to ensure that MHPI projects continue to be sustainable, that
    housing remains attractive to our soldiers and their families, and that
    housing remains competitive with the local, off-post housing market,
    where soldiers always have the option of renting. It is also important
    to note that when there are inadequate funds in the reinvestment
    account to execute long-term projects--such as renovations, demolition
    or replacements--the private partners do not retain the revenue as
    profit. Instead, the long-term project sustainment is postponed until
    the necessary projects can be executed. Furthermore, the performance of
    the private partners dictates their incentive fees. These incentive
    fees are based on metrics developed jointly between the Army and the
    individual partners, and are in no way guaranteed.
                                   conclusion
        Our mission is to provide high quality homes and living experiences
    for those who choose to live on our installations, whether the housing
    is Army-owned or privatized. We remain committed to providing safe and
    secure housing for our soldiers and their families.
        The Army and its private partners have well-established procedures
    in place to monitor and manage environmental hazards in all homes and
    are continuing to develop and implement enhanced move-in protocols,
    maintenance procedures, and oversight responsibilities.
        The Army and its private partners will continue to inform and
    educate soldiers and families about concerns and health impacts of
    environmental hazards, resources available to tenants, and all
    available methods to report potential risks.
        We believe these efforts will lead to proactive reporting of
    potential environmental hazards and greatly reduce the risk to our
    soldiers, families, and civilians.
        We have not achieved the level of resident satisfaction that we
    strive for. There is clearly room for improvement. We believe that
    increased education for garrison and senior commanders along with
    initiatives to improve communications with residents will close gaps
    that exist.
        Thank you for the opportunity to present this testimony and for
    your continued support of our soldiers, families, and civilians.

        Senator Tillis. Secretary Bayer?

    STATEMENT OF HON. PHYLLIS L. BAYER, ASSISTANT SECRETARY OF THE
            NAVY FOR ENERGY, INSTALLATIONS, AND ENVIRONMENT

        Secretary Bayer. Good afternoon. Senator Reed, Senators,
    thank you for the opportunity to have this dialogue. It is a
    very important topic.
        I want to start out first by--I want to--on behalf of
    Secretary Spencer for the Navy and Marine Corps families and
    particularly for the ladies here today, I want to apologize for
    the horrible experiences that you have experienced in your
    families and in your homes. We are responsible, and we are
    going to fix it.
        With that, Secretary Spencer and I are fully dedicated and
    committed to ensuring that all marines, sailors, and their
    families live in safe, secure housing that meet or exceed
    health and safety standards. We are committed to families
    first.
        Seventy-five percent of our servicemembers live in off-base
    housing, and 25 percent of our servicemembers are in on-base
    privatized housing. Across the department, we have 62,700
    privatized homes.
        Since Congress passed the Military Housing Privatization
    Initiative, the Navy and Marine Corps have leveraged this
    private sector investment to obtain the equivalent of $9.8
    billion of improved housing, with only $1.5 billion of Navy or
    taxpayer investment.
        Prior to privatization, government-owned family housing
    resident satisfaction scores ranged from average to good. I
    know you have heard a lot about this, and I am not throwing
    this up for an excuse. By no means. But today our resident
    satisfaction scores range from very good to outstanding
    overall, and it is better than what it was when the government
    had our housing where we just did not have the discipline to
    compete with other funding priorities to have quality housing.
        As we all know from our own housing, maintenance issues are
    a constant effort, and we must strive to do better.
        In 2001 and 2011, the Department of Navy learned many
    lessons from a mold incident with our privatized homes in
    Norfolk, Virginia. Based on that experience, the Navy
    incorporated better management practices to address the
    environmental hazards in our privatized housing. From that
    experience with our Navy CNIC [Commander, Navy Installations
    Command], we developed a standard operating manual. A copy was
    sent to each of you. I will only point this out because this
    SOP was developed for environmental hazards in privatized
    housing. It is particularly focused on environmental hazards
    such as asbestos, carbon monoxide, lead-based paint, radon,
    security, mold, water infiltration, and pest infestation. The
    SOP provides enhanced oversight of privatized houses through
    prescribed actions and notifications through the chain of
    command to ensure our servicemembers' needs are addressed.
        The SOP also increases the visibility of property
    management response times pertaining to health and safety
    issues, and it helps the Navy hold our partners accountable in
    their delivery of services to sailors, marines, and their
    families.
        At each installation, the Navy and the Marine Corps
    maintain an installation housing office that monitors our
    partners' performance. Any significant or systemic concerns are
    elevated in accordance with our SOP.
        It is evident that there are cases where we and our housing
    partners did not meet our expectations. We will hold our
    partners and ourselves accountable. It is clear that our SOP
    has not always been followed because the procedures here are
    written with the intent to address these needs. You have my
    commitment and that of Secretary Spencer that we are looking
    into this problem.
        Thank you.
        [The prepared statement of Ms. Bayer follows:]

              Prepared Statement by The Honorable Phyllis L. Bayer
        Chairman Tillis, Chairman Sullivan, Ranking Member Gillibrand,
    Ranking Member Kaine, and distinguished members of the Committees, it
    is an honor to sit before you today with my fellow Service leaders to
    testify on the Department of the Navy's (DON)'s oversight of its
    privatized housing portfolio.
        The DON is committed to ensuring that all marines, sailors, and
    their families live in safe and secure housing that meet or exceed
    health and safety standards. This commitment stands firm whether our
    families live in community rentals, government-owned, or privatized
    houses, or government furnished or leased housing overseas.
        Thank you for the opportunity this forum provides for me to voice
    my commitment to learning where and how we can do better. The DON works
    very hard to address any complaints of environmental hazard through
    multiple actions and oversight, however, house maintenance is a
    constant effort and we continually strive to improve our response. The
    Navy learned many lessons in 2011-2012 from a mold issue in Norfolk,
    Virginia, which we incorporated into better management practices for
    all environmental hazard responses. That experience shaped how we
    manage and respond to health and safety concerns in DON privatized
    housing today. It is evident there are cases where our housing Partners
    failed to meet the standards and we must hold them and ourselves
    accountable. I am committed to continuing to strengthen our oversight
    of our Partners to ensure rapid remediation of any reported or
    discovered environmental hazards. Our privatized housing is ongoing and
    effective----evidenced by our 82 percent resident satisfaction and 94.3
    percent occupancy rate, however there is always room for improvement.
        The Military Housing Privatization Initiative (MHPI) legislation
    passed by Congress in 1996 empowered the Military Departments to
    leverage private sector expertise and investment to more quickly
    improve our military family housing inventory. The DON successfully
    leveraged private sector investment to obtain the military equivalent
    of $9.8 billion of improved housing with a DON investment of
    approximately $1.5 billion. This infusion of private sector resources
    improved the quality of our privatized housing and increased resident
    satisfaction across the portfolio. The DON has 62,713 privatized houses
    across the United States, and all are currently financially stable.
                          privatized housing oversight
        Our Partners are required to immediately notify the DON
    Installation Housing Office of any resident concern involving asbestos,
    carbon monoxide, lead based paint, radon, security, mold/water
    infiltration and pest infestation. These issues are documented by our
    Partners and addressed in accordance with hazardous material management
    plans, emergency/urgent/or routine maintenance service calls, depending
    on the severity and situation, and established action plans, including
    applicable laws and regulations. When issues arise, our Partners
    perform preliminary investigations to collect relevant and detailed
    information about the concerns or incidents, and record all health and
    safety issues in a commercial real estate property management database.
    Our Partners and government housing staff track all maintenance actions
    and perform follow-up inspections to ensure resident satisfaction. For
    mold, water intrusion, pest, drinking water and hazardous material
    responses, Partners mitigate issues and monitor for recurrence. The DON
    has full access to the database and, if there is a health and safety
    concern identified, DON personnel engage in accordance with our Health
    & Safety Standard Operating Procedures (SOP). The SOP, developed from
    lessons learned from the Norfolk incident is intended to ensure Navy is
    aware of potential health and safety risks to residents in privatized
    housing and they advocate for our servicemembers and families. The SOP
    also increases visibility of property management responses pertaining
    to the health and safety of residents living in privatized housing.
        Our Partners routinely monitor houses for Lead Based Paint (LBP),
    in accordance with all laws, including state laws which vary and may be
    most strict in locations with old or historic homes. Prior to signing a
    lease agreement, our Partners provide tenants with a LBP Disclosure
    Form, and educational materials. At change of occupancy, and/or in
    response to resident requests, as well as any other requirements for
    more frequent inspections, our Partners have trained personnel who
    examine lead-positive components to confirm that all lead-containing
    components are intact and managed.
        The DON implements robust tools and processes to perform oversight
    of our privatized housing. We have Business Agreements with each of our
    Partners across 14 projects that allow us direct access to data to
    analyze trends, identify systemic issues, and resolve conflicts. At
    each installation, the DON maintains an Installation Housing Office
    that performs oversight of the partner's property management
    performance. Our DON Housing directors and staff monitor monthly the
    partner's property management performance. Any significant or systemic
    concerns are elevated to the Navy/Marine Corps Region Housing Staff
    and/or the NAVFAC Business Agreement Managers (BAMs) to engage with the
    Partners and resolve issues.
                          installation housing offices
        Every Navy and Marine Corps installation has a Housing Office that
    is responsible for providing advice and advocacy for servicemembers and
    families. If a resident believes our Partner is not responsive to their
    needs or concerns, they can report the issue to the Installation
    Housing Office. If a resident is dissatisfied with our Partner's
    response, the resident may contact a Navy or Marine Corps
    representative at the Installation Housing Office and speak with a
    military liaison trained in Landlord-Tenant relations. DON government
    housing counselors receive issue resolution training from the Navy
    Housing Learning Center to facilitate resolution of landlord--tenant
    disputes in community rentals as well as privatized housing. Military
    members may also report issues to their chain of command or
    installation Commanding Officer. DON Installation Commanding Officers
    and Senior Enlisted Advisors receive training on privatized housing
    during their pre-command course In the Navy, a Partner representative
    usually assists in the training and provides the property manager's
    perspective to installation leadership. In the Marine Corps, the
    Installation Leadership Management Program provides training in
    privatized housing to new Installation Commanders and Sergeants Major.
        In accordance with the established Business Agreements, all
    Partners conduct Resident Satisfaction Surveys (RSS) using a private
    sector third party company to measure performance against private
    sector best practice benchmarks. The satisfaction survey is also
    structured to seek best practices to continually improve customer
    satisfaction. As previously mentioned, over the past 5 years, the DON's
    resident satisfaction scores for privatized housing have averaged 82.2
    percent and the occupancy rate is 94.3 percent. Prior to privatization,
    government-owned family housing RSS scores ranged from Average to Good.
    Today, our resident satisfaction scores range from Very Good to
    Outstanding across the program.
                           condition of mhpi housing
        The DON team (NAVFAC BAM and Navy/Marine Corps Region and
    Installation housing staff) performs annual condition assessments of
    privatized housing. These assessments review curb appeal, resident
    compliance, ancillary amenities, common areas, and private partner
    compliance with environmental regulations. The assessment also
    identifies noticeable and identified health and safety issues. Pre-work
    for condition assessments includes review of maintenance logs for
    residences with multiple service calls for health- and safety-related
    issues. These are targeted for resident interviews, which allow the
    Navy team access to the homes as part of the assessment. Our Partners
    are required to supply documentation that they are in full compliance
    with all environmental regulations/requirements.
        The condition of the DON portfolio is at levels comparable to or
    better than surrounding community housing properties near our
    installations. The DON selected privatized housing Partners based on
    qualifications and likelihood for success due in no small part to their
    experience managing, maintaining and recapitalizing their commercial
    residential portfolios. Overall, the privatized housing initiative is
    financially healthy, having recovered from the housing market crash of
    2007-2009.
                              incentive structures
        The DON uses an incentive structure within the Business Agreements
    to motivate the Partners to deliver quality performance in their
    property management and service. Should a project not perform to the
    agreed upon levels of performance (i.e., service call response time,
    work order completion rates, and resident satisfaction scores), it can
    negatively impact the incentive fees. Moreover, should private sector
    management companies fail to perform, the DON has the authority to
    issue Cure Notices to elevate concerns to bond holders financing the
    projects; potentially affecting a Partner's credit rating. Our goal is
    to resolve issues before a project goes into extremis, however, our
    agreements allow us to take this level of action.
                                   conclusion
        In closing, I want to reemphasize that we take the health and
    safety of our servicemembers and their families very seriously and
    believe the incidents highlighted in the recent media represent
    opportunities for us to improve. Thank you for your unwavering support
    of our sailors, marines and their families, and I look forward to your
    questions.

        Senator Tillis. Secretary Henderson?

    STATEMENT OF HON. JOHN W. HENDERSON, ASSISTANT SECRETARY OF THE
          AIR FORCE FOR INSTALLATIONS, ENVIRONMENT, AND ENERGY

        Secretary Henderson. Mr. Chairman, Ranking Members, Ranking
    Member Reed, Ranking Member Kaine, and distinguished Members of
    the Committee, it is an honor to represent our airmen and our
    Air Force civilian and our senior Air Force leaders at this
    hearing today.
        My full written statement is submitted for the record where
    we articulate some of the background about the Air Force
    privatized housing initiatives, some of the challenges we are
    currently having, and what specifically we are doing about it.
        The safety and health of our airmen is our highest
    priority, and we share their frustration with the housing
    challenges that they are experiencing at some of our bases.
    These challenges distract our airmen from their mission. This
    is unacceptable and we all must do better.
        Now, my assessment--and that is an assessment based on
    spending 18 years during my Active Duty career in some of the
    very housing run by the folks behind me and my assessment based
    on my time in this position. What ultimately determines whether
    a military family has a positive or negative experience in
    military housing has everything to do with the on-site
    leadership managing the housing at each location.
        Generally speaking, where the Air Force has had problems
    with poor construction quality, which has led to a lot of the
    mold problems, mismanagement of maintenance requirements, or
    unresponsive customer service, ultimately the root cause can be
    linked to a breakdown in communications and a breakdown in
    oversight and leadership at the site where it matters the most.
        Now, challenges with facility degradation can be expected
    and are unavoidable in property management, but there is no
    excusing any instance where these issues go unaddressed or are
    allowed to persist to a point where they are impacting the
    quality of life of airmen and their families. Whether it is the
    construction companies who build our homes, the project owners
    who operate and maintain them, or the on-site management teams
    who serve our airmen. If their highest priority is not aligned
    with our highest priority, there is no room on the Air Force
    team for them.
        To this end, the Air Force will continue to exercise
    proactive leadership and own these challenges by holding our
    private sector partners and our on-site leadership accountable
    for meeting our quality of life, health, and safety
    requirements for our airmen and their families.
        Please accept our sincere gratitude for your demonstrated
    support for the Air Force and the opportunity to testify today.
    I look forward to your questions.
        [The prepared statement of Mr. Henderson follows:]

                 Prepared Statement by Honorable John Henderson
                                  introduction
        The United States Air Force endeavors to build, operate, and
    maintain installations which serve as power projection platforms in
    support of multi-domain joint warfighting operations, the foundation
    for generating combat power, and safe and healthy communities for our
    airmen and their families. The health and safety of our airmen, their
    families, and the communities in which we serve is our priority, and
    the quality of life of our airmen is key to meeting our recruiting and
    retention goals. A significant component to the quality of life of our
    airmen is access to adequate housing. We share the concerns of our
    airmen as well as the concerns of this Committee when we are confronted
    with instances where our housing objectives have not been met. When
    there are challenges, Air Force leadership owns it. We intervene with
    the project owners, advocate for our residents, and support
    installation commanders in our mission to take care of our airmen and
    their families.
        Currently, the Air Force provides 74,500 family housing units
    worldwide for use by our airmen and their families. In 1997, the Air
    Force began a journey to privatize its stateside housing inventory in
    an effort to improve the quality of housing for the servicemembers and
    families living on our Air Force bases. We sought to leverage private
    sector funding and expertise to provide quality housing for our members
    while shedding a non-core warfighting function. In the first 16 years,
    the Air Force completed 32 projects that privatized housing at 63
    installations with a total end state of 53,237 homes. Of these, 18,028
    existing adequate homes were conveyed at closing, and $619 million in
    Air Force scored costs were used to obtain $8.3 billion in total
    development though private partnerships to renovate 12,595 homes and
    construct an additional 22,219 homes. Of the 32 projects, 28 are now
    complete (42,786 homes) and four are still in development (10,451
    homes). Twenty-two years into this journey, we're focused on overseeing
    the long-term project health and sustainment of these projects with a
    focus on providing a quality housing experience for our servicemembers.
        Today, the privatization of our military housing has been generally
    successful in providing quality communities that our airmen choose to
    live in. As evidence of this, our 2017 customer satisfaction survey,
    conducted by a third-party agency, returned a rating of ``Very Good''
    (81.8 percent) with military occupancy rates of 90 percent across the
    Air Force. As can be expected with any housing portfolio of this size
    and scope, we certainly have some challenges at a few of our
    installations as well as opportunities to improve. Recently-published
    articles critical of military privatized housing have highlighted these
    known challenges that we were already actively working to resolve with
    the project owners, residents, and installation commanders.
        To this end, the Air Force has a comprehensive portfolio management
    process. Specifically, the Air Force has housing offices at each of our
    installations that serve as advocates for our families. They engage
    daily with the project owners' staffs and residents, visit housing
    units, and assess compliance with transactional documents for
    privatized housing. Additionally, the Air Force established a
    centralized organization within the Air Force Civil Engineering Center
    (AFCEC/CI) to work directly with our installations and privatized
    project owners to address both individual project and broader portfolio
    concerns. When local housing offices are unable to resolve residents'
    housing issues, they can elevate those issues through their chain of
    command or directly to AFCEC/CI. Finally, AFCEC/CI works directly with
    project owners and with the Deputy Assistant Secretary for the Air
    Force for Installations (SAF/IEI) as necessary to resolve resident's
    concerns with privatized housing.
        Through these Air Force resources, we conduct oversight of the 32
    projects across our 63 installations. We focus on proactive
    interventions in an effort to identify and prevent problems before they
    happen. For instance, AFCEC/CI conducts quarterly project reviews that
    include meetings with installation leadership, project owners, and the
    housing offices to address project performance. Where warranted, AFCEC/
    CI will establish corrective action plans to bring performance back
    into alignment with transactional documents. AFCEC/CI also conducts
    annual site visits to each installation, visiting a sample of the
    housing units and assessing compliance with project requriements.
    AFCEC/CI and SAF/IEI conduct regular Program Management Reviews to
    address a wide range of issues across the entire portfolio of
    privatized projects and work closely together on an almost daily basis
    with installations to resolve resident concerns. Finally, AFCEC/CI,
    SAF/IEI, and the project owners meet twice a year to share best
    practices, discuss lessons learned, and conduct one-to-one feedback
    sessions with the partners. Through this process, the Air Force works
    diligently with installations, residents, the chain of command, and
    project owners to resolve all concerns to ensure that our
    servicemembers have a positive family housing experience and that any
    challenges they have are resolved quickly and fairly.
    current focus areas for addressing privatized housing challenges in the
                                   air force
    Tyndall Air Force Base Rebuild
        On October 10, 2018, Category 4 Hurricane Michael made landfall
    near Tyndall Air Force Base, Florida. With sustained winds of 155 miles
    per hour, Hurricane Michael remains the strongest hurricane on record
    to hit the Florida Panhandle. Tyndall Air Force Base sustained
    catastrophic damage from the eyewall of the hurricane. The storm
    resulted in the largest loss in the Air Force Privatized Housing
    Program history: all 867 Tyndall Air Force Base homes were damaged,
    from roof and siding damage to complete losses. Immediately following
    the hurricane, the project owner initiated response efforts to preserve
    salvageable structures, clear debris from the neighborhoods, and create
    safe access for residents to recover their belongings. Additionally,
    they immediately stopped collecting Basic Allowance Housing payments
    (Oct 11, 2018), began the process of cancelling tenant leases, and
    engaged with their insurer to begin casualty insurance damage
    assessments and invoke business interruption insurance to ensure the
    solvency of the larger project. The Air Force is currently working to
    provide housing to support Tyndall Air Force Base's enduring missions
    and to assure financial stability to the Air Education Training Command
    Group 1 Housing Privatization Project that includes Tyndall, Sheppard,
    Altus, and Luke Air Force Bases. The Air Force is working with the
    project owner and its private lender to develop a viable course of
    action to meet these objectives and is fully engaged with the Project
    Owner, the Office of the Secretary of Defense, and the Office of
    Management and Budget to map the execution of this project to meet
    recovery goals. The severity of the damage is still so great that the
    Air Force, and project owner and its lender need to pursue a formal
    restructuring of the project, which requires Office of the Secretary of
    Defense and Office of Management and Budget approval, in order to
    continue meeting the Air Force's long-term housing requirements for our
    airmen at all four installations and assure financial stability within
    this project.
    Lead-Based Paint
        The Air Force conveyed 13,426 homes built before 1978 to the
    privatization projects. Those homes may still contain some form of lead
    paint or leaded materials. The status of the lead-based paint program
    at each installation and each project is evaluated annually.
    Additionally, the Air Force visits a random selection of these homes
    during the annual visit. While we have identified some documentation
    issues, the project owners are complying with statutory requirements in
    the management of lead-based paint in these homes. In areas where we
    have found elevated levels of lead in homes, like at F.E. Warren Air
    Force Base where we had a family that resided in privatized housing and
    whose child had elevated blood levels, the project owners have
    proactively stepped up to assess the full scope of the problem and are
    working with residents to ensure their homes are safe.
    Mold
        Mold is always a challenge in perennial high-humidity climates.
    Environmental mold spores grow readily when the right moisture
    conditions are present. Even the best facility designs cannot eliminate
    the risk. Residents living in areas susceptible to mold growth are
    provided a mold addendum to their tenant leases, which recommends
    specific measures they can take to prevent mold growth. Facility
    design, construction and maintenance are also key to controlling mold.
    We have identified three installations where facility design,
    construction, or materials are a key contributor to mold growth in
    1,667 homes: Tinker Air Force Base, OK, Keesler Air Force Base, MS, and
    MacDill Air Force Base, FL. Seventy-six percent of these 1,667 homes
    were conveyed to these housing privatization projects from the
    government's inventory.
        At Tinker Air Force Base, 398 homes constructed from 2009 to 2012
    by the project owner, Balfour Beatty Communities, experienced mold
    issues. These homes were built using cross-linked polyethylene water
    lines which were later found to have systemic manufacturing defects.
    The water lines developed pinhole leaks in the wall system, providing
    the moisture for mold growth. In May 2018, the Air Force approved $6.1
    million in project funds to replace the water lines and relocate
    families to fully furnished homes (at no cost) while whole-house water
    line replacements are being conducted; the estimated completion date is
    May 2019. In June 2018, Balfour Beatty Communities also discovered that
    roughly 200 newly constructed homes were experiencing moisture problems
    in mechanical rooms resulting in mold growth. In consultation and with
    direction from the Air Force, Balfour Beatty Communities remediated the
    mold. Furthermore, they hired to a third-party engineering firm to
    assess the mechanical room heating, ventilation, and air conditioning
    systems to determine the causes of moisture issues and recommend
    further corrective actions. The estimated completion date is May 2019.
        At Keesler Air Force Base, the Air Force conveyed 1,028 homes built
    by Hunt Companies in 2010 to Forest City Military Communities in 2011.
    Poor workmanship in both the air conditioning systems and the building
    envelope resulted in condensation. Forest City treated mold as it
    occurred while seeking remedies from Hunt Construction.
        In 2015, Hunt Military Communities purchased the project from
    Forest City. The Air Force insisted on a Mold Remediation Settlement as
    a condition of sale. The settlement required Hunt Companies to correct
    the construction defects within the scope of the original construction
    contract, representing a $6.4 million exposure to Hunt Companies. The
    Air Force worked with Hunt Companies on a multi-phased Moisture
    Remediation Plan with an estimated completion date of June 2020. Hunt
    Communities has completed the Test Pilot Phase, Immediate Response
    Phase, and the first of three stages of the Sustainment Phase. All
    1,028 units have received some work. Stage Two of the Sustainment Phase
    is 33 percent complete and involves 255 units. Once complete, the
    project owner will conduct an assessment, and will correct any residual
    facility moisture issues in the final stage. AFCEC/CI continues to
    monitor the project owner's compliance with the action plan, including
    eradication of the mold and correction of the root cause.
        At MacDill Air Force Base, 241 units previously built for the Air
    Force were conveyed to Clark/Harbor Bay. Due to breaches or lack of a
    vapor barrier, systemic moisture issues were present in these units.
    The project owner treated the mold while designing projects and plans
    to correct the underlying cause. In 2017, 94 units were reclad at a
    cost of $3.7 million. In 2018, interstitial spaces and stucco repairs
    were executed, dehumidifiers were added to homes where the air
    conditioning units were not controlling moisture adequately on their
    own, and 19 homes were treated for mold growth. This year, an
    additional 68 units will be reclad.
        At all three installations, the Project Owners have taken steps to
    correct the underlying causes. The corrections have not been as quick
    as we would like, and there have been instances where the project
    owner's response has lacked the urgency we would expect. Air Force
    leadership has engaged with the project owners, retained Performance
    Incentive Fees, and implemented corrective action plans to address
    project owner underperformance and inadequate oversight.
                                   conclusion
        The Air Force privatization effort enabled the Air Force to
    modernize its housing, shed a non-core warfighting management function,
    and support our members with a significantly higher quality of housing
    by leveraging private sector funding and expertise. The Air Force takes
    our responsibility to provide safe and healthy living conditions to our
    airmen and their families very seriously. When we identify challenges,
    we have a consistent history of proactively resolving these issues with
    the project owners. While we remain focused on addressing sites with
    facility issues and projects that are struggling financially, these
    represent a small percentage of the housing inventory. The underlying
    causes have been identified and corrective actions are underway. As we
    move forward, our focus is on oversight, sustainment, and the long-term
    success of the privatized housing portfolio in order to provide safe
    and healthy housing for our airmen. We view this as an essential
    activity to support ready and resilient Air Force installations, which
    serve as power projection platforms for our nation.

        Senator Tillis. I am going to defer to Senator Reed. He has
    another commitment. He will go ahead of me.
        Senator Reed. Thank you very much, Mr. Chairman.
        Thank you, Secretaries, ladies and gentlemen.
        Since you are literally the partners of the private housing
    companies, I want to ask you the same questions I asked them,
    and I think a yes or no answer is appropriate, beginning with
    Secretary McMahon.
        Do you affirm today that you will do everything in your
    power to immediately address the issues raised today by
    military families here and also by those who have testified and
    submitted material to the Committee? Mr. Secretary?
        Secretary McMahon. Yes, Senator, I will.
        Secretary Beehler?
        Secretary Beehler. Yes, Senator.
        Senator Reed. Secretary Bayer?
        Secretary Bayer. Absolutely, Senator.
        Secretary Henderson. Absolutely, Senator.
        Senator Reed. As the Chairman stresses, communication with
    Congress in any form is a protected communication of the
    whistleblower statutes. Do you affirm today that you will do
    everything in your power to protect the military families who
    have appeared here today, as well as those who submitted
    testimony and information to the Committee, the Inspector
    General, and the chain of command from reprisal? Just as a
    caveat, I was a little distressed when the implication is that
    the chain of command was not as responsive, in fact, indeed,
    retaliated against some of these complaints. Secretary McMahon?
        Secretary McMahon. Yes, Senator, I will.
        Senator Reed. Secretary Beehler?
        Secretary Beehler. Yes, Senator. I find retaliation totally
    unacceptable and will do everything in my power to make sure it
    never happens.
        Senator Tillis. Secretary Bayer?
        Secretary Bayer. Absolutely, Senator.
        Senator Tillis. Secretary Henderson?
        Secretary Henderson. Absolutely, Senator. I would follow on
    that the Secretary of the Air Force and Chief of Staff have
    initiated an IG investigation to look exactly into those
    mechanisms that allow our families to raise these concerns in
    an environment that is free for communication and allows the
    chain of command to act.
        Senator Reed. Well, thank you very much.
        I think one of the things that we have to do is provide
    incentives and appropriate disincentives. It strikes me,
    listening to the testimony and the questions of my colleagues,
    particularly the very, very thoughtful testimony of the family
    members, that what we need is, in some respects, a military
    housing ombudsman on every post that is empowered. We have them
    but they are not empowered. That they would be the ones as a
    representative of the families, not the company or the chain of
    command, that would certify that the housing is quality
    housing, not just adequate, but quality housing, and from that
    certification might flow the retention of the housing
    allowance, some financial indication that would be appropriate.
        Secretary McMahon, let me just ask you. Is that something
    that you could work on or will work on?
        Secretary McMahon. Senator, we have to find a different way
    to both incentivize and disincentivize. I would have to have a
    lawyer in the room to figure out what we can do with the legal
    documents and what is within the art of the possible. But we
    have to find solutions to get to a better position than where
    we are today.
        Senator Reed. I understand, but part of this I think is
    sitting down with the companies and, if necessary,
    renegotiating aspects of the contract so that we can protect
    the families. That is something I think should be done.
        Secretary McMahon. Yes, sir. I agree with that, and we have
    already begun that process. I meet again with them next month
    to continue this journey to figure out how we can collectively
    provide a better level of service to our residents.
        Senator Reed. Just a final comment. It is surprising to me
    and I think my colleagues on the Committee that--particularly
    let me commend Senator Tillis and his colleagues on the
    Personnel Subcommittee. They spend a lot of time with DOD
    personnel, service personnel asking questions about what is
    going on, how can we help the service men and women and their
    families. This issue seems to have caught us by surprise, which
    suggests that we have to go back and look at--you know, you are
    doing surveys. I reviewed the surveys showing 85 percent
    approval. The companies are doing surveys showing 85 percent.
    But then an independent party does a survey and it is 55. I
    think we have to go and step back, among our many missions we
    have, and not be caught by surprise again.
        I am pleased by the testimony in some respects of the
    companies admitting that they were themselves somewhat taken
    aback when they discovered that these issues were so flagrant
    and so serious. Again, all of you, I would hope you would take
    that back and do it.
        Secretary McMahon. Yes, sir.
        Senator Reed. Thank you.
        Thank you, Mr. Chairman, for your kindness.
        Senator Tillis. Certainly, Senator Reed.
        I am going to defer my questions till the end and give
    Senator Rounds an opportunity to go.
        Senator Rounds. Thank you, Mr. Chairman.
        Let me just begin by just saying, I appreciate the service
    that you have all provided to our country. But I also want to
    point out something here. I think we have an obligation to call
    you on the carpet when it does not appear that you are getting
    your job done.
        Secretary McMahon, I just want to understand. You pointed
    out that you have an 85 percent positive rating, and I want to
    allow you a few minutes of my time to clarify. That means 15
    percent of all the folks who are out there are telling you that
    they were not satisfied. What is an acceptable number? What did
    you do when you found out that you had 15 percent of these
    young men and women that were in these housing locations, that
    they had a problem, enough to where they would report up the
    line? Can you clarify for us that that was not necessarily
    something that you were bragging about?
        Secretary McMahon. Yes, sir, I would. Senator, to your
    question, the acceptable number is 100 percent. Although we may
    fail at times of being able to support the resident, the
    question then becomes how responsive and how do we respond to
    the failures that we have. The clear answer today, as you have
    heard and as we have seen, is that we have not responded
    collectively well enough as we have.
        Senator Rounds. So we got a lot of work to do. You would
    say that in terms of your role and responsibility on this, we
    have got a commitment that this is one that you are going to be
    working your way from the top down to find a better way to do
    it.
        Secretary McMahon. Sir, let me be clear. I am the
    accountable person in the Department of Defense for ensuring
    that we provide quality homes to our residents that elect to
    live on base, and ultimately it is my responsibility working
    with my partners here and our privatization partners. So, yes,
    I am committed to that.
        Senator Rounds. Thank you, sir. I suspect that this
    Subcommittee may very well be visiting with you again in the
    future on it.
        Colonel Henderson, as I know you, but Secretary Henderson,
    you have over a period of years proven to me that you are a
    person that is very capable of coming up with solutions and
    working with people. I have a two-part question for you, and I
    have got about a minute and 53 seconds left.
        First, could you please discuss with the Members of this
    Committee what recourse the Air Force currently has at its
    disposal to hold accountable under-performing privatized
    housing owners that are on your bases?
        Secondly, what tools or mechanisms could this Committee
    help provide you with to better hold them accountable in the
    future?
        Secretary Henderson. Thank you, Senator.
        First, we have a myriad of tools that I will not talk about
    now where we measure performance, and there is a number of
    those. But when we see those performance indicators start to
    lag, which we have with a few of our companies, we have these
    options inside the transactional documents to retain incentive
    pays. How much incentive pay we have the discretion kind of
    varies from partnership to partnership. But we have that option
    and our Air Force team would tell you in a lot of cases we have
    never paid the full incentive pay, but we always end up having
    to pay partial.
        When things get really bad, as they have at Tinker Air
    Force Base, we have had to stop. We have had to get with the
    project owner and put them on a very deliberate corrective
    action plan, which is part of the transactional documents. That
    is what we can do inside of the programs.
        We do have the ability to go out with State and local
    authorities for violations for the EPA [Environmental
    Protection Agency], for building codes, and for landlord-tenant
    laws. For some reason or another, it sounds like at some of our
    bases that is mixed up, but we do have those authorities.
        Additionally, in places where we have found suspected fraud
    or malfeasance, we have initiated Office of Special
    Investigation (OSI) investigations, and we are working with the
    FBI [Federal Bureau of Investigation] on some of those
    currently.
        Senator Rounds. I am going to ask if you could respond for
    the record with the remaining portions of answers to my
    question.
        But I want to know one more thing. If we could put together
    a bill of rights, a tenants bill of rights, do you believe that
    the Air Force--I know you cannot speak for all of the others,
    but do you believe the Air Force could participate and work
    through the issue of creating a bill of rights that the private
    contractors will use if we do a good job of putting something
    like that together?
        Secretary Henderson. Absolutely, sir. Inside the bill of
    rights--we talked about this thing of accountability earlier--
    there are some important things in there. For instance, the
    resident should have the choice of whether they pay their rent
    or not if they feel like their landlord has not given them a
    healthy and safe place to live. That makes the landlord
    responsive financially to the resident.
        Additionally, I think there should be rebates for untimely
    repairs, for power outages, and those things that they have to
    do for self-help. Some of our project owners already do things
    like that. I would like to see that franchised a bit because
    that is where we are seeing our positive satisfaction ratings.
        Finally, it would be nice if we could look at something
    where we had a little bit more discretion over the entire
    incentive fee so when we were not getting the response out of
    our project owners that we expected, we had a little bit bigger
    hammer inside the partnerships to influence that behavior.
        Senator Rounds. Thank you. Thank you all once again for
    your service. I appreciate that.
        Mr. Chairman, thank you for allowing me to move forward.
        Senator Tillis. Senator Kaine?
        Senator Kaine. Thanks to all of you. You have heard the
    same testimony that I have heard. Secretary McMahon, you used
    three very good words in your opening comment:
    ``communication,'' ``engagement,'' ``responsiveness.'' Those
    are things that are needed. Clearly the frustration of family
    members not feeling like they have a place to go, they are
    getting turned away here, turned away there. They do not have
    an avenue where they can approach to get an answer is really,
    really important. So those are good words.
        I want to say, Secretary Beehler, you used great words. You
    used ``accountability'' and ``apology.''
        Accountability, Secretary McMahon, you said you are the
    accountable person, but I think what we are going to want to
    see as we work on the NDAA over the course of the next couple
    months, where is the accountability for poor performers, where
    is the mechanism that is a fair mechanism in connection with
    contracts that exist already and cannot just be torn up. What
    can we put in that creates accountability for poor performers?
    Is it a withholding? Is it access to bases by local building
    officials with the ability sanction poor performers? There has
    got to be accountability. The communication mechanism is
    really, really important because it is so frustrating to not
    get an answer, but there have to be accountability mechanisms.
        Secretary Bayer, you used the ``apology'' word, and I
    highly, highly commend you for that because these folks are
    owed an apology. Frankly, they are owed an apology more by
    panel 3 than by panel 2. We ought to hold panel 2 accountable
    for living up to their contract, but these folks did not
    volunteer to be a Lendlease tenant or a Lincoln tenant. They
    volunteered to be a member of the military. They volunteered
    with their spouses to be soldiers and military families, troops
    and military families. To the extent that there is an apology
    owed, it is more from you all. It is more from the command
    structure that has let them down by not having the
    accountability mechanisms so they can live.
        I asked the panel of the business folks just that simple
    question. Have any of you ever served? Have any of you ever
    lived in military housing for the obvious reason? There is no
    shame in not serving. I did not serve in the military. But if
    you have not lived the life that these people live, you guys
    understand the life, but they do not necessarily understand the
    life. These military spouses--first, they are in a joint
    project to patriotically serve this country. Second, they
    deploy and move around and change locations repeatedly in ways
    that are extremely stressful. Third, they are dealing with the
    military deployments of their spouses and family members in the
    longest war in the history of this country, multiple
    deployments again and again and again, and worried about the
    physical safety of their loved ones.
        Then on top, military spouses have an unemployment rate
    that is three to five times the national average because it is
    very difficult to find jobs as a military spouse either because
    of the absence of high-quality child care or an employer that
    looks at you and thinks, well, boy, you are really qualified
    but you are going to move in the next year and a half, so I am
    not going to hire you.
        There is a particular set of challenges that these families
    deal with that you understand. I am not sure that the private
    housing providers even after all these years fully understand
    that. For most of them, it is a division of a big housing
    enterprise where they are dealing with all kinds of tenants who
    are not military spouses, not military families to deal with
    these issues.
        So this is incumbent upon you to get right in the
    accountability mechanisms that you set up, and to the extent
    that we have fallen short, hey, there may be things that we
    need to apologize for. To the extent that problems are the most
    persistent in legacy housing, you know, if we did not build it
    right or maintain it along the way and then it is causing
    problems, then that is something that we need to fix from a
    budgetary standpoint.
        But they are owed an apology and I am glad that you made
    one, Secretary Bayer.
        The last thing I would love to ask Secretary Beehler. I
    know about the GAO investigation. Tell me about the IG
    investigation you mentioned.
        Secretary Beehler. Yes, Senator, a couple things.
        First, when we were made aware of the situation at Fort
    Benning last--my office--I was not in the office, but last
    August, my office immediately launched an investigation by the
    Army Corps of Engineers. That report took 10 percent of all----
        Senator Kaine. Because I am way over time. Just the IG
    investigation you mentioned. Tell us about that.
        Secretary Beehler. Yes. The IG investigation is being
    called by the Chief of Staff of the Army to do spot, swoop-
    down, splash type of inspections on designated installations
    that obviously we are not going to reveal in advance in order
    not to compromise. When we have those results, I would be happy
    to share them with the Committee and engage in further
    discussion.
        Senator Kaine. That would be enormously helpful.
        Thank you, Mr. Chair.
        Senator Tillis. Senator Sullivan?
        Senator Sullivan. Thank you, Mr. Chairman.
        I appreciate some of the initial testimony, Secretary
    Beehler, with your statement from the Secretary of the Army and
    the Chief of Staff.
        Secretary Bayer, I think it takes--it is not always easy to
    apologize, but I think that is warranted here.
        Secretary McMahon, I appreciate your written testimony on
    the moral obligation that we have, that you, the Pentagon has,
    as you mentioned as a military member. I did not like the
    statement in your testimony about, well, they are not required
    to live on base. That is kind of a non sequitur in my view. I
    mean the whole point of this hearing is that if they are going
    to live on base, it should be appropriate, outstanding housing.
    I think you might want to relook at that one because that is
    not the point in my view at least.
        Secretary McMahon. Senator, may I respond?
        Senator Sullivan. Yes, you may.
        Secretary McMahon. Senator, the intent of that is to say
    what we want to do is create on-base housing where our
    residents, our military members and families, want and desire
    to live. That is a matter of motivating our private sector
    partners to build something so that it becomes the first
    choice. If I implied something other than that, I apologize.
    Our goal is to make it so good that they want and desire to
    live there and that is where they choose to live.
        Senator Sullivan. No. I think that is a good goal. Maybe I
    read it differently, but I just kind of read it differently.
    Anyway, the point is if we are providing housing on base, it
    should be outstanding and it should not be, well, you can
    always go off base. I do not think anyone believes that. That
    is how I read yours and maybe I will take a look at it and
    reassess it.
        I want to go to this issue that the first panelist, Ms.
    Cornwall, raised. I think she called it an unholy alliance or a
    marriage that exists between the housing kind of entities and
    maybe even the senior chain of command and the private
    companies. I think she was making a good point where it seemed
    like they seem to be very closely aligned, almost opposed to
    the interests of the servicemembers, which is the whole damn
    point of good housing. It is for the men and women in the
    military and their families.
        Can any of you address that? I think she is raising a good
    point. How do we address that?
        Let me just throw out another question because, again, I do
    not have a lot of time here. But the chain of command failures.
    It does seem like something happened or something has happened,
    not in every case, but where the chain of command, the unholy
    marriage, as she mentioned, seems to create a situation where
    the people we are all dedicated and supposed to serve,
    including this housing situation, gets forgotten or thought
    about last. I would like you to comment on that. I know you
    were all here for her testimony, but it seems to me it was
    powerful.
        Secretary McMahon. Senator, if I could comment on your
    second question first, and that is this concept of leadership.
    Whether it is on the private partner side or whether it is on
    the military side, it is clear to, I think, all of us that
    there has been breakdown in leadership. We have senior NCOs
    [non-commissioned officers] who ought to represent the needs of
    their soldiers, sailors, airmen, and marines. We have first
    sergeants. We have commanders at all levels whose job it is to
    take care of the individual and take care of the family. We
    recruit the individual. We retain the family. If we are not
    doing that on the military side, we are failing.
        If, on the other side, that first line of defense is the
    manager on the local base, if they are not sensitive to those
    requirements, we failed there.
        This is a failure of leadership on both sides that we need
    to address and figure out how we change the way we attack this.
        Senator Sullivan. How about this unholy marriage or
    alliance that she was referencing?
        Secretary McMahon. Sir, as you know from your private
    sector time, it is about partnerships. I will tell you that it
    is absolutely essential that we are partners, that we
    understand what each brings to the table. These homes, as you
    know, are not government homes. They are private homes. We have
    to acknowledge that and the legal elements associated with
    that. At the same time, we have to partner with them in a way
    that provides, at the end of the day, the best quality home
    that we can to our residents.
        Senator Sullivan. Thank you, Mr. Chairman.
        Senator Tillis. Senator Warren?
        Senator Warren. Thank you, Mr. Chairman.
        Ultimately, each of you are here representing the services,
    and you are responsible for making sure that these private
    partners are providing safe housing, responding to maintenance
    on time, generally satisfying the terms of their agreements. In
    practice, these private housing providers are virtually
    guaranteed to make a profit. They get a base fee plus costs.
    Your big tool is the incentive fee.
        Now, DOD told the Committee that the incentive fees were
    paid out about 95 percent of the time, and you heard the
    testimony from the companies themselves. Not a single one said
    they were ever denied all of their incentive fees, at the same
    time that we are receiving testimony about appalling
    conditions.
        I just want to understand what has gone wrong here, how it
    is that these guys can get 95 percent of their incentive fees,
    plus their base fee, plus their expenses at the same time that
    we are hearing this kind of testimony.
        Let me ask my first one. Secretary McMahon, tenant surveys
    are your main tool to determine whether private partners are
    meeting their obligations, but those surveys evidently did not
    alert you to the mice, the mold, and the lead poisoning. Do you
    agree that surveys are not giving you a complete picture of
    what is going on?
        Secretary McMahon. Yes, Senator, I agree with that, and
    just so you know, what we see in returns on an annual basis is
    somewhere between 35 and 50 percent from our residents. So we
    are only getting a partial picture.
        Senator Warren. All right. Do you independently verify what
    you are getting on surveys through inspections?
        Secretary McMahon. Senator, the data that I just gave you
    is from a third party independent. So it is not----
        Senator Warren. No, no. I am asking whether or not you do
    any inspections or contract with someone to do independent
    inspections. Do you only do the surveys?
        Secretary McMahon. That is correct, ma'am, at the
    Department of Defense level. We defer the rest of that to the
    services who actually own the----
        Senator Warren. Is anybody doing anything beyond the
    surveys? Secretary Beehler?
        Secretary Beehler. Senator, we have conducted annual ground
    lease surveys of the condition of the outside of the houses. As
    I started to refer, we launched an Army Corps of Engineers
    investigation where we surveyed 10 percent of all properties.
        Senator Warren. Let me just stop then. You have a housing
    portfolio that is more than 200,000 units. Are you telling me
    you surveyed 20,000 units last year?
        Secretary Beehler. Senator, we focused on--no. We did
    investigations inspections of the houses that had--they were
    pre-1978 that had lead----
        Senator Warren. I appreciate it. Listen, I am sorry, but I
    am short on time here, and I know we are trying to stay within
    a time limit.
        I am just trying to ask, out of 200,000 housing units, how
    many inspections did the services do last year?
        Secretary Beehler. For the Army we have roughly 100,000. We
    have done inspections both inside and outside all of the
    houses, to the best of my understanding.
        Senator Warren. So you are telling me you did 100 percent
    inspections last year?
        Secretary Beehler. During the course of a year, yes.
        Senator Warren. In the course of a year, you inspect 100
    percent of the housing, and you did not find any of this?
        Secretary Beehler. What we found we took and made repairs
    and instigated work orders.
        Senator Warren. Okay. So you inspected but you did not see
    the rats? I just do not understand what that means.
        Secretary Beehler. I will take for the record and go back
    and provide what our inspections found that were not acceptable
    and what actions were taken to address it.
        [The information follows:]

        Secretary Beehler. During the USCAE 10 percent
    Environmental Hazards inspections, there were 60 percent
    positive visual findings. These findings included nicked/
    scratched wood on doors, door frames, and banisters, cracks/
    scratches in window frames, peeling paint on porches/carports/
    exterior doors. The RCI Project Companies took immediate action
    to test to verify if the paint was lead-based, followed
    standard maintenance procedures nor non-lead-based paint, or
    remediated. HQ IMCOM is tracking all findings and remediation
    efforts to ensure all findings are repaired/remediated. Over
    the last two months, the Army has inspected all homes and
    barracks. All findings are placed in the RCI Project Company
    work order system or in the DPW work order system and monitored
    until completion by Army leadership.
        OACSIM conducted project compliance and partnering visit,
    development and special purpose reviews on approximately 71
    homes. These visits verified work that was completed,
    identified discrepancies in bid processes, and way-ahead
    discussion on the next phase of development.
        USACE conducted 15 annual lease compliance reviews. During
    the compliance reviews, environmental management plans, lessee
    response plans, and natural resource management plans were
    outdated or not signed by the garrison commander; support
    leases needed renewal; pesticide usage reports not being
    provided to the Army monthly; and maintenance concerns of storm
    water retention structures.

        Senator Warren. How many State and local housing inspectors
    were invited onto base last year?
        Secretary Beehler. Senator, I will have to take that for
    the record and provide.
        [The information follows:]

        Secretary Beehler. The Army is not aware of any State or
    local housing inspectors being invited onto base last year.

        Senator Warren. You know, I will quit because I understand
    where we are on this.
        But this just is not right. These contracts are bad enough
    as they are. A guaranteed profit--virtually guaranteed in
    return for which they are supposed to provide decent housing,
    and the one tool you have got is to say there has got to be
    some performance evaluation here. And to give away 95 percent
    of the performance-based money at the same time that we are
    hearing from the people who live in this housing that it is
    rat-infested, that it is dirty, that things leak, that is just
    not right. You are not using the tools that Congress gave to
    you on behalf of our servicemembers. Until this gets fixed, we
    got a real problem.
        [Applause.]
        Senator Tillis. Senator Blumenthal?
        Senator Warren. Thank you. Sorry, Mr. Chairman.
        Senator Blumenthal. Thank you, Mr. Chairman.
        I am going to begin where Senator Warren ended because when
    I first learned about this absolutely outrageous scandal, in
    effect, hiding in plain sight, my first question was when did
    you know about it. Maybe you can tell me, Secretary McMahon,
    when you first knew about this problem.
        Secretary McMahon. Senator, as you know, I was reconfirmed
    for the position that I am in and took over this responsibility
    effective 1 November. Part of the conversation as I prepared
    for this was to find out that there were issues. As such, as
    early as middle January, I scheduled to meet with my partners
    here, as well as the privatization partners, to look into the
    details.
        Senator Blumenthal. Did your predecessor know about it?
        Secretary McMahon. Sir, I do not know the answer to that
    question.
        Senator Blumenthal. When you were briefed about it, I
    assume the folks who briefed you had known about it for some
    time.
        Secretary McMahon. Sir, I cannot put words in their mouth.
    I do not know the answer to that question.
        Senator Blumenthal. Well, I would like to ask you for the
    record to provide us with information about what was known, who
    knew it and when.
        Secretary McMahon. Yes, Senator. I will take that for the
    record.
        [The information follows:]

        Secretary McMahon. My predecessor first learned of the
    issues regarding lead and mold in December 2017 when Ms.
    Crystal Cornwall from the Safe Military Housing Initiative
    provided information to OSD. This information was forward to
    the Military Departments for resolution. The Reuters articles,
    the first of which was published in November 2018, identified
    resident issues warranting immediate attention, with more
    extensive and wide-ranging resident concerns subsequently
    surfacing.

        Senator Blumenthal. I would like to know also what accounts
    for the disparity between the Department of Defense 85 percent
    satisfaction survey versus the Military Family Advisory Network
    survey which shows 50 percent satisfaction.
        Secretary McMahon. Senator, I will take that for the record
    as well and provide----
        [The information follows:]

        Secretary McMahon. The survey performed by the Military
    Departments and the survey conducted by the Military Family
    Advisory Network (MFAN) utilize vastly different methodologies
    and their results cannot be meaningfully compared. The Military
    Departments' surveys have been conducted since the early years
    of the MHPI program by a nationally-recognized independent firm
    using industry best practices to ensure the statistical
    validity of the responses. The surveys included strict controls
    to ensure that responses were only sent to MHPI households and
    to avoid duplicate responses. While the 85 percent average
    satisfaction rate statistic is based on resident responses to
    whether or not they would recommend privatized housing, the
    survey also contains multiple questions about many other
    aspects of the privatized housing to help the Military
    Departments gain a better understanding of resident
    experiences. In comparison, the MFAN survey was an online
    questionnaire administered via a freely-available web link. At
    this time, it is unclear what survey controls were put into
    place to ensure that each response was unique and to verify
    that the respondents are currently residing in privatized
    military housing or lived in private military housing within
    the last 3 years. While the two survey results cannot be
    compared with the appropriate statistical rigor, the MFAN
    survey raised important issues that the Department must
    address. We appreciate the MFAN's efforts to bring these issues
    to our attention and are committed to working with all
    stakeholders to ensure that military families have safe,
    quality housing.

        Senator Blumenthal. Well, what would be your response right
    now?
        Secretary McMahon. Senator, I cannot comment on the study
    or the survey that was done by the family group. I do not know
    how widespread it was or whether or not everyone was offered
    the opportunity. I do know that on the annual survey, it sounds
    like there is a much larger population that is surveyed.
        Senator Blumenthal. Would you support the proposal that has
    been advanced by the military families--I certainly support
    it--that the basic allowance for housing payments should be cut
    until housing conditions, acceptable standards are met?
        Secretary McMahon. Sir, working with the lawyers, something
    along those lines I think would be prudent to ensure that we
    incentivize our partners to respond rapidly.
        Senator Blumenthal. I am going to take that as a yes
    because I think that more than an apology needs to be provided.
    I accept that you are new and all of you may have come into
    these positions after the problems arose, but now more than
    apologies, I would like to see accountability imposed on those
    providers of housing, the landlords, the renters because if we
    were in the private sector and I were still attorney general of
    the State of Connecticut, I would be saying let us sue the--and
    there would probably an expletive. Let us sue them. Right?
        [Applause.]
        Senator Blumenthal. That option for the families is costly,
    burdensome, and frankly risky. But for the Department of
    Defense to take their side and be their advocate and champion
    it seems to me is basic accountability. Would you agree?
        Secretary McMahon. Senator, I would agree that there is
    additional accountability on both our private partner side as
    well as on the military side.
        Senator Blumenthal. Let me just ask you one more question.
    If those families were to withhold housing payments from their
    private landlords, I assume there would be no retaliation by
    the Department of Defense.
        Secretary McMahon. What I would tell you, Senator, is there
    should be absolutely no reason for retaliation whatsoever on
    any of these issues as our job is to take care of our military
    members and their families.
        Senator Blumenthal. It is a matter of military readiness.
    Would you agree?
        Secretary McMahon. Yes, sir.
        Senator Blumenthal. Because no one is going to want to put
    their families through this kind of hardship.
        Secretary McMahon. Senator, as I mentioned earlier, we
    recruit the individual. We retain the family. It is absolutely
    essential that we take care of both.
        Senator Blumenthal. Thank you.
        Thanks, Mr. Chairman.
        Senator Tillis. Thank you.
        I actually deferred to the end. My colleague, Senator
    Rounds, probably thought I was doing it because I was nice, but
    this way I can talk longer and I am not holding anybody else
    up.
        [Laughter.]
        Senator Tillis. Except for the ranking member.
        Now, I want to be very brief because, as I said to the
    first panel, this is the beginning. This is more or less the
    tip of the iceberg. There is a lot of work that has to be done
    here. I think it was Senator Reed who said that he remembers
    the military housing back when leisure suits were popular.
    About that time.
        Senator Reed. Yes.
        Senator Tillis. It was a horrible situation. That is when
    DOD was doing it.
        Quite honestly, I do believe that the public-private
    partnership is a way to be able to have a better chance and a
    more consistent, reasonably priced property. I think most of us
    agree with that. If not, those who testified or otherwise,
    please provide the feedback. But there are a lot of structural
    things that we need to do differently.
        Secretary McMahon, as the convener in all of DOD with the
    lines of service, I have heard Secretary Bayer talk about the
    standard operating procedure for the Navy.
        Now, I know the lines of service come in here and they will
    oftentimes say that they have to do things differently because
    of their mission set. I cannot imagine that there is a
    different best practice for Air Force housing than there is for
    Marine housing or Army housing.
        One thing I would like for you all to start doing very
    quickly is figure out who is doing things right or better and
    start building best practices and not have variations, which I
    think exist.
        I think we also need to go back to the 82 or so contracts
    that are out there and determine to what extent they need to be
    modernized that is a fair and equitable treatment for the DOD,
    for the private sector, but mainly for the tenants, the people
    who are renting these houses.
        Finally, I was trying to figure out--I think, Secretary
    Bayer, when you were talking about the standard operating
    procedure and you were listing off some of the hazards, is
    there like a trip mechanism now to where if somebody called up
    and called whoever their private housing provider is and said I
    see black mold, I see mushrooms growing in my second story
    bathroom, I see these things that I have a reason to believe
    that I have lead paint exposure--is there any tripping
    mechanism right now that just absolutely escalates that to make
    sure that they are being handled within the Navy?
        Secretary Bayer. Yes, Senator. The processes and the
    procedures are in the SOP.
        Senator Tillis. Are they being followed?
        Secretary Bayer. Exactly.
        Senator Tillis. If they are not being followed, what is the
    recourse for the people not following them?
        Secretary Bayer. It is a leadership issue. When I look at
    the SOP and--we have these maintenance calls. There are
    emergency maintenance calls, urgent maintenance calls, or
    routine maintenance calls.
        Senator Tillis. Well, I would argue that that is one thing,
    without getting into the SOPs of the other lines of service.
    Secretary McMahon, I believe there is a right and wrong way to
    do that. The escalation procedures and the repercussions for
    when the escalation does not occur need to be very clearly
    spelled out.
        Secretary Bayer. The point is there, Senator, is we just
    need to hold leaders accountable that we are following our
    procedures.
        Senator Tillis. Well, that is right.
        That actually gets to the last thing that I wanted to talk
    about, and it has to do with retaliation. Nothing irks me more
    than abuse of authority. I consider retaliation from somebody
    in a position of authority is the worst kind of leadership you
    can possibly exhibit. As the chair of the Personnel
    Subcommittee and someone who gets consulted with on future
    promotions, I can assure you if there is even a whiff of
    retaliation among leaders that come before my committee, they
    better find a different line of work.
        This is a very important issue that needs to be solved
    quickly. I hope that you all will convene and come back and
    give us suggestions particularly with respect to any additional
    authorities or revisions that we need to make in advance of the
    National Defense Authorization Act. If there are things that
    you need, we need to know that fairly quickly.
        I also want to see evidence pretty quickly that you are
    engaging the two dozen or so private housing providers in each
    of your lanes and solving this problem and coming back with
    very different results in the near future.
        I also want to--on behalf of the chair, he appreciates all
    of you coming in today and he wants to assure you that he is
    clearly--on the one hand, this is a joint committee between my
    Personnel Subcommittee and Senator Sullivan's Readiness
    Subcommittee. The chair and the ranking member thought enough
    of this that they want to elevate this to the full committee
    level. At the same time, both the chair and the ranking member
    have encouraged both me and Senator Sullivan and our respective
    ranking members to go through our own process, probably hold
    other hearings so that we are moving this along.
        So you can expect in my capacity as the Personnel
    Subcommittee chair that you will be getting an invitation to
    come back, and we will be wanting some specific answers to
    questions. You can also expect questions for the record from
    many of us, particularly those of us on the subcommittees,
    other members. We would expect or would appreciate a prompt
    response because we want to produce a result.
        Again, in the meantime, anybody out there, all the
    networks, all the interest groups that are watching this,
    please make sure they know that the Senators are here to do the
    casework.
        Actually there is one other thing and then I will stop.
        By the way, I yielded back 1 and half minutes from my first
    line of questions.
        [Laughter.]
        Senator Tillis. So I am only 30 seconds over so far.
        Is there anything that would prohibit any of you all from
    sending a letter to current military housing tenants saying we
    are concerned about this? You may have a work in progress. We
    want to know about it. Is there anything within the contracts
    that would prevent you from doing that?
        Secretary Beehler. Sir, on behalf of the Army, I will
    double check. I do not know of anything, but I will definitely
    check and hopefully we can do as you suggest but I need to
    check.
        Senator Tillis. Whatever is most expedient, whether it is
    snail mail, email communication. But I think that we owe to
    these tenants, particularly these young people, to know that we
    have their back and that you are willing to help them. And
    while the private providers are helping, I think you owe it to
    the current base and maybe over some recurring period until the
    foreseeable future when we are convinced we have got a handle
    on this problem. I think you should do that to your base.
        Thank you all for being here today, And again, stay tuned.
    We will be reaching back out to you and look for questions for
    the record.
        The meeting is adjourned.
        [Whereupon, at 5:07 p.m., the Committee adjourned.]

        [Questions for the record with answers supplied follow:]

                    Questions Submitted by Senator Jack Reed
                            military family housing
        1. Senator Reed. Secretary McMahon, Secretary Beehler, Secretary
    Bayer, Secretary Henderson, Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, are each of you 100 percent confident that every
    military family is living a safe and healthy home today and what steps
    have you taken to alleviate family perceptions of potential retribution
    for reporting issues of maintenance and hazards?
        Secretary McMahon. The health and safety of our servicemembers and
    their families is a top priority for the DOD. Although privatization
    has dramatically improved the quality of on-base housing, there is room
    for improvement, including in those areas raised in recent media
    coverage. Under my leadership, working together with the Military
    Departments and the MHPI partners, inspections of individual homes are
    underway, resident communication has increased, and development of an
    MHPI Resident Bill of Rights, with input from families and family
    advocates, is underway. We are committed to improve communication with
    residents, without fear of retribution, and to quickly identify and
    address health and safety issues going forward.
        Secretary Beehler. The health and safety of the Army's soldiers,
    civilians and their families is an enduring priority. With over 100,000
    Army-owned, leased and privately-managed homes, the Army can never be
    100 percent certain that every military family home is free of
    deficiencies.
        All residents have an Army advocate at each installation housing
    office. The Army and RCI Project Company's collaborate to ensure all
    reported problems and issues are heard and resolved. We are
    communicating to residents to ensure they understand that they have the
    exact same protection available to anyone living on the local rental
    market under the Fair Housing Act without having to face any fear of
    reprisals.
        The Army will not tolerate reprisals and will hold accountable any
    person who engages in such acts. Army senior leaders and Garrison
    Commanders have disseminated this zero tolerance policy to families at
    every Army installation through housing town halls February 2019. While
    100 percent certainty that every family is living in a safe and healthy
    home is difficult to achieve, the Army is striving to improve
    visibility of conditions in family housing and to inform residents of
    the proper mechanisms to effectively communicate and obtain remedies
    for any identified deficiencies.
        Secretary Bayer. General Neller and Admiral Richardson have each
    issued orders requiring commanding officers to afford the opportunity
    for every family in military housing to receive a voluntary visit by
    April 15, 2019. The purposes of these visits are:

        1.  to raise command awareness of family living conditions to
    ensure that they are safe, secure and environmentally healthy;
        2.  to personally observe any issues affecting the home and to
    understand any actions being taken to address them; and
        3.  if a problem is found, to help servicemembers and their
    families get the problem resolved, and ensure that all families
    understand the help and resources available to them.

        Marine Corps Commanders will use the Marine Housing Outreach
    program to improve their awareness of concerns and better advocate for
    military families. Commanders will leverage appointed servicemember
    advocates and the base housing office to streamline communication with
    providers. Both commanders and appointed advocates will ensure
    effective oversight and remediation are in place, operating with the
    full authority and support of the chain of command. The DON will
    streamline its reporting process so that no sailor (or soldier or
    airman living in DON privatized housing) has to exceed two calls before
    achieving resolution--the first to the housing company, and the next to
    their chain of command, which can then properly advocate on their
    behalf with the government base housing office, base leadership, and
    Commander Navy Installation Command (CNIC) to ensure resolution.
    Simultaneously, families will continue to have an open channel to the
    base housing office. Our guidance regarding the home visits and
    resolution of issues states: ``there cannot be even the hint of
    retaliation or retribution. It should be the goal of every command that
    their sailors bring these and other issues to their command leadership
    for resolution. Leadership, especially small unit leadership like
    division officers and division chiefs, should be eager to resolve these
    problems on behalf of their sailors.''
        Secretary Henderson. The health and safety of our airmen and their
    families is a leadership imperative. This is about taking care of
    people. There is nothing better than engaged leaders with eyes on the
    problem. Therefore, the Secretary and Chief of Staff of the Air Force
    directed each of our wings to conduct a health and safety check for our
    airmen living in privatized and government owned homes and government
    leased housing worldwide. We found that of the almost 51,000 airmen
    contacted, almost 9,900 expressed concerns about their home. We were
    only able to reach 89 percent in the short time before this hearing,
    and we will continue our efforts until we reach 100 percent.
        Of those contacted, over 14 percent were concerned with the health
    and safety of their homes. Wing leadership offered members a home visit
    to view the problems firsthand. Installation commanders are taking
    immediate action to address health and safety concerns of these members
    as well as the concerns from those who directly contacted the Senate
    Armed Services Committee. I sent an update letter to the Committee on
    March 26, 2019 regarding those families who directly contacted the
    Committee.
        The Secretary and Chief have conducted visits to the most troubled
    bases and met with residents, installation leadership and, in some
    cases, the project owner. The Air Force Inspector General is performing
    an inspection of housing privatization policies, procedures, and best
    practices for handling resident complaints and protecting residents.
    While we have not found any cases of retribution, we take this issue
    seriously and this is an aspect of the Inspector General's
    investigation. The Air Force Judge Advocate General has provided
    guidance to legal offices to educate tenants about the services
    available through military legal assistance, tenants' rights under
    leases and state law, and the process for filing claims. Finally, the
    Air Force established a toll-free housing call center for residents to
    report concerns with privatized housing to the Air Force Civil Engineer
    Center Housing Division.
        Mr. Williams. To the best of my knowledge, I am not currently aware
    of any occupied homes across our military housing portfolio that
    exhibit habitability concerns or are non-compliant with applicable
    health and safety laws and regulations. BBC maintains extensive lead-
    based paint, moisture/mold remediation and other health and safety
    policies and procedures designed to ensure that resident concerns are
    addressed promptly and consistently. Once a work order request made by
    a resident is received, BBC staff respond to it based on the
    appropriate service level priority (emergency, urgent, routine). With
    regard to work order requests placed by residents after regular
    business hours, we assign ``on-call'' duty to BBC maintenance staff to
    ensure an appropriate response regardless of the time of day. It is
    BBC's policy that all emergency and urgent work order requests made by
    residents also receive a follow-up satisfaction call. BBC also
    maintains a preventative maintenance program that is designed to
    proactively identify maintenance issues, and ensure homes are monitored
    on a continuous basis for needed repairs. As part of this program, BBC
    maintenance staff conduct the following procedures, among others:

          Comprehensive check of all life safety systems (smoke/
    carbon monoxide detectors, fire extinguishers, range hood fire
    suppression canisters) as part of every work order/service visit to the
    home;
          Annual and visual inspection of lead-based painted
    surfaces in pre-1978 homes to identify compromised areas in need of
    repair/remediation;
          Annual checks of all housing components and systems,
    interior/exterior; and
          Review of repeat work orders to identify any systemic
    issues.

        See our response to question 28 below regarding steps taken to
    alleviate family perceptions of retribution for reporting maintenance
    or health and safety issues. We stand alongside our service branch
    partners in condemning any actions that involve retaliation against
    servicemembers for reporting housing concerns. To the extent BBC were
    to become aware of any employees or contractors engaging in such
    activity, we would take immediate disciplinary action.
        Mr. Picerne. Based on our own records as well as the results of
    recent inspections performed by the Army and Air Force, we are
    confident that more than 99 percent of the homes we manage are safe.
    The remaining less than 1 percent have varying issues that may impact
    the habitability of the home to the point where residents must be
    offered temporary alternative housing (i.e. hospitality suite home or
    hotel) while necessary repairs are made. In any situation where there
    is any concern about issues that could potentially adversely impact the
    residents' health or safety, appropriate steps are taken to ensure the
    home is fit for re-occupancy following completion of repair work.
        Corvias is partnered with the Army and Air Force on projects that
    in total include approximately 27,000 homes. One of the key drivers
    behind the Program was the private partners' ability to bring
    significant private financing (via long-term debt) to an on-post
    housing program that was traditionally woefully underfunded via annual
    federal budget appropriations. The deferred maintenance issue is simply
    too great to overcome without the addition of significant additional
    capital. The initial capital infusion was never intended to be enough
    to completely transform what was a very old and neglected housing stock
    during the initial development period (the first 7 to 10 years of each
    50-year partnership). As such, the private partners' ability to
    continue to improve the military housing is heavily influenced by the
    revenues and capital available to the partnerships. The reality is that
    while great strides have been made over the past 15+ years including
    thousands of newly constructed homes and renovations of thousands of
    others, these partnerships between the government and private sector
    still own thousands of very old homes that needs to be replaced.
        With respect to concerns about potential retribution for resident's
    reporting maintenance issues or hazards, we have stated publicly that
    we agree with our military partners' policy against retaliation. If we
    are made aware of any resident's concerns about retaliation, we will
    cooperate in a thorough review of the situation, and if necessary will
    take appropriate disciplinary action.
        Mr. Ehle. At Hunt Military Communities (``Hunt''), we have no
    higher priority than ensuring the health and safety of our resident
    servicemembers and their families. Every resident deserves our best. We
    recognize, however, that there is no such thing as maintenance-free
    housing and that issues will inevitably arise that must be remedied
    with both our historic and newer homes. When that happens, we strive to
    address the situation in a timely and transparent manner.
        We value and are committed to maintaining regular communication and
    an open dialogue with all resident families. In support of this, we
    strive to continually improve our customer service and communication
    skills among our personnel, particularly those management and
    maintenance teams that are focused on assisting residents and
    addressing their concerns every day. In recent weeks, we have
    undertaken refresher training among our community directors,
    maintenance directors, and other leadership to ensure that
    communications with our resident families are effective and reflect the
    high-quality customer service our families deserve.
        Mr. Hickey. We believe that all residents have the right to reside
    in homes and communities that are safe and meet health and
    environmental standards. Our portfolio consists of over 40,000 homes,
    including 24,142 legacy homes built prior to privatization. We actively
    manage many issues in our portfolio as they arise, and work with
    residents and installation leadership to resolve them. Lendlease
    encourages residents to report housing issues, and any confirmed
    incidents of retribution will be dealt with swiftly and appropriately.
    Based on our own inspections, command inspections and feedback
    available to us, to the best of our knowledge, we are confident that
    every military family in one of our properties is in a safe and healthy
    home and that any maintenance incident that arises to change that
    status will receive a very prompt and satisfactory response. There are
    no circumstances under which any retribution is condoned, to the best
    of our knowledge this has not occurred.
        Mr. Bliss. I am 100 percent confident that Lincoln Military Housing
    (LMH) has a process in place to make homes ready for occupancy that are
    safe and of high quality. We are in the process of an in-depth review
    with our Department of Defense (DOD) partners to confirm the condition
    of our homes and the processes in place for maintaining them. LMH
    completes annual preventive maintenance checks on every home in the LMH
    MHPI portfolio. Thorough checks are made by LMH personnel for signs of
    water intrusion, mold growth, peeling/flaking paint in pre-1978 homes
    and other potential life/safety concerns (i) during the make ready
    process, (ii) at change of occupancy, and (iii) during the annual
    preventive maintenance process. While LMH makes every effort to
    identify issues and remedy them in advance, LMH also relies on its
    residents to abide by established residence guidelines, which require
    the residents to immediately report any issues so that LMH personnel
    can promptly address them. LMH's call center is staffed 24 hours/7 days
    a week to address service calls.
        LMH was disappointed to hear stories of retribution. Accordingly
    LMH has again communicated with its on-site teams that, as service
    providers, we want and need our residents to report maintenance needs
    and potential hazards. In addition, in 2017 LMH expanded its
    communication of the escalation process for unresolved resident
    concerns. The escalation process in place entails the following:

        (a)  contacting LMH's maintenance hotline with a concern or
    maintenance request,
        (b)  if the resident's concern is not resolved, LMH asks the
    resident to call LMH's Regional General Management Office, and
        (c)  LMH encourages the resident to contact the Government/Base
    housing office at any time during the process to further advocate on
    their behalf to resolve any concerns.

        In addition, LMH follows strict protocols for homes that (i)
    exhibit mold (in accordance with EPA guidelines and industry best
    practices), (ii) are of pre-1978 construction where lead-based paint
    (LPB) may be present (specific lease disclosures and EPA information
    pamphlets notify residents of this in accordance with applicable laws),
    or (iii) are known or suspected to contain asbestos-containing
    materials (ACM). As part of the military housing privatization program,
    DOD was required to report any existing hazards, including but not
    limited to LBP and ACM. The public-private ventures (PPVs) took the
    information presented by DOD and completed Phase I environmental site
    assessments.
        No landlord can guarantee that all health and safety concerns are
    reported. At the same time, LMH's residents are routinely informed of
    how to report any instances that might affect their safety and health,
    whether it be through LMH's 24-hour call center, its online service
    request system, the resident's district office or the resident's
    Command.

        2. Senator Reed. Secretary McMahon, Secretary Beehler, Secretary
    Bayer, Secretary Henderson, Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, how do each of you define family satisfaction,
    what kind of questions do you ask in your resident satisfaction
    surveys, what is your survey response rate and have you ever taken any
    steps to incentivize families to respond to surveys (if so, please
    detail)?
        Secretary McMahon. Annual resident satisfaction surveys are
    performed by a nationally recognized independent third party. The
    surveys include a set of core questions asked of all residents,
    supplemented by questions that are Military Department specific. One of
    the key questions asked is whether the resident would recommend
    privatized housing. In 2018, the resident satisfaction survey was
    distributed to 184,345 military households and had a response rate of
    43.6 percent. The Department is unaware of any instances where steps
    were taken to incentivize families to respond to the third party
    surveys, but private partners may have incentivized other surveys they
    use to monitor staff performance. Resident responses on the third party
    survey of MHPI housing exceed national averages based on data reported
    by Multifamily Executive Magazine in 2018, and consistently produced
    ratings considered by the independent firm to be outstanding.
        Secretary Beehler. The Army Annual Housing Survey is focused on
    three key satisfaction: Service, Property, and Overall Resident
    Experience. These metrics provide a good indicator of how well or
    poorly the RCI Portfolio partners are performing. Nine (9) Business
    Success Factors in the survey, which may vary slightly from year-to-
    year, also provide specific insight into which functions have a high
    level of satisfaction and which may require improvement. The most
    recent completed survey for 2018 reported a response rate of 38.5
    percent (30,241 respondents out of 78,515 surveys sent). Response rates
    for the previous 3 years were between 38.2 percent and 39.8 percent.
    The Army does not incentivize respondents to respond to the Army Family
    Housing Survey.
        Secretary Bayer. The surveys DON's MHPI partners use are directed
    by the DON and developed by CEL & Associates, LLC. The surveys provide
    a benchmark and allow DON to compare pre- and post-privatization
    satisfaction ratings as well as compare privatization project
    satisfaction ratings to community rentals/industry standards. A copy of
    DON's Resident Satsifaction Survey (RSS) have been retained in
    Committee files. The full survey includes 55 questions, some of which
    are highlighted below:

               With regard to the appearance and condition of the
    community, how satisfied are you with . . . How would you evaluate the
    property management of Privatized Housing with regard to the following
    . . . . How would you rate your satisfaction with maintenance services
    . . . ? How satisfied are you with each of the following features of
    the community . . . How would you rate your satisfaction with the
    following characteristics of your home . . . How would you evaluate the
    leasing process: . . . Please indicate how much you agree or disagree
    with each of the following statements . . .

        The survey includes satisfaction questions related to
    responsiveness and follow through, property appearance and condition,
    quality of management, leasing, maintenance, customer service, property
    rating, relationship rating, and intention to renew housing. The RSS
    survey also gives respondents the opportunity to provide to open-ended
    comments and request to be contacted.
        The average response rate for 2017 to 2018 was 45 percent.
        Secretary Henderson. The Air Force measures resident satisfaction
    for all but one of our 63 installations using an industry standard
    third party Resident Satisfaction Survey. The third party company
    reviews responses for signs of tampering. The survey questions are
    standardized across the military and the private sector and the survey
    process allows residents to respond anonymously. The 2018 response rate
    was greater than 46 percent. Each question is rated on a scale of 1 to
    5 and the survey includes 53 questions on appearance and condition of
    the community, management of the property, maintenance services,
    community amenities, characteristics of the home, leasing process and
    overall morale. In addition to the annual survey, customers are
    provided feedback cards for every work request, which seeks ratings and
    comments regarding ease of reporting, timeliness of response, whether
    the work was performed correctly the first time, professionalism of the
    technician, and whether they want a follow up. The Air Force is
    exploring potential improvements to both the Resident Satisfaction
    Survey and the Work Order Survey to improve response rates, detect
    trends, and provide a picture of the overall satisfaction, while not
    diluting the minority with serious problems.
        Mr. Williams. BBC utilizes a third party independent electronic
    driven touch point survey (SatisFacts) to track customer satisfaction
    response and customer service for each service request and each
    resident move-in. While we work with this third party service to
    develop proper survey questions to ensure reliable data, generally our
    questions are selected to obtain satisfaction with work order response
    time, quality of work order responses, professionalism exhibited by
    staff and satisfaction with housing conditions.
        Generally, BBC's response work order response rate is 13 percent
    (industry standard 10 percent to 20 percent) and its move-in response
    rate is 29 percent (industry standard 10 percent to 15 percent). From
    time to time, BBC has used contests (through random drawings) to
    encourage resident completion of surveys, such as winning a rent
    credit. These surveys and the drawings are promoted on housing
    Facebook pages, by site personnel and in marketing collateral in order
    to promote increased response rates.
        Mr. Picerne. Our goals are aligned with our military partners. We
    agree that we should work together to ensure that we can provide on-
    post military housing that is safe, comfortable, and affordable, such
    that it is considered the housing of choice by servicemembers and their
    families. Along with the housing, we must also provide excellent
    customer service to all of our residents. We have acknowledged that in
    some instances, the quality of our service had slipped. We have
    undertaken a concerted effort to quickly improve our performance, with
    the goal of returning to the gold standard of resident satisfaction.
        Our residents are all offered the opportunity to respond to
    independent surveys, approved by our military partners and administered
    by unbiased third-party survey firms, including annual resident
    satisfaction surveys and satisfaction surveys after the completion of
    work orders.
        As is the case with all surveys, one goal is to find ways to
    encourage as many people as possible to take the survey, so the surveys
    represent a wider cross-section and representation of the population
    being surveyed. To that end, we have worked with the independent survey
    companies to get the word out about surveys and encourage residents to
    respond to the surveys, including e-mail blasts to all residents. In
    the past, we have held resident events during which we encouraged
    participation by allowing servicemembers to be eligible for a raffle
    for gift cards, etc., once they submitted their survey. Our military
    partners encouraged efforts to increase resident participation in the
    surveys, however, based upon recent feedback we acknowledge how such
    events could be perceived differently, as such, we've suspended those
    events moving forward.
        Mr. Ehle. Hunt does not have control over the annual resident
    satisfaction survey. It is administered by an independent third party,
    CEL & Associates, Inc., and delivered electronically directly to
    residents to maximize response rates. The survey invites residents to
    answer questions about Hunt's readiness and willingness to solve
    problems, its responsiveness to resident concerns, the physical
    appearance and condition of Hunt properties, overall resident
    satisfaction, including resident intention to renew their lease, and
    other topics.
        While response rates vary from property to property, Hunt is proud
    of the overall response rates across its communities. In recent years,
    response rates have exceeded 50 percent at some properties, and we
    strive to obtain increased response rates year after year.
        Hunt values resident feedback and takes steps to increase response
    rates. Internally, Hunt publishes response results to further motivate
    staff teams to improve resident service. Externally, Hunt holds
    community events to encourage residents to complete the survey through
    the independent, third-party administrator.
        Mr. Hickey. Family satisfaction is primarily measured using two
    methods:

          1.  Military service-sanctioned, independent CEL & Associates
    (CEL) resident satisfaction and performance improvement surveys. They
    have performed this for our MHPI portfolio for over a decade. CEL
    annually surveys every MHPI project within each branch of the Military
    Services using a core set of questions for all surveys to generate a
    like for like comparison. Surveys are conducted online using strict
    quality control measures.
          2.  A separate SatisFacts survey is conducted following each time
    a work service order or key event occurs. These surveys are sent out by
    Lendlease service teams immediately after a service order event (see
    results below).

        Projects from time to time offer incentives (such as raffle prizes)
    to drive survey participation as survey results are more valid the
    higher the participation as a percentage of total population surveyed.
        The 2018 CEL portfolio response rate across the full Lendlease
    portfolio was 44.2 percent reflecting approximately 17,680 responses.
    The CEL survey questions identify nine (9) Success Factors (SF--2018
    score and CEL overall rating are reflected):

            SF1: Readiness to Solve Problems--84 ``Very Good''
            SF2: Responsiveness & Follow Through--80.6 ``Very
    Good''
            SF3: Property Appearance & Condition--80.9 ``Very
    Good''
            SF4: Quality of Management Services--83 ``Very Good''
            SF5: Quality of Leasing--87.9 ``Outstanding''
            SF6: Quality of Maintenance--86.1 ``Outstanding''
            SF7: Property Rating--79.8 ``Good''
            SF8: Relationship Rating--83.1 ``Very Good''
            SF9: Renewal Intention--77.5 ``Good''

        The 2018 SatisFacts response rate across the full Lendlease
    portfolio was 13.0 percent reflecting approximately 37,150 responses
    across all survey types (conducted post Leasing, Move-in, Service
    Order, Resident Experience and Point of Service). The 2018 scores and
    SatisFacts ratings were:

            Leasing: 4.52--Exceptional
            Move-In: 4.56--Exceptional
            Service Order: 4.39--Superior
            Resident Experience: 4.25--Superior
            Point of Service: 4.24--Superior

        Whilst these scores for both surveys are strong, we do pay specific
    attention to the negative feedback we receive and address it directly,
    both at an individual level as well as through our business planning
    cycle. In addition, we are focused on lifting our response rates.
        Mr. Bliss. LMH defines family satisfaction as being a time when all
    residents enjoy their living experience and when issues arise, as they
    will, LMH personnel quickly resolve such issues with excellent customer
    service and quality workmanship.
        The third-party resident satisfaction survey mandated under the
    project documents is anonymous and extensive. This independent survey
    also affords residents the opportunity to provide comments either
    anonymously or with an option to be contacted to follow-up on their
    comments. These comments are reviewed by both LMH and its DOD partners.
    LMH understands that all branches of the military utilize substantially
    the same third-party survey form (a sample of which is attached
    hereto).
        LMH's resident survey response rate is typically in the 35 percent
    to 50 percent range, which we understand is typical. To increase the
    response rate, LMH has utilized tools to encourage increased
    participation by residents. Such incentives are never offered in an
    effort to influence how LMH is rated. LMH welcomes any and all
    feedback, positive or negative, as it continues to seek ways to improve
    resident satisfaction.

        3. Senator Reed. Secretary McMahon, Secretary Beehler, Secretary
    Bayer, Secretary Henderson, Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, have any of you ever had fees withheld for
    failure to perform, and if so please describe?
        Secretary McMahon. The Military Departments, as part of their
    respective oversight programs, are in a better position to respond to
    this question.
        Secretary Beehler. Garrison Commanders in the past have withheld a
    portion of incentive fees when the MHPI partner failed to meet the
    criteria of an objective metric. We are assessing this area and believe
    we need to make improvements and will be working with the MHPI partners
    to ensure that metrics are quantifiable and reflective of desired
    performance objectives.
        Each Military Housing Privatization Initiative (MHPI) project,
    other than Fort Carson, has an individual incentive fee management plan
    based on objective and subjective metrics.
        Secretary Bayer. Yes, on a few occasions the DON has withheld fees
    for failure to perform or for other reasons. Please refer to our
    response to question 72 below. DON's privatized housing is owned,
    operated and maintained by privatization (i.e., Military Housing
    Privatization Initiative or ``MHPI'') project entities which are
    Limited Liability Companies (LLCs). It is often referred to as public-
    private venture, or ``PPV'' housing. The Managing Members (Private
    Partners) of the LLCs hire and pay fees to service providers, such as a
    property managers, to carry out the purposes of the LLCs. These fees
    are paid out of funding available to the LLCs, primarily revenue.
    Although in many instances the service provider is a related entity of
    the Managing Member, each of the fees are customary for the particular
    service provided, would have to be paid regardless of who provides the
    service, and are in line with market rates for the fees. Wherein the
    service fee includes a base and incentive, the total of the two is in
    line with market rates for that particular fee. Both base & incentive
    fees, including incentive fee performance requirements, are documented
    in the operating agreement of the LLC or attachments to that operating
    agreement, and cannot be revised without DON Member approval.
        Secretary Henderson. Over the last 12-month period, the Air Force
    has withheld $1.2 million in Performance Incentive Fees out of a
    potential $19.7 million. We withheld these fees based on project
    owners' failures to meet standards established in the Performance
    Incentive Fee Plans. In the case of Keesler, MacDill, and Tinker Air
    Force Bases, inadequate mold remediation efforts were specifically
    cited in the decision to reduce the performance incentive fee.
        Mr. Williams. We have been debited portions of our fees in
    instances where we have not achieved our defined metrics. Examples of
    these would be exceeding budgeted controllable expenses, occupancy
    targets going below 95 percent, not completing turnover work within the
    defined timeline (specific to each project but range is generally 4 to
    7 days), not meeting response and or completion times of a portion of
    work orders or not meeting customer satisfaction ratings for a defined
    period (varies based on project; either annual or quarterly and
    benchmarks range from 85 percent to 95 percent).
        Mr. Picerne. On occasion, we have received less than 100 percent of
    our incentive fees for failing to meet the metric necessary to earn 100
    percent. Some examples include failure to comply with adherence to
    budget metrics (mostly related to timing of expenses), failure to
    manage occupancy expectations, etc. Admittedly, these examples/
    instances are not the norm, but we have on multiple occasions, earned
    less than 100 percent of incentive fees.
        Mr. Ehle. Under our agreements, Hunt is compensated for services
    associated with the management of rental real estate housing complexes,
    such as property management and, as applicable, asset management. The
    fee arrangement typically includes two components:

        1.  a base fee, which includes (a) property management fee and/or
    (b) asset management fee, if applicable; and
        2.  a performance incentive fee. The rates for these fees, and the
    ways in which they are earned, are established during the competitive
    bidding process for the award of the MHPI project, and are then
    negotiated and agreed upon in definitive documents. The amount of fees
    received is not guaranteed.

        Incentive fees are discretionary and are based upon performance.
    The criteria that factor into incentive fee calculations vary from
    project to project, but, generally, they include at least:

        1.  resident satisfaction (via annual surveys);
        2.  maintenance response times; and
        3.  other performance metrics as decided by the particular military
    department for a given project. Installation base commanders can also
    weigh-in on the performance of the property manager and adjust the
    incentive fee accordingly.

        If we fail to meet performance expectations outlined in the
    agreement, as assessed by our military partners, some or all of the
    incentive fee may be withheld. There have been times when Hunt has not
    received the all available incentive fee. This has occurred, for
    example, when Hunt received low resident satisfaction survey scores,
    when percentage of response times for work orders has exceeded the
    allowable threshold, and when we have exceeded acceptable variances for
    expenses within our operating budget.
        Mr. Hickey. All Lendlease project's asset and property management
    agreements include an element of incentive fee to promote performance.
    The Military Services can withhold and/ or not award full incentive
    fees if agreed performance metrics are not achieved. Project
    performance is measured against incentive criteria established in
    project business agreements and each military service determines the
    resulting award percentage in accordance with those agreements
    Lendlease has had incentive fees withheld.
        By way of example, as a part of our SASC response, we reviewed our
    incentive awards over the past 3 years (fiscal year 2016 through fiscal
    year 2018). Eighty-eight incentive awards were analyzed and of these,
    53 had their incentives reduced from the full 100 percent possible.
    Fees were reduced for;

          Not achieving service completion times
          Not achieving change of occupancy completion times
          Not achieving customer satisfaction rations from CEL or
    SatisFact scores

        Lendlease provided 3 specific examples of instances in which
    incentive fees were withheld from its projects to Senator Warren's team
    on March 9, 2019. The Lendlease team would be pleased to provide a
    similar briefing to SASC, if additional information is desired in
    response to this question.
        Mr. Bliss. LMH has had a portion of our fees withheld. The
    incentive fees that are included in LMH's project documents are
    determined by a variety of metrics, including but not limited to: (a)
    resident satisfaction survey results, (b) completion of change of
    occupancy maintenance and service requests within specific thresholds,
    (c) LMH's participation with small businesses as part of its vendor
    pool and (d) evaluation by LMH's DOD partner. While incentive fee
    calculations differ by project, LMH generally receives 80 percent to 90
    percent of the fees. LMH is committed to achieving the highest level of
    service for our residents.

        4. Senator Reed. Secretary McMahon, Secretary Beehler, Secretary
    Bayer, Secretary Henderson, Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, what are the most common housing hazard issues
    you're tracking today, how widespread are they, and how do you know?
        Secretary McMahon. The Military Departments, as part of their
    respective oversight programs, are in a better position to respond to
    this question.
        Secretary Beehler. Based on work orders submitted to MHPI partners
    from February 15 to March 20, 2019, the most common housing
    deficiencies are plumbing, electrical, and elevated moisture levels
    leading to mold. Based on review of these work orders and installation-
    led visits to 100 percent of the inventory, The Army has determined
    that life/health/safety work orders account for less than .2 percent of
    current work orders in the queue (47 out of 29,217).
        The Army is inspecting 100 percent of all work /service orders
    relating to life/health/safety; contacting 5 percent of all residents
    with a completed maintenance call within the last 72 hours to assess
    the results of the maintenance performed; and visiting 100 percent of
    those called who indicate dissatisfaction with the maintenance
    performed.
        Secretary Bayer. The issues raised in recent housing
    dissatisfaction reports are: poor workmanship/construction, mold,
    pests, water intrusion and lack of air conditioning. The DON and PPV
    partners are currently evaluating all relevant data to determine the
    magnitude of the problems raised. The results of this analysis will
    help us develop the best way ahead.
        Secretary Henderson. The most common housing hazard issues we are
    tracking today are mold/moisture intrusion, pests, and chipped or
    flaking paint that may be lead-based. Based on the health and safety
    review we conducted, the Air Force is tracking that 14 percent of our
    military residents have health or safety concerns. Of the 9,980 members
    that accepted a visit from the installation leadership team, they
    confirmed that 2,421 had evidence of mold or moisture, 1,234 had
    evidence of pests, and 482 had peeling or flaking paint. These same
    concerns were also the most common raised during recent Air Force
    leadership visits to our most troubled installations.
        Mr. Williams. We track our service requests by category (asbestos,
    lead based paint, fire/safety, water intrusion, mold, pest, electric,
    HVAC, plumbing) and also by priority of emergency, urgent and routine.
    We respond to all emergency work orders within one hour and all urgent
    within four hours. If there are any situations that cannot be corrected
    immediately and rise to the level of a hazard (environmental) and/or
    compromises quality of life (lack of heat, lack of air conditioning),
    the resident is offered alternative accommodations for the duration of
    the repair.
        General plumbing maintenance requests make up the majority of our
    service requests. Mold/mildew maintenance related requests represent
    less than 1 percent of service calls and are classified as urgent.
    Additionally, a community management and facility management
    representative responds to all moisture related calls and we invite our
    government partner to join us on these visits to the resident's home.
        Mr. Picerne. More than 99 percent of the homes we manage are safe,
    meaning no hazards. The remaining less than 1 percent have issues that
    may impact the habitability of the home to the point where residents
    must be offered temporary alternative housing (i.e. hospitality suite
    home or hotel) while necessary repairs are made. In any situation where
    there is any concern about issues that could potentially adversely
    impact the residents' health or safety, appropriate steps are taken to
    ensure the home is fit for re-occupancy following completion of repair
    work.
        The more common housing hazard issues that we're currently tracking
    are related to water intrusion that may create an environment for mold
    growth. These problems are most persistent in the older homes in our
    portfolio. Of the approximately 27,000 military homes we manage on
    behalf of our partnerships with the Army and Air Force, approximately
    10,000 were built prior to 1978. While several of these instances are
    tied to roof and/or plumbing leaks, there are also instances where our
    failure to continually educate our residents has led to some of these
    issues. For example, we have several cases of aluminum windows sweating
    (condensation), especially in the winter months. If left unaddressed,
    the window sweat can lead to mold spores collecting on the sides of the
    window as well as the window sill. However with proper routine care
    given by the resident in the form of simply wiping up the condensation
    on a regular basis, the likelihood of any mold related challenges
    related to window sweating is reduced to virtually zero.
        Mr. Ehle. Hunt currently owns and operates 21 separate projects in
    partnership with DOD. All of Hunt's projects, some of which include
    multiple property sites, are located on or near Air Force, Navy, Marine
    Corps, and Army bases throughout the country. Specifically, Hunt own
    interests in approximately 52,000 homes on or within close proximity to
    49 military installations located in 21 states and the District of
    Columbia. Of that number, we manage about 32,000 units across 44
    installations and serve more than 165,000 residents.
        Across this diverse portfolio, we would not characterize one type
    or group of complaints as most common. Rather, resident issues
    typically vary according to geographic location, age of housing stock,
    and other factors.
        One challenge that we have experienced at more than one of our
    properties involves moisture issues. For example, our communities at
    Keesler Family Housing in Biloxi, Mississippi. The previous homes there
    were largely destroyed by Hurricane Katrina in 2005 and rebuilt via
    MilCon before privatization. After privatization, we found that
    residents were consistently identifying moisture-related issues.
    Addressing these issues proved difficult, but we took ownership of the
    situation and executed a multi-phase moisture remediation project,
    which included assessments of each of the approximately 1,100 homes at
    Keesler, and completed all necessary remediation work. We have received
    some reports of moisture issues at other Hunt properties, and we
    address them promptly and diligently.
        Mr. Hickey. The most common maintenance and hazard issues the
    Lendlease team is currently tracking include mold and lead-based paint
    concerns. For calendar year 2018, a total of 2,001 mold service orders
    and 582 lead-based paint service orders were received across 400,000
    service orders. These reflect 0.50 percent and 0.145 percent
    respectively of total service orders during the calendar year.
        All work orders with homes that have potential environmental
    conditions are pre-stamped and identified directly on the service order
    to notify the technician that they need to take appropriate precautions
    and employ EPA guidelines to appropriately remediate issues. Preventive
    maintenance occurs on all homes each year with special attention given
    to those with known environmental conditions.
        Issues are tracked and logged via Yardi property management
    software, an industry-leading product as well as the primary standard
    for property management software across the privatized military housing
    program.
        Mr. Bliss. We take any health and safety hazards very seriously and
    treat such work orders as emergencies, which require a 30-minute
    maximum response time. In addition, we review our work orders to
    identify trends. Emergency work orders represent approximately 10
    percent of our total service requests.
        Based on a review of service request histories, mold is the most
    common environmental service request LMH receives, although it is not
    widespread. We follow EPA guidelines and industry best practices for
    addressing mold. LMH follows a multi-step process to address and follow
    up with mold, both from when a resident calls in for potential mold or
    when one of our Preventative Maintenance Teams discovers mold during
    their annual walks. Resident education is also a crucial aspect
    regarding mold. In 2018, we began an outreach program to ensure
    residents understand what they can do to prevent/mitigate mold and what
    to expect from LMH when it is reported. Whether the result of a leaking
    pipe, leaking roof or a housekeeping issue, we treat any occurrence of
    mold with the same level of urgency and care.

        5. Senator Reed. Secretary McMahon, Secretary Beehler, Secretary
    Bayer, Secretary Henderson, Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, how do you use maintenance and work order
    histories to inform your housing maintenance plans?
        Secretary McMahon. The housing privatization projects own, operate,
    and maintain the privatized housing under the Military Housing
    Privatization Initiative and, therefore, are the entities who develop
    and maintain all associated housing maintenance plans.
        Secretary Beehler. Maintenance and work order histories are a
    critical resource in all housing (Army-owned, leased, and privatized)
    to identify maintenance trends and validate long-range plans for repair
    and replacement. These histories allow the Army to gauge the timeliness
    and thoroughness of responses and may identify the need for more, or
    better trained maintenance personnel. Feedback from work orders allows
    us to identify recurring issues and details of any equipment failure,
    to analyze the quality of preventive maintenance for improvement, and
    to assess the project Capital Repair and Replacement Plans and
    operating budgets for adequacy.
        Secretary Bayer. Maintenance plan development is the responsibility
    of the partners, based on recurring maintenance, the age of the home,
    and resident feedback. Maintenance plans are included in the Partner's
    annual budget and 5-year plan, both of which are reviewed by the DON.
        Secretary Henderson. Project owners are required to maintain,
    sustain, and operate housing in a safe and healthy condition.
    Installation commanders and the Air Force Civil Engineer Center review
    both the Operating Budget and Sustainment Plans and the Air Force Civil
    Engineer Center approves the Operating Budget. Where we know of
    specific issues, such as moisture issues or other major complaints,
    these budgets and plans are questioned to ensure they are addressing
    those concerns.
        Within our government owned housing, we conduct a Housing Community
    Profile every 5 years, which includes condition assessments to inform
    our Housing Master Plan and program for larger projects. In addition to
    these assessments, we use trends in maintenance data to develop smaller
    repair and upgrade projects by facility maintenance teams at each
    installation.
        Mr. Williams. Maintenance and work order histories are used to
    identify systemic issues and to develop short term and long term action
    plans to correct. These histories are also the benchmark for the
    development of our annual operating budgets, our annual and 5 year
    capital replacement plans and the more far reaching sustainment plans
    for our projects, which are reviewed and approved by the military
    services.
        Mr. Picerne. Maintenance and work order histories are used to
    inform both our housing maintenance plans and our short and long-term
    capital repair and replacement plans. For example, if we observe a high
    number or work orders relating to a certain condition in homes, we take
    steps to immediately address those issues, if possible, and if not then
    take steps to ensure the condition is addressed via either specifically
    addressing that issue across similar housing stock or, if necessary
    incorporating means to address the issue as part of our annual
    budgeting for capital repairs and replacements.
        Mr. Ehle. Resident complaints and reports of issues are logged into
    Hunt's housing maintenance software, Yardi. Hunt monitors this
    information closely and works proactively with residents to address
    issues as they arise. In situations where we have found that residents
    are consistently identifying specific issues, we use that information
    to help us understand and identify potential underlying causes and
    develop a comprehensive solution.
        For example, when we found that Keesler residents were consistently
    identifying moisture-related issues, we took a broader look at the
    challenges they were experiencing, and we were ultimately able to
    identify repairs that needed to be made to the ventilation system in
    many homes in the community. With this information, we were able to
    address an underlying cause of the moisture-related issues throughout
    the community.
        Mr. Hickey. At each project, Lendlease and its partners use
    historical trend analysis to inform assumptions about future
    maintenance needs. Along with other analyses, these form the basis of
    the Project's annual budget and business plan (PBBP). The PBBPs rely on
    trend analysis to forecast changes of occupancy, maintenance service
    orders, and replacement of minor capital items such as home appliances,
    HVACs and roofs. PBBPs for each Project are presented to the military
    services for input and then approval each year.
        Mr. Bliss. We use work order histories extensively. All of our
    maintenance systems are online (Yardi system) and we can pull emerging
    trends at all properties in order to formulate effective maintenance
    plans, both for our operating and capital budgets. Annual preventative
    maintenance inspections for each housing unit are custom tailored as
    they are based on maintenance and work order histories at specific
    locations. This allows LMH staff to inspect and address typical problem
    areas in each specific type of housing unit.

        6. Senator Reed. Secretary McMahon, Secretary Beehler, Secretary
    Bayer, Secretary Henderson, Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, if any of you fail to timely and properly
    remediate an issue in a home, or fail to meet your agreement
    obligations, what corrective actions can DOD take?
        Secretary McMahon. The housing privatization projects own, operate,
    and maintain the privatized housing under the Military Housing
    Privatization Initiative and, therefore, are the entities responsible
    for timely and properly remediating any issue in a privatized home, not
    the Military Departments. If a project fails to timely and property
    remediate an issue, the existing deal structures provide the mechanisms
    for the Military Departments to hold the MHPI private partners
    accountable for substandard housing. In addition to withholding of
    incentive fees, the Military Departments have certain rights regarding
    major decisions made by the privatization project, to include the right
    to require replacement of the housing management and maintenance
    service providers if warranted based on overall poor performance as
    defined in the deal structure documents. In a small number of cases, a
    Military Department has required the housing privatization project to
    replace the property management service provider. While the ground
    lease and associated legal agreements that comprise the project deal
    structures include termination clauses that can be exercised in extreme
    cases, DOD is focused on ensuring the long-term success of the existing
    partnerships and projects rather than considering their termination,
    whether for either re-competition/selection of new private partners or
    for resumption of government owned and operated housing. Termination is
    an extreme step that would impose significant financial cost upon the
    Department and adversely impact our ability to provide quality homes
    for military members and their families.
        Secretary Beehler. The Army's privatized housing project companies
    are required to comply with all applicable federal and state laws and
    regulations, including those that regulate housing and response to
    environmental hazards. The Ground Lease is the controlling document
    that sets the framework on which our partnerships are based; there is a
    mechanism in place to remove a property management, construction
    company or RCI Privatized Partner. If a RCI Private Company continually
    fails to adhere to the terms of the ground lease, the Army may be able
    to either withhold incentive fees or terminate the lease.
        Secretary Bayer. DON leaders have various tools available to ensure
    our PPV partners meet their obligations. Oversight and monitoring
    authority is set forth in 10 U.S.C. 2884 & 2885 and in associated legal
    agreements. The operating agreement of each PPV company defines the
    rights and responsibilities of the DON in the company. DON leadership
    exercises oversight of privatized housing projects with the aid of a
    ``monitoring matrix'' based on the PPV's obligations in each business
    deal. The managing member (or in one instance, the general partner) of
    each PPV company is tasked with management of the company. While DON
    does not participate in the day-to-day management of these private
    companies, DON's daily interaction with these companies is the DON's
    first level of oversight and issue resolution. DON is specifically
    prohibited from managing the company except with regards to certain
    consent rights, and other specifically defined rights, such as the
    ability to initiate the process for replacement of the property
    manager. DON reviews and approves the annual budget and incentive fees,
    and can request reporting to provide oversight and make well-informed
    consents. In addition, DON can enforce performance from the privatized
    housing projects by engaging bondholders to work with the projects to
    meet the commitments under the project legal agreements. DON can also
    issue cure notices or use the court system, if needed, to seek
    resolution for poor performance. Each PPV partner has the opportunity
    to earn performance incentive fees based on several criteria, such as
    resident satisfaction, maintenance responsiveness, and property
    condition. Poor performance in any of these areas will reduce the
    amount of the fee earned.
        Secretary Henderson. If the project owner fails to properly
    remediate or meet other obligations under our agreements, the Air Force
    can leverage all tools available to ensure the project owner takes
    corrective action. These tools include:

          Performance Incentive Fees: Withholding performance
    incentive fees when remediation efforts are inadequate or unsuccessful,
    or other obligations are not met. However, under the current Incentive
    Fee Plans, project owners generally earn at least a partial incentive
    fee.
          Formal Dispute Process: Initiating a Formal Dispute
    process in accordance with closing documents ranging from cure notices
    to termination of the leases.
          Enforcement Agencies: Air Force can initiate a complaint
    with the Environmental Protection Agency or state and local agencies,
    which can levy fines and punitive actions against the project owner for
    violations of environmental, health, or safety laws

        Mr. Williams. The applicable Ground Lease for each of our MHPI
    projects contains provisions regarding ``Events of Default'', which
    identify the events upon which the government may terminate the
    agreement. Generally, these events of default include any failure to
    materially comply with the representations, obligations and covenants
    contained in the Ground Leases. These include, but are not limited to,
    compliance with: applicable environmental and health and safety laws
    and regulations; leasing requirements outlined in the Ground Lease; use
    of the improvements and premises only for the purposes set forth in the
    Ground Lease; obligations to repair and restore the improvements after
    casualty events; and requirements to maintain minimum levels of
    insurance. It should be noted that with regard to environmental
    hazards, generally the project owner/lessee is not liable for any pre-
    existing environmental conditions prior to effectiveness of the Ground
    Lease or for any hazards that are created by the government/lessor or
    its agents.
        Mr. Picerne. As a technical matter, our military partnerships are
    with the Army and the Air Force, not the Department of Defense. Our
    military partners have various rights and remedies pursuant to the
    legal agreements that govern our partnerships, including entity (i)
    Operating Agreements (for the Army partnerships in which Corvias and
    the Army are members in the project-specific entity/LLC), (ii) Ground
    Leases (Army)/Lease of Property (Air Force), (iii) Master Development
    and Management Agreement (Air Force), Project Operating Agreements (Air
    Force).
        Mr. Ehle. Hunt is subject to financial or other penalties if it
    fails to perform its contracts. Under the terms of our project
    agreements, a military partner may terminate our agreement if we are in
    material default of our obligations. Alternatively, if we are not in
    material default of our agreements, but we have, nevertheless, failed
    to meet performance expectations, a military partner may withhold all,
    or a portion of, our incentive fees.
        Mr. Hickey. Each of the Military Services has rights to exercise
    remedies as stipulated in the various project business agreements. This
    can include withholding incentive fees in accordance with management
    agreements and at its highest, a declaration of potential default for
    failure to meet contractual obligations.
        Mr. Bliss. DOD has extensive oversight and review capabilities
    under our project documents. If DOD finds that a PPV is not performing
    its contractual obligations, then DOD can take specific actions under
    the Ground Lease and other project documents to which they are a party.
    DOD can also actively support the PPV's enforcement of its service
    contracts. LMH supports the development of a more clear and well-
    defined protocol among the PPV, property manager, DOD and our residents
    regarding follow up on maintenance issues.

        7. Senator Reed. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr. Hickey,
    and Mr. Bliss, what do you charge families if they have to break their
    lease due to health or maintenance hazards?
        Mr. Williams. BBC (through its affiliates) does not charge families
    to break their lease where a health or safety/hazardous condition
    exists.
        Mr. Picerne. Nothing. If a military family elects to terminate
    their lease due to health and safety concerns with the housing, we do
    not charge an early termination fee.
        Mr. Ehle. When health and maintenance hazards are reported, Hunt's
    first priority is ensuring resident safety. As issues arise, we want to
    know about them, and we aim to fix them promptly. In most instances,
    when a resident voices a concern, we work with them to address the
    issue, and, if necessary, we relocate the resident into alternative
    housing. On rare occasions, residents are not amenable to repairs or
    relocation and wish to leave a Hunt property altogether. We assess such
    situations on a case-by-case basis and may release residents from their
    leases without penalty. In either scenario (i.e., whether a resident
    remains a Hunt resident or not), health and maintenance hazards are
    corrected.
        Mr. Hickey. Protecting the health and safety of all who have a
    relationship with Lendlease is a core value of our organization. As
    such, we take resident concerns about health and safety extremely
    seriously. When a resident identifies a health or safety issue, there
    is an interactive process to address those issues. If a home has a
    health or safety hazard that would put the family at risk, temporary
    lodging or other accommodations are made immediately. Generally, this
    would occur if residents will be without heat, water or electricity for
    more than a day or where there is an environmental hazard that is
    deemed to be unsafe. If it's determined that the issues in the home
    cannot be remedied in 30 days or less, (for example fire or significant
    structural issues), the family would be offered a permanent move-over
    to a safe, comparable home. If residents decline the move, or in the
    rare situation where a comparable home is not available, a lease break
    is offered. In these situations, Lendlease charges no break fees. There
    are circumstances in which repairs become more complicated or require
    more time than estimated as they unfold. In those cases, the same
    remedy approach set forth above is applied. Ultimately, if we are not
    able to satisfy the resident through any other means, we relieve the
    resident of their lease obligations, and do not charge any fees. Given
    the quality of our inventory, this does not happen frequently. In most
    cases, we can provide a suitable replacement home and/or address the
    issue in an expeditious enough time frame to not unreasonably
    inconvenience the resident.
        Mr. Bliss. We typically do not charge residents who break their
    leases due to health or maintenance hazards. If this were to occur, we
    would coordinate the effort with the local government housing office or
    Commands.

        8. Senator Reed. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr. Hickey,
    and Mr. Bliss, what access do families have to work order history and
    home test results of hazards in their home, and if none, do you have
    any issues with sharing those with families going forward?
        Mr. Williams. Residents have access to their work history through
    our software resident portal and/or app. In select circumstances where
    BBC contracts with an independent firm to perform testing, a member of
    our management team, and often a member of our health/safety/
    environmental staff, meet with the resident to review and provide an
    explanation of the data and results.
        Mr. Picerne. Currently, upon request we provide copies of work
    order histories to residents. In addition, if any tests are performed
    in a home, we provide copies of the tests along with a summary
    explanation of the test results, which is provided by the independent
    third party testing firm.
        Mr. Ehle. Hunt residents currently have access to the work order
    history pertinent to their home from the time of their initial move-in
    through the time they move out. We are also putting in place additional
    measures to facilitate residents' access to their work orders.
        Mr. Hickey. Lendlease believe that residents should be informed
    about the homes they will be living in and are committed to providing
    information in a transparent and timely manner. At move in, all
    residents are provided the requisite disclosures regarding pre-existing
    environmental conditions and are educated about their associated
    management regimes in accordance with applicable laws and regulations.
        Residents have full access to work order histories of their homes
    during the length of their residency. This information is available on
    the MilitaryCafe resident portal (both desktop and via an app) or upon
    request to the community and maintenance management teams.
        Mr. Bliss. Families are able to track their work order histories
    online. If LMH identifies a current health or safety issue with a home,
    we share that information with the current resident.

        9. Senator Reed. Secretary McMahon, Secretary Beehler, Secretary
    Bayer, and Secretary Henderson, what steps have each of you taken over
    the past several years to ensure private housing companies are being
    held accountable where remediation efforts have failed and what forcing
    mechanisms do you have to ensure that MHPI partners are living up to
    their commitments?
        Secretary McMahon. As ASD(Sustainment), I have met three times with
    the housing privatization partner CEOs to ensure their commitment to
    the shared goal of providing safe, quality and affordable housing where
    servicemembers and their families will want and choose to live.
    Additionally, I have been working closely with the Military Department
    Assistant Secretaries to ensure that they are taking steps to
    reinvigorate their oversight of privatized housing projects, to include
    quality assurance, monitoring, and enforcement of performance
    requirements by privatization projects, and withholding of incentive
    fees and other forcing mechanisms provided for in the existing legal
    deal structures. I am also working with my staff to implement new
    performance metrics to better monitor Military Department oversight and
    privatization partner performance to help ensure that the Department
    addresses housing concerns raised by residents and keeps this
    commitment over the long-term.
        Secretary Beehler. The Army is not aware of instances where
    remediation of unsatisfactory conditions deemed necessary by the Army
    has ``failed.'' If such failure were to occur, however, the Army could
    decrement incentive fees or require the replacement of the responsible
    unresponsive Project Company contractors. For unresolved conditions
    creating a significant health or safety concern, the Army could also
    declare the Project Company in default of the Company's ground lease
    with the Army.
        In order to improve MHPI performance and to ensure that MHPI
    partners continue to live up to their commitments The Army leadership
    has directed several initiatives:

        1.  Drafted a tri-service Tenant Bill of Rights in coordination
    with the Navy and Air Force.
        2.  Worked with the RCI Project Companies to eliminate non-
    refundable pet fees.
        3.  Suspended the RCI Energy Conservation Program.
        4.  Moved incentive fee approval to HQDA.

        Secretary Bayer. Oversight and monitoring authority is set forth in
    10 U.S.C. 2884 & 2885 and in associated legal agreements. The operating
    agreement of each PPV company defines the rights and responsibilities
    of the DON in the company. DON leadership exercises oversight of
    privatized housing projects with the aid of a ``monitoring matrix''
    based on the PPV's obligations in each business deal. The managing
    member (or in one instance, the general partner) of each PPV company is
    tasked with management of the company. While the DON does not
    participate in the day-to-day management of these private companies,
    DON's daily interaction with these companies is the DON's first level
    of oversight and issue resolution. DON is specifically prohibited from
    managing the company except with regards to certain consent rights, and
    other specifically defined rights, such as the ability to initiate the
    process for replacement of the property manager. DON reviews and
    approves the annual budget and incentive fees, and can request
    reporting to provide oversight and make well-informed consents. In
    addition, DON can enforce performance from the privatized housing
    projects by engaging bondholders to work with the projects to meet the
    commitments under the project legal agreements. DON can also issue cure
    notices or use the court system, if needed, to seek resolution for poor
    performance.
        Secretary Henderson. The Air Force has withheld performance
    incentive fees at Keesler, Tinker, and MacDill Air Force Bases for
    failures in their remediation efforts for mold. While not a formal
    mechanism, we have also placed both Hunt and Balfour Beatty Communities
    on corrective action plans due to performance failures by their
    maintenance teams that exacerbated the moisture and mold issues. The
    forcing functions at our disposal today include withholding of
    performance incentive fees, invoking the formal dispute process, and
    raising complaints with an enforcement agency such as the Environmental
    Protection Agency.

        10. Senator Reed. Secretary McMahon, Secretary Beehler, Secretary
    Bayer, and Secretary Henderson, how often are each of you paying out
    fees to housing companies and how often have each of you withheld from
    paying fees?
        Secretary McMahon. The Military Departments, as part of their
    respective oversight programs, are in a better position to respond to
    this question.
        Secretary Beehler. Incentive Fees are typically paid quarterly in
    accordance with the project legal documents.
        Prior to February 2019, the RCI Project Company would submit a
    request for the amount to be awarded. The installation housing office
    would validate the request and make a recommendation to the Garrison
    Commander. The Garrison Commander determines the appropriate incentive
    fee payment to the MHPI partner based on the agreed upon metrics, to
    include incentives paid and incentives withheld. The Office of the
    Assistant Secretary of the Army for Installations, Environment and
    Energy (ASA IE&E) transferred approval authority of the performance
    incentive fees to their office in February 2019 effective 2d quarter
    fiscal year 2019. As a result, incentive fees awarded and withheld with
    the reason why, will be tracked and monitored by ASA IE&E.
        Secretary Bayer. Base fees to housing companies are paid monthly
    with the operating draw. Incentive fees are paid to housing companies
    on at least a semi-annual basis. Incentive fees are tied to performance
    measures and unearned fees go back into the project.
        Secretary Henderson. Performance incentive fees are paid out
    quarterly by the project (not with appropriated funds) except for four
    projects (Robins I and II, Offutt and Dyess (off base site only)) which
    do not have performance incentive fees. In the past year, seven of ten
    project owners have seen reductions in their performance incentive
    fees.

        11. Senator Reed. Secretary McMahon, Secretary Beehler, Secretary
    Bayer, and Secretary Henderson, have any of you ever issued cure
    notices to elevate concerns to bond holders financing these MHPI
    projects (and if so, please detail)?
        Secretary McMahon. The MHPI project legal agreements between the
    private-sector project entity, private-sector partners, and the
    Military Departments are not contracts. As such there is no protocol
    for the Department to issue a cure notice to the partner or the
    respective bondholder representative.
        Secretary Beehler. The Army has not issued a cure notice designed
    to elevate concerns to bond holders. At least one lower level cure
    notice has been issued to improve performance.
        Secretary Bayer. Issuing cure notices is one of the tools available
    to DON. Cure notices are sent to the project owner, not the bond
    holders. DON would engage the bond holders when the project owner fails
    to remedy issues in a cure notice. Examples of cure notices sent
    include:

          2007 June--NAVFAC HQ SVA letter to American Eagle
    Communities LLC (PACIFICNORTHWEST) to cure Operating Agreement Defaults
          2010 July--NAVFAC PACIFIC letter to Hawaii Military
    Communities LLC on Asset Management Agreement deliverables
          2011 December--NAVFAC HQ SVA letter to Lincoln Military
    Housing LLC on Norfolk Mold plan of action
          2012 January--NAVFAC HQ SVA letter to South Texas
    Military Housing on Development Agreement and Ground Lease potential
    defaults

        Secretary Henderson. Cure notices were issued to four military
    housing privatization initiative projects held by American Eagle early
    in the program for performance failures. American Eagle was not meeting
    its construction obligations during the initial development phase of
    the project. Ultimately, the projects were taken over by a new project
    owner, Hunt.

        12. Senator Reed. Secretary McMahon, Secretary Beehler, Secretary
    Bayer, and Secretary Henderson, what steps are each of you taking and
    what information are you providing to installation commanders to ensure
    they are holding housing companies responsible for timely and high-
    quality service to families?
        Secretary McMahon. As ASD(Sustainment), I am working closely with
    the Military Department Assistant Secretaries who directly oversee
    their respective privatized housing projects to establish near-term,
    mid-term, and long-term actions that the Department needs to take to
    address conditions in privatized housing, to include the need for
    Military Departments to reinstate quality MHPI training for
    installation commanders and housing staff regarding their
    responsibilities so that they are able to provide quality assurance,
    monitor and hold privatized housing projects accountable for providing
    timely, responsive, high-quality service and housing for servicemembers
    and their families. This includes understanding their authority to
    withhold incentive fees and other forcing mechanisms provided for in
    the existing legal deal structures, or to raise significant concerns to
    high leadership, as appropriate.
        Secretary Beehler. In order to re-establish its oversight of
    housing services and maintenance, the Army is re-establishing the
    number of personnel (an increase of 114) across its installations over
    the next two months to ensure that Quality Assurance and Quality
    Control is at or above levels utilized in the early years of the MHPI
    program. We will emphasize and educate our soldiers and families about
    the concerns and health impacts of indoor contaminates, resources
    available, and methods to report potential risks.
        The Army has introduced enhanced quality assurance procedures to be
    conducted by Army Housing careerists that includes:

        a.  Inspection of 100 percent of all homes having completed between
    occupancy maintenance to ensure families are moving into homes that
    have no outstanding maintenance issues
        b.  Physical inspection of 100 percent of all maintenance work
    orders relating to life, health or safety issues.
        c.  Contacting 5 percent of all residents who have had recently-
    completed work orders to determine if they are satisfied with the work
    performed. Army Housing Management staff will visit all of those
    expressing dissatisfaction with the maintenance conducted.
        d.  Hosting quarterly town hall meetings for residents hosted by
    the Garrison Commander and including the MHPI partner attendance and
    participation.
        e.  Establishing a Hot Line phone number which can be accessed by
    any housing resident should they prefer privacy to report any housing
    issue.
        f.  Improving the training plan for Garrison Commanders, DPW staff,
    and Army Housing staff to ensure the appropriate training and
    certifications are obtained.

        Secretary Bayer. On February 22, 2019, the commander, Navy
    Installations Command, directed all installation commanding officers to
    contact 100 percent of PPV residents informing them how to raise issues
    with their homes. Installation Commanding Officers also held town hall
    meetings to hear privatized housing residents' concerns first-hand.
    Within the DON, prospective installation leaders attend senior shore
    leadership training (Navy) and the Installation Leadership Management
    Program training (USMC) that includes a segment on privatized housing.
        Installation housing managers support Installation commanding
    officers and executive officers in overseeing privatized housing. The
    housing installation program manager has the responsibility for
    resolving issues and/or escalating issues and concerns to installation
    leaders. Both Navy and USMC are reviewing their leadership and staff
    training on privatized housing oversight responsibilities and will
    modify this training as appropriate to address recent oversight
    concerns.
        Secretary Henderson. The Air Force is collaborating with our Army
    and Navy counterparts on a Resident's Bill of Rights, to educate
    military residents on their rights when a project owner fails to
    correct health or safety problems. Senior Air Force leadership recently
    issued a letter reiterating and clarifying chain of command
    responsibilities to ensure the safety and welfare of our airmen. We are
    also increasing our current oversight policies and revitalizing local
    commander engagement in the oversight processes. We are reviewing
    manpower in the local Air Force housing management offices to ensure
    commanders have sufficient oversight resources. We will update our
    training on these new processes and oversight tools to the one-on-one
    training we provide commanders on privatized housing when they assume
    command.

        13. Senator Reed. Secretary McMahon, Secretary Beehler, Secretary
    Bayer, and Secretary Henderson, what authorities to installation
    commanders have to exercise oversight and how, if ever, have they been
    used?
        Secretary McMahon. In general, installation commanders have
    authority and responsibility for day-to-day oversight and quality
    assurance regarding housing privatization project compliance with the
    ground lease and associated legal agreements. This includes
    responsibility for assessing project performance against metrics
    defined in the legal agreements, such as responsiveness to resident
    maintenance, and recommendations or approval regarding the withholding
    of any performance fees. The Military Departments, as part of their
    respective oversight programs, are in a better position to provide
    details regarding installation commander oversight authorities and how
    they have been used.
        Secretary Beehler. Each MHPI project has a Ground Lease, which
    denotes specific authorities, including reinforcing the garrison
    commander's inherent responsibility for command and control. The Ground
    Lease also identifies the MHPI partner as responsible for providing
    safe and habitable homes to residents, establishes the provisions for
    default, and the Contract Disputes Act as the method for settling
    disputes. Garrison commanders, as the local military representatives
    for the project, have the responsibility for ensuring compliance with
    the various legal documents covering requirements such as the Davis-
    Bacon Act, Municipal Services, National Historic Preservation Act
    (NHPA), and those authorities included in title 10 of the United States
    Code Sections 2884/2885. Compliance checklists are provided to the
    garrison commander to document and report on their oversight functions
    throughout the year and these are reviewed as part of the annual
    project Compliance Site Visit conducted by higher headquarters.
        Secretary Bayer. Installation commanders have overall oversight of
    the program, and they are the primary advocate for servicemembers and
    their families living in privatized housing on DON installations. They
    are responsible for ensuring privatized housing at their installation
    meets DON and DOD policies and procedures. Installation Commanders
    report to Region Commanders, who are also held responsible for ensuring
    installations in their Region comply with DON and DOD policies and
    procedures.
        Secretary Henderson. All of the Air Force's project documents
    expressly state that commanders retain all of their inherent authority
    to protect the life, health and safety of persons on their
    installations. Additionally, most commanders (32 of 63) have direct
    input and discretion into the performance incentive fees earned as part
    of their oversight and performance feedback. As we work to improve our
    oversight of the program, we will work to reach mutual agreement with
    our project owners to amend those agreements where commander input for
    performance incentive fees is not currently required. Our goal is for
    all 63 of our commanders to provide direct input and feedback into the
    performance incentive fees to be awarded to project owners.

        14. Senator Reed. Secretary McMahon, Secretary Beehler, Secretary
    Bayer, and Secretary Henderson, how many people in each of your
    departments are dedicated to the oversight of MHPI?
        Secretary McMahon. Within my organization, the Office of the Deputy
    Assistant Secretary of Defense for Facilities Management [ODASD(FM)]
    provides oversight for the Military Housing Privatization Initiative.
    One civilian employee with contract support conducts this oversight as
    part of a broader range of duties.
        Secretary Beehler. At the various headquarters levels the Army has
    17 manpower authorizations dedicated to oversight of MHPI. The Deputy
    Assistant Secretary of the Army for Installations, Housing, and
    Partnerships (DASA IH&P) is resourced for 4 manpower authorizations and
    will be hiring one additional full-time employee. OACSIM Privatized
    Housing and Lodging Branch has 9 manpower authorizations. HQ IMCOM has
    4 manpower authorizations. The Army Installation Family Housing offices
    currently have 104 manpower authorizations providing oversight for 49
    MHPI projects. The installations are in the process of hiring
    additional manpower. By the end of May, IMCOM will have an additional
    114 permanent positions filled to perform quality assurance and quality
    control of the 49 MHPI projects.
        Secretary Bayer. The DON has a total of 191 positions dedicated to
    MHPI oversight. For the Marine Corps, there are approximately 46 people
    dedicated to the oversight of MHPI, most of whom are at the region and
    installation levels. The Marine Corps also funds approximately 17
    additional positions at NAVFAC for their support and oversight of the
    business agreements. The Navy has 128 positions that support the MHPI
    program overall; 88 of these positions are at CNIC and are mostly at
    the installation-level; and, 40 positions are funded through NAVFAC for
    additional support and oversight of the business agreements.
        Secretary Henderson. The Air Force has roughly 100 full time
    equivalents dedicated to the oversight of the Military Family Housing
    Privatization Initiative.

        15. Senator Reed. Secretary McMahon, Secretary Beehler, Secretary
    Bayer, and Secretary Henderson, how do each of you ensure that
    privatized housing companies are complying with all environmental,
    health and safety laws and regulations?
        Secretary McMahon. As part of my oversight of the Military Housing
    Privatization Initiative, I've directed my staff to expand their
    monitoring of each Military Department's oversight of its respective
    housing privatization projects. This includes establishing metrics and
    collecting and reviewing data to ensure each Military Department is
    monitoring and ensuring project compliance with environmental, health,
    and safety laws and regulations, consistent with the project legal
    agreements. I defer to the Military Department Assistant Secretaries to
    explain their respective oversight measures.
        Secretary Beehler. The Garrison Commander (GC) is responsible for
    ensuring privatized housing management companies are maintaining on-
    post housing at an acceptable standard of comfort and safety for
    servicemembers and their families through his/her installation support
    staff. The Director of Public Works (DPW) provides the bulk of
    installation support to the GC for environmental, cultural resources,
    safety, and housing.
        The housing manager is responsible to the GC and DPW for all
    housing related issues on-post or as may be brought to them from off-
    post. The housing manager will coordinate with other DPW support staff
    on housing matters such as ensuring the partner environmental
    management plans are reviewed and approved or coordinating with the
    cultural resources offices for historical homes during renovations.
        Secretary Bayer. Private housing partners are required to comply
    with all applicable federal, state, and local laws and regulations,
    including those related to environmental, health, and safety hazards.
    These requirements are generally included in the project ground leases
    and augmented by Environmental Management Plans or other legal
    agreements that are part of the MHPI project deal structure.
        Partners are required to immediately notify the DON Installation
    Housing Office of any resident concern involving asbestos, carbon
    monoxide, lead based paint, radon, security, mold/water infiltration
    and pest infestation. Such environment, health and safety issues are
    documented by our Partners and addressed in accordance with hazardous
    material management plans, emergency/urgent/or routine maintenance
    service calls, depending on the severity and situation, and established
    action plans, including applicable laws and regulations.
        In addition, DON requires the Managing Member to certify on an
    annual basis that:

        The Managing Member is in compliance with the environmental
    requirements contained in the business agreements that are applicable
    to the Managing Member's activities on the leased premises, and that
    the Managing Member has all environmental permits (including air
    permits) or authorizations required for its operations under the ground
    lease or environmental laws.
        2. The Managing Member has developed, implemented and is in
    compliance with all Environmental Management Plans (including, as
    applicable and without limitation, hazardous materials, pesticide
    management, storm water pollution prevention, lead based paint, and
    mold management) required pursuant to the ground lease, and has updated
    such plans from time to time as required by changes to environmental
    laws or at the reasonable request of the government.

        Secretary Henderson. Our housing privatization projects include the
    broad requirement that project owners must comply with all applicable
    laws, which would include all environmental, health, and safety laws
    and regulations. If the Air Force becomes aware of non-compliance with
    a specific environmental, health, or safety law, we immediately engage
    with the project owner and, if necessary, the applicable regulatory
    authority to ensure that the issue is resolved.
        In addition, the local housing management office provides day to
    day oversight to ensure compliance with specific performance
    requirements under the transaction documents, including those relating
    to maintenance and repair of housing units. Monthly reviews are
    conducted at the installation level between project owner and housing
    management office representatives using a compliance checklist.
    Quarterly Management Reviews take place between installation commanders
    and project owners. Annual site visits are conducted by the Air Force
    Civil Engineer Center to include review of all compliance checklists.
        When necessary, senior Air Force leadership may engage project
    owners at corporate levels, withhold performance incentive fees, engage
    enforcement agencies, issue cure notices for performance failures, and
    initiate other formal dispute actions.

        16. Senator Reed. Secretary McMahon, Secretary Beehler, Secretary
    Bayer, Secretary Henderson, Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, what legal recourse options do families have
    when they cannot resolve an issue with their housing and how often have
    you seen families exercise these options?
        Secretary McMahon. Military families living in privatized housing
    are encouraged to report housing concerns to the privatized housing
    property manager, and then the government housing office on the
    installation, but they always have the option to elevate concerns to
    their installation commander or the Inspector General. The military
    legal office at their installation can help provide guidance regarding
    their legal options depending on the issue of concern. The Military
    Departments, as part of their respective oversight programs, can
    provide specifics in response to this question.
        Secretary Beehler. Army leadership and chain of command are
    responsible for ensuring residents are satisfied with their housing.
    Dissatisfied residents have several avenues for recourse, including
    submitting complaints through Army leadership, their chain of command,
    the installation housing hot line, the Army housing office, or the MHPI
    partner.
        We will continue to strongly encourage residents to take advantage
    of this process, as their satisfaction is the goal of the Army and our
    partners. Our military or civilian tenants have the same protection
    available to anyone living on the local rental market under the Fair
    Housing Act without having to face any fear of reprisals. Finally, if a
    family is unable to resolve an issue with a privatized housing company,
    they can bring legal action in a state or federal court that has
    jurisdiction over the parties. The Army has not tracked such litigation
    but is aware that such litigation has occurred several times in the
    past.
        Secretary Bayer. Complaints arising out of PPV partner concerns are
    adjudicated in accordance with processes defined in the PPV/tenant
    agreement. A dispute is between the tenant and the landlord, the PPV
    partner. Legal Assistance attorneys assigned to DON Legal Service
    Offices are authorized to provide eligible PPV tenants with the same
    scope of services currently offered to eligible legal assistance
    beneficiaries engaged in housing disputes with non-PPV entities. These
    services include advising, consulting with, and negotiating on behalf
    of eligible tenants in PPV housing.
        Secretary Henderson.

          The housing management office is the primary interface to
    assist residents in disputes with the project owner. This occurs on a
    daily basis.
          Residents may also seek their commander's support, who
    can independently exercise command authorities to ensure the health,
    welfare, safety, or security of Air Force families. This occurs when
    the housing management office has not been able to resolve the dispute
    with the project owner.
          The local housing management office or commander may
    elevate the dispute to the Air Force Director for Installations at the
    Air Force Civil Engineer Center, which may lead to direct engagement
    with the project owner at the corporate level and the use of informal
    and/or formal dispute process. This may include issuing cure notices,
    withholding performance incentive fees, and developing corrective
    action plans. It is rare for a resident to directly raise a concern to
    this level, but our addition of a toll free number to reach the Air
    Force Civil Engineer Center will likely change this paradigm.
          Residents can raise a complaint with federal, state, and
    local enforcement agencies. Projects have had ``no-notice'' inspections
    of lead-based-paint'' programs brought on indirectly by resident
    complaints raised through the media.
          Tenants can independently take legal action in accordance
    with the tenant lease agreement and seek advice from the local base
    legal assistance office. We are aware of residents at four
    installations that have exercised their legal options and secured
    counsel at Tinker, Keesler, Los Angeles and MacDill Air Force Bases.

        The Air Force Judge Advocate General has provided guidance to legal
    offices to educate tenants about the services available through
    military legal assistance, tenants' rights under leases and state law,
    and the process for filing claims.
        Mr. Williams. Residents are able to address housing issues with the
    local housing management office/housing office administered by the
    service branches which oversee and monitor MHPI housing and/or with
    their local command. In addition, residents are able to raise legal
    concerns with their local legal assistance/JAG office or through the
    engagement of a private attorney. In addition, residents may file
    lawsuits against the landlord/project owner and property manager under
    relevant state and local law.
        Mr. Picerne. If a resident is dissatisfied with how a housing issue
    is being addressed by Corvias staff at the project, they are encouraged
    to contact our corporate leadership at our corporate office. Our
    military partners are also encouraged to bring housing related issues
    to their respective housing office, or installation/base leadership. If
    neither of those avenues result in resolution satisfactory to the
    resident, the resident may seek recourse through the appropriate legal
    avenues by (i) working with the military's lawyers, (ii) retaining a
    private lawyer, and/or (iii) filing a lawsuit.
        Mr. Ehle. In the event that a resident has a complaint or dispute
    with the landlord, the resident can follow the dispute resolution
    procedures outlined in their lease, handbook, and resident guidelines.
    Hunt interacts with its residents via these procedures on a regular
    basis. Under the current procedures:

          The resident should raise the complaint or dispute with
    the neighborhood property management office.
          If the resident feels that the issue has not been
    adequately resolved by the neighborhood property management office, the
    matter will be immediately raised to the Landlord's Community Director.
          The resident may request a meeting with the Community
    Director and Housing Military Office (``HMO'') to present their concern
    or dispute.
          If the resident feels that the issue has not been
    adequately resolved, HMO will elevate the request to the Installation
    Commander (``IC''). The HMO, IC, and the Landlord's Director of
    Operations will evaluate the issue and seek to resolve it within 30
    days. The Landlord will notify the resident in writing of the final
    decision.
          If a resident is not satisfied, he or she may, at any
    time, seek to enforce his or her legal rights under the lease agreement
    as well as applicable law and standards. The resident may also retain
    independent legal counsel.

        We are also working with our military partners to develop a
    consistent approach to the MHPI experience, including uniform lease
    agreements, resident guidelines, a Resident Bill of Rights and
    Responsibilities, and a uniform dispute resolution process that could
    be invoked by the landlord or the resident and would be incorporated as
    an addendum to the Resident Lease Agreement. We expect to seek the
    input of our residents before any proposal is adopted.
        Mr. Hickey. Residents can elevate their concerns in the first
    instance through several channels including;

          the Projects local Community Managers (responsible for
    the management of their neighborhood) as the first point of contact,
          then in escalation, Property Management Directors (who
    oversee the whole project).
          Additionally, Lendlease Project Directors at each site
    (overall responsibility for the entire Privatization on an
    installation) are directly and immediately accessible to residents.
          Further, the Government partner's local installation
    housing office, and military chain of command are other avenues for
    residents to raise their concerns,
          Resident lease agreements also have a mediation clause, a
    mechanism that residents can employ to formally seek and enter
    mediation via an independent arbiter. In Lendlease's experience, it is
    a very rare occurrence where residents use this facility
          Generally, local State courts resolve landlord tenant
    issues, but there are some State courts who shy away from issues
    related to federal jurisdiction matters.

        Lendlease is currently revisiting this structure, to implement a
    more effective complaints/arbitration process for residents and this is
    currently being finalized with the respective military partners.
        Mr. Bliss. Families are able to legally enforce the terms of their
    resident lease through the local court systems. Although some residents
    have sought this recourse, LMH strives to resolve all issues with our
    residents before they feel that court proceedings are necessary. A
    critical component to effective resolution is communication. While we
    believe we provide quality housing to military families, LMH is
    exploring new ways to communicate with residents about service issues,
    especially mold prevention and remediation. While we encourage families
    to utilize the escalation process to ensure issues are resolved to
    their satisfaction, we never want a family to feel that they have to go
    somewhere else to have their concern heard. LMH commits to doing more
    to foster better lines of communication with residents. We welcome each
    residents' input into how we can improve our responsiveness to their
    concerns in a productive way. LMH has been working collaboratively with
    one of the military families that testified at the February 13 SASC
    hearing to develop reforms which will improve the experience of
    military families. We understand the urgency with which we must act to
    regain the trust of our servicemember families, and we look forward to
    working with SASC and our DOD partner to ensure a great living
    experience for our men and women in uniform and their families.

        17. Senator Reed. Secretary Beehler, what have been residents'
    response to the Army's efforts over the past six months to address
    concerns about lead-based paint in family housing?
        Secretary Beehler. Resident responses have generally been positive
    over the last six months. Some feedback has been that residents are
    appreciative about the response to their concerns, are pleased with how
    the remediation is being managed, and the education provided by Army
    and Partner sources has been an eye-opener. Most families welcomed the
    Army's additional inspection of their homes by EPA-certified staff as
    well as the sharing of the inspection results.
        We received a few negative responses where a couple of partners did
    not confirm the visual findings with testing before they remediated the
    areas identified and some residents noted the appearance of a lack of
    urgency in mitigating the areas of visual findings identified during
    the inspections.

        18. Senator Reed. Secretary Beehler, how does the Army justify a 10
    percent sampling of homes as an ``enhanced'' review and what is the
    Army doing to ensure all problems are being addressed, given the 60
    percent hit rate at just those 10 percent of homes?
        Secretary Beehler. The Army inspected Army-owned, privatized, and
    leased homes in response to concerns of environmental hazards in Army
    housing. USACE recommended the Army identify a random sample of pre-
    1978 homes with children 6 years of age or younger as this group is
    considered at higher risk by EPA. This 10 percent sample was the focus
    of the USACE effort.
        The visual assessments were simply a snapshot in time of
    conditions. USACE did not see a value in more visual inspections beyond
    the first phase. USACE concluded the Army and the RCI Project Companies
    have procedures in place to manage hazards in the interior of the homes
    between occupants. Due to these procedures, USACE's review of the
    inspection results found little to suggest a risk to current occupants
    on the interior of the homes as long as encapsulated lead-based paint
    was not compromised.
        USACE recommended the Army implement a robust monitoring program to
    manage potential hazards, address concerns identified during the visual
    inspections, regular interior and exterior inspections, establish and
    track inspections in Defense Occupational & Environmental Health
    Readiness System--Industrial Hygiene (DOEHRS-IH), and foster an
    understanding of potential environmental hazards in housing through
    resident education as well as housing and garrison staff.

        19. Senator Reed. Secretary Beehler, many families at Fort Bragg
    have reportedly signed a petition demanding improvements to their
    housing. Have those issues been addressed, and if so, how have they
    been addressed?
        Secretary Beehler. Army staff and Fort Bragg are aware of the
    petition and are working to address issues reported by residents. The
    Army is fully committed to taking care of soldiers and families and
    will thoroughly investigate all reported concerns.

        20. Senator Reed. Secretary McMahon, the Department's program
    evaluation report to Congress on MHPI is consistently late. For
    example, the report covering 2014 to 2016 was not delivered to Congress
    until the end of September 2018. Why are these MHPI evaluation reports
    so late and going forward do you commit to having them delivered on
    time?
        Secretary McMahon. We acknowledge the delays in providing the
    Department's program evaluation report to Congress, primarily due to
    resource constraints. However, we are implementing streamlined data
    collection and verification processes to expedite submission of this
    report in the future.
                                   __________
               Questions Submitted by Senator Richard Blumenthal
                           private housing companies
        21. Senator Blumenthal. Mr. Williams, Mr. Picerne, Mr. Ehle, Mr.
    Hickey and Mr. Bliss, the Military Family Advisory Network reported a
    disconnect between the experiences of military families in privatized
    housing, and company reports of resident satisfaction. Why is this
    disconnect so stark, and how do your companies plan to address it?
        Mr. Williams. BBC agrees that the data resulting from these two
    sources raises questions. The MHPI projects, together with the military
    services, engage a third party survey organization, CEL, which is
    professionally accredited to conduct surveys and to provide analysis of
    the data.
        There are stringent controls used by the third party to ensure that
    there are not duplicate responses by any one party; and are based on a
    strong forensic program to review response anomalies. Conversely, the
    Military Family Advisory Network performed a survey without any of
    these controls and without a formal analysis program.
        Mr. Picerne. The military service branches and the private partner
    firms engage independent, unbiased third party professional survey
    firms to conduct resident satisfaction surveys. By contrast, the
    Military Family Advisory Network (MFAN) is not an unbiased third party,
    nor is it a professional survey firm that can/should be counted on to
    create or administer resident satisfaction surveys. MFAN is a non-
    profit that was founded by a for-profit marketing and communications
    firm (Reingold) that pushes social media campaigns. The MFAN survey was
    flawed because (i) it was a completely ``open'' survey, meaning anyone
    could go on line and complete the survey, whether they lived in on-base
    military housing or not, ad (ii) there was no limit to the number of
    times someone could complete the survey.
        Mr. Ehle. Communication is an area that Hunt can improve with its
    residents. We understand that when residents report maintenance issues,
    keeping them informed of the maintenance response plan and process is
    empowering and makes them an integral part of the process. As with
    other areas, when we fall short in our communication goals, we take
    steps to fix it. As noted in response to question 1 above, we have
    recently undertaken to provide refresher or enhanced communication
    training for key personnel within the Hunt organization to improve our
    future communication efforts.
        Hunt cannot speak to the methodology used by the Military Family
    Advisory Network in conducting its survey or the validity of its
    reported results. Nevertheless, any time Hunt's performance falls
    short, Hunt takes action. We are committed to being responsive to the
    needs and concerns of our residents suggested by the survey report and,
    in particular, have continued to work directly with the affected
    families to address the issues they raised.
        Mr. Hickey. The MFAN survey lacks transparency to determine the
    valid authenticity of survey results. When the survey results were
    released there was, and still is, no transparency around the basic
    survey controls.

          Anyone could complete the survey multiple times (allowing
    distortion/manipulation)
          Anyone with the survey link could complete a survey,
    regardless of their connection to MHPI housing.

        Based on the information Lendlease has received, MFAN received
    16,779 completed surveys (8.8 percent response rate assuming one survey
    per MHPI household-assuming one survey per person, which cannot be
    confirmed). This is compared to 82,170 received by CEL (43.2 percent
    response rate). CEL provides one survey link to and accepts one survey
    response from each MHPI household (190,006 surveys distributed in
    2018). That is why Lendlease credits the results of the CEL survey over
    those from the MFAN survey.
        For additional information on the background of each survey and
    disparities between the two, please see the attached CEL & Associates,
    Inc.'s Military Housing Partner Briefing to Hon. Robert McMahon from
    March 8, 2019.
        Mr. Bliss. LMH is not familiar with the survey process utilized by
    the Military Family Advisory Network and so is unable to speculate on
    whether those survey results are accurate or on the specific reasons
    for the difference in results from surveys conducted of LMH's
    residents. LMH believes that the best way to resolve any confusion
    regarding the level of satisfaction with military family housing would
    be to initiate a carefully monitored survey conducted by a third-party
    service provider across all military branches.

        22. Senator Blumenthal. Mr. Williams, Mr. Picerne, Mr. Ehle, Mr.
    Hickey and Mr. Bliss, who provides oversight of housing management and
    maintenance? Is oversight primarily conducted by your companies, or by
    various military services?
        Mr. Williams. The Department of Defense and relevant branch of
    armed service for our MHPI projects regularly monitor and assess our
    performance and adherence to MHPI project agreements, including housing
    management and maintenance. While the types of processes vary by armed
    service branch, each have implemented a variety of weekly, monthly,
    quarterly, semi-annual, annual and ad hoc forms of review and
    reporting. With respect to BBC, organizationally we maintain: (i) local
    on-site community and facility managers who oversee leasing
    administration and facilities maintenance staff; (ii) regional
    community managers and regional facility managers who oversee local
    project staff within their assigned region; (iii) Vice Presidents who
    monitor the regional and local staff and report directly into senior
    management executives at BBC's corporate office; and (iv) senior and
    executive level management which monitors the entire MHPI portfolio,
    and includes subject matter experts dealing with operations, training,
    legal/compliance, and health, safety and environmental training and
    administration.
        While day-to-day oversight of the housing operations is
    administered and managed by BBC (by design and purpose of the MHPI
    program), BBC views each of its housing projects as true partnerships
    with the service branches. The service branches (i) receive monthly,
    quarterly and annual reports from BBC regarding project operations,
    (ii) review and approve annual project budgets, including capital
    repair/replacement plans with respect to the housing operations, (iii)
    frequently hold ``partner'' meetings with BBC and other developers to
    discuss and address relevant topic affecting the MHPI program; and (iv)
    perform their own review, assessment and inspections of housing
    operations, housing conditions, resident survey results, and compliance
    with law and MHPI project agreements.
        Mr. Picerne. On our military housing partnership projects,
    oversight is provided by representatives of both parties to the
    partnership--Corvias and either the Departments of the Army and the Air
    Force.
        For the military service branch partner, oversight is provided at,
    both at the local installation/base level and at the Pentagon level,
    through a combination of uniformed and civilian staff as well as third
    party consultants who are engaged in a variety of expert capacities.
    For Corvias, oversight is provided at both the local installation and
    corporate level. In addition, the partnerships engage independent third
    parties for a variety of oversight and inspections, including
    construction code compliance, financial compliance, and health and
    safety compliance.
        Mr. Ehle. Our military partners have multiple controls in place to
    oversee and monitor Hunt's performance, and we encourage such
    engagement. Hunt is subject to reporting and inspection requirements
    that occur on weekly, monthly, quarterly and annual bases. Our military
    partners have access to our maintenance software, Yardi, and can review
    work orders and survey responses. They are also able to inspect homes
    and follow up directly with residents. Each of our military partners
    has its own unique requirements for reporting and inspection. Please
    see the response to question 107 below for additional detail.
        Mr. Hickey. At the program level, the first line of military
    oversight is the Local Installation Housing Office. These military
    housing professionals are coordinating daily with the installation and
    the Project Company and report performance up through their chains of
    command. Housing offices for all service branches, report to both the
    installation command and the Service's installations management
    authority, each of which oversee Project Company performance.
        The respective Military Services retain governance oversight and
    control over all major decisions impacting each Project Company. This
    is formalized in the contractual rights outlined in the various project
    documents. Lenders, bondholders and others with financial interests
    also exercise a high degree of control over the Project Companies'
    operations (including scope changes and financial investments of
    Project Company funds, for example) and have significant rights under
    the financing documents.
        In addition to monitoring and oversight conducted by the Military
    Services through contractual agreements and processes, independent
    construction consultants provide oversight on major property
    development and construction activities, including independent review
    and approval of construction progress and pay applications. The Project
    Companies' assets and operations are also subject to inspection by
    Federal, Military Services and certain State regulatory authorities.
        Mr. Bliss. There are many monitoring and oversight mechanisms built
    into each of our PPV business agreements. Our DOD partners regularly
    monitor and assess our performance and adherence to the various PPV
    business agreements. The PPV documents outline a number of financial,
    legal, environmental and governmental reporting controls that govern
    the operation of the PPVs. These controls include, but are not limited
    to: (a) government approval of major decisions; (b) government approval
    of annual operating and renovation budgets; (c) government review of
    financial information, occupancy reports, service request summaries,
    and reserve account funding activity; and (d) government assessment of
    community appearance and property manager's performance. A portion of
    our compensation for services depends upon our satisfactory completion
    of our work. Below we list some of the ways in which the provisions for
    oversight included in the PPV business agreements are put into action
    on a day-to-day basis:

          Government partner access to resident service records:
    The Departments of the Navy and Army have each been afforded 24-hour/7-
    days a week online access to the Yardi System (i.e., LMH's property
    management tracking software). This access allows the DOD partner to
    view resident data, including but not limited to resident service
    request status/completion, make-ready status/completion, and comments
    regarding resident satisfaction. The Yardi System also allows the DOD
    partner to filter for service related to various specific areas of
    concern including mold-related service requests. In addition to being
    tracked in and available to the DOD partner through the Yardi System,
    separate notification is provided to the applicable military branch
    partner for any resident displacements.

          Government inspection of PPV property: The DOD partner
    conducts announced and unannounced inspections of the PPV's housing
    communities. The applicable military branch partners also have the
    right to inspect any housing unit with minimal advance notice (for
    occupied units, the resident must be present in the unit for said
    inspection to occur).

          Financial information shared with government: Each PPV
    provides the applicable military partner monthly ``Flash Reports''
    (Navy/Marine Corps) or ``Dashboards'' (Army) that summarize occupancy
    levels, expenses (detailed variance analysis), performance with regard
    to completion of resident service requests and completion of turn-over/
    make ready units, reserve account funding, etc. In addition, each PPV
    provides quarterly reporting to the applicable service branch, which
    includes construction activity updates, reporting on Flag/Executive
    housing units, operational highlights and other items as may be
    requested by the applicable military partner. Detailed budget
    submissions (both operating and capital) are presented to the
    applicable military partner annually for their approval. Annually, each
    of the PPVs' updated 5-year plans are reviewed by the applicable
    military partner. The applicable military partners also receive copies
    of the annual financial audits, monthly account reporting to the
    Trustees (inflows and outflows of various accounts related to the PPVs)
    and monthly financials which are also sent to Bondholders, Trustees and
    Credit Providers for the applicable PPVs.

          Meetings between the Government and Private Partner:
    There are scheduled as well as informal meetings (in person or via
    conference call) that occur on a weekly to monthly basis with
    Headquarters, Regions (Federal personnel, Flags), Bases, NAVFAC (Navy
    Partner), and the Army.

          Specific Navy reporting includes, but is not limited to:
    Based upon findings and inspections, the Navy submits monthly,
    quarterly and annual reports to the applicable oversight divisions
    within the Navy (LANT and SVA) which oversee the entire privatized
    housing program. In addition, a Monitoring Matrix (oversight of all
    aspects of the applicable PPV, including property inspections) is
    continually updated and presented/completed annually to/by LANT and
    SVA. A breakdown of these reports is as follows:

            Monthly Operating Reports

            Quarterly Operating Reports

            Annual Program Evaluation Reports (Congressional
    report)

            Condition Assessments--environmental and property
    management review via regular neighborhood visits

            Monitoring Matrix--ongoing annual report on property
    management, development, financial, and environmental oversight

            YARDI access by Navy Partner

            Service branch notifications on all resident
    displacements

            Local Navy housing representatives on site at all
    installations for day-to-day oversight

            Navy ad-hoc site visits to check on the specific issues
    for the properties

            Annual Resident Satisfaction Surveys

            Ongoing case-by-case interpretation and compliance with
    all PPV obligations

          Specific Army reporting includes, but is not limited to:

            Daily--Army verifies a sampling of work (inspecting)
    for move-in and move-out inspections, make ready, and renovations.

            Weekly--Army verifies a sampling, via phone calls,
    residents' maintenance satisfaction, move-in satisfaction, move-out
    satisfaction, and office service satisfaction. Army also verifies
    renovations, a sampling of lead based paint repairs, and capital work.
    LMH meets at least weekly, and often daily, with Army (RCI) regarding
    any issues that arise.

            Monthly--Army performs neighborhood drive through and
    walks, Davis-Bacon wage inspections, and renovation inspections. Army
    consultant, Jones Lange LaSalle (JLL), and analysts for the Army's
    Office of the Assistant Chief of Staff for Installation Management
    (ACSIM), review applicable PPV reports and financials. Army/
    Installation Management Command (IMCOM) and ACSIM review all monthly
    ``Dashboard Reports'' delivered to Army (RCI).

            Quarterly--Army performs maintenance shop inspections
    and reviews results from the J. Turner Resident Satisfaction Survey.
    Army, IMCOM, and ACSIM review the Portfolio Asset Management report.
    Incentive fee submissions are reviewed by RCI, ASA and the Garrison
    Commander before approval. Additionally, a quarterly Portfolio
    Evaluation Report/Plan monitoring matrix (highlights project progress
    and status during the relevant period) is prepared for the Army.

            Annual--Army conducts separate project site visits by
    Army representatives, and the IMCOM/ASA and United States Army Corps of
    Engineers (USACE) conduct ground lease inspections. Annual CEL Army
    survey is conducted. Annual Army survey by IMCOM/ACSIM is performed.
    Annual budgets are reviewed and approved by Army, IMCOM, ACSIM, and
    JLL.

            Every 2 years--Army performs a wounded warrior home
    inspection.

          Environmental Oversight:

            Navy: Annually, each PPV submits an Environmental
    Disclosure Report (called the ``LLC Environmental Submittal'') to
    NAVFAC, which summarizes environmental permits, any notices of
    violations received from regulatory agencies, any spill incidents,
    abatement projects, copies of any updated environmental plans, and
    other information concerning radon, pesticides, and cultural resources
    for the year. In addition, annually, the Navy performs a condition
    assessment, which includes and environmental oversight inspection of
    representative properties in each PPV. The Navy checks for complete/
    accurate tenant lease addenda relating to environmental conditions,
    water intrusion ticket spot checks, environmental plans/updates, and
    completes a visual inspection of the hazardous materials storage areas.
    The Navy includes this information in their overall condition
    assessment reporting.

            Army: The JBLM and Fort Sam PPVs fall under the base's
    environmental program relating to hazardous materials management and
    are inspected regularly. The JBLM and Fort Sam PPV management plans
    require particular oversight for property management and development,
    which include various inspections by the Army. The Army follows an
    inspection checklist to monitor make ready, work orders, development/
    capital activities and property inspections based on our management
    plans. Our PPVs are also subject to the oversight of and regulation by
    other Federal, state, and local authorities. For example, if there is
    an environmental permit in place, the applicable local/state/Federal
    agency may inspect according to the requirements of the permit. In
    addition, if an ACM or LBP abatement project is underway, the
    regulating agency may come to inspect at their discretion.

             Beyond government oversight, LMH proactively takes steps to
    ensure it is using best practices with regards to environmental
    compliance. These steps include, without limitation: (a) annual
    environmental training for all maintenance and management staff; (b)
    maintenance center inspections by construction/LMH environmental
    services department at least twice annually; (c) annual visual
    inspection of at least 10 percent of housing units with LBP/ACM; and
    (d) third-party consultant oversight of projects involving LBP/ACM.

        Oversight of the project is primarily conducted by the PPV and its
    contractors, but our military partner plays an active role in oversight
    as well.

        23. Senator Blumenthal. Mr. Williams, Mr. Picerne, Mr. Ehle, Mr.
    Hickey and Mr. Bliss, when military families lodge complaints or
    request maintenance assistance, how long does it take for complaints to
    be addressed?
        Mr. Williams. Once a work order request made by a resident is
    received, BBC staff respond to it based on the appropriate service
    level priority (emergency, urgent, routine). Based on the service level
    priority assigned, generally a response must be addressed within one
    hour for emergency matters, within four hours for urgent matters and
    within 8 business hours for routine matters.
        With regard to work order requests placed by residents after
    regular business hours, we assign ``on-call'' duty to BBC maintenance
    staff to ensure an appropriate response regardless of the time of day.
    It is BBC's policy that all emergency and urgent work order requests
    made by residents also receive a follow-up satisfaction call.
        Mr. Picerne.

    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Emergency 1              Emergency 2             Emergency 3               Urgent                  Routine
                                   -------------------------------------------------------------------------------------------------------------------------
                                                  Expected     Response    Expected    Response    Expected    Response    Expected    Response    Expected
                                     Response    Completion      Time     Completion     Time     Completion     Time     Completion     Time     Completion
                                    Time (Hrs)   Time (Hrs)     (Hrs)     Time (Hrs)    (Hrs)     Time (Hrs)    (Hrs)     Time (Hrs)    (Days)   Time (Days)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    APG...........................  1           24            4          24           8          24           72         72           3          10
    Ft. Bragg.....................  1           24            4          24           8          24           48         48           3          6
    Ft. Meade.....................  1           24            4          24           8          24           48         48           3          10
    Ft. Polk......................  1           24            4          24           .........  ...........  48         48           3          6
    Ft. Riley.....................  1           24            4          24           8          24           72         72           3          10
    Ft. Rucker....................  1           24            4          24           8          24           72         72           3          10
    Ft. Sill......................  1           24            4          24           8          24           72         72           3          10
    --------------------------------------------------------------------------------------------------------------------------------------------------------

        Mr. Ehle. Resident reports and requests are assigned into one of
    three categories: emergency, urgent, or routine. On average, Hunt
    responds to emergency reports or requests within one hour, urgent
    reports or requests within four hours, and routine reports or requests
    within three days. Hunt emphasizes, however, that these numbers are
    rough averages and that response times vary on a case-by-case basis.
        Resident reports and requests are assigned into one of three
    categories: emergency, urgent, or routine. Hazards to health and safety
    are treated as emergencies.
        Mr. Hickey. As stipulated in project business agreements, property
    management is required to respond to service order requests within a
    specific amount of time by service order category: Emergency, Urgent,
    or Routine. Service orders are opened upon receipt and remain open
    until all work has been completed (which spans response to and
    ``arresting'' the initial issue as well as all subsequent and follow-on
    requirements). These response and completion times are typically:
           Emergency: Response within 1 hour, Completion--Service orders
    remain open until full completion of the original issue prompting the
    emergency as well as all follow-on and subsequent requirements.
           Urgent: Response within four (4) to twenty-four (24) hours
    (depending on operating documents of the project), Completion--Service
    orders remain open until full completion of the original issue
    prompting the urgent call as well as all follow-on and subsequent
    requirements.
           Routine: Response is typically three (3) to five (5) days
    (depending on the operating documents of the project), Completion--
    Typically within three (3) to ten (10) days (depending on the operating
    documents of the project).
        In 2018, the on-time response rate was 95 percent and the on-time
    completion rate was 97 percent.
        Mr. Bliss. As soon as a call comes in, the work order is classified
    as either Emergency, Urgent, or Routine. Any call relating to health
    and safety is classified as an Emergency and is responded to within 30-
    minutes. Any call that is classified as Urgent is responded to within
    4-hours, and any call that is classified as Routine is responded to
    within 24-hours. The average completion time for a maintenance issue is
    one (1) day.

        24. Senator Blumenthal. Mr. Williams, Mr. Picerne, Mr. Ehle, Mr.
    Hickey and Mr. Bliss, do customers have a means to track their requests
    and work orders?
        Mr. Williams. Residents are able to submit, manage and track
    service requests and work orders online or through a mobile app.
        Mr. Picerne. Corvias is in the process of introducing a new
    property management software that includes ways for residents to track
    their work order requests, including an app that will greatly improve
    the residents' ability to submit and track work order requests remotely
    using an app on their electronic devices such as mobile phones.
        Mr. Ehle. When a resident calls in or submits a maintenance request
    online, the resident is provided with a work order number. Residents
    can call or email their property management office to obtain a status
    update on the work order. Residents are also able to access the work
    order history pertinent to their home from the time of their initial
    move-in through the time they move out.
        Hunt is in the process of testing solutions that would allow
    additional means by which residents can check the status of a work
    order. For example, we are testing a mobile application that would
    enable residents and maintenance personnel to track a work order or
    other maintenance request in real-time on their mobile devices.
        Mr. Hickey. As mentioned in response to question 8, Residents can
    utilize the Military Cafe app and online portal on the property website
    to submit work order requests and track their progress. Residents have
    access to work order status, completion information, and details about
    the work order.
        Mr. Bliss. Yes. Families are able to track their work order
    histories online.

        25. Senator Blumenthal. Mr. Williams, Mr. Picerne, Mr. Ehle, Mr.
    Hickey and Mr. Bliss, what is the average timeline to address housing
    concerns?
        Mr. Williams. Once a work order request made by a resident is
    received, BBC staff respond to it based on the appropriate service
    level priority (emergency, urgent, routine). Based on the service level
    priority assigned, generally a response must be addressed within one
    hour for emergency matters, within four hours for urgent matters and
    within 8 business hours for routine matters.
        With regard to work order requests placed by residents after
    regular business hours, we assign ``on-call'' duty to BBC maintenance
    staff to ensure an appropriate response regardless of the time of day.
    It is BBC's policy that all emergency and urgent work order requests
    made by residents also receive a follow-up satisfaction call.
        Mr. Picerne.

    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Emergency 1              Emergency 2             Emergency 3               Urgent                  Routine
                                   -------------------------------------------------------------------------------------------------------------------------
                                                  Expected     Response    Expected    Response    Expected    Response    Expected    Response    Expected
                                     Response    Completion      Time     Completion     Time     Completion     Time     Completion     Time     Completion
                                    Time (Hrs)   Time (Hrs)     (Hrs)     Time (Hrs)    (Hrs)     Time (Hrs)    (Hrs)     Time (Hrs)    (Days)   Time (Days)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    APG...........................  1           24            4          24           8          24           72         72           3          10
    Ft. Bragg.....................  1           24            4          24           8          24           48         48           3          6
    Ft. Meade.....................  1           24            4          24           8          24           48         48           3          10
    Ft. Polk......................  1           24            4          24           .........  ...........  48         48           3          6
    Ft. Riley.....................  1           24            4          24           8          24           72         72           3          10
    Ft. Rucker....................  1           24            4          24           8          24           72         72           3          10
    Ft. Sill......................  1           24            4          24           8          24           72         72           3          10
    --------------------------------------------------------------------------------------------------------------------------------------------------------

        Mr. Ehle. Resident reports and requests are assigned into one of
    three categories: emergency, urgent, or routine. On average, Hunt
    responds to emergency reports or requests within one hour, urgent
    reports or requests within four hours, and routine reports or requests
    within three days. Hunt emphasizes, however, that these numbers are
    rough averages and that response times vary on a case-by-case basis.
        Mr. Hickey. As stipulated in project business agreements, property
    management is required to respond to service order requests within a
    specific amount of time by service order category: Emergency, Urgent,
    or Routine. Service orders are opened upon receipt and remain open
    until all work has been completed (which spans response to and
    ``arresting'' the initial issue as well as all subsequent and follow-on
    requirements). These response and completion times are typically:
           Emergency: Response within 1 hour, Completion--Service orders
    remain open until full completion of the original issue prompting the
    emergency as well as all follow-on and subsequent requirements.
           Urgent: Response within four (4) to twenty-four (24) hours
    (depending on operating documents of the project), Completion--Service
    orders remain open until full completion
        of the original issue prompting the urgent call as well as all
    follow-on and subsequent requirements.
           Routine: Response is typically three (3) to five (5) days
    (depending on the operating documents of the project), Completion--
    Typically within three (3) to ten (10) days (depending on the operating
    documents of the project).
        In 2018, the on-time response rate was 95 percent and the on-time
    completion rate was 97 percent.
        Mr. Bliss. As soon as a call comes in, the work order is classified
    as either Emergency, Urgent, or Routine. Any call relating to health
    and safety is classified as an Emergency and is responded to within 30-
    minutes. Any call that is classified as Urgent is responded to within
    4-hours, and any call that is classified as Routine is responded to
    within 24-hours. The average completion time for a maintenance issue is
    one (1) day.

        26. Senator Blumenthal. Mr. Williams, Mr. Picerne, Mr. Ehle, Mr.
    Hickey and Mr. Bliss, is there a system to triage these complaints
    based on urgency and severity?
        Mr. Williams. Once a work order request made by a resident is
    received, BBC staff respond to it based on the appropriate service
    level priority (emergency, urgent, routine). Based on the service level
    priority assigned, generally a response must be addressed within one
    hour for emergency matters, within four hours for urgent matters and
    within 8 business hours for routine matters.
        With regard to work order requests placed by residents after
    regular business hours, we assign ``on-call'' duty to BBC maintenance
    staff to ensure an appropriate response regardless of the time of day.
    It is BBC's policy that all emergency and urgent work order requests
    made by residents also receive a follow-up satisfaction call.
        Mr. Picerne. On a quarterly basis our teams summarize all work
    orders submitted, broken down by category, and analyze a) if there are
    recurring issues that need to be addressed, b) if there are any
    challenges with response times related to particular issues and/or work
    order categories, and c) determine how we introduce process
    improvements in our work order response.
        Mr. Ehle. Resident reports and requests are assigned into one of
    three categories: emergency, urgent, or routine. Hazards to health and
    safety are treated as emergencies.
        Mr. Hickey. As discussed in response to question 23, all service
    orders are assigned a response category of Emergency, Urgent or Routine
    based on the severity and nature of the issue. There are guidelines
    that identify the appropriate classification of each service order.
        Mr. Bliss. Yes. We prioritize the work orders in order of urgency,
    based on the substance of each request. As soon as a call comes in, the
    work order is classified as either emergency, urgent, or routine. Any
    call relating to health and safety is classified as an emergency and is
    responded to within 30-minutes.

        27. Senator Blumenthal. Mr. Williams, in your testimony, you state
    that Balfour Beatty invites ``local Army, Navy, and Air Force housing
    partners to accompany our staff when inspecting the home to ensure any
    problems are being adequately addressed with input from the Service
    partners.'' How often do service partners conduct this oversight?
    Should the military services be required to accompany your staff when
    surveying housing conditions?
        Mr. Williams. A chart identifying monitoring and assessment
    processes, shown by armed service branch, is provided along with this
    letter.
        BBC welcomes active participation by the military services in the
    surveying of housing conditions at its MHPI project locations. See
    Exhibit A which identifies active monitoring and assessment procedures
    currently employed by the military services. Retained in Committee
    files.

        28. Senator Blumenthal. Mr. Williams, in your testimony, you also
    mention that Balfour Beatty has created the position of Resident
    Engagement Specialist to provide customer engagement and ensure
    residents are receiving responses to questions and concerns. When was
    this position created, and what kind of outreach was conducted to make
    sure that military families are aware of the support available to them
    by the Resident Engagement Specialist?
        Mr. Williams. The Resident Engagement Specialist position was
    created by BBC in January 2019. The first formal hiring and staffing of
    this position occurred in February at West Point. BBC is currently
    recruiting and hiring Resident Engagement Specialists at its properties
    around the country with a goal to drive greater resident communications
    and satisfaction. When this position is staffed an email announcement/
    introduction is sent to each resident and also posted to our Facebook,
    which indicates how residents may contact the Resident Engagement
    Specialist directly (such as via email and telephone). This position is
    also in attendance at Townhalls, Neighborhood Huddles and all other
    resident events. When they are not meeting with residents, they will be
    spotted going through neighborhoods at popular meeting places like the
    school bus stop and playgrounds to engage and elicit informal feedback
    from residents.

        29. Senator Blumenthal. Mr. Williams, what role does the Resident
    Engagement Specialist play in ensuring timely responses to concerning
    maintenance and housing condition concerns?
        Mr. Williams. The Resident Engagement Specialist is charged with
    aiding customers with service-related questions; and they will
    continuously identify opportunities to improve the resident experience.
    The Resident Engagement Specialist also will be tasked with monitoring
    resident needs and obtaining their feedback.
                        department of defense officials
        30. Senator Blumenthal. Secretary McMahon, when did you first learn
    of these problems with private company abusing military families? Did
    any of your predecessors know of this problem? If yes, when did you or
    any of your predecessors learn of the cases we heard from in testimony
    before the committee?
        Secretary McMahon. My predecessor first learned of the issues
    regarding lead and mold in December 2017 when Ms. Crystal Cornwall from
    the Safe Military Housing Initiative provided information to OSD. This
    information was forward to the Military Departments for resolution. The
    Reuters articles, the first of which was published in November 2018,
    identified resident issues warranting immediate attention, with more
    extensive and wide-ranging resident concerns subsequently surfacing.

        31. Senator Blumenthal. Secretary McMahon, Secretary Beehler,
    Secretary Bayer, and Secretary Henderson, who provides oversight of
    housing management and maintenance? How do the relationships between
    DOD, military services, and various private housing companies differ
    across the country? Should we be working toward more standardized
    contracts and oversight processes?
        Secretary McMahon. The MHPI partners provide direct daily oversight
    of each project's property management service provider that is
    responsible for all aspects of housing management and maintenance;
    Military Department government housing staff provide daily oversight of
    the MHPI project from a programmatic standpoint including resolution of
    housing issues and resident concerns. The Government housing office is
    the first line of Military Department oversight of a privatization
    project's housing management and maintenance, with direct daily
    interaction with the privatization partner's team at the installation.
    The Military Departments, under the project legal documents
    administered by their respective oversight programs, have certain
    rights with regard to decisions made by the project related to the
    housing manager. These controls can include such items as operating
    budget reviews, incentive fee awards, capital expenditures, and
    reinvestment account expenditures. These rights include replacement of
    the housing management and maintenance firm by the project for poor
    overall performance, a right that the Military Departments have
    exercised in the past.
        Secretary Beehler. Oversight of housing management and maintenance
    is provided at various levels. HQDA performs RCI project and program
    portfolio performance oversight management and monitors each privatized
    project through reviews of monthly, quarterly, and annual reports as
    well as compliance visits and special purpose reviews. USACE Norfolk
    visually inspects a sampling of homes and the area specific to the
    ground lease during annual compliance reviews. Army Material Command
    (AMC) provides oversight of the work order process and all execution
    actions to improve the quality of the homes. IMCOM HQs provides
    installation level operational asset management oversight support and
    conducts review of reports and annual site visits of each project to
    ensure compliance with all Army requirements. The Garrison Commander
    has the responsibility for ensuring compliance with the various legal
    documents covering requirements and those authorities included in title
    10 of the United States Code Sections 2884/2885 as well as the day-to-
    day interests of the Army.
        The Services implemented the MHPI program differently through
    partnership agreements or through contractual methods. There are
    different requirements by state that cause the resident leases to
    differ. Other differences include wait list management, referral
    processes, and oversight.
        The Army agrees that more standardization in our partnerships and
    in our oversight processes to improve housing for our servicemembers
    and their families is needed. A few things we are standardizing is the
    Tri-Service Bill of Rights (currently in draft), developing a common
    MHPI tenant lease that is augmented by addendums, identifying and
    sharing best practices, making work orders status and progress visible
    and transparent, developing a process to potentially withhold rent
    until life, health, and safety issues are resolved, and evaluating the
    annual resident survey for additional areas for improvement. Supporting
    documents have been retained in Committee files.
        Secretary Bayer. Oversight and monitoring authority is set forth in
    10 U.S.C. 2884 & 2885 and in associated legal agreements. The operating
    agreement of each PPV company defines the rights and responsibilities
    of the DON in the company. DON leadership exercises oversight of
    privatized housing projects with the aid of a ``monitoring matrix''
    based on the PPV's obligations in each business deal via personnel in
    CNIC and MCICOM housing offices and NAVFAC Business Agreements
    Managers. DON is actively working with OSD, Army and Air Force on
    initiatives that include common lease language and a resident bill of
    rights to create a more consistent privatized housing experience across
    the DOD.
        Secretary Henderson. Project owners are responsible for providing
    quality control over their management and maintenance activities. The
    Air Force provides quality assurance over these functions using a
    variety of tools.

          The local housing management office provides day to day
    oversight and evaluates random samples of the project owner's work to
    ensure the project owner's quality control function is effective and
    maintaining compliance with all requirements of the transaction
    documents;
          Monthly reviews of metric data and compliance checklists
    are conducted at the installation level between project owner and
    housing management office representatives;
          Quarterly Management Reviews of metric data are conducted
    between installation commanders and project owners; and
          Annual site visits are conducted by the Air Force Civil
    Engineer Center Installations Directorate to evaluate project owner
    compliance with transaction documents.
          For Air Force projects, the oversight process is
    centralized and standardized across the portfolio.

        32. Senator Blumenthal. Secretary McMahon, Secretary Beehler,
    Secretary Bayer, and Secretary Henderson, for each service branch, what
    is the role of the installation commander in overseeing private sector
    housing projects? Is there a conflict of interest in the installation
    commander having direct influence over privatized housing companies?
        Secretary McMahon. The Military Departments are in a better
    position to respond to this question.
        Secretary Beehler. Garrison Commanders and the Senior Military
    Member assigned to Army Garrison Commander equivalent positions on
    Joint Bases are appointed by the Deputy Assistant Secretary of the Army
    for Installations, Housing and Partnerships (DASA (IH&P)) as the Army's
    senior representative (Designated Member) for the RCI project entity
    Limited Liability Company/Limited Partnership (LLC). The Garrison
    Commander/Designated Member is responsible for installation level day-
    to-day asset management oversight for RCI project execution. The
    Garrison Commander acts as the Secretary of the Army's local
    representative for coordination of Major Decisions submitted for the
    Army's consideration.
        There is not a conflict of interest. The Garrison Commander/
    Designated Member's authority is limited to specific actions as
    delegated by the DASA IH&P, and defined within the legal framework of
    the RCI Limited Liability Company (LLC) (or Limited Partnerships)
    structure for each RCI project. The Garrison Commander/Designated
    Members shall not authorize health and welfare inspections, participate
    in RCI project eviction decisions, or influence housing assignment
    process.
        Secretary Bayer. There is no conflict of interest. The DON
    Installation Commander is the primary person responsible for overseeing
    the housing program on their base, and for ensuring that the housing
    concerns of its servicemembers are addressed. The DON Installation
    Commander works through their housing office and DON's Business
    Agreement Manager to address issues with the PPV's Property Manager or
    Managing Member.
        Secretary Henderson. The installation commander is responsible for
    the health, safety, and morale and mission effectiveness of the
    personnel under his or her command. The installation commander partners
    with the project owner's site lead. The housing management office
    reports to the installation commander, provides the day-to-day
    oversight, and advises the commander on housing issues. The commander
    provides a quarterly evaluation to provide feedback to the project
    owner on the program--on several projects this evaluation is also part
    of the incentive fee structure. The commander coordinates on the annual
    budget, sustainment, and reinvestment plans. Finally, commanders may
    independently exercise their command authorities to ensure the health,
    welfare, safety, or security of Air Force families living in privatized
    housing, although this authority is limited to directing Air Force
    action and does not include the right to direct project owners to take
    action.
        We do not believe these activities are a conflict of interest, but
    are essential for the commander to execute his or her responsibilities
    to protect the health, safety, morale, and mission effectiveness of the
    personnel under his or her command.

        33. Senator Blumenthal. Secretary McMahon, Secretary Beehler,
    Secretary Bayer, and Secretary Henderson, how are the various service
    branches ensuring that military installations have a strong military
    community when the military no longer owns houses in these communities?
    What improvements should be made to enhance the experiences of military
    families living in privately-owned housing?
        Secretary McMahon. The DOD overall has many programs and services
    in place for the military families on a military installation, anchored
    by the community of military families living on the installation in
    MHPI housing. The Military Departments are in a better position to
    provide further responses on potential improvements.
        Secretary Beehler. For the Army, a community is more than just the
    homes. It is about the streets, the parks, the landscape, and the
    activities. It is having a place for residents to feel like they
    belong. Our RCI Project Companies provide community centers for
    residents use to have neighborhood meetings, to have kids' playtime, or
    mommy and me meetings. The RCI Project Companies typically go above and
    beyond the requirements of the project legal documents to host monthly
    and quarterly events to create a sense of welcome and belonging such as
    Mother's Day Spa day, Father's Day Bowling, Back-to-School Bash, and
    Christmas parties where kids can make things to give as gifts. The RCI
    Project Companies also work with the installations for National Night
    Out events, Easter Egg Hunts, or developing neighborhood watches. The
    RCI Project Companies also give back through Thanksgiving Dinner
    giveaways and Scholarships to residents. It is also about giving the
    residents the ability to collaborate on what is happening within the
    housing community from activities such as hosting a block party through
    the Housing Mayor Program to community design such as a dog park. The
    RCI Project Companies provide outreach services to servicemembers and
    their families during times of crisis and natural disasters.
        The Army will continue to support the existing activities and
    events sponsored by the RCI project companies and ensure that residents
    and Army leadership are more involved. We can assist in publicizing
    these activities and events by increasing awareness through social
    media.
        Secretary Bayer. The DON is executing short- and long-term actions
    to increase oversight of PPV housing through routine boots on the
    ground and resident follow-up, spot checks, continued town halls,
    education, increased leadership engagement, and continued
    communications with all stakeholders. We look forward to working with
    Congress to identify additional authorities that may aid in improving
    the experiences of our military families living in privatized housing.
        Secretary Henderson. The success of privatized housing was built on
    the premise that project owners must provide housing desirable to the
    military members. The requirement in our agreements to first offer a
    preference in renting of homes to Active Duty families assigned to the
    installation and resident satisfaction surveys are essential in
    monitoring the health of the community. Where these tools indicated a
    project was failing to meet the needs of military families, the Air
    Force Civil Engineer Center and the installation leadership team
    engaged with the project owners in those areas that were deficient.
    However, we have learned these tools alone are not effective. One of
    the improvements we will be implementing is the use of Resident
    Councils to provide direct feedback to installation commanders and
    project owners on the military community needs. We are also adding
    resident interviews and sensing to our oversight tools. These
    additional tools will help focus Air Force engagement with project
    owners and inform Air Force decisions with regard to the project
    operating budget, sustainment, and reinvestment activities.

        34. Senator Blumenthal. Secretary McMahon, Secretary Beehler,
    Secretary Bayer, and Secretary Henderson, what changes are necessary
    for existing MHPI authorities to ensure that contractors are held
    accountable for substandard housing?
        Secretary McMahon. MHPI partners are not DOD or Military Department
    contractors. Under the MHPI, Military Departments conveyed their
    existing government housing units to competitively selected
    privatization entities (i.e., the MHPI projects). MHPI projects operate
    under long-term (850-year) ground leases and associated legal
    agreements with a Military Department, with one 25-year option period.
    In return, the MHPI projects assumed responsibility for operation,
    maintenance, construction, and replacement of the housing during the
    lease term, in accordance with the MHPI authorities as defined in title
    10, United States Code. The main role of the Military Department is to
    monitor the MHPI projects to ensure adherence to the terms of the
    project documents, as well as applicable legal and regulatory
    requirements. Additionally, the Military Departments monitor MHPI
    projects to ensure project financial performance can sustain quality
    housing over the life of the ground lease. To this end, the Military
    Departments monitor housing occupancy and resident satisfaction, as
    well as revenue, operating expenses, operating budgets, and the overall
    financial health of each MHPI project, to include the project's
    sustainment and recapitalization funding as compared to pro forma
    expectations and project needs. Depending on the particular structure
    of a given project, the Military Departments may also have approval
    authority for project budgets, certain major project expenditures,
    changes in property management companies, or other key project
    oversight decisions. DOD and the Military Departments are reassessing
    and enhancing our oversight roles and processes to confirm we are
    appropriately monitoring the projects and partner performance in
    providing a safe, healthy, and enjoyable living experience for military
    members and their families. The existing MHPI legislation and the
    agreement documents undertaken pursuant to that legislation give the
    government the authorities it needs to adequately run a good MHPI
    program. This is not an issue of lack of authority, rather one of
    needing to do a better job of exercising the authorities we already
    have.
        Secretary Beehler. The existing MHPI authorities are adequate to
    ensure the RCI Project Companies are held accountable. Even with
    adequate authorities, we realize that like any other business
    enterprise, collaboration and oversight with our RCI Project Companies
    needs to be evaluated on a continual basis. We will work with OSD and
    the other Services to review current legislation; if we find
    opportunities to improve, we are committed to do so.
        Secretary Bayer. Existing MHPI authorities are sufficient and
    provide ample opportunities to hold PPV partners accountable for
    substandard housing. For example, in most projects, the PPV Partner
    hosts a Resident Advisory Board which consists of military housing
    personnel, PPV property management personnel and select residents. The
    goal of the board is to solicit ideas and suggestions for making PPV
    communities the best option for military members and their families.
    Additionally, the PPV partner obtains input from residents at move out
    and when developing the budget. They also receive input from the DON
    during condition assessments.
        Secretary Henderson. The Air Force has sufficient authority and
    will work to negotiate with the project owners and private lenders on
    changes to existing agreements that are necessary to ensure that
    privatized housing meets or exceeds applicable standards for the health
    and safety. The Air Force always strives to ensure that privatized
    housing is an attractive and safe option for military members that
    meets or exceeds the standards for safe housing that are available off
    the installation.
        The negotiations with project owners and private lenders will be
    informed by the Resident Bill of Rights that is developed to inform
    residents of their rights within privatized housing. To the extent the
    Resident Bill of Rights provides for additional rights beyond those
    currently found under tenant leases and state laws, we will need to
    work closely with project owners and private lenders to amend the
    existing agreements. We are also evaluating other changes that will be
    discussed with project owners, to include alternative performance
    incentive fee metrics to increase commander input and increase overall
    Air Force leverage when a project owner fails to perform in accordance
    with the requirements of existing agreements.

        35. Senator Blumenthal. Secretary McMahon, Secretary Beehler,
    Secretary Bayer, and Secretary Henderson, how are you sharing
    information with VA about these conditions that are a direct result of
    exposure to environmental hazards and toxic substances encountered
    during military service?
        Secretary McMahon. My office is working with the Office of the
    Assistant Secretary of Defense for Health Affairs [OASD(HA)] to ensure
    processes are in place for DOD medical or public health officials to
    share information about potential housing-related health conditions
    with other health officials, as appropriate. According to OASD(HA),
    medical conditions for servicemembers are documented in the service
    treatment record which is shared with the VA during transition for
    continued treatment and/or disability where applicable. There is
    currently no information sharing with VA regarding environmental
    hazards and toxic substances encountered in privatized housing during
    military service. However, any hazard and/or toxic substances annotated
    in the service treatment record, regardless of the source, would be
    shared with the VA during transition. DOD, in coordination with the
    military Services, is working solutions to make privatized housing
    environmental health assessment data available to government housing,
    public health specialists and healthcare providers. DOD will also
    assess the feasibility of providing the privatized housing
    environmental health assessment data to VA. Further questions on
    interagency information sharing between DOD and VA should be addressed
    by OSD.
        Secretary Beehler. The DOD/VA Deployment Health Working Group meets
    monthly to discuss issues that relate to servicemembers and Veterans.
    Frequent topics are environmental exposures. As appropriate, we will
    ensure care is provided to those eligible at Military Treatment
    Facilities (MTFs), and we will work with those who are not eligible for
    care at MTFs in order to identify the best resources available to them.
        Secretary Bayer. Medical conditions for servicemembers are
    documented in the service treatment record which is shared with the VA
    during transition for continued treatment and/or disability where
    applicable. There is currently no information sharing with VA regarding
    environmental hazards and toxic substances encountered in privatized
    housing during military service. However, any hazard and/or toxic
    substances annotated in the service treatment record, regardless of the
    source, would be shared with the VA during transition. DOD, in
    coordination with the military Services, is working solutions to make
    privatized housing environmental health assessment data available to
    government housing, public health specialists and healthcare providers.
    DOD will also assess the feasibility of providing the privatized
    housing environmental health assessment data to VA. Further questions
    on interagency information sharing between DOD and VA should be
    addressed by OSD.
        Secretary Henderson. The answers were provided by AFMSA.
        Upon completion of service, military members can share their
    medical records with the VA and these records contain occupational and
    environmental exposure information from in-garrison as well as deployed
    operations. Furthermore, clinical evaluations, to include annual
    preventive health assessments are included which can assist with
    determining disability and healthcare needs for our servicemen and
    women.

        36. Senator Blumenthal. Secretary McMahon, Secretary Beehler,
    Secretary Bayer, and Secretary Henderson, can you confirm that these
    families are receiving adequate health care services through TRICARE to
    address these conditions?
        Secretary McMahon. My office is working with OSD Health Affairs to
    ensure military families who have health concerns that may be related
    to housing receive appropriate health care services, and that there are
    clear processes in place for medical and public health officials to
    raise concerns about housing conditions to installation housing offices
    for investigation and remediation, as appropriate.
        Secretary Beehler. The Military Health System (MHS) is equipped
    with medical specialties and can provide the highest standard of care
    for any medical condition. The availability of specific sub-specialists
    may be limited to larger MTFs, but in areas where in-house specialty
    care is not readily available, the MHS provides access to specialists
    through civilian partners using the purchased care system.
        In rare cases where a patient requires sub-specialty care that is
    not available in the military or local civilian healthcare systems, DOD
    will pay travel costs to where care is available.
        Secretary Bayer. Eligible beneficiaries can access care at their
    local medical treatment facilities (MTFs). Navy Medicine is ensuring
    that our MTFs have an internal process that facilitates communication
    and coordination between providers and public health personnel. We are
    also working to ensure providers, servicemembers, and families
    understand the proper procedures for reporting health concerns related
    to housing discrepancies. If required health care services cannot be
    provided at the MTF, the TRICARE network is used to ensure all required
    care is received. Network providers are required to provide reports to
    the Primary Care Manager or MTF, thus ensuring the MTF tracks all
    health care provided by the network. The Department of Navy is
    committed to ensuring the readiness, health and safety of our sailors,
    marines and their families.
        Secretary Henderson. The answers were provided by AFMSA.
        Family members who seek care through military treatment facilities
    or via off-base using the TRICARE benefit will receive quality
    healthcare to address their symptoms and conditions. Public health
    professionals are developing additional guidance for clinical
    professionals to ensure these patients are adequately tracked and cared
    for using the best in evidenced-based practices to resolve their
    healthcare concerns.

        37. Senator Blumenthal. Secretary Bayer, in your testimony, you
    mention that privatized housing partners are required to immediately
    notify the Navy Installation Housing Office of any resident concern
    involved asbestos, carbon monoxide, lead based paint, radon, mold, and
    pest infestation. In your experience with Navy installations, are
    privatized housing partners consistently and appropriately notifying
    the Navy of these alarming conditions?
        Secretary Bayer. The Business Agreements specify notification time,
    and the partners are, in general, meeting these requirements. However,
    we are seeing that concerns are not suitably resolved in a timely
    manner.

        38. Senator Blumenthal. Secretary Bayer, does the Navy often
    accompany the privatized housing partner to conduct oversight of
    housing conditions? If not, why?
        Secretary Bayer. Navy and Marine Corps military housing personnel
    accompany the partners on about 3 percent of the visits.

        39. Senator Blumenthal. Secretary Bayer, in your testimony you
    state ``partners and government housing staff track all maintenance
    actions and perform follow-up inspections to ensure resident
    satisfaction.'' What is the average timeline from the initial complaint
    to resolving the maintenance issue?
        Secretary Bayer. In general practice, there are three categories of
    service. While response times may vary by project, typical response
    times are:

          Emergency calls should be responded to within thirty
    minutes (either by phone or in person) and completed as soon as
    possible
          Urgent calls should be responded to within four (4) hours
    and completed within one (1) working day.
          Routine calls should be responded to within one (1) day
    and completed within 24 hours (pending parts).

        A ``Carve Out'' occurs when (a) the resident wishes to schedule an
    appointment for the time they wish the request to be responded to, (b)
    after responding to the call, the Manager determines that replacement
    parts are needed to complete the request or (c) the service request
    requires completion by a licensed contractor (such as Exterminator,
    Plumber, Electrician, etc.) after an initial response by maintenance
    personnel. Most ``Carve Outs'' are completed within two weeks; however,
    any ``Carve Outs'' outstanding (i) for more than two weeks are reviewed
    by the Regional Property Managers for action, (ii) for more than three
    weeks are reviewed by the Vice President of Property Management, and
    (iii) for more than forty-five (45) days are explained in the Manager's
    quarterly management report delivered to the housing office. Some
    ``Carve Outs'' that require ``continual'' work, such as water intrusion
    or roof leaks that damage sheetrock or flooring and require time to dry
    or cure before repairs can be completed by multiple trades may extend
    past the typical two week period, but will be monitored accordingly by
    Property Management.
                                   __________
                     Questions Submitted by Senator Hirono
              ways to improve issue response--ppv representatives
        40. Senator Hirono. Mr. Williams, Mr. Picerne, Mr. Ehle, Mr. Hickey
    and Mr. Bliss, when determining if an issue is satisfactorily resolved,
    does the resident have input?
        Mr. Williams. BBC has implemented a policy that gives residents
    final approval on closing work orders to ensure tasks are completed to
    their satisfaction. In addition, BBC utilizes a third party to survey
    residents regarding their experiences with respect to work order
    submission.
        Mr. Picerne. Yes. We utilize a third party survey company to
    administer surveys to the residents after work orders are complete in
    order to help us learn and improve upon our processes and procedures.
        Mr. Ehle. Yes. After a work order or maintenance request is
    completed, Hunt solicits informal feedback from the resident regarding
    the work that was performed. Hunt also issues work order satisfaction
    surveys for every visit. Our military partners have access both to our
    work order survey results and may also follow-up with the resident.
        If the resident is not satisfied with a repair, the resident can
    follow the dispute resolution procedures outlined above in the response
    to question 9.
        Mr. Hickey. Yes, via the SatisFacts service order survey. These are
    distributed weekly to all residents who have had a service order
    performed in their home during that week. For calendar year 2018,
    approximately 19,900 completed SatisFacts service order surveys were
    received. These surveys ask if any maintenance problems still exist and
    if the resident would like to be contacted. Additionally, any survey
    with an overall score of less than 3.0 is investigated by the
    maintenance team as to what led to resident dissatisfaction.
        Mr. Bliss. Yes. We notify residents when a service request has been
    closed out. If the resident does not believe the issue has been
    resolved to their satisfaction, then there is a process to address the
    issue. In 2017, LMH expanded its communication of the escalation
    process for unresolved resident concerns. That process involves the
    following steps:

        (a)  Step 1--contacting LMH's maintenance hotline with a concern or
    maintenance request,
        (b)  Step 2--if the resident's concern is not resolved, LMH asks
    the resident to call LMH's Regional General Management Office, and
        (c)  Step 3--LMH encourages the resident to contact the Government/
    Base housing office at any time during the process to further advocate
    on their behalf to resolve any concerns.

        41. Senator Hirono. Mr. Williams, Mr. Picerne, Mr. Ehle, Mr. Hickey
    and Mr. Bliss, what protocol do you have in place to notify the
    Department of Defense of pervasive maintenance issues, perhaps across
    communities, bases or states?
        Mr. Williams. The service branches actively monitor and review work
    order performance by BBC and have 24/7 access to the Yardi software
    platform through which work orders are logged and tracked through
    completion. In addition, BBC regularly submits reports to the service
    branches on the state of housing and recommendations for any
    unprogrammed and necessary capital repairs/replacements, the presence
    and remediation of any environmental hazards and work order processing.
        Mr. Picerne. As active partners with the Army and Air Force, we
    have direct avenues to communicate all manner of issues with the
    appropriate military officials, both and the installation/base ad
    Pentagon levels.
        Mr. Ehle. Hunt values transparency and we are committed to
    maintaining regular communication and an open dialogue with our
    military partners. As we discuss in greater detail below (see response
    to question 31), Hunt is subject to reporting and inspection
    requirements that occur on weekly, monthly, quarterly and annual bases.
    Our military partners have access to the Yardi maintenance software and
    can review work orders and survey responses. They are also able to
    inspect homes (with notice and consent unless its an emergency) and
    follow up directly with residents.
        When extraordinary issues arise, Hunt reports developments through
    the chain of command, including the Air Force Civil Engineering Center,
    the Office of the Assistant Chief of Staff for Installation Management,
    and the Naval Facilities Engineering Command.
        Mr. Hickey. The entire Lendlease team, from on-site Project
    Managers to Executives, maintain very regular communication with their
    counterparts, from local military housing staff and installation
    command to Pentagon personnel. This is both formal and informal. If a
    pervasive maintenance issue were to occur, we would work
    collaboratively with our military partners to comprehensively address
    the situation. We have regular, formal meetings with the Service
    Secretary's staff to work through operational concerns.
        Mr. Bliss. Primarily, we use informal calls and official meetings
    with DOD when maintenance trends emerge. We also use the monthly Flash
    report/Dashboard designed by the Navy/Army and the annual budget
    process to identify recommended repairs. In addition, DOD has access to
    our online maintenance system and they perform condition assessments
    annually.

        42. Senator Hirono. Mr. Williams, Mr. Picerne, Mr. Ehle, Mr. Hickey
    and Mr. Bliss, how can your organization incentivize greater survey
    participation and honest responses by residents in order to get
    meaningful data about issues experienced by families living in your
    communities?
        Mr. Williams. BBC incentivizes residents with the opportunity to be
    entered to win a small rent credit by submitting responses to our third
    party survey firm that contacts residents regarding work order request
    and move-in satisfaction.
        Mr. Picerne. We have begun participating in discussions with the
    Offices of the Secretaries of Defense, Army, Air Force, along with the
    independent survey firms to review the survey questions and the
    methodologies, all with the goal of ensuring the partnerships all
    receive meaningful data and increase survey participation.
        Mr. Ehle. As stated in response to question 2 above, Hunt values
    resident feedback, and we take proactive steps to encourage residents
    to provide feedback and participate in satisfaction surveys. With
    respect to the annual satisfaction survey conducted by an independent
    third party, Hunt publishes response results to motivate staff teams to
    constantly improve resident service. Externally, Hunt holds community
    events to encourage residents to complete the survey through the
    independent, third-party administrator. On a day-to-day basis, we reach
    out to residents to solicit real-time feedback on maintenance requests
    and work orders that have been completed at their residence.
        Mr. Hickey. Survey participation is encouraged in numerous ways,
    including community events, social media engagement and personal
    interaction with residents. In 2018, 44.2 percent/ (17,680) of our
    residents submitted CEL surveys. Providing residents with general
    community communications that reflect the feedback provided by the
    community along with what actions are being taken in this regard builds
    trust with residents and improves feedback.
        We are investigating other ways to collect feedback and increase
    participation, including proactive outbound calls and/or live feedback
    on iPads at times of service.
        Mr. Bliss. SatisFacts surveys (independent third party), are
    continuous and ongoing with each service request and move-in
    assessment. On average, we receive a 13 percent response rate to our
    survey requests. The Annual Resident Satisfaction Surveys are
    anonymous. We offer residents the ability to enter a drawing for prizes
    in order to increase participation, but the drawing is not dependent on
    whether the resident provides praise or criticism in their survey
    response. LMH will work with the third-party survey company to better /
    inform residents that honest and open responses are crucial to the
    ongoing success of privatized military housing.

        43. Senator Hirono. Mr. Williams, Mr. Picerne, Mr. Ehle, Mr. Hickey
    and Mr. Bliss, how can your organization better communicate its
    standard processes and procedures to address concerns with residents?
        Mr. Williams. BBC is in the process of creating resident access to
    an electronic library of resident informational documents, not only for
    the resolution process and contact information but also seasonal and
    educational ``how to'' guides, tips and tricks, for living in our homes
    and communities. BBC also is developing a move-in orientation session
    that will be scheduled and hosted in person, as well as be accessible
    via Facebook live.
        Mr. Picerne. Over the past 3 months, we have dramatically increased
    our efforts to ensure that all of our residents are aware of our
    standard processes and procedures for contacting us with any concerns
    they may have with their homes or the services Corvias is providing,
    including five different ways to communicate with us, 24 hrs/day, 7
    days/week.
        Mr. Ehle. Hunt strives to keep our residents informed of important
    environmental and safety matters that may affect them. We have in place
    the Hunt Safety Zone, an online library of information relevant to
    residents' safety, which is regularly updated with new information and
    seasonally relevant topics. We also provide our residents standard
    health and safety information upon move-in, as required by applicable
    law and standards, regarding moisture and mold, lead-based paint,
    asbestos, radon, and/or pesticides.
        As stated in response to question 1 above, we proactively interact
    with our residents and military partners in a variety of ways,
    including, among others, routine electronic and written messages,
    regular town hall-style meetings, and via social media. Nevertheless,
    we recognize that improving communication starts with us. As such, we
    have undertaken to provide customer service and communication training
    for relevant personnel within the Hunt organization to improve our
    future communication and resident relation efforts. We are also
    reviewing our operational processes for work order resolution and
    evaluating whether staffing levels are sufficient to address service
    requests in a high-quality and timely manner.
        Hunt has also implemented an improved helpline, the ``Hunt Promise
    Helpline,'' which will be a more efficient way for residents to voice
    complaints directly to a Hunt senior management team member if a
    concern has not been resolved by the local housing management or
    military housing office.
        Mr. Hickey. The Lendlease team are committed to continual
    improvement in everything that we do, especially in providing clear,
    consistent and straightforward communications with our residents that
    is delivered in a variety of formats. Currently, at move in residents
    are provided information including:

          Reviewing of the lease and its key provisions;
          Explaining how to submit work orders, through what
    mechanisms, together with an outline of work order classifications,
    response and completion time expectations;
          Sharing our feedback channels and encouraging residents
    to complete move-in surveys;
          Reviewing the key points from the resident guide and
    where to find the guide; and
          Inviting residents to register for the Resident Portal
    and MilitaryCafe App to allow them to submit work orders and track
    requests.

        An orientation is completed in the home, showing residents how to
    operate the life/safety components, appliances, etc. Residents have a
    magnet with contact information on their refrigerator.
        The Resident Guide is available on the website and outlines
    procedures, policies and processes for all areas of their residency.
    Each project has a local Facebook page which provides periodic posts
    about procedures and reminders that help residents in their tenancy.
    Also, residents receive periodic reminder emails. Many properties host
    or participate in regularly held Town hall meetings which give us an
    opportunity to provide information and answer resident questions.
        Recently, Escalation Posters were posted in all community offices
    giving residents more awareness of what their escalation channels are
    and how to utilize them. Our goal is to adapt and change as new
    communication tools and methods are adopted widely by our residents.
    Additionally, we are investigating other ways to collect resident
    feedback proactively and have commenced a program of `outbound calls'
    to this end as well as securing live feedback using app and iPad at the
    time of service orders.
        Lendlease understand and acknowledge that a need exists to provide
    more modern, user friendly communications. To this end, we have
    examined where the most impactful improvements can be made (starting
    with technology and access upgrades) and are preparing for a refreshed
    communications plan which is currently in pilot stage at one of our
    largest installations.
        Mr. Bliss. LMH is exploring new ways to communicate with residents
    about our processes and procedures. This may include revised and
    simplified lease forms and community handbooks, revisions to our
    website and online access to address questions and concerns. LMH
    commits to doing more to foster better lines of communication with
    residents.
        fiscal year 2018 ndaa requirement for assessment of child safety
        44. Senator Hirono. Secretary McMahon, the Fiscal Year 2018 NDAA
    called for the Secretary of Defense to enter into an agreement with an
    independent entity with experience in performing technical evaluations
    of the compliance of housing units with the codes and standards of the
    International Code Council and other relevant codes and standards to
    conduct and submit to the Secretary and the congressional defense
    committees an assessment of child safety issues in military family
    housing units, with an emphasis on assessing hazards that may result in
    falls. This was to be completed no later than a year after the
    enactment of the NDAA. I have sent a letter to the acting Secretary of
    Defense requesting the status of this assessment. To your knowledge,
    was this assessment done and, if so, what were the results?
        Secretary McMahon. The safety of children residing in military
    family housing is of the utmost importance to the Department. The
    Department agrees with Congress that an analysis is necessary to ensure
    family housing standards are in place to provide for the safety and
    well-being of servicemembers and their families in accordance with the
    codes and standards of the International Code Council and other
    relevant local, state, and federal building codes. In order to utilize
    the ``independent entity with experience'' required by the legislation,
    the Department secured fiscal year 2019 funding to contract for this
    assessment. We have begun the process to contract with an independent
    entity that possesses the required authoritative knowledge and
    experience in performing such technical evaluations, including an
    emphasis on assessing hazards that may result in window falls. Due to
    the size and global distribution of the Department's military housing
    inventory, we estimate any independent entity would require several
    months to conduct an extensive assessment. Therefore, we anticipate
    delivery of the assessment by the end of December 2019.

        45. Senator Hirono. Secretary McMahon, I have seen the report for
    calendar year (CY) 2017 to the Committee on Armed Services indicating
    there were no window falls from Government-owned family housing and two
    non-fatal falls from privatized housing units. Do you have the final
    numbers for calendar year 2018 and, if so, what is your assessment of
    the results?
        Secretary McMahon. The report on window falls is expected to be
    provided to the Defense committees in early April. During calendar year
    2018 there were no window falls from Government-owned family housing
    but one non-fatal fall occurred from a privatized family housing unit
    at Buckley Air Force Base, Colorado, on October 29, 2018. DOD's housing
    privatization partners provide window safety education as part of their
    leasing process, supplemented with ongoing education at townhall
    meetings and other forums.
                     health concerns in privatized housing
        46. Senator Hirono. Secretary McMahon, Secretary Beehler, Secretary
    Bayer, and Secretary Henderson, what mechanisms does your service make
    available for military families to report health and safety concerns
    with military housing?
        Secretary McMahon. Military families are encouraged to report any
    health and safety concerns regarding their housing to their landlord
    and the government housing office at their installation, regardless of
    whether the housing is on the installation or not. They can also report
    any health and safety concerns to Installation Commander or the
    Inspector General. In all cases, OSD expects the Military Departments
    to ensure resident reports of health and safety concerns are taken
    seriously and handled in an expedited manner, without fear of
    retribution, and will ensure this is included in the Residents' Bill of
    Rights.
        Secretary Beehler. In addition to the ability to report health and
    safety concerns directly using the soldier's chain of command, the
    Commanders of installations with Army housing were recently tasked to
    establish and maintain a command hotline to respond to Army housing
    concerns of soldiers and families. In addition, Army Medicine is
    revising policy and implementing oversight procedures to ensure that
    any health condition potentially associated with an environmental
    hazard inside the home is documented in the patient's electronic health
    record, and, where a home assessment is recommended, assisting
    residents of on-post housing with the coordination of a home inspection
    and remediation of the potential hazard.
        Secretary Bayer. Partners have agreed to immediate notification to
    the Navy/Marine Corps on issues related to: asbestos, carbon monoxide,
    LBP, Radon, Security, Mold/water infiltration and pest infestation.
        Upon discovery or notification, Partner documents incident,
    provides service call; follows established action plans:

          Partner performs preliminary investigations to collect
    relevant and detailed information about the concern or incident
          Partner records all Health and Safety issues in the
    commercial real estate property management databases
          If hazard suspected, alternate housing provided
          Partners conduct follow up inspections
          Partner maintenance actions are tracked

        For Mold/Pests/Drinking water/hazardous material responses:
          No Federal or state EPA/OSHA regulations exist for mold
          Partner cleans hazard and monitors home
          Residents sign mold addendum in lease

        Secretary Henderson.

          Members can and should immediately notify the maintenance
    staff, whether privatized or government owned, by submitting a work
    order.
          Members can and should report failures to perform to the
    housing management office for resolution and if unable to resolve,
    elevate their concern through their chain of command.
          The Air Force established a call center for residents to
    express their concerns and receive direct engagement by the Director of
    Installations at the Air Force Civil Engineer Center.
          Members can report concerns to the Inspector General
          Members can report the concern to an enforcement agency
    such as the Environmental Protection Agency or state or local
    enforcement agencies.

        47. Senator Hirono. Secretary McMahon, are mechanisms for military
    families to report health and safety concerns with military housing
    standardized across services and housing properties?
        Secretary McMahon. Each Military installation includes a government
    housing office to provide housing referral and assistance to
    servicemembers and their families, to include receiving resident
    reports of health and safety concerns including issues that residents
    feel have not been adequately addressed by the privatized housing
    project. In all cases, residents are encouraged to submit work order
    requests and report any health and safety concerns to the privatized
    housing property management office first, followed by raising concerns
    to the government housing office. Privatized housing residents may
    always raise any concerns to their leadership chain, the installation
    commander, the Inspector General, or local or state housing
    authorities.

        48. Senator Hirono. Secretary McMahon, Secretary Beehler, Secretary
    Bayer, and Secretary Henderson, do the services have sufficient
    oversight capability and authority to manage the MHPI program?
        Secretary McMahon. The DOD has the authorities necessary to provide
    sufficient MHPI program and project oversight. Where DOD needs to
    improve is in exercising those authorities and funding the level of
    staff support necessary to fully perform required privatized housing
    oversight as it was originally envisioned/intended at the outset of the
    MHPI program. In addition, DOD leadership must re-engage in the
    oversight process to demonstrate their continued commitment to military
    families and ensure the continued success of the program.
        Secretary Beehler. Yes, the Army believes that sufficient
    authorities exist to oversee and manage the MHPI program. The recent
    lapse in MHPI oversight was the direct result of budget and personnel
    cuts that are now being rectified. The Deputy Assistant Secretary of
    Defense (DASD) for Health Services Policy and Oversight (Health
    Affairs), in collaboration with DASD Environment, and DASD Facilities
    Management is evaluating current Service policies and procedures to
    ensure standardization across the Services and housing properties
    regarding health and safety concerns with military housing.
        Secretary Bayer. Based on the original objectives defined by
    Congress when the program was initially created in the mid-1990s, the
    DON has sufficient oversight capability and authority to manage the
    MHPI program.
        Secretary Henderson. The Air Force has the necessary capabilities,
    resources, and authorities to provide sufficient oversight and manage
    the MHPI program. However, we will need to reevaluate past reductions
    in our housing management office and program oversight staff required
    to provide the necessary oversight and support to our housing
    residents.

        49. Senator Hirono. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, what percentage of homes in your service's
    portfolio did your service independently inspect in 2018?
        Secretary Beehler. Installation housing offices routinely conduct
    random sample inspections of homes at every installation but actual
    numbers of inspections were not tracked. HQ IMCOM, HQ Department of the
    Army and US Army Corps of Engineers personnel conducted inspections on
    approximately 2 percent of the homes in the inventory in 2018 during
    annual site visits. The Army recognizes that it should increase the
    number of inspections performed. Following the recent surge in
    complaints, the Army in 2019 conducted visits to 100 percent of the
    homes in the inventory.
        Secretary Bayer. Navy and Marine Corps military housing personnel
    typically inspect about 3 percent to 5 percent of the homes during
    changes of occupancy, condition assessments and/or upon following up on
    action items from residents or maintenance logs.
        Secretary Henderson. The Air Force independently inspected
    approximately 3.3 percent of the housing portfolio in 2018.

        50. Senator Hirono. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, in Hawaii, we have housing built as far back as
    the early 1900s. What is being done at your level to address issues
    regarding lead-based paint and other environmental concerns in these
    communities?
        Secretary Beehler. RCI Project Companies are required to adhere to
    all Federal, States, and local laws and regulations to address
    environmental hazards. The Army will be randomly inspecting to ensure
    laws and regulations are followed. The Army is assessing the staffing
    and hiring needed at each installation. We are increasing ground lease
    compliance inspections. We are refining existing protocols while
    simultaneously implementing enhanced move-in protocols, maintenance
    procedures, and oversight responsibilities.
        The Army is ensuring garrisons inspect 100 percent of all homes
    where between occupancy maintenance / change of occupancy maintenance
    have been completed and inspect 100 percent of all work / service
    orders relating to life/health/safety issues. The Army and the RCI
    Project Companies will continue to inform and educate soldiers and
    families about the concerns and health impacts of environmental
    hazards, the resources available to tenants, and all of the available
    methods to report potential risks.
        Secretary Bayer.

          Prior to transferring the property to the PPV Partner,
    the Navy conducts an Environmental Baseline Survey and provides the PPV
    partner with a Finding of Suitability to Lease/Finding of Suitability
    to Transfer, which later transitions to an Environmental Condition of
    Property. Additionally, LBP Inspections and Risk Assessments are
    conducted in accordance with applicable regulations such as24 CFR Part
    35. After transfer through Ground Lease, the PPV project becomes
    responsible at its cost and expense for:
            Necessary abatement, removal, disposal maintenance and
    management of LBP located in and on the Improvements
            Maintenance and management in place of LBP hazards in
    the soils immediately adjacent to the improvements on the Leased
    Premises
            Claims or liability resulting from Lessee's failure to
    properly manage, remove, abate, or dispose of all LBP in the
    improvements.
          Lessee must comply with and incorporate a LBP hazards
    removal, disposal, management and abatement plan into Lessee's plans.

        Annually on a routine basis; at Change of Occupancy; and/or in
    response to Resident Request; partners will: have trained personnel
    conduct a physical ``walk through'' to examine lead-positive
    components; document findings to confirm that all lead-containing
    components are intact and manageable; reference the original lead
    survey and any subsequent inspection reports and; identify and track
    all properties containing LBP and update the inventory records.
        Also, regarding disclosure/notification to residents in PPV units:
    in accordance with Federal regulations, and as specified in the ground
    lease, prior to signing the lease agreement, partners provide each
    tenant under a Housing Agreement: a copy of the LBP Disclosure Form, a
    copy of the Pamphlet ``Protect Your Family from Lead in Your Home,''
    and upon resident request, all known records, reports and documents
    regarding LBP.
        Secretary Henderson. Within the Secretariat, I am responsible for
    the lead based paint management policy for Air Force owned facilities.
    The Air Force maintains records of the program for the housing it
    manages. For privatized housing, the project owner maintains those
    records. The Air Force checks the lead based paint program for each
    privatized project during compliance audits conducted annually.
    Residents of pre-1978 homes are provided an addendum to their lease
    that informs them of the potential existence of lead based paint in
    their home, housekeeping instructions when residing in a home with
    potential lead based paint, and instructions to contact maintenance if
    they see degradation to painted surfaces.

        51. Senator Hirono. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, besides withholding incentive payments, what
    additional authority or authorities does your service have to address
    PPVs that are not sufficiently addressing concerns of servicemembers
    and their families with regard to their housing?
        Secretary Beehler. Additional authorities the Army has to address
    RCI Project Companies that are not sufficiently addressing concerns of
    servicemembers and their families include:

        1.  Issue a cure notice when responsibilities in agreements are not
    met.
        2.  Notify lenders that issues are not being corrected.
        3.  Approval authority over operating budgets (operating budget
    that determines what flows into the Reinvestment Account).
        4.  Terminate the ground lease.

        Secretary Bayer. Oversight and monitoring authority is set forth in
    10 U.S.C. 2884 & 2885. The operating agreement of each PPV company
    defines the rights and responsibilities of the DON in the company. DON
    leadership exercises oversight of privatized housing projects with the
    aid of a ``monitoring matrix'' based on the PPV's obligations in each
    business deal. The managing member (or in one instance, the general
    partner) of each PPV company is tasked with management of the company.
    DON does not participate in the day-to-day activities of these private
    companies. DON is specifically prohibited from managing the company
    except with regards to certain consent rights, and other specifically
    defined rights, such as the ability to initiate the process for
    replacement of the property manager. DON reviews and approves the
    annual budget and incentive fees, and can request reporting to provide
    oversight and make well-informed consents. In addition, DON can enforce
    performance from the privatized housing projects by engaging
    bondholders to work with the projects to meet the commitments under the
    agreement. DON can also issue cure notices or use the court system, if
    needed, to seek resolution for poor performance.
        Secretary Henderson. The Air Force can initiate the formal legal
    action in accordance with the existing agreements. The remedies for the
    Air Force range from the issuance of a default and cure notice to the
    extreme remedy of termination of the lease agreement. The remedies are
    subject to the rights of the private lender to step in and cure any
    default that has been declared by the Air Force.
        The Air Force can also initiate a complaint with the Environmental
    Protection Agency or state and local agencies, which can levy fines or
    other enforcement actions against the project owner for violations of
    environmental, health, or safety laws.
                                   __________
                Questions Submitted by Senator Elizabeth Warren
                    financial performance of mhpi agreements
        52. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, do any of your agreements with any of your
    privatized military housing partners dictate either an expected target
    profit or a minimum or maximum profit that a partner is allowed or
    expected to receive through fees and member distributions? If so,
    please describe each such agreement?
        Secretary Beehler. Yes. In regards to member distributions, or
    partner equity return, the majority of the operating agreements include
    a minimum preferred return and also a maximum total equity return to
    the partner. The preferred return percentage, if applicable, is
    included as a portion of the total equity return. In regard to property
    management fees, the majority of the projects include a cap on total
    fees which is adjusted by CPI or other similar benchmark. The idea
    behind the CPI cap is to ensure property managers do not receive large
    increases in fees due to a large BAH increase and therefore fees are
    capped at CPI or other benchmark index increases. The spreadsheet has
    been retained in Committee files.
        Secretary Bayer. The 98.3 percent pays for Operations and
    Sustainment. The partners' return is 1.7 percent.
        Secretary Henderson. The Air Force projects are not uniform in the
    payment of fees or other distributions. The project owners may be
    entitled to the payment of certain fees (e.g., property management,
    asset management, or development fees) depending on the revenues of the
    project and priority payment of other expenses within the project. The
    project owners may also be entitled, as the last priority for payment,
    to a percentage of any remaining revenue after the payment of all other
    expenses of the project. There is typically a Lockbox Agreement for
    each project that outlines how the rent revenue for the project will be
    used to pay expenses and other obligations of the project. The
    financial structure of each project was established in the proposal
    submitted by the successful developer in a competitive source
    selection.

        53. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, for each of your respective Military Department's
    active Military Housing Privatization Initiative agreements, please
    provide the following information: (1) The date it was signed; (2)
    installation(s) that it serves; (3) number of housing units provided;
    (4) year or years that those housing units were first occupied; (5)
    year or years of any substantial renovations; (5) value of the
    replacement reserve fund or other funds available for capital expenses.
        Secretary Beehler. Every project has had some percentage of their
    respective housing stocks undergo substantial renovation or
    replacement. The actual percentage varies with each project and is
    dependent upon the amount and quality of the housing inventory that was
    transferred, direct government investment (cash) at closing, and most
    importantly the financial cash flows and loan proceeds used for
    investment in the initial development period. The portfolio has
    replaced 26,804 and constructed 8,655 new homes with another 27,026
    substantial renovations completed to date. The spreadsheet with
    response have been retained in Committee files.
        Secretary Bayer. Attachments 1 and 2 have been retained in
    Committee files.
        Attachment 1 includes: (1) The date it was signed; (2)
    installation(s) that it serves; (3) number of housing units provided;
    and (6) value of the replacement reserve fund or other funds available
    for capital expenses.
        Attachment 2 includes: (4) year or years that those housing units
    were first occupied; (5) year or years of any substantial renovations.
        Secretary Henderson. [Deleted.]

        54. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, for each of the last 10 years, please provide the
    following information for each year for each agreement: (1) How much in
    total revenues from rental payments did each of your private partners
    generate from each agreement? (2) How much (in dollars) did each of
    your private partners receive or retain through member distributions
    for each agreement? (3) How much (in dollars) did each of your private
    partners receive or retain through incentive-based fees for each
    agreement? (4) How much did each of your private partners receive or
    retain through management, operations, or other non-incentive-based
    fees or payments for each agreement? (5) How much was the total profit
    (in dollars) for each of your private partners for each agreement?
        Secretary Beehler. As for the total profit for each of the Private
    Partners, the Army doesn't have visibility on the profitability of the
    individual Private Partners for each Partnership Agreement. See
    spreadsheet in response to #53 for details by project of the amounts of
    fees and equity distributions made to the Private Partners from the
    Project Companies.
        Secretary Bayer. Please refer to Attachments 3 and 4 retained in
    Committee files.
        Attachment 3 contains the information requested, broken out by
    year, from 2009 to 2018. Attachment 4 contains a roll-up of the
    information requested for the period 2009 to 2018.
        Secretary Henderson. Attached document [deleted] labeled revenue
    and fees have separate charts for items (1) through (4). We cannot
    determine the profit level of the private partners without full
    visibility of their internal costs, which is not available to the Air
    Force.

        55. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, do DOD officials or does any third party conduct
    financial audits of any of your agreements or partners? If so, please
    provide copies of any audits conducted in each of the last 5 years.
        Secretary Beehler. RCI Partnerships are required to have a
    financial audit completed by a third-party annually. A sample copy has
    been retained in Committee files.
        Secretary Bayer. The DON does not conduct financial audits of our
    agreements or partners. Nevertheless, DON executes oversight via (1)
    inspections of, and reports and certifications by the company (all set
    forth in a ``monitoring matrix''), (2) the ability to make the
    bondholder replace key managers for grave performance issues, and (3)
    veto power over major decisions including the annual budget.
        Secretary Henderson. Each project is required to have an annual
    independent audit of the project's financial statements by a qualified
    public accounting firm. Copies of the Audited Financial Statements will
    be provided to the Committee separately.

        56. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, are you aware of what, if any, capital need plans
    your private partners have in place for each development, for the next
    5 years?
        Secretary Beehler. Yes, every Partner, as a part of their annual
    operating budget submission to the Army, provides an updated 5-year
    Capital Repair & Replacement plan. In addition, all of the Projects
    submit an Out-Year Development plan in 5-year increments that
    establishes the development activity for the Project over that time
    period. These plans are approved by the Army. The amount and type of
    development activity largely depends upon the needs of the Project and
    the availability of investment proceeds for utilization from the
    Project Reinvestment Account. At this time, there are Out-Year
    Development plans that contain no major development and construction as
    the project builds up funds in the Reinvestment Account for future
    construction.
        Secretary Bayer. Yes. As part of the budget, the PPV Partner
    submits their Capital Repair and Replacement (CRR) plans to the DON,
    and they are reviewed and approval annually.
        Secretary Henderson. Project owners submit a capital needs plan
    each year for Air Force review that outlines their plans for capital
    expenditures. This review includes comparisons to industry standard
    needs assessments and models.

        57. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, is the balance in the reserve account sufficient
    to meet the needs of the developments?
        Secretary Beehler. All projects have funding available to meet the
    minimum needs of the projects.
        Secretary Bayer. All of our PPV Partners' accounts have sufficient
    balances to meet required obligations under our agreements.
        Secretary Henderson. The Air Force has identified six projects for
    financial restructuring (Robins I, Robins II, Scott, Barksdale/Langley/
    Bolling, Offutt, and Air Education and Training Command Group I) with
    insufficient sustainment and reinvestment reserves to fully to sustain
    and recapitalize for the duration of the lease term. The Air Force has
    another seven projects (Falcon Group, Buckley, ACC Group II, U.S. Air
    Force Academy, Dover, and Kirtland) that are on a watch list. These
    seven projects can meet minimum sustainment needs for the life of the
    lease term but have insufficient recapitalization reserves.
                                  inspections
        58. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, do all applicable state and local housing codes
    apply to the houses within your privatized housing portfolio? Please
    provide a list of all bases or installations that are excepted from
    applicable state and local housing codes.
        Secretary Beehler. The Army requires all privatized projects to
    comply with a list of overarching codes including the International
    Building Code, the International Residential Code, National Electric
    Code and National Fire Protection Agency (NFPA), as examples.
        Historically for privatized housing falling under Exclusive Federal
    Jurisdiction, state and local codes were not applicable by law. The
    Army recognized this as an area which required clarification and
    updated the RCI Construction Standards policy which was issued in
    October 2018. The policy clarifies the intent of applicable codes: all
    state and local housing building codes apply to all houses and work
    completed within the RCI privatized housing portfolio. Even for areas
    of Exclusive Federal Jurisdiction, the policy states RCI shall comply
    with state and local codes with the caveat that in the event of
    conflict with Federal Regulations, Federal Regulations take precedence.
    Prior to the issuance of the policy, ``applicable'' may have resulted
    in elements of construction non-compliant with state and local
    standards for RCI projects falling under Exclusive Federal
    Jurisdiction.
        Secretary Bayer. None of DON's business agreements except the
    privatized housing companies from applicable state and local housing
    codes.
        Secretary Henderson. No project is excepted from applicable state
    and local housing codes. Project owners are required under the ground
    leases to comply with all applicable laws, which is typically defined
    very broadly. For example, the AETC II project defines ``Applicable
    Laws'' to include ``all federal, state and local laws, rules,
    regulations, orders, ordinances, and other governmental standards and
    requirements which are applicable to the Project Owner or the
    Project.''

        59. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, how many homes within your entire privatized
    housing portfolio were inspected by Federal authorities in fiscal year
    2018?
        Secretary Beehler. The General Accounting Office (GAO) conducted an
    audit of the financial health of the privatized housing projects at
    Fort Knox and Fort Meade. During the visit at these installations, the
    GAO team visited approximately 10 homes. OMB, OSD, and EPA visited Fort
    Meade and walked-through approximately 10 homes. OACSIM conducted
    project compliance and partnering visit, development and special
    purpose reviews at Fort Wainwright, Fort Greeley, Carlisle Barracks,
    Picatinny Arsenal, Joint Base Lewis McChord, Fort Hood, Fort Bragg,
    Fort Hamilton, Fort Meade, Hawaii, Presidio of Monterrey, Fort Rucker,
    and Fort Benning walking 71 homes.
        USACE conducted 15 annual lease compliance reviews for Carlisle
    Barracks/Picatinny Arsenal, Fort Belvoir, Fort Benning, Fort Bragg,
    Fort Gordon, Fort Hamilton, Fort Hood, Fort Leavenworth, Fort Leonard
    Wood, Joint Base San Antonio--Fort Sam Houston, Fort Stewart/Hunter
    Army Air Field, Hawaii, Joint Base Lewis McChord, Presidio of Monterey,
    and Redstone Arsenal.
        The total percentage of homes independently inspected in 2018 is
    unknown, however the Army conducted Environmental Hazards screenings in
    10 percent (1,360) of all pre-1978 built homes during 2018. During site
    visits, HQ IMCOM focused on the Army's oversight roles and did not
    inspect homes.
        Secretary Bayer. We do not track this in a centralized master
    database. Officials from the Environmental Protection Agency perform
    inspections as warranted.
        Secretary Henderson. The Air Force inspected approximately 3
    percent of privatized homes at change of occupancy. We have no record
    of inspection of any homes by other federal authorities. However, the
    Environmental Protection Agency has conducted ``no notice'' reviews of
    the lead based paint program of project owners at several
    installations. The EPA reviewed records and inspected several homes.

        60. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, which specific Federal authority performed these
    inspections?
        Secretary Beehler. The General Accounting Office (GAO) conducted an
    audit of the financial health of the privatized housing projects at
    Fort Knox and Fort Meade. During the visit at these installations, the
    GAO team walked approximately 10 homes. OMB, OSD, and EPA visited Fort
    Meade and walked-through approximately 10 homes. OACSIM conducted
    project compliance and partnering visit, development and special
    purpose reviews at Fort Wainwright, Fort Greeley, Carlisle Barracks,
    Picatinny Arsenal, Joint Base Lewis McChord, Fort Hood, Fort Bragg,
    Fort Hamilton, Fort Meade, Hawaii, Presidio of Monterrey, Fort Rucker,
    and Fort Benning walking 71 homes. USACE conducted 15 annual lease
    compliance reviews for Carlisle Barracks/Picatinny Arsenal, Fort
    Belvoir, Fort Benning, Fort Bragg, Fort Gordon, Fort Hamilton, Fort
    Hood, Fort Leavenworth, Fort Leonard Wood, Joint Base San Antonio--Fort
    Sam Houston, Fort Stewart/Hunter Army Air Field, Hawaii, Joint Base
    Lewis McChord, Presidio of Monterey, and Redstone Arsenal.
        Secretary Bayer. Officials from the Environmental Protection Agency
    have inspected DON privatized housing.
        Secretary Henderson. Home inspections were conducted by the local
    Air Force housing management office. The Environmental Protection
    Agency reviewed lead based paint programs and documentation at multiple
    sites but did not perform any widespread home inspections.

        61. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, how many homes within your entire privatized
    housing portfolio were inspected by state and/or local authorities in
    fiscal year 2018? Please provide a breakdown of which state/local
    authority conducted these investigations, and under what authority they
    did so.
        Secretary Beehler. HQ IMCOM does not have specific data relating to
    inspections conducted by state or local officials for privatized
    housing.
        Secretary Bayer. The DON is not aware of any investigation by
    state/local authorities of homes within the DON's privatized housing
    portfolio.
        Secretary Henderson. We are not aware of any inspections by state
    or local authorities in 2018.

        62. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, please provide the inspection results for those
    inspections undertaken by Federal, state and/or local authorities in
    fiscal year 2018.
        Secretary Beehler. While comprehensive data is not tracked by The
    Army, a sample of inspection results from state and local authorities
    have been retained in Committee files.
        Secretary Bayer. Outside inspection results are not centrally
    collected.
        Secretary Henderson. The Environmental Protection Agency has not
    provided any final reports to the Air Force for the no-notice reviews
    they conducted.
                            reprisal and retaliation
        63. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, did anyone in your Military Department receive any
    reports of retaliation or reprisal from any servicemember or their
    family after they reported unsafe, unhealthy, or unacceptable
    conditions in privatized housing? Please provide a list of all reports
    of retaliation or reprisal, if any, that your Military Department
    received.
        Secretary Beehler. Army Materiel Command is aware of 4 total
    reports of retaliation/reprisal by private housing partners. There are
    3 reports of retaliation/reprisal by Balfour Beatty Communities (1 each
    at Carlisle Barracks, West Point, and Fort Detrick), and 1 by Corvias
    (Fort Riley). The Army Inspector General's office will provide chain of
    command retaliation/reprisal data when it completes its final report in
    mid-May.
        Secretary Bayer. The DON is not aware of any reports of retaliation
    or reprisal in connection with a report of unsafe, unhealthy, or
    unacceptable living conditions in privatized housing.
        Secretary Henderson. The Air Force Inspector General reviewed 70
    substantiated reprisal findings covering the past 5 years (2014 to
    2019) and found no record of reprisal based on military housing
    complaints or concerns raised through official communications to
    Congress, Inspector General or command. However, the Air Force is
    currently addressing one allegation of reprisal against command based
    on a member's protected communications regarding housing issues.

        64. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, what, if any, training or education does your
    Military Department provide to prospective base or installation
    commanders regarding their legal authorities and responsibilities with
    regard to ensuring that privatized military housing under their command
    is safe, clean, and meets all Federal, state, and local regulations?
        Secretary Beehler. The Army incorporated into the Garrison Pre-
    Command Course specific training in housing program oversight, quality
    assurance, legal documents, financial accounts, and development
    planning, and developed a chain-teaching program of the same study
    areas for existing commanders and command sergeants major currently in
    command.
        Secretary Bayer. Prospective Navy installation leaders attend
    senior shore leadership (SSL) training and prospective Marine Corps
    installation leaders attend Installation Leadership Management Program
    (ILMP) training. Both of these training courses include a segment on
    privatized housing. The installation housing managers also provide MHPI
    education to Commanding Officers and Executive Officers. PPV executive
    briefs are provided both at the SSL and ILMP courses and at regions and
    installations. The housing installation program manager has
    responsibility for resolving issues and/or escalating issues and
    concerns to installation leaders.
        Secretary Henderson. The Director for Installations for the Air
    Force Civil Engineer Center provides a 2-hour one-on-one leadership
    orientation discussion tailored to each new installation commander and
    their leadership team covering roles, oversight tools, communication,
    project health, resident satisfaction, lessons learned, and command
    authority. The Director for Installations for the Air Force Civil
    Engineer Center also offers an open dialogue with the installation
    commanders throughout the duration of their commands if they have any
    issues or concerns regarding privatized housing.

        65. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, what, if any, training or education does your
    military department provide to employees, civilian and military, in
    base or installation housing offices, regarding their legal authorities
    and responsibilities with regard to ensuring that privatized military
    housing under their command is safe, clean, and meets all Federal,
    State, and local regulations?
        Secretary Beehler. Technical training of the Army's Housing
    Management careerists is a priority. Since 2016, approximately 350 Army
    Housing careerists have attended the IMCOM-led technical training in
    Army Housing Management Levels I & II and the Residential Communities
    Initiative technical training Levels I & II courses. Additionally,
    almost a thousand careerists have attended `Housing the Force' training
    since 2014. `Housing the Force' is a workshop of seminars and training.
    These courses provide a wealth of knowledge and best practices for Army
    Housing careerists in budgeting, management and oversight. The test
    scores and surveys for these events clearly indicate we are on the
    right path for providing quality training that is valuable and relevant
    to our Army Housing careerists.
        Housing Career Program 27 provides industry standard training on
    privatization, finance, real estate management, fair housing, housing
    inspections, customer service and Basic Allowance for Housing through
    such as the Institute of Real Estate Management and Military Housing
    and Lodging Institute.
        Secretary Bayer. Local training is provided to Military Housing
    personnel outlining the provisions of the lease which specifically
    address the condition of the home at move in, informs the resident of
    their right to a joint walkthrough inspection, and their right to list
    any noted defects within a specified period. Additionally each lease
    specifies the Choice of Law that governs the contractual agreement
    between the landlord and tenant.
        Secretary Henderson. The Air Force provides a variety of training
    to housing management offices on their authorities and
    responsibilities. These include:

          Bimonthly Housing Management Office Staff Training: The
    Director for Installations for the Air Force Civil Engineer Center
    provides a telecom training opportunity to housing management office
    staff every two months to provide training on privatized housing
    oversight topics, discuss lessons learned, cross-feed ideas, and
    receive feedback from the field.
          Biennial Housing Symposium: The Director for
    Installations for the Air Force Civil Engineer Center conducts a
    Biennial Housing Symposium to discuss the health of the housing fleet,
    provide training on housing topics, .discuss lessons learned, cross-
    feed ideas, and receive feedback from the field from the much wider
    community of housing professionals.
          Air Force Institute of Technology (AFIT) Formal Courses:
    AFIT provides formal training courses for housing professionals to
    provide initial skills and enhance skills.
          Civil Engineer Squadron Commanders, who oversee the
    housing management office, receive training on housing privatization
    roles and responsibilities prior to assuming command as part of the
    Civil Engineer Squadron Commander's Course.
                                   oversight
        66. Senator Warren. Secretary McMahon, please provide a copy of all
    regulations, policy, and/or written best practices that governed the
    formation or set out required elements of new partnership agreements as
    part of the Military Housing Privatization Initiative.
        Secretary McMahon. These documents will be provided under separate
    cover in the near future.

        67. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, what mechanisms are in place for your respective
    Military Departments to amend or alter the agreements following
    findings of malfeasance on the part of privatized military housing
    providers?
        Secretary Beehler. Failure of any privatized housing service
    provider to comply with laws or contract requirements can trigger
    termination of the provider's contract or a diminishment of incentive
    fees that the provider could otherwise be awarded.
        Secretary Bayer. The DON has entered into business agreements with
    private partners which are the Managing Members of each LLC. The
    Managing Members are responsible for the management of each company,
    including developing, constructing, renovating, maintaining, leasing,
    operating and managing the housing, as specified in the PPV LLC
    operating agreements. Should the Managing Member violate provisions
    within these agreements, the DON has the ability to initiate a process
    for replacing the Managing Member.
        All changes to the business agreements must be negotiated and
    mutually agreed-upon by the DON and the Managing Member.
        Secretary Henderson. While the Air Force does not have the
    authority to unilaterally alter agreements, the Air Force can engage
    project owners at corporate levels to withhold performance incentive
    fees, engage enforcement agencies, issue cure notices, and take other
    formal dispute actions. The Air Force can also work directly with a
    project owner to mutually agree on amendments to the existing
    agreements, which also occurs as part of the normal oversight performed
    on these projects.
        The Air Force will work to propose changes to existing agreements
    that are necessary to ensure that privatized housing meets or exceeds
    applicable standards for the health and safety. The negotiations with
    project owners and private lenders will be informed by the Resident
    Bill of Rights that is developed to inform residents of their rights
    within privatized housing. To the extent the Resident Bill of Rights
    provides for additional rights beyond those currently found under
    tenant leases and state laws, we will need to work closely with project
    owners and private lenders to amend the existing agreements. We are
    also evaluating other changes that will be discussed with project
    owners, to include alternative performance incentive fee metrics to
    increase commander input and increase overall Air Force leverage when a
    project owner fails to perform in accordance with the requirements of
    existing agreements.

        68. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, has your respective Military Department ever taken
    any action to alter or amend an agreement with a privatized military
    housing provider after findings of malfeasance?
        Secretary Beehler. Yes. Between 2010 and 2015, Pinnacle, the
    property manager for four privatized housing projects (operating on
    Forts Belvoir, Benning, and Irwin, along with the Presidio of Monterey,
    Moffett Field, Ord Military Community, and the Naval Post Graduate
    School), was terminated for multiple acts of civil fraud.
        Secretary Bayer. No, we have not taken such action, nor have we
    encountered instances that would warrant such action.
        Secretary Henderson. The Air Force has not had any formal findings
    of malfeasance and has therefore not taken any actions to alter or
    amend any agreement based on such a finding. The Air Force and project
    owners routinely alter or amend the agreements for the purpose of
    incorporating changes that are based on lessons learned and to improve
    the manner in which these projects are operated.

        69. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, has your respective Military Department ever
    completely and entirely withheld a performance fee from one of your
    privatized military housing provider partners, and if so, for what
    reasons?
        Secretary Beehler. To the best of our knowledge and specifically
    within the previous 3 years, the Army has never completely and entirely
    withheld an incentive performance fee from any Project Partner.
        Secretary Bayer. No, the DON has never completely and entirely
    withheld a performance fee from our PPV partners.
        Secretary Henderson. The Air Force has not completely withheld a
    performance fee from any privatized military housing provider. The Air
    Force administers the performance fee according to the performance fee
    plan for each project.

        70. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, please provide a list of all agreements under
    which your respective Military Department has ever wholly or partially
    withheld performance fees from a privatized military housing partner in
    the last 10 years.
        Secretary Beehler. Please refer to the table retained in Committee
    files.
        Secretary Bayer. Please refer to Attachment 3 in response #54 for
    the 10-year history of incentive-based fees. Retained in Committee
    files.
        Secretary Henderson. The Air Force does not generally retain
    records of working files, which includes the documents that contain the
    total available performance incentive fee award for a respective time-
    period. The Air Force evaluates each incentive fee request to verify
    the proper performance thresholds were achieved. If performance fell
    short, the project transaction documents specify how much payment to
    withhold. The Air Force approves the performance incentive fees in
    accordance with the project transaction documents. Once the appropriate
    incentive fee award is determined, an approval letter is created and
    retained. The approval letter only specifies the award amount, not the
    total possible award.

        71. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, for each year from 2008 to the present, what was
    the total value of all available incentive fees for each of your
    partners?
        Secretary Beehler. Please refer to the response for question #70,
    for a list, by project, of the awarded incentive fees since 2016.
    Retained in Committee files.
        Secretary Bayer. Please refer to Attachment 4 (column 3) in
    response #54, for the Incentive-Based Fees earned by the Partners over
    the last 10 years. Retained in Committee files.
        Secretary Henderson. The Air Force does not generally retain
    records of the working files that contain the total available award
    amounts. The Air Force evaluates each incentive request against the
    established metrics and thresholds. If performance fell short of
    target, the project transaction documents specify how much of the
    available fee should be withheld. The Air Force then approves the
    amount to be awarded, but does not retain the working document that
    indicates how much incentive fee was available during that period.

        72. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, during that same period, if all available
    incentive fees were not awarded, please provide a brief explanation
    why.
        Secretary Beehler. Please refer to the response for question #70,
    for a list, by project, of the awarded incentive fees since 2016.
    Retained in Committee files.
        Secretary Bayer. Examples of Incentive Fee reductions include:

          April 2014--Letter denying Forest City Hawaii appeal for
    scoring below 70 in Resident Satisfaction due to high utility costs
          January to June 2018--AMCC (Camp Lejeune, Cherry Point,
    Stewart)
          2nd half of 2017--PNC Property Management Incentive Fee
    (Northwest)
          1st Half 2017--Ohana Military Communities--Property
    Management Incentive Fee (Hawaii)
          Marine Corps Hawaii Phases 1 to 3
          Navy Hawaii Phases 1 and 2

        Secretary Henderson. A project owner must meet multiple performance
    targets in order to achieve the full incentive fee. Some of the more
    common reasons for not earning the full incentive award are: occupancy
    below budgeted expectations, operating expenses or net operating income
    below budgeted expectations, resident survey results that are below the
    required threshold, the project not meeting work order response and
    completion time requirements, and Installation Commanders not awarding
    their full discretionary award. Each project has different incentive
    metrics, but most have some combination of those listed.

                         resident satisfaction surveys
        73. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, the private housing companies all described
    resident satisfaction surveys as a key metric for them to receive
    performance incentive fees. Please describe in detail the survey
    process your respective Military Department uses to determine if
    military personnel are satisfied with the quality of on-base housing.
        Secretary Beehler. There are three different survey mechanisms in
    existence at Army MHPI projects.

        1)  The most comprehensive and scientifically accurate survey is
    the Army Annual Housing Survey which is contracted by the Army with an
    independent, third-party contractor (CEL Associates, Inc) through its
    MHPI financial consulting contract with RER Solutions, Inc. CEL uses a
    core set of questions for all multifamily surveys. This core set of
    questions is used by all military and private sector clients year after
    year to ensure a basis of comparison and reliable trending information.
    During project setup, the survey instrument for the project is reviewed
    and approved. The survey sponsor may add questions unique to their
    population, but the core questions are left intact.

            Email addresses are validated in advance to provide opportunity
    for correction in order to get the survey to each resident. Only one
    survey response per household is accepted. All occupied homes are
    included in survey distribution. Those residents without email
    addresses, or who do not receive the email, may receive instructions to
    access the survey via a ``code letter,'' or by contacting CEL directly
    via email. CEL will email the resident the URL and Survey ID for their
    survey. Online surveys are controlled by address. Surveys completed
    online are accessible only by CEL staff members. Individual survey
    responses are never available to the Partners or Branches.

            CEL scores are a proprietary metric used to measure one
    population against others, or the same population over time, in
    multiple categories. They are calculated from the core set of
    standardized scored questions across CEL's military and private
    clients. CEL calculates scores for the following categories:
            a.  Three satisfaction indexes--overall satisfaction, property
    satisfaction, and service satisfaction.
           b.  Nine Business Success Factors--readiness to solve problems,
    quality of management services, property eating, responsiveness &
    follow-through, quality of leasing services, relationship rating,
    property appearance & condition, quality of maintenance services, and
    renewal intention.
           c.  Question scores for each survey question.
           d.  Scores are computed based on all answers for a population
    (such as a property, installation, or region) using CEL's scoring
    formula. These calculations result in a CEL score per respective
    category. Reports contain both results from the current survey and
    historical data so longer-term trends and patterns can be reviewed.
    Individual survey responses are never provided to the Partners,
    Branches, or any other entity outside CEL. All comments are provided
    verbatim. Action Plan templates containing the current scores are
    provided as part of the report package. Completed reports are provided
    to the survey sponsor (Department of the Army). Creating specific,
    actionable goals--and working towards those goals each year results in
    satisfaction improvement.
        2)  The RCI Project Company assesses tenant satisfaction at each
    point of service--move-in, move-out, maintenance, and resident
    satisfaction. The RCI Project Companies in coordination with the
    installation housing team will develop questions for the distributed
    surveys. The surveys are distributed by the RCI Project Company or its
    independent firm with results being provided to the RCI Project Company
    who provides to the Army Family Housing Office. The Army Family Housing
    Office will review survey results and identify any concerns or
    anomalies for discussion with the RCI Project Company.
        3)  The Army Family Housing Office conducts independent surveys to
    verify incentive fee awards for move-in, move-out, or maintenance
    satisfaction. The surveys are developed to assess resident satisfaction
    and verify metrics were met. Returned responses are reviewed and any
    concerns or anomalies are discussed with the RCI Project Companies.

        Secretary Bayer. CEL & Associates, LLC administers a Resident
    Satisfaction Survey (RSS) for all Navy-owned housing residents. The
    Marine Corps is in the process of administering a RSS for all USMC-
    owned housing residents. PPV partners contract directly with CEL to
    conduct the same survey with all PPV residents. CEL is an industry
    leader in tenant resident Surveys and has provided surveys to DON since
    2000. The RSS is conducted using a controlled method of one survey per
    household. Each family is given a unique, anonymous password.
        Navy's RSS survey includes 55 questions. Questions include
    satisfaction questions related to readiness to solve problems,
    responsiveness and follow through, property appearance and condition,
    quality of management/leasing/maintenance, customer service, property
    rating, relationship rating, and intention to renew housing. The RSS
    survey also gives respondents the opportunity to provide to open-ended
    comments and request to be contacted.
        The RSS is a point based survey on a range of 1 to 100, not a
    percentage score. All residents receive the opportunity to complete a
    survey and the average response rate for the DON was over 45 percent in
    2018.
        Secretary Henderson. The Air Force has measured resident
    satisfaction for all but one of our 63 installations using the industry
    standard third party survey created and conducted by CEL and
    Associates. The questions are standardized across the military and the
    private sector, the resident response is anonymous, and responses are
    reviewed by the company for signs of tampering. The 2018 response rate
    was greater than 46 percent. Each question is rated on a scale of 1 to
    5 and the survey includes 53 questions on appearance and condition of
    the community, management of the property, maintenance services,
    community amenities, characteristics of the home, leasing process, and
    overall morale. We are currently exploring revisions of the CEL survey
    to better capture the resident experience.
        All but one of the property owners using this survey distribute it
    electronically. For properties owned by Balfour Beatty Corporation,
    blank surveys are provided to the residents by Balfour Beatty
    Corporation and once completed, the resident drops it in a locked box
    that is only accessible by the third party survey company (i.e.,
    Balfour Beatty Corporation never touches a completed survey).
        In addition to the annual survey, customers are provided feedback
    cards for every work order request and can provide feedback on ease of
    reporting, timeliness of response, whether the work was performed
    correctly the first time, professionalism of the technician, and
    whether they want a follow up. These forms are provided to the resident
    by the project owner, collected by the project owner, and provided to
    the Air Force housing management office.

        74. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, which entities are responsible for disseminating
    the survey to privatized housing residents?
        Secretary Beehler. The Army housing survey is administered by an
    independent third-party survey firm, CEL Associates, through its MHPI
    financial consulting contract with RER Solutions, Inc. to conduct the
    Army Annual Housing Survey. As such, they are responsible for all
    administrative functions of the survey including the creation,
    dissemination, collection and reporting of results. The maintenance and
    point-of-service surveys are administered by the RCI Project Companies
    via survey cards, independent third-party survey firms hired by the RCI
    Project Companies, or electronic survey's through the property
    management operations system. The Army Family Housing Office surveys
    are administered electronically by the Army Family Housing Office
    staff.
        Secretary Bayer. CEL & Associates, LLC administers the survey with
    a controlled method of one survey per household with a unique anonymous
    password. With the exception of Balfour Beatty, surveys are distributed
    electronically from CEL. Balfour Beatty distributes them manually, but
    in 2018, Navy requested they change to electronic.
        Secretary Henderson. The annual resident satisfaction surveys are
    disseminated and collected electronically by the third party survey
    firm with the exception of projects held by Balfour Beatty Communities,
    which distributes the paper surveys to residents, who then submit them
    in a locked collection box controlled by the third party firm.
    Maintenance satisfaction cards are distributed and collected by the
    project owner and provided to the housing management office.

        75. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, which entities are responsible for tabulating the
    surveys and publishing the results?
        Secretary Beehler. The Army's independent third-party survey firm,
    CEL Associates, is responsible for the tabulation and reporting of
    results for the Army Annual Housing Survey. The RCI Project Company
    surveys, tabulates, and consolidates the results of survey cards and
    electronic surveys then distributes the results to the Army Family
    Housing Office. For RCI Project Company independent third-party survey
    firms, the independent firm tabulates, consolidates, and distributes
    the results to the RCI Project Company who in turn provides the results
    to the Army Family Housing Office. The Army Family Housing Office
    surveys, tabulates, and consolidates the results for their use in
    validating the incentive fees.
        Secretary Bayer. CEL & Associates, LLC.
        Secretary Henderson. The third party survey firm tabulates the
    surveys and publishes the results, which are then provided to the
    project owner and the Air Force.

        76. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, does the completed survey come directly to your
    respective Military Department, and if not, which entity receives it
    first?
        Secretary Beehler. The Army's annual survey are completely
    anonymous and confidential to the Army. The survey is completed online
    and only CEL & Associates, Inc has access to the results. At no time
    are the results of any individual survey disclosed by CEL. Residents
    are notified the survey is confidential and anonymous up front within
    the survey text. Once the survey results are tabulated and compiled by
    CEL Associates, Inc; the results are then provided directly to the Army
    in a summarized format only. Residents have the option of completing a
    comment section and these comments are provided verbatim to the Army
    ongoing during the survey process. The RCI Project Company receives
    their surveys first then the results are provided to the Army Family
    Housing Office. The Army Family Housing Office receives their surveys
    first.
        Secretary Bayer. CEL & Associates, LLC provides PPV survey results
    directly to the PPV partners. They also post them on the CEL website.
    PPV Partners have given Navy access to the website and CNIC HQ uses
    this access to review the reports. Partners separately provide the
    reports on CDs to NAVFAC.
        Secretary Henderson. The completed resident satisfaction survey
    goes directly to the third party survey firm. The completed maintenance
    feedback card is first submitted to the project owner and then provided
    to the Air Force.

        77. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, what measures are in place to ensure that surveys
    are representative?
        Secretary Beehler. Each installation is divided into multiple
    neighborhoods with ``Like Type Housing''. All residents within a
    neighborhood are invited to complete a survey. One survey is provided
    to each occupied home, we do not sample or otherwise restrict
    participation. Reporting is provided by neighborhood, installation,
    region and overall. Prior to the start of the survey a survey
    announcement is distributed to all residents. Additionally, the survey
    details are provided on various social media sites. Residents are
    instructed to contact CEL & Associates, Inc. with any questions or
    issues. The RCI Project Company provides surveys to all tenants at
    move-in, move-out, and every maintenance call. The surveys questions
    are kept to a minimum and are directed to the staff, the service, or
    the event itself. If the response rate is low, then the RCI Project
    Company will resurvey tenants to ensure a larger representative
    response is achieved. The Army Family Housing Office randomly selects
    touch points to survey. Randomization minimizes the impact of any
    errors and spreads potential bias evenly across all tenants surveyed.
    The selection method is by simple selection or cluster sampling to
    obtain a representative sample from the touch point list. The Army
    Family Housing Office survey may touch tenants that have been sampled
    by the RCI Project Company.
        Secretary Bayer. The best measure is reflected in the response
    rates. A response rate of 20 percent is considered statistically valid.
    DON PPV survey response rates have always been much higher; typically,
    in the 30 to 50 percent range. In 2017 and 2018, response rates
    averaged 45 percent.
        Secretary Henderson. This survey can be anonymous, responses are
    reviewed by the third party company for signs of tampering, and the
    questions are standardized across the military and the private sector.
    Additionally, residents are encouraged to participate and the Air Force
    has a 46 percent response rate. The data also provides feedback by
    neighborhoods in order to permit the Air Force to identify under
    represented neighborhoods.

        78. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, how frequently are these surveys conducted?
        Secretary Beehler. The independent, third-party contracted Army
    Annual Housing Survey is conducted annually typically between the
    months of March to June. The RCI Project Companies surveys are
    administered at each touch point--move-in, move-out, and at every
    maintenance service. Resident satisfaction surveys are administered
    quarterly but only once per year to each tenant. The Army Family
    Housing Office surveys are administered monthly for a random selection
    of RCI Project Company touch points--move-in, move-out, and
    maintenance.
        Secretary Bayer. The surveys are conducted annually, or more
    frequently, if warranted.
        Secretary Henderson. Resident satisfaction surveys are conducted
    annually. Maintenance feedback cards are provided after each
    maintenance event.

        79. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, please provide copies of all survey forms and/or
    questionnaires you and/or your private partners make available to
    residents.
        Secretary Beehler. Representative copies of surveys are retained in
    Committee files.
        Secretary Bayer. Please refer to Attachment 5. The survey contains
    55 questions that do not change from year to year in order to provide
    continuity of the relevant data points. Additional questions may be
    added as deemed appropriate, but are not scored. Attachment 5 has been
    retained in Committee files.
        Secretary Henderson. A copy of an example CEL survey and examples
    from various bases of the surveys distributed after move-in or after a
    maintenance work order is completed will be provided to the Committee
    separately.

                         private partnership agreements
        80. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, how many military housing privatization agreements
    have you signed with private companies since the launch of the Military
    Housing Privatization Initiative program?
        Secretary Beehler. The Army has entered into 36 separate
    Partnerships with Private Companies since the launch of the Military
    Housing Privatization Initiative Program.
        Secretary Bayer. The Navy has signed 18 Housing Privatization
    agreements with private companies; 16 for family housing and 2 for
    unaccompanied housing. Of the 18 agreements, 3 have been sold and are
    no longer in effect.
        Secretary Henderson. The Air Force has 32 Military Housing
    Privatization projects and each project has numerous agreements that
    outline all the terms and conditions for the project.

        81. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, do you know of any subcontractors, subsidiaries,
    or other third parties associated with your private partners, that
    manage or provide any services at your agency's military housing
    properties?
        Secretary Beehler. Yes, the Army is aware of related party/identity
    of interest/affiliate parties that are associated with the Private
    Partners while providing contractual services to the Project Companies.
    Please refer to the attached spreadsheet outlining the related party
    transactions as disclosed in the Project Company 2017 Annual Audited
    Financial Statements. Depending on the services required by the
    Project, the list of related party/identity of interest/affiliate
    parties will change. The spreadsheet has been retained in Committee
    files.
        Secretary Bayer. The Operating Agreements for PPV Housing do not
    create a ``government contract'' under the Federal Acquisition
    Regulation. DON has agreements with the Managing Member and not anyone
    else they contract out to, including the property manager, even if the
    Property Manager comes from the same company.
        The Operating Agreements specify that the private company takes the
    leading role in what is best described as a partnership-like
    arrangement with the DON. The Operating Agreements use the term
    ``Managing Member'' to describe this leading role in the LLC. The
    agreements make clear that the Managing Member, with limited
    exceptions, shall have sole and exclusive management and control of the
    business of the LLC and shall make all decisions regarding the affairs
    of the LLC. DON's business partner under these Operating Agreements is
    not a contractor and is responsible for management, operations,
    development and recapitalization of the housing owned not by DON or the
    Managing Member but by the LLC itself.
        Secretary Henderson. The majority of the Air Force projects involve
    vertically integrated real estate firms. The firms generally set up a
    single purpose entity as the ownership entity. The ownership entity
    then generally contracts the major service subcontracts (construction,
    development, asset management and property management) to affiliated
    entities. Some projects subcontract one or multiple of those service
    agreements to unaffiliated third party firms. All major subcontracts
    listed above are reviewed by the Air Force at closing and project
    owners are required to seek Air Force approval before entering into
    agreements with affiliated entities. The projects also subcontract with
    other service providers such as landscaping, snow removal, pest
    control, trash removal, recycling, major plumbing or electrical
    repairs, roofing, and utility work. These subcontracts for routine
    operational requirements are not subject to Air Force review.

        82. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, if so, please provide a list of all of these
    entities, a summary of the services they provide, and the locations
    where they provide these services.
        Secretary Beehler. Please refer to the attached spreadsheet
    referred to with response #81 for a detailed list of all 2017 related
    parties and the services provided sorted by Project. Retained in
    Committee files.
        Secretary Bayer. DON does not maintain a list of the partner
    service-providers.
        Secretary Henderson. The majority of all major contracts
    (construction, development, asset management, and property management)
    across the portfolio are with affiliated entities of the respective
    project owner at that installation. Additionally, each project has
    subcontracts--usually with local subcontractors--for routine services
    such as landscaping, snow removal, pest control, trash removal,
    recycling, major plumbing or electrical repairs, roofing, and utility
    work.
        The following are the affiliated major subcontractors, the services
    they provide, and the locations where they provide their services:
        Balfour Beatty Construction, Inc.: Construction, renovation, and
    large project services.
        Locations: Moody (all except Falcon Neighborhood), Dyess (on base
    housing), Tyndall, Altus, Luke, Sheppard, Tinker, Fairchild, Travis,
    Lackland, Mountain Home, Ellsworth, Minot, Cannon, Cavalier, Grand
    Forks, Vandenberg, Beale, Malmstrom, FE Warren, Whiteman.

        Hunt Building Corporation: Construction, demolition, renovation,
    and large project services.
        Locations: Wright Patterson (except 100 government owned units),
    U.S. Air Force Academy (except 2 government owned units), Columbus,
    Goodfellow, Laughlin, Maxwell, Randolph, Vance, Langley, Bolling,
    Barksdale, Buckley, Dover, Dyess, Moody (Falcon Neighborhood), Hanscom,
    Patrick, Little Rock, Kirtland, Nellis, Robbins, Scott, Shaw, Keesler,
    Arnold, Charleston, Joint Base Elmendorf-Richardson.

        Actus Lend Lease LLC: Construction, demolition, renovation, and
    large project services.
        Locations: Hickam, Davis-Monthan, Holloman, Los Angeles, Peterson,
    Schriever.

        Clark Design-Build LLC: Construction, renovation, and large project
    services.
        Locations: Andrews, MacDill.

        Corvias Construction LLC: Construction, demolition, renovations,
    and large project services.
        Locations: Edwards, Eglin, Hulburt Field, Eielson, McConnell,
    Seymour Johnson.

        83. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, please describe the legal authorities, policies,
    and procedures that govern your respective Military Department's
    oversight over any subcontractors, subsidiaries, or other third parties
    associated with your private partners.
        Secretary Beehler. Oversight of related parties/identity of
    interest/affiliate companies is outlined within the Operating Agreement
    and typically requires the Private Company to disclose any and all
    related party/identity of interest company transactions. The fees
    charged by these related parties were typically negotiated and agreed
    to by the Army at the onset of the program or as these services are
    required by the Project Company thereafter.
        Secretary Bayer. Oversight and monitoring authority is set forth in
    10 U.S.C. 2884 & 2885 and in associated legal agreements. The operating
    agreement of each PPV company defines the rights and responsibilities
    of the DON in the company. DON leadership exercises oversight of
    privatized housing projects with the aid of a ``monitoring matrix''
    based on the PPV's obligations in each business deal. The managing
    member (or in one instance, the general partner) of each PPV company is
    tasked with management of the company. While the DON does not
    participate in the day-to-day management of these private companies,
    DON's daily interaction with these companies is the DON's first level
    of oversight and issue resolution. DON is specifically prohibited from
    managing the company except with regards to certain consent right s,
    and other specifically defined rights, such as the ability to initiate
    the process for replacement of the property manager. DON reviews and
    approves the annual budget and incentive fees, and can request
    reporting to provide oversight and make well-informed consents. In
    addition, DON can enforce performance from the privatized housing
    projects by engaging bondholders to work with the projects to meet the
    commitments under the agreement. DON can also issue cure notices or use
    the court system, if needed, to seek resolution for poor performance.
        Secretary Henderson. The Air Force performs direct compliance
    oversight on privatized housing project owners to confirm that all
    requirements under the legal documents are met. The legal documents
    outline a project owner's operation, maintenance, and repair
    obligations for a housing privatization project. If a project owner has
    a subcontractor, subsidiary, or third party performing work, the Air
    Force does not have direct contractual relationships that provide the
    Air Force with direct remedies against such parties. The Air Force
    would address any performance issues directly with a project owner.
        The Air Force may have certain rights under the legal agreements to
    directly impact the project owner's contractual relationships with a
    third party for meeting project requirements. In most projects, while
    the Air Force is not a party to the property management agreement,
    there is a requirement that any property management agreement must
    provide the Air Force with a right to direct a project owner to
    terminate the property management agreement upon an ``Event of
    Default'' under the ground lease. The Air Force must also generally
    approve of any material revisions to a property management agreement,
    which would include any changes to the identity of the property
    manager, the fee to be paid to a property manager, or the right to
    direct termination of the property management agreement. The Air Force
    may also need to approve any performance incentive fees that are to be
    paid by a project to third parties, which may include property
    management, asset management, or construction incentive fees.

        84. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, are you aware if any of these subcontractors
    either are subsidiaries of or otherwise are financially related to your
    private partners? Are you aware if your private partners share key
    officers or Board members with any of these subcontractors?
        Secretary Beehler. Yes, as stated previously, the Private Companies
    are required to disclose any related parties/identity of interest
    companies that are providing services to the Project Companies. This
    disclosure is contained within the Annual Audited Financial Statements
    for each Project Company.
        Secretary Bayer. The DON has a relationship with the Managing
    Member (private partner), which is responsible for day-to-day
    operations. DON does not track the business/financial relationships
    between the Managing Member and PPV project's hired service providers,
    which may or may not be subsidiaries of the private partner. The fees
    paid to service providers are defined in the project legal agreements.
    DON consent is required on key PPV project business decisions, to
    include replacement of the Property Manager service provider.
        Secretary Henderson. The majority of all major contracts
    (construction, development, asset management, and property management)
    across the portfolio are with affiliated entities of the project owner.
                        repairs and maintenance records
        85. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, do you have access to your private partners'
    repair or work order tracking and response procedures and protocols? If
    so, please provide copies of all documents related to these protocols
    and procedures.
        Secretary Beehler. Yes, all garrisons have access to the private
    partners work order system. Garrison staff are accessing these systems
    to assess the quantity of work orders, their timeliness and any reports
    of life, health or safety concerns. Procedures and protocols are in the
    property management agreement and/or community development management
    plans. Retained in Committee files.
        Secretary Bayer. The DON has full access to the PPV projects' work
    order databases and, if there is a health and safety concern
    identified, DON personnel engage in accordance with our Health & Safety
    Standard Operating Procedures (SOP). This SOP has been provided to
    Committee staff.
        Secretary Henderson. The Air Force does not have access to detailed
    work order tracking and response procedures and protocols that the
    project owners use internally to manage their work order processes and
    train employees on how to utilize their software systems and manage
    employee workflow. The Air Force negotiates, as part of the closing
    documents, the general framework, performance standards, and
    requirements the project owners must meet. The Operating Agreements
    define how work orders should be classified as Emergency, Urgent, or
    Routine and the response and completion time requirements for each of
    those categories. The Operating Agreements also generally describe
    whether the project owners utilize a third party answering service for
    after-hours calls, the methods residents may utilize to submit work
    orders (phone, email, website, in-person in the office, etc.), the
    approach to asking for permission to enter and perform the work while
    the resident is not home, setting up appointment times to complete the
    work, and other high level requirements related to the work order
    process.

        86. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, do your private partners have assigned maintenance
    staff and/or outside contractors available to make repairs?
        Secretary Beehler. Yes, the RCI Project Companies have assigned
    maintenance staff and outside contractors available to make repairs.
    Many of the RCI Project Companies are hiring additional maintenance and
    property management staff.
        Secretary Bayer. Per the project business agreements, partners have
    assigned maintenance staff and/or outside contractors available to make
    repairs. Staffing levels and mix are determined by the project Managing
    Members (private partners).
        Secretary Henderson. All of our project owners have assigned
    maintenance staff and/or outside contractors available to make repairs.

        87. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, do your private partners utilize work order logs
    to track maintenance requests and the completion of work?
        Secretary Beehler. Yes, the RCI Project Companies use work order
    logs to track maintenance requests and the completion of work.
        Secretary Bayer. Yes, and Navy and Marine Corps can review those
    records by accessing their databases.
        Secretary Henderson. The project owners for Air Force projects use
    work order logs to track maintenance requests and completion of work.

        88. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, do you have access to these work order logs in a
    database or other electronic format? If so, please provide the
    electronic records of these work logs for the last 12 months.
        Secretary Beehler. Yes, we have access to the RCI Project Companies
    electronic work order database. Retained in Committee files.
        Secretary Bayer. Yes, the DON can review those records through
    access to their databases, but they do not belong to the DON. The
    records belong to the PPV partners. Any request for copies should go to
    them.
        Secretary Henderson. The Air Force does not have access to the
    project owners' maintenance systems across the portfolio. The Air Force
    has requested the project owner provide an electronic copy of the work
    logs for the last 12 months. We expect to receive those in the coming
    weeks and will provide that data as an addendum to this response.

                                   complaints
        89. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, do you have a complaint hotline or other process
    in place for servicemembers who are living in your housing facilities
    to contact you with problems?
        Secretary Beehler. Each garrison has a hotline managed by the
    garrison commander dedicated to capturing soldiers' and families'
    concerns, complaints and suggestions. Additionally, each garrison has
    an Army Housing management staff that advocates for soldiers and
    families living in privatized housing.
        Secretary Bayer. The DON maintains the right to inspect PPV housing
    under the terms of the ground lease and associated project legal
    agreements, to include short notice inspections for environmental
    matters. In addition, the DON completes spot checks of project
    compliance with requirements included in the partnership agreements
    (operating agreements for limited liability companies and ground
    leases). Navy and Marine Corps housing offices at installations have
    access to the partner's electronic maintenance database system (e.g.,
    YARDI) and reviews work orders for potential environmental concerns and
    other issues. As DON's first level of housing oversight, installation
    housing directors are supposed to be informed by the PPV of any
    potential suggestion, concern or complaint that families may have, and
    are available for direct input from residents, as well--whether through
    in person meetings, emails, townhalls or other avenues. Resident input,
    to include concerns and complaints, are elevated to installation,
    region and headquarters leadership, as appropriate.
        Secretary Henderson. The Air Force has a well-established process
    in place for residents to raise complaints to the housing management
    office. In addition, the Air Force recently established a toll free
    line for residents to elevate complaints when other mechanisms fail.

        90. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, what is the process for submitting complaints?
        Secretary Beehler. Army leadership and chain of command are
    responsible for ensuring residents are satisfied with their housing.
    Residents can submit a complaint through the installation housing hot
    line and Army housing offices. The Army is also working to empower
    residents through a smartphone/web application that will streamline
    complaint submissions and enhance quality assurance and quality control
    for completed work orders.
        Secretary Bayer. DON is taking new steps to address immediate
    problems as well as adjust our business processes to permanently
    correct systemic issues. General Neller and Admiral Richardson have
    each issued orders requiring commanding officers to afford the
    opportunity for every family in military housing to receive a voluntary
    visit by 15 April 2019. The purposes of these visits are:
        (1) to raise command awareness of family living conditions to
    ensure that they are safe, secure and environmentally healthy; (2) to
    personally observe any issues affecting the home and to understand any
    actions being taken to address them; and (3) if a problem is found, to
    help servicemembers and their families get the problem resolved, and
    ensure that all families understand the help and resources available to
    them.
        Marine Corps Commanders will use the Marine Housing Outreach
    program to improve their awareness of concerns and better advocate for
    military families. Commanders will leverage appointed servicemember
    advocates and the base housing office to streamline communication with
    providers. Both Commanders and appointed advocates will ensure
    effective oversight and remediation are in place, operating with the
    full authority and support of the chain of command.
        The Navy will streamline its reporting process so that no sailor
    (or soldier or airman living in DON privatized housing) has to exceed
    two calls before achieving resolution--the first to the housing
    company, and the next to their chain of command, which can then
    properly advocate on their behalf with the government base housing
    office, base leadership, and Commander Naval Installation Command
    (CNIC) to ensure resolution.
        Simultaneously, families will continue to have an open channel to
    the base housing office.
        Secretary Henderson. If the resident was not satisfied with the
    project owner's resolution, the resident can call or email the housing
    management office with their concern. If the resident is not satisfied
    with the response from the housing management office, they can raise
    the concern through their chain of command. If the resident is not
    satisfied with the response from their immediate chain of command, they
    can contact the Inspector General. Additionally, the resident may call
    the toll free line when local efforts fail to resolve the issue to
    their satisfaction. Residents can also seek assistance from the base
    legal office.

        91. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, can complaints be submitted anonymously?
        Secretary Beehler. Yes, complaints can be submitted anonymously
    through the installation Hot Line phones.
        Secretary Bayer. Complaints can be submitted anonymously to either
    the PPV property managers or the base housing office. If a resident has
    a complaint, it is imperative that they communicate it openly to the
    property manager. Residents may also discuss their complaints with DON
    Housing staff, their chain of command, or the installation commanding
    officer and can request to remain anonymous. Anonymous complaints may
    also be filed with the Department of the Navy or the Department of
    Defense Inspectors General.
        Secretary Henderson. Certainly complaints can be, and are, raised
    anonymously. However, without the particulars of the housing unit, it
    may be very difficult to act on anonymous complaints.

        92. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, please provide a list of all complaints (without
    personal identifying information) submitted since January 1, 2008, at
    all your facilities owned or operated by your private partners, and a
    description of how these complaints were resolved.
        Secretary Beehler. The Army does not maintain a record of all
    complaints. Some complaints include delayed work order response times,
    delayed work order completion times, mold in homes, and unqualified
    maintenance staff.
        Secretary Bayer. The DON has full access to the PPV projects' work
    order databases. However, this request should be submitted to the PPV
    private partners, as Managing Members and owners of the PPV projects.
        Secretary Henderson. This data has been compiled for 27
    installations and will be provided to the Committee separately.

        93. Senator Warren. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, do your private partners have a complaint hotline
    or other process in place for servicemembers who are living in your
    housing facilities to contact them with problems?
        Secretary Beehler. The RCI Project Companies do have a complaint
    and concern process for servicemembers and their families to contact
    them about problems. The RCI Project Companies consider residents'
    complaints and concerns of the utmost importance. They maintain an
    ``open door'' policy for any resident wanting to speak to a
    representative or management. Contact information is provided to
    residents at time of move-in; is in the resident guide; is on social
    media; and on housing websites.
        Secretary Bayer. All partners have provided dedicated phone numbers
    to residents for reporting complaints about their housing units; they
    have 24/7 toll free numbers and online methods to report maintenance
    problems. Access to partners for other concerns are typically confined
    to normal business hours. Both DON and its PPV partners provide 24/7/
    365 coverage via email addresses that are provided for resident contact
    for any reason.
        Secretary Henderson. The process varies from project to project,
    but all project owners have a process to handle complaints. The Air
    Force is working with project owners to standardize the process across
    the portfolio and ensure residents are better informed of the process.
    In addition, the Air Force recently established a toll free line for
    residents to elevate complaints when other mechanisms fail.

        94. Senator Warren. Secretary McMahon, Secretary Beehler, Secretary
    Bayer, and Secretary Henderson, on February 15, 2019, President Trump
    declared a national emergency in order to raid unobligated military
    construction funds so that he could build a border wall. According to
    the White House, this emergency declaration will result in ``up to $3.6
    billion reallocated from Department of Defense military construction
    projects.'' What projects, if any, has the Department identified within
    military family housing or single servicemember quarters (e.g.
    barracks) that are available for transfer to the border wall project?
        Secretary McMahon. As the Acting Secretary has testified, no
    military housing, barracks, or dormitory projects will be used to fund
    the border barrier should the Acting Secretary of Defense choose to use
    the 2808 authority.
        Secretary Beehler. The Army has not been directed to provide,
    prioritize, or otherwise withhold projects in anticipation of funds
    needed for the border wall project. The Army also has not spent any
    MILCON funding for construction on the border wall project. However, at
    the request of OSD, The Army initially identified 136 unawarded MILCON
    projects valued at 8$2.7 billion. OSD screened out all projects
    scheduled for award before October 1, 2019, and all Housing
    Construction Projects. Thirty-six Army projects valued at 8$1.05
    billion remain on the list after screening.
        Secretary Bayer. The Acting Secretary of Defense has removed
    construction projects in these categories from consideration for a
    border barrier solution.
        Secretary Henderson. No Air Force military family housing project
    or single servicemember quarters have been identified to reallocate
    funds to the border wall project.

        95. Senator Warren. Secretary McMahon, Secretary Beehler, Secretary
    Bayer, and Secretary Henderson, has the Department recommended that any
    of the identified projects be included for reallocation?
        Secretary McMahon. As the Acting Secretary has testified, no
    military housing, barracks, or dormitory projects will be used to fund
    the border barrier should the Acting Secretary of Defense choose to use
    the 2808 authority.
        Secretary Beehler. No. The Army is executing our program based on
    the funds appropriated in fiscal year 2019 and prior years.
        Secretary Bayer. Please refer to our response to question 94.
        Secretary Henderson. Not applicable, no projects were identified.

        96. Senator Warren. Secretary McMahon, Secretary Beehler, Secretary
    Bayer, and Secretary Henderson, please provide a complete list of all
    such projects or programs, and the amount of funds subject to
    reallocation.
        Secretary McMahon. As the Acting Secretary has testified, no
    military housing, barracks, or dormitory projects will be used to fund
    the border barrier should the Acting Secretary of Defense choose to use
    the 2808 authority.
        Secretary Beehler. The Army has not been directed to provide,
    prioritize, or otherwise withhold projects in anticipation of funds
    needed for the border wall project.
        Secretary Bayer. Please refer to our response to question 94.
        Secretary Henderson. Not applicable, no projects were identified.

                                mhpi agreements
        97. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, how many military housing project awards has
    your company received from the Department of Defense since the launch
    of the Military Housing Privatization Initiative (MHPI) program?
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Piscerne. Answer provided directly to Senator Warren on
    February 19, 2019.
        Mr. Ehle. Hunt currently owns and operates 21 separate projects in
    partnership with DOD. Hunt also maintains a minority ownership interest
    in some properties that it does not manage or oversee. All of Hunt's
    projects, some of which include multiple property sites, are located on
    or near Air Force, Navy, Marine Corps, and Army bases throughout the
    country. Each project that Hunt operates is governed by a ground lease
    and limited liability company operating agreement.
        Mr. Hickey. Lendlease Americas has been awarded eleven privatized
    military housing projects as an integrated asset manager, development
    manager and design builder following a competitive bidding process
    administered by the respective Military Services.
        We currently manage ten1A\1\ MHPI family housing projects, which
    include ground leases and family housing operations across different
    installations in twelve States. Six of those Project Companies operate
    family housing on United States Army installations, one on Marine Corps
    installations, and three on Air Force installations.
    ---------------------------------------------------------------------------
        \1\ The Beaufort/Parris Island project was awarded separately by
    the Navy in 2002, but the project was later merged into the Atlantic
    Marine Corps Communities project upon the award of the third phase of
    that project by the Navy in 2007.
    ---------------------------------------------------------------------------
        Each of the project agreements, including the Project Company
    contracts with LLUSPP affiliates for the ongoing and continuing asset
    management, development management and property management services
    provided to the Projects, were negotiated and approved by the
    respective Military Service and their consultants at the initial
    closing of each MHPI project.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        98. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, how many separate agreements have your company
    signed with the Military Departments for these awards?
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Piscerne. Answer provided directly to Senator Warren on
    February 19, 2019.
        Mr. Ehle. Hunt currently owns and operates 21 separate projects in
    partnership with DOD. Hunt also maintains a minority ownership interest
    in some properties that it does not manage or oversee. All of Hunt's
    projects, some of which include multiple property sites, are located on
    or near Air Force, Navy, Marine Corps, and Army bases throughout the
    country. Each project that Hunt operates is governed by a ground lease
    and limited liability company operating agreement.
        Mr. Hickey. Lendlease Americas has been awarded eleven privatized
    military housing projects as an integrated asset manager, development
    manager and design builder following a competitive bidding process
    administered by the respective Military Services.
        We currently manage ten1A\1\ MHPI family housing projects, which
    include ground leases and family housing operations across different
    installations in twelve States. Six of those Project Companies operate
    family housing on United States Army installations, one on Marine Corps
    installations, and three on Air Force installations.
    ---------------------------------------------------------------------------
        \1\ The Beaufort/Parris Island project was awarded separately by
    the Navy in 2002, but the project was later merged into the Atlantic
    Marine Corps Communities project upon the award of the third phase of
    that project by the Navy in 2007.
    ---------------------------------------------------------------------------
        Each of the project agreements, including the Project Company
    contracts with LLUSPP affiliates for the ongoing and continuing asset
    management, development management and property management services
    provided to the Projects, were negotiated and approved by the
    respective Military Service and their consultants at the initial
    closing of each MHPI project.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        99. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, please provide a list of all active service
    agreements, and include the following information for each agreement:
    the date it was signed; the installation that it served; the number of
    housing units that were provided; the year or years that those housing
    units were first occupied; the year or years of any substantial
    renovations; the total budget associated with the agreements for each
    of the last 10 years; the annual profit you have earned under each of
    these agreements for each of the last 10 years; and the value of the
    replacement reserve fund or other funds available for capital expenses
    for each of the last 10 years.
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Piscerne. Answer provided directly to Senator Warren on
    February 19, 2019.
        Mr. Ehle. Hunt currently owns and operates 21 separate projects in
    partnership with DOD. Hunt also maintains a minority ownership interest
    in some properties that it does not manage or oversee. All of Hunt's
    projects, some of which include multiple property sites, are located on
    or near Air Force, Navy, Marine Corps, and Army bases throughout the
    country. Each project that Hunt operates is governed by a ground lease
    and limited liability company operating agreement. Data regarding the
    years in which Hunt's properties have undergone substantial renovation
    is provided in Attachment A (follows). Information regarding Hunt's
    reserve balances is provided in Attachment B (follows).

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Hickey. Senator Warren requested this information from
    Lendlease in her correspondence dated February 6, 2019. In response to
    that request, the Lendlease team provided Senator Warren and her staff
    two document productions dated February 21, 2019, and March 6, 2019, in
    addition to conducting an in-depth briefing with Senator Warren's team.
    Accordingly, we believe that this question has been adequately
    responded to as a result of such responses. If this response is not
    sufficient for purposes of this request, the Lendlease team would be
    happy to provide a similar briefing to the SASC staff.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        100. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, please provide full copies of all agreements
    under which your company has received compensation for developing,
    operating, or providing any service to and for private military housing
    projects for any of the military services.
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Piscerne. Answer provided directly to Senator Warren on
    February 19, 2019.
        Mr. Ehle. Hunt currently owns and operates 21 separate projects in
    partnership with DOD. Hunt also maintains a minority ownership interest
    in some properties that it does not manage or oversee. All of Hunt's
    projects, some of which include multiple property sites, are located on
    or near Air Force, Navy, Marine Corps, and Army bases throughout the
    country. Each project that Hunt operates is governed by a ground lease
    and limited liability company operating agreement.
        Mr. Hickey. Senator Warren requested this information from
    Lendlease in her correspondence dated February 6, 2019. In response to
    that request, the Lendlease team provided Senator Warren and her staff
    two document productions dated February 21, 2019, and March 6, 2019, in
    addition to conducting an in-depth briefing with Senator Warren's team.
    Accordingly, we believe that this question has been adequately
    responded to as a result of such responses. If this response is not
    sufficient for purposes of this request, the Lendlease team would be
    happy to provide a similar briefing to the SASC staff.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        101. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, please describe your company MHPI capital need
    plan for the next 5 years. Is the balance in the reserve account
    sufficient to meet the needs of the development?
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Piscerne. Answer provided directly to Senator Warren on
    February 19, 2019.
        Mr. Ehle. Information pertaining to the balances of project
    sustainment accounts as of January 2019 is set forth in Attachment B
    (see response for #99). Importantly, these accounts are government-
    owned. They do not contain Hunt money. The funds in the accounts are
    subject to government consent and dedicated for use on reinvestment and
    sustainment of each applicable project. Information regarding each
    project's capital needs over the next 5 years and whether sources of
    funds are sufficient to cover the projected uses is provided in
    Attachment C (follows).

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Hickey. Funds to perform capital repairs and replacements can
    generally come from two accounts established by the Project Companies:
    Capital Repair and Replacement Accounts and Project Reinvestment
    Reserve Account. As discussed with Senator Warren's staff during our
    March 6, 2019 briefing, funds in these reserve accounts accumulate and
    are held in secure accounts maintained by the Project Companies at
    approved financial institutions in accordance with each of the
    Projects' financing documents. Capital Repair and Replacement
    expenditures are approved by the Military Services through the Project
    Company's annual project budget and business plan, and any expenditures
    of Project reinvestment reserve funds are approved by the respective
    Military Services in accordance with a Project Company's specific
    contractual agreements. At present, across the portfolio, there is a
    variance across the individual project companies in respective reserve
    funds they each hold. Some are enough to meet all the needs, however
    other projects have less retentions available.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.
                             use of subcontractors
        102. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, do any subcontractors, subsidiaries, or other
    third parties manage or provide any other services at the military
    housing properties under your company's control?
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Piscerne. Answer provided directly to Senator Warren on
    February 19, 2019.
        Mr. Ehle. At most of its properties, Hunt handles property
    management and asset management itself. At certain properties where
    Hunt owns an interest in partnership with others, management of the
    project is delegated to Hunt's partner. Additionally, Hunt sometimes
    engages third-party subcontractors or vendors to provide services such
    as painting, HVAC maintenance, lawn care, and snow removal. A list of
    some of Hunt's primary third-party maintenance vendor contracts
    currently in effect is provided in Attachment D.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Hickey. Yes, we engage a variety of small and large business
    subcontractors, subsidiaries, and third parties to manage and provide
    services in our communities. We partner with Winn Housing Services to
    manage many of our day-to-day operations at the facility level. We also
    contract for some specialty services, such as environmental
    assessments, testing and remediation if required. We often contract
    with several trade service providers when necessary including HVAC,
    plumbing and electrical. We also have major subcontracts for
    landscaping, tree removal and refuse collection.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        103. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, if so, please provide a list of all of these
    entities, a summary of the services they provide, and the locations
    where they provide these services.
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Piscerne. Answer provided directly to Senator Warren on
    February 19, 2019.
        Mr. Ehle. At most of its properties, Hunt handles property
    management and asset management itself. At certain properties where
    Hunt owns an interest in partnership with others, management of the
    project is delegated to Hunt's partner. Additionally, Hunt sometimes
    engages third-party subcontractors or vendors to provide services such
    as painting, HVAC maintenance, lawn care, and snow removal. A list of
    some of Hunt's primary third-party maintenance vendor contracts
    currently in effect is provided in Attachment D in response #102.
        Mr. Hickey. Senator Warren requested this information from
    Lendlease in her correspondence dated February 6, 2019. In response to
    that request, the Lendlease team provided Senator Warren and her staff
    two document productions dated February 21, 2019, and March 6, 2019, in
    addition to conducting an in-depth briefing with Senator Warren's team.
    Accordingly, we believe that this question has been adequately
    responded to as a result of such responses. If this response is not
    sufficient for purposes of this request, the Lendlease team would be
    happy to provide a similar briefing to the SASC staff.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        104. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, please provide copies of all agreements and
    contracts between your company and these property managers or other
    service providers.
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Picerne. Answer provided directly to Senator Warren on February
    19, 2019.
        Mr. Ehle. At most of its properties, Hunt handles property
    management and asset management itself. At certain properties where
    Hunt owns an interest in partnership with others, management of the
    project is delegated to Hunt's partner. Additionally, Hunt sometimes
    engages third-party subcontractors or vendors to provide services such
    as painting, HVAC maintenance, lawn care, and snow removal. A list of
    some of Hunt's primary third-party maintenance vendor contracts
    currently in effect is provided in Attachment D in response #102.
        Mr. Hickey. Senator Warren requested this information from
    Lendlease in her correspondence dated February 6, 2019. In response to
    that request, the Lendlease team provided Senator Warren and her staff
    two document productions dated February 21, 2019, and March 6, 2019, in
    addition to conducting an in-depth briefing with Senator Warren's team.
    Accordingly, we believe that this question has been adequately
    responded to as a result of such responses. If this response is not
    sufficient for purposes of this request, the Lendlease team would be
    happy to provide a similar briefing to the SASC staff.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        105. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, are any of these subcontractors either
    subsidiaries or otherwise financially related to your company?
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Picerne. Answer provided directly to Senator Warren on February
    19, 2019.
        Mr. Ehle. At most of its properties, Hunt handles property
    management and asset management itself. At certain properties where
    Hunt owns an interest in partnership with others, management of the
    project is delegated to Hunt's partner. Additionally, Hunt sometimes
    engages third-party subcontractors or vendors to provide services such
    as painting, HVAC maintenance, lawn care, and snow removal. A list of
    some of Hunt's primary third-party maintenance vendor contracts
    currently in effect is provided in Attachment D in response #102. The
    third-party subcontractors or vendors referenced above are not
    subsidiaries or otherwise financially related to Hunt.
        Mr. Hickey. Senator Warren requested this information from
    Lendlease in her correspondence dated February 6, 2019. In response to
    that request, the Lendlease team provided Senator Warren and her staff
    two document productions dated February 21, 2019, and March 6, 2019, in
    addition to conducting an in-depth briefing with Senator Warren's team.
    Accordingly, we believe that this question has been adequately
    responded to as a result of such responses. If this response is not
    sufficient for purposes of this request, the Lendlease team would be
    happy to provide a similar briefing to the SASC staff.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        106. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, do you share key officers or Board members with
    any of these subcontractors?
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Picerne. Answer provided directly to Senator Warren on February
    19, 2019.
        Mr. Ehle. At most of its properties, Hunt handles property
    management and asset management itself. At certain properties where
    Hunt owns an interest in partnership with others, management of the
    project is delegated to Hunt's partner. Additionally, Hunt sometimes
    engages third-party subcontractors or vendors to provide services such
    as painting, HVAC maintenance, lawn care, and snow removal. A list of
    some of Hunt's primary third-party maintenance vendor contracts
    currently in effect is provided in Attachment D in response #102. Hunt
    does not share key officers or board members with any of the third-
    party subcontractors or vendors referenced above.
        Mr. Hickey. Senator Warren requested this information from
    Lendlease in her correspondence dated February 6, 2019. In response to
    that request, the Lendlease team provided Senator Warren and her staff
    two document productions dated February 21, 2019, and March 6, 2019, in
    addition to conducting an in-depth briefing with Senator Warren's team.
    Accordingly, we believe that this question has been adequately
    responded to as a result of such responses. If this response is not
    sufficient for purposes of this request, the Lendlease team would be
    happy to provide a similar briefing to the SASC staff.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

                                   oversight
        107. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, what controls are in place under your company's
    MHPI contracts to monitor and oversee your performance?
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Picerne. Answer provided directly to Senator Warren on February
    19, 2019.
        Mr. Ehle. Our military partners have multiple controls in place to
    oversee and monitor Hunt's performance, and we encourage such
    engagement. Hunt is subject to reporting and inspection requirements
    that occur on weekly, monthly, quarterly and annual bases. Our military
    partners have access to our maintenance software, Yardi, and can review
    work orders and survey responses. They are also able to inspect homes
    and follow up directly with residents. Each of our military partners
    has its own unique requirements for reporting and inspection. A general
    overview of these requirements is included below.
    Day-to-Day/Site Level Reporting
        In many of our housing offices, Hunt co-locates with its military
    housing partner. This provides for open and regular communication,
    coordination, and interaction between Hunt, the Military Housing Office
    (``HMO''), and residents. The military routinely conducts random
    inspections of units that are ready for occupancy. Our military
    partners also check in with residents to elicit feedback on recent
    moves or completed work order requests. Hunt has weekly meetings with
    its military partners to review any open or pending projects, customer
    service issues, work order response times, pending move-ins and move-
    outs, and occupancy rates. In addition, all new servicemember residents
    must obtain a referral from their command to move into their designated
    home.
    Monthly Reporting
        Hunt is required to provide monthly reports to its military
    partners on the financial health of the project, including an analysis
    of the approved annual operating budget. These reports contain
    information regarding:

          line-item budget variances;
          occupancy;
          work orders;
          response times;
          capital repair and replacement status;
          project bank account reconciliations; and
          any other important upcoming issues.

        In addition, Hunt provides its military partners with monthly
    utility consumption reports, which provide information regarding
    resident utility consumption, rates, and charges. At most of its
    projects, Hunt also participates in monthly meetings with its military
    partners to receive feedback and provide updates on any upcoming events
    or issues that may require the base commander's input.
    Quarterly/Semi-Annual Reporting
        On a quarterly or semi-annual basis, Hunt conducts a meeting with
    military leadership at the base, command, and housing levels as well as
    with the military's independent consultants. These meetings are
    intended to maintain open and consistent communication between the
    partners by facilitating discussion of the financial health of the
    project, sustainment of the project, resident issues, military
    partnership issues, events, occupancy, and/or strategic initiatives.
    Further, Hunt and the military engage in quarterly asset management
    meetings to coordinate on open items and discuss upcoming issues, as
    well as review executive home reports and compare them to budgets. Hunt
    also conducts semi-annual partnering meetings with the military to
    address the higher-level strategic goals of the project.

    Annual Reporting
        The military partner conducts an annual site visit at each military
    installation and supports its review with a report and scoring system.
    All issues that are unacceptable are noted, and the property manager
    takes action to address them. All of the military services also conduct
    an annual resident satisfaction survey. As part of this process,
    residents rate the project according to a variety of metrics and are
    encouraged to give narrative feedback. Both Hunt and its military
    partner review the scores and resident feedback and follow up
    accordingly. Additionally, Hunt develops an action plan to address any
    issues that require attention. Further, Hunt's incentive fee earnings
    are, in part, tied to the site visit and resident satisfaction results.
        Hunt provides information on the following topics for coordination
    and approval on an annual basis to all levels of military leadership
    and to military independent consultants:

          Project operation;
          Capital repair and replacement;
          Executive home budgets; and
          Out-year sustainment plans.

        In addition, Hunt also submits the following information to the
    military on an annual basis:

          Verifications to uphold insurance, environmental, and
    document compliance;
          Environmental reports relating to lead-based paint or
    asbestos-containing materials; and
          Audited financials on a per-project basis.

        Some of the military services also hold annual meetings to review
    each project in detail. Similarly, the military routinely requests
    additional information from Hunt on an as-needed basis to assess the
    performance of projects. In addition to military oversight, the ground
    leases require that the projects are operated in compliance with all
    applicable laws. In addition, resident leases are subject to applicable
    state landlord-tenant laws. Thus, even though a particular project may
    be located on federal land, it is not necessarily insulated from the
    mandates of applicable state or local law.
        Often, a project will enter into a municipal service agreement with
    a local state agency for the provision of police, fire, life safety,
    and welfare protection services. All projects are required to comply
    with federal regulations including those administered by OSHA, the EPA,
    HUD, and the Department of Labor, as well as their state law
    equivalents. The projects are also subject to inspections by these
    authorities.
        Finally, Hunt is subject to penalties for violating its contracts.
    Under the terms of our project agreements, a military partner may
    terminate our agreement if we are in material default of our
    obligations or withhold all, or a portion of, our incentive fees if we
    fail to meet performance expectations outlined in the agreement.
    Indeed, in recent years, Hunt has had some portions of its incentive
    fees withheld for certain projects.
        Mr. Hickey. MHPI Project Companies are contractually accountable to
    multiple stakeholders, including, but not limited to, the DOD and the
    other Military Services, who regularly monitor and assess our
    performance.
        The respective Military Services retain governance oversight and
    control over major decisions impacting each Project Company through
    contractual rights contained in the various project documents. Lenders,
    bondholders and others with financial interests also exercise a high
    degree of control over the Project Companies' operations (including
    scope changes, financial investments of Project Company funds, and
    certain expenditures, for example) and have significant rights under
    the financing documents.
        In addition to monitoring and oversight conducted by the Military
    Services, independent construction consultants provide oversight on
    property development and construction activities on project companies,
    including independent review and approval of construction progress and
    pay applications.
        The Project Companies' assets and operations have also been subject
    to inspection by Federal, Military Services and State regulatory
    authorities.
        The Project Companies and management service providers are subject
    to specific consequences for violating the terms of their Project
    agreements. This includes rights of the Military Services to exercise
    remedies up to termination for specified events of default under the
    various contracts.
        In addition, the ongoing asset and property management agreements
    all contain an element of incentive fee to promote performance. The
    Military Services can withhold and not award full incentive fees if
    agreed performance metrics are not met by the respective manager.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        108. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, does the DOD, or any of the Military Departments
    with whom your company has agreements, regularly monitor and assess
    your performance and adherence to these agreements? If so, how?
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Picerne. Answer provided directly to Senator Warren on February
    19, 2019.
        Mr. Ehle. Our military partners have multiple controls in place to
    oversee and monitor Hunt's performance, and we encourage such
    engagement. Hunt is subject to reporting and inspection requirements
    that occur on weekly, monthly, quarterly and annual bases. Our military
    partners have access to our maintenance software, Yardi, and can review
    work orders and survey responses. They are also able to inspect homes
    and follow up directly with residents. Each of our military partners
    has its own unique requirements for reporting and inspection. A general
    overview of these requirements is included below.

    Day-to-Day/Site Level Reporting
        In many of our housing offices, Hunt co-locates with its military
    housing partner. This provides for open and regular communication,
    coordination, and interaction between Hunt, the Military Housing Office
    (``HMO''), and residents. The military routinely conducts random
    inspections of units that are ready for occupancy. Our military
    partners also check in with residents to elicit feedback on recent
    moves or completed work order requests. Hunt has weekly meetings with
    its military partners to review any open or pending projects, customer
    service issues, work order response times, pending move-ins and move-
    outs, and occupancy rates. In addition, all new servicemember residents
    must obtain a referral from their command to move into their designated
    home.

    Monthly Reporting
        Hunt is required to provide monthly reports to its military
    partners on the financial health of the project, including an analysis
    of the approved annual operating budget. These reports contain
    information regarding:

          line-item budget variances;
          occupancy;
          work orders;
          response times;
          capital repair and replacement status;
          project bank account reconciliations; and
          any other important upcoming issues.

        In addition, Hunt provides its military partners with monthly
    utility consumption reports, which provide information regarding
    resident utility consumption, rates, and charges. At most of its
    projects, Hunt also participates in monthly meetings with its military
    partners to receive feedback and provide updates on any upcoming events
    or issues that may require the base commander's input.
    Quarterly/Semi-Annual Reporting
        On a quarterly or semi-annual basis, Hunt conducts a meeting with
    military leadership at the base, command, and housing levels as well as
    with the military's independent consultants. These meetings are
    intended to maintain open and consistent communication between the
    partners by facilitating discussion of the financial health of the
    project, sustainment of the project, resident issues, military
    partnership issues, events, occupancy, and/or strategic initiatives.
    Further, Hunt and the military engage in quarterly asset management
    meetings to coordinate on open items and discuss upcoming issues, as
    well as review executive home reports and compare them to budgets. Hunt
    also conducts semi-annual partnering meetings with the military to
    address the higher-level strategic goals of the project.

    Annual Reporting
        The military partner conducts an annual site visit at each military
    installation and supports its review with a report and scoring system.
    All issues that are unacceptable are noted, and the property manager
    takes action to address them. All of the military services also conduct
    an annual resident satisfaction survey. As part of this process,
    residents rate the project according to a variety of metrics and are
    encouraged to give narrative feedback. Both Hunt and its military
    partner review the scores and resident feedback and follow up
    accordingly. Additionally, Hunt develops an action plan to address any
    issues that require attention. Further, Hunt's incentive fee earnings
    are, in part, tied to the site visit and resident satisfaction results.
        Hunt provides information on the following topics for coordination
    and approval on an annual basis to all levels of military leadership
    and to military independent consultants:

          Project operation;
          Capital repair and replacement;
          Executive home budgets; and
          Out-year sustainment plans.

        In addition, Hunt also submits the following information to the
    military on an annual basis:

          Verifications to uphold insurance, environmental, and
    document compliance;
          Environmental reports relating to lead-based paint or
    asbestos-containing materials; and
          Audited financials on a per-project basis.

        Some of the military services also hold annual meetings to review
    each project in detail. Similarly, the military routinely requests
    additional information from Hunt on an as-needed basis to assess the
    performance of projects. In addition to military oversight, the ground
    leases require that the projects are operated in compliance with all
    applicable laws. In addition, resident leases are subject to applicable
    state landlord-tenant laws. Thus, even though a particular project may
    be located on federal land, it is not necessarily insulated from the
    mandates of applicable state or local law.
        Often, a project will enter into a municipal service agreement with
    a local state agency for the provision of police, fire, life safety,
    and welfare protection services. All projects are required to comply
    with Federal regulations including those administered by OSHA, the EPA,
    HUD, and the Department of Labor, as well as their state law
    equivalents. The projects are also subject to inspections by these
    authorities.
        Finally, Hunt is subject to penalties for violating its contracts.
    Under the terms of our project agreements, a military partner may
    terminate our agreement if we are in material default of our
    obligations or withhold all, or a portion of, our incentive fees if we
    fail to meet performance expectations outlined in the agreement.
    Indeed, in recent years, Hunt has had some portions of its incentive
    fees withheld for certain projects.
        Mr. Hickey. MHPI Project Companies are contractually accountable to
    multiple stakeholders, including, but not limited to, the DOD and the
    other Military Services, who regularly monitor and assess our
    performance. The respective Military Services retain governance
    oversight and control over major decisions impacting each Project
    Company through contractual rights contained in the various project
    documents. Lenders, bondholders and others with financial interests
    also exercise a high degree of control over the Project Companies'
    operations (including scope changes, financial investments of Project
    Company funds, and certain expenditures, for example) and have
    significant rights under the financing documents. See also the response
    above to question 107.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        109. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, how frequently are your company's properties
    inspected by DOD or military service personnel, or by any third-party
    inspector acting on their behalf?
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Picerne. Answer provided directly to Senator Warren on February
    19, 2019.
        Mr. Ehle. Our military partners have multiple controls in place to
    oversee and monitor Hunt's performance, and we encourage such
    engagement. Hunt is subject to reporting and inspection requirements
    that occur on weekly, monthly, quarterly and annual bases. Our military
    partners have access to our maintenance software, Yardi, and can review
    work orders and survey responses. They are also able to inspect homes
    and follow up directly with residents. Each of our military partners
    has its own unique requirements for reporting and inspection. A general
    overview of these requirements is included below.

    Day-to-Day/Site Level Reporting
        In many of our housing offices, Hunt co-locates with its military
    housing partner. This provides for open and regular communication,
    coordination, and interaction between Hunt, the Military Housing Office
    (``HMO''), and residents. The military routinely conducts random
    inspections of units that are ready for occupancy. Our military
    partners also check in with residents to elicit feedback on recent
    moves or completed work order requests. Hunt has weekly meetings with
    its military partners to review any open or pending projects, customer
    service issues, work order response times, pending move-ins and move-
    outs, and occupancy rates. In addition, all new servicemember residents
    must obtain a referral from their command to move into their designated
    home.

    Monthly Reporting
        Hunt is required to provide monthly reports to its military
    partners on the financial health of the project, including an analysis
    of the approved annual operating budget. These reports contain
    information regarding:

          line-item budget variances;
          occupancy;
          work orders;
          response times;
          capital repair and replacement status;
          project bank account reconciliations; and
          any other important upcoming issues.

        In addition, Hunt provides its military partners with monthly
    utility consumption reports, which provide information regarding
    resident utility consumption, rates, and charges. At most of its
    projects, Hunt also participates in monthly meetings with its military
    partners to receive feedback and provide updates on any upcoming events
    or issues that may require the base commander's input.

    Quarterly/Semi-Annual Reporting
        On a quarterly or semi-annual basis, Hunt conducts a meeting with
    military leadership at the base, command, and housing levels as well as
    with the military's independent consultants. These meetings are
    intended to maintain open and consistent communication between the
    partners by facilitating discussion of the financial health of the
    project, sustainment of the project, resident issues, military
    partnership issues, events, occupancy, and/or strategic initiatives.
    Further, Hunt and the military engage in quarterly asset management
    meetings to coordinate on open items and discuss upcoming issues, as
    well as review executive home reports and compare them to budgets. Hunt
    also conducts semi-annual partnering meetings with the military to
    address the higher-level strategic goals of the project.

    Annual Reporting
        The military partner conducts an annual site visit at each military
    installation and supports its review with a report and scoring system.
    All issues that are unacceptable are noted, and the property manager
    takes action to address them. All of the military services also conduct
    an annual resident satisfaction survey. As part of this process,
    residents rate the project according to a variety of metrics and are
    encouraged to give narrative feedback. Both Hunt and its military
    partner review the scores and resident feedback and follow up
    accordingly. Additionally, Hunt develops an action plan to address any
    issues that require attention. Further, Hunt's incentive fee earnings
    are, in part, tied to the site visit and resident satisfaction results.
        Hunt provides information on the following topics for coordination
    and approval on an annual basis to all levels of military leadership
    and to military independent consultants:

          Project operation;
          Capital repair and replacement;
          Executive home budgets; and
          Out-year sustainment plans.

        In addition, Hunt also submits the following information to the
    military on an annual basis:

          Verifications to uphold insurance, environmental, and
    document compliance;
          Environmental reports relating to lead-based paint or
    asbestos-containing materials; and
          Audited financials on a per-project basis.

        Some of the military services also hold annual meetings to review
    each project in detail. Similarly, the military routinely requests
    additional information from Hunt on an as-needed basis to assess the
    performance of projects. In addition to military oversight, the ground
    leases require that the projects are operated in compliance with all
    applicable laws. In addition, resident leases are subject to applicable
    state landlord-tenant laws. Thus, even though a particular project may
    be located on federal land, it is not necessarily insulated from the
    mandates of applicable state or local law.
        Often, a project will enter into a municipal service agreement with
    a local state agency for the provision of police, fire, life safety,
    and welfare protection services. All projects are required to comply
    with federal regulations including those administered by OSHA, the EPA,
    HUD, and the Department of Labor, as well as their state law
    equivalents. The projects are also subject to inspections by these
    authorities.
        Finally, Hunt is subject to penalties for violating its contracts.
    Under the terms of our project agreements, a military partner may
    terminate our agreement if we are in material default of our
    obligations or withhold all, or a portion of, our incentive fees if we
    fail to meet performance expectations outlined in the agreement.
    Indeed, in recent years, Hunt has had some portions of its incentive
    fees withheld for certain projects.
        Mr. Hickey. The Project Companies' assets and operations are
    subject to inspection by Federal, Military Services and in many
    instances State regulatory authorities. The frequency of such
    inspections varies. In recent weeks many of our properties have been
    inspected and our personnel interviewed by various military service's
    Inspectors General (IG).
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        110. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, please provide a list of the results of all such
    inspections of all of your company's MHPI facilities since January 1,
    2008, including any deficiencies identified and a description of how
    these deficiencies were remedied.
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Picerne. Answer provided directly to Senator Warren on February
    19, 2019.
        Mr. Ehle. Our military partners have multiple controls in place to
    oversee and monitor Hunt's performance, and we encourage such
    engagement. Hunt is subject to reporting and inspection requirements
    that occur on weekly, monthly, quarterly and annual bases. Our military
    partners have access to our maintenance software, Yardi, and can review
    work orders and survey responses. They are also able to inspect homes
    and follow up directly with residents. Each of our military partners
    has its own unique requirements for reporting and inspection. A general
    overview of these requirements is included below.

    Day-to-Day/Site Level Reporting
        In many of our housing offices, Hunt co-locates with its military
    housing partner. This provides for open and regular communication,
    coordination, and interaction between Hunt, the Military Housing Office
    (``HMO''), and residents. The military routinely conducts random
    inspections of units that are ready for occupancy. Our military
    partners also check in with residents to elicit feedback on recent
    moves or completed work order requests. Hunt has weekly meetings with
    its military partners to review any open or pending projects, customer
    service issues, work order response times, pending move-ins and move-
    outs, and occupancy rates. In addition, all new servicemember residents
    must obtain a referral from their command to move into their designated
    home.

    Monthly Reporting
        Hunt is required to provide monthly reports to its military
    partners on the financial health of the project, including an analysis
    of the approved annual operating budget. These reports contain
    information regarding:

          line-item budget variances;
          occupancy;
          work orders;
          response times;
          capital repair and replacement status;
          project bank account reconciliations; and
          any other important upcoming issues.

        In addition, Hunt provides its military partners with monthly
    utility consumption reports, which provide information regarding
    resident utility consumption, rates, and charges. At most of its
    projects, Hunt also participates in monthly meetings with its military
    partners to receive feedback and provide updates on any upcoming events
    or issues that may require the base commander's input.
    Quarterly/Semi-Annual Reporting
        On a quarterly or semi-annual basis, Hunt conducts a meeting with
    military leadership at the base, command, and housing levels as well as
    with the military's independent consultants. These meetings are
    intended to maintain open and consistent communication between the
    partners by facilitating discussion of the financial health of the
    project, sustainment of the project, resident issues, military
    partnership issues, events, occupancy, and/or strategic initiatives.
    Further, Hunt and the military engage in quarterly asset management
    meetings to coordinate on open items and discuss upcoming issues, as
    well as review executive home reports and compare them to budgets. Hunt
    also conducts semi-annual partnering meetings with the military to
    address the higher-level strategic goals of the project.

    Annual Reporting
        The military partner conducts an annual site visit at each military
    installation and supports its review with a report and scoring system.
    All issues that are unacceptable are noted, and the property manager
    takes action to address them. All of the military services also conduct
    an annual resident satisfaction survey. As part of this process,
    residents rate the project according to a variety of metrics and are
    encouraged to give narrative feedback. Both Hunt and its military
    partner review the scores and resident feedback and follow up
    accordingly. Additionally, Hunt develops an action plan to address any
    issues that require attention. Further, Hunt's incentive fee earnings
    are, in part, tied to the site visit and resident satisfaction results.
        Hunt provides information on the following topics for coordination
    and approval on an annual basis to all levels of military leadership
    and to military independent consultants:

          Project operation;
          Capital repair and replacement;
          Executive home budgets; and
          Out-year sustainment plans.

        In addition, Hunt also submits the following information to the
    military on an annual basis:

          Verifications to uphold insurance, environmental, and
    document compliance;
          Environmental reports relating to lead-based paint or
    asbestos-containing materials; and
          Audited financials on a per-project basis.

        Some of the military services also hold annual meetings to review
    each project in detail. Similarly, the military routinely requests
    additional information from Hunt on an as-needed basis to assess the
    performance of projects. In addition to military oversight, the ground
    leases require that the projects are operated in compliance with all
    applicable laws. In addition, resident leases are subject to applicable
    state landlord-tenant laws. Thus, even though a particular project may
    be located on federal land, it is not necessarily insulated from the
    mandates of applicable state or local law.
        Often, a project will enter into a municipal service agreement with
    a local state agency for the provision of police, fire, life safety,
    and welfare protection services. All projects are required to comply
    with federal regulations including those administered by OSHA, the EPA,
    HUD, and the Department of Labor, as well as their state law
    equivalents. The projects are also subject to inspections by these
    authorities.
        Finally, Hunt is subject to penalties for violating its contracts.
    Under the terms of our project agreements, a military partner may
    terminate our agreement if we are in material default of our
    obligations or withhold all, or a portion of, our incentive fees if we
    fail to meet performance expectations outlined in the agreement.
    Indeed, in recent years, Hunt has had some portions of its incentive
    fees withheld for certain projects.
        Mr. Hickey. Senator Warren requested this information from
    Lendlease in her correspondence dated February 6, 2019. In response to
    that request, the Lendlease team provided Senator Warren and her staff
    two document productions dated February 21, 2019, and March 6, 2019, in
    addition to conducting an in-depth briefing with Senator Warren's team.
    Accordingly, we believe that this question has been adequately
    responded to as a result of such responses. If this response is not
    sufficient for purposes of this request, the Lendlease team would be
    happy to provide a similar briefing to the SASC staff.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        111. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, are any of your properties subject to inspection
    by any other federal authority, or by any state or local authority? If
    so, please provide a list of any inspections and the results of such
    inspections by these officials.
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Picerne. Answer provided directly to Senator Warren on February
    19, 2019.
        Mr. Ehle. Our military partners have multiple controls in place to
    oversee and monitor Hunt's performance, and we encourage such
    engagement. Hunt is subject to reporting and inspection requirements
    that occur on weekly, monthly, quarterly and annual bases. Our military
    partners have access to our maintenance software, Yardi, and can review
    work orders and survey responses. They are also able to inspect homes
    and follow up directly with residents. Each of our military partners
    has its own unique requirements for reporting and inspection. A general
    overview of these requirements is included below.

    Day-to-Day/Site Level Reporting
        In many of our housing offices, Hunt co-locates with its military
    housing partner. This provides for open and regular communication,
    coordination, and interaction between Hunt, the Military Housing Office
    (``HMO''), and residents. The military routinely conducts random
    inspections of units that are ready for occupancy. Our military
    partners also check in with residents to elicit feedback on recent
    moves or completed work order requests. Hunt has weekly meetings with
    its military partners to review any open or pending projects, customer
    service issues, work order response times, pending move-ins and move-
    outs, and occupancy rates. In addition, all new servicemember residents
    must obtain a referral from their command to move into their designated
    home.

    Monthly Reporting
        Hunt is required to provide monthly reports to its military
    partners on the financial health of the project, including an analysis
    of the approved annual operating budget. These reports contain
    information regarding:

          line-item budget variances;
          occupancy;
          work orders;
          response times;
          capital repair and replacement status;
          project bank account reconciliations; and
          any other important upcoming issues.

        In addition, Hunt provides its military partners with monthly
    utility consumption reports, which provide information regarding
    resident utility consumption, rates, and charges. At most of its
    projects, Hunt also participates in monthly meetings with its military
    partners to receive feedback and provide updates on any upcoming events
    or issues that may require the base commander's input.

    Quarterly/Semi-Annual Reporting
        On a quarterly or semi-annual basis, Hunt conducts a meeting with
    military leadership at the base, command, and housing levels as well as
    with the military's independent consultants. These meetings are
    intended to maintain open and consistent communication between the
    partners by facilitating discussion of the financial health of the
    project, sustainment of the project, resident issues, military
    partnership issues, events, occupancy, and/or strategic initiatives.
    Further, Hunt and the military engage in quarterly asset management
    meetings to coordinate on open items and discuss upcoming issues, as
    well as review executive home reports and compare them to budgets. Hunt
    also conducts semi-annual partnering meetings with the military to
    address the higher-level strategic goals of the project.

    Annual Reporting
        The military partner conducts an annual site visit at each military
    installation and supports its review with a report and scoring system.
    All issues that are unacceptable are noted, and the property manager
    takes action to address them. All of the military services also conduct
    an annual resident satisfaction survey. As part of this process,
    residents rate the project according to a variety of metrics and are
    encouraged to give narrative feedback. Both Hunt and its military
    partner review the scores and resident feedback and follow up
    accordingly. Additionally, Hunt develops an action plan to address any
    issues that require attention. Further, Hunt's incentive fee earnings
    are, in part, tied to the site visit and resident satisfaction results.
        Hunt provides information on the following topics for coordination
    and approval on an annual basis to all levels of military leadership
    and to military independent consultants:

          Project operation;
          Capital repair and replacement;
          Executive home budgets; and
          Out-year sustainment plans.

        In addition, Hunt also submits the following information to the
    military on an annual basis:

          Verifications to uphold insurance, environmental, and
    document compliance;
          Environmental reports relating to lead-based paint or
    asbestos-containing materials; and
          Audited financials on a per-project basis.

        Some of the military services also hold annual meetings to review
    each project in detail. Similarly, the military routinely requests
    additional information from Hunt on an as-needed basis to assess the
    performance of projects. In addition to military oversight, the ground
    leases require that the projects are operated in compliance with all
    applicable laws. In addition, resident leases are subject to applicable
    state landlord-tenant laws. Thus, even though a particular project may
    be located on federal land, it is not necessarily insulated from the
    mandates of applicable state or local law.
        Often, a project will enter into a municipal service agreement with
    a local state agency for the provision of police, fire, life safety,
    and welfare protection services. All projects are required to comply
    with federal regulations including those administered by OSHA, the EPA,
    HUD, and the Department of Labor, as well as their state law
    equivalents. The projects are also subject to inspections by these
    authorities.
        Finally, Hunt is subject to penalties for violating its contracts.
    Under the terms of our project agreements, a military partner may
    terminate our agreement if we are in material default of our
    obligations or withhold all, or a portion of, our incentive fees if we
    fail to meet performance expectations outlined in the agreement.
    Indeed, in recent years, Hunt has had some portions of its incentive
    fees withheld for certain projects.
        Mr. Hickey. The Project Companies' assets and operations are
    subject to inspection by Federal and State regulatory authorities. For
    additional information, please see our response to question 99.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        112. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, under your company's existing lease agreements,
    is your company subject to specific financial or other penalties for
    violating the terms of your agreements with the Military Departments?
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Picerne. Answer provided directly to Senator Warren on February
    19, 2019.
        Mr. Ehle. Our military partners have multiple controls in place to
    oversee and monitor Hunt's performance, and we encourage such
    engagement. Hunt is subject to reporting and inspection requirements
    that occur on weekly, monthly, quarterly and annual bases. Our military
    partners have access to our maintenance software, Yardi, and can review
    work orders and survey responses. They are also able to inspect homes
    and follow up directly with residents. Each of our military partners
    has its own unique requirements for reporting and inspection. A general
    overview of these requirements is included below.

    Day-to-Day/Site Level Reporting
        In many of our housing offices, Hunt co-locates with its military
    housing partner. This provides for open and regular communication,
    coordination, and interaction between Hunt, the Military Housing Office
    (``HMO''), and residents. The military routinely conducts random
    inspections of units that are ready for occupancy. Our military
    partners also check in with residents to elicit feedback on recent
    moves or completed work order requests. Hunt has weekly meetings with
    its military partners to review any open or pending projects, customer
    service issues, work order response times, pending move-ins and move-
    outs, and occupancy rates. In addition, all new servicemember residents
    must obtain a referral from their command to move into their designated
    home.

    Monthly Reporting
        Hunt is required to provide monthly reports to its military
    partners on the financial health of the project, including an analysis
    of the approved annual operating budget. These reports contain
    information regarding:

          line-item budget variances;
          occupancy;
          work orders;
          response times;
          capital repair and replacement status;
          project bank account reconciliations; and
          any other important upcoming issues.

        In addition, Hunt provides its military partners with monthly
    utility consumption reports, which provide information regarding
    resident utility consumption, rates, and charges. At most of its
    projects, Hunt also participates in monthly meetings with its military
    partners to receive feedback and provide updates on any upcoming events
    or issues that may require the base commander's input.

    Quarterly/Semi-Annual Reporting
        On a quarterly or semi-annual basis, Hunt conducts a meeting with
    military leadership at the base, command, and housing levels as well as
    with the military's independent consultants. These meetings are
    intended to maintain open and consistent communication between the
    partners by facilitating discussion of the financial health of the
    project, sustainment of the project, resident issues, military
    partnership issues, events, occupancy, and/or strategic initiatives.
    Further, Hunt and the military engage in quarterly asset management
    meetings to coordinate on open items and discuss upcoming issues, as
    well as review executive home reports and compare them to budgets. Hunt
    also conducts semi-annual partnering meetings with the military to
    address the higher-level strategic goals of the project.

    Annual Reporting
        The military partner conducts an annual site visit at each military
    installation and supports its review with a report and scoring system.
    All issues that are unacceptable are noted, and the property manager
    takes action to address them. All of the military services also conduct
    an annual resident satisfaction survey. As part of this process,
    residents rate the project according to a variety of metrics and are
    encouraged to give narrative feedback. Both Hunt and its military
    partner review the scores and resident feedback and follow up
    accordingly. Additionally, Hunt develops an action plan to address any
    issues that require attention. Further, Hunt's incentive fee earnings
    are, in part, tied to the site visit and resident satisfaction results.
        Hunt provides information on the following topics for coordination
    and approval on an annual basis to all levels of military leadership
    and to military independent consultants:

          Project operation;
          Capital repair and replacement;
          Executive home budgets; and
          Out-year sustainment plans.

        In addition, Hunt also submits the following information to the
    military on an annual basis:

          Verifications to uphold insurance, environmental, and
    document compliance;
          Environmental reports relating to lead-based paint or
    asbestos-containing materials; and
          Audited financials on a per-project basis.

        Some of the military services also hold annual meetings to review
    each project in detail. Similarly, the military routinely requests
    additional information from Hunt on an as-needed basis to assess the
    performance of projects. In addition to military oversight, the ground
    leases require that the projects are operated in compliance with all
    applicable laws. In addition, resident leases are subject to applicable
    state landlord-tenant laws. Thus, even though a particular project may
    be located on federal land, it is not necessarily insulated from the
    mandates of applicable state or local law.
        Often, a project will enter into a municipal service agreement with
    a local state agency for the provision of police, fire, life safety,
    and welfare protection services. All projects are required to comply
    with federal regulations including those administered by OSHA, the EPA,
    HUD, and the Department of Labor, as well as their state law
    equivalents. The projects are also subject to inspections by these
    authorities.
        Finally, Hunt is subject to penalties for violating its contracts.
    Under the terms of our project agreements, a military partner may
    terminate our agreement if we are in material default of our
    obligations or withhold all, or a portion of, our incentive fees if we
    fail to meet performance expectations outlined in the agreement.
    Indeed, in recent years, Hunt has had some portions of its incentive
    fees withheld for certain projects.
        Mr. Hickey. Senator Warren requested this information from
    Lendlease in her correspondence dated February 6, 2019. In response to
    that request, the Lendlease team provided Senator Warren and her staff
    two document productions dated February 21, 2019, and March 6, 2019, in
    addition to conducting an in-depth briefing with Senator Warren's team.
    Accordingly, we believe that this question has been adequately
    responded to as a result of such responses. If this response is not
    sufficient for purposes of this request, the Lendlease team would be
    happy to provide a similar briefing to the SASC staff.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        113. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, please provide a list of any time your company
    has been penalized or fined for violating your agreement(s) with the
    Military Departments.
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Picerne. Answer provided directly to Senator Warren on February
    19, 2019.
        Mr. Ehle. Our military partners have multiple controls in place to
    oversee and monitor Hunt's performance, and we encourage such
    engagement. Hunt is subject to reporting and inspection requirements
    that occur on weekly, monthly, quarterly and annual bases. Our military
    partners have access to our maintenance software, Yardi, and can review
    work orders and survey responses. They are also able to inspect homes
    and follow up directly with residents. Each of our military partners
    has its own unique requirements for reporting and inspection. A general
    overview of these requirements is included below.

    Day-to-Day/Site Level Reporting
        In many of our housing offices, Hunt co-locates with its military
    housing partner. This provides for open and regular communication,
    coordination, and interaction between Hunt, the Military Housing Office
    (``HMO''), and residents. The military routinely conducts random
    inspections of units that are ready for occupancy. Our military
    partners also check in with residents to elicit feedback on recent
    moves or completed work order requests. Hunt has weekly meetings with
    its military partners to review any open or pending projects, customer
    service issues, work order response times, pending move-ins and move-
    outs, and occupancy rates. In addition, all new servicemember residents
    must obtain a referral from their command to move into their designated
    home.

    Monthly Reporting
        Hunt is required to provide monthly reports to its military
    partners on the financial health of the project, including an analysis
    of the approved annual operating budget. These reports contain
    information regarding:

          line-item budget variances;
          occupancy;
          work orders;
          response times;
          capital repair and replacement status;
          project bank account reconciliations; and
          any other important upcoming issues.

        In addition, Hunt provides its military partners with monthly
    utility consumption reports, which provide information regarding
    resident utility consumption, rates, and charges. At most of its
    projects, Hunt also participates in monthly meetings with its military
    partners to receive feedback and provide updates on any upcoming events
    or issues that may require the base commander's input.

    Quarterly/Semi-Annual Reporting
        On a quarterly or semi-annual basis, Hunt conducts a meeting with
    military leadership at the base, command, and housing levels as well as
    with the military's independent consultants. These meetings are
    intended to maintain open and consistent communication between the
    partners by facilitating discussion of the financial health of the
    project, sustainment of the project, resident issues, military
    partnership issues, events, occupancy, and/or strategic initiatives.
    Further, Hunt and the military engage in quarterly asset management
    meetings to coordinate on open items and discuss upcoming issues, as
    well as review executive home reports and compare them to budgets. Hunt
    also conducts semi-annual partnering meetings with the military to
    address the higher-level strategic goals of the project.

    Annual Reporting
        The military partner conducts an annual site visit at each military
    installation and supports its review with a report and scoring system.
    All issues that are unacceptable are noted, and the property manager
    takes action to address them. All of the military services also conduct
    an annual resident satisfaction survey. As part of this process,
    residents rate the project according to a variety of metrics and are
    encouraged to give narrative feedback. Both Hunt and its military
    partner review the scores and resident feedback and follow up
    accordingly. Additionally, Hunt develops an action plan to address any
    issues that require attention. Further, Hunt's incentive fee earnings
    are, in part, tied to the site visit and resident satisfaction results.
        Hunt provides information on the following topics for coordination
    and approval on an annual basis to all levels of military leadership
    and to military independent consultants:

          Project operation;
          Capital repair and replacement;
          Executive home budgets; and
          Out-year sustainment plans.

        In addition, Hunt also submits the following information to the
    military on an annual basis:

          Verifications to uphold insurance, environmental, and
    document compliance;
          Environmental reports relating to lead-based paint or
    asbestos-containing materials; and
          Audited financials on a per-project basis.

        Some of the military services also hold annual meetings to review
    each project in detail. Similarly, the military routinely requests
    additional information from Hunt on an as-needed basis to assess the
    performance of projects. In addition to military oversight, the ground
    leases require that the projects are operated in compliance with all
    applicable laws. In addition, resident leases are subject to applicable
    state landlord-tenant laws. Thus, even though a particular project may
    be located on federal land, it is not necessarily insulated from the
    mandates of applicable state or local law.
        Often, a project will enter into a municipal service agreement with
    a local state agency for the provision of police, fire, life safety,
    and welfare protection services. All projects are required to comply
    with federal regulations including those administered by OSHA, the EPA,
    HUD, and the Department of Labor, as well as their state law
    equivalents. The projects are also subject to inspections by these
    authorities.
        Finally, Hunt is subject to penalties for violating its contracts.
    Under the terms of our project agreements, a military partner may
    terminate our agreement if we are in material default of our
    obligations or withhold all, or a portion of, our incentive fees if we
    fail to meet performance expectations outlined in the agreement.
    Indeed, in recent years, Hunt has had some portions of its incentive
    fees withheld for certain projects.
        Mr. Hickey. Senator Warren requested this information from
    Lendlease in her correspondence dated February 6, 2019. In response to
    that request, the Lendlease team provided Senator Warren and her staff
    two document productions dated February 21, 2019, and March 6, 2019, in
    addition to conducting an in-depth briefing with Senator Warren's team.
    Accordingly, we believe that this question has been adequately
    responded to as a result of such responses. If this response is not
    sufficient for purposes of this request, the Lendlease team would be
    happy to provide a similar briefing to the SASC staff.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.
                            repairs and maintenance
        114. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, how do you address needed repairs or work order
    requests made by residents?
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Picerne. Answer provided directly to Senator Warren on February
    19, 2019.
        Mr. Ehle. Hunt has assigned maintenance staff available to address
    resident repair issues and retains third-party contractors as needed.
    Hunt utilizes a property management software called Yardi to track
    maintenance requests and monitor the completion of work orders.
        Mr. Hickey. As discussed further in response to question 23, we
    take very seriously the obligations on the Project Companies to
    effectively provide timely repairs and maintenance services. The
    Property Managers, and in some cases the Project Companies directly,
    employ dedicated property maintenance staff to service the Projects.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        115. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, do you have assigned maintenance staff available
    to make repairs and/or outside contractors?
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Picerne. Answer provided directly to Senator Warren on February
    19, 2019.
        Mr. Ehle. Hunt has assigned maintenance staff available to address
    resident repair issues and retains third-party contractors as needed.
    Hunt utilizes a property management software called Yardi to track
    maintenance requests and monitor the completion of work orders.
        Mr. Hickey. We have our own dedicated maintenance staff on each
    project. In cases where assigned staff require augmentation, third
    party subcontractors are retained to perform maintenance and repair
    services and track service requests to ensure their timely completion.
    Many of these subcontractors are long-term service providers on the
    projects and they are made fully aware of and required to be compliant
    with all operating protocols and procedures.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        116. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, do you utilize work order logs to track
    maintenance requests and the completion of work?
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Picerne. Answer provided directly to Senator Warren on February
    19, 2019.
        Mr. Ehle. Hunt has assigned maintenance staff available to address
    resident repair issues and retains third-party contractors as needed.
    Hunt utilizes a property management software called Yardi to track
    maintenance requests and monitor the completion of work orders.
        Mr. Hickey. Senator Warren requested this information from
    Lendlease in her correspondence dated February 6, 2019. In response to
    that request, the Lendlease team provided Senator Warren and her staff
    two document productions dated February 21, 2019, and March 6, 2019, in
    addition to conducting an in-depth briefing with Senator Warren's team.
    Accordingly, we believe that this question has been adequately
    responded to as a result of such responses. If this response is not
    sufficient for purposes of this request, the Lendlease team would be
    happy to provide a similar briefing to the SASC staff.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        117. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, if so, please provide work logs for the last 12
    months, if such a list is available.
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Picerne. Answer provided directly to Senator Warren on February
    19, 2019.
        Mr. Ehle. Hunt has assigned maintenance staff available to address
    resident repair issues and retains third-party contractors as needed.
    Hunt utilizes a property management software called Yardi to track
    maintenance requests and monitor the completion of work orders.
        Mr. Hickey. Senator Warren requested this information from
    Lendlease in her correspondence dated February 6, 2019. In response to
    that request, the Lendlease team provided Senator Warren and her staff
    two document productions dated February 21, 2019, and March 6, 2019, in
    addition to conducting an in-depth briefing with Senator Warren's team.
    Accordingly, we believe that this question has been adequately
    responded to as a result of such responses. If this response is not
    sufficient for purposes of this request, the Lendlease team would be
    happy to provide a similar briefing to the SASC staff.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        118. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, does your company have a complaint hotline or
    other process in place for servicemembers who are living in your
    housing facilities to contact you with problems?
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Picerne. Answer provided directly to Senator Warren on February
    19, 2019.
        Mr. Ehle. Hunt has a process in place for residents to contact us
    should they experience any problems. All resident requests for
    maintenance are ultimately submitted in the form of a work order and,
    as mentioned, are documented through Yardi, our property management
    software.
        Resident requests can be submitted by phone, e-mail, or online.
    Requests made during normal business hours are generally handled by the
    on-site team. For emergencies occurring after business hours, Hunt has
    a 24/7 call center to receive resident requests at any time. Requests
    made through this call center are submitted to an on-call technician
    for appropriate action. Residents can track the status of their work
    orders online.
        In addition, Hunt residents may submit a complaint on the
    ``Resident Feedback'' webpage. Such complaints can be made anonymously
    and are directed to Hunt corporate for review and resolution.
        Hunt also recognizes that many residents turn to social media to
    voice complaints and, in an effort to accommodate this development, we
    have implemented a Facebook response policy. We now monitor concerns or
    negative comments posted on our Facebook page and track such messages
    to ensure proper follow up.
        Additionally, we are in the process of rolling out an improved
    hotline across our portfolio. The ``Hunt Promise Helpline'' will be a
    more efficient way for residents to voice complaints, which will go
    directly to a Hunt corporate representative for necessary action.
    Residents will have one phone number that will be provided to them to
    express their concerns and complaints as well as any compliments or
    good news. This phone number will be prominently displayed on our
    property websites and promoted across our portfolio. All calls will be
    noted and tracked for appropriate follow-up.
        Mr. Hickey. Yes, Lendlease operates a resident hotline and all
    residents are encouraged to submit service order requests for any
    issues concerning their home. Military families have access to various
    means of instituting service orders, such as in-person at the onsite
    property management office, by telephone or through the Project Company
    website. Each Project Company registers, tracks and maintains service
    order requests in a property management database (Yardi).
        Residents are also able to file complaints, anonymously or
    otherwise, by phone or email via Project Company websites, the Property
    Manager's Resident Hotline or Project Company Facebook pages. Our
    communities provide resident guidelines at time of move-in which
    include a clear dispute resolution procedure for residents to reference
    and use throughout their tenancy. The goal of the dispute resolution
    procedure is to resolve all resident issues at the lowest level
    possible and in a timely manner.
        Residents are first asked to contact their community office with
    issues and if they are unable to resolve them the resident then works
    with the Operations Director, followed by the Director of Property
    Management. The dispute resolution process specifically includes an
    option to involve the military housing partner or the chain of command
    if necessary, to ensure a reasonable outcome for all parties is
    achieved.
        The Military Services also maintain the Interactive Customer
    Evaluation (ICE) platform which servicemembers and their families can
    use any time, bypassing other traditional complaint mechanisms. The ICE
    platform enables servicemembers or their families to register
    complaints about any service or facility on the installation, including
    housing. These complaints are brought to the Project Company's
    management by installation representatives for immediate attention and
    are resolved in consultation with local installation leadership. To our
    knowledge, resolution of every complaint is documented and stored in
    the ICE system maintained by the Military Services. We do not currently
    have the ability to provide that detailed information.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        119. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, if so, what is the process for submitting
    complaints and can complaints be submitted anonymously?
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Picerne. Answer provided directly to Senator Warren on February
    19, 2019.
        Mr. Ehle. Please see the response to question 118.
        Mr. Hickey. Senator Warren requested this information from
    Lendlease in her correspondence dated February 6, 2019. In response to
    that request, the Lendlease team provided Senator Warren and her staff
    two document productions dated February 21, 2019, and March 6, 2019, in
    addition to conducting an in-depth briefing with Senator Warren's team.
    Accordingly, we believe that this question has been adequately
    responded to as a result of such responses. If this response is not
    sufficient for purposes of this request, the Lendlease team would be
    happy to provide a similar briefing to the SASC staff.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        120. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, please provide a list of all complaints (without
    personal identifying information) since January 1, 2008 at all DOD
    installations you operate, and a description of how these complaints
    were resolved.
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Picerne. Answer provided directly to Senator Warren on February
    19, 2019.
        Mr. Ehle. Please see the response to question 118.
        Mr. Hickey. P Senator Warren requested this information from
    Lendlease in her correspondence dated February 6, 2019. In response to
    that request, the Lendlease team provided Senator Warren and her staff
    two document productions dated February 21, 2019, and March 6, 2019, in
    addition to conducting an in-depth briefing with Senator Warren's team.
    Accordingly, we believe that this question has been adequately
    responded to as a result of such responses. If this response is not
    sufficient for purposes of this request, the Lendlease team would be
    happy to provide a similar briefing to the SASC staff.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.
                              financial statements
        121. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, how much revenue did your company generate from
    developing and operating private military housing in 2018? In the past
    15 years? Please provide annual revenues for each facility you operate
    for each year.
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Picerne. Answer provided directly to Senator Warren on February
    19, 2019.
        Mr. Ehle. Under its agreements, Hunt is compensated for services
    associated with the management of rental real estate housing complexes,
    such as property management and, as applicable, asset management. The
    fee arrangement typically includes two components: (1) a base fee,
    which includes (a) property management fee and/or (b) asset management
    fee, if applicable; and (2) an incentive fee. The rates for these fees,
    and the ways in which they are earned, are established during the
    competitive bidding process for the award of the MHPI project and are
    then negotiated and agreed upon in definitive documents. There is no
    mechanism by which Hunt could unilaterally adjust its compensation
    without consent from a military partner. Also, although set forth as a
    percentage rate, the amount of fees received is not guaranteed. The
    amounts depend upon a number of factors, including occupancy and BAH
    rates in each local market. It is important to note that each project
    is unique and its performance is subject to a variety of external
    factors, including market conditions, BAH rates, the scope of the deal,
    and the sources of funds available, plus internal factors related to
    property management, as further described below.

    Base Fees
        In our agreements, like those in the conventional housing market,
    the base fee is provided for services rendered and is calculated as a
    percentage of gross property income, before paying operating expenses.
    This incentivizes the property manager to maintain high occupancy
    levels, which requires the property manager to maintain a desirable,
    marketable community to generate demand. If existing and potential
    residents move outside of the project, the property manager will
    realize a negative financial impact via reduced base fees.
        The asset management fee, if applicable, is often calculated as a
    percentage of net operating income, which is income after the payment
    of operating expenses. It incentivizes the asset manager to balance
    project income and expenses to ensure that a project is well-operated,
    occupied, and sustainable for the long term.

    Incentive Fees
        The other component of our fee structure consists of at-risk
    property management incentive fees. The incentive fees, while included
    as a portion of our overall compensation, are entirely discretionary,
    and are based upon performance. Incentive fees enable the installation
    base commanders to weigh-in on the performance of the property manager
    and adjust the incentive fee accordingly. There is no guarantee or
    assurance of an incentive fee. Each of the Military Departments have
    their own unique criteria that factor into incentive fee calculations,
    but, generally, they include at least: (1) resident satisfaction (via
    annual surveys); (2) maintenance response times; and (3) other
    performance metrics as decided by the particular Military Department
    for a given project.
        Resident satisfaction typically receives the most weight and will
    generally have the greatest influence on the amount of incentive fees
    ultimately earned. If resident satisfaction dips below the low-end
    threshold of acceptable scores, the property manager may completely
    forfeit that portion of the incentive fee.
        This dynamic stands in marked contrast to the conventional housing
    market. Generally speaking, the total of base and incentive property
    management fees for a privatized military housing provider is the rough
    equivalent of a typical base property management fee for a conventional
    property manager. Notably, however, incentive fees are not usually
    found in the conventional housing market. Thus, privatized military
    housing providers are uniquely positioned compared to their
    conventional housing counterparts. Indeed, it would be unusual for a
    conventional property manager to have over 50 percent of its management
    fees at risk on a discretionary basis, as Hunt does under its property
    management agreements.
        Similarly, privatized military housing providers operate in a
    unique environment insofar as the respective Military Departments must
    vet and approve all incentive fees before they may be paid. As with
    base fees, Hunt does not have the ability to adjust its incentive fees
    without consent from the military partner.
        Separately, Hunt is providing audited financial statements for its
    projects for the past 10 years.
        Mr. Hickey. Senator Warren requested this information from
    Lendlease in her correspondence dated February 6, 2019. In response to
    that request, the Lendlease team provided Senator Warren and her staff
    two document productions dated February 21, 2019, and March 6, 2019, in
    addition to conducting an in-depth briefing with Senator Warren's team.
    Accordingly, we believe that this question has be+en adequately
    responded to as a result of such responses. If this response is not
    sufficient for purposes of this request, the Lendlease team would be
    happy to provide a similar briefing to the SASC staff.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        122. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, are the profits you receive from private
    military projects set in or otherwise outlined in your agreements with
    the Military Departments? If so, how are these profits set?
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Picerne. Under its agreements, Hunt is compensated for services
    associated with the management of rental real estate housing complexes,
    such as property management and, as applicable, asset management. The
    fee arrangement typically includes two components: (1) a base fee,
    which includes (a) property management fee and/or (b) asset management
    fee, if applicable; and (2) an incentive fee. The rates for these fees,
    and the ways in which they are earned, are established during the
    competitive bidding process for the award of the MHPI project and are
    then negotiated and agreed upon in definitive documents. There is no
    mechanism by which Hunt could unilaterally adjust its compensation
    without consent from a military partner. Also, although set forth as a
    percentage rate, the amount of fees received is not guaranteed. The
    amounts depend upon a number of factors, including occupancy and BAH
    rates in each local market. It is important to note that each project
    is unique and its performance is subject to a variety of external
    factors, including market conditions, BAH rates, the scope of the deal,
    and the sources of funds available, plus internal factors related to
    property management, as further described below.

    Base Fees
        In our agreements, like those in the conventional housing market,
    the base fee is provided for services rendered and is calculated as a
    percentage of gross property income, before paying operating expenses.
    This incentivizes the property manager to maintain high occupancy
    levels, which requires the property manager to maintain a desirable,
    marketable community to generate demand. If existing and potential
    residents move outside of the project, the property manager will
    realize a negative financial impact via reduced base fees.
        The asset management fee, if applicable, is often calculated as a
    percentage of net operating income, which is income after the payment
    of operating expenses. It incentivizes the asset manager to balance
    project income and expenses to ensure that a project is well-operated,
    occupied, and sustainable for the long term.

    Incentive Fees
        The other component of our fee structure consists of at-risk
    property management incentive fees. The incentive fees, while included
    as a portion of our overall compensation, are entirely discretionary,
    and are based upon performance. Incentive fees enable the installation
    base commanders to weigh-in on the performance of the property manager
    and adjust the incentive fee accordingly. There is no guarantee or
    assurance of an incentive fee. Each of the Military Departments have
    their own unique criteria that factor into incentive fee calculations,
    but, generally, they include at least: (1) resident satisfaction (via
    annual surveys); (2) maintenance response times; and (3) other
    performance metrics as decided by the particular Military Department
    for a given project.
        Resident satisfaction typically receives the most weight and will
    generally have the greatest influence on the amount of incentive fees
    ultimately earned. If resident satisfaction dips below the low-end
    threshold of acceptable scores, the property manager may completely
    forfeit that portion of the incentive fee.
        This dynamic stands in marked contrast to the conventional housing
    market. Generally speaking, the total of base and incentive property
    management fees for a privatized military housing provider is the rough
    equivalent of a typical base property management fee for a conventional
    property manager. Notably, however, incentive fees are not usually
    found in the conventional housing market. Thus, privatized military
    housing providers are uniquely positioned compared to their
    conventional housing counterparts. Indeed, it would be unusual for a
    conventional property manager to have over 50 percent of its management
    fees at risk on a discretionary basis, as Hunt does under its property
    management agreements.
        Similarly, privatized military housing providers operate in a
    unique environment insofar as the respective Military Departments must
    vet and approve all incentive fees before they may be paid. As with
    base fees, Hunt does not have the ability to adjust its incentive fees
    without consent from the military partner.
        Separately, Hunt is providing audited financial statements for its
    projects for the past 10 years.
        Mr. Ehle. Under its agreements, Hunt is compensated for services
    associated with the management of rental real estate housing complexes,
    such as property management and, as applicable, asset management. The
    fee arrangement typically includes two components: (1) a base fee,
    which includes (a) property management fee and/or (b) asset management
    fee, if applicable; and (2) an incentive fee. The rates for these fees,
    and the ways in which they are earned, are established during the
    competitive bidding process for the award of the MHPI project and are
    then negotiated and agreed upon in definitive documents. There is no
    mechanism by which Hunt could unilaterally adjust its compensation
    without consent from a military partner. Also, although set forth as a
    percentage rate, the amount of fees received is not guaranteed. The
    amounts depend upon a number of factors, including occupancy and BAH
    rates in each local market. It is important to note that each project
    is unique and its performance is subject to a variety of external
    factors, including market conditions, BAH rates, the scope of the deal,
    and the sources of funds available, plus internal factors related to
    property management, as further described below.

    Base Fees
        In our agreements, like those in the conventional housing market,
    the base fee is provided for services rendered and is calculated as a
    percentage of gross property income, before paying operating expenses.
    This incentivizes the property manager to maintain high occupancy
    levels, which requires the property manager to maintain a desirable,
    marketable community to generate demand. If existing and potential
    residents move outside of the project, the property manager will
    realize a negative financial impact via reduced base fees.
        The asset management fee, if applicable, is often calculated as a
    percentage of net operating income, which is income after the payment
    of operating expenses. It incentivizes the asset manager to balance
    project income and expenses to ensure that a project is well-operated,
    occupied, and sustainable for the long term.

    Incentive Fees
        The other component of our fee structure consists of at-risk
    property management incentive fees. The incentive fees, while included
    as a portion of our overall compensation, are entirely discretionary,
    and are based upon performance. Incentive fees enable the installation
    base commanders to weigh-in on the performance of the property manager
    and adjust the incentive fee accordingly. There is no guarantee or
    assurance of an incentive fee. Each of the Military Departments have
    their own unique criteria that factor into incentive fee calculations,
    but, generally, they include at least: (1) resident satisfaction (via
    annual surveys); (2) maintenance response times; and (3) other
    performance metrics as decided by the particular Military Department
    for a given project.
        Resident satisfaction typically receives the most weight and will
    generally have the greatest influence on the amount of incentive fees
    ultimately earned. If resident satisfaction dips below the low-end
    threshold of acceptable scores, the property manager may completely
    forfeit that portion of the incentive fee.
        This dynamic stands in marked contrast to the conventional housing
    market. Generally speaking, the total of base and incentive property
    management fees for a privatized military housing provider is the rough
    equivalent of a typical base property management fee for a conventional
    property manager. Notably, however, incentive fees are not usually
    found in the conventional housing market. Thus, privatized military
    housing providers are uniquely positioned compared to their
    conventional housing counterparts. Indeed, it would be unusual for a
    conventional property manager to have over 50 percent of its management
    fees at risk on a discretionary basis, as Hunt does under its property
    management agreements.
        Similarly, privatized military housing providers operate in a
    unique environment insofar as the respective Military Departments must
    vet and approve all incentive fees before they may be paid. As with
    base fees, Hunt does not have the ability to adjust its incentive fees
    without consent from the military partner.
        Separately, Hunt is providing audited financial statements for its
    projects for the past 10 years.
        Mr. Hickey. Senator Warren requested this information from
    Lendlease in her correspondence dated February 6, 2019. In response to
    that request, the Lendlease team provided Senator Warren and her staff
    two document productions dated February 21, 2019, and March 6, 2019, in
    addition to conducting an in-depth briefing with Senator Warren's team.
    Accordingly, we believe that this question has been adequately
    responded to as a result of such responses. If this response is not
    sufficient for purposes of this request, the Lendlease team would be
    happy to provide a similar briefing to the SASC staff.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        123. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, for each of the last ten years, please provide
    the following information for each year for each of your company's MHPI
    agreements.
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Picerne. Answer provided directly to Senator Warren on February
    19, 2019.
        Mr. Ehle. Under its agreements, Hunt is compensated for services
    associated with the management of rental real estate housing complexes,
    such as property management and, as applicable, asset management. The
    fee arrangement typically includes two components: (1) a base fee,
    which includes (a) property management fee and/or (b) asset management
    fee, if applicable; and (2) an incentive fee. The rates for these fees,
    and the ways in which they are earned, are established during the
    competitive bidding process for the award of the MHPI project and are
    then negotiated and agreed upon in definitive documents. There is no
    mechanism by which Hunt could unilaterally adjust its compensation
    without consent from a military partner. Also, although set forth as a
    percentage rate, the amount of fees received is not guaranteed. The
    amounts depend upon a number of factors, including occupancy and BAH
    rates in each local market. It is important to note that each project
    is unique and its performance is subject to a variety of external
    factors, including market conditions, BAH rates, the scope of the deal,
    and the sources of funds available, plus internal factors related to
    property management, as further described below.

    Base Fees
        In our agreements, like those in the conventional housing market,
    the base fee is provided for services rendered and is calculated as a
    percentage of gross property income, before paying operating expenses.
    This incentivizes the property manager to maintain high occupancy
    levels, which requires the property manager to maintain a desirable,
    marketable community to generate demand. If existing and potential
    residents move outside of the project, the property manager will
    realize a negative financial impact via reduced base fees.
        The asset management fee, if applicable, is often calculated as a
    percentage of net operating income, which is income after the payment
    of operating expenses. It incentivizes the asset manager to balance
    project income and expenses to ensure that a project is well-operated,
    occupied, and sustainable for the long term.

    Incentive Fees
        The other component of our fee structure consists of at-risk
    property management incentive fees. The incentive fees, while included
    as a portion of our overall compensation, are entirely discretionary,
    and are based upon performance. Incentive fees enable the installation
    base commanders to weigh-in on the performance of the property manager
    and adjust the incentive fee accordingly. There is no guarantee or
    assurance of an incentive fee. Each of the Military Departments have
    their own unique criteria that factor into incentive fee calculations,
    but, generally, they include at least: (1) resident satisfaction (via
    annual surveys); (2) maintenance response times; and (3) other
    performance metrics as decided by the particular Military Department
    for a given project.
        Resident satisfaction typically receives the most weight and will
    generally have the greatest influence on the amount of incentive fees
    ultimately earned. If resident satisfaction dips below the low-end
    threshold of acceptable scores, the property manager may completely
    forfeit that portion of the incentive fee.
        This dynamic stands in marked contrast to the conventional housing
    market. Generally speaking, the total of base and incentive property
    management fees for a privatized military housing provider is the rough
    equivalent of a typical base property management fee for a conventional
    property manager. Notably, however, incentive fees are not usually
    found in the conventional housing market. Thus, privatized military
    housing providers are uniquely positioned compared to their
    conventional housing counterparts. Indeed, it would be unusual for a
    conventional property manager to have over 50 percent of its management
    fees at risk on a discretionary basis, as Hunt does under its property
    management agreements.
        Similarly, privatized military housing providers operate in a
    unique environment insofar as the respective Military Departments must
    vet and approve all incentive fees before they may be paid. As with
    base fees, Hunt does not have the ability to adjust its incentive fees
    without consent from the military partner.
        Separately, Hunt is providing audited financial statements for its
    projects for the past 10 years.
        Mr. Hickey. Senator Warren requested this information from
    Lendlease in her correspondence dated February 6, 2019. In response to
    that request, the Lendlease team provided Senator Warren and her staff
    two document productions dated February 21, 2019, and March 6, 2019, in
    addition to conducting an in-depth briefing with Senator Warren's team.
    Accordingly, we believe that this question has been adequately
    responded to as a result of such responses. If this response is not
    sufficient for purposes of this request, the Lendlease team would be
    happy to provide a similar briefing to the SASC staff.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        124. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, how much in total revenues from rental payments
    did your company generate from each agreement?
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Picerne. Answer provided directly to Senator Warren on February
    19, 2019.
        Mr. Ehle. Under its agreements, Hunt is compensated for services
    associated with the management of rental real estate housing complexes,
    such as property management and, as applicable, asset management. The
    fee arrangement typically includes two components: (1) a base fee,
    which includes (a) property management fee and/or (b) asset management
    fee, if applicable; and (2) an incentive fee. The rates for these fees,
    and the ways in which they are earned, are established during the
    competitive bidding process for the award of the MHPI project and are
    then negotiated and agreed upon in definitive documents. There is no
    mechanism by which Hunt could unilaterally adjust its compensation
    without consent from a military partner. Also, although set forth as a
    percentage rate, the amount of fees received is not guaranteed. The
    amounts depend upon a number of factors, including occupancy and BAH
    rates in each local market. It is important to note that each project
    is unique and its performance is subject to a variety of external
    factors, including market conditions, BAH rates, the scope of the deal,
    and the sources of funds available, plus internal factors related to
    property management, as further described below.

    Base Fees
        In our agreements, like those in the conventional housing market,
    the base fee is provided for services rendered and is calculated as a
    percentage of gross property income, before paying operating expenses.
    This incentivizes the property manager to maintain high occupancy
    levels, which requires the property manager to maintain a desirable,
    marketable community to generate demand. If existing and potential
    residents move outside of the project, the property manager will
    realize a negative financial impact via reduced base fees.
        The asset management fee, if applicable, is often calculated as a
    percentage of net operating income, which is income after the payment
    of operating expenses. It incentivizes the asset manager to balance
    project income and expenses to ensure that a project is well-operated,
    occupied, and sustainable for the long term.

    Incentive Fees
        The other component of our fee structure consists of at-risk
    property management incentive fees. The incentive fees, while included
    as a portion of our overall compensation, are entirely discretionary,
    and are based upon performance. Incentive fees enable the installation
    base commanders to weigh-in on the performance of the property manager
    and adjust the incentive fee accordingly. There is no guarantee or
    assurance of an incentive fee. Each of the Military Departments have
    their own unique criteria that factor into incentive fee calculations,
    but, generally, they include at least: (1) resident satisfaction (via
    annual surveys); (2) maintenance response times; and (3) other
    performance metrics as decided by the particular Military Department
    for a given project.
        Resident satisfaction typically receives the most weight and will
    generally have the greatest influence on the amount of incentive fees
    ultimately earned. If resident satisfaction dips below the low-end
    threshold of acceptable scores, the property manager may completely
    forfeit that portion of the incentive fee.
        This dynamic stands in marked contrast to the conventional housing
    market. Generally speaking, the total of base and incentive property
    management fees for a privatized military housing provider is the rough
    equivalent of a typical base property management fee for a conventional
    property manager. Notably, however, incentive fees are not usually
    found in the conventional housing market. Thus, privatized military
    housing providers are uniquely positioned compared to their
    conventional housing counterparts. Indeed, it would be unusual for a
    conventional property manager to have over 50 percent of its management
    fees at risk on a discretionary basis, as Hunt does under its property
    management agreements.
        Similarly, privatized military housing providers operate in a
    unique environment insofar as the respective Military Departments must
    vet and approve all incentive fees before they may be paid. As with
    base fees, Hunt does not have the ability to adjust its incentive fees
    without consent from the military partner.
        Separately, Hunt is providing audited financial statements for its
    projects for the past 10 years.
        Mr. Hickey. Senator Warren requested this information from
    Lendlease in her correspondence dated February 6, 2019. In response to
    that request, the Lendlease team provided Senator Warren and her staff
    two document productions dated February 21, 2019, and March 6, 2019, in
    addition to conducting an in-depth briefing with Senator Warren's team.
    Accordingly, we believe that this question has been adequately
    responded to as a result of such responses. If this response is not
    sufficient for purposes of this request, the Lendlease team would be
    happy to provide a similar briefing to the SASC staff.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        125. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, how much (in dollars) did your company receive
    or retain through member distributions for each agreement?
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Picerne. Answer provided directly to Senator Warren on February
    19, 2019.
        Mr. Ehle. Under its agreements, Hunt is compensated for services
    associated with the management of rental real estate housing complexes,
    such as property management and, as applicable, asset management. The
    fee arrangement typically includes two components: (1) a base fee,
    which includes (a) property management fee and/or (b) asset management
    fee, if applicable; and (2) an incentive fee. The rates for these fees,
    and the ways in which they are earned, are established during the
    competitive bidding process for the award of the MHPI project and are
    then negotiated and agreed upon in definitive documents. There is no
    mechanism by which Hunt could unilaterally adjust its compensation
    without consent from a military partner. Also, although set forth as a
    percentage rate, the amount of fees received is not guaranteed. The
    amounts depend upon a number of factors, including occupancy and BAH
    rates in each local market. It is important to note that each project
    is unique and its performance is subject to a variety of external
    factors, including market conditions, BAH rates, the scope of the deal,
    and the sources of funds available, plus internal factors related to
    property management, as further described below.

    Base Fees
        In our agreements, like those in the conventional housing market,
    the base fee is provided for services rendered and is calculated as a
    percentage of gross property income, before paying operating expenses.
    This incentivizes the property manager to maintain high occupancy
    levels, which requires the property manager to maintain a desirable,
    marketable community to generate demand. If existing and potential
    residents move outside of the project, the property manager will
    realize a negative financial impact via reduced base fees.
        The asset management fee, if applicable, is often calculated as a
    percentage of net operating income, which is income after the payment
    of operating expenses. It incentivizes the asset manager to balance
    project income and expenses to ensure that a project is well-operated,
    occupied, and sustainable for the long term.

    Incentive Fees
        The other component of our fee structure consists of at-risk
    property management incentive fees. The incentive fees, while included
    as a portion of our overall compensation, are entirely discretionary,
    and are based upon performance. Incentive fees enable the installation
    base commanders to weigh-in on the performance of the property manager
    and adjust the incentive fee accordingly. There is no guarantee or
    assurance of an incentive fee. Each of the Military Departments have
    their own unique criteria that factor into incentive fee calculations,
    but, generally, they include at least: (1) resident satisfaction (via
    annual surveys); (2) maintenance response times; and (3) other
    performance metrics as decided by the particular Military Department
    for a given project.
        Resident satisfaction typically receives the most weight and will
    generally have the greatest influence on the amount of incentive fees
    ultimately earned. If resident satisfaction dips below the low-end
    threshold of acceptable scores, the property manager may completely
    forfeit that portion of the incentive fee.
        This dynamic stands in marked contrast to the conventional housing
    market. Generally speaking, the total of base and incentive property
    management fees for a privatized military housing provider is the rough
    equivalent of a typical base property management fee for a conventional
    property manager. Notably, however, incentive fees are not usually
    found in the conventional housing market. Thus, privatized military
    housing providers are uniquely positioned compared to their
    conventional housing counterparts. Indeed, it would be unusual for a
    conventional property manager to have over 50 percent of its management
    fees at risk on a discretionary basis, as Hunt does under its property
    management agreements.
        Similarly, privatized military housing providers operate in a
    unique environment insofar as the respective Military Departments must
    vet and approve all incentive fees before they may be paid. As with
    base fees, Hunt does not have the ability to adjust its incentive fees
    without consent from the military partner.
        Separately, Hunt is providing audited financial statements for its
    projects for the past 10 years.
        Mr. Hickey. Senator Warren requested this information from
    Lendlease in her correspondence dated February 6, 2019. In response to
    that request, the Lendlease team provided Senator Warren and her staff
    two document productions dated February 21, 2019, and March 6, 2019, in
    addition to conducting an in-depth briefing with Senator Warren's team.
    Accordingly, we believe that this question has been adequately
    responded to as a result of such responses. If this response is not
    sufficient for purposes of this request, the Lendlease team would be
    happy to provide a similar briefing to the SASC staff.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        126. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, how much (in dollars) did your company receive
    or retain through incentive-based fees for each agreement?
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Picerne. Answer provided directly to Senator Warren on February
    19, 2019.
        Mr. Ehle. Under its agreements, Hunt is compensated for services
    associated with the management of rental real estate housing complexes,
    such as property management and, as applicable, asset management. The
    fee arrangement typically includes two components: (1) a base fee,
    which includes (a) property management fee and/or (b) asset management
    fee, if applicable; and (2) an incentive fee. The rates for these fees,
    and the ways in which they are earned, are established during the
    competitive bidding process for the award of the MHPI project and are
    then negotiated and agreed upon in definitive documents. There is no
    mechanism by which Hunt could unilaterally adjust its compensation
    without consent from a military partner. Also, although set forth as a
    percentage rate, the amount of fees received is not guaranteed. The
    amounts depend upon a number of factors, including occupancy and BAH
    rates in each local market. It is important to note that each project
    is unique and its performance is subject to a variety of external
    factors, including market conditions, BAH rates, the scope of the deal,
    and the sources of funds available, plus internal factors related to
    property management, as further described below.

    Base Fees
        In our agreements, like those in the conventional housing market,
    the base fee is provided for services rendered and is calculated as a
    percentage of gross property income, before paying operating expenses.
    This incentivizes the property manager to maintain high occupancy
    levels, which requires the property manager to maintain a desirable,
    marketable community to generate demand. If existing and potential
    residents move outside of the project, the property manager will
    realize a negative financial impact via reduced base fees.
        The asset management fee, if applicable, is often calculated as a
    percentage of net operating income, which is income after the payment
    of operating expenses. It incentivizes the asset manager to balance
    project income and expenses to ensure that a project is well-operated,
    occupied, and sustainable for the long term.

    Incentive Fees
        The other component of our fee structure consists of at-risk
    property management incentive fees. The incentive fees, while included
    as a portion of our overall compensation, are entirely discretionary,
    and are based upon performance. Incentive fees enable the installation
    base commanders to weigh-in on the performance of the property manager
    and adjust the incentive fee accordingly. There is no guarantee or
    assurance of an incentive fee. Each of the Military Departments have
    their own unique criteria that factor into incentive fee calculations,
    but, generally, they include at least: (1) resident satisfaction (via
    annual surveys); (2) maintenance response times; and (3) other
    performance metrics as decided by the particular Military Department
    for a given project.
        Resident satisfaction typically receives the most weight and will
    generally have the greatest influence on the amount of incentive fees
    ultimately earned. If resident satisfaction dips below the low-end
    threshold of acceptable scores, the property manager may completely
    forfeit that portion of the incentive fee.
        This dynamic stands in marked contrast to the conventional housing
    market. Generally speaking, the total of base and incentive property
    management fees for a privatized military housing provider is the rough
    equivalent of a typical base property management fee for a conventional
    property manager. Notably, however, incentive fees are not usually
    found in the conventional housing market. Thus, privatized military
    housing providers are uniquely positioned compared to their
    conventional housing counterparts. Indeed, it would be unusual for a
    conventional property manager to have over 50 percent of its management
    fees at risk on a discretionary basis, as Hunt does under its property
    management agreements.
        Similarly, privatized military housing providers operate in a
    unique environment insofar as the respective Military Departments must
    vet and approve all incentive fees before they may be paid. As with
    base fees, Hunt does not have the ability to adjust its incentive fees
    without consent from the military partner.
        Separately, Hunt is providing audited financial statements for its
    projects for the past 10 years.
        Mr. Hickey. Senator Warren requested this information from
    Lendlease in her correspondence dated February 6, 2019. In response to
    that request, the Lendlease team provided Senator Warren and her staff
    two document productions dated February 21, 2019, and March 6, 2019, in
    addition to conducting an in-depth briefing with Senator Warren's team.
    Accordingly, we believe that this question has been adequately
    responded to as a result of such responses. If this response is not
    sufficient for purposes of this request, the Lendlease team would be
    happy to provide a similar briefing to the SASC staff.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        127. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, how much did your company receive or retain
    through management, operations, or other non-incentive-based fees or
    payments for each agreement?
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Picerne. Answer provided directly to Senator Warren on February
    19, 2019.
        Mr. Ehle. Under its agreements, Hunt is compensated for services
    associated with the management of rental real estate housing complexes,
    such as property management and, as applicable, asset management. The
    fee arrangement typically includes two components: (1) a base fee,
    which includes (a) property management fee and/or (b) asset management
    fee, if applicable; and (2) an incentive fee. The rates for these fees,
    and the ways in which they are earned, are established during the
    competitive bidding process for the award of the MHPI project and are
    then negotiated and agreed upon in definitive documents. There is no
    mechanism by which Hunt could unilaterally adjust its compensation
    without consent from a military partner. Also, although set forth as a
    percentage rate, the amount of fees received is not guaranteed. The
    amounts depend upon a number of factors, including occupancy and BAH
    rates in each local market. It is important to note that each project
    is unique and its performance is subject to a variety of external
    factors, including market conditions, BAH rates, the scope of the deal,
    and the sources of funds available, plus internal factors related to
    property management, as further described below.

    Base Fees
        In our agreements, like those in the conventional housing market,
    the base fee is provided for services rendered and is calculated as a
    percentage of gross property income, before paying operating expenses.
    This incentivizes the property manager to maintain high occupancy
    levels, which requires the property manager to maintain a desirable,
    marketable community to generate demand. If existing and potential
    residents move outside of the project, the property manager will
    realize a negative financial impact via reduced base fees.
        The asset management fee, if applicable, is often calculated as a
    percentage of net operating income, which is income after the payment
    of operating expenses. It incentivizes the asset manager to balance
    project income and expenses to ensure that a project is well-operated,
    occupied, and sustainable for the long term.

    Incentive Fees
        The other component of our fee structure consists of at-risk
    property management incentive fees. The incentive fees, while included
    as a portion of our overall compensation, are entirely discretionary,
    and are based upon performance. Incentive fees enable the installation
    base commanders to weigh-in on the performance of the property manager
    and adjust the incentive fee accordingly. There is no guarantee or
    assurance of an incentive fee. Each of the Military Departments have
    their own unique criteria that factor into incentive fee calculations,
    but, generally, they include at least: (1) resident satisfaction (via
    annual surveys); (2) maintenance response times; and (3) other
    performance metrics as decided by the particular Military Department
    for a given project.
        Resident satisfaction typically receives the most weight and will
    generally have the greatest influence on the amount of incentive fees
    ultimately earned. If resident satisfaction dips below the low-end
    threshold of acceptable scores, the property manager may completely
    forfeit that portion of the incentive fee.
        This dynamic stands in marked contrast to the conventional housing
    market. Generally speaking, the total of base and incentive property
    management fees for a privatized military housing provider is the rough
    equivalent of a typical base property management fee for a conventional
    property manager. Notably, however, incentive fees are not usually
    found in the conventional housing market. Thus, privatized military
    housing providers are uniquely positioned compared to their
    conventional housing counterparts. Indeed, it would be unusual for a
    conventional property manager to have over 50 percent of its management
    fees at risk on a discretionary basis, as Hunt does under its property
    management agreements.
        Similarly, privatized military housing providers operate in a
    unique environment insofar as the respective Military Departments must
    vet and approve all incentive fees before they may be paid. As with
    base fees, Hunt does not have the ability to adjust its incentive fees
    without consent from the military partner.
        Separately, Hunt is providing audited financial statements for its
    projects for the past 10 years.
        Mr. Hickey. Senator Warren requested this information from
    Lendlease in her correspondence dated February 6, 2019. In response to
    that request, the Lendlease team provided Senator Warren and her staff
    two document productions dated February 21, 2019, and March 6, 2019, in
    addition to conducting an in-depth briefing with Senator Warren's team.
    Accordingly, we believe that this question has been adequately
    responded to as a result of such responses. If this response is not
    sufficient for purposes of this request, the Lendlease team would be
    happy to provide a similar briefing to the SASC staff.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        128. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, how much was the total profit (in dollars) for
    your company for each agreement?
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Picerne. Answer provided directly to Senator Warren on February
    19, 2019.
        Mr. Ehle. Under its agreements, Hunt is compensated for services
    associated with the management of rental real estate housing complexes,
    such as property management and, as applicable, asset management. The
    fee arrangement typically includes two components: (1) a base fee,
    which includes (a) property management fee and/or (b) asset management
    fee, if applicable; and (2) an incentive fee. The rates for these fees,
    and the ways in which they are earned, are established during the
    competitive bidding process for the award of the MHPI project and are
    then negotiated and agreed upon in definitive documents. There is no
    mechanism by which Hunt could unilaterally adjust its compensation
    without consent from a military partner. Also, although set forth as a
    percentage rate, the amount of fees received is not guaranteed. The
    amounts depend upon a number of factors, including occupancy and BAH
    rates in each local market. It is important to note that each project
    is unique and its performance is subject to a variety of external
    factors, including market conditions, BAH rates, the scope of the deal,
    and the sources of funds available, plus internal factors related to
    property management, as further described below.

    Base Fees
        In our agreements, like those in the conventional housing market,
    the base fee is provided for services rendered and is calculated as a
    percentage of gross property income, before paying operating expenses.
    This incentivizes the property manager to maintain high occupancy
    levels, which requires the property manager to maintain a desirable,
    marketable community to generate demand. If existing and potential
    residents move outside of the project, the property manager will
    realize a negative financial impact via reduced base fees.
        The asset management fee, if applicable, is often calculated as a
    percentage of net operating income, which is income after the payment
    of operating expenses. It incentivizes the asset manager to balance
    project income and expenses to ensure that a project is well-operated,
    occupied, and sustainable for the long term.

    Incentive Fees
        The other component of our fee structure consists of at-risk
    property management incentive fees. The incentive fees, while included
    as a portion of our overall compensation, are entirely discretionary,
    and are based upon performance. Incentive fees enable the installation
    base commanders to weigh-in on the performance of the property manager
    and adjust the incentive fee accordingly. There is no guarantee or
    assurance of an incentive fee. Each of the Military Departments have
    their own unique criteria that factor into incentive fee calculations,
    but, generally, they include at least: (1) resident satisfaction (via
    annual surveys); (2) maintenance response times; and (3) other
    performance metrics as decided by the particular Military Department
    for a given project.
        Resident satisfaction typically receives the most weight and will
    generally have the greatest influence on the amount of incentive fees
    ultimately earned. If resident satisfaction dips below the low-end
    threshold of acceptable scores, the property manager may completely
    forfeit that portion of the incentive fee.
        This dynamic stands in marked contrast to the conventional housing
    market. Generally speaking, the total of base and incentive property
    management fees for a privatized military housing provider is the rough
    equivalent of a typical base property management fee for a conventional
    property manager. Notably, however, incentive fees are not usually
    found in the conventional housing market. Thus, privatized military
    housing providers are uniquely positioned compared to their
    conventional housing counterparts. Indeed, it would be unusual for a
    conventional property manager to have over 50 percent of its management
    fees at risk on a discretionary basis, as Hunt does under its property
    management agreements.
        Similarly, privatized military housing providers operate in a
    unique environment insofar as the respective Military Departments must
    vet and approve all incentive fees before they may be paid. As with
    base fees, Hunt does not have the ability to adjust its incentive fees
    without consent from the military partner.
        Separately, Hunt is providing audited financial statements for its
    projects for the past 10 years.
        Mr. Hickey. Senator Warren requested this information from
    Lendlease in her correspondence dated February 6, 2019. In response to
    that request, the Lendlease team provided Senator Warren and her staff
    two document productions dated February 21, 2019, and March 6, 2019, in
    addition to conducting an in-depth briefing with Senator Warren's team.
    Accordingly, we believe that this question has been adequately
    responded to as a result of such responses. If this response is not
    sufficient for purposes of this request, the Lendlease team would be
    happy to provide a similar briefing to the SASC staff.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        129. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, for each of your agreements, please list the
    following for each of the last ten years.
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Picerne. Answer provided directly to Senator Warren on February
    19, 2019.
        Mr. Ehle. Under its agreements, Hunt is compensated for services
    associated with the management of rental real estate housing complexes,
    such as property management and, as applicable, asset management. The
    fee arrangement typically includes two components: (1) a base fee,
    which includes (a) property management fee and/or (b) asset management
    fee, if applicable; and (2) an incentive fee. The rates for these fees,
    and the ways in which they are earned, are established during the
    competitive bidding process for the award of the MHPI project and are
    then negotiated and agreed upon in definitive documents. There is no
    mechanism by which Hunt could unilaterally adjust its compensation
    without consent from a military partner. Also, although set forth as a
    percentage rate, the amount of fees received is not guaranteed. The
    amounts depend upon a number of factors, including occupancy and BAH
    rates in each local market. It is important to note that each project
    is unique and its performance is subject to a variety of external
    factors, including market conditions, BAH rates, the scope of the deal,
    and the sources of funds available, plus internal factors related to
    property management, as further described below.

    Base Fees
        In our agreements, like those in the conventional housing market,
    the base fee is provided for services rendered and is calculated as a
    percentage of gross property income, before paying operating expenses.
    This incentivizes the property manager to maintain high occupancy
    levels, which requires the property manager to maintain a desirable,
    marketable community to generate demand. If existing and potential
    residents move outside of the project, the property manager will
    realize a negative financial impact via reduced base fees.
        The asset management fee, if applicable, is often calculated as a
    percentage of net operating income, which is income after the payment
    of operating expenses. It incentivizes the asset manager to balance
    project income and expenses to ensure that a project is well-operated,
    occupied, and sustainable for the long term.

    Incentive Fees
        The other component of our fee structure consists of at-risk
    property management incentive fees. The incentive fees, while included
    as a portion of our overall compensation, are entirely discretionary,
    and are based upon performance. Incentive fees enable the installation
    base commanders to weigh-in on the performance of the property manager
    and adjust the incentive fee accordingly. There is no guarantee or
    assurance of an incentive fee. Each of the Military Departments have
    their own unique criteria that factor into incentive fee calculations,
    but, generally, they include at least: (1) resident satisfaction (via
    annual surveys); (2) maintenance response times; and (3) other
    performance metrics as decided by the particular Military Department
    for a given project.
        Resident satisfaction typically receives the most weight and will
    generally have the greatest influence on the amount of incentive fees
    ultimately earned. If resident satisfaction dips below the low-end
    threshold of acceptable scores, the property manager may completely
    forfeit that portion of the incentive fee.
        This dynamic stands in marked contrast to the conventional housing
    market. Generally speaking, the total of base and incentive property
    management fees for a privatized military housing provider is the rough
    equivalent of a typical base property management fee for a conventional
    property manager. Notably, however, incentive fees are not usually
    found in the conventional housing market. Thus, privatized military
    housing providers are uniquely positioned compared to their
    conventional housing counterparts. Indeed, it would be unusual for a
    conventional property manager to have over 50 percent of its management
    fees at risk on a discretionary basis, as Hunt does under its property
    management agreements.
        Similarly, privatized military housing providers operate in a
    unique environment insofar as the respective Military Departments must
    vet and approve all incentive fees before they may be paid. As with
    base fees, Hunt does not have the ability to adjust its incentive fees
    without consent from the military partner.
        Separately, Hunt is providing audited financial statements for its
    projects for the past 10 years.
        Mr. Hickey. Senator Warren requested this information from
    Lendlease in her correspondence dated February 6, 2019. In response to
    that request, the Lendlease team provided Senator Warren and her staff
    two document productions dated February 21, 2019, and March 6, 2019, in
    addition to conducting an in-depth briefing with Senator Warren's team.
    Accordingly, we believe that this question has been adequately
    responded to as a result of such responses. If this response is not
    sufficient for purposes of this request, the Lendlease team would be
    happy to provide a similar briefing to the SASC staff.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        130. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, the total incentive-based fees or payments that
    were available to your company under the agreement.
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Picerne. Answer provided directly to Senator Warren on February
    19, 2019.
        Mr. Ehle. Under its agreements, Hunt is compensated for services
    associated with the management of rental real estate housing complexes,
    such as property management and, as applicable, asset management. The
    fee arrangement typically includes two components: (1) a base fee,
    which includes (a) property management fee and/or (b) asset management
    fee, if applicable; and (2) an incentive fee. The rates for these fees,
    and the ways in which they are earned, are established during the
    competitive bidding process for the award of the MHPI project and are
    then negotiated and agreed upon in definitive documents. There is no
    mechanism by which Hunt could unilaterally adjust its compensation
    without consent from a military partner. Also, although set forth as a
    percentage rate, the amount of fees received is not guaranteed. The
    amounts depend upon a number of factors, including occupancy and BAH
    rates in each local market. It is important to note that each project
    is unique and its performance is subject to a variety of external
    factors, including market conditions, BAH rates, the scope of the deal,
    and the sources of funds available, plus internal factors related to
    property management, as further described below.

    Base Fees
        In our agreements, like those in the conventional housing market,
    the base fee is provided for services rendered and is calculated as a
    percentage of gross property income, before paying operating expenses.
    This incentivizes the property manager to maintain high occupancy
    levels, which requires the property manager to maintain a desirable,
    marketable community to generate demand. If existing and potential
    residents move outside of the project, the property manager will
    realize a negative financial impact via reduced base fees.
        The asset management fee, if applicable, is often calculated as a
    percentage of net operating income, which is income after the payment
    of operating expenses. It incentivizes the asset manager to balance
    project income and expenses to ensure that a project is well-operated,
    occupied, and sustainable for the long term.

    Incentive Fees
        The other component of our fee structure consists of at-risk
    property management incentive fees. The incentive fees, while included
    as a portion of our overall compensation, are entirely discretionary,
    and are based upon performance. Incentive fees enable the installation
    base commanders to weigh-in on the performance of the property manager
    and adjust the incentive fee accordingly. There is no guarantee or
    assurance of an incentive fee. Each of the Military Departments have
    their own unique criteria that factor into incentive fee calculations,
    but, generally, they include at least: (1) resident satisfaction (via
    annual surveys); (2) maintenance response times; and (3) other
    performance metrics as decided by the particular Military Department
    for a given project.
        Resident satisfaction typically receives the most weight and will
    generally have the greatest influence on the amount of incentive fees
    ultimately earned. If resident satisfaction dips below the low-end
    threshold of acceptable scores, the property manager may completely
    forfeit that portion of the incentive fee.
        This dynamic stands in marked contrast to the conventional housing
    market. Generally speaking, the total of base and incentive property
    management fees for a privatized military housing provider is the rough
    equivalent of a typical base property management fee for a conventional
    property manager. Notably, however, incentive fees are not usually
    found in the conventional housing market. Thus, privatized military
    housing providers are uniquely positioned compared to their
    conventional housing counterparts. Indeed, it would be unusual for a
    conventional property manager to have over 50 percent of its management
    fees at risk on a discretionary basis, as Hunt does under its property
    management agreements.
        Similarly, privatized military housing providers operate in a
    unique environment insofar as the respective Military Departments must
    vet and approve all incentive fees before they may be paid. As with
    base fees, Hunt does not have the ability to adjust its incentive fees
    without consent from the military partner.
        Separately, Hunt is providing audited financial statements for its
    projects for the past 10 years.
        Mr. Hickey. Senator Warren requested this information from
    Lendlease in her correspondence dated February 6, 2019. In response to
    that request, the Lendlease team provided Senator Warren and her staff
    two document productions dated February 21, 2019, and March 6, 2019, in
    addition to conducting an in-depth briefing with Senator Warren's team.
    Accordingly, we believe that this question has been adequately
    responded to as a result of such responses. If this response is not
    sufficient for purposes of this request, the Lendlease team would be
    happy to provide a similar briefing to the SASC staff.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        131. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, the total incentive-based fees or payments that
    your company received under the agreement.
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Picerne. Answer provided directly to Senator Warren on February
    19, 2019.
        Mr. Ehle. Under its agreements, Hunt is compensated for services
    associated with the management of rental real estate housing complexes,
    such as property management and, as applicable, asset management. The
    fee arrangement typically includes two components: (1) a base fee,
    which includes (a) property management fee and/or (b) asset management
    fee, if applicable; and (2) an incentive fee. The rates for these fees,
    and the ways in which they are earned, are established during the
    competitive bidding process for the award of the MHPI project and are
    then negotiated and agreed upon in definitive documents. There is no
    mechanism by which Hunt could unilaterally adjust its compensation
    without consent from a military partner. Also, although set forth as a
    percentage rate, the amount of fees received is not guaranteed. The
    amounts depend upon a number of factors, including occupancy and BAH
    rates in each local market. It is important to note that each project
    is unique and its performance is subject to a variety of external
    factors, including market conditions, BAH rates, the scope of the deal,
    and the sources of funds available, plus internal factors related to
    property management, as further described below.

    Base Fees
        In our agreements, like those in the conventional housing market,
    the base fee is provided for services rendered and is calculated as a
    percentage of gross property income, before paying operating expenses.
    This incentivizes the property manager to maintain high occupancy
    levels, which requires the property manager to maintain a desirable,
    marketable community to generate demand. If existing and potential
    residents move outside of the project, the property manager will
    realize a negative financial impact via reduced base fees.
        The asset management fee, if applicable, is often calculated as a
    percentage of net operating income, which is income after the payment
    of operating expenses. It incentivizes the asset manager to balance
    project income and expenses to ensure that a project is well-operated,
    occupied, and sustainable for the long term.

    Incentive Fees
        The other component of our fee structure consists of at-risk
    property management incentive fees. The incentive fees, while included
    as a portion of our overall compensation, are entirely discretionary,
    and are based upon performance. Incentive fees enable the installation
    base commanders to weigh-in on the performance of the property manager
    and adjust the incentive fee accordingly. There is no guarantee or
    assurance of an incentive fee. Each of the Military Departments have
    their own unique criteria that factor into incentive fee calculations,
    but, generally, they include at least: (1) resident satisfaction (via
    annual surveys); (2) maintenance response times; and (3) other
    performance metrics as decided by the particular Military Department
    for a given project.
        Resident satisfaction typically receives the most weight and will
    generally have the greatest influence on the amount of incentive fees
    ultimately earned. If resident satisfaction dips below the low-end
    threshold of acceptable scores, the property manager may completely
    forfeit that portion of the incentive fee.
        This dynamic stands in marked contrast to the conventional housing
    market. Generally speaking, the total of base and incentive property
    management fees for a privatized military housing provider is the rough
    equivalent of a typical base property management fee for a conventional
    property manager. Notably, however, incentive fees are not usually
    found in the conventional housing market. Thus, privatized military
    housing providers are uniquely positioned compared to their
    conventional housing counterparts. Indeed, it would be unusual for a
    conventional property manager to have over 50 percent of its management
    fees at risk on a discretionary basis, as Hunt does under its property
    management agreements.
        Similarly, privatized military housing providers operate in a
    unique environment insofar as the respective Military Departments must
    vet and approve all incentive fees before they may be paid. As with
    base fees, Hunt does not have the ability to adjust its incentive fees
    without consent from the military partner.
        Separately, Hunt is providing audited financial statements for its
    projects for the past 10 years.
        Mr. Hickey. Senator Warren requested this information from
    Lendlease in her correspondence dated February 6, 2019. In response to
    that request, the Lendlease team provided Senator Warren and her staff
    two document productions dated February 21, 2019, and March 6, 2019, in
    addition to conducting an in-depth briefing with Senator Warren's team.
    Accordingly, we believe that this question has been adequately
    responded to as a result of such responses. If this response is not
    sufficient for purposes of this request, the Lendlease team would be
    happy to provide a similar briefing to the SASC staff.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

        132. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, for any year in which you did not receive 100
    percent of available incentive-based payments or fees, an explanation
    of why you did not receive them.
        Mr. Williams. Answer provided directly to Senator Warren per letter
    dated February 20, 2019.
        Mr. Picerne. Answer provided directly to Senator Warren on February
    19, 2019.
        Mr. Ehle. Under its agreements, Hunt is compensated for services
    associated with the management of rental real estate housing complexes,
    such as property management and, as applicable, asset management. The
    fee arrangement typically includes two components: (1) a base fee,
    which includes (a) property management fee and/or (b) asset management
    fee, if applicable; and (2) an incentive fee. The rates for these fees,
    and the ways in which they are earned, are established during the
    competitive bidding process for the award of the MHPI project and are
    then negotiated and agreed upon in definitive documents. There is no
    mechanism by which Hunt could unilaterally adjust its compensation
    without consent from a military partner. Also, although set forth as a
    percentage rate, the amount of fees received is not guaranteed. The
    amounts depend upon a number of factors, including occupancy and BAH
    rates in each local market. It is important to note that each project
    is unique and its performance is subject to a variety of external
    factors, including market conditions, BAH rates, the scope of the deal,
    and the sources of funds available, plus internal factors related to
    property management, as further described below.

    Base Fees
        In our agreements, like those in the conventional housing market,
    the base fee is provided for services rendered and is calculated as a
    percentage of gross property income, before paying operating expenses.
    This incentivizes the property manager to maintain high occupancy
    levels, which requires the property manager to maintain a desirable,
    marketable community to generate demand. If existing and potential
    residents move outside of the project, the property manager will
    realize a negative financial impact via reduced base fees.
        The asset management fee, if applicable, is often calculated as a
    percentage of net operating income, which is income after the payment
    of operating expenses. It incentivizes the asset manager to balance
    project income and expenses to ensure that a project is well-operated,
    occupied, and sustainable for the long term.

    Incentive Fees
        The other component of our fee structure consists of at-risk
    property management incentive fees. The incentive fees, while included
    as a portion of our overall compensation, are entirely discretionary,
    and are based upon performance. Incentive fees enable the installation
    base commanders to weigh-in on the performance of the property manager
    and adjust the incentive fee accordingly. There is no guarantee or
    assurance of an incentive fee. Each of the Military Departments have
    their own unique criteria that factor into incentive fee calculations,
    but, generally, they include at least: (1) resident satisfaction (via
    annual surveys); (2) maintenance response times; and (3) other
    performance metrics as decided by the particular Military Department
    for a given project.
        Resident satisfaction typically receives the most weight and will
    generally have the greatest influence on the amount of incentive fees
    ultimately earned. If resident satisfaction dips below the low-end
    threshold of acceptable scores, the property manager may completely
    forfeit that portion of the incentive fee.
        This dynamic stands in marked contrast to the conventional housing
    market. Generally speaking, the total of base and incentive property
    management fees for a privatized military housing provider is the rough
    equivalent of a typical base property management fee for a conventional
    property manager. Notably, however, incentive fees are not usually
    found in the conventional housing market. Thus, privatized military
    housing providers are uniquely positioned compared to their
    conventional housing counterparts. Indeed, it would be unusual for a
    conventional property manager to have over 50 percent of its management
    fees at risk on a discretionary basis, as Hunt does under its property
    management agreements.
        Similarly, privatized military housing providers operate in a
    unique environment insofar as the respective Military Departments must
    vet and approve all incentive fees before they may be paid. As with
    base fees, Hunt does not have the ability to adjust its incentive fees
    without consent from the military partner.
        Separately, Hunt is providing audited financial statements for its
    projects for the past 10 years.
        Mr. Hickey. Senator Warren requested this information from
    Lendlease in her correspondence dated February 6, 2019. In response to
    that request, the Lendlease team provided Senator Warren and her staff
    two document productions dated February 21, 2019, and March 6, 2019, in
    addition to conducting an in-depth briefing with Senator Warren's team.
    Accordingly, we believe that this question has been adequately
    responded to as a result of such responses. If this response is not
    sufficient for purposes of this request, the Lendlease team would be
    happy to provide a similar briefing to the SASC staff.
        Mr. Bliss. LMH respectfully refers Senator Warren to our response
    to this question (posed by Senator Warren in a February 6 letter to
    LMH) set forth in our letter dated March 6, 2019, which contains
    business-sensitive and/or confidential information.

                                   __________
                 Questions Submitted by Senator Tammy Duckworth
               use of non-disclosure agreements to stifle speech
        133. Senator Duckworth. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, I'm troubled by recent reporting that
    highlighted instances where military families paid penalties for
    breaking their leases as a result of escaping environmental conditions
    adverse to their health. In some instances, your companies were at
    fault for these maintenance and health failures. More insidious were
    the accounts where your companies tried to silence these families'
    voices by using penalty fees and non-disclosure agreements (NDAs). Were
    the reports accurate and do you use NDAs?
        Mr. Williams. BBC has never required residents to pay financial
    penalties for breaking their leases where an adverse environmental
    condition affecting resident health has been confirmed. BBC (through
    its affiliates) does not charge families to break their lease where a
    health or safety/hazardous condition exists.
        With respect to use of NDAs, residents have been asked to execute a
    confidential settlement/release agreement in connection only with the
    following: (1) where the resident is represented by an attorney, in
    which case our legal counsel communicates directly with the resident's
    counsel, and (2) where the resident has threatened to pursue litigation
    and an agreed settlement as to resolution of the dispute has been
    reached. These most typically are for claims involving ``slip and
    fall''/personal injury matters that are unrelated to environmental
    conditions, such as mold. The forms are reviewed and recommended by
    legal counsel, and in connection with matters covered by insurance, are
    required by the relevant insurance carriers.
        Mr. Picerne. During the recent SASC hearing on February 13, 2019,
    Senator Tillis shared that he has learned that some MHPI partners are
    requiring residents to sign various residency related agreements--which
    he referred to as NDA's--that include a provision which requires the
    resident to not disclose the fact that the resident entered into the
    agreement in exchange for the waiver of rental amounts, fees, and/or
    reimbursement of certain amounts that the resident incurred as a result
    of an issue with the home, or, in order to accept a ``non-standard''
    home.
        Corvias has not asked nor required residents to sign those sort of
    non-disclosure agreements on any of our projects.
        We do however use a standard ``insurance claim'' form of release
    when we pay/reimburse a resident for amounts paid to them relating to
    issues with the homes (damaged household goods, reimbursement for rent
    for days out of the home, reimbursement for medical expenses/pain for
    slip/fall on walkway, etc.). That form of release does not include any
    type of non-disclosure or confidentiality provision.
        Mr. Ehle. Hunt does not issue Non-Disclosure Agreements (``NDAs'')
    to residents prior to conducting maintenance work in a home nor is the
    completion of maintenance work made contingent on the signing of an
    NDA. Hunt also does not otherwise use NDAs as part of its normal course
    during leasing, move-in, or move-out.
        Mr. Hickey. Lendlease are aware of no standard policies or
    requirements across our projects that require that residents sign such
    an NDA. Further, we do not endorse and have not authorized the use of
    such forms in the ordinary course of day to day operations on our
    projects.
        In the limited circumstances of a formal settlement of a legal
    claim or dispute initiated by a resident or former resident, the
    project companies have entered into settlement agreements. We
    understand such settlement agreements would typically include customary
    releases of claims and confidentiality provisions based upon legal
    advice in connection with the settlement of claims.
        In addition, we note that certain environmental disclosure
    notifications are provided to prospective residents for their education
    and acknowledgment upon signing a lease. For example, for homes with
    known lead-based paint presence (built pre-1978), a tenant would
    receive and sign a lead based-paint disclosure and acknowledgment.
    While we do not think this is necessarily responsive to the concerns
    that have been raised regarding NDA's, it is mentioned on the
    possibility these notifications are somehow being misconstrued.
        In amplification of the foregoing, we were transparent with our
    residents in post recovery efforts attributable to damage caused by
    Hurricane Florence at Camp Lejeune in our Atlantic Marine Corps
    Communities project. In consultation with the Navy, residents who were
    offered and advised of relocation but insisted on remaining in homes
    that suffered some damages from the hurricane have been asked to sign a
    limited waiver and release to be permitted to stay in the homes until
    necessary repairs can be completed. In such circumstances, the homes do
    remain habitable but may have certain damages that will be repaired as
    the restoration work continues. To confirm, however, there was no NDA
    or confidentiality provision contained in these limited waivers, rather
    these were utilized to fulfill any duty to warn.
        Mr. Bliss. LMH believes that the only time it would request non-
    disclosure would be as part of a settlement of a legal dispute or
    property damage claims. The non-disclosure covenant is commonly used in
    settlement of litigation (or pre-litigation) claims as a way of
    protecting both parties (so that neither party publishes un-proven
    allegations made against the other party or defenses to such
    allegations). At no time do we require the families to sign a NDA to
    receive service.

        134. Senator Duckworth. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, if so, why do you use them, how many do you
    currently have with military families and how many have you offered in
    the past year?
        Mr. Williams. BBC has never required residents to pay financial
    penalties for breaking their leases where an adverse environmental
    condition affecting resident health has been confirmed. BBC (through
    its affiliates) does not charge families to break their lease where a
    health or safety/hazardous condition exists.
        With respect to use of NDAs, residents have been asked to execute a
    confidential settlement/release agreement in connection only with the
    following: (1) where the resident is represented by an attorney, in
    which case our legal counsel communicates directly with the resident's
    counsel, and (2) where the resident has threatened to pursue litigation
    and an agreed settlement as to resolution of the dispute has been
    reached. These most typically are for claims involving ``slip and
    fall''/personal injury matters that are unrelated to environmental
    conditions, such as mold. The forms are reviewed and recommended by
    legal counsel, and in connection with matters covered by insurance, are
    required by the relevant insurance carriers.
        Mr. Picerne. Corvias has not asked nor required residents to sign
    those sort of non-disclosure agreements on any of our projects.
        Mr. Ehle. Hunt does not issue Non-Disclosure Agreements (``NDAs'')
    to residents prior to conducting maintenance work in a home nor is the
    completion of maintenance work made contingent on the signing of an
    NDA. Hunt also does not otherwise use NDAs as part of its normal course
    during leasing, move-in, or move-out.
        Mr. Hickey. As discussed above, we do not use NDA's in the standard
    practice or day to day operations of the projects.
        In the limited circumstances of the settlement of a legal claim or
    dispute, where no liability has been established but the project has
    nevertheless elected to make a payment to settle a claim, the
    settlement agreement would typically contain a customary
    confidentiality provision in accordance with legal advice provided to
    the project companies.
        Mr. Bliss. As stated, LMH has not required families to sign non-
    disclosure agreements outside of the legal claim or property damage
    claim resolution process. LMH does not have statistics available on the
    number of settlement agreements we have entered into with non-
    disclosure language within the past year, but they are not very common.
    We would estimate less than ten total.
                    pre-leasing notification of mold/mildew
        135. Senator Duckworth. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, all of your companies seem to collect and store
    data on your performance and work orders. How are you using that data
    to identify houses with recurring mold/mildew problems and what are you
    doing to fix those structural issues without inconveniencing
    servicemembers?
        Mr. Williams. BBC does not believe that we have homes with
    recurring mold problems; and to the extent we identify homes with any
    water infiltration, water leaks or other structural/design issues that
    may result in mold/mildew issues, BBC follows its moisture- related
    issues policy. BBC does offer residents temporary alternative housing
    in a furnished home or hotel suite in an effort to avoid
    inconveniencing residents while certain types of remediation work are
    being performed in a home or where residents express concerns regarding
    their home.
        Mr. Picerne. We do not believe we have any specific homes with
    recurring mold problems. However, when we have identified mold in a
    home, our team members are trained to follow our Mold SOP, which has
    been designed to comply with/follow industry best practices.
        Mr. Ehle. As we stated in response to question 5 above, resident
    complaints and reports of issues are logged into Hunt's housing
    maintenance software, Yardi. Hunt monitors this information closely and
    works proactively with residents to address issues as they arise. In
    situations where we have found that residents are consistently
    identifying specific issues, we use that information to help us
    understand and identify potential underlying causes and develop a
    comprehensive solution.
        For example, when we found that Keesler residents were consistently
    identifying moisture-related issues, we took a broader look at the
    challenges they were experiencing and were ultimately able to identify
    repairs that needed to be made to the ventilation system in many homes
    in the community. With this information, we were able to address an
    underlying cause of the moisture-related issues throughout the
    community.
        Addressing moisture-related and potential mold issues in a home can
    be intrusive, and we work with residents to try to reduce any
    inconvenience they may experience. When necessary, Hunt works to
    relocate residents into temporary alternative housing, either in the
    community or off-base, while work is being completed in their home.
    Hunt also provides financial support to affected residents during these
    periods such as by providing gift cards for meals or rent concessions.
        Mr. Hickey. All environmental issues that are received (including
    mold and mildew items) are elevated to the supervisor level for review
    and action and the approved response protocol is followed and
    documented. Additionally, supervisors, managers and directors regularly
    review service order activity reports to identify repeat issues.
    Typically, a 60-day look back period is used to identify a home that
    has had more than two service orders for the same issue during that
    period. Repairs are undertaken to both ``arrest'' the issue causing the
    concern as well as address any follow-on requirements necessitated for
    the home to be returned to full operating condition.
        Depending on the nature and severity of the issue, temporary
    lodging or accommodations arrangements are made. If it is determined
    that the home cannot be brought back to full operating condition in
    less than 30 days, the family is offered a move over to a comparable
    home (if available). If the move over is declined or a comparable home
    is not available, a lease break may be offered. There are circumstances
    when repairs become more complicated or require more time than
    estimated as they unfold. In those cases, we use the same remedy
    approach--temporary lodging, move overs and ultimately, if we are not
    able to satisfy the resident through any other means, we will offer to
    relieve the resident from lease obligations.
        Mr. Bliss.
        Use of Data: LMH uses the data to identify trends in home systems
    that need to be addressed. When issues are identified, we create action
    plans to address those issues either immediately or when the home is
    turned at the end of the lease, depending on whether this involves a
    health safety issue. If the issue does involve health or safety, we
    schedule the work immediately.
        Repair: LMH does its very best to mitigate issues without
    inconveniencing our residents. In the vast majority of mold or moisture
    cases, the service requests require a simple fix that is in accordance
    with the PPVs' mold maintenance program and EPA guidelines. The follow
    up system in Yardi, our online management system, automatically
    generates three (3) follow up tickets after the mold has been initially
    remediated. While we know that multiple follow up tickets can
    inconvenience residents, LMH takes this issue very seriously and wants
    to ensure the health and safety of our families. When the mold is of a
    nature that requires more extensive work, we coordinate with the
    residents in order to make the process as smooth as possible. If this
    means that the resident needs to be temporarily or permanently
    relocated, LMH pays for all costs related to the relocation.
        Education: LMH will work closely with its DOD partners to further
    enhance resident education regarding mold, along with establishing
    clear protocols to report and resolve mold issues. In 2017, LMH
    expanded its communication of the escalation process for unresolved
    resident concerns. That process involves the following steps:

          (a)  Step 1--contacting LMH's maintenance hotline with a concern
    or maintenance request,
          (b)  Step 2--if the resident's concern is not resolved, LMH asks
    the resident to call LMH's Regional General Management Office, and
          (c)  Step 3--LMH encourages the resident to contact the
    Government/Base housing office at any time during the process to
    further advocate on their behalf to resolve any concerns.

        136. Senator Duckworth. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, given the lack of EPA/OSHA regulation on mold/
    mildew, do you inform current occupants of past occurrences of mold/
    mildew before they sign a lease, just as you would with lead-based
    paint?
        Mr. Williams. BBC complies with all applicable federal, state and
    local legal requirements to provide disclosures to residents regarding
    the presence of environmental hazards in homes. As there are no legal
    requirements to disclose the prior presence of mold/mildew in a home,
    this is not disclosed to residents as part of the standard leasing
    process.
        Mr. Picerne. No.
        Mr. Ehle. As a preliminary matter, all homes undergo and must pass
    a move-in inspection. When a resident moves in, the home should be free
    and clear of any issues.
        Hunt provides residents with safety information in their lease
    materials prior to lease signing. This includes addenda regarding
    environmental hazards such as lead-based paint, mold, asbestos, radon,
    and/or pesticides. With respect to mold, Hunt provides residents with
    the EPA pamphlet, ``A Brief Guide to Mold, Moisture In Your Home.''
    Hunt makes additional information available to residents throughout the
    duration of their residency via regular communications and the Hunt
    Safety Zone online library to educate them regarding moisture and mold-
    related issues.
        Mr. Hickey. Our project's lease packages comply with any state
    disclosure laws and the military services review and approve any
    resident leases implemented at the project. Our leases contain lead-
    based paint, asbestos and mold addendums. When a home becomes vacant
    our local team go through the home to inspect and repair all
    maintenance issues including any broken or unserviceable items, in many
    instances a complete painting, floor repair and replacement and
    preventive maintenance of the HVAC system.
        Mr. Bliss. At lease signing LMH provides all residents with
    information on moisture/mold in their homes and steps they can take to
    help prevent moisture and mold from occurring. These informational
    disclosures are similar to LBP disclosures in that they alert residents
    to the issue and provide guidance on how to avoid potential risks to
    their family. In the vast majority of cases, moisture and mold service
    requests require a simple fix that eliminates the problem area. This is
    different from maintenance and repair of LBP in pre-1978 homes, because
    LBP remains in a home and must be monitored and periodically repaired
    until the LBP components are permanently removed (e.g., through a
    complete, down to the studs renovation).

                       services base commander oversight
        137. Senator Duckworth. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, I am curious about how the Services view their
    role in facilitating remediation efforts. According to recent
    reporting, the Services seem unable or unwilling to step in when a
    military family and a company disagree about who is at fault for unsafe
    conditions. That strikes me as a failure of oversight responsibility,
    and a lack of advocacy on behalf of these families and residents. Folks
    in my State--on the civilian side--know all too well how dangerous and
    devastating poor oversight is. In Cairo, Illinois, we are still living
    through HUD's failed oversight of the Alexander County Housing
    Authority, and the residents there have had to move out of their
    homes--some of them have moved out of their community altogether. I do
    not want to see bad oversight in housing, whether public or military,
    be a trend. Do the base commanders have the requisite training,
    resources and authorities to conduct oversight over these private
    companies?
        Secretary Beehler. Yes, Garrison commanders have the requisite
    training and authorities to conduct oversight. Since 2016,
    approximately 350 Army Housing careerists have attended the Housing
    Management technical training and a thousand careerists have attended
    Housing the Force training hosted each year since 2014, a workshop of
    seminars and training. IMCOM has incorporated into the Garrison
    Commander Pre-Command Course in-depth training in housing program
    oversight responsibilities. With regard to resources, IMCOM is
    increasing the number of quality assurance/quality control personnel
    across the Army's installations by 114 hires in order to improve the
    Army's ability to execute housing oversight.
        Secretary Bayer. DON is taking steps to address immediate problems
    as well as adjust our business processes to permanently correct
    systemic issues. General Neller and Admiral Richardson have each issued
    orders requiring commanding officers to afford the opportunity for
    every family in military housing to receive a voluntary visit by April
    15, 2019. The purposes of these visits are:

        1.  to raise command awareness of family living conditions to
    ensure that they are safe, secure and environmentally healthy;
        2.  to personally observe any issues affecting the home and to
    understand any actions being taken to address them; and
        3.  if a problem is found, to help servicemembers and their
    families get the problem resolved, and ensure that all families
    understand the help and resources available to them. Marine Corps
    Commanders will use the Marine Housing Outreach program to improve
    their awareness of concerns and better advocate for military families.
    Commanders will leverage appointed servicemember advocates and the base
    housing office to streamline communication with providers. Both
    Commanders and appointed advocates will ensure effective oversight and
    remediation are in place, operating with the full authority and support
    of the chain of command. The DON will streamline its reporting process
    so that no sailor (or soldier or airman living in DON privatized
    housing) has to exceed two calls before achieving resolution--the first
    to the housing company, and the next to their chain of command, which
    can then properly advocate on their behalf with the government base
    housing office, base leadership, and Commander Naval Installation
    Command (CNIC) to ensure resolution. Simultaneously, families will
    continue to have an open channel to the base housing office. Finally,
    with respect to training, prospective installation leaders attend
    senior shore leadership training (Navy) and the Installation Leadership
    Management Program training (USMC) that includes a segment on
    privatized housing. Both Navy and USMC are reviewing their leadership
    and staff training on privatized housing oversight responsibilities and
    will modify this training as appropriate to address recent oversight
    concerns.

        Additional systemic improvements include:

          Privatized Housing Crisis Action Teams at the
    Installations Command headquarters, as well as each Regional Command,
    to respond with alacrity to housing complaints.
          Comprehensive reviews of all reporting mechanisms and
    oversight procedures that govern the way privatized military housing
    discrepancies are reported, remediated, and verified through our PPV
    partners. We have been in discussion with PPV partners about available
    apps to address reporting, tracking, rating and resolution.
          Weekly assessments conducted by Regional Housing
    Directors to provide comprehensive oversight and quality control on
    work orders, including database systems to track work orders and spot
    checks of individual work orders to ensure quality repairs.
          Outreach letters to all families in PPV housing as well
    as social media communication.
          Open forums sponsored by installations and delivered by
    the local base commanders.
          Out of cycle independent Resident Satisfaction Surveys
    with specific questions added to ensure resident concerns have been
    captured fully.
          Quarterly meetings with PPV CEOs and Service Secretaries
    to address and monitor the satisfactory delivery of housing for our
    sailors and marines.

        Secretary Henderson. Air Force installation commanders have the
    resources, training, and authorities to protect the health and safety
    of the military members under their command. The privatization
    agreements recognize their command authorities. The installation
    commander's staff includes medical, housing, and engineering
    professionals to advise and assist them in carrying out these
    responsibilities. While they cannot direct the private company, they
    can direct Air Force actions such as testing and relocation of the
    member to protect the member's safety or health.

        138. Senator Duckworth. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, if not, why and what should Congress do?
        Secretary Beehler. Garrison commanders have training, authorities,
    and resources to conduct oversight. The Army identified training as an
    area that needed reinforcement and resources were identified as an area
    that needed more manpower. AMC has implemented measures to reinforce
    training and hiring actions to add 114 manpower positions to execute
    housing oversight.
        Secretary Bayer. As stated in response to question 137 above, Base
    commanders have the requisite training, resources, and authorities to
    conduct oversight over PPV partners. In addition to the tools described
    above, Service Secretaries are working with OSD and the privatized
    partners to establish a Resident Bill of Rights, a common lease, and
    reviewing how incentive fees are calculated, among other measures.
        Secretary Henderson. We believe Air Force installation commanders
    have the resources, training and authorities to protect the health and
    safety of the military members under their command.
              competition flexibility and 50-year lease contracts
        139. Senator Duckworth. Secretary McMahon, Secretary Beehler,
    Secretary Bayer, and Secretary Henderson, do the 50-year lease
    contracts restrict the U.S. military's flexibility to seek out
    competition in the private sector and partner with other companies that
    can provide improved quality?
        Secretary McMahon. MHPI partners are not DOD or Military Department
    contractors. Under the MHPI, Military Departments conveyed their
    existing government housing units to competitively selected
    privatization entities (i.e., the MHPI projects). MHPI projects operate
    under long-term (850-year) ground leases and associated legal
    agreements with a Military Department, with one 25-year option period.
    In return, the MHPI projects assumed responsibility for operation,
    maintenance, construction, and replacement of the housing during the
    lease term, in accordance with the MHPI authorities as defined in title
    10, United States Code. The long-term duration of the initial ground
    leases was necessary in order to attract the third-party financing that
    was critical to fund the Initial Development Periods of the MHPI
    projects. Asset, property, development, and construction management is
    performed under separate service agreements or contracts between the
    housing project and the service provider, not under contract with the
    Military Department. The Military Department retains certain rights
    under the legal agreements to include the replacement, for default
    under the terms of the agreements, of each of these primary service
    providers to the MHPI project.
        Secretary Beehler. The entities that own and operate the housing on
    Army Installations are Limited Liability Companies in which the Army is
    a minority member and, as such, a ``contract'' for service between the
    Army and a service provider does not exist. The Majority Members in
    these LLCs were competitively selected under a competitive procurement
    governed by Federal Acquisition Regulations and the terms were defined
    in the LLC business documents and ground leases. The Majority Member,
    with Army input, selects the Service Providers in the RCI projects. The
    LLC structure does not negatively impact the Army's ability to work
    with the Majority Member of the LLC to seek a replacement Service
    provider at any time performance is deemed to be unacceptable or for
    other just cause. The LLC structure does not negatively impact the
    Army's ability to work with the Majority Member of the LLC to seek a
    replacement Service provider at any time performance is deemed to be
    unacceptable or for other just cause.
        The Army's privatized housing partners leverage private sector best
    practices and commercial standards to meet the Army's housing mission.
    The Army has a portfolio level Partner review on a quarterly basis
    specifically focused on improving portfolio and project performance and
    discussing implementation of new property management techniques and
    technology. It is through these meetings that the RCI Partner, in
    coordination with the Army, determines where future investment should
    be made to implement new property management practices.
        Secretary Bayer. Flexibility is included in 50-year leases to open
    up private competition in certain instances. There are triggers in the
    property management agreements for termination for poor performance.
    DON has retained certain safeguards in the partnership operating
    agreement to include DON consent required on key business decisions
    including:

          refinancing or taking out additional debt
          disposition of company assets
          changes in the distribution of cash flow
          replacement of the property manager
          changes in project ownership
          formulation of the annual operating budgets
          prioritization and scoping of capital projects utilizing
    reserve funds

        Secretary Henderson. The 50-year lease term was necessary to
    attract competition for the Military Housing Privatization Initiative
    projects and to maximize the amount of development. Shorter lease terms
    would have resulted in much less development. Once in a 50-year
    agreement, the Air Force has committed to working with the project
    owner for the duration of the 50-year term. There are also private
    loans associated with these projects that make re-competition extremely
    challenging and costly.
                            services incentive fees
        140. Senator Duckworth. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, I am struck by how pervasive these problems are
    across company providers. Even if the cases described in recent
    reporting are only a small percentage of all the houses provided under
    these public-private partnerships, the near 100 percent payment of the
    Services to these companies, based upon the incentive fee structure,
    necessitates close scrutiny. How do these cases factor into incentive
    fees?
        Secretary Beehler. These cases are a small percentage and may not
    affect the award of the incentive fee. However, the Army elevated
    approval of all performance incentive fees to HQDA. HQDA will review,
    validate, and approve all performance incentive fees based on
    recommendations from Garrison Commanders who will confirm that property
    management and operations goals have been met. The Army is also
    standardizing the incentive fee metric at the portfolio level within
    the next 90 days. The metric will be 50 percent of the incentive fee as
    determined by customer satisfaction and garrison commander satisfaction
    with the remaining 50 percent consisting of a group of areas such as
    service quality and timeliness.
        Secretary Bayer. The PPV project Managing Members (Private
    Partners) pay fees to service providers (e.g., property managers) they
    hire on behalf of Limited Liability Companies (LLCs) to carry out the
    purposes of the LLCs. These fees are paid out of funding available to
    the LLCs, primarily revenue. Wherein the service fees typically include
    base and incentive components, each total combined service fee is in
    line with market rates for that particular fee. Both base & incentive
    fees and performance requirements/metrics are documented in the
    operating agreement of the LLC or attachments to that operating
    agreement, and cannot be revised without DON Member approval.
        Incentive fees for property management are determined using a
    number of criteria including resident satisfaction as determined by an
    annual survey conducted by a third-party company and response times for
    service calls. An individual case of a home not being repaired
    satisfactorily would likely not impact an incentive fee in a given time
    period given the significant number of privatized houses that are part
    of each project. However, systemic under-performance would be captured
    in the incentive fee criteria and would reduce the incentive fees paid
    to the corresponding property management service provider.
        Secretary Henderson. Twenty-eight of the Air Force's thirty-two
    projects include incentive fees. The Incentive Fee Plan was a product
    of negotiation during the development of each project and each plan
    varies. The Air Force administers the awarding of these fees according
    to these plans. Fees are withheld to the extent project owners have not
    met a metric in the plan. Additionally, the award fee includes many
    other elements such as timely report submittals, adherence to budget,
    occupancy rate, resident satisfactaaqion survey scores, etc.
        Over the last 12 months, the Air Force has withheld $1.2 million in
    performance incentive fees out of a potential $19.7 million. We
    withheld these fees based on project owners' failures to meet standards
    established in the Performance Incentive Fee Plans. In the case of
    Keesler, MacDill and Tinker Air Force Bases, inadequate mold
    remediation efforts were specifically cited in the decision to reduce
    their performance incentive fee.

        141. Senator Duckworth. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, how do these cases factor into incentive fees?
        Secretary Beehler. To the extent the satisfaction and survey of the
    cases involved impact, the overall calculation will be decremented in
    accordance with the metric per the Incentive Performance Management
    Plan. Likewise, the metrics pertaining work order response time,
    quality or work, or resident satisfaction could be impacted depending
    on the magnitude of the residents responses to survey's.
        Secretary Bayer. Incentive fees based on performance were a
    requirement from the MHPI program's inception. The DON wanted to reward
    good performance and maintain monetary leverage in key categories
    including resident satisfaction. The incentive metrics are based on
    objective and measurable data points, including response time on
    service requests and resident satisfaction scores, as well as command
    satisfaction on select projects. The determination of the base line for
    these metrics was motivated by the desire to improve pre?MHPI average
    resident satisfaction scores of 60 percent and extended wait times for
    completion of maintenance repairs. When properly utilized, the
    incentive management portion of the fees is an effective tool to use
    when property managers are not meeting expectations.
        Secretary Henderson. Twenty-eight of the Air Force's 32 projects
    include incentive fees. The Incentive Fee Plan was a product of
    negotiation during the development of each project and each plan
    varies. The Air Force administers the awarding of these fees according
    to these plans. Fees are withheld to the extent a project owner has not
    met a metric in the plan. Additionally, the award fee includes many
    other elements such as timely report submittals, adherence to budget,
    occupancy rate, resident satisfaction survey scores, etc.
        Over the last 12 months, the Air Force has withheld $1.2 million in
    performance incentive fees out of a potential $19.7 million. We
    withheld these fees based on project owners' failures to meet standards
    established in the Performance Incentive Fee Plans. In the case of
    Keesler, MacDill and Tinker Air Force Bases, inadequate mold
    remediation efforts were specifically cited in the decision to reduce
    their performance incentive fee.
                                  cure notices
        142. Senator Duckworth. Secretary Beehler, Secretary Bayer, and
    Secretary Henderson, based upon your written testimonies, how many
    times, in the past 2 years, have you issued Cure Notices to elevate
    concerns to bond holders financing the projects?
        Secretary Beehler. The Army has not issued a cure notice in the
    past 2 years. However, the Army issued a cure notice to Clark Realty
    Capital in January 2012 based on their failure to provide operating
    smoke detectors at Dogue Creek at Fort Belvoir. Clark responded to the
    Army and the Army was satisfied in April 2012 with Clark Realty
    Capital's curative actions.
        Secretary Bayer. In the last two years, DON has not issued Cure
    Notices.
        Secretary Henderson. The Air Force has not issued cure notices in
    the past 2 years.

                          army lead-based paint issue
        143. Senator Duckworth. Secretary Beehler, I am particularly
    concerned about this issue and left perplexed as to why we are still
    having problems. What have been residents' response to the Army's
    efforts over the past six months to address concerns about lead-based
    paint in family housing?
        Secretary Beehler. The Army has not received a large amount of
    input from residents in response to our efforts over the past six
    months to redress concerns about lead-based paint (LBP) in family
    housing. Some feedback has been that residents are appreciative about
    the response to their concerns, are pleased with how the remediation is
    being managed, and the education provided by Army and Partner sources
    has been an eye-opener. We did received a few negative responses where
    a couple of partners did not confirm the visual findings with testing
    before they remediated the areas identified and some residents noted
    the appearance of a lack of urgency in mitigating the areas of visual
    findings identified during the inspections. Overall, we have seen very
    few concerns as compared to the number of residents living in
    privatized housing; over 82,000 as of December 2018.
                 army enhanced review of environmental hazards
        144. Senator Duckworth. Secretary Beehler, the Army recently
    conducted a ``90 enhanced review'' of environmental hazards, to include
    lead-based paint (LBP), but only surveyed 10 percent of homes with LBP.
    And of that 10 percent, the Army found one or more positive indicators
    of LBP in over 60 percent of those homes. How could you possibly
    characterize only a 10 percent sampling of homes as an ``enhanced''
    review and what is the Army doing to ensure all problems are being
    addressed, given the 60 percent hit rate at just those 10 percent of
    homes?
        Secretary Beehler. Based on USACE recommendation, the Army
    identified a random sample of the 36,338 pre-1978 homes with children 6
    years of age or younger as this group is considered at higher risk by
    EPA. The 60 percent preliminary positive visual findings required
    additional testing to confirm presence of lead-based paint. In many
    cases, the RCI Project Company immediately mitigated risks without
    testing. When subsequent testing was positive for lead-based paint, the
    RCI Project Company took immediate action to mitigate and other tested
    areas were not lead;-based paint. The visual assessments were simply a
    snapshot in time of conditions. USACE did not see a value in more
    visual inspections beyond the first phase. USACE concluded the Army and
    the RCI Project Companies have procedures in place to manage hazards in
    the interior of the homes between occupants. Due to these procedures,
    USACE's review of the inspection results found little to suggest a risk
    to current occupants on the interior of the homes as long as
    encapsulated lead-based paint was not compromised.
        USACE recommended the Army implement a robust monitoring program to
    manage potential hazards, address concerns identified during the visual
    inspections, regular interior and exterior inspections, establish and
    track inspections in Defense Occupational & Environmental Health
    Readiness System--Industrial Hygiene (DOEHRS-IH), and foster an
    understanding of potential environmental hazards in housing through
    resident education as well as housing and garrison staff. The Army is
    taking action to implement these recommendations.
                                   __________
                   Questions Submitted by Senator Doug Jones
              withholding bah payments for substandard maintenance
        145. Senator Jones. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
    Hickey, and Mr. Bliss, given Ms. Cornwall's testimony suggesting that
    military families be allowed to withhold BAH payments when health or
    safety issues remain unresolved, I asked if your companies would oppose
    allowing the families to withhold the housing allowance if a system is
    in place to give you adequate time to document and correct the problem.
    Each of you agreed that such a system makes sense. Can you please
    outline the parameters of such a system that would serve the interests
    of all stakeholders?
        Mr. Williams. BBC is currently in discussions with the military
    services to agree on a process for permitted the withholding of rent
    where a resident has reported an unresolved health or safety concern.
    To date, these discussions have suggested a process that includes a
    neutral arbiter/ombudsman reviewing the dispute and determining whether
    there is good cause for the claim to undergo further review, and during
    such time allowing for rent to be placed in escrow until such time as a
    resolution is reached. BBC submits that any such process should be
    adopted in common form by each of the military services to ensure
    consistency of approach; and that any process to select the appointed
    neutral arbiter/ombudsman be designed to require involvement of persons
    with adequate knowledge and expertise to assess the validity of health,
    safety and environmental allegations.
        Mr. Picerne. We do agree that there should be a process in which if
    a resident is dissatisfied with their home they will have the ability
    to have their concern/grievance heard by a neutral arbiter/mediator. If
    through that process the parties have not satisfactory resolved the
    resident's issue/concern, then the residents basic allowance for
    housing should be placed into a separate disputed rent account until
    the issue is satisfactorily resolved. We are currently in discussions
    with the Army about what that process would entail and look forward to
    sharing that proposed process with the SASC.
        Mr. Ehle. Some residents have expressed frustration with the
    existing MHPI complaint process. Hunt understands this frustration and
    supports the development of a uniform dispute resolution or mediation
    process that would be made available to landlords and tenants alike and
    that would allow disputes to be heard by an independent, third-party
    mediator. Such forums must be in addition to, and not in lieu of, the
    resident's and landlord's rights to pursue all remedies available under
    a lease or at law or in equity. It follows that among other remedies,
    the neutral mediator could have the authority--in a good faith
    dispute--to hold BAH or rental payments in escrow until a decision by
    the mediator is made, in accordance with applicable state laws and
    regulations.
        Mr. Hickey. Lendlease believe strongly that residents have a right
    to have their concerns, especially in relation to health and safety
    issues heard, actioned and resolved. If this is not satisfactorily
    achieved from the perspective of the resident via current resolution
    methods, escalation pathways are available. If augmentation of current
    practices is to occur, the form that this takes needs to be carefully
    determined and executed.
        We believe any system allowing a resident to unilaterally withhold
    rent while still residing in the home is not in accordance with any
    existing Federal and/or State tenant rights. In private rental markets,
    withholding rent typically results in eviction proceedings.
    Additionally, bond and other debt holders in MHPI projects are unlikely
    to authorize the introduction of any revenue risk senior to debt
    service not contemplated at the time of financial closing.
        Complicating the issue further is that the BAH is comprised of Rent
    + Utility components. Utility expenses are incurred by residents as a
    result of occupancy and are paid by the project company on behalf of
    the resident. Any discussion of rent withholding or rebating should be
    confined to the rent component of BAH only.
        We do however believe that a ``rebate'' system could be introduced.
    If a resident's complaints are affirmed by a neutral arbiter or
    mediator, then an appropriate amount of the BAH rent would be refunded
    by the project company.
        Lendlease believes determining a solution that is meaningful for
    residents, aligned with the guiding principles of Lendlease, and
    practically achievable is critical. We are committed to working in
    close collaboration with all relevant stakeholders in privatization to
    find meaningful and enduring solution.
        Mr. Bliss. Under applicable landlord/tenant law, some states allow
    the withholding of rent under certain circumstances and so to that
    extent, this recourse is already available to our residents under the
    terms of their lease. Having a consistent lease across all military
    installations would help residents better understand the terms of their
    lease and their rights therein. LMH acknowledges that a Tenant Bill of
    Rights is necessary and absolutely must be established and communicated
    by the private partners and DOD partners. LMH is working with DOD to
    explore how best to implement a system that would be acceptable to our
    residents and lenders. It may be that modeling new provisions after
    existing state law would be appropriate. We can provide additional
    information on this after we complete our review with our DOD partner.
        Enclosure: Form of Third Party Survey

           neglect of maintenance requests at maxwell air force base
        146. Senator Jones. Mr. Ehle, please provide a report on the steps
    you have taken and steps you plan to take to address the maintenance
    and repair problems in base housing at Maxwell Air Force Base and
    Gunter Annex which were raised in Lt. Gov. Ivey's September 2016 letter
    to your company as well as in the October 2016 and October 2018
    Montgomery Advertiser articles.
        Mr. Ehle. Maxwell Family Housing (``MFH'') is the private entity
    managed by Hunt, which owns and operates the family housing on Maxwell
    Air Force Base located in Montgomery, Alabama. MFH residents
    experienced a drop in property manager performance through 2015 and
    2016. Specifically, in 2015, the property experienced a significant
    backlog in the processing of maintenance service requests, a lag in
    response times, reduced quality of repairs, and a failure to keep
    building mechanic components correctly functioning. Substandard
    operations continued into 2016, garnering the attention of state and
    local leaders as well as senior military command. Hunt responded. New
    regional leadership was assigned to MFH, and a training campaign and
    on-site staff philosophy were developed and implemented. With new
    leadership at the helm, MFH performance has started to show improvement
    in the quality of homes and services offered to military families. We
    have also observed a substantial correlated increase in resident
    satisfaction.

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