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

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                      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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