[Senate Hearing 116-643]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 116-643

THE GOVERNMENT ACCOUNTABILITY OFFICE ON PRIVATIZED HOUSING FINDINGS TO 
  INCLUDE RESPONSES FROM THE MILITARY SERVICES ON ONGOING REPORTS OF 
              SUBSTANDARD HOUSING CONDITIONS AND SERVICES

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

                                HEARING

                               BEFORE THE

                      COMMITTEE ON ARMED SERVICES
                          UNITED STATES SENATE

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION
                               __________

                            DECEMBER 3, 2019
                               __________

         Printed for the use of the Committee on Armed Services
         

                   [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]        


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

                    U.S. GOVERNMENT PUBLISHING OFFICE
                    
54-864 PDF                 WASHINGTON : 2024                   


                      COMMITTEE ON ARMED SERVICES

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

                                  (ii)

  


                            C O N T E N T S

                                __________

                            December 3, 2019

                                                                   Page

The Government Accountability Office on Privatized Housing            1
  Findings to Include Responses From the Military Services on 
  Ongoing Reports of Substandard Housing Conditions and Services.

                           Members Statements

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

Statement of Senator Jack Reed...................................     3

                           Witness Statements

Field, Elizabeth A. Director, Defense and Management, Government      4
  Accountability Office.

McCarthy, Hon. Ryan D., Secretary of the Army; Accompanied by        30
  General James C. McConville, USA, Chief of Staff of the Army.

Modly, Hon. Thomas B., Acting Secretary of the Navy; Accompanied     32
  by Admiral Michael M. Gilday, USN, Chief of Naval Operations 
  and General David H. Berger, USMC, Commandant of the Marine 
  Corps.

Barrett, Hon. Barbara M., Secretary of the Air Force; Accompanied    36
  by General David L. Goldfein, USAF, Chief of Staff of the Air 
  Force.

Questions for the Record.........................................    75

                                 (iii)

 
THE GOVERNMENT ACCOUNTABILITY OFFICE ON PRIVATIZED HOUSING FINDINGS TO 
  INCLUDE RESPONSES FROM THE MILITARY SERVICES ON ONGOING REPORTS OF 
              SUBSTANDARD HOUSING CONDITIONS AND SERVICES

                              ----------                              


                       TUESDAY, DECEMBER 3, 2019

                              United States Senate,
                               Committee on Armed Services,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 9:31 a.m. in room 
SD-G50, Dirksen Senate Office Building, Senator James M. Inhofe 
(Chairman) presiding.
    Committee Members present: Senators Inhofe, Wicker, 
Fischer, Cotton, Ernst, Tillis, Sullivan, Perdue, McSally, 
Scott, Blackburn, Hawley, Reed, Shaheen, Blumenthal, Hirono, 
Kaine, King, Heinrich, Peters, Manchin, Duckworth, and Jones.

          OPENING STATEMENT OF SENATOR JAMES M. INHOFE

    Chairman Inhofe. The Committee meets today to receive 
testimony from the Government Accountability Office (GAO), the 
Service S]ecretaries, the Service Chiefs on the current 
condition of privatized military housing.
    Almost a year ago, I first heard from military families 
about the dismal conditions they faced. Frankly, if confession 
is good for the soul, Janna Driver called this to my attention 
from Tinker Air Force Base. I thought this was something that 
was just unique to Tinker Air Force Base, and then I thought 
no. It is elsewhere in Oklahoma. But then it is also all the 
way around the country, and so that was the background of how 
this all started.
    We have come to learn that it is a problem nationwide. It 
is a national crisis of proportions we have not seen since the 
scandal at Walter Reed about a decade ago.
    Members of this Committee, our staff, and myself--we have 
all traveled and seen these problems firsthand.
    This is the third hearing this Committee has had on this 
issue, and I am sure it is not going to be the last. We hoped 
that since our first two hearings in February and March we 
would see marked differences by now and be able to use this 
hearing. In fact, it was set up to discuss the progress that 
has been made. Well, it is set up to look at the progress, but 
the progress has not been what we wanted.
    We continue to hear regularly from the families across the 
country about questionable practices, poor workmanship, and 
frankly, in some places about housing contractors just not 
caring about the families they are supposed to be serving.
    Additionally, as reported in the press, some of these 
contractors are now under investigation for defrauding the 
Federal Government. I am really worried. What else can come out 
of the woodwork on this? What other problems are out there that 
we do not know?
    To our witnesses from the Department, I have to ask, when 
is enough enough?
    I have to make one comment, though. Of the eight witnesses 
that are here, with one exception, they all kind of walked into 
this blind because this is a new issue that you were not 
familiar with. So when I am critical and say some things that 
are critical, I am not looking at you personally but as the 
Department and who was representing it before you arrived here. 
Regardless of any potential criminal wrongdoing, we are still 
receiving complaints on a daily basis showing that you are 
still failing to fix the problem.
    The time for talk is over. If these companies cannot get 
the job done, you owe it to the military families to find a 
company who will. I say this because this housing problem is 
really a readiness problem. We do not think of it as being a 
readiness problem.
    I had an experience talking about this. We actually had two 
airmen who had to come back from the UAE [United Arab Emirates] 
to handle this problem that should have been handled by the 
military in their absence.
    So this is a very important element. These hearings are not 
to be an indictment on the privatization of the housing system 
as a whole because in some cases it has worked and worked very 
well. It is meant to be an indictment on the bad actors that we 
know are out there. To those who lead our men and women in 
uniform, I ask what are we going to do about it, since almost a 
year later we are still hearing about the same problems.
    As I mentioned earlier, this will not be the last hearing. 
I am putting our witnesses on notice that we will have another 
hearing early next year to discuss implementation of our 
housing reform efforts, and the contractors will be back to 
answer the hard questions.
    I had some things I was going to say about Ms. Field, but I 
think I will go ahead and not use her time. But I think that 
the GAO has done a great job, and I want to make sure everyone 
hears from them.
    To remediate these and dozens of other problems, we have 
more than 30 housing-related legislative provisions in the NDAA 
[National Defense Authorization Act] this year. Thirty 
provisions. That is another reason that the NDAA is important. 
We have been unable to get--we did a good job in the Senate. 
They did not do that good of a job in the House, and we do have 
those problems that we will be addressing. We cannot afford to 
ignore this readiness problem.
    Issues like military housing are why it is so crucial we 
continue to pass the NDAA every year. The NDAA supports the 
bipartisan national security of this country, and it should not 
be held hostage by issues outside this Committee's 
jurisdiction.
    Unfortunately, because of issues that are not in the Senate 
Armed Services Committee's jurisdiction, this year's NDAA is 
not resolved, which means only leadership can clear up this 
logjam that is out there. Otherwise, the likelihood is greater 
now than it was that we would have a skinny bill. We are out of 
time, and I did not mean to deviate from the subject of this 
Committee hearing, but I think it is very important that we 
bring this up as a critical thing that is taking place right 
now.
    I hope that we can move past these issues so that we can 
remain focused on the promises we made to those who serve our 
country and get an NDAA signed into law. That should be our 
priority, and it is.
    With that, I would like to recognize the military families 
who have traveled here today to seek answers from you. They are 
in the back of the room. I want all families that have an 
interest or who have been affected to stand up right now. All 
right. Let us give them a round of applause.
    [Applause.]
    Chairman Inhofe. To our Department of Defense (DOD) 
witnesses, as I have said before, these are the people whose 
trust you are going to have to regain.
    Senator Reed?

                 STATEMENT OF SENATOR JACK REED

    Senator Reed. Well, thank you very much, Mr. Chairman.
    I would like to begin by again thanking the vast number of 
military families who have spoken out about the inadequate 
conditions of their privatized housing. I especially want to 
recognize the military families who have traveled here today 
for this hearing, as the chairman has done.
    Today we welcome Ms. Elizabeth Field from the GAO and the 
senior civilian and uniformed leadership of the military 
services. Ms. Field, I especially want to thank you and your 
team for your dedicated work thus far.
    The GAO's findings thus far confirm the alarming trends we 
have heard from many military families. For example, the GAO 
found that the often quoted 87 percent satisfaction rate is, 
quote, misleading and unreliable, and that the records for 
resident requests for work orders and service calls are 
questionable.
    This Committee continues to receive complaints directly 
from military families. While the services have made strides 
since last February, many unacceptable problems with housing 
remain. I am still not convinced these private companies are 
doing everything in their power and investing as much as they 
can to improve the quality of homes for our military.
    I also have several questions that I ask be entered into 
the record that were requested directly by military families on 
the many issues with military treatment facilities and 
diagnosing medical problems caused by inadequate housing 
conditions.
    Senator Reed. While the conference process is still 
underway for the Fiscal Year 2020 NDAA, I remain confident that 
we will reach an agreement on legislation that will represent 
the most significant reform of privatized housing since its 
inception in 1996. We all still have a lot of work to do on 
addressing the systemic problems that have been discovered with 
privatized housing, and I thank the chairman for convening this 
important and timely hearing.
    Lastly, I want to take this opportunity, with the civilian 
and military leadership of each of the services present, to 
express my deep concern about the President's recent 
interference in war crimes cases involving members of the U.S. 
military. These comments follow my remarks on the floor of the 
Senate on November 21.
    The President has the power to pardon, but he has a 
responsibility to use that power wisely, not recklessly. Good 
order and discipline are critical and time-honored traits of 
the United States military, not only to enable military 
readiness and effectiveness, but also to ensure military men 
and women remain firmly tethered to our nation's moral and 
ethical principles in the most demanding wartime environments.
    Some have claimed that these cases were distractions and 
that the President's intervention has somehow improved the 
morale of the military. On the contrary, President Trump's 
disregard for our military justice system risks undermining the 
confidence of our servicemembers in the rule of law and their 
chain of command, especially those who were courageous enough 
to bring allegations of war crimes to light and testify against 
their teammates. When we do not hold our military personnel to 
appropriate standards of conduct, it also makes it more likely 
that they will face similar abuses on the battlefield and less 
likely that we will be able to hold our enemies accountable.
    There is no one with more credibility on these issues than 
former Senator John McCain who stated: ``This is a moral 
debate. It is about who we are. I don't mourn the loss of any 
terrorist's life. What I do mourn is what we lose when by 
official policy or official neglect we confuse or encourage 
those who fight this war for us to forget that best sense of 
ourselves. Through the violence, chaos, and heartache of war, 
through deprivation and cruelty and loss, we are always 
Americans, and different, stronger and better than those who 
would destroy us.''
    This is the standard we should demand from our military men 
and women, and I believe the President's interference in these 
cases has done them a serious disservice.
    Thank you, Mr. Chairman.
    Chairman Inhofe. Thank you, Senator Reed.
    Each of the Military Departments have submitted a statement 
for the record, which will be made a part of the record. I 
would ask each of our Military Departments through the 
secretaries to limit your remarks to 5 minutes. We have a full 
panel today. We have a lot of members who have a lot of 
questions.
    So before we turn to the departments, I would ask Ms. 
Elizabeth Field, Director of Defense Capabilities and 
Management at GAO, to provide her statement, which I know 
includes new findings that will be made public for the first 
time today. Ms. Field?

    STATEMENT OF ELIZABETH A. FIELD, DIRECTOR, DEFENSE AND 
          MANAGEMENT, GOVERNMENT ACCOUNTABILITY OFFICE

    Ms. Field. Thank you, Chairman Inhofe, Ranking Member Reed, 
Senators, and staff of the Committee. It is an honor to be here 
today to discuss GAO's ongoing work assessing the Military 
Housing Privatization Initiative, or MHPI.
    Almost as soon as reports began surfacing last year of 
problems with military privatized housing, servicemembers and 
their families began reaching out to us at GAO to share their 
stories. We heard from military families who reported mold 
throughout their homes, rodent infestations, and other serious 
problems like gas and carbon monoxide leaks, and repeated 
sewage leaks.
    While these are just some examples of the complaints we 
received, they are indicative of the types of concerns we heard 
from military families living in privatized housing at 
installations across the country.
    What we wanted to find out, when we began receiving these 
complaints, was how commonly held they were. Defense Department 
officials have primarily pointed to two metrics to help answer 
that question.
    First, they cite the results of the Department's annual 
customer satisfaction survey. According to DOD's most recent 
report, ``Evaluating the MHPI Program,'' tenant satisfaction 
has remained at 87 percent and is, quote, a critical indicator 
of overall program success. However, as Senator Reed noted, we 
have determined that for many reasons, ranging from how the 
survey question was asked to how the results were compiled and 
calculated, this 87 percent figure is not in any way reliable.
    Second, the Department points to high occupancy rates. In 
the same report from May of this year, DOD stated that the fact 
that occupancy rates remain greater than 93 percent program-
wide demonstrates--and I am going to quote again--a high level 
of servicemember satisfaction and overall success in providing 
suitable and desirable housing. However, through our site 
visits to 10 installations where we conducted 15 focus groups 
with families, we learned that family members often choose to 
live in privatized housing for reasons that have nothing to do 
with the housing itself, reasons such as living in close 
proximity to medical and education services for children with 
special needs or a concern that off-base housing is neither 
affordable nor safe.
    As part of our ongoing review, we sought a different way to 
determine the extent of the problems we were hearing about. We 
collected and analyzed over 8 million work order records from 
all 14 private partners and all 79 projects. Our hope was that 
we could use these data to determine the prevalence of certain 
hazards, to see patterns over time and in different locations, 
and possibly to assess the timeliness of maintenance conducted 
on the homes. Unfortunately, we found that because the data in 
these records are not captured reliably or consistently, they 
cannot be used to do so.
    Among other problems, we found anomalies in the data 
provided by all 14 private partners such as duplicate work 
orders and work orders with completion dates prior to when they 
were submitted.
    The problems I detail are significant not just because they 
tell us that DOD's statement that the program has been 
successful overall may not be fully accurate, but because the 
Department has been using these metrics to reward and 
incentivize the private partners. I want to acknowledge that 
the Service Secretaries, along with officials from the Office 
of the Secretary of Defense (OSD), have taken steps to address 
these and other problems, from working to renegotiate the 
performance incentive fee structure to strengthening oversight 
on the ground to increasing staffing levels in military offices 
that had seen their resources cut.
    I also want to acknowledge the many factors that make this 
a deeply complex problem, including the Department's inability 
to unilaterally make certain changes to the legal agreements 
with the partners. Through our ongoing review, we know that the 
Department's efforts are headed in the right direction, but it 
will take sustained attention, likely over a number of years, 
to work through the many complications of this long-term 
public-private partnership and to fully meet the Department's 
goal of providing safe and clean housing for all servicemembers 
and their families.
    Thank you, and I look forward to your questions.
    [The prepared statement of Ms. Field follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Inhofe. Thank you, Ms. Field.
    What we are going to do is--we have a lot of participation 
today. We are going to have 7-minute rounds. Senator Reed and I 
agreed that we were going to ask our members to stay on 
subject. There will be a temptation I think in this environment 
to get into other areas, but housing is it today. So that will 
be what we will attempt to do.
    Let us go ahead with our opening statements. We will start 
with Secretary McCarthy.

  STATEMENT OF HON. RYAN D. McCARTHY, SECRETARY OF THE ARMY; 
ACCOMPANIED BY GENERAL JAMES C. MCCONVILLE, USA, CHIEF OF STAFF 
                          OF THE ARMY

    Secretary McCarthy. Thank you, Mr. Chairman.
    Chairman Inhofe, Ranking Member Reed, and distinguished 
members of the Committee, thank you for this opportunity to 
provide an update on actions taken by the Army since the 
intensive focus on housing operations and oversight that began 
in February 2019.
    I would like to reiterate the Army's serious commitment to 
providing safe, quality, and affordable housing to our 
soldiers, civil servants, and their families. It is our 
responsibility to provide housing, not simply to code but also 
to quality.
    We must fix the current housing crisis using a house- to-
house approach. We must also fix the governance model and 
address underlying issues to ensure systemic change.
    Over the last 10 months, we identified our governance 
flaws, initiated commander-driven town halls, and created 24-
hour help lines to hear feedback directly from the families 
affected. We have empowered the chain of command as part of the 
solution, created transparency of the work order process, and 
ultimately sought to regain the trust of the men and women in 
our ranks and their families.
    We directed housing as our top quality of life priority and 
are aligning resources against it. As a demonstration of our 
commitment to this issue, we assigned housing operations to the 
four-star commander of Army Materiel Command (AMC), General Gus 
Perna, who has the delegated authority to withhold incentive 
fees.
    We developed new incentive fee metrics measuring work order 
response times, work order repair quality, and resident 
satisfaction that will allow us to withhold fees for 
substandard performance. A tri-service resident bill of rights 
is being finalized to give residents an active voice and 
avenues for recourse.
    We are also equally concerned and committed to improving 
barracks and Army-owned housing. In the last 2 fiscal years, 
the Army has invested $1.1 billion in barracks sustainment. For 
fiscal year 2020, projects for new barracks will total $790 
million in R&M [repair and maintenance] and MILCON [military 
construction].
    While the Army has worked hard over the past 10 months to 
make significant strides in the way we manage privatized 
housing, there is much more work to be done.
    The immediate focus is to fix current housing issues that 
can be addressed by effective follow-through on work orders and 
improved management. We owe it to the 45 percent of our force 
who live on post.
    In addition, we need to rapidly address the needs of 
families who have been temporarily displaced. Across Army 
installations, there is a need for standard operating 
procedures, transparency, and accountability of claims.
    This must include standardizing rent reimbursement, food 
cards, and remediation or replacement of household items. Since 
February, the Army has tracked the displacement of 2,265 
families. Currently 182 families are still in temporary 
housing, while privatized companies are addressing issues in 
their homes. To displaced families, days can feel like weeks, 
and weeks can feel like months. These are not simply numbers. 
These are lives.
    Currently, we have over 86,000 privatized homes, with one-
third of houses in good condition, one-third in fair condition, 
requiring minor refurbishing, and one-third in poor condition 
needing to be rebuilt.
    Right now, General Perna is working on an overall analysis 
of the Army's privatized housing requirements, and in the 
spring, we plan to present the findings to the key committees 
of jurisdiction.
    In closing, the Army is resolved in our commitment to 
provide safe, quality, and affordable housing to our soldiers 
and their families. But much more work remains. We need 
congressional help in two areas. First, we need the NDAA 
approved to enact items such as the resident bill of rights. 
Second, we need a final fiscal year 2020 appropriations bill to 
continue immediate housing improvements.
    Thank you and I look forward to your questions.
    [The prepared statement of Mr. McCarthy and General 
McConville follows:]

Joint Prepared Statement by The Honorable Ryan D. McCarthy and General 
                          James C. McConville
    Chairman Inhofe, Ranking Member Reed, and distinguished members of 
the Committee. Thank you for this opportunity to provide an update on 
actions taken by the Army since the intensive focus on Housing 
Operations and Oversight that began in February 2019.
    I would like to reiterate the Army's serious commitment to 
providing safe, quality, and affordable housing to our soldiers, civil 
servants, and their families. It is our responsibility to provide 
housing, not simply to code but also to quality.
    We must fix the current housing crisis using a house-to-house 
approach. We must also fix the governance model and address underlying 
issues to ensure systemic change.
    Over the last ten months, we identified our governance flaws, 
initiated commander driven town halls and created 24-hour help lines to 
hear feedback directly from the families affected. We have empowered 
the chain of command as part of the solution, created transparency of 
the work order process, and ultimately, sought to regain the trust of 
the men and women in our ranks and their families.
    We directed housing as our top Quality of Life priority and are 
aligning resources against it. As a demonstration of our commitment to 
this issue, we assigned housing operations to the 4-star commander of 
the Army Materiel Command, General Gus Perna, who has the delegated 
authority to withhold incentive fees.
    We developed new incentive fee metrics measuring work order 
response times, work order repair quality, and resident satisfaction 
that will allow us to withhold fees for substandard performance. A tri-
service Resident Bill of Rights is being finalized to give residents an 
active voice and avenues for recourse.
    We are also equally concerned and committed to improving barracks 
and Army-owned housing. In the last two fiscal years, the Army has 
invested $1.1 billion in barracks sustainment. For fiscal year 2020, 
projects for new barracks will total $790 million in R&M and MILCON.
    While the Army has worked hard over the past ten months to make 
significant strides in the way we manage privatized housing, there is 
much more work to be done.
    The immediate focus is to fix current housing issues that can be 
addressed by effective follow-through on work orders and improved 
management. We owe it to the forty-five percent of our force who live 
on post.
    In addition, we need to rapidly address the needs of families who 
have been temporarily displaced. Across Army installations, there is a 
need for standard operating procedures, transparency, and 
accountability of claims.
    This must include standardizing rent reimbursement, food cards, and 
remediation or replacement of household items. Since February, the Army 
tracked the displacement of two thousand, one hundred and fifty-five 
families. Currently, one hundred and ninety-eight families are still in 
temporary housing while privatized companies are addressing issues in 
their homes. These aren't simply numbers; these are lives.
    Currently, we have over eighty-six thousand privatized homes; with 
one third of the houses in good condition; one third in fair condition, 
requiring minor refurbishing; and one third in poor condition needing 
to be rebuilt.
    Right now, General Perna is working on an overall analysis of the 
Army's privatized housing requirements. In the spring, we plan to 
present the findings to the key committees of jurisdiction.
    In closing, the Army is resolved in our commitment to providing 
safe, quality, and affordable housing to our soldiers and their 
families. But much more work remains.
                             call to action
    We need Congressional help in two areas. First, we need the NDAA 
approved to enact items such as the Resident Bill of Rights. Second, we 
need a final fiscal year 2020 appropriations bill to continue immediate 
housing improvements. Thank you and I look forward to answering your 
questions.

    Chairman Inhofe. Thank you, Mr. Secretary.
    My staff has reminded me that we will stay on our schedule.
    Next we will be hearing from Acting Secretary Modly, then 
Secretary Barrett. Try to stay within your 5 minutes.

  STATEMENT OF HON. THOMAS B. MODLY, ACTING SECRETARY OF THE 
 NAVY; ACCOMPANIED BY ADMIRAL MICHAEL M. GILDAY, USN, CHIEF OF 
NAVAL OPERATIONS AND GENERAL DAVID H. BERGER, USMC, COMMANDANT 
                      OF THE MARINE CORPS

    Secretary Modly. Chairman Inhofe, Ranking Member Reed, 
distinguished Members of the Committee, thank you for your 
continued attention to this very critical issue.
    For the Navy and Marine Corps team, our people are our most 
precious resource, and we will always prioritize their safety 
and their well-being, particularly of our sailors and marines, 
but also their families who serve alongside them. There is an 
empty chair at the Thanksgiving table for many of our Navy and 
Marine Corps families because a father, a mother, a wife, or a 
husband was deployed overseas. These families served with pride 
and distinction. On top of the considerable demands of military 
service, no military family should ever have to contend with 
chronic maintenance issues or concerns such as mold and pests 
in their homes. Trust and confidence are the bedrock of 
effective command, and the sailors and marines in our care must 
be confident their leadership will advocate tirelessly on their 
behalf. This is commander's business. The three of us are 
actively engaged on this issue and have been since the 
beginning, and we are committed to empowering leaders 
throughout the chain of command to assess, monitor, and 
remediate issues of concern.
    Since the Department of the Navy last addressed this 
Committee, we have diligently pursued three distinct lines of 
effort: one, active and engaged leadership; two, reinforcing 
the Department of Navy's oversight of our PPV [Public Private 
Venture] partners; and three, improving partnerships with 
privatized housing owners to most importantly restore trust 
with those families that reside in those housing units.
    Our written testimony provides more details on these 
efforts. So we will close with this. While we have made steady 
progress over the past 6 months, we are not completely 
satisfied, and we will not rest in our determination to make 
this right for our sailors and marines and their families.
    We appreciate the Committee's continued resolve on this 
matter and the Committee's efforts to secure the resources we 
need in this effort by ensuring final passage of the National 
Defense Authorization Act (NDAA) and the fiscal year 2020 
appropriations.
    Thank you and we look forward to your questions.
    [The prepared statement of Secretary Modly, General Berger, 
and Admiral Gilday follows:]

  Joint Prepared Statement by The Honorable Thomas B. Modly, General 
             David H. Berger, and Admiral Michael M. Gilday
    Chairman Inhofe, Ranking Member Reed, distinguished Members of the 
Committee, thank you for your continued attention to this critical 
issue. For the Navy/Marine Corps Team, our people will always be our 
greatest resource, and we prioritize the safety and well-being of our 
sailors, marines and their families. Trust and confidence are the 
bedrock of effective command, and the sailors and marines in our care 
must be confident their leadership will advocate tirelessly on their 
behalf. On top of the considerable demands of service, no military 
family should ever have to contend with chronic maintenance issues or 
concerns such as mold and pests in their on-base housing. This is 
commander's business, and we are committed to empowering our leaders to 
assess, monitor, and remediate issues of concern.
    Since the Department of the Navy (DON) last addressed this 
Committee, we have diligently pursued three distinct lines of effort--
reestablishing active and engaged leadership on this issue, reinforcing 
DON oversight, and improving partnerships with privatized housing 
owners to help restore resident trust. While we have made steady 
progress over the past six months, we can never rest in our 
determination to provide safe, secure, and comfortable housing for all 
sailors, marines, and sea service families.
    We also appreciate the Committee's resolute concern on this matter. 
We would be remiss if we neglected mentioning the importance of the 
timely passage of the National Defense Authorization Act (NDAA) for 
fiscal year 2020 and the adverse impact of a potential lengthy 
Continuing Resolution. Our ability to maintain momentum relies on 
critical resources dependent on the enactment of the NDAA and fiscal 
year 2020 appropriations. Continuing Resolutions have a direct negative 
impact on our ability to address shortfalls and improve the 
responsiveness and enforcement of our partnerships.
                      active & engaged leadership
    In March, we stated that our primary focus was to engage our 
leaders as active participants in the privatized housing program. We 
cannot outsource this responsibility. Since that time, Navy and Marine 
Corps leaders achieved 100 percent contact with all sailors and marines 
to inquire about on-base housing concerns and offer a home visit. Every 
Navy and Marine Corps installation also held town halls with residents, 
and each installation now offers a combination of quarterly or monthly 
meetings to provide residents with information and access to 
installation and partner representatives.
    Additionally, we have implemented structured training for all 
leaders to help them better understand the DON privatized housing 
program, specific housing conditions, and local procedures available to 
assist their sailors and marines. However, their responsibility does 
not end there. We have tracked performance metrics and begun to spot 
trends and help identify areas of concern before they escalate. Active 
leadership is a pre-requisite to rectifying housing concerns.
    DON leadership also interacts weekly with the other military 
departments. We also maintain regular contact with our Public-Private 
Venture (PPV) partners at the CEO level to improve partnerships, 
enhance oversight initiatives, strengthen communications, and seek 
resolution for our servicemembers and their families. Navy and Marine 
Corps leadership also participated in two quarterly Tri-Service working 
groups chaired and attended by the Service Secretaries, and three 
Military Housing Privatization Initiative (MHPI) partnering sessions 
sponsored by the
    Office of the Secretary of Defense (OSD) and an OSD-sponsored 
workshop with our partners focused on National Historic Preservation 
Act compliance to efficiently manage resources.
    We also note that we are equally committed to improving housing for 
all sailors and marines in on-base and government-owned housing, not 
just those in PPV facilities under MHPI. Residents of unaccompanied 
housing and government-owned or government-leased family housing 
overseas also received command contact and Resident Satisfaction 
Surveys. Our Housing Offices will continue to track the completion of 
all maintenance work orders and safety concerns, regardless of whether 
those issues are in PPV housing, barracks, or government-owned or 
leased housing overseas.
    All residents now have the ability to submit and track the status 
of their service requests via a mobile application provided by their 
PPV Partners. Key features of the app are the ability to take photos of 
maintenance issues and to receive up-to-the-minute updates on service 
status. Residents are also able to complete satisfaction surveys on the 
quality of repairs through the app.
    To better track work order data and measure performance against 
benchmarks in real time, we developed a PPV Performance Dashboard Suite 
displaying family housing performance information for each echelon--
from the installation and regional level to the enterprise level, as 
well as in alignment with project-specific requirements. DON Leadership 
now has access to view data with the ability to drill down to the 
individual housing unit via an Electronic Data Warehouse (EDW), updated 
manually on a bi-weekly basis. Installation and Region Housing Offices 
can now pull work order data directly from partner maintenance systems 
in order to perform monthly review of electronic maintenance records, 
monitor performance by neighborhood, and to conduct spot-checks with 
residents to confirm work is complete. By the end of January, 2020, we 
will transition to an automated process to allow leadership to view 
integrated Navy and Marine Corps data, refreshed on a daily basis.
                 reinforce department of navy oversight
    The Navy and Marine Corps significantly improved project oversight 
over the last six months. DON Military Housing Privatization Initiative 
(MHPI) partners are now assessing standardized metrics related to work 
order timeliness and quality, a primary area of concern highlighted by 
our residents. We are also re-evaluating Housing Condition Assessments 
and Program Review processes, updating policies, procedures, roles and 
responsibilities, and implementing lessons learned on an ongoing basis.
    We've revised the PPV Project Performance Incentive Fee Structure 
in order to anticipate implementation at the end of the calendar year, 
consistent with OSD policy issued in October 2019. To ensure the 
incentive fee structure incorporates the voices of our sailors, 
marines, and their families, resident satisfaction will be weighted 
within the metric upon which the amount awarded is assessed. Resident 
satisfaction will be determined by resident move-in and out surveys and 
resident work order surveys, in addition to the annual resident 
satisfaction survey.
    We are also focusing significant attention on the long-term 
financial health of our individual PPV transactions to ensure the 
sustainment of quality housing over the life cycle of the partnership. 
We are acutely aware that the actions being taken today by the partners 
to address immediate resident concerns will have a long-term impact on 
the ability of project revenue to support future investments in the 
homes. The DON has dedicated an audit team to provide a fiscal 
assessment of the accounts needed to repair and modernize the 
inventory. Our goal with this audit review is to ensure our partners 
will continue to be able to meet their commitments to sustain modern, 
safe, attractive housing for our residents.
    The DON continues to work with the Naval Audit Service, the Office 
of the Department of Defense Inspector General, and the Government 
Accountability Office to review PPV project performance and processes. 
In the wake of the fraud allegations brought to light at Tinker Air 
Force Base, Oklahoma, we are proactively assessing if and how Navy and 
Marine Corps projects are affected. On November 6, 2019, the Naval 
Audit Service completed a formal audit of maintenance records and 
provided twelve recommendations, all of which are being implemented.
    In addition, we issued ``Letters of Concern'' to all of our 
partners requesting validation of all of their maintenance records and 
processes and have asked partners to report all anomalies or findings 
of interest. We directed Departmental Region and Installation Housing 
teams to conduct monthly reviews of electronic maintenance records and 
random spot-checks with families to confirm response and completion 
times reported by partners. We are also conducting historical reviews 
on partner maintenance data systems for anomalies that would indicate 
fraudulent data entry, such as unreasonably common service dates.
    Furthermore, we conducted an independent review of PPV partner 
portfolios to evaluate housing maintenance records and their 
relationships to incentive fees, a summary of which was provided to the 
Office of the Assistant Secretary of Defense for Sustainment on 
September 16, 2019. We continue to provide information and updates to 
the Government Accountability Office to inform their report on 
Privatized Military Housing expected in February 2020. We anticipate 
that their recommendations will help us further improve our oversight 
efforts.
                         restore resident trust
    The DON is committed to restoring the trust of residents. One of 
the best tangible demonstrations is by increasing the number of 
advocates. We are hiring additional staff for housing offices 
administrative support, home inspections, and maintenance to increase 
responsiveness and performance. We appreciate the Committee's support 
to fund an additional 183 personnel in Navy Housing offices and 114 in 
Marine Corps housing offices by including authorizations in the NDAA 
for fiscal year 2020.
    Recognizing this issue is not limited to the DON, we have reached 
out across the Joint Force to aggressively pursue solutions that 
benefit every American who wears the uniform today while providing the 
best value possible to the American taxpayer. We have worked 
extensively on the Air Force-led effort that produced a standard 
Resident Bill of Rights and a Resident Responsibilities document. The 
DON has led the tri-Department effort that developed a list of Common 
Lease provisions for all Services and their PPV partners. It includes a 
list of specific resident responsibilities consistent with similar 
documents in the commercial sector to underscore common expectations 
for care of the home.
    We expect to finalize Common Lease provisions soon after release of 
the NDAA to ensure consistency with congressional direction. We have 
also taken point on development of a formal Dispute Resolution Process. 
This is an extremely important initiative to get right, as it will be a 
tool the Services and their partners can use to resolve conflicts and 
give residents the assurance that their voices are being heard and 
issues are being independently adjudicated.
    While this process is in development, we are renewing efforts to 
strengthen our existing informal issue resolution processes and ensure 
Housing Office engagement in resolving resident concerns. When families 
have a maintenance or service-related issue, they are directed to first 
contact the PPV Property Management Office. The housing service center 
and installation commanding officer will advocate for servicemembers 
and families that are not satisfied with property manager results. 
Region Legal Service Offices and the Marine Corps Legal Support 
Sections are also available to provide free legal advice and 
consultation to military tenants and their families living in PPV 
housing.
    While we have made significant progress, there is still work to be 
done. We are conducting Out-of-Cycle Resident Satisfaction Surveys 
across the Navy and Marine Corps, and we look forward to sharing the 
results. We are also monitoring the steps that our PPV partners are 
taking to regain trust. From Corrective Actions Plans to address 
premature work order closeouts or lack of follow-up, to realistically 
capturing the current condition of home offerings versus a model home, 
this forms the foundation of an honest and transparent relationship 
with residents.
    We are enhancing partnerships with several military and veteran 
service organizations including the National Military Family 
Association, the Military Officers Association of America, the Fleet 
Reserve Association, Blue Star Families and the Military Family 
Advisory Network. These partnerships are focused on addressing 
communication difficulties, quality of maintenance work performed, 
government advocacy for residents, and environmental health concerns.
    In order to equip our residents with the knowledge and information 
they need to ensure the upkeep of their homes, partners are now 
regularly including information in their monthly newsletters regarding 
changing of filters, what to expect when the heat comes on, etc. 
Additionally, our housing websites have resident related information 
including; but not limited to Resident Energy Conservation Program, the 
3 step process and the Exceptional Family Member Program. Additional 
information is expected to be added over the next year.
    Commander, Navy Installations Command (CNIC) is revising training 
to reflect new guidance and lessons learned over the past several 
months. By March 30, 2020, CNIC will roll-out a revised Navy Privatized 
Housing Course, Housing Referral Training, and Issue Resolution and 
Dispute Resolution Training (pending NDAA passage). The Marine Corps 
Order (MCO) on housing is being revised and has incorporated a chapter 
to address health and safety concerns. We have also engaged with the 
Office of the Secretary of Defense on the development on the Bill of 
Rights, Resident Responsibilities, Universal Lease and Disputes 
Resolution policy. The Navy Bureau of Medicine and Surgery (BUMED) has 
also promulgated fact sheets on mold and mold sampling and directed 
health providers to be sensitive to housing-related health concerns and 
to participate in keeping residents informed.
                             moving forward
    While we can never be satisfied as long as quality, safety, and 
health issues persist among any of our housing solutions, we are 
confident in the significant progress made on near-term efforts to 
advocate for servicemembers and their families, increase awareness of 
the problem resolution process, and increase involvement of the DON 
government housing team. The revelations over the past nine months 
resulted in more rigorous awareness and oversight by the Department to 
protect our personnel. We must maintain momentum by continuing to open 
the lines of communication and improve collaboration between residents, 
Service leadership, and our PPV partners.
    Our PPV partners are demonstrating a commitment to restore resident 
trust, implement improved maintenance and quality assurance, and track 
metrics at higher levels. We continue to work with those partners to 
ensure issues are being addressed in a timely manner. This involves 
ensuring all levels of the partner organizations, down to neighborhood 
managers and repair technicians, are equally committed to providing 
outstanding customer service, quality workmanship, and accountability. 
We are particularly concerned with continued accounts of service 
discrepancies, particularly during the move-in process, that place a 
burden on the residents to resolve. We are aware that hiring a skilled 
workforce can be difficult in this competitive economy, and we remain 
committed to working with partners to resolve issues.
    The men and women who wear our uniform rightfully expect quality 
workmanship in their homes and the quick resolution of problems 
directly impacting their families. Both they and our partner employees 
want to be treated with courtesy and professionalism. We encourage our 
residents to work with the partners collaboratively to address concerns 
with the services being offered to maintain homes. At every level of 
command, we are committed to ongoing improvement in our leadership, 
responsiveness, and oversight efforts when it comes to advocating for 
our sailors, marines, and families.
    We appreciate the work of this Committee on this critical issue and 
your active involvement, oversight, and advocacy on behalf of our 
warriors. Thank you once again, and we look forward to your questions.

    Chairman Inhofe. Thank you.
    Secretary Barrett?

  STATEMENT OF HON. BARBARA M. BARRETT, SECRETARY OF THE AIR 
FORCE; ACCOMPANIED BY GENERAL DAVID L. GOLDFEIN, USAF, CHIEF OF 
                     STAFF OF THE AIR FORCE

    Secretary Barrett. Chairman Inhofe, Ranking Member Reed, 
Members of the Committee, thank you for inviting us to discuss 
housing today.
    The Service Secretaries and Service Chiefs work together on 
this issue. We share ideas of how to improve housing because 
our soldiers, sailors, airmen, and marines who live on military 
facilities deserve safe, secure quarters. We are jointly 
committed to resolving housing issues, and we thank you for 
your continued attention to this matter of mutual concern.
    Issues with privatized housing on some installations 
revealed instances of faulty construction, sub-par maintenance, 
and late-to-need responsiveness. While many bases have 
effective privatized housing, others have suffered with project 
owners who have simply failed. Some project owners have 
reportedly disregarded maintenance requests, misrepresented 
timelines, performed partial repairs, and failed to correct the 
root causes of problems.
    The Air Force owns part of the responsibility as well. We 
cut too many personnel who provided oversight of the projects 
and failed to fully empower the chain of command to own and fix 
these issues. As a result, housing problems have distracted 
from the Air Force mission. They have disrupted our airmen and 
dislocated their families. This is unacceptable. So we are 
taking steps necessary to hold our project owners accountable 
for improved performance.
    During my confirmation hearing before this Committee, we 
discussed some of these issues. Subsequently, my first stop on 
my first trip as Secretary was to survey base housing. In my 
first 5 weeks as Secretary, I have examined privatized housing 
in Wyoming, Oklahoma, Texas, and Mississippi to observe 
problems and process firsthand.
    Since my predecessor, Secretary Heather Wilson, and General 
Goldfein testified on this subject 9 months ago, the Department 
of the Air Force has fixed many housing issues and made 
progress toward fixing others. They completed an important 
Inspector General (IG) investigation, the results of which have 
been shared with this Committee. Dozens of recommendations from 
the IG and from Air Force itself and from families themselves 
have been fully and partially implemented.
    Process improvements fall into five broad categories. We 
are empowering the residents. We are integrating leadership and 
accountability into all levels of housing. Residents, project 
owners, and the military chain of command are now communicating 
directly and candidly. Housing now has local and central 
scrutiny and oversight. Finally, Air Force policies for housing 
management have been updated and standardized.
    Under the leadership of Air Force Assistant Secretary John 
Henderson and tenacious base commanders, we are establishing 
resident councils to solicit direct feedback. We are placing 
new resident advocates at each of our military housing offices 
to connect residents with resources and to help resolve 
disputes, and additional personnel will help us achieve 100 
percent pre-move-in inspections while enhancing oversight.
    We have also worked with project owners to fix root causes 
of recurring mold at the bases with the most severe challenges.
    Some housing issues invite concern about possible 
misconduct, including allegations that some project owners 
manipulated maintenance data to increase their incentive 
awards. These allegations have been referred to the Air Force 
Office of Special Investigations (AFOSI) which, in coordination 
with the FBI [Federal Bureau of Investigation], will determine 
whether to press criminal charges.
    Senator Wicker, last week when you and I visited Keesler 
Air Force Base in Mississippi, we met Air Force families who 
had been displaced from their privatized homes as many as four 
times in recent years. As these families prepared for 
Thanksgiving, they wondered whether they should decorate a 
Christmas tree in their temporary homes or rely upon the latest 
promise that they would return to their permanent homes in time 
for their holiday. Family disruptions and health challenges are 
profoundly personal and impactful to these families and 
therefore to us.
    We owe it to Air Force families to get this right. With 
your continued support, we will.
    I look forward to your questions.
    [The prepared statement of Secretary Barrett and General 
Goldfein follows:]

 Joint Prepared Statement by Secretary Barbara M. Barrett and General 
                           David L. Goldfein
                              introduction
    Taking care of our airmen and their families is an operational 
imperative for the Air Force. Our ability to provide safe and habitable 
housing for airmen is a key part of their quality of life, 
strengthening our efforts to recruit and retain the people we need to 
lead the most powerful Air, Space, and Cyber Force on the planet. This 
is commanders' business, and we have taken on this challenge to make 
meaningful, enduring changes to our privatized military housing 
program. We want to thank the members of this Committee for your 
leadership in supporting our airmen and their families.
                               background
    The Air Force provides 71,200 family housing units worldwide for 
use by our airmen, other servicemembers, and their families. In 1996, 
Congress passed the Military Housing Privatization Initiative, giving 
the Services the authority to enter into agreements with the private 
sector to secure housing for members of the Armed Forces and their 
families. Since then, across the United States, the Air Force has 
privatized 53,327 homes, capitalizing on private sector funding and 
expertise to update and modernize family housing on our bases. Most of 
our projects were highly successful. In the first 16 years, the Air 
Force completed 32 projects that privatized housing at 63 
installations. We invested $619 million in Air Force-scored costs to 
obtain $8.3 billion in total privatized project development. Project 
owners renovated 12,595 homes and constructed an additional 22,613 
homes. Of the 32 projects, 29 are now complete (47,332 homes) and three 
are still in development (5,905 homes).
    We are now 22 years into this program. Concerns expressed by our 
airmen and their families, combined with the results of our commander-
led 100 percent review of the Air Force's housing inventory, have 
clearly identified challenges and the need to improve. For the first 
several years, we focused on project closure and construction. Over the 
last few years, our focus has been on oversight of the longterm project 
health and sustainment of these projects. Airmen generally give high 
marks for their privatized housing accommodations. A 2018 independent 
third-party survey rated overall privatized housing resident 
satisfaction at 81.7 out of 100, which is characterized as ``Very 
Good.'' This is more than 15 points higher than when the government 
owned and operated housing. We need to improve.
                           resident concerns
    Some privatized housing project owners have not met expectations. 
Our airmen and their families want to know their rights, want a voice 
in the process, and want to know that they have an advocate when issues 
arise. Our airmen want the ability to raise concerns without the fear 
of reprisal and have any problems corrected promptly by skilled and 
professional maintenance staff. Our airmen want more proactive 
engagement from the chain of command, more support from our military 
housing offices, increased visibility on the status of their work 
requests, simplified move-in and move-out procedures, and standardized 
dispute resolution processes.
    We are committed to rebuilding the trust between our residents, the 
housing management teams, and Air Force leadership in order to improve 
the overall experience for our airmen and families who choose to live 
in privatized military housing. The Air Force has taken several actions 
to achieve these objectives which are summarized throughout the rest of 
this statement.
                    wing commander health and safety
    As reported in the April 4, 2019 hearing with the House Armed 
Services Committee, Air Force leadership reached out personally to our 
military families, conducting a 100 percent review of the health and 
safety conditions in our military housing. After that review, we 
started an aggressive program to correct the identified deficiencies. 
The data reported through October 1, 2019 included responses from 
56,689 military residents of government-owned, government-controlled, 
and privatized housing out of a total of 57,553 military residents. Of 
those, 45,284 responses were from privatized housing residents.
    Overall, 14.3 percent of military residents who were contacted 
expressed a life, health, or safety concern with their homes. The 
percentage was lower in government-owned and leased homes, where 7.8 
percent of military residents expressed concerns vice 15.9 percent for 
privatized housing. Common resident concerns included mold and 
moisture, lead-based paint, insects, and rodents.
    During the review, Air Force leaders were invited to visit 11,534 
homes. We found 3,164 had mold and moisture issues (3,155 have been 
resolved, with 9 still being worked), 473 had chipped or flaking paint 
(all have been resolved), and 1,637 had evidence of vermin (all have 
been resolved).
    In addition to the resolution of over 99 percent of these 
identified issues, we have changed our policies and procedures across 
the portfolio, implementing new systems to better identify, then 
quickly resolve, future issues.
                   air force inspector general review
    The Air Force Inspector General conducted a thorough review of the 
Military Housing Privatization Program to identify best practices and 
make recommendations for improvement.
    Published April 9, 2019, the Inspector General's report identified 
35 recommended improvement areas, all of which the Air Force 
incorporated into our Military Housing Privatization Initiative 
Improvement program.
     military housing privatization initiative improvement program
    In April 2019, the Air Force initiated a Military Housing 
Privatization Initiative Improvement Program along five lines of 
effort: empower residents, integrate leadership into all levels of 
privatized housing, improve communications, improve local and 
centralized oversight by both the government and privatization Project 
Owners, and standardize Air Force policies for privatized housing 
management and oversight. These initiatives, which include the 35 
Inspector General recommendations plus 16 additional recommendations 
brought to us by our families, have led to a 51-item action plan 
tracked weekly by Air Force leadership.
                           empower residents
    The Air Force has collaborated with advocacy groups, this 
Committee, the other Services, and the 10 project owners to develop a 
Military Residents' Bill of Rights and Tenant Responsibilities. These 
serve as contracts between the project owners and the residents, 
designed to provide a common agreement of rights, responsibilities, and 
options available when residents don't receive the quality homes and 
maintenance support they deserve.
    As previously reported, we also established a toll free Air Force 
Housing Call Center in March 2019. The call center transitioned to 24/7 
operations in May 2019. As of October 17, 2019, the call center has 
received 49 calls and the Air Force has resolved all but 10 issues, 
which are currently being addressed.
    Leadership at all levels has worked with our project owners to 
ensure residents can submit work orders electronically and can view the 
status of their work order requests. As of October 1, 2019, residents 
at 53 of 63 installations can submit work orders electronically. By the 
end of the year, eight more installations will have this capability. 
Residents at 29 of our 63 installations can already view the current 
status of their work order requests on-line in real time. By year's 
end, that number will grow to 60 installations. We are working closely 
with the project owners at the remaining three installations to provide 
the same capabilities.
    Perhaps most significantly, we are working toward resourcing 
Resident Advocate positions at each of our Military Housing Offices to 
assist our military residents. These advocates will connect families 
and project owners to help resolve all types of issues, including 
solutions to Exceptional Family Member Program needs. Ultimately, this 
will enhance the resiliency of our airmen and families, making them 
more mission effective.
                          integrate leadership
    The former Secretary of the Air Force and the current Chief of 
Staff of the Air Force issued a letter to all commanders in April 2019, 
reemphasizing the commander responsibilities within the privatized 
housing program. This letter clarified expectations of Installation 
Commanders, the Air Force Civil Engineering Center, and Project Owners, 
stressing their role in the health and safety of our members. Leaders 
in each of these agencies understand their responsibilities in the 
oversight of these projects and are empowered to resolve issues at 
their level, while leveraging senior Department leaders when fiscal or 
policy disputes arise.
    The Air Force has been negotiating with our project owners and 
other Services to revise the performance incentive fee structure to 
provide a greater voice to Installation Commanders. We are devising 
metrics to clearly communicate expectations, ensuring transparency and 
full accountability between all parties.
                         improve communications
    The Air Force is revising the annual resident satisfaction survey, 
asking pointed questions and presenting the results and data in a 
manner to help identify actionable issues that may be masked by the 
volume of data.
    Government Housing Officers are now required to have clearly 
identified private areas for conversations between the residents and 
military housing offices or resident advocates to improve 
communications outside of the privatized partner spaces.
    The Air Force is implementing Wing-led Resident Councils. Under 
this arrangement, residents have the opportunity to express concerns 
directly to the Wing Commanders and project owner leadership.
                           improve oversight
    We are actively pursuing 149 additional positions to augment our 
Military Housing Offices, seeking to improve and expand oversight and 
quality assurance of the privatized housing portfolio.
    These positions will target 100 percent tenant and military housing 
office participation in the pre-move-in inspection of units prior to 
leasing, conduct oversight and validation that the Project Owners 
satisfactorily resolve 100 percent of all health and safety work order 
requests, and review and audit 30 percent of urgent work order requests 
to ensure proper completion.
                          standardize policies
    In June 2019 the Air Force established a reporting system and 
issued guidance to capture and collect airmen's housing-related medical 
concerns. This policy ensures these concerns are documented, the 
affected residents are referred to medical providers, and specific 
concerns that may require housing modifications are worked toward 
mutual resolution.
    The Air Force is also revising our housing policies to empower 
residents. We are emplacing proper signage to clearly distinguish the 
government-run Military Housing Office staff from the Project Owner 
housing staff and designating private areas for confidential Military 
Housing Office consults with residents. We are establishing Resident 
Councils to allow residents to share experiences with and elevate 
concerns to installation leadership. Additionally, we are adding 61 
Resident Advocates to serve as liaisons for residents to mediate 
concerns with the Project Owner, ensure resident representative 
participation at Management Review Committee meetings, and link 
residents with available installation resources such as legal and 
medical support.
                       maintenance data integrity
    The Air Force has discovered maintenance data anomalies affecting 
six Air Force bases. The Air Force directed these Project Owners with 
data integrity issues to conduct an independent third-party audit of 
their maintenance programs, assess their higher level oversight and 
quality control, identify specific actions the Project Owners will take 
to remedy any deficiencies, ensure their maintenance and work order 
processes are accomplished in accordance with all Air Force 
requirements, and make required adjustments to current and past 
performance incentive fee payments. Additionally, the Air Force is 
currently withholding Property Management Performance Incentive Fee 
payments to projects with validated maintenance order discrepancies and 
will make adjustments, as appropriate, to future payments upon analysis 
of that data.
    In all instances where the Air Force suspects there may have been 
Project Owner fraud, or any other action that may be illegal, we 
immediately notify the AF Office of Special Investigations (AFOSI) and 
the Department of Justice. The Air Force takes all allegations of fraud 
seriously. There is no room on the Air Force team for anyone who does 
not share our core values of integrity, service, and excellence.
 significant quality and performance challenges: tinker, keesler, and 
                        macdill air force bases
    Mold is a challenge in persistent high-humidity climates. Even the 
best facility designs cannot entirely eliminate mold. Residents living 
in areas prone to mold growth are provided a mold addendum to their 
tenant leases, recommending specific measures 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 proved causal to mold growth: Tinker 
Air Force Base, OK; Keesler Air Force Base, MS; and MacDill Air Force 
Base, FL.
    At Tinker Air Force Base, Balfour Beatty Communities experienced 
significant problems with mold. These problems were largely the result 
of manufacturing defects in the new water lines installed in 398 homes 
and the buildup of moisture in the mechanical rooms of roughly 200 
homes. To fix these problems, the Air Force approved $6.1 million in 
project funds to replace the defective water lines. Those repairs were 
completed in May 2019. To remedy the problem with the mechanical rooms, 
the Air Force Civil Engineer Center placed an Air Force Resident 
Construction Manager with mold remediation training and experience at 
Tinker to provide oversight of an Air Force-directed corrective action 
plan.
    Balfour Beatty Communities has treated mold growth in the 
mechanical rooms and hired a third-party engineering firm to determine 
the causes of mold and recommend corrective actions.
    An Air Force investigation of a fire in a duplex unit at Tinker 
earlier this year resulted in the discovery of a fire code violation in 
the construction of the unit's firewall. As a result, the Air Force 
Civil Engineer Center required Balfour Beatty Communities to inspect 
all of its duplex units at Tinker Air Force Base with the Air Force 
Civil Engineer Center Resident Construction Manager oversight.
    This inspection identified the need for some level of repair to the 
firewalls of all of these duplex units. These repairs are scheduled to 
be completed later this month.
    In September 2019, an oversight visit by the local Military Housing 
Office at Tinker also found a flooring subcontractor hired by Balfour 
Beatty Communities was disturbing and removing asbestos-containing 
materials without employing the proper protocols. Balfour Beatty 
Communities immediately halted the work and performed the required air 
sampling and cleanup work of these 20 units. Fortunately, no residents 
were exposed to harmful asbestos.
    Because of the extent and severity of the problems with Balfour 
Beatty Communities, particularly at Tinker Air Force Base, the Air 
Force has required Balfour Beatty Communities to submit a comprehensive 
improvement plan with milestones and schedules, to remedy all of its 
construction, maintenance, repair, management, and oversight 
performance deficiencies for Air Force approval by the end of this 
calendar year. We notified Balfour Beatty Communities that unless we 
see prompt and substantial improvements to these serious performance 
failures, the Air Force will initiate formal action under the dispute 
provisions of the project documents.
    At Keesler Air Force Base, which is a part of the Southern Group 
housing privatization project, inspections revealed poor workmanship in 
both the air conditioning systems and the building envelope, causing 
mold growth in homes constructed by the Air Force after Hurricane 
Katrina. In 2015, the Air Force required the Project Owner, Hunt 
Military Communities, to commit to a $6.4 million Moisture Remediation 
Plan. Hunt Military Communities has made progress in remedying the 
causes of mold at Keesler, however, the Air Force is not satisfied with 
disruption the repair work causes to residents. The Air Force Civil 
Engineer Center is currently working with Hunt Military Communities to 
revise its Moisture Remediation Plan.
    At MacDill Air Force Base, Clark Realty has experienced systemic 
moisture issues due to breaches or a lack of vapor barriers in 241 
housing units constructed by the Air Force prior to privatization. 
Since 2017, Clark Realty has treated the mold and completed $4.7 
million in repair projects to correct the underlying causes of systemic 
moisture issues in 294 homes. An additional 68 homes are scheduled for 
repair, with work to be completed in 2022 at a cost of $6.8 million.
    The project expenditures on mold remediation at these three 
installation has exceeded $24 million to date. At all three 
installations, military families who experienced problems with mold 
have been relocated, where warranted, to temporary quarters at no 
expense while remediation work was accomplished.
    In addition to those three locations, the Air Force contracted 
moisture and mold inspections at Joint Base San Antonio--Randolph, TX, 
Eglin Air Force Base, FL, and Travis Air Force Base, CA to address 
resident concerns. The Air Force shared all these reports with the 
project owners, employing remediation actions where appropriate. Some 
of these actions are ongoing, and we are committed to ensuring Project 
Owners fix these problems in a timely and successful manner.
    While these corrective actions chart the path forward toward 
remedying a myriad of challenges in privatized military housing, they 
have not always been accomplished as quickly as we expected, and there 
have been instances where the project owners' responses lacked an 
appropriate sense of urgency, diligence, stewardship, and management 
oversight. Air Force leadership is engaged and taking necessary actions 
to hold project owners accountable for these deficiencies. 
Additionally, the Air Force has placed additional personnel at these 
three installations to assist in in the work to improve the quality of 
housing provided to our military families.
                               conclusion
    The Air Force is committed to providing safe and habitable housing 
to our airmen, other servicemembers, and their families. While we have 
made significant progress over the past year to improve military 
housing, we frankly have a long way to go as we still have some 
privatized housing project owners who are not meeting expectations. In 
those instances where we let our families down, we are wholly committed 
to earning back their trust. Our leaders are fully engaged, and we are 
taking on these challenges as operational imperatives. We look forward 
to working with you as we implement the full range of our Military 
Housing Privatization Initiative Improvement Program.

    Chairman Inhofe. Thank you, Secretary Barrett.
    We are going to have 5-minute rounds.
    We have more than a dozen contractors out there providing 
military housing to our services, and some are better than 
others. There is one that is kind of notorious at one end of 
the spectrum, and that is Balfour Beatty. I am very familiar 
with that because that is where this whole thing started. In my 
opening statement, I mentioned Tinker Air Force Base. But they 
also are representing Lackland, Mahlstrom, Travis, and 
Fairchild. It might be a little unfair since you are the newest 
one, Secretary Barrett, to give you the first question.
    If you have a repeater like this and conduct like this, why 
is it that they are still there? What do we have to do? How do 
you pull a plug? How do you get that done? Are there contract 
obstacles out there? We want to get things done, and you are 
the newest one out there. What do you think?
    Secretary Barrett. Senator, that is what we are looking at. 
Before I was confirmed, the Air Force was taking action on 
exactly that concern. That company received a letter of concern 
from the Air Force expressing that the Air Force has lost 
confidence in their ability to perform under their contract. 
That letter was issued in September. Since that time, they have 
not been receiving performance incentive fees. Since that time, 
all of their contract--they have the contract on many bases. 
All of their performance fees have been withheld. So they are 
under financial penalty right now.
    In addition to that, it has been requested that they submit 
an action plan for what they will be doing. That plan is due by 
the end of the year, and there will be metrics and 
accountability from that plan or the Air Force will be 
initiating the elements accessible to us under the dispute 
resolution procedures, which could lead to anything up to a 
default on their lease.
    Chairman Inhofe. I guess the short version is you are doing 
everything that you can do that you inherited all the 
facilities that you are able to--changes you are able to make 
currently.
    To each of the secretaries, I keep hearing that they are 
talking about these companies said that they would be open to 
reopening these agreements to ensure transparency, 
accountability, and performance. They never talk anything about 
what the cost would be. So I would ask any secretary who would 
like to respond to the question. Behind closed doors, are 
companies actually willing to reopen these agreements, or are 
they just giving you lip service to contractors trying to dig 
their way out of a bad situation? If they are open to reopening 
the agreements, have any of them talked about what the cost 
would be involved to do such a thing? Any of the secretaries.
    Secretary McCarthy. Mr. Chairman, in our most recent 
discussions with the RCI [Residential Communities Initiative] 
partners, there was a discussion about the restructuring of the 
debt of their companies. The economics, in most cases, for the 
projects are under 1996 interest rates, so 7, 8, 9 percent for 
these projects, which by changing the scoring model at OMB 
[Office of Management and Budget], we can provide an 
opportunity for them to go to capital markets and increase the 
capital for reinvestment.
    What we have instructed in the Army is for General Gus 
Perna to come back with an analysis of just how substantial of 
a project this would entail, and then we would have to 
negotiate that. But the sense that I had from the most recent 
discussion in September was there was definitely energy to do 
that.
    Chairman Inhofe. Any other secretaries?
    Secretary Barrett. We absolutely would consider reopening 
the contracts, renegotiating the contracts. It is much more 
efficient to work under that contract now if they will correct 
their behaviors, but if not, we will----
    Chairman Inhofe. Much cheaper than trying to start all over 
again I would suggest too.
    Secretary Barrett. Exactly.
    Chairman Inhofe. We have gotten some positive results. I 
know we hear more about the negative results, but I know in the 
case of Tinker, Colonel Filcek took command of the 72nd Air 
Wing, and things really started to improve. One of the things 
he did--and I was down there and I heard from other people 
saying that he actually went to town hall meetings. We are 
talking about those that are in charge in the chain of command 
going to town hall meetings and meet with people. He would 
really get emotionally involved in them. So I would like to at 
least point out that some good things are happening, and we 
want to learn from those experiences.
    Senator Reed?
    Senator Reed. Well, thank you very much, Mr. Chairman.
    Let me once again commend Ms. Field and the GAO for their 
excellent work. You have made the point that many of the 
statistics that are used particularly for the performance 
incentive fee structure are erroneous, misleading, not 
appropriate, which begs the question which Secretary Barrett 
has already responded to. I will address it first to the Army 
and the Navy.
    Have you withheld performance fees just in general because 
of the inaccurate data or specifically because of problems you 
have encountered? Secretary McCarthy or General McConville.
    Secretary McCarthy. Most recently what we did, Senator, was 
I had to go back and look at the incentive award fees to ensure 
that the metrics were such that we had incentivized the 
appropriate behavior by the contractor in this case. So what 
General Perna has done is he has revised them. We did get 
inputs from the GAO and others, but he has revised those. Those 
will go live here in a couple weeks. But there are specific 
instances for installations in Fort Benning and I think one 
other location most recently where we held back substantially. 
I think Joint Base Lewis-McChord withheld substantial fees back 
from the contractors in this case because of poor performance 
and work order response time, as well as quality.
    Chief, do you want to add anything?
    General McConville. Senator, I would just add that as the 
Secretary said, the average incentive fee right now is 77 
percent, but we are taking a much harder look at that. So they 
are not getting 100 percent. We have had some posts that have 
got 100 percent, but as low as 11 percent, and we see that 
making a difference in performance of the contractors in 
executing their mission.
    Senator Reed. Mr. Secretary?
    Secretary Modly. Senator, we in the Navy have not paid out 
an incentive fee this year. We are looking at those very, very 
carefully to understand whether or not they have earned them, 
and we are going through that analysis. But, going forward, we 
have also done what the Army has done in terms of changing the 
way that we are calculating the incentive fee to much more 
heavily weighted towards resident feedback and their 
perceptions, to include health and safety issues, which were 
not part of the incentive fee structure before.
    Senator Reed. Thank you.
    Secretary Barrett, do you have anything to add?
    Secretary Barrett. The Air Force has been looking at 
restructuring the fees, including a lot more input from the 
base commanders so that their performance on the base is 
calculated into the structure.
    Senator Reed. Let me return again directing questions to 
each of the services.
    These contractual agreements you find now somewhat 
constraining in terms of getting the proper performance. What 
is the biggest contractual obstacle that you see, Secretary 
McCarthy, and is there any way we can provide assistance to you 
to get that modified?
    Secretary McCarthy. Senator, when the bill of rights is 
published, I think that dispute resolution is one in particular 
that we need to put in place as quickly as possible. It is why 
in many cases that the only mechanism that families have to get 
results is legal action. So the sooner we can have a dispute 
resolution in place, it would help improve matters 
dramatically.
    Senator Reed. So if there was a meeting of minds between 
the companies and the services on dispute resolution to benefit 
the quality of life of soldiers, sailors, airmen, and marines, 
that would be a positive step.
    Secretary McCarthy. Yes, sir.
    Senator Reed. Thank you.
    Mr. Secretary?
    Secretary Modly. Yes, Senator. I agree with Secretary 
McCarthy on this one, but I also would say that one of the 
other challenges that we have is until now we did not have 
great visibility into the data. Most of the maintenance data 
was captured in two different types of IT [information 
technology] systems, without getting into the mundane aspects 
of that. But they were not capturing data in the same ways, and 
so what we are trying to do is to standardize that so that we 
can get visibility into that a lot quicker. So we understand if 
a contractor is not performing properly, we can take action on 
that a lot more immediately.
    I also agree with Secretary McCarthy on this issue of the 
tenant bill of rights. I think once we standardize that, I 
think that is really going to help our ability to resolve 
disputes more quickly.
    Senator Reed. You can rationalize the data without any 
contractual changes? You can do that within the current 
context?
    Secretary Modly. Yes, sir. We believe we can do that. We 
need the partners to enter the data in a way that makes sense 
to us so that we can compare it across the entire population of 
homes that we have managed.
    Senator Reed. Secretary Barrett, your comments please.
    Secretary Barrett. I do not know of any contractual changes 
that Congress can help us implement, but we will take a look 
and if that is the case, we would be happy to provide those for 
the record.
    Senator Reed. Thank you very much.
    Thank you, Mr. Chairman.
    Chairman Inhofe. Thank you, Senator Reed.
    Senator Wicker?
    Senator Wicker. Ms. Field, who performed this satisfaction 
survey?
    Ms. Field. The annual satisfaction survey that I referred 
to in my opening remarks was conducted by an independent third 
party group named CEL. I should say we found nothing wrong with 
how CEL conducted the survey. It is more the questions that 
were asked and how the results were collected and analyzed and 
presented to you.
    Senator Wicker. Okay. Who makes that determination?
    Ms. Field. Well, there are multiple levels in which there 
were problems with this.
    Senator Wicker. So CEL did not devise the questions. They 
just simply asked what they were told to ask.
    Ms. Field. My understanding is that the services 
coordinated with CEL to develop the questions. Specifically 
they asked how much do you agree or disagree. I would recommend 
this community to others, which is different than the question 
that was presented to you.
    Senator Wicker. Well, I think we should all agree we got 
bad information, inaccurate information, and we ought to 
completely rethink how we ask that question so we can find out 
what the troops are really thinking there. So thank you for 
that.
    Secretary Barrett, thank you for coming to Mississippi and 
visiting with our servicemembers there at Keesler. Senator 
Hyde-Smith was there with me. Congressman Palazzo's staff was 
very involved also.
    Let me give a shout out to Colonel Heather Blackwell, the 
wing commander there at Keesler, as well as her senior enlisted 
leadership. I think this particular group of leaders 
represents, frankly, a mindset change to be very customer-
oriented and to be empathetic with the troops and the folks 
that are trying to make it work in these houses.
    Frankly, I would contrast that with some of the previous 
leadership we had at Keesler where one particular person told a 
member of my staff that by raising these questions, he was 
simply making matters worse. I was absolutely delighted to see 
that there is none of that left at the leadership at Keesler 
anymore, and there is very much a mindset of knowing what the 
problem is and that it must be solved for folks that have 
stepped forward.
    You have dedicated an assistant secretary to work almost 
exclusively with this problem. Is that right, Secretary 
Barrett?
    Secretary Barrett. Well, Senator, that assistant secretary 
has a lot of other duties as well, but he is really spending a 
great deal of his time on exactly this topic and really is 
devoted to it. John Henderson.
    Senator Wicker. That is John Henderson, and he is sitting 
behind you. So I want to thank him too, and it does occur to me 
he is spending a lot of time on this.
    We have an unusual situation at Keesler in that Katrina 
hit, and almost all of our 1,188 housing units had to be 
replaced in one fell swoop.
    It took me a while, but yesterday I finally found out this 
information. Of the 1,188 residences there, 1,084 actually have 
experienced moisture and mold. Now, we are told this was a 
mistake with the installation of the air conditioning units and 
particularly the air conditioning ducts. I would like for you 
to tell us on the record how many air conditioning companies 
were involved in this?
    [The information referred to follows:]

    Secretary Barrett. The Air Force does not have records for 
the number or names of the air conditioning subcontractors used 
during the original pre-privatization construction in 2007, 
2008 and 2009.

    Were all of them involved in these homes that have had the 
moisture problems?
    [The information referred to follows:]

    Secretary Barrett. The Air Force does not have records for 
the number or names of the air conditioning subcontractors used 
during the original pre-privatization construction in 2007, 
2008 and 2009.

    Why the multiple instances?
    [The information referred to follows:]

    Secretary Barrett. Most of the moisture and mold was 
associated with improperly insulated ducts in the attics 
resulting in duct sweating. Duct repairs in one section often 
caused increased air flows and resultant duct sweating in a new 
location. The improperly insulated ducts were not in all the 
homes, and were not readily visible. We believe a new 
maintenance approach will cause fewer mold issues, thereby 
minimizing future family relocations.

    You mentioned a family that had had to leave their 
residence four times, and the problem still has not been 
solved. Why is it that the remediation is often not getting 
done?
    [The information referred to follows:]

    Secretary Barrett. Most of the moisture and mold was 
associated with improperly insulated ducts in the attics 
resulting in duct sweating. Duct repairs in one section often 
caused increased air flows and resultant duct sweating in a new 
location. The improperly insulated ducts were not in all the 
homes, and were not readily visible. We believe a new 
maintenance approach will cause fewer mold issues, thereby 
minimizing future family relocations.

    Why are they typically told you are going to be out of the 
house 2 weeks and typically that turns into 4 and 6 and 8 
weeks?
    [The information referred to follows:]

    Secretary Barrett. Because dozens of homes were undergoing 
simultaneous remediation and many homes required unanticipated 
work, schedules changed. The project owner's numerous customer 
service representatives did not share schedule information. The 
project owner is now expediting remediation and has a plan for 
more effective communication to dislocated families.

    Are there any houses that are ever repaired in 2 weeks? I 
would like to know that.
    [The information referred to follows:]

    Secretary Barrett. Very few.

    How often does it, in fact, take 2 weeks?
    [The information referred to follows:]

    Secretary Barrett. In very few instances.

    Why is it that neighbors tell these people that their units 
that have been vacated often go days without workmen being 
there? Of course, they are out for longer and no work is being 
done. That cannot be a good use of the time.
    [The information referred to follows:]

    Secretary Barrett. The large number of units under 
simultaneous remediation created schedule conflicts and workman 
shortages. In November, the project owner added Quality 
Assurance Managers to assist with scheduling to reduce 
displacement times. The project owner is expediting remediation 
and has a plan to more effectively communicate with dislocated 
families.

    Many of our troops are asked to move out to hotels because 
there is not adequate housing for them to be in. One troop said 
he had to be out by 11:00 a.m., got all his belongings in his 
vehicle to comply with the 11:00 a.m. checkout, and then mid-
afternoon, as he sat in his car, he was told it will be another 
2 weeks. You have to move back in. This is called being jerked 
around by the system.
    Then one other question. I am over my time, but these need 
to be answered on the record. In many instances like Biloxi, 
Mississippi, the homeowners insurance is so high that the basic 
allowance for housing (BAH) is not adequate. Now, when I was in 
the Air Force on Active Duty, I was happy to go off base, use 
my BAH, and live well.Do we need to change the statute to 
account for higher homeowners insurance with BAH?
    [The information referred to follows:]

    Secretary Barrett. Homeowner's insurance is not a component 
of BAH and is an out-of-pocket expense to all military 
personnel, whether living on base or off base. If homeowner's 
insurance was a component of BAH, the Air Force could mandate 
that project owners provide insurance for their residents. 
However, for off base airmen, unless mandated that airmen 
purchase homeowner's insurance, it may not protect residents 
from unforeseen losses as intended.

    Thank you, Mr. Chairman, for that indulgence.
    Chairman Inhofe. Thank you.
    Senator Blumenthal?
    Senator Blumenthal. Thanks, Mr. Chairman, and thanks to you 
and the ranking member for having this hearing to follow up on 
our last hearing in March. Most of you were not here for that 
hearing. I recognize the progress that has been made since then 
has been encouraging but extremely limited. I want to thank the 
military families who are here today, but also the countless 
military families who have continued to contact us directly 
and, as well, to advocate for better housing.
    I want to highlight, as a matter of fact, one area where we 
have received complaints, and I would like to know of all the 
complaints that you have received about retaliation. This issue 
is one that is most troubling to me, retaliation for legitimate 
complaints ranging from servicemembers being prevented from 
attending certain training with their unit or military spouses 
being disinvited from participating in spouse support groups. 
We have heard stories about housing company representatives 
circling homes of military families in cars making verbal 
threats or moving work orders to the back of the queue for 
families who are asking for desperately needed maintenance. 
These reports are absolutely outrageous, and I would like to 
know in writing of all the complaints received by the services. 
My time does not allow me to go into them here.
    [The information referred to follows:]

    Secretary McCarthy. Since February 2019, 11 potential cases 
of retaliation or reprisal by military officials or MHPI 
Company employees against Servicemembers and Family members for 
raising housing complaints have been reported to the Department 
of the Army Inspector General. After conducting thorough 
inquiries of the 11 potential cases, 2 were founded, 4 were 
unfounded, and 5 complaints were withdrawn by the complainant. 
In the two founded cases, the MHPI company employee was 
reprimanded for their behavior. There were no founded cases 
concerning military officials. We have thorough systems in 
place to address any reports of retaliation or reprisal.
    Secretary Modly did not respond in time for printing. When 
received, answer will be retained in Committee files.
    Secretary Barrett. Nine airmen have reported retaliation or 
fear of retaliation. Each of these instances was referred to 
the Air Force Inspector General for review and appropriate 
action.
    General Berger. The Marine Corps is not aware of any 
complaints from residents regarding retaliation by PPV entities 
for submitting work orders for required housing maintenance.

    These military families report to us conditions that have 
been chronic, repeated, recurring, endemic to their living. No 
doubt loss of incentive fees will spur some improvements, but 
incentive fees and even the bill of rights--and I have been a 
strong advocate for a bill of rights--in my view lack the 
impact that rightful criminal prosecution would have. I note 
that in none of the statements presented here this morning has 
there been any mention of an actual referral for criminal 
prosecution. I am deeply disappointed that there has been no 
such referral.
    Secretary Barrett, I thank you for mentioning that in all 
actions where fraud is suspected, you, quote, immediately 
notified the Air Force Office of Special Investigations and the 
Department of Justice (DOJ). There has been a recent report by 
Reuters released last month that Balfour Beatty Communities 
(BBC) faked maintenance records to pocket performance bonuses 
at several Air Force bases nationwide. These same reports have 
been in the misrepresentations and outright lies to every one 
of the services, and I would like to know from each of the 
services whether you have referred any cases for criminal 
prosecution beginning with Secretary McCarthy.
    Secretary McCarthy. Not at this time, Senator.
    Senator Blumenthal. Secretary Modly?
    Secretary Modly. Senator, we have not done that yet, but I 
would like to say that a couple months ago I made a decision as 
the under to put a dedicated audit function within the 
Assistant Secretary for EI&E [Energy Installations and 
Environment] solely focused on PPV to go out and investigate 
and to determine whether or not there is any such activity as 
you mentioned so that if there is such an instance of that, we 
have the ability to have data, to have evidence, and then turn 
that over for prosecution if necessary.
    Senator Blumenthal. Secretary Barrett?
    Secretary Barrett. As I indicated, we have investigations 
going on by the Office of Special Investigations of the Air 
Force, and where fraud has been alleged, those facts have been 
presented to the FBI and they will be determining whether or 
not to go forward with pressing criminal charges.
    Senator Blumenthal. Have there been any referrals for 
prosecution as yet?
    Secretary Barrett. Not yet. The investigation is underway.
    Senator Blumenthal. I really want to urge you--and I did it 
in the March hearing as well. It is not a new concern on my 
part, and in fact, in the NDAA there is language in the Senate-
passed version of the NDAA to encourage these investigations 
which I helped to write. I have also written to each of the 
Service Secretaries urging that fraudulent activity be referred 
to the Department of Justice, and I would like a report within 
a reasonable amount of time from each of you as to what the 
status of any investigations are within your departments. Thank 
you for your attention.
    [The information referred to follows:]

    Secretary McCarthy. Our criminal investigators are working 
with Department of Justice attorneys and FBI agents to examine 
several housing contractors alleged to have engaged in 
fraudulent activity. The investigations are ongoing and no 
fraudulent activity has been proven at this time. In order to 
protect the integrity of the investigative process, we defer to 
the Department of Justice regarding the status of the 
investigations.
    Secretary Modly. ``To date, although the Department of the 
Navy (DON) has uncovered maintenance timeliness and quality 
concerns, the DON is not aware of any fraud allegations against 
any of its Public Private Venture (PPV) partners in connection 
with Navy or Marine Corps privatized housing. The DON continues 
to work with the Naval Audit Service, the Office of the 
Department of Defense Inspector General, and the Government 
Accountability Office to review PPV project performance and 
processes. In the wake of the fraud allegations brought to 
light at Tinker Air Force Base, Oklahoma, we continue to 
proactively assess if and how Navy and Marine Corps projects 
are affected. On 6 November 2019, the Naval Audit Service 
completed a formal audit of maintenance records and provided 
twelve recommendations, all of which are being implemented. In 
addition, we issued ``Letters of Concern'' to all of our 
partners requesting validation of all of their maintenance 
records and processes and have asked partners to report all 
anomalies or findings of interest. We directed Departmental 
Region and Installation Housing teams to conduct monthly 
reviews of electronic maintenance records and random spot-
checks with families to confirm response and completion times 
reported by partners. We are also conducting historical reviews 
on partner maintenance data systems for anomalies that would 
indicate fraudulent data entry, such as unreasonably common 
service dates. Furthermore, we conducted an independent review 
of PPV partner portfolios to evaluate housing maintenance 
records and their relationships to incentive fees, a summary of 
which was provided to the Office of the Assistant Secretary of 
Defense for Sustainment on 16 September 2019. We continue to 
provide information and updates to the Government 
Accountability Office to inform their report on Privatized 
Military Housing expected in February 2020. We anticipate that 
their recommendations will help us further improve our 
oversight efforts.''
    General Berger. The Marine Corps is not aware of any 
fraudulent activity cases in its PPV portfolio that have been 
referred to the Department of Justice for investigation.
    Secretary Barrett. Nine Airmen have reported retaliation or 
fear of retaliation. Each of these instances was referred to 
the Air Force Inspector General for review and appropriate 
action.

    Just in closing, let me say I know that every one of you 
wants the best possible housing for the men and women under 
your command. I have no doubt about your commitment, but I 
think we need to use every tool, every possible resource to 
make sure that these private contractors get the message that 
there is a new era for military housing.
    Thank you, Mr. Chairman.
    Chairman Inhofe. Thank you, Senator Blumenthal.
    Senator Ernst?
    Senator Ernst. Thank you, Mr. Chair.
    I would like to say thank you to the witnesses today and 
for your commitment, but even more importantly, I want to say 
thank you to the spouses, the family members, that are here 
today. In the 1990s, I was a young Army wife, newly married 
into the Rangers and had a husband that deployed frequently. So 
I can only imagine the situation that all of our family members 
went through, whether you are juggling family, children, child 
care, school, a civilian job, whatever it was that you had, in 
addition to that you had housing issues that you had to address 
because maybe your spouses were elsewhere doing what the United 
States Federal Government told them to do. So thank you to all 
of you. I do understand those challenges and we have to make a 
change. So thank you for being here.
    We have talked a lot about this high level of 
investigations and involvement of our secretaries and so forth. 
But what I would like to hear from the Commandant and to our 
chiefs is what are we doing to educate those young commanders. 
The health and welfare of their troops - - that is up to them. 
So while we do have other special offices that are involved, 
what are we doing to educate that chain of command and how they 
can get engaged with their troops in making sure that housing 
is appropriate? Secretary Barrett, if we could start with you.
    Secretary Barrett. We are, in fact, working on training for 
the commanders of the bases and the squadron commanders on the 
housing issue and on medical issues so that there is a better 
understanding. That will be passed on to each of the members of 
the military.
    Senator Ernst. General Goldfein, did you have any more to 
add?
    General Goldfein. Yes, ma'am. So after this issue came up, 
I hosted a conference with all of our wing commanders in the 
United States Air Force. That is Active, Guard, Reserve, 
civilian leaders, 278 strong. What I shared with them was that 
there are certain things that we have to do as leaders that are 
nothing short of sacred duty, and one of those is ensuring that 
every airmen that deploys into harm's way is properly 
organized, trained, equipped, and when they come home, we have 
taken care of their families while they are gone. You cannot 
delegate that. That is command team business. So in every 
echelon of command now, we have training not only on their 
responsibilities but also on the tools they have available and, 
to get to Senator Blumenthal's point, to make sure that we have 
all the tools available and we are pushing decision authority 
down to where they can make the most difference.
    Senator Ernst. Absolutely. Thank you.
    Commandant?
    General Berger. I think your point, ma?am, about the two 
chains of command is really important. Both have a key role, as 
you pointed out. The installation--this is what they do every 
day and they focus on it, but I would say accurate prior to 
this spring they were not educated on how to interface with 
their PPV partners and what laborers they had when they were 
not performing.
    On the unit chain of command, which is what General 
Goldfein focused on, we did not look the other way, but I am 
not sure that all of our commanders--in fact, I am pretty 
confident most did not understand--they understand their role 
in leading their troops in everything they do or fail to do but 
not when their housing situation is not working right. What are 
they supposed to do? Now that is part of our commander scores. 
You could argue it should have been beforehand. Now it is.
    So on both chains of command, I think your point about 
education has to be there, but it cannot be one time. It cannot 
be in 2019 only. It is just something we have to sustain.
    Senator Ernst. Thank you, Commandant.
    Admiral?
    Admiral Gilday. Yes, ma'am. So thinking about the core 
issue here, really the root cause of what drove us to where we 
are right now, I think a big part of that was mindset. The 
Commandant kind of got at this with the fact that we dismissed 
responsibility for those things that we are accountable for, as 
General Goldfein said.
    The other thing that went hand in glove with that was the 
fact that we never codified roles, responsibilities, including 
oversight for commanders, and so like the Marine Corps, we now 
have formalized courses for all of our commanders, executive 
officers, and senior enlisted. But even more importantly right 
now, recognizing that most of the progress that we made to date 
is grounded on good leadership, enabling commanders at every 
level and their senior enlisted to understand what the 
processes are, what the right levers are to pull so that when a 
sailor and his family has an issue, we can respond immediately 
and not put it on the back burner.
    Senator Ernst. General, if you have anything to add 
briefly, please.
    General McConville. Yes, Senator. We may have outsourced 
housing to private contractors, but we have not outsourced 
responsibility. Our commanders at the lowest level, every 
leader is responsible and accountable for their soldiers. They 
understand that, and they are back into fixing this problem 
set.
    Senator Ernst. Thank you.
    Again, to our families, I want to thank you for your 
resiliency and your intestinal fortitude. I truly appreciate 
it. Thank you.
    Chairman Inhofe. Thank you.
    Senator Kaine?
    Senator Kaine. Thank you, Mr. Chair.
    Thanks to our witnesses.
    I want to thank the military families who have been so 
important in this effort.
    To Secretary McCarthy, thank you. Yesterday Secretary 
McCarthy asked me to accompany him to Fort Belvoir, and we saw 
two houses there that had really serious problems. Fort Belvoir 
has 15 communities in it. Some of the houses were built in the 
1940s and 1950s, and some are 10 years old. We visited two 
communities that were new communities. In one house, we saw a 
family who were repeatedly told that they did not have a mold 
problem. The husband has some carpentry skills and he could 
remove some molding around a shower and find that, no, indeed 
there was mold, and so he was being told that there was not a 
problem when there was. Even after the mold problem was 
discovered by him, he could not get a response until he said 
the place is so unsafe, we need to move out, and then the 
housing company jumped into action maybe because there was 
going to be a financial consequence if they moved out.
    A second family was having their home repaired. The spouse 
noticed that they were not bringing any new insulation into the 
home. They were supposed to clear out a mold situation and put 
in new insulation. They told her they had done it. She noticed 
that no new insulation had been brought into the home, and she 
said open the wall, I think you are lying to me. The wall was 
opened up and the old insulation that was dirty had been put 
back in and it was already soaking wet because not only had 
they not put in new insulation, they had not fixed the water 
problem behind the wall. This is 6 months after we had this 
hearing.
    Secretary McCarthy was not happy with this when he heard 
these stories, nor was the garrison commander.
    I think we have identified two main problems. The military 
chain of command abdicated responsibility for this when the 
contracts were entered into. I can understand it, especially 
given the OPSTEMPO of warfighting in the last 15 or 20 years. 
There were priorities that maybe assumed front of mind and 
other priorities that did not get attention that they deserve 
and that they need to now get.
    But secondly, these housing companies--they had a double 
standard, and the double standard was they all operate in the 
private sphere and they lease to private tenants and they have 
to compete hard to make sure that they have high occupancy 
rates because if they treat their private tenants badly, they 
will go elsewhere.
    But they treat military tenants like they are captives, 
like it is a captive audience. People who move from across the 
country to a place where they do not know anyone, where they do 
not know anything about the rental market, where they are 
trying to find new schools and get accustomed to everything 
else--there is a natural tendency to want to live on base. The 
occupancy rates will be high because of that tendency. So these 
companies who would compete hard and try to produce a high 
quality product in another business unit of the identical 
company treat these folks as if they are captives and that they 
do not have to treat them in the same way that they would treat 
private tenants. I find that outrageous.
    I want to ask you, Ms. Field, a question about your 
testimony because I find a couple things about it pretty 
shocking.
    The 87 percent satisfaction. That is in a report that 
Congress demands, and so it is a report to Congress, and I feel 
misled, and I am trying to determine whether I am accidentally 
misled or intentionally misled. If you read Ms. Field's 
testimony, pages 12 and 13, you understand her conclusion that 
the data is unreliable.
    OSD gave an instruction to the military departments that in 
the annual satisfaction survey they were supposed to ask this 
question: would you recommend privatized housing? It was yes, 
no, or I do not know. That was the OSD instruction to the 
departments.
    Instead, the departments on the survey--they did not ask 
that question. They asked this question: how much do you agree 
or disagree with the following statement? I would recommend 
this community to others. I would recommend this community to 
others. A reasonable person reading that question would not 
think it was a question about housing. What does that mean? My 
neighborhood? Fort Belvoir? Fairfax County? Northern Virginia? 
If people had a problem with housing, it might factor into 
their answer. But the fact that the answer to that question is 
87 percent tells us precisely nothing about what people think 
about their housing.
    if I understand your report correctly, the military 
departments did not ask the question that the OSD told them to 
ask.
    Now, I understand from a footnote that in 2019 finally they 
are going to ask the question that they should have asked all 
along: are you satisfied with the condition of your unit? That 
is the question that you need to ask to have an answer that you 
can count on.
    But the answer to the question of would you recommend this 
community to others tells us exactly nothing about housing. So 
I definitely feel misled by this 87 percent number, and I do 
not know whether to feel intentionally misled or accidentally 
misled.
    I am going to conclude. Secretary McCarthy, you have raised 
a really important point that we may need to grapple with as a 
committee. If the companies, because of the dates they entered 
into these contracts and their bond arrangements, structured 
the finances around a 7 or 8 percent interest rate and right 
now, if they could refinance and refinance to a much lower rate 
and free up capital that could be used to capitalize 
improvements in military housing, we should be doing what we 
can in a fiscally responsible manner to allow the refinancing 
of these contracts with the expectation that some of the money 
that is freed up with the refinancing could be plowed back into 
houses. Many of us have probably refinanced our own houses 
during times of low interest rates, and we have been able to do 
what the military and what these housing providers should be 
able to do. I hope we might explore as a committee if there is 
a fiscally sound way where we could allow these companies to 
refinance and then use those monies to perform improvements.
    Thank you, Mr. Chair.
    Chairman Inhofe. Thank you.
    Senator Scott?
    Senator Scott. I want to thank each of you for being here 
and worrying about the housing for our families.
    Ms. Field, you said in your testimony that there were 
changes, that if we could make those changes, that it would 
have a big impact. Is there legislation that we can pass right 
now that would force changes that would positively impact 
housing for these families?
    Ms. Field. Senator, I think the most important thing that 
this Committee can do is to keep the pressure on both the 
services, as well as the partners. A lot of the things that are 
in, for example, the bill of rights are things that could be 
done right now. They do not necessarily need to be 
legislatively mandated.
    We at GAO have been looking at MHPI almost from its 
inception, and we have found problems throughout. It is really 
that pressure that you can exert that will probably be most 
impactful.
    Senator Scott. So there is no legislation that you need--
that the services need right now that would change the housing.
    Ms. Field. I do not want to state that categorically, but I 
would say that some of the things that probably would be most 
helpful are not things that can be legislatively mandated 
because they have to do with the legal agreements between the 
services and the private partners.
    Senator Scott. But we can pass legislation that requires 
the private companies to change. Right?
    Ms. Field. I believe that that would still require 
negotiation with the partners because of the existing standing 
legal agreements, many of which are 50-year agreements.
    Senator Scott. For all the secretaries, what is the 
limitation on issuing the resident bill of rights today? Is 
there any limitation?
    Secretary McCarthy. Senator, there are a couple issues 
related to the NDAA language that we have that are different 
than the department's position. Specifically I will cite two 
examples. With the dispute resolution, we need to hire an 
outside firm to be a third-party mediator where there is a 
difference of opinion between us and the Committee on how to 
best bring a third-party entity into the fold. Another one 
would be on whether or not the Army could have on-post quality 
assurance folks to inspect the RCI partners? homes through 
legal liabilities associated with that because we do not own 
the assets. We are working through that with the Committee, but 
we could step out but we want to do it in concert with the 
Congress and have the support of the Congress, sir.
    Secretary Modly. Senator Scott, just let me add to that 
that the Service Secretaries have all agreed on the tenant bill 
of rights that we have negotiated with the PPV partners, and we 
are ready to go into signing. We are just being deferential to 
the Committee and what they are trying to put in legislation to 
make sure that we are in sync on that.
    Secretary Barrett. Senator, that is exactly the same with 
the Air Force. We are ready to go, and could have issued it 
earlier, but do not want to issue something today that then 
lies in contrast with what the NDAA might----
    Senator Scott. Why do we not just do it and if the 
Committee ever gets it done, then change it?
    Secretary Barrett. We could, but I think for our troops, 
our airmen would rather have a consistency of what that bill of 
rights entails.
    Senator Scott. So the dollars that have been held back on 
performance, can you take those dollars and mitigate the 
problem? Are you allowed to do that? Like in a private 
contract, if somebody violates the contract, I can go spend the 
dollars and eventually get the money back. Do you have the 
ability to do that under existing contracts? So if you want to 
take the dollars--any dollars, but take for sure the 
performance dollars and say I have got 15 homes that need mold 
repair. I will go ahead and take the money and spend it. Can 
you do that?
    Secretary Modly. Senator, I will have to get the answer for 
that specifically. I am not familiar enough with the 
negotiations with the PPV partners say. But when the fees are 
not paid out, they stay within the service. So I have to look 
and see exactly what our legal rights are in terms of what we 
can do with that, and I do not know the answer to that. But we 
will get the answer for you, Senator.
    Secretary Barrett. I am not sure of the contract language 
on whether that is held in escrow or withheld but not available 
to the Air Force. In the Air Force's instance, we have, 
however, spent $25 million in remediation that may be brought 
against the contractor.
    [The information referred to follows:]

    Secretary Barrett. Funds for performance incentive fee 
payments that have been denied fall through the cash flow 
waterfall. The majority of these funds end up in the 
reinvestment account where they are used to sustain and 
renovate the homes.

    Secretary McCarthy. Senator, it is my understanding the 
funding is held in escrow, but I do not think it can be 
converted for other projects.
    [The information referred to follows:]

    Secretary McCarthy. Yes. On average, at least 85 percent of 
all unawarded privatized housing company incentive fees are 
deposited in the housing company's reinvestment account. Funds 
in a privatized housing company's reinvestment account can be 
used, with Army consent, to pay for improvements or repairs to 
the company's housing.

    Secretary Modly. Incentive fees are paid out of project 
revenue, not additional payments from the Department of the 
Navy (DON). Unearned incentive fees stay within the project. 
The vast majority (98.3 percent) of unearned fees continue 
through the revenue distribution (cash flow waterfall) of the 
limited liability company and are retained in sustainment 
reserve accounts for the recapitalization and sustainment of 
housing over the long term. The DON approves the annual budget 
for each Public Private Venture project, including allocation 
of project dollars to sustainment, such as mold remediation 
efforts.

    Senator Scott. Will you find out when you get back and just 
let me know if you can spend the dollars? Because why would you 
not spend those dollars if you can do it and take it away from 
the money you had to pay the companies?
    Have any companies said to you all that because of their 
finances, they do not have the financial wherewithal to make 
the changes?
    Secretary McCarthy. Yes, sir. I mean, the last discussion, 
we specifically addressed how do we increase the ceiling on 
capital for investment because as I mentioned in my opening 
statement, a third of our housing is going to require 
recapitalization. So we need substantially more funding. If you 
have economics from the mid-1990s, there is like 8-9 percent on 
the bonds.
    Senator Scott. So they are never going to fix this. If they 
do not have the capital to do it and they cannot get the 
capital to do it----
    Secretary McCarthy. General McConville and I sent a letter 
to the director of the Office of Management and Budget to 
change the scoring criteria on projects so that they could go 
back to the capital markets, get lower interest rates, which 
they have very much a desire to do that obviously from a 
business perspective, but to be able to increase the capital so 
it can be much more aggressive on investment projects.
    Senator Scott. Thank you, Mr. Chairman.
    Chairman Inhofe. Yes. Senator Scott, let me just interject 
here that we have had the bill of rights language on the 
defense authorization bill. Our problem is we have been bogged 
down mostly because of the House on the defense authorization 
bill. Now, we are dealing with an absolute deadline now, and of 
course, that language is in there.
    It was our thinking at that time to not encourage the bill 
of rights to be put together until we had a chance to do that 
in the NDAA.
    Senator Scott. That makes sense. You sure would think, 
though, that they could take the money that has been held on 
performance and go spend it to go fix the problem that these 
companies are responsible for.
    Chairman Inhofe. That makes sense. Thank you.
    Senator Heinrich?
    Senator Heinrich. Thank you, Chairman.
    I want to start by saying that I share Senator Kaine's 
frustration with the data that we have been given and frankly 
how that data has been characterized. We need to understand, as 
Ms. Field points out, exactly what the situation is, and the 
way questions have been asked has really obscured that.
    I want to ask each of you, one, are you currently--as 
Service Secretaries, asking the question that OSD suggested 
that you ask, would you recommend privatized housing? In 
addition, are you asking the question that was also referenced 
in the GAO report, are you satisfied with the condition of your 
housing unit?
    Secretary McCarthy. Yes, Senator. We are making the changes 
to the customer survey.
    Senator Heinrich. is that current or is that in process?
    Secretary McCarthy. I believe it is in process, sir.
    Secretary Modly. Senator, we are looking at that as well to 
ensure that the surveys are asking the right questions in terms 
of what has happened in the past. In terms of how we followed 
the guidance of OSD, I do not have information about that.
    I will say that we did an out-of-cycle survey immediately 
after this situation came to the forefront last year, and we 
discovered that we actually had much lower rates than we had 
thought before. So I think we are looking at this and we want 
to make sure--and this is my point that I made earlier about 
data and understanding what the data is telling us and making 
sure we are asking the right questions and measuring these PPV 
partners properly.
    Senator Heinrich. Well, I will say that I think that Ms. 
Field and the GAO were able to get to the heart of a lot of 
data very quickly and to implement other tools like focus 
groups to understand the nature of this problem. All of us up 
here need to be able to have reliable, consistent data.
    So for the remaining two secretaries, I would also ask are 
you asking those two questions today or when will you be asking 
those two questions?
    Secretary Barrett. Senator, we are asking the questions as 
directed by the Secretary in the form that is the requested 
form.
    One of the key issues on the data is that we really are 
challenged when we do not disaggregate the data. When you put 
it all together, it looks like 87 percent sounds like a really 
good number. It is 90-plus percent on many bases, but it is 
much, much lower, and that is where we really need to focus our 
attention. But when we aggregate the data, it is harder to find 
the real answers and the real problems.
    Senator Heinrich. Secretary McCarthy, you mentioned the 
need to fix the model. I think those were your words. But we 
also heard a third of housing is in poor condition. So it 
forces me to ask the question, was privatizing our military 
housing a mistake? To put that another way, do we at least need 
to take a step back and analyze whether this model is actually 
working for our men and women in uniform.
    Secretary McCarthy. Senator, if we had not privatized, we 
would not have been able to bring the investment capital to 
bear to have the current housing portfolio even the shape that 
it is in. $13 billion worth of investment has been put in place 
since 1996. We would not have had those funds, for example.
    I think that the challenge is over a 50-year relationship, 
you have to adjust over time. The flexibility of the contract, 
the manner in which to restructure debt when economic 
conditions are better, you have to present these opportunities. 
So that is where the challenge is.
    Senator Heinrich. Do we have the tools and the knowledge 
built into your services to actually implement those contracts, 
to hold people to account? Because those things happen every 
day in private real estate business. But that is not an 
expertise that is necessarily something that I think the 
services have spent a lot of time thinking about. If we are not 
doing that, we certainly owe it to the men and women who live 
in these homes to get that right.
    Secretary McCarthy. A great question, Senator. It really 
hits home to the point Secretary Modly mentioned before, our 
ability to analyze the depreciating assets, when to make the 
right investments, are we capturing the appropriate data to 
know the health of these homes. The oversight, the quality 
assurance requires substantially more resources, but also to 
your point, the right skill sets associated to manage that. In 
many cases, we need to improve across the board in all those 
areas.
    Secretary Modly. Senator, I think it was absolutely the 
right decision at the time to go in this direction, and as 
Secretary McCarthy said, we would not have been able to 
recapitalize these homes at the time that we did it.
    That does not mean that it has worked out great, and I 
would say that it is not horrible performance, but I just think 
it is very uneven performance. From personal experience, I have 
a son-in-law and a daughter who are on Active Duty, and they 
have lived in privatized housing and it was fantastic. I have 
gone and visited several different bases, and some of it is 
fantastic and some it is not.
    the problem we have right now is really understanding the 
differences because we do not have good access and visibility 
into what is actually going on on a unit-by-unit basis. So when 
you accumulate data and it says 87 percent, well, what about 
the people that are not happy and how are we finding out about 
that, and not just finding out about it every----
    Senator Heinrich. But how are we fixing it?
    Secretary Modly. Right. But, sir, we are also finding out 
about it a year after, sometimes a year after it has happened. 
We need to be much more in a real-time monitoring of this 
problem, and that is what we are trying to do. We certainly 
have the tools to do it. Data is being captured. It is just not 
standardized. Once we have that and we have real-time 
information, we can act a lot more appropriately and a lot more 
quickly. We certainly have the tools to do that given some of 
the tools that exist because of the revolution of technology 
that we have seen. So we can address this.
    I think the model needs tweaking, and as Secretary McCarthy 
said, there may be some structural challenges with the debt 
that we need to look at as well, but this is a problem where, 
when you outsource something, I think there was a cultural 
shift where people felt that it was not their problem anymore. 
But it is always going to be our problem to worry about the 
health and well-being of our military families, and we just 
have to reinforce those messages and I am sure we will.
    Chairman Inhofe. Senator McSally?
    Senator McSally. Thank you, Mr. Chairman.
    I also want to recognize our military families that are 
here today. It is hard enough to serve in the military. It is 
hard enough to be a spouse of someone who serves in the 
military. But you add onto it the challenges that we are 
talking about here today and the types of stories that we have 
heard for what families have had to put up with, and as someone 
who served myself, this pisses me off. You know, again, what 
you endure is hard enough.
    This is a leadership issue. I appreciate our service 
leaders being here today and your commitment to address this 
issue.
    This is also a leadership issue by these companies. You 
know, in America, we just came past Veterans Day. We are very 
patriotic. We want to say thank you for your service and all 
you do. Yet, climate and culture in these companies starts at 
the top too. The culture that they have from the top all the 
way down, whether they are going to be customer service-
oriented, whether they are going to be responsive 24/7 to the 
needs of those families, whether they are going to do whatever 
they can to make sure that they are addressing the health and 
welfare of these families, that is a climate issue. So maybe 
some of the CEOs need to move into some military housing over 
the holidays. What do you guys think about that?
    [Applause.]
    Senator McSally. See how they feel about trying to figure 
out where they are going to put up their Christmas tree or 
where they are going to be serving Christmas dinner.
    Ms. Field, thank you for all your work on this. I see there 
are basically 14 companies that have been involved in 
privatized military housing. Are any of them not acting like 
slumlords at this point? Are any of them doing a good job? Any 
of them?
    Ms. Field. Senator, I would not want to characterize any 
individual company as good across the board or bad across the 
board. I would say that at almost every installation we 
visited, we found that the military housing officials on the 
ground were extremely frustrated with the private partner 
personnel on the ground, were getting the cooperation or 
support they needed. There were some exceptions to that, which 
I would be happy to talk about. But I think it is fair to say, 
as we have discussed earlier, whether the tenants are satisfied 
at an 87 percent rate or not, there is clearly a problem here.
    Senator McSally. One thing I read in some of the testimony 
is that sometimes families were confused when they went to the 
office as to who was the advocate for them that is paid by the 
taxpayer and who is actually a representative of the slumlord. 
Maybe they could wear their own T-shirts that say 'slumlord? on 
them. I am not trying to be facetious here, but actually 
identify themselves as whether they are with the company or 
whether they are with the housing office. There has to be some 
sort of distinguishing factor. I would encourage our Service 
Chiefs just to ask them to do that. They need to know who is 
who, and that they are not talking to the contractor when they 
are making a complaint.
    General Goldfein, did you want to just say something about 
that?
    General Goldfein. Ma'am, I would just offer that there is a 
trifecta approach to this. There is the command team. There is 
the housing management officer and the office, and then there 
is the privatized owner. All three of those have to be engaged, 
and where we have good engagement by those three and ownership 
and responsiveness, it is working. Where one of those is not 
there, it does not work.
    Senator McSally. Just the family member, though, needs to 
know if they are coming in to vent their frustration whether 
they are talking to somebody who is representing the company 
versus somebody who is supposed to be their advocate. You guys 
agree? I am trying to get audience engagement here.
    But one other factor is we specifically put language in, as 
you are trying to hire more individuals in the housing offices 
and to be advocates, is to prioritize military spouses for 
those positions. I do not think you need NDAA language for 
that. Is that something that each of the services are looking 
to do? Because they are at depression level unemployment as 
well. This is something we have been working on this Committee 
as well related to military spouse employment. But pretty 
quickly I bet you would have a number of military spouses who 
would love to serve in that role. I would like to hear from 
each of the services whether that is a priority.
    Secretary McCarthy. Secretary Esper prioritized that early 
on in his tenure to give the opportunities for military spouses 
to have preference for hiring opportunities on the 
installation.
    Senator McSally. Are there positions that are open that are 
unfilled right now, though, that could quickly be filled with 
military spouses? Any of the other services want to jump in?
    Secretary Modly. Senator, we have added 300 additional 
positions, and this is one of the problems that we discovered 
in our discovery this last year was that, to your point, we did 
not feel like we had enough advocates out there, and so we are 
adding 300. We are in the process of hiring them. We are also 
waiting on the appropriations bill to pass so that we can fund 
those positions. But prioritizing military spouses for those 
jobs is something that we are going to do.
    Senator McSally. Great, thanks.
    Secretary Barrett?
    Secretary Barrett. We have also established 219 new 
positions for residents advocates, and those would be great 
jobs for military spouses.
    Senator McSally. Thanks. I am almost out of time, but I 
want to just make sure everybody understands that the NDAA is 
being held up for political games. The defense appropriations 
bill is being held up for political reasons that have nothing 
to do with our troops. I just want to make sure everybody 
understands that without a NDAA and without the defense 
appropriations bill, the level that we have agreed to or that 
we have been fighting for--this is going to hurt fixing some of 
these issues that military families are dealing with in 
military housing. Can I get a yes from everybody? Thank you.
    So let us get everybody on both sides of the aisle to vote 
those out and get them done this week. Thank you.
    I yield back.
    Chairman Inhofe. Thank you.
    Senator Hirono?
    Senator Hirono. Thank you, Mr. Chairman.
    I thank all the secretaries and the chiefs and the families 
and advocates who are here. This is a continuing addressing of 
a concern that is going to be ongoing, and as you noted, we 
have to be vigilant not just today, tomorrow but going forward.
    So, Ms. Field, you said that the Department cannot make 
unilateral changes to these long-term contracts to address some 
of these issues that have been brought forth. Can you give me 
an example of a limitation in a contract that would make it 
really difficult for the Department of Defense to unilaterally 
make a change or require a change?
    Ms. Field. Sure, Senator. Most of the agreements, although 
not all, do have a performance incentive fee built into the 
agreement. What we have determined through our work is that a 
number of the metrics that underlie those performance incentive 
fees are not good ways to measure the condition or the quality 
of the home. So they are looking at things like rewarding the 
partner for occupancy rate, which again has nothing to do 
necessarily with the condition of the home, or with things like 
timeliness in reporting.
    Our understanding is that to change those underlying 
metrics, as written in the agreements, the partners will have 
to agree with the services to make those changes.
    Senator Hirono. There is no underlying metric for 
habitability of units?
    Ms. Field. I cannot say uniformly across all of the 
agreements because they are all different, but when we looked 
at them, we found that they were overwhelmingly more focused on 
the financial health of the project and the partner as opposed 
to the quality or condition of the home and holding the partner 
accountable for that.
    Senator Hirono. For the secretaries or the chiefs, are any 
of your agreements relating to habitability of the units--is 
there anything that allows you to negotiate regarding 
habitability in any of your contracts? Anybody can answer.
    Secretary McCarthy. Senator, the metrics--the incentive 
award fees reference--they are not uniform across all of the 
installations, first off.
    Second, with respect to habitability, the question you 
asked, I do not know if on any of the installations if we have 
that today. But as I mentioned in my opening statement, we are 
changing the incentive award structure and starting that on 
January 1.
    Senator Hirono. So you are able to change the incentive 
structure by focusing on habitability even if somehow there is 
not reference to that in your long-term contract?
    Secretary McCarthy. We have gone back to the partners and 
we are changing the incentive award fees. We had to go back to 
the partners and do that.
    Senator Hirono. Are your partners cooperating with changing 
the metrics?
    Secretary McCarthy. That has been in negotiation, but that 
is how we are initiating it on January 1.
    Senator Hirono. What about the other Service Secretaries? 
What are you doing? Obviously, we are here because of the non-
habitability of some of these units. It is a huge issue. Are 
you imposing habitability as a factor in your incentive 
payments?
    Secretary Modly. Senator, yes. We are going through that 
process just as Secretary McCarthy said. We have restructured 
our incentive fee and what we are measuring for an incentive 
fee, and prior to this, we did not have that sort of health and 
habitability thing as a factor that we looked at, but now we 
will. Our partners have worked with us on this, and they are 
accepting that.
    Secretary Barrett. We are in the process of restructuring 
our incentive fees, and that will include elements of the 
commanders? overview or observation. Habitability would be 
probably one of the elements that they would put. In addition, 
100 percent of our units have had a health and safety review 
prior to people moving in, and so that habitability would be 
another word for the health and safety of that----
    Senator Hirono. Yes. I am using the word ``habitability'' 
to cover the broad range of issues of concern to all of us.
    There was a mention made--I think it was Secretary Modly--
that the data is inputted in such a way that it is really not 
terribly helpful in terms of what is actually going on. What 
are you all doing to make sure that there is--for one thing, 
should all of the contracts, these housing contracts, not be 
the same in terms of the terms of the contract across the 
services? Ms. Field, can you answer yes or no on that one?
    Ms. Field. Because they were entered into at different 
times and by different services, they created them with 
different terms and different levels of accountability built 
into them.
    Senator Hirono. That is a problem. But okay, be that as it 
may.
    What about the data, the insufficiency of the data? Do the 
rest of you besides Secretary Modly agree that that is an 
issue? Anybody?
    Secretary McCarthy. Of course, Senator. We have addressed 
that at the quarterly discussions, and that process is starting 
to improve.
    Secretary Barrett. We do agree that the data is an issue 
and disaggregating it, working to improve the quality of the 
data, is one of the key things that we are looking at.
    Senator Hirono. May I ask just one follow-up question with 
Secretary McCarthy?
    So the condition of the housing that you went to see with 
Senator Kaine--very clearly, that if they are putting back 
molding that should never have been put back, that sounds like 
fraud to me. So you had testified that you did not refer any 
matter for prosecution. Is this the kind of thing that you are 
considering sending on for prosecution?
    Secretary McCarthy. Senator, after what I saw yesterday, I 
was very concerned, and it is something that I addressed 
specifically with General Perna and we are going to take a very 
hard look at that. Yes, ma'am.
    Senator Hirono. Please do so, and that goes for all the 
services.
    Thank you, Mr. Chairman.
    Chairman Inhofe. Thank you.
    Senator Perdue?
    Senator Perdue. Thank you, Mr. Chairman.
    I want to thank the chairman and the ranking member for the 
participation today. I have been here 5 years. I have never 
seen a panel of military leadership that we have today. I think 
that sends a message to the families but also says how serious 
this problem is. So I want to thank everybody for being here.
    I have a question for the panel and your staffs that are 
here.
    If you have ever lived in base housing anytime in your 
career, would you raise your hand please? All right. There is 
the issue. So these people understand. I grew up in base 
housing. I understand what it means to be dislocated. This is 
unacceptable what is happening right now.
    But I want everybody in this hearing to understand the 
hypocrisy that you have heard this morning. We are pointing 
fingers at contractors. Yes, there is culpability there and it 
needs to be dealt with. There are leadership issues maybe 
within the DOD. It needs to be dealt with. But the one thing we 
are not talking about is responsibility we have right here in 
Congress.
    This is the third month. This is the end of the first 
quarter of our fiscal year. We have not funded our men and 
women in uniform. Period. We can talk about a continuing 
resolution (CR) all we want to, but we have sent a message to 
Putin and Xi and everybody else in the world that the political 
games here are more important than our men and women in 
uniform. That is unacceptable, and it directly affects housing 
capability.
    The U.S. Army did a study recently, Secretary McCarthy, 
that you guys said that specifically right now 4,400 new units 
are being held up from construction because of this continuing 
resolution. By the way, this is like the 10th--out of 11 years, 
this is the 10th year that the first quarter has been spent 
under a continuing resolution where no contracts can be let, no 
follow-up can be made, no accountability can be accomplished.
    My question is, are these numbers right? I think there are 
269 other maintenance housing units for something like $69 
million, which I do not understand those numbers. That is 
$250,000 a unit. So somewhere offline I want to get at these 
numbers because it does not make any sense.
    But would you give us an update as to the impact that 
continuing resolutions have on this specific issue of getting 
this problem fixed?
    Secretary McCarthy. Specifically on military construction 
for barracks projects, Senator, we have about $239 million held 
up: Fort Sill, $73 million; Joint Base Langley Eustis, $55 
million; Jackson, $54 million. So barracks is being impacted 
across the force. The family housing projects overseas----
    Senator Perdue. Look, if I could interrupt you. I am sorry 
to interrupt. We can do this all day. I do not want to give you 
guys a pass, but I want full accountability here. We bear the 
brunt of this at the very get-go here. Had we funded this prior 
to September, the continuity of the programs that you guys have 
already started could be continuing right now. I just want the 
people who have been affected to understand that the fix cannot 
be accomplished as long as these political games are being 
played right now, and that is the point I want to make.
    So can you give us the other impact that may be caused by 
this insidious practice that we have here? One hundred eighty-
seven times since the Budget Act was put in place in 1974. This 
is our 187th continuing resolution that this Congress has used, 
and it devastates you guys and it hurts these families. So can 
you give us a little more detail around that?
    Secretary McCarthy. A $1.1 billion request specifically on 
housing restoration and modernization is being held up right 
now.
    Senator Perdue. What does that mean?
    Secretary McCarthy. We cannot start the projects. We can 
initiate the projects. We do not have the funding.
    Senator Perdue. So the projects that are already underway--
does it affect any of those?
    Secretary McCarthy. In some cases, yes, sir.
    Senator Perdue. So all projects that are being directed 
toward this problem are being affected right now during this 3-
month period. Is that correct?
    Secretary McCarthy. Any new projects and then existing ones 
are being funded at the previous levels. So the buying power is 
reduced. Yes, sir.
    Senator Perdue. Thank you.
    General McConville, I visited Benning. It is one of our 
great heritage sites in the country really. It happens to be in 
my home State of Georgia. I have got red clay under these nails 
like you do I am sure from your time in that part of our State.
    I just met with General Brito down there, and he is doing a 
fabulous job. You have a different problem in Columbus. You 
have these historic homes, and of course, they have lead. They 
probably had asbestos before and all that, and some of this has 
been dealt with in the past. Give us an update on how that lead 
problem is being dealt with.
    By the way, you know, we deploy a significant percentage of 
our men and women in uniform today, from Air Force, Marines--we 
have a significant percentage across more than 100 countries 
right now today. So most of the people who are on these bases 
have a spouse overseas.
    Can you help us understand the progress being made there 
and the displacement that we have incurred there and what we 
can expect?
    General McConville. Yes, I can, Senator.
    First of all, on the historical homes, we have taken the 
philosophy that old is not historical. What I mean by that is, 
you know, we have homes. We have to replace them or restore 
them to the level they were at. It may be a house that is 100 
years old that a captain lived in. We have a whole bunch of 
these type homes, somewhere from 50 to 100 years old. We do not 
want to have to go back and restore them with the original 
materials and those type things that are sometimes required. So 
we are working our way through that right now. We think we have 
a way ahead so we are not going to have to go back and get 
original materials. We can actually modernize some of these 
homes so they are not living in old homes.
    I grew up in an old home, 100 years old, but it is old. It 
is not historic, and what we need to do for these homes is 
modernize them so they are what we need for the families.
    As you know, we are going through the homes right now. Lead 
is a huge issue. We are very, very concerned with our families. 
We are going back and getting these homes and remediating the 
homes, but it just takes time. I think we are working about 
eight to nine homes a week, and it is going to take us some 
time. It is going to take us 2 to 3 years with these homes to 
get them to the level that we want them to be.
    Senator Perdue. Would you get your staff to keep us updated 
each month about the progress of that project specifically? 
Because I think that is a bellwether for the rest of all of the 
bases out there.
    General McConville. It is, Senator, and we will.
    Senator Perdue. Thank you.
    Thank you, Mr. Chairman.
    Chairman Inhofe. Thank you.
    Senator Jones?
    Senator Jones. Mr. Chairman, with the chair's permission, I 
am going to yield a couple minutes to Senator Manchin who has 
got to leave for a committee hearing.
    Senator Manchin. Thank you so much, Mr. Chairman.
    I thank all of you.
    This is to the secretaries and Ms. Field to you. Just 
listening to everybody and the concerns we have, there is not a 
person up here--and I am sure you all feel the same way--who is 
not concerned. Servicemembers should have better quality of 
life and their families, and they should not be in this 
jeopardy.
    A homeowners association is something I am familiar with, 
and a homeowners association works this way. You are the 
developer. You are the developer. Any of you all are the 
developers, and basically when you have the covenants and turn 
it over after a period of time to the homeowners, then we have 
a responsibility to basically evaluate are you doing your job 
or not. Have you lived up to your part of the bargain when it 
was turned over? We have the right to bring civil actions 
against you.
    Why can we not do the same here? Every member of the 
service and their family that moves into one of the homes 
basically would be part of a homeowners association. That 
association develops their own board, and they are able to 
bring a civil suit if they have not performed. That is the best 
way to do it, much better than the military and everybody else. 
We will spend millions and millions of dollars for the people 
on the front line that could tell you immediately. If you are 
the contractor that is awarded basically one of these exclusive 
contracts for 50 years, then you have a responsibility. If that 
is the responsibility and you have not lived up to it, let them 
go to civil court, not through the military court. Let me them 
go directly to the civil court. You will never have this 
problem. This will eliminate and remedy this immediately.
    We can put this right into the bill of rights. Mr. 
Chairman, we could do this as we are going right now, and it 
will basically take care of, I think, a remedy of how you can 
cure this quickly, and they will step up to the plate. They do 
not want these civil lawsuits brought against them.
    That is my input. Thank you, Mr. Chairman.
    Chairman Inhofe. Thank you.
    Senator Jones?
    Senator Jones. Mr. Chairman, thank you. Thank you, Mr. 
Chairman. Thank you, Senator Manchin.
    Two comments before I ask a couple of questions.
    Number one, I agree with Senator Perdue completely about 
the CR and about where we are in the politics in the NDAA and 
appropriations. I just do not want there to be any impression 
of anybody in this room that the politics that are being played 
is only one side of the aisle. That is a process that is 
ongoing, and there is too much politics being played not only 
in Congress but with the administration as well. We need to get 
it done. I completely agree with him in needing to get it done.
    The second thing I would like to comment on is I am hearing 
a lot in these hearings where these companies are being 
referred to as our partners. They are not our partners. They 
provide a service. We pay them for their service. They are not 
a partner where there is a give and take and issues like that. 
They are providing a service to these people and their military 
and their families. We should be demanding and make sure that 
we are demanding that they deliver the excellent services that 
we are paying them for and that we do not consider them a 
partner like I would my spouse or a law partner. They are 
providing services.
    Now, just with the time remaining, I would like to ask each 
of the secretaries. Secretary McCarthy, you have mentioned 
General Perna. I am a big fan of General Perna. So I commend 
you for getting him engaged in this because he can get it done.
    When we had the companies here, one of the things I asked 
them if they would agree to withhold incentive fees, and I 
think you mentioned in your testimony that General Perna is 
working on that. Have any incentive fees been withheld yet, or 
is that still part of the process that is ongoing?
    Secretary McCarthy. Yes, sir. We have withheld fees at Fort 
Benning and Joint Base Lewis-McChord, and we will be doing it 
at others here in the very near future.
    Senator Jones. So you already got a process in place for 
that?
    Secretary McCarthy. Yes. It is being formalized on the 1st 
of January, but some of these instances were pretty extreme and 
we have done that here just in the last couple months.
    Senator Jones. How about the Navy?
    Secretary Modly. Senator, we have not given an award for 
the incentive fee this year. We are evaluating all those 
individually to determine what they earn.
    Senator Jones. Is there a process in place to withhold 
incentive fees that you have got in place now?
    Secretary Modly. There is.
    Senator Jones. All right. Thank you.
    How about the Air Force?
    Secretary Barrett. Senator, we are withholding all fees 
from one contractor on the basis of misperformance or 
performance problems on some of their bases. The other 
contractors--we are observing their performance and they are 
aware of the contract withholding--the process, the fact that 
we are withholding fees on others.
    Senator Jones. All right. Well, thank you all three. I 
think that is a good step.
    I will say, Secretary Barrett, I am still hearing of 
issues. I visited the Maxwell Air Force Base, and there are 
particular issues with historic properties and I get that. But 
I am still hearing from constituents down there who are having 
serious problems. So please take a look. Thank you.
    Thank you, Mr. Chairman.
    Chairman Inhofe. Thank you.
    Senator Tillis?
    Senator Tillis. Thank you, Mr. Chairman.
    Thank you all for being here and a special thanks to the 
military families who are in attendance.
    Back in March when we had the last hearing, I did not have 
a very happy discussion because we had a revelation come up 
about these nondisclosure agreements (NDAs) that the housing 
providers were requiring the tenants to sign onto before they 
would settle anything that seemed to be a legitimate tenant 
complaint. At that time, I asked everybody to go back and make 
sure over the next 30 days to have all of those NDAs rescinded, 
and if there was any private property housing provider that 
thought they had a great case to call me up and come to my 
office and explain to me why they should have these 
nondisclosure agreements. I had nobody come to my office.
    I thought that I was assured that these had been rescinded, 
but this week I got an email and another nondisclosure 
agreement from Monterrey Bay where the practice continued at 
least up until August. Secretary McCarthy, we will have a 
discussion about this because it is in your lane.
    But look, Ms. Field, I think when you were responding to 
Senator Kaine's question about the satisfaction surveys, if you 
have a nondisclosure agreement that says you cannot speak even 
about the existence of the agreement and you cannot speak 
disparagingly about the housing provider, then how does the 
answer to that question go?
    Ms. Field. That is a great question.
    Senator Tillis. Right, which is why these damn things have 
to be eliminated.
    [Applause.]
    Senator Tillis. Now, I want to ask you all right now, can I 
get your assurance that you can go through your chain of 
command and go to your housing providers and say this ends 
immediately? If you think you have a legitimate reason for 
having one, contact me. I would love to hear the basis for 
that. I do not think there can be one, and I want your 
assurance that we are going to move forward with this. This is 
a part of the problem.
    Look, I have tried to be balanced every time I come in 
here. If you look at it when these contracts started getting 
initiated back in 1996, you were moving. You were conveying 
property that was owned by the government to a private housing 
provider. They were to fix some of them, the old units, maybe 
up-fit them. They were to build new units, and they had to make 
a financial decision that ultimately resulted in an investment 
that the private sector investors invested in. Great. Hopefully 
they made a good decision.
    Now, it may have been that in some cases they simply did 
not know what they were buying. You know, everybody that flips 
a house, sometimes you buy something and it worked out well, 
and sometimes it did not work out so well. There may be a 
rational basis to go back to some of these housing providers 
and say, look, we may have sold you a bill of goods and we have 
some responsibility for trying to smooth out the economic 
consequences of that decision.
    In other cases, they built houses that are the subject of 
the problem. We owe them not a dime to fix that. That is on 
them.
    So my question to you all is, when is enough enough? When 
do we finally look at these contracting vendors, consistent 
with what Senator Inhofe opened up with, and say you know it is 
time just to recognize that you are in breach of contract? We 
got to go a different way. Or your business practices are to a 
point where we have got to go to a court of law and settle 
this. When is enough enough? Secretary McCarthy?
    Secretary McCarthy. We might be there right now, sir.
    Senator Tillis. Secretary Modly?
    Secretary Modly. Senator, I think that in certain cases we 
may be there. In other cases, I think there is a pretty heavy 
responsibility on the Navy and Navy leadership over the last 
couple years in terms of not paying attention to it.
    Senator Tillis. Secretary Barrett?
    Secretary Barrett. Senator, enough is enough. We have had 
enough. On some of these properties, they have worn out the 
patience of the Air Force. In other instances, they are doing a 
great job and we are happy.
    Senator Tillis. I agree. I do not want to go too far over 
time, but I want to be fair. I do not want to, all of a sudden, 
let our passions sweep up private housing providers that seem 
to be doing a good job, trending in the right direction. But we 
probably need to make an example out of a couple of them and 
just draw the line and move forward, and in the other cases, go 
back and figure out--I think you are right. If we do not look 
at recapitalization--I am not one who thinks that we should 
take this back over and go to the old ways because it was not 
working, and then Senator Perdue's point is well taken. Then 
all of a sudden you guys have to rely on us to give you 
resources, and how has that worked out for you?
    So I think it makes more sense to provide some certainty by 
having these contracts in place, but we have to look at 
recapitalization. We have to go back and rationalize what 
should be a consistent model, to Senator Hirono's point. I know 
that these contracts were negotiated over time and there were 
differences. Some of them we are learning from the past 
contracts. But at some point, we have got to go back and reopen 
this and aggressively pursue it.
    I am going to leave you with this. I do not know what other 
members have done, but I have had town halls at Camp Lejeune. I 
have had town halls at Fort Bragg. I have had multiple 
sessions. I have literally met with hundreds of military 
families down on those two bases, and things are improving 
there. But I had at least one military spouse drive up from 
Fort Benning, and she said we were here when you all started 
really shining a light down at Fort Bragg. But now I am at 
Benning and it is not so good. It sounds like it is improving.
    But I would encourage all of my colleagues in the Senate 
and in the House to go on base and cast light on these folks. 
It makes a difference. We are making progress, but we are not 
making it nearly as quickly as we should. I really do believe 
it is time to draw a line with some of these vendors and some 
of these contracts and say enough is enough.
    Thank you, Mr. Chair.
    Chairman Inhofe. Thank you.
    Senator King?
    Senator King. Thank you, Mr. Chairman.
    Ms. Field----
    [Applause.]
    Senator King. I do not want to step on your recognition, 
Senator Tillis, which is appropriate.
    Ms. Field, I want to get to the sort of basic question. Are 
these contracts adequate or inadequate? Is the problem the 
contracts or the enforcement of the contracts?
    Ms. Field. I think it is both, Senator. In many cases, the 
contracts were not written in such a way that the services 
could truly hold the partners accountable for everything they 
should be holding them accountable for.
    Senator King. Let me stop you there, though. I want to 
follow up on Senator Hirono's question. I cannot believe that 
the fundamental nature of the contract does not require that 
the contractor--and by the way, I agree with Senator Jones--
these are not partners. They are contractors. Banish that word, 
will you? Quit referring to them as partners. They are 
contractors. I cannot believe the basic requirement of that 
contract was not safe and healthy, habitable units. What were 
we buying?
    Ms. Field. The companies--pardon me--are required under all 
of the projects to comply with all federal, State, and local 
environmental health and safety codes. So that is a requirement 
that is in all of the contracts.
    To your second point, I think part of what we have found 
through our ongoing review is that the services at many of the 
installations have not done everything they could to perform 
oversight to make sure that that was happening.
    When it comes to things like incentives to really get the 
companies to pay attention, that is where there are problems in 
the contracts.
    Senator King. But I do not think they should be paid even 
the basic rent if they are not renting safe and habitable 
units. Forget about incentives.
    [Applause.]
    Ms. Field. The services do have the option of rescinding 
these contracts, and that is an option available to them.
    Senator King. My experience in this kind of work is that 
implementation is as important as vision. My sense is there are 
differences in the contracts, but clearly, as you say, there 
are basic provisions that they have to be safe and healthy. 
They have to meet codes. I believe, not having seen the 
contracts myself, but I believe that this is really mostly an 
implementation problem. Then my question is, who is in charge? 
Is it the base commander? Is it a base housing officer? Is it 
the Secretary of the Navy? Is it the Secretary of Defense? 
There has got to be somebody who can be held accountable here 
in what looks like endemic non-enforcement.
    Ms. Field. If I may, it is the Service Secretaries that 
signed the agreements with the companies. I would say that the 
Service Secretaries are ultimately responsible.
    Senator King. Ultimately responsible means not so 
responsible. I want somebody that can be fired.
    Ms. Field. I think that would have to be done on a case-by-
case basis.
    But I do want to point out two examples of where there was 
a break in leadership. At Camp Lejeune, for example, and at 
Tinker Air Force Base, we learned from the military housing 
offices that they had recommended to senior leadership, to 
NAVFAC [Naval Facilities Engineering Command] and to AFCEC [Air 
Force Civil Engineer Center], to withhold either part or all of 
the performance incentive for years and had never gotten 
support for that. So that is an example of where there was a 
break in leadership.
    Senator King. Was that the base command or was it regional 
command? I think part of something you all should do--the 
secretaries--is assign somebody who is in charge of this and 
hold them accountable. I do not know whether it can be one 
person at each base or it can be somebody in the Department or 
in the Army or the Air Force, the Navy. We have this diverse, 
diffuse responsibility, and therefore nobody really is held 
responsible.
    Secretary McCarthy, you have talked about the bill of 
rights. Can that be imported into these agreements without 
permission, if you will, or negotiation with the contractors? 
Is that something that can just be stuck into the agreements?
    Secretary McCarthy. We had to work through the language 
with the companies in question, Senator.
    With respect to your earlier comment, it is the chain of 
command on the installation. Those installation commanders in 
the Army's case had not been empowered.
    Senator King. Would that not be the logical place? It seems 
to me the base commander would be the logical place to lodge 
this responsibility.
    Secretary McCarthy. The senior commanders are now back part 
of the process, and they rate the garrison commander who 
manages the housing relations----
    Senator King. Is that true in the other departments? I am 
getting a yes. Let the record show affirmative nods.
    Secretary Barrett. Yes.
    Senator King. A final question, sort of a detailed question 
on this refinancing. I do not understand why they need our 
permission to refinance. I mean, people refinance all the time. 
If interest rates have gone down, they can go in, raise more 
capital. What is the holdup there?
    Secretary McCarthy. So in the contract, they have to have a 
scoring criteria for the projects, and that is managed by the 
Office of Management and Budget. What we referenced earlier is 
we would like to rescind the Raines memorandum from the 1990s 
so that we can adjust the scoring criteria so that they can go 
back to the capital markets to raise the capital.
    Senator King. So this is something that is within the 
control of the government. We can fix that. Does it take an act 
of Congress?
    Secretary McCarthy. No, Senator. We are working with the 
Office of Management and Budget on that.
    Senator King. Would you please let us know if that gets 
bogged down? Because that would be one way to get a lot of new 
capital into these projects.
    Secretary McCarthy. Yes, sir, I will.
    Senator King. Please.
    Thank you all very much.
    I would like for the record statements from the secretaries 
about where you are lodging the responsibility for the 
enforcement of these contracts, the name of the person, the 
position, and what the arrangements are to be sure that the 
enforcement takes place. You can have the best contract in the 
world. If it is not enforced and implemented properly, people 
are going to suffer for it, and that is exactly what has 
happened in this case. Thank you.
    [The information referred to follows:]

    Secretary Barrett. The Secretary of the Air Force has 
overall responsibility for the enforcement of the program, 
delegated down to the Assistant Secretary for Installations, 
Environment and Energy, then to the Deputy Assistant Secretary 
(Installations) and finally to the Air Force Civil Engineering 
Center (AFCEC). The AFCEC Program Manager and Military Housing 
Office exercise oversight responsibility at the project level. 
The Installation Commander then has responsibility for day-to-
day oversight at the base level and we are adding personnel at 
each installation to increase oversight.

    Secretary McCarthy. The administration of the MHPI within 
the Army is divided into three categories: 1) the Ground Lease, 
which is administered by the Director of Real Estate, United 
States Army Corps of Engineers; 2) oversight of MHPI Company 
Partnership Agreements is by the Deputy Assistant Secretary of 
the Army (Installations, Housing, and Partnerships); and 3) 
oversight of the implementation of MHPI Company Property 
Management Agreements is by the Commanding General, Army 
Materiel Command. The staffs of the responsible officials are 
engaged daily in monitoring privatized housing company 
performance and compliance with the applicable legal 
requirements.

    Secretary Modly. ``Senator King, as the Acting Secretary of 
the Navy, I am responsible for the formulation, implementation, 
and enforcement of policies and programs for the Navy and 
Marine Corps, to include privatized military housing. With that 
said, it takes a large team of dedicated civil servants to 
provide oversight for the Public Private Venture housing 
program and I have entrusted them to carry out my guidance 
towards continuous improvement in the program for our sailors, 
marines, and their families.''

    Thank you, Mr. Chairman.
    Chairman Inhofe. Do any of you feel that is an unreasonable 
expectation? Okay. We recorded the nods.
    Senator King. Affirmative nods.
    Chairman Inhofe. Yes.
    Senator Hawley?
    Senator Hawley. Thank you, Mr. Chairman.
    I want to start by also thanking the military families who 
are here, first of all, for your service to this country. Thank 
you for the sacrifices that you have made. Your servicemembers, 
your family members, thank you for doing what you have done to 
defend this country. Thank you for being here today. Thank you 
for making the trek and for showing up and for advocating.
    I just want to say that what you have been through, after 
the service that you have rendered to this country, is 
absolutely outrageous and it is absolutely unacceptable. It 
would not be acceptable for anybody to be treated like this in 
this way. But for you as servicemembers and families who are 
sacrificing day in and day out for this country, to have been 
through what you have been through is really a breach of faith 
in what this country owes to you. So thank you for being here. 
I am sorry for what you have been through, and you have my 
commitment that my office and I will do everything we can to 
see that this does not continue. So thank you for being here.
    Let me ask a few questions specifically about Fort Leonard 
Wood and Whiteman Air Force Base in my home State of Missouri. 
I want to start by saying that many military families in 
Missouri are worried that base housing on those installations 
may still be at risk. I want to thank the base leadership at 
both of those installations for doing their part to ensure that 
our servicemembers are getting high quality on base housing.
    But let me ask about some of the concerns that military 
families in the State have expressed to me. In particular, 
military families in Missouri have raised concerns to me that 
as Balfour Beatty and other companies shift their attention to 
fix problems in other States, that those companies might take 
their eyes off the ball in Missouri and let things slip.
    So, Secretary McCarthy, Secretary Barrett, let me ask you 
in particular. What are your services doing to ensure that Fort 
Leonard Wood and Whiteman, respectively, will not be short-
changed as these companies reallocate resources to address 
these glaring deficiencies elsewhere. Go ahead, Secretary 
Barrett. We will start with you.
    Secretary Barrett. Well, Balfour Beatty has had very poor 
performance in some settings, but very fine performance in 
others.
    The base commander having responsibility and authority over 
the housing topic will mean that there will be careful 
attention given to the local base by the local leadership. So 
distractions at other bases will not be a distraction from 
performance at Whiteman.
    Senator Hawley. Thank you.
    Secretary McCarthy?
    Secretary McCarthy. We are watching it very closely, 
Senator, and we will ensure that there is no change with the 
performance, if anything to improve it.
    Senator Hawley. Thank you.
    Let me ask both of you again. Secretary McCarthy, we will 
start with you maybe this time. Families in my State have also 
raised concerns about insufficient tenants? rights for 
servicemembers who live off base. With that in mind, I want to 
ask you what the Army is doing to ensure that military families 
have access to high quality off-base housing in Missouri and 
elsewhere. Can you address that?
    Secretary McCarthy. Specifically to Missouri, I would have 
to get back to you on that, sir. But in other instances like 
yesterday at Fort Belvoir, with respect to Fort Benning and 
Bragg and others that I visited over the last 90 days, 100 
days, they work very hard with the local communities to get 
additional opportunities for off-post housing. So we are doing 
this in all of our installations, and I will get back to you 
specifically on what we are doing at Fort Leonard Wood, sir.
    Senator Hawley. Thank you. I would appreciate that.
    Secretary Barrett, can I ask you the same question as 
regards Whiteman?
    Secretary Barrett. Off-base housing is covered--there is an 
allowance that members get. Maybe the chief would have further 
detail on that.
    General Goldfein. Yes, sir. As you know, we do routine 
housing allowance surveys, and we also go out and look at the 
basic allowance for housing.
    The Service Secretaries all signed a memo to governors last 
year. It was a really important memo that said as we are 
looking at your bases, there are two issues that are top shelf 
for our families, and that is, number one, reciprocity of 
licensure for spouses so as they move around the country they 
can continue to work, and the second is the quality of their 
schools. That letter has had a fairly significant impact, and I 
want to thank this Committee for all the work that has been 
done because it has definitely improved the quality of life for 
our spouses.
    Senator Hawley. Thank you.
    In my time remaining let me just, Ms. Field, ask you. At 
the current rate of decline of the housing inventory, I am 
wondering if you think the MHPI program is financially viable 
and will survive the full 50-year term.
    Ms. Field. The Department has determined that the MHPI 
portfolio across the board is healthy. We issued a report last 
year where we found that while the services had good mechanisms 
in place to assess the financial strength of the projects in 
the near term, they do not in the long term. So I think your 
concern is well founded.
    Quite frankly, though, what concerns me more is that there 
are more mechanisms in place for the services to assess the 
financial health of the projects and hold the partners 
accountable for financial health than there are for assessing 
and holding the partners accountable for the quality of the 
housing.
    Senator Hawley. Thank you for that. That is a very, very 
important point and something I think that we have absolutely 
got to rectify.
    Thank you, Mr. Chairman.
    Chairman Inhofe. Thank you.
    Senator Duckworth?
    Senator Duckworth. I just do not buy this argument that the 
chain of command cannot really be held accountable in the past 
because we have not empowered them to enforce these contracts 
because by nature of being in command or especially being a 
garrison commander, you are responsible. I mean, if you had 
troops in barracks where they come to complain that the ceiling 
is collapsing and hurting these soldiers and that garrison 
commander did nothing about it, you would hold him accountable. 
If you had a tank gunnery range, an aerial gunnery range, or 
outdoor gunnery range that was constantly hurting the troops 
who were operating that range and that range was not up to 
standard, that garrison commander would be held responsible for 
whether or not he--whatever contractor that was running that 
range for you and keeping it safe for our troops to use. So I 
do not understand why not a single garrison commander to my 
knowledge has yet been fired over a failure to maintain these 
standards.
    [Applause.]
    Senator Duckworth. Period. Okay, that is the past. Let us 
look forward.
    I would like to ask each of the Service Chiefs, is 
maintaining the highest quality of housing for your troops and 
their family members a line item on every person's evaluation 
report, all the way up the chain from garrison commanders up to 
and including yourself right now?
    Secretary McCarthy. Senator, it is not.
    Secretary Modly. It is at the flag level. We are looking at 
doing that down at the O-6 level and below.
    Senator Duckworth. So not so far.
    General Berger. No.
    Senator Duckworth. How many years has it been? Why is it 
not? Sorry, General.
    General Goldfein. No.
    Senator Duckworth. Well, I would like to recommend that it 
be on there for every single garrison commander and all the way 
up to and including the Service Chiefs because until you are 
being evaluated on it, you can just walk away. I have looked. I 
cannot find a single person who has been fired over this.
    Ms. Field, you look like you want to say something.
    Ms. Field. I do. Thank you.
    With all due respect to Secretary McCarthy, because I know 
this was not a decision that you made, I think it is important 
to point out that in 2013 the Army issued clear instruction to 
installation commanders and garrison commanders not to perform 
inspections of homes for the life, health, and safety of those 
servicemembers. That has since been reversed, but to me I can 
see how commanders during that time period would have been 
confused about what it was that they were and were not supposed 
to do because they were getting an instruction that told them 
not to perform inspections.
    Senator Duckworth. Well, I think that is a good point, and 
since that has been reversed, that is good, but that is not 
enough. I think it should be on their OERs [Officer Evaluation 
Reports] that they will be evaluated on this, period, for every 
single person up the chain.
    I want to touch on one other topic which is the family 
members who live in this housing--there is no safe level of 
lead especially for children to be exposed to. None.
    [Applause.]
    Senator Duckworth. Are we doing anything to track the 
children who have lived--the family members who have lived in 
these housing units? Are we keeping and maintaining a database 
so that we may track their health over the course of their 
lifetime so that they can themselves receive benefits and/or 
health care over the course of their lifetime? Because we know 
that children cannot be exposed to any level of lead safely. So 
what are we doing to protect the children and the family 
members in general who have lived in all of these housing 
units? Secretary McCarthy?
    Secretary McCarthy. Senator, we have the Army health 
registry. When the family members come forward and put that 
into the database, we can capture that data and then track each 
of these cases.
    Senator Duckworth. Does that come as part of the briefing 
for every single family member who moves into housing, that you 
should come forward?
    I feel like you should know and be able to track and have 
records of every single family member who has lived in every 
single one of these units in order to track them. I do not see 
why we are putting the responsibility on the family members. 
They have got enough on their plates. The services should be 
doing this, and we have those records.
    [Applause.]
    Senator Duckworth. Certainly the contractors do--right--
because we are paying them for it. So they know who lived in 
these housing units. Why are we not maintaining this? Have we 
done this for any of the services--a database?
    Chairman Inhofe. You are out of time.
    Secretary Modly. We are capturing that----
    Senator Duckworth. I am so sorry. Go ahead.
    Secretary Modly. Senator, we are capturing that information 
in the individual health record for members and their families. 
The challenge we have is if they go out and they go outside of 
the military health system for their health care, we do not 
have an ability to get that. So we are looking at developing a 
database to do that.
    Senator Duckworth. I am not talking about on the health 
care side. I am talking about you know who has lived in every 
single one of these housing units. You can go back into the 
housing records, not into the medical records, but into the 
housing records and make a list of every single person. We know 
every single person who has been stationed at Fort Bliss, at 
Fort Bragg, at wherever. Why do we not have a list of every 
single person that has lived in these units? We have them. Do 
not put it on the family members and on the medical side to 
wait until the health condition happens. Do it on the front end 
so that everybody can--later on some child comes up and has a 
problem, they can say, hey, I was at Fort Bragg. They are in 
the system without them having to come forward.
    Secretary Modly. We will do that.
    Senator Duckworth. I am out of time. I yield back.
    Chairman Inhofe. Thank you, Senator Duckworth.
    Anything further? Any other member? Any other comment?
    [No response.]
    Chairman Inhofe. All right. First of all, as I mentioned in 
my opening statement, we will have another housing hearing as 
early as possible next year. At a minimum, we need the 
companies back, maybe even some of the new ones that seem to be 
part of this problem, and the services so that you can let us 
know and we can reflect on, if we ever get our NDAA passed, the 
language, and we are out of time, so that is a serious problem.
    First, I do want to thank all the--it is a very large 
number of people who went to a lot of inconvenience to be here. 
You have been heard and you have heard us, and so I appreciate 
very much your being here.
    The record will stay open until close of business 
Wednesday, December 4, for any additional questions.
    Now, what I would ask of our witnesses respond no later 
than Friday, December 20. Do I have your commitment to respond 
to the Committee's additional questions by that time? All of 
you nod.
    Secretary McCarthy. Yes, Senator.
    Secretary Modly. Yes.
    Secretary Barrett. Yes, sir.
    Chairman Inhofe. That is good. I appreciate it very much. I 
appreciate your testimony, and I thank you very much.
    We are adjourned.
    [Whereupon, at 11:34 a.m., the Committee adjourned.]

    [Questions for the record with answers supplied follow:]

             Questions Submitted by Senator Roger F. Wicker
                     keesler air force base housing
    1. Senator Wicker. Secretary Barrett, how many different air 
conditioning contractors were used during construction of base housing 
units at Keesler Air Force Base?
    Secretary Barrett. The Air Force does not have records for the 
number or names of the air conditioning subcontractors used during the 
original pre-privatization construction in 2007, 2008 and 2009.

    2. Senator Wicker. Secretary Barrett, has the Air Force identified 
the reason(s) why repair work on homes at Keesler Air Force Base proved 
to be unsuccessful in eliminating mold and moisture issues?
    Secretary Barrett. Yes. Most of the moisture and mold was 
associated with improperly insulated ducts in the attics resulting in 
duct sweating. Duct repairs in one section often caused increased air 
flows and resultant duct sweating in a new location. The improperly 
insulated ducts were not in all the homes, and were not readily 
visible. We believe a new maintenance approach will cause fewer mold 
issues, thereby minimize future family relocations.

    3. Senator Wicker. Secretary Barrett, why do some home repairs take 
four, six, or eight weeks to complete when families are told they will 
only take two weeks?
    Secretary Barrett. Because dozens of homes were undergoing 
simultaneous remediation and many homes required unanticipated work, 
schedules changed. The project owner's numerous customer service 
representatives did not share schedule information. The project owner 
is now expediting remediation and has a plan for more effective 
communication to dislocated families.

    4. Senator Wicker. Secretary Barrett, are any repairs actually 
completed in two weeks?
    Secretary Barrett. Some are actually completed in two weeks, but 
most are not due to the extensive additional work required. In these 
cases, it is imperative that we take the time necessary to fully 
remediate.

    5. Senator Wicker. Secretary Barrett, why are residents at Keesler 
Air Force Base telling their neighbors that units that have been 
vacated often go days without workmen being present?
    Secretary Barrett. The large number of units under simultaneous 
remediation created schedule conflicts and workman shortages. In 
November, the project owner added Quality Assurance Managers to assist 
with scheduling to reduce displacement times. The project owner is 
expediting remediation and has a plan to more effectively communicate 
with dislocated families.
                               __________
               Questions Submitted by Senator Thom Tillis
                  alternative construction techniques
    6. Senator Tillis. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, as the projects within your services' purview begin 
to rebuild or replace homes that poor condition, what consideration 
have your departments given to leveraging new technologies, such as 
cross-laminate timber, mass timber, or timber-frame construction that 
could provide enduring environmental, aesthetic and health benefits to 
military families while also reducing construction time and labor 
costs?
    Secretary McCarthy. The Army collaborates with MHPI project 
companies during project development to ensure new construction 
technologies are considered and applied, especially those with direct 
impacts on the quality of life for families. The Army evaluates new 
construction technologies on a regular basis and coordinates with Navy 
and Air Force for appropriate design and construction implementation 
for our owned inventory. The use of Cross Laminated Timber (CLT), mass 
timber, and timber-frame construction techniques are evaluated on a 
project-by-project basis. The DOD developed a Designer's CLT guide for 
these technologies, which are typically used for larger, multi-family 
complexes such as transient lodging. For example, Privatized Army 
Lodging (PAL) built CLT hotels at Redstone Arsenal, Fort Drum, and 
Joint-Base Lewis McChord. Currently, PAL has two additional CLT hotels 
under construction at Fort Jackson.
    Secretary Modly. The Department of the Navy (DON) works with the 
managing member to define the requirements and scope for new 
construction as well as any renovation work. It is in the interest of 
the DON and the managing member to continuously innovate and use 
materials that sustain the inventory over the long-term. Currently, 
projects are incorporating anti-fungal paint in water sensitive areas, 
composite decking for deck replacements, and improved bathroom 
ventilation fans.
    Secretary Barrett. The Air Force encourages the use of new 
technologies.
                    use of non-disclosure agreements
    7. Senator Tillis. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, non-disclosure agreements (NDAs) have been used by 
private housing providers to intimidate tenants and suppress reporting 
of their unsatisfactory performance. NDAs have been used in 
``settlements'' for merely hundreds of dollars, or a half month's rent, 
but also in conjunction with otherwise fair and just settlements. Under 
what circumstances should NDAs be an acceptable component of a 
settlement agreement between military families and privatized housing 
providers, and what constraints or restrictions should be placed on 
their scope?
    Secretary McCarthy. Dispute settlement agreements containing non-
disparagement and non-disclosure clauses are frequently used in 
industry to avoid or minimize the cost of protracted civil litigation, 
and are appropriate where the payer sees value in preserving the 
confidentiality of the settlement terms for a number of reasons. Army 
issued guidance to privatized housing partners in March 2019 which 
states that non-disclosure clauses are only to be used as part of 
agreements to settle a dispute with a tenant in which litigation was 
either threatened or was ongoing, and are never to be required for a 
tenant to receive maintenance or other services, or to limit a 
servicemember's ability to used privatized housing in the future. Non-
disclosure clauses in settlement agreements should not be written in a 
manner that prohibits or discourages the reporting of substandard 
housing conditions to the Army or any other entity that may have 
regulatory or oversight jurisdiction over the housing company. Non-
disclosure agreements will not be used as a requirement to obtain 
services.
    Secretary Modly. Per written Department of the Navy (DON) guidance, 
non-disclosure agreements (NDA)/confidentiality agreements are not used 
during the regular course of business, to include move-in/move-out, 
routine maintenance, and service call response. They may be used to 
settle a significant or contentious dispute that results in monetary 
payment to the resident or where the privatized housing provider waives 
damages owed by the resident. The DON informed its partners in writing 
in June 2019 that it should be notified when an NDA or a similar type 
of document (e.g. confidentiality agreement and/or a release of claims 
agreement) is used to settle a dispute. In November 2019, the DON 
issued formal guidance on the use of NDAs/confidentially agreements, to 
include expected notifications to the DON.
    Secretary Barrett. In addition to the restrictions from the fiscal 
year 2020 NDAA on NDAs, the Air Force prohibits NDAs when a military 
member chooses to lease a home of lesser grade or as a pre-condition 
for maintenance work. If an Airman or military retiree is asked to 
enter into an NDA, their Staff Judge Advocate is available to provide 
legal assistance.
                   unit chain-of-command involvement
    8. Senator Tillis. General McConville, General Berger, Admiral 
Gilday, and General Goldfein, what directives have been issued to unit 
commanders regarding their involvement in base housing?
    General McConville. The SA, CSA, and SMA issued a tri-signed letter 
that charged senior commanders to actively monitor the condition of 
housing (family and unaccompanied housing, whether Army-owned, Army-
leased or privatized) for health, safety, and environmental issues of 
concern. The letter empowered commanders and noncommissioned officers 
throughout the chain of command to routinely visit housing units and 
check on living conditions with appropriate notice and the consent of 
servicemembers and their families. Where life, health, and safety 
issues exist in privatized housing, it requires senior commanders to 
work with MHPI project companies and their property management service 
providers to immediately remediate the condition and/or to relocate 
residents to temporary quarters. It also directed senior commanders to 
personally conduct town halls, in collaboration with the MHPI company 
representatives, to give families a forum to voice housing concerns. 
Senior commanders were directed, and have completed, visits to all 
installation housing to assess the scale and scope of housing issues 
and to report their assessment up through the chain of command.
    Senior commanders also were directed to expedite housing inspector 
hiring efforts and to increase the frequency of ``post-maintenance work 
order'' quality inspections to ensure maintenance was completed to 
standard and met resident expectations. Commanders are inspecting 100 
percent of homes between tenant changes of occupancy.
    Finally, senior commanders were directed to make sure all actions 
taken to ensure the health and safety of our soldiers and family 
members are documented. Our commanders and leaders continue to inspect 
100 percent of all life, health, and safety work orders and a 10 
percent sample of routine work orders. Temporarily relocated housing 
residents should return to their permanent residence only after the 
senior commander deems that appropriate corrective actions are in 
place.
    General Berger. The Marine Corps has issued refined Command 
Guidance to Installation Commanders advising of the need to support our 
marines, sailors and their families by ensuring that residents receive 
quality housing at our installations and affirming our commitment to 
their well-being. In support of this, Installations Commanders have 
been directed to: 1) conduct regular meetings with housing personnel, 
the PPV partners and Business Agreements managers to review housing 
issues including health and safety concerns, housing trends and 
resident satisfaction concerns, 2) promote annual resident satisfaction 
surveys to maximize resident participation, 3) validate PPV provided 
metrics by conducting spot checks on work orders, move ins/move outs, 
4) promote use of the mobile maintenance app, 5) conduct resident 
advisory boards quarterly, 6) review PPV budgets, 7) conduct regular 
site assessments, and 8) provide input on incentive fees. All of these 
actions are intended to ensure that Installation Commanders are 
actively engaged with our residents and knowledgeable of their housing 
concerns.
    Separately, Marine Corps Order 11000.22 Ch 1, Marine Corps Bachelor 
and Family Housing Management, will be updated upon the completion of 
negotiations pertaining to the Bill of Rights, resident 
responsibilities, universal lease, incentive fee structure, disputes 
process, roles and responsibilities of Commanders, and guidance for 
health and safety.
    Admiral Gilday. Navy leadership released a Naval Administrative 
Message on February 23, 2019, directing division officers to personally 
ask every sailor in their unit if their living quarters were 
satisfactory, and to raise any identified issues to the chain of 
command. Sailors were also asked if they wanted a housing visit so 
leaders in their command could visually inspect any problems the sailor 
and their family are experiencing. Ensuring the wellbeing of our 
sailors and their families remains one of my top priorities and I 
expect chain of command involvement at the deckplate level to resolve 
any housing-related concerns through existing processes.
    General Goldfein. On 1 April 19, the Secretary of the Air Force, 
the Chief of Staff of the Air Force, and the Chief Master Sergeant of 
the Air Force issued a letter reiterating and clarifying commanders' 
responsibilities to ensure the safety and welfare of airmen. The Air 
Force issued guidance to commanders related to moisture and mold in 
privatized homes, tenant access to legal assistance for housing issues, 
establishment of Resident Councils, and their role in management review 
committees. Wing commanders are now briefed on their roles and 
responsibilities in privatized housing.

    9. Senator Tillis. General McConville, General Berger, Admiral 
Gilday, and General Goldfein, what cultural, legal, or other obstacles 
are limiting the unit chain-of-command from getting involved in 
military housing issues at the lowest levels?
    General McConville. Throughout the process of privatizing its 
housing, the Army never ceded any of its authority and responsibility 
for ensuring the protection of life, health, and safety on its 
installations. Over time, however, the failure to properly communicate 
that precept throughout the Army chain of command resulted in a widely 
held and mistaken belief that the Army lacked authority to ensure that 
soldiers and families lived in safe and habitable MHPI housing. The 
Army has aggressively attacked this misperception at multiple levels to 
ensure commanders, officers, and NCOs at every level understand that it 
remains their personal responsibility as Army leaders to assist and 
advocate for soldiers who are encountering housing habitability issues.
    General Berger. Based on current contractual obligations, 
Commanders do not have the ability to withhold incentive fees or to 
direct Partners to address issues that would otherwise affect the 
safety and health of our Military Families. Business agreements must be 
negotiated to address the following: 1) the disputes resolution 
process, 2) the revised incentive fee structure, and 3) the universal 
lease. There is also a need to clearly define Service and Commander 
roles and responsibilities without impacting PPV partner 
responsibilities outlined in the business agreements (potential legal 
implications).
    Admiral Gilday. I am aware of no cultural, legal, or other 
obstacles which exist that limit the chain of command involvement in 
military housing issues impacting our sailors. I expect the chain of 
command to be proactively engaged and to notify me of any difficulties 
they encounter.
    General Goldfein. No hurdles preclude unit chain-of-command 
involvement. During the initial phase of the projects, installation 
commanders were told that privatized housing involved business 
agreements, not command contracts, so modifications required higher-
level review. We did not adequately explain their enduring 
responsibility to care for airmen and families in privatized housing. 
We have since made meaningful changes to the privatized housing program 
to empower commanders, including training, establishing Resident 
Councils, and increasing their input in assessing the performance 
incentive fee.
                        leverage in negotiations
    10. Senator Tillis. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, do your services and departments have adequate 
leverage or authority to negotiate effectively with privatized housing 
providers to ensure that those providers satisfactorily fulfill their 
obligations?
    Secretary McCarthy. While the MHPI project companies are the direct 
managers of the program at each installation, the Army's concurrence is 
required for annual budget approval, use of Reinvestment Account funds, 
and other major decisions. The Army also has authority over the MHPI 
project companies as the ``landlord'' via the Ground Lease, which 
delineates the regulatory requirements for occupying land and 
facilities on each installation. Through financial oversight and ground 
lease administration, the Army's ability to affect direction and 
decisions within the MHPI companies is adequate to ensure that the 
Army's needs are met.
    Secretary Modly. The Department of the Navy believes it has 
adequate and appropriate leverage and authority to negotiate 
effectively with providers to ensure they fulfill their obligations.
    Secretary Barrett. The Air Force has adequate leverage and 
authority to negotiate with project owners. We place underperforming 
project owners on corrective action plans, require performance 
improvement plans, withhold performance incentive fees, require 
independent audits of work orders, and if appropriate, initiate formal 
action under the dispute provisions of the project documents.
     contract termination for under-performing private contractors
    11. Senator Tillis. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, what consideration has been given to terminating 
contracts with housing providers who fail to meet expectations, what 
steps, if any, have been taken to begin termination proceedings for any 
of these projects, and what additional authorities or resources would 
be required to do so?
    Secretary McCarthy. The MHPI legal documents provide the Army with 
the necessary authorities to address issues associated with substandard 
MHPI performance. The Army continuously evaluates the performance of 
MHPI service provider companies (e.g., property managers) and refers 
substandard service issues to the attention of the MHPI project company 
(i.e., managing member company) for action. If the Army fails to see 
sufficient efforts to correct substandard performance, the Army will 
request that the MHPI managing member company terminate the MHPI 
service provider company in question. If the MHPI managing member 
company fails to take appropriate action against a substandard MHPI 
service provider company, the Army can take action to replace the MHPI 
managing member company and the MHPI service provider company in 
question.
    The Army has not encountered a situation where a deficient MHPI 
service provider company has failed to make commercially reasonable 
efforts to resolve their performance deficiencies as they have the 
right to do under the terms of their service contract.
    Secretary Modly. The Department of the Navy (DON) does not require 
additional authorities or resources to effectively negotiate with 
providers. No projects are currently under consideration for 
termination of the property manager or Managing Member. The DON 
continues to assess Public Private Venture provider performance and 
will enforce all of its rights under its agreements, including 
implementing the right to terminate where warranted.
    Secretary Barrett. The Air Force placed underperforming project 
owners on corrective action plans, required performance improvement 
plans, withheld performance incentive fees, required independent audits 
of work orders, and if appropriate, could initiate formal action under 
the dispute provisions of the project documents. Allegations that may 
be criminal in nature are referred to the Air Force Office of Special 
Investigations (AFOSI). For the sake of providing healthy and safe 
homes for airmen and their families, we want project owners to comply 
with the terms and conditions of our ground leases and for the projects 
to be successful.
             bolstering government housing office capacity
    12. Senator Tillis. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, how do you plan to strengthen the capacity and 
effectiveness of government housing offices to advocate for tenants and 
hold private contractors accountable, and what additional resources do 
those plans require?
    Secretary McCarthy. The Army hired an additional 114 housing 
professionals to provide oversight and resident advocacy for the MHPI 
and support for soldiers and families living in privatized housing. 
IMCOM HQ will complete a manpower study in fiscal year 2020 to validate 
the new staffing requirements due to additional responsibilities at 
each installation housing office.
    The Army established 24/7 housing hotlines at all installations to 
support residents. Housing management specialists respond to queries 
and concerns coming from owned/privatized family housing as well as 
from barracks residents. The Army is working to establish a formal 
housing management specialist certification program, which will improve 
staff effectiveness across the housing portfolio. The Army also 
implemented new inspection standards and oversight tasks to hold MHPI 
companies accountable.
    Secretary Modly. The Department is hiring additional staff for 
housing offices' administrative support, home inspections, and 
maintenance to increase responsiveness and performance. We appreciate 
the Committee's support to fund an additional 183 personnel in Navy 
housing offices and an additional 114 personnel in Marine Corps housing 
offices by including authorizations in the Fiscal Year 2020 National 
Defense Authorization Act. Our ability to maintain momentum relies on 
critical resources dependent on the enactment of fiscal year 2020 
appropriations. We are also re-evaluating Housing Condition Assessments 
and Program Review processes, updating policies, procedures, roles and 
responsibilities, and implementing lessons learned on an ongoing basis.
    Secretary Barrett. We are nearly doubling our housing manpower by 
adding 218 housing positions, to include a new Resident Advocate 
position at each base. These positions will improve oversight and 
quality assurance of the housing portfolio, enabling Military Housing 
Offices to achieve 100 percent participation in pre-leasing 
inspections, validate completion of all health and safety work order 
requests, and audit 30 percent of urgent work order requests. 
Additionally, we expanded the toll-free 1-800 line to 24/7, 365 days a 
year and established Resident Councils for airmen to raise concerns. As 
part of the tenant's Bill of Rights, we will establish a dispute 
resolution process with a significant commander role.

    13. Senator Tillis. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, what steps have been taken to ensure that government 
housing representatives are clearly distinct in appearance, role and 
responsibility from representatives of private contractors?
    Secretary McCarthy. While government housing representatives do not 
wear distinctive uniforms, they do have clearly defined roles and 
responsibilities that are separate and distinct from MHPI 
representatives.
    Government housing professionals now receive specific training on 
MHPI operations and oversight. Permanent change of station orders 
direct soldiers and their families to government housing offices, where 
trained housing staff provide information on all leased housing options 
(on post and off post) at their next duty station. Our uniformed 
Garrison Commanders, along with the unit chains of command, have taken 
ownership of ensuring all installation tenants have the best housing 
and are continuously engaging and educating installation populations. 
In addition, new signage has been installed outside each government 
housing office to clarify that it is staffed by government personnel 
and is separate from the housing office managed by the MHPI project.
    Secretary Modly. The Department is ensuring government personnel 
working in installation housing offices have nametags, signage, and, in 
some cases, apparel that clearly indicate they are government personnel 
and not associated with the Public Private Venture property manager.
    Secretary Barrett. We revised Air Force policies to direct that 
signage clearly distinguishes Military Housing Offices from Privatized 
Housing Offices. As of 1 Feb 20, 54 of 63 locations have distinctive 
signage or are not collocated, and 62 of 63 have a private counseling 
area. Additionally, our senior leaders check to ensure this policy is 
being implemented during visits to our bases.
                               __________
              Questions Submitted by Senator Dan Sullivan
                     performance incentive payments
    14. Senator Sullivan. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, while there are certainly systemic problems with 
privatized housing that need to be addressed, there are some privatized 
housing projects--such as those in Alaska--that are maybe doing better 
than others. How can we realign aspects of the program like performance 
incentive payments to incentivize better performance from those 
companies falling short while enabling companies that are doing well to 
continue to do so?
    Secretary McCarthy. The Army negotiated for one common set of 
Incentive Performance Management Plan (IPMP) metrics for all of its 
seven MHPI managing member companies starting on January 1, 2020. The 
revised metrics contain significant revisions. For instance, 75 percent 
of the Property Management Company's score will now be generated by 
resident satisfaction, work order quality, and responsiveness with the 
remainder based on garrison commander discretion (10 percent) as well 
as the property manager meeting financial reporting (5 percent) and 
financial performance (10 percent) requirements.
    Secretary Modly. The Department of the Navy (DON) will be 
implementing the revised Office of the Secretary of Defense incentive 
fee structure to standardize property management incentive fees across 
the portfolio. Oversight of performance will be enabled by metrics, 
increased staffing, and elevated approval levels for incentive fee 
payments. Navy housing personnel now have unfettered access to the 
partner's maintenance systems to perform quality assurance checks, 
trend analysis, and to look for anomalies. In addition, the Navy 
recently deployed its own Public Private Venture (PPV) Electronic Data 
Warehouse and PPV Dashboards focusing installation oversight on command 
reportable items and metrics that better measure resident satisfaction. 
Using this new system, installation and region Housing Offices are now 
able to pull work order data directly from partner maintenance systems 
in order to perform monthly review of electronic maintenance records, 
monitor performance by installation/neighborhood, and to conduct random 
spot-checks with residents to confirm work is complete. The Marine 
Corps is working with the Navy to leverage their contract in order to 
provide identical reports for the Marine Corps leadership.
    Secretary Barrett. The Air Force developed a performance incentive 
fee framework that incentivizes project owners to achieve high customer 
and commander satisfaction by delivering timely and quality 
workmanship.

    15. Senator Sullivan. Ms. Field, while there are certainly systemic 
problems with privatized housing that need to be addressed, there are 
some privatized housing projects--such as those in Alaska--that are 
maybe doing better than others. How would the Government Accountability 
Office recommend realigning aspects of the program like performance 
incentive payments to incentivize better performance from those 
companies falling short while enabling companies that are doing well to 
continue to do so?
    Ms. Field.In our recently issued report, \1\ we stated that most of 
the privatized housing projects' business agreements include the option 
for the private partners to receive annual or quarterly performance 
incentive fees based on achieving the performance metrics established 
in each individual project's business agreement. \2\ These fees are 
intended to incentivize private partner performance and can be withheld 
in part or in total if the private partner fails to meet the 
established metrics. Further, these fees are project-specific and are 
commonly measured through four key metrics--resident satisfaction, 
maintenance management, project safety, and financial management. The 
weight each performance metric and underlying indicator carries toward 
the incentive fee varies by project, so incentive fees for some 
projects may be heavily dependent on financial performance, while 
others may be more heavily weighted toward resident satisfaction. To 
determine how well the private partners are performing under these 
metrics, military housing office officials rely on a range of 
indicators established in the project business agreements. However, we 
found that the indicators underlying the metrics designed to focus on 
resident satisfaction and on the quality of the maintenance conducted 
on housing units may not provide meaningful information or reflect the 
actual condition of the housing units.
---------------------------------------------------------------------------
    \1\ GAO, MILITARY HOUSING: DOD Needs to Strengthen Oversight and 
Clarify Its Role in the Management of Privatized Housing, GAO-20-281 
(Washington, D.C.: Mar. 26, 2020).
    \2\ Most, but not all, of the private partners are eligible to 
receive performance incentive fees based on achieving the performance 
metrics established in each individual project's business agreement. We 
have determined that 5 of the 79 privatized housing projects, as of the 
end of fiscal year 2017, did not have an established incentive fee 
plan. The projects are Fort Carson, Colorado; Hill Air Force Base, 
Utah; Dyess Air Force Base, Texas; Robins I Air Force Base, Georgia; 
and Robins II Air Force Base, Georgia.
    OSD and military department officials have also recognized that the 
current indicators for measuring performance do not consistently focus 
on or prioritize the private partners' performance and have begun to 
take steps to address identified shortfalls. In October 2019, the 
Office of the Secretary of Defense (OSD), in collaboration with the 
military departments and private partners, issued new guidance 
standardizing the performance incentive fee framework across the 
military departments. The new guidance provides a framework for 
standardizing the minimum and maximum percentages of the fee that each 
metric can account for, allowing for some flexibility in the weight 
each metric will carry for an individual project. However, at the time 
of our report these officials indicated that they had not yet 
reevaluated the specific indicators used to determine whether a private 
partner has met a specific metric, resulting in a lack of assurance 
that the information the military departments are using to award these 
incentives reflects the actual condition of the housing. Thus, we 
recommended that each military department take steps, in collaboration 
with their Military Housing Privatization Initiative (MHPI) project 
partners, to review the indicators underlying the MHPI housing project 
performance metrics to ensure they provide an accurate reflection of 
the condition and quality of the homes, and thus are appropriately 
rewarding private partner performance. Each military department 
concurred with this recommendation, and outlined actions being taken to 
improve oversight of private partner performance. Implementing this 
recommendation will ensure that the indicators driving these metrics 
accurately reflect private partners' performance in maintaining the 
condition and quality of privatized homes and better position DOD to 
hold private partners accountable in a more meaningful way. Moving 
forward, we will closely monitor the Department of Defense's (DOD) 
implementation of our recommendation.
---------------------------------------------------------------------------
                               __________
             Questions Submitted by Senator Martha McSally
         mechanisms for terminating a housing project contract
    16. Senator McSally. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, since these problems with the privatized housing 
program came to light, it seems that the 14 housing contractors have 
been able to drag their feet on correcting these problems because they 
are not afraid of having their contracts terminated. What legal 
mechanisms exist in their leasing contracts allow for your service 
branch to terminate the contract with a certain privatized housing 
contractor (if any)?
    Secretary McCarthy. As a part owner of the companies that own the 
privatized military housing, the Army can require the MHPI managing 
member companies to require deficient MHPI service providers to either 
cure the defects in their performance or have their contracts with the 
MHPI managing member company terminated. The Army is also the ground 
lessor for the MHPI companies that own and operate housing located on 
Army installations. If a MHPI company fails to satisfy its obligation 
to operate habitable housing, the Army can terminate the MHPI company's 
ground lease and reacquire ownership of all of the housing located 
within the leasehold. The Army's right to terminate a MHPI company's 
ground lease, however, is subject to the rights of both the MHPI 
company, and the MHPI company's lenders, to cure the conditions that 
would lead the Army to claim that the MHPI company is in default.
    Secretary Modly. The governing agreements for Department of the 
Navy (DON) privatization projects provide several mechanisms for the 
DON to address instances of unacceptable performance or, when 
necessary, default. 1. Removal of Property Manager: In the event of 
unacceptable performance by a property manager, governing project 
agreements give the DON the right to direct the company to terminate 
the property management agreement and replace the property manager 
without terminating the LLC agreements or removing the managing member. 
2. Issue Cure Notice to Managing Member: In cases where the managing 
member has defaulted on its obligations, the DON can issue a written 
cure notice. According to project operating agreements, default events 
include the violation of any provision of the agreement. The cure 
notice serves to set the timeline to remedy or cure such violation. 3. 
Default Managing Member: The DON has the right to default the managing 
member of the LLC. A replacement managing member would assume all 
rights and obligations of the managing member and the existing LLC 
entity construct would continue to own and operate the housing. 
Alternatively, the DON may cause the project or the managing member's 
interest to be sold to a third party in accordance with the terms of 
the agreements. Either remedy must be coordinated with the bondholder. 
4. Terminate the Project: In an extreme case, where the DON is unable 
to replace the managing member, the ground lease may be terminated and 
the project entity itself may be dissolved and liquidated. The 
bondholders would require debt repayment for which the government could 
be potentially liable. The DON would be responsible for ownership and 
operation of the housing project. In the event of Government re-
acquisition, resident leases would be terminated and payment of BAH to 
military members ceased in accordance with 37 U.S.C. Section 403. Per 
fiscal law (10 U.S.C. Section 2821), sufficient appropriated resources 
would be required to sustain the housing for military families. 
Although the circumstances did not reach the event of a default, in 
2007 the DON caused the managing member's interest in the LLC to be 
sold to a third party in the Navy's Pacific Northwest project. That 
third party stepped in and assumed ownership and operation of the 
housing without disruption to the residents.
    Secretary Barrett. When project owners underperform, the Air Force 
puts them on corrective action plans, requires performance improvement 
plans, withholds performance incentive fees, requires independent 
audits of work orders, and if appropriate, would initiate formal action 
and exercise our contractual rights to demand failures be cured. A 
failure to cure may result in default and have serious financial and 
operational consequences for a housing project. Once an event of 
default exists, the private lender controls project cash flow. The Air 
Force would then ensure the project owner meets its obligation to 
provide safe and habitable homes while the parties determine a path 
forward. If no agreement is reached, an event of default can lead to 
termination of the property management agreement and/or the ground 
lease.

    17. Senator McSally. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, if a service branch were to end a privatized housing 
contract, what would happen the next day?
    Secretary McCarthy. If the Army terminated a MHPI company's ground 
lease for a default that had not been cured, the Army would become the 
owner of all of the housing within the leasehold with immediate 
responsibility to oversee, operate, and maintain the housing. Leading 
up to a default termination, the Army, at minimum, would need to 
consider the fair market value of the project, funding to repay private 
debt and prepayment penalties as applicable, any outstanding balance of 
any government direct loans, and other relevant costs to include 
litigation costs.
    Secretary Modly. In the event of a default, there are two 
scenarios. 1. Department of the Navy (DON) could cause the default and 
replacement of the managing member without terminating and liquidating 
the overall privatization project business entity. Under this scenario, 
the new managing member assumes all the obligations under the terms of 
the governing project agreements. Other than any transitional 
administrative requirements associated with the transfer of ownership, 
the effects on sailors, marines, and their families would be 
negligible. 2. In an extreme case, where the DON is unable to replace 
the managing member, the ground lease could be terminated and the 
project entity itself could be liquidated. The bondholders would 
require debt repayment for which the government could be potentially 
liable. The DON would be responsible for ownership and operation of 
housing project. In the event of Government re-acquisition, resident 
leases would be terminated and payments of the Basic Allowance for 
Housing to military members would cease in accordance with 37 U.S.C. 
Section 403. Per fiscal law (10 U.S.C. Section 2821), sufficient 
appropriated resources would be required to sustain the housing for 
military families. Residents may see changes in the service and 
maintenance levels and property management policies.
    Secretary Barrett. The lengthy process to end a privatized housing 
ground lease is governed by the dispute resolution language found in 
the transactional documents within each agreement. In previous 
instances when our business relationships with project owners have 
ended, these projects were bought out by other companies. While in the 
dispute resolution or buy-out process, there could be a degradation of 
service to our residents. Upon an event of default, private lenders 
have rights pursuant to the intercreditor agreements executed at 
closing. Private lenders have six months to cure the events of default, 
working with the Air Force and project owners to develop a mutually 
acceptable path forward. Private lenders may pursue any of the 
following: seek a state or federal court order requiring the project 
owner to perform certain obligations under the project documents; take 
possession of the project and assume full responsibility for its 
completion and/or operation; seek the appointment of a receiver in 
state or federal court to take possession of the project; terminate 
management agreements and require the project owner to hire another; or 
seek reimbursement from the project owner for all costs incurred for 
repairs and maintenance.

    18. Senator McSally. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, what immediate impact would that have on the 
tenants, the housing project, and the service branch?
    Secretary McCarthy. By law, the Army can only use funds 
appropriated for operating and maintaining Army Family Housing. The 
amount of funding currently appropriated for Army use is only adequate 
for the Army's current inventory of government owned and operated 
family housing. As a result, if the Army terminated a MHPI company's 
ground lease agreement without previously being appropriated 
supplemental Army Family Housing operational and maintenance funding, 
then Army would potentially lack the necessary resources to operate and 
maintain the family housing it reacquires upon the termination of the 
MHPI company's leasehold. Termination of the lease would also result in 
the completion of the MHPI project company's obligations consistent 
with the terms of the company's operating agreement.
    Secretary Modly. In the event of the replacement of one managing 
member with another, without the dissolution or liquidation of the 
overall business entity, the impacts on tenants should be negligible. 
Those impacts would include changes related to the transition of 
ownership (e.g., revisions to leases, changes in personnel, contact 
numbers, etc.). Because the governing project's agreements would remain 
in effect, there would be no immediate impact on the housing project 
and the entity's obligations and requirements would remain the same. 
The rents paid by military residents would not change. There would be 
no significant impact to the Department of the Navy or to sailors, 
marines, and their families. In the event of the termination of the 
ground lease and the dissolution and liquidation of privatized housing 
business entity and the Governmental assumption of ownership of the 
housing, the immediate impact on residents would be the termination of 
their Basic Allowance for Housing in accordance with 37 U.S.C. Section 
403. Per fiscal law (10 U.S.C. Section 2821), sufficient appropriated 
resources would be required to sustain the housing for military 
families. The longer-term impact would be the need for this new 
resource requirement to compete for Navy and Marine Corps financial and 
personnel resources. Residents may see changes in the service and 
maintenance levels and property management policies.
    Secretary Barrett. Once an event of default exists, the private 
lender controls project cash flow. This would adversely impact the 
quality of housing by limiting the funds available for maintenance.

    19. Senator McSally. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, what next steps would that service need to take to 
replace that contractor/partner?
    Secretary McCarthy. In the Army's privatized housing transactions, 
the replacement for a MHPI service provider company is selected by the 
MHPI managing member company, subject to the approval of the Army and 
the MHPI managing member company's lender/bondholders.
    Secretary Modly. The governing agreements for Department of the 
Navy (DON) privatization projects provide several mechanisms for the 
DON to address instances of unacceptable performance or, when 
necessary, default. The language of the business agreements provides 
the framework and steps DON would take to address unacceptable 
performance. The available steps include: 1. Removal of Property 
Manager: In the event of unacceptable performance by a property 
manager, governing project agreements give the DON the right to direct 
the company to terminate the property management agreement and replace 
the property manager without terminating the LLC agreements or removing 
the Managing Member. 2. Issue Cure Notice to Managing Member: In cases 
where the Managing Member has defaulted on its obligations, the DON can 
issue a written cure notice. According to project operating agreements, 
default events include the violation of any provision of the agreement. 
The cure notice serves to set the timeline to remedy or cure such 
violation. 3. Default Managing Member: The DON has the right to default 
the Managing Member of the LLC. A replacement Managing Member would 
assume all rights and obligations of the Managing Member and the 
existing LLC entity construct would continue to own and operate the 
housing. Alternatively, the DON may cause the project or the Managing 
Member's interest to be sold to a third party in accordance with the 
terms of the agreements. Either remedy must be coordinated with the 
bondholder. 4. Terminate the Project: In an extreme case, where the DON 
is unable to replace the Managing Member, the ground lease may be 
terminated and the project entity itself may be dissolved and 
liquidated. The bondholders would require debt repayment for which the 
government could be potentially liable. The DON would be responsible 
for ownership and operation of the housing project. In the event of 
Government re-acquisition, resident leases would be terminated and 
payment of Basic Allowance for Housing (BAH) to military members ceased 
in accordance with 37 U.S.C. Section 403. Per fiscal law (10 U.S.C. 
Section 2821), sufficient appropriated resources would be required to 
sustain the housing for military families. Although the circumstances 
did not reach the event of a default, in 2007 the DON caused the 
Managing Member's interest in the LLC to be sold to a third party in 
the Navy's Pacific Northwest project. That third party stepped in and 
assumed ownership and operation of the housing without disruption to 
the residents.
    Secretary Barrett. The replacement of a project owner would trigger 
private lenders rights pursuant to the intercreditor agreements 
executed at closing, require mutual agreement between the Air Force, 
project owner and private lender on a way forward, and may lead to 
termination of the project documents and operation of the project by 
the Air Force until a new contract/partner is identified.
                               __________
               Questions Submitted by Senator Josh Hawley
                            off-base housing
    20. Senator Hawley. Secretary McCarthy, my constituents have raised 
concerns about insufficient tenants' rights for servicemembers living 
off base. What is the Army doing to ensure military families have 
access to high-quality off-base housing?
    Secretary McCarthy. Seventy percent of our soldiers and families 
reside off our installations. Garrison commanders, deputy garrison 
commanders, and Army housing employees have the skillsets to 
communicate soldier, family, and civilian housing requirements to 
``off-post'' housing communities. Housing managers are proficient in 
developing working relationships with property and real estate managers 
as their properties are evaluated for inclusion in the Housing Office's 
referral networks. Army regulations establish clear housing standards 
which are shared with the local community. Housing managers are 
sensitive to any allegations of discrimination, poor business 
practices, and, in coordination with the legal resources available on 
the installation, are able to determine when to initiate sanctions 
against property managers and landlords who discriminate or attempt to 
violate the Servicemembers Civil Relief Act. Army housing career 
employees receive training in conducting the annual Basic Allowance for 
Housing survey, which requires inspections, visits, and a keen 
awareness of safe, affordable, and adequate rental housing inventory 
available in local communities. Many of our Army housing offices, 
through rental partnership programs, have coordinated with local 
communities to provide rental options at highly competitive rates with 
reduced deposit requirements. We will continue to work with local 
communities to ensure the best housing options are available for 
servicemembers and their families.

    21. Senator Hawley. Secretary McCarthy, how are you thinking about 
strengthening those protections going forward?
    Secretary McCarthy. We believe the current laws and local municipal 
policies are adequate to protect our servicemembers. As a part of our 
current manpower study, we identified the requirement for an increase 
in the staffing of Army Housing offices. By properly staffing these 
offices, we can provide needed advocacy to support and strengthen our 
servicemembers and our families, to include providing information and 
support regarding housing options in local communities.
                               __________
                Questions Submitted by Senator Jack Reed
               military treatment facilities and families
    22. Senator Reed. Secretary McCarthy, General McConville, Secretary 
Modly, Admiral Gilday, General Berger, Secretary Barrett, and General 
Goldfein, what are each of the military services doing to ensure that 
those responsible for writing military health policies are issuing 
directives that aid providers in recognizing, diagnosing and treating 
the various forms of environmental illness associated with sick 
buildings?
    Secretary McCarthy and General McConville. Army healthcare 
providers screen patients for risk of exposure to environmental health 
hazards, such as lead and mold. Testing is completed during every well-
child check from birth to age 6 and also for children who are at high 
risk. If an elevated blood lead level is identified, a housing 
assessment and an investigation is completed to identify the source of 
lead exposure. All elevated blood lead levels are reported to the state 
and local public health departments, and to the DOD system of record 
for reportable illnesses.
    If a patient reports health concerns associated with mold exposure, 
the provider completes a questionnaire with the patient to determine 
indoor mold exposure levels. If responses to the questionnaire 
indicates high exposure, healthcare providers document the exposure in 
the medical record, request case management, and complete a housing 
assessment to evaluate the environmental conditions. The results of the 
housing assessment are stored in the DOD's system of record. 
Additionally, the Army developed a comprehensive checklist to determine 
the environmental health and safety of homes. It addresses lead, mold, 
asbestos, and radon and a wide range of safety considerations, such as 
smoke alarms, egress, height of window ledges, and function of HVAC 
equipment. The checklist is based on the recommendations from the 
National Center for Health Homes and aligns with the Environmental 
Protection Agency, the Centers for Disease Control, and Housing and 
Urban Development, as well as Unified Facilities Criteria standards. 
This checklist will be used to evaluate the health and safety of homes 
between occupancy per the Residential Communities Initiative Portfolio 
and Asset Management Handbook and will be included in relevant Army 
policy, such as AR 420-1 (Facilities Management).
    Secretary Modly and Admiral Gilday. and General Berger. A draft 
Directive-Type Memorandum (DTM), ``Managing Health and Safety Risks in 
Housing,'' from the Under Secretary of Defense for Personnel and 
Readiness (USD P&R) is being formally coordinated with the military 
Departments. Specifically, the draft DTM:

      Directs the military Departments on the appropriate and 
consistent management of housing safety and health hazards reported by 
residents.
      Directs the Assistant Secretary of Defense for Health 
Affairs to create consistent clinical response guidelines associated 
with a resident's report of health concerns from military housing to 
their primary health care provider. In addition, the Navy has issued 
policy and clinical guidelines as follows.

      Memorandum from Chief, Bureau of Medicine and Surgery 
(BUMED): ``Health Hazards from Environmental Exposures in Military 
Housing'' (March 18, 2019)
      Navy and Marine Corps Public Health Center (NMCPHC): 
``Guide for Clinicians Caring for Patients with Mold-Related 
Complaints'' (April 1, 2019)

    Secretary Barrett and General Goldfein. The Air Force utilizes 
well-established surveillance, prevention, and control of disease 
processes to include mold, a major complaint associated with sick 
buildings. The Air Force Medical Service updated guidance to medical 
commanders and physicians in May 2019 for evaluation of mold exposure. 
The updated guidance included an evidence-based ``Guide for Clinicians 
Caring for Patients with Mold-related Complaints''. Subject matter 
experts at the Environmental, Safety, and Occupational Health Service 
Center at the USAF School of Aerospace Medicine at Wright-Patterson Air 
Force Base, Ohio, are also available to assist providers.

    23. Senator Reed. Secretary McCarthy, General McConville, Secretary 
Modly, Admiral Gilday, General Berger, Secretary Barrett, and General 
Goldfein, who is ultimately responsible to ensure that military 
providers are appropriately educated and trained and are subsequently 
able to perform the proper diagnostic workup on patients with signs and 
symptoms indicative of environmental illness resultant from exposures 
in negligently built and maintained military housing?
    Secretary McCarthy and General McConville. The Surgeon General is 
ultimately responsible for ensuring providers are appropriately 
educated, trained, and capable of performing proper diagnostic workup 
on patients. The Surgeon General accomplishes this through regulation 
and Joint Commission accreditation standards to ensure each provider 
has appropriate credentials, training, and clinical competency to 
provide care in their respective field.
    Secretary Modly. Per a March 18, 2019 memorandum from Chief, Bureau 
of Medicine and Surgery (BUMED), titled ``Health Hazards from 
Environmental Exposures in Military Housing,'' Navy Medicine regions 
must ensure clinicians are educated on this topic for evaluating 
patients. This would be delegated to the medical treatment facility 
(MTF) command level. The memorandum provides educational resources for 
this purpose, as well as the ability for MTF providers to consult with 
their MTF public health experts (e.g., Occupational and Environmental 
Medicine, Preventive Medicine, and Industrial Hygiene) who can liaise 
with the Navy Housing Service Centers to further investigate 
environmental conditions of a home on a case-by-case basis. In 
addition, the Navy and Marine Corps Public Health Center (NMCPHC) 
developed a ``Guide for Clinicians Caring for Patients with Mold-
Related Complaints'' dated April 1, 2019. Links for additional 
educational resources are found on the NMCPHC website. Navy Medicine 
regularly reviews provider competence and performance, which is subject 
to both supervisor evaluation and peer review of the medical records. 
This includes checking competence in addressing environmental-related 
medical concerns. Providers evaluate and treat patients with concerns 
about environmental exposures and illness based on symptoms and 
history, which guide the physical exam, evaluation, tests, other 
studies, diagnosis, and treatment. Of note, there are often confounding 
factors in the home with respect to environmental exposures and disease 
causation. Symptoms potentially related to housing environmental 
exposures such as mold are also triggered by numerous other common 
exposures in the home (e.g., dust mites, pet dander, cockroaches, mice 
droppings, pollen, second-hand smoke, scented candles, air fresheners, 
plants, etc.). Some people are sensitive to environmental exposures 
such as mold, which can exacerbate pre-existing health issues such as 
allergies and asthma. Per the Centers for Disease Control and 
Prevention, allergic response symptoms like those to pollen or animal 
dander are the most common types of symptoms related to environmental 
exposure to mold (e.g., nasal stuffiness, throat irritation, sneezing, 
coughing or wheezing, eye irritation, or skin irritation). Chronic 
respiratory complaints, such as allergies and asthma, are often multi-
factorial, and it is not possible to quantify the contribution of any 
particular environmental irritant or allergen to such a disease 
process.
    Secretary Barrett. As the Secretary of the Air Force, I am 
ultimately responsible for the training and education for all of our 
airmen. The authorities to implement policies and ensure military 
providers are appropriately educated and trained is delegated to the 
Surgeon General. Military Treatment Facility Commanders are responsible 
for granting provider privileges to practice medicine based on their 
credentials, which routinely includes diagnostic workup on patients 
with illness from exposure irrespective of the source.
    General Berger. Per memorandum from Chief, BUMED, subject: ``Health 
Hazards from Environmental Exposures in Military Housing,'' dated 18 
Mar 2019, Navy Medicine regions must ensure clinicians are educated on 
this topic for evaluating patients. This would be delegated to the 
medical treatment facility (MTF) command level. The memorandum provides 
educational resources for this purpose, as well as the ability for MTF 
providers to consult with their MTF public health experts (e.g., 
Occupational and Environmental Medicine, Preventive Medicine, and 
Industrial Hygiene) who can liaison with the Navy Housing Service 
Centers to further investigate environmental conditions of a home on a 
case by case basis. In addition, Navy and Marine Corps Public Health 
Center (NMCPHC) developed a ``Guide for Clinicians Caring for Patients 
with Mold-Related Complaints'' dated 1 Apr 2019. Links for additional 
educational resources are found on the NMCPHC website.
    Navy Medicine regularly reviews provider competence and performance 
which is subject to both supervisor evaluation and peer review of the 
medical records, and would include competence in addressing 
environmental-related medical concerns.
    Providers evaluate and treat patients with concerns about 
environmental exposures and illness based on symptoms and history, 
which guide the physical exam, evaluation, tests, other studies, 
diagnosis, and treatment.
    Of note, there are often confounding factors in the home with 
respect to environmental exposures and disease causation. Symptoms 
potentially related to housing environmental exposures such as mold are 
also triggered by numerous other common exposures in the home (e.g., 
dust mites, pet dander, cockroaches, mice droppings, pollen, second 
hand smoke, scented candles, air fresheners, plants, etc.). Some people 
are sensitive to environmental exposures such as mold, which can 
exacerbate pre-existing health issues such as allergies and asthma. Per 
the Centers for Disease Control and Prevention, allergic response 
symptoms like those to pollen or animal dander are the most common 
types of symptoms related to environmental exposure to mold (e.g., 
nasal stuffiness, throat irritation, sneezing, coughing or wheezing, 
eye irritation, or skin irritation). Chronic respiratory complaints, 
such as allergies and asthma, are often multi-factorial, and it is not 
possible to quantify the contribution of any particular environmental 
irritant or allergen to such a disease process.
    Admiral Gilday. Per a March 18, 2019 memorandum from Chief, Bureau 
of Medicine and Surgery (BUMED), titled ``Health Hazards from 
Environmental Exposures in Military Housing,'' Navy Medicine regions 
must ensure clinicians are educated on this topic for evaluating 
patients. This would be delegated to the medical treatment facility 
(MTF) command level. The memorandum provides educational resources for 
this purpose, as well as the ability for MTF providers to consult with 
their MTF public health experts (e.g., Occupational and Environmental 
Medicine, Preventive Medicine, and Industrial Hygiene) who can liaise 
with the Navy Housing Service Centers to further investigate 
environmental conditions of a home on a case-by-case basis. In 
addition, the Navy and Marine Corps Public Health Center (NMCPHC) 
developed a ``Guide for Clinicians Caring for Patients with Mold-
Related Complaints'' dated April 1, 2019. Links for additional 
educational resources are found on the NMCPHC website. Navy Medicine 
regularly reviews provider competence and performance, which is subject 
to both supervisor evaluation and peer review of the medical records. 
This includes checking competence in addressing environmental-related 
medical concerns. Providers evaluate and treat patients with concerns 
about environmental exposures and illness based on symptoms and 
history, which guide the physical exam, evaluation, tests, other 
studies, diagnosis, and treatment. Of note, there are often confounding 
factors in the home with respect to environmental exposures and disease 
causation. Symptoms potentially related to housing environmental 
exposures such as mold are also triggered by numerous other common 
exposures in the home (e.g., dust mites, pet dander, cockroaches, mice 
droppings, pollen, second-hand smoke, scented candles, air fresheners, 
plants, etc.). Some people are sensitive to environmental exposures 
such as mold, which can exacerbate pre-existing health issues such as 
allergies and asthma. Per the Centers for Disease Control and 
Prevention, allergic response symptoms like those to pollen or animal 
dander are the most common types of symptoms related to environmental 
exposure to mold (e.g., nasal stuffiness, throat irritation, sneezing, 
coughing or wheezing, eye irritation, or skin irritation). Chronic 
respiratory complaints, such as allergies and asthma, are often multi-
factorial, and it is not possible to quantify the contribution of any 
particular environmental irritant or allergen to such a disease 
process.
    General Goldfein. As the Secretary of the Air Force, I am 
ultimately responsible for the training and education for all of our 
airmen. The authorities to implement policies and ensure military 
providers are appropriately educated and trained is delegated to the 
Surgeon General. Military Treatment Facility Commanders are responsible 
for granting provider privileges to practice medicine based on their 
credentials, which routinely includes diagnostic workup on patients 
with illness from exposure irrespective of the source.

    24. Senator Reed. Secretary McCarthy, General McConville, Secretary 
Modly, Admiral Gilday, General Berger, Secretary Barrett, and General 
Goldfein, what is currently being done to ensure that military 
providers are knowledgeable about the scientifically proven ability of 
mold to cause debilitating cognitive and neurological injuries?
    Secretary McCarthy and General McConville. The Army published new 
policy in April 2019 to protect soldiers and families from potential 
health impacts related to residential indoor environmental mold 
exposure. It includes policy-reinforcing educational materials to 
healthcare providers that provide: 1) guidance on mold-related hazards; 
2) recommendations for testing and management of suspected illnesses 
related to mold exposure; 3) information on how to document mold-
related illness in the patient's medical record; and 4) information on 
how to educate patients on mold mitigation measures.
    In addition to provider education, the Army is also developing 
educational material for soldiers and families. This includes 1) facts 
about mold; 2) strategies to prevent mold growth; and 3) recommended 
actions when one suspects or has detected mold growth within their 
home.
    Secretary Modly, General Berger and Admiral Gilday. The Navy and 
Marine Corps Public Health Center (NMCPHC) developed a ``Guide for 
Clinicians Caring for Patients with Mold-Related Complaints,'' dated 
April 1, 2019, explaining that mold exposure is sometimes associated 
with adverse health effects, including infections, hypersensitivity 
disorders, and toxic or irritant effects from mold by-products. The 
National Academy of Sciences (NAS) conducted a comprehensive literature 
review and analysis and found there was sufficient evidence to link 
mold and other factors related to damp indoor environments with some 
upper respiratory tract symptoms, coughing, wheezing, and asthma in 
sensitized persons, people who already have respiratory problems, the 
elderly, or the very young. However, NAS found there was not enough 
evidence to make conclusions for many other health outcomes, including 
rheumatologic and other inflammatory diseases, neurological symptoms, 
cancer, and reproductive effects [per National Toxicology Program, 
https://www.niehs.nih.gov/health/materials/mold--508.pdf].
    Provider competence and knowledge of medicine in general includes 
competence in addressing household mold-related medical concerns in the 
general population. Navy medical providers dealing with especially 
complex patient mold-related medical issues (e.g., patients with HIV, 
those on immunosuppressant therapy or cancer chemotherapy, or patients 
with poorly controlled diabetes mellitus) know to refer patients to the 
appropriate specialist as necessary (e.g., Allergy/Immunology, 
Infectious Disease, or Neurology as deemed appropriate).
    There is no clear evidence for specific direct association of mold 
exposure with debilitating cognitive and neurological injuries. Most 
peer reviewed studies investigating neurologic disorders and fungal 
exposure have described complaints in vague terms and did not define 
specific neurologic deficits or use objective testing or findings to 
confirm any neurologic dysfunction. ``Despite many reported subjective 
complaints, there is no objective evidence for neurological compromise 
caused by indoor mold exposure'' (Indoor Mold, Toxigenic Fungi, and 
Stachybotrys chartarum: Infectious Disease Perspective, D. M. Kuhn and 
M. A. Ghannoum, Clinical Microbiology Reviews, Jan. 2003, p. 159).
    For individuals who have medical conditions exacerbated or related 
to indoor environment triggers, controlling or eliminating the sources 
of indoor/building mold and other indoor allergens, along with medical 
treatment, should lead to improvement or resolution of symptoms.
    Secretary Barrett and General Goldfein. Air Force providers utilize 
the updated ``Guide for Clinicians Caring for Patients with Mold-
related Complaints'' which is published by the Air Force Medical 
Support Agency and is based on information from a number of 
authoritative sources to include the Institute of Medicine, the Center 
for Disease Control, and the Environmental Protection Agency, among 
others. This guide contains the latest information regarding the 
possible effects of mold exposure. Military medical providers are 
informed regarding health hazards associated with mold (and other 
household exposures) through regularly scheduled Professional Staff 
meetings guided by the Military Treatment Facility Chief of 
Professional Services and career field updates provided by Career Field 
Mangers/Consultants to the Air Force Surgeon General.

    25. Senator Reed. Secretary McCarthy, General McConville, Secretary 
Modly, Admiral Gilday, General Berger, Secretary Barrett, and General 
Goldfein, there are reports that some military physicians are 
acknowledging that they do not know how to treat illnesses brought on 
by inadequate housing. There are reports that some referrals are being 
denied by military treatment facility (MTF) commands, despite the fact 
that Tricare is approving and agreeing to pay for the services. Are you 
aware of any of such cases, and if so, why are the referrals being 
denied?
    Secretary McCarthy and General McConville. All patients with 
potential mold-associated symptoms or health concerns are evaluated and 
managed in accordance with safe and effective clinical protocols. 
Testing for mold and other allergies may include a skin or blood test 
to measure a patient's sensitivity to specific types of mold, and 
treatments for mold allergies may include corticosteroids, 
antihistamines, decongestants, or immunotherapy.
    We are aware of requests for mycotoxin testing, a test to quantify 
mold exposure, being denied. That particular test is not a TRICARE 
covered benefit because urine mycotoxin tests are not approved by the
    U.S. Food and Drug Administration and are not recommended by the 
Centers for Disease Control and Prevention for diagnostic purposes. 
Using non-validated tests could potentially lead to misdiagnoses and 
perhaps even harmful medical interventions. The Army Office of The 
Surgeon General has asked the Defense Health Agency to review mycotoxin 
testing as a TRICARE covered benefit based on multiple requests for 
this testing.
    Secretary Modly, General Berger, and Admiral Gilday. We have no 
knowledge of Commanders/Commanding Officers denying referrals.
    Secretary Barrett and General Goldfein. We rely on our medical 
providers to assess whether a referral is necessary. We are not aware 
of the denial of any referrals to any environmental physicians once an 
assessment has been made by the medical provider, nor are we ordering 
Military Treatment Facility commanders to deny referrals. Care not 
available at a Military Treatment Facility is referred to the 
appropriate specialist, ideally within the military health system, 
based on the diagnosis of the patient.

    26. Senator Reed. Secretary McCarthy, General McConville, Secretary 
Modly, Admiral Gilday, General Berger, Secretary Barrett, and General 
Goldfein, what is being done to ensure that the cost of medically 
necessary care, resultant from exposures to negligently built and 
maintained housing, is subrogated to the privatized landlords and/or 
their insurers?
    Secretary McCarthy and General McConville. The existing Medical 
Affirmative Claims (MAC) program would be the avenue by which the Army 
would assert such a claim. The Army has not yet asserted a MAC against 
a privatized landlord or its insurer for the cost of medical care 
expended to treat an illness resulting from conditions in housing. 
Establishing a causal nexus between the condition in housing (e.g., the 
presence of lead, mold, or asbestos) and the resulting ailment would be 
difficult as both sides would have experts that would differ on the 
source of the illness. We will look to add additional paths forward 
through the dispute resolution process.
    Secretary Modly and Admiral Gilday. The Department of the Navy's 
(DON) first priority is to ensure prompt and appropriate treatment of 
all medical conditions of servicemembers and their family members. 
Medical conditions for servicemembers and family members are documented 
in each individual's medical treatment record. Navy Medicine has issued 
policy to all medical treatment facilities (MTF) directing that 
internal processes be developed that facilitate 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 by 
the Primary Care manager at the MTF, the TRICARE network is used to 
ensure all required care is received and tracked. The DON is committed 
to ensuring the readiness, health, and safety of our sailors, marines, 
and their families. Currently, the DON is not considering legal action 
to recover health care costs of servicemembers or family members from 
the companies providing privatized housing.
    General Berger. The DON's first priority is to ensure prompt and 
appropriate treatment of all medical conditions of servicemembers and 
their family members. Medical conditions for servicemembers and family 
members are documented in each individual's medical treatment record. 
Navy Medicine has issued policy to all MTFs directing that internal 
processes be developed that facilitate 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 by 
the Primary Care manager at the Military Treatment Facility, the 
TRICARE network is used to ensure all required care is received and 
tracked. The DON is committed to ensuring the readiness, health and 
safety of our sailors, marines and their families. Currently, the DON 
is not considering legal action to recover health care costs of 
servicemembers or family members from the companies providing 
privatized housing.
    Secretary Barrett. and General Goldfein. The Air Force has an 
established process to recoup medical treatment costs for Active Duty, 
dependent, or retiree privatized housing residents when those costs are 
associated with negligence on the part of third parties such as project 
owners or their property casualty insurers.

    27. Senator Reed. Secretary McCarthy, General McConville, Secretary 
Modly, Admiral Gilday, General Berger, Secretary Barrett, and General 
Goldfein, will a military housing registry, similar to the lead 
registry, be developed and implemented to track the health issues that 
have arisen from exposures to mold, toxic water, asbestos, radon, and 
soil contamination?
    Secretary McCarthy and General McConville. All housing-related 
health concerns and potential environmental health hazards in housing 
may be reported to the Housing Environmental Health Response Registry.
    The Housing Environmental Health Response Registry is available for 
residents to: 1) report concerns about housing and related health 
issues; 2) obtain additional information on housing environmental 
health hazards; and 3) receive assistance in seeking medical care for 
any housing-related illnesses or concerns. The goal of the Housing 
Environmental Health Response Registry is to allow the military to link 
housing, occupants, and potential health hazard data to: 1) understand 
the health effects of potential environmental hazards in housing; 2) 
assess future needs for health interventions and health education; and 
3) inform individual occupants regarding potential exposure and adverse 
health impacts.
    As of November 30, 2019, 323 families have enrolled in the Housing 
Environmental Health Response Registry. One hundred fifty-seven of the 
323 families reported specific hazards in their homes, the majority of 
which are mold and dampness. One hundred forty-six families requested 
additional contact with a public health professional from the Army 
Public Health Center, which is ongoing.
    The Army Medical Command published Operations Order 20-10 (MEDCOM 
Support to Garrison Quarterly Town Hall Engagements) which directs 
medical, dental, and public health participation at Garrison town hall 
engagements to address concerns about housing and to encourage and 
assist with enrollment in the Housing Environmental Health Response 
Registry to residents who have housing related health concerns.
    Secretary Modly and Admiral Gilday. Similar to medical encounters 
for lead exposure and all other medical encounters, visits and 
potential treatments for conditions that are reported by the patient as 
being housing-related are documented in their electronic health record 
for tracking and follow-up by the attending provider. Additionally, the 
Navy, Navy Installations Command (CNIC), and Public Private Venture 
(PPV) partners maintain databases (i.e., Enterprise Military Housing 
[eMH] and Yardi) that track the historical record of residents in every 
home, including all maintenance and service calls that are 
environmental (e.g., mold), health, and safety related. If deemed 
medically necessary, a medical professional can obtain information from 
CNIC to link patients and military housing history.
    General Berger. The DON's first priority is to ensure prompt and 
appropriate treatment of all medical conditions of servicemembers and 
their family members. Medical conditions for servicemembers and family 
members are documented in each individual's medical treatment record. 
Navy Medicine has issued policy to all MTFs directing that internal 
processes be developed that facilitate 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 by 
the Primary Care manager at the Military Treatment Facility, the 
TRICARE network is used to ensure all required care is received and 
tracked. The DON is committed to ensuring the readiness, health and 
safety of our sailors, marines and their families. Currently, the DON 
is not considering legal action to recover health care costs of 
servicemembers or family members from the companies providing 
privatized housing.
    Secretary Barrett and General Goldfein. Any health related concern 
that arises is referred to the Air Force Environmental, Safety, and 
Occupational Health (ESOH) Service Center, who maintains a database.
                               __________
             Questions Submitted by Senator Jeanne Shaheen
   transition of military housing privatization initiative oversight 
                                 issues
    28. Senator Shaheen. Secretary McCarthy, General McConville, 
Secretary Modly, Admiral Gilday, General Berger, and Secretary Barrett, 
in March, a hearing was held on these issues. Given nearly all of you 
were not in your current positions in March, can you describe what the 
handover was like on this issue as you transitioned into this job?
    Secretary McCarthy and General McConville. General McConville and I 
have been involved with the hearings since March as the Vice Chief and 
Under Secretary, respectively, therefore our onboarding requirements on 
this sensitive and highly visible issue were minimal. We have visited 
many installations and maintained close contact with our staffs while 
working through sensitive housing issues.
    Secretary Modly. While I have only been serving as the Acting 
Secretary of the Navy since November 25, 2019, I have been serving as 
the Under Secretary of the Navy since December 4, 2017 and have been 
greatly involved in the review and improvement of the Public Private 
Venture housing program. I receive updates through the Chief of Naval 
Operations and Commandant of the Marine Corps on a regular basis.
    Secretary Barrett. Military Housing Privatization was one of the 
first briefings during my transition into this position. I understood 
that providing safe and habitable homes for airmen and their families 
is an operational imperative where I need to direct my attention. My 
first stop on my first trip included a visit to privatized housing 
where I spoke to airmen at F.E. Warren Air Force Base in Wyoming. I 
spoke with the Chief, Major Command commanders, many other Air Force 
leaders, and visited privatized housing at Tinker, Randolph, Keesler, 
and Air Force Bases abroad to assess the condition of the homes, 
listened to residents' concerns, and received updates from wing 
leadership on the way forward.
    General Berger. A smart data pack was created for me which provided 
pertinent documents such as the SECNAV/CMC testimonies, audits, PPV 
housing initiatives, and MFAN reports that have been released regarding 
this issue. Additionally, I have met with my senior leadership who 
briefed me on the housing portfolio to ensure that I have a good 
understanding of 1) key issues raised during the Congressional 
testimonies in March, 2) actions that have been taken since that time, 
and 3) additional actions that will be implemented in the near term to 
regain resident trust and improve our oversight of the PPV housing 
program. Further, specific to Camp Lejeune, North Carolina, I have had 
the opportunity to visit and see firsthand the issues that our 
residents have endured, and all work that has been completed post 
Hurricane Florence. We value our residents and plan to be transparent 
in our efforts to improve their quality of life in our housing 
programs.
    Admiral Gilday. Since becoming the Chief of Naval Operations, I 
have received regular updates on the Navy's efforts to improve 
privatized housing oversight from Vice Admiral Mary Jackson, Commander 
of Navy Installations Command, and Rear Admiral John Korka, Commander 
of Naval Facilities Engineering Command.
                               __________
           Questions Submitted by Senator Richard Blumenthal
                                 fraud
    29. Senator Blumenthal. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, in your estimate, how extensive is this fraudulent 
activity? In other words--how many housing companies have defrauded our 
military families?
    Secretary McCarthy. Our criminal investigators are working with 
Department of Justice attorneys and FBI agents in examining allegations 
of fraudulent activity regarding several MHPI companies. The 
investigations are ongoing and no fraudulent activity has been proven 
at this time. In order to protect the integrity of the investigative 
process, we defer to the Department of Justice regarding the number of 
companies under investigation.
    Secretary Modly. To date, although the Department of the Navy (DON) 
has uncovered maintenance timeliness and quality concerns, the DON is 
not aware of any allegations of fraud against any of its Public Private 
Venture (PPV) partners in connection with Navy or Marine Corps 
privatized housing. The DON continues to work with the Naval Audit 
Service, the Office of the Department of Defense Inspector General, and 
the Government Accountability Office to review PPV project performance 
and processes. In the wake of the fraud allegations brought to light at 
Tinker Air Force Base, Oklahoma, we continue to proactively assess if 
and how Navy and Marine Corps projects are affected. On November 6, 
2019, the Naval Audit Service completed a formal audit of maintenance 
records and provided twelve recommendations, all of which are being 
implemented. In addition, we issued ``Letters of Concern'' to all of 
our partners, requesting validation of all of their maintenance records 
and processes and have asked partners to report all anomalies or 
findings of interest. We directed Departmental Region and Installation 
Housing teams to conduct monthly reviews of electronic maintenance 
records and random spot-checks with families to confirm response and 
completion times reported by partners. We are also conducting 
historical reviews on partner maintenance data systems for anomalies 
that would indicate fraudulent data entry, such as unreasonably common 
service dates. Furthermore, we conducted an independent review of PPV 
partner portfolios to evaluate housing maintenance records and their 
relationships to incentive fees, a summary of which was provided to the 
Office of the Assistant Secretary of Defense for Sustainment on 
September 16, 2019. We continue to provide information and updates to 
the Government Accountability Office to inform their report on 
Privatized Military Housing expected in February 2020. We anticipate 
that their recommendations will help us further improve our oversight 
efforts.
    Secretary Barrett. The Air Force discovered maintenance data 
anomalies affecting three project owners. While findings of fraud have 
not been substantiated, the Air Force directed these project owners to 
conduct an independent audit of their maintenance programs, assess 
oversight and quality control, identify specific actions to remedy 
deficiencies, ensure maintenance and work order processes comply with 
Air Force requirements, and make required adjustments to current and 
past performance incentive fee payments. Allegations or concerns that 
may be criminal in nature were referred to the Air Force Office of 
Special Investigations (AFOSI).

    30. Senator Blumenthal. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, if fraudulent activity is uncovered, what actions 
will the deter future wrongdoing?
    Secretary McCarthy. Any credible allegations of fraud will be 
immediately referred to the appropriate investigative agencies.
    Secretary Modly. The Department of the Navy will refer any 
potential fraudulent activity by its Public Private Venture partners in 
connection with Navy or Marine Corps housing to the Naval Criminal 
Investigative Service or Acquisition Integrity Office, as appropriate, 
for a determination of whether to refer such activities to the 
Department of Justice.
    Secretary Barrett. The Air Force directed the project owners with 
data integrity issues to conduct an independent audit of their 
maintenance programs. The Air Force is withholding performance 
incentive fees from these projects and will make adjustments, as 
appropriate, to future payments upon analysis of the data.
    Allegations or concerns that may be criminal in nature were 
referred to the Air Force Office of Special Investigations (AFOSI). 
Upon completion of the AFOSI investigation, the Air Force could suspend 
or debar any referred project owner from contracting with the 
government.

    31. Senator Blumenthal. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, how will the Pentagon punish negligent--and 
potentially criminal--companies to ensure accountability and deter 
future wrongdoing?
    Secretary McCarthy. Negligent conduct by MHPI companies will be 
addressed in various ways depending on the nature of the conduct. In 
some circumstances, negligent conduct will result in a reduction or 
elimination of incentive fees. Negligent conduct that persists and 
remains uncured, can result in the Army compelling that a deficient 
MHPI company be terminated. Allegations of criminal conduct will be 
referred to the appropriate investigative authorities. Previously, the 
MHPI property managing company for the Army's Forts Belvoir, Benning, 
Irwin and Presidio of Monterey/Naval Post Graduate School, was 
terminated because of fraudulent activity and was compelled to pay the 
MHPI companies that own the housing at those installation over $100 
million in costs and damages.
    Secretary Modly. The Department of the Navy is not aware of any 
fraud allegations against any of its Public Private Venture (PPV) 
partners in connection with Navy or Marine Corps privatized housing. 
The DON will refer any potential fraudulent activity by its PPV 
partners in connection with Navy or Marine Corps housing to the Naval 
Criminal Investigative Service or Acquisition Integrity Office, as 
appropriate, for a determination of whether to refer such activities to 
the Department of Justice.
    Secretary Barrett. Allegations or concerns that may be criminal in 
nature are referred to the Air Force Office of Special Investigations 
(AFOSI). AFOSI is investigating allegations and closely coordinating 
with the other military criminal investigative organizations (NCIS / 
CID) and the Department of Justice as appropriate. Upon completion of 
the AFOSI investigation, the Air Force could suspend or debar any 
referred project owner from contracting with the government.
                             incentive fees
    32. Senator Blumenthal. Secretary Barrett, the Reuters reporting on 
Balfour Beatty's fraudulent activities at Tinker and other Air Force 
bases indicates that the Air Force was aware that maintenance data 
could not be validated but the Air Force continued to pay incentive 
fees--essentially rewarding fraudulent activity. What are you doing now 
to prevent these fees from going to actors actively defrauding our 
military families?
    Secretary Barrett. The Air Force directed project owners with data 
integrity issues to conduct independent audits of their maintenance 
programs, assess oversight and quality control, identify specific 
actions to remedy deficiencies, ensure maintenance and work order 
processes comply with Air Force requirements, and make required 
adjustments to current and past incentive fee payments. Additionally, 
the Air Force is withholding performance incentive fees from these 
projects and will make adjustments, as appropriate, to future payments 
upon analysis of that data.

    33. Senator Blumenthal. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, your testimonies mention that each of the services 
are revising the performance incentive fee structure to ensure that 
private contractors are not being rewarded for bad performance. What 
have you done to prevent the Military Housing Privatization Initiative 
from being a cash cow for commercial real estate developers?
    Secretary McCarthy. The Army, with agreement from the MHPI 
companies, has redesigned its incentive performance management plan. 
The measurement criteria have been changed to more closely match key 
areas of focus for improvement. The overarching goal of the revised 
incentive fee plan is to reward MHPI companies for meeting or exceeding 
the improved performance goals.
    In addition, the MHPI companies receive a base fee for services 
provided as well as a return on their respective equity contributions. 
These business terms were independently negotiated, by project, with 
the ``return on equity contributed'' typically capped on average at 15 
percent. In addition, fees paid by the MHPI project to its service 
providers (e.g., property manager) are based on market rates for such 
service fees, include some at-risk component via incentive fees, and 
are capped at a percentage of either revenue or project cost. In 
addition, equity returns are capped. In some cases, equity has been 
returned to the project owner to reduce the cost to the MHPI project.
    Secretary Modly. At the onset of the Military Housing Privatization 
Initiative (MHPI) initiative, the Department of the Navy (DON) 
conducted non-Federal Acquisitions Regulation competitive source 
selection process for each of the now 15 distinct Public Private 
Venture (PPV) partnerships. Open and fair competition ensured market 
based fees and returns for property and asset management services. 
Property Management Fees are paid out of project cash flow rather than 
with Navy or Marine Corps funding. DON is re-evaluating the current 
incentive fee structure and aligning it to the Office of the Secretary 
of Defense/Tri-Services incentive fee structure. Across the DON PPV 
Housing portfolio, 98.3 percent of all revenue is applied to 
operations, management, maintenance, payment of debt service 
(associated with debt taken out by the project company to construct 
new/replacement homes and recapitalize existing homes upon 
privatization), capital repairs and replacement, and sustainment or 
recapitalization homes and associated infrastructure over the long-
term. While fees across the DON portfolio vary, a typical property 
management fee is 2.8 percent base fee and 1.8 percent incentive as 
percentage of total rent revenue. Fees and returns associated with DON 
MHPI projects are considered reasonable and do not represent a windfall 
(or ``cash cow'') for the DON's private partners.
    Secretary Barrett. The Air Force is negotiating a revised 
performance fee structure with project owners. The new structure 
provides increased commander input, work order responsiveness elements, 
and resident satisfaction. The Air Force leverages its approval 
authority over the project annual budgets to ensure project owners 
address non-compliance areas. Also, the Air Force scrutinizes 
disbursement requests and other lockbox financial transactions to 
ensure accuracy as confirmed by annual third-party audits.

    34. Senator Blumenthal. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, is withholding incentive fees enough to ensure 
accountability and deter future wrongdoing?
    Secretary McCarthy. The Incentive Performance Management Plan is 
just one component of the Army's effort to hold MHPI companies 
accountable. Other components include ground lease inspections, quality 
assurance inspections, and recurring financial audits. Each MHPI 
project is governed by legal agreements that delineate MHPI company 
requirements and obligations. The Army established an oversight process 
that routinely reviews MHPI company operations for legal compliance. 
The Army has also revised its process for reviewing and approving major 
decision memorandums (MDMs), which the MHPI companies use to request 
approval for such items as major housing renovations, neighborhood 
improvements, and new construction. These MDMs are now vetted through 
the garrison commander, the installation senior commander, and the AMC 
commander prior to release to Headquarters, Department of the Army, for 
further review and funding allocation.
    Secretary Modly. Incentive fees are only one component of effective 
oversight of the Public Private Venture (PPV) program. Oversight of 
performance will be enabled by metrics, increased staffing, and 
elevated approval levels for incentive fee payments. Navy housing 
personnel now have unfettered access to the Partner's maintenance 
systems to perform quality assurance checks, trend analysis and to look 
for anomalies. In addition, the Navy recently deployed its own PPV 
Electronic Data Warehouse and PPV Dashboards focusing installation 
oversight on command reportable items and metrics that better measure 
resident satisfaction. Using this new system, installation and region 
Housing Offices are now able to pull work order data directly from 
partner maintenance systems in order to perform monthly review of 
electronic maintenance records, monitor performance by installation/
neighborhood, and to conduct random spot-checks with residents to 
confirm work is complete. The Marine Corps is working with the Navy to 
leverage their contract in order to provide identical reports for the 
Marine Corps leadership. The DON does not have an explicit right to 
withhold either base or incentive property management fees directly. 
However, if the DON feels and can demonstrate that a property manager 
is not performing per their property management contract, the DON could 
demand that the managing member/asset manager step in and correct or 
cure the situation. Alternatively, the DON could recommend to the 
managing member/asset manager that they withhold a portion of the base 
or incentive property management fee from the property manager until 
the situation is corrected or cured. The DON also has the right to 
cause the replacement of the property manager in the event of 
unacceptable performance.
    Secretary Barrett. Withholding performance incentive fees is not 
the only tool to ensure accountability. The Air Force leverages budget 
approval authority to ensure project owners fulfill their obligations. 
Where we have experienced challenges, we put project owners on 
corrective action plans and performance improvement plans and, if those 
measures are unsuccessful, we will initiate formal action under the 
dispute provision of the project documents. Additionally, we continue 
to refer allegations that may be criminal in nature to the Air Force 
Office of Special Investigations.

    35. Senator Blumenthal. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, what additional punitive measures are being taken?
    Secretary McCarthy. The U.S. Army Criminal Investigation Division 
has two ongoing investigations that are being conducted in coordination 
with Defense Criminal Investigative Service (DCIS), the Air Force 
Office of Special Investigations (OSI) and the Federal Bureau of 
Investigations (FBI). Should the allegations prove founded, Army 
leadership will refer the matters for appropriate action.
    Secretary Modly. No additional punitive measures are being taken.
    Secretary Barrett. In addition to withholding performance incentive 
fees and requiring corrective actions plans, the Air Force directed 
project owners with data integrity issues to conduct, at their own 
expense, an independent audit of their maintenance programs. The Air 
Force is currently withholding performance incentive fees to these 
projects and will make adjustments, as appropriate, to performance 
incentive fees upon analysis of that data. Allegations or concerns that 
may be criminal in nature were referred to the Air Force Office of 
Special Investigations (AFOSI). AFOSI is investigating allegations and 
closely coordinating with the other military criminal investigative 
organizations (NCIS / CID) and the Department of Justice as 
appropriate. Upon completion of the AFOSI investigation, the Air Force 
could suspend or debar any referred project owner from contracting with 
the government.

    36. Senator Blumenthal. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, the fox is in the henhouse given that these 
incentive fees are based on performance metrics and prone to 
manipulation by the housing companies. What steps have you taken to 
take ownership of the data collection used to award incentive fees?
    Secretary McCarthy. MHPI company data is auditable. The Army has 
established multiple Army-owned processes (inspections, resident 
surveys, and resident hotlines) to validate resident feedback and 
assess MHPI Property Management performance. Garrison commanders have 
access to both the MHPI data as well as the audit results and they can 
verify actual MHPI performance when recommending incentive fee payment 
rates. The Garrisons' Housing Support Offices have access to the MHPI 
companies' work order database management systems and are able to 
independently validate the maintenance scope and timelines associated 
with work orders.
    Secretary Modly. The Department of the Navy (DON) has developed a 
Public Private Venture (PPV) Performance Dashboard Suite displaying 
family housing performance information for the installation, regional, 
and enterprise level, in alignment with project-specific requirements. 
Region and Installation Housing teams now conduct monthly reviews of 
electronic maintenance records and conduct random spot-checks with 
families to confirm response and completion times reported by partners. 
We are also conducting historical reviews on partner maintenance data 
systems for anomalies that would indicate fraudulent data entry, such 
as unreasonably common service dates. At the end of the calendar year 
2019, the DON will revise the Incentive Fee Structure to ensure it 
incorporates the voices of our sailors, marines, and their families. 
Resident satisfaction will be the most heavily weighted factor; it will 
be determined based on resident move-in and move-out surveys and 
resident work order surveys, in addition to the annual resident 
satisfaction survey.
    Secretary Barrett. The Military Housing Office has access to 
project owners' data to conduct quality assurance reviews in support of 
incentive fee awards. The Air Force is increasing the use of automated 
work order systems, use of electronic customer satisfaction surveys, 
and changing the incentive fee structure to reduce data manipulation 
issues.

    37. Senator Blumenthal. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, what problems have you identified in the incentive 
fee process that you plan to reform to prevent future fraud?
    Secretary McCarthy. The previous incentive fee process was not 
standardized across all MHPI companies and in many cases was not based 
on the appropriate metrics with regard to resident satisfaction. The 
Army negotiated for a standard Incentive Performance Management Plan 
(IPMP), with the same detailed performance metrics for all of its seven 
MHPI project companies. Effective 1 January 2020, this new IPMP 
contains significant revisions to the metrics, with increased focus on 
resident satisfaction, work order quality, and responsiveness.
    Furthermore, commanders are involved. Installation commanders, 
either the Senior Commander or the Garrison Commander, review and 
recommend any and all incentive fee awards; the AMC commanding general 
is the approval authority for these awards.
    Secretary Modly. The Naval Audit Service review at five locations 
(Charleston, SC; Newport, RI; Oahu, HI; San Diego, CA; and New Orleans, 
LA) with 16,211 Public Private Venture (PPV) homes did not show 
significant issues with reported service call timeliness or with 
customer satisfaction based on annual surveys in line with each 
partners' business agreement. The Naval Audit Service identified 
opportunities for the improvement of Navy oversight of the PPV military 
family housing program, policy guidance, and the control environment. 
Specifically, they found opportunities to improve oversight in the 
areas of monitoring, documentation, staffing, standardization of 
performance metrics (including timeliness and incentive fees), 
training, and the use of more advanced data analytics to identify 
emerging trends and systemic issues. DON is thoroughly reviewing 
incentive fee processes to correct issues of a lack of documentation 
and insufficient government oversight. Naval Facilities Engineering 
Command has directed the PPV teams to look at how award fees are 
calculated and documented on all PPV agreements and to determine which 
projects warrant a similar thorough historical review and validation. 
In addition, PPV staffs are moving towards a 100 percent review and 
validation of award fee requests going forward vice the spot-checking 
that had been done in the past. These actions will result in greater 
oversight and chain of command involvement.
    Secretary Barrett. Prior Air Force metrics for performance 
incentive fees measured work order response and completion timeliness 
that are quantitative and prone to data discrepancies. The Air Force is 
increasing the use of automated work order systems, use of electronic 
customer satisfaction surveys, and changing the incentive fee structure 
to reduce data discrepancy issues. Additionally, the Military Housing 
Office has access to project owners' data to conduct quality assurance 
reviews in support of incentive fee awards.

    38. Senator Blumenthal. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, in cases where tenants have reported problems with 
the quality of their housing, what steps have you taken to address 
these problems before paying performance incentive fees?
    Secretary McCarthy. Leaders and commanders are fully engaged in 
advocating for installation tenants. Garrison command teams work 
proactively with both tenants and the MHPI companies to identify and 
resolve housing quality issues. The garrison commander, command 
sergeant major, director of public works, and garrison housing staff 
routinely conduct inspections of homes when residents raise concerns 
and have an aggressive response plan for any soldier and family who are 
displaced due to conditions in a home. The revised IPMP metrics, 
effective 1 January 2020, place increased emphasis on the quality and 
condition of housing, work order quality and responsiveness, and 
resident satisfaction.
    Secretary Modly. Tenants are encouraged to report problems with the 
quality of their housing that cannot be satisfactorily resolved with 
the property manager and/or project company to the Department of the 
Navy (DON) housing staff using either a two (Navy Installations 
Command) or three (Marine Corps Installations Command) step process. 
Reported problems will be tracked by DON housing staff, but there is no 
direct linkage between addressing a specific case prior to paying 
incentive fees. Under the revised incentive fee structure, resident 
work order satisfaction and work order quality and responsiveness are 
factored into the property management incentive fee.
    Secretary Barrett. The Air Force is working with project owners to 
increase automated work order submissions, tracking, and surveys, which 
will inform the payment of incentive fees and providing the Military 
Housing Office access to project owners' data to conduct quality 
assurance reviews in support of incentive fee awards.

    39. Senator Blumenthal. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, for the last performance incentive fee cycle, how 
much did you pay in performance incentive fees to the private partners?
    Secretary McCarthy. The MHPI companies were awarded $4,895,929.00 
in incentive fees for second quarter calendar year 2019; $937,164.00 
(19 percent) was withheld based on failure to meet required performance 
metrics. Ten of the companies' incentive fee recommendations have not 
yet been processed so the final figure for second quarter is expected 
to change.
    Secretary Modly. The last incentive fee cycle was for Calendar Year 
(CY) 2017, which was paid by the managing member in CY2018. In 2018, 
$22.5 million was paid. In 2019 all incentive fee packages submitted 
for CY2018 are currently on hold.
    Secretary Barrett. The Air Force awarded a total of $2,124,596 in 
performance incentive fees across its 63-base portfolio for the second 
quarter in calendar year 2019, out of an estimated $4,649,323 available 
(46 percent).

    40. Senator Blumenthal. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, how were these amounts calculated?
    Secretary McCarthy. These amounts were calculated using current 
incentive fee metrics as validated by the garrison commander. Revised 
metrics that are better aligned with resident satisfaction will be 
effective 1 January 2020.
    Secretary Modly. The amounts were calculated consistent with the 
established objective and subjective criteria contained in each of the 
15 Department of the Navy (DON) Military Housing Privatization 
Initiative business agreements. Managing Members will prepare an 
incentive fee evaluation package for DON review and approval.
    Secretary Barrett. With the exception of those projects or sites 
where performance incentive fees are being withheld, the fees awarded 
were calculated based on the performance fee plan for each project. The 
Air Force is in the process of negotiating a revised performance fee 
structure with project owners. The new structure includes increased 
commander input, work order responsiveness elements, and resident 
satisfaction and are less prone to data discrepancy issues.

    41. Senator Blumenthal. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, since March 2019, have you withheld the performance 
incentive fees from any projects, either entirely or in part?
    Secretary McCarthy. Yes. Twenty-six garrisons submitted their 
recommendations for incentive fees for second quarter calendar year 
2019.
      9 (31 percent) received 100 percent of the available 
incentive fees ($1,870,465.00)
      17 (59 percent) received <100 percent of the available 
fees ($3,025,464.00).
      10 garrison incentive fee recommendations have yet to be 
finalized.
    Secretary Modly. In calendar year 2019, the Department of the Navy 
(DON) has not paid any incentive fees. Incentive fees are submitted in 
arrears and several companies have submitted calendar year 2018 
incentive fee requests. Payment of incentive fees is pending DON review 
of the incentive fee process and a revised review and approval chain. 
In the case of the Southeast DON project managed by Balfour Beatty, the 
DON is using a government audit service to examine Balfour Beatty 
records as they pertain to incentive fees.
    Secretary Barrett. Yes.

    42. Senator Blumenthal. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, if so, which projects?
    Secretary McCarthy. United States Army Garrison (USAG) Alaska, USAG 
Hawaii, Redstone Arsenal, White Sands Missile Range, Carlisle Barracks, 
Picatinny Arsenal, West Point, Forts Campbell, Bliss, Knox, Stewart, 
Leavenworth, Leonard Wood, Hamilton, Gordon, Jackson, Eustis/Story, and 
Benning.
    Secretary Modly. No incentive fees have been paid or withheld in 
2019. Payment of incentive fees is pending DON review of the incentive 
fee process and a revised review and approval chain.
    Secretary Barrett. The Air Force is withholding all or a portion of 
the performance incentive fee from 9 projects:
    1.  Continental (Edwards and Hurlburt AFBs)
    2.  ACC Group 3 (Dyess and Moody AFBs)
    3.  AETC Group 1 (Altus, Luke, Sheppard, and Tyndall AFBs)
    4.  AMC West (Fairchild, Tinker, and Travis AFBs)
    5.  Lackland AFB
    6.  Northern (Cavalier AFS, Cannon, Ellsworth, Grand Forks, Minot, 
and Mountain Home AFBs)
    7.  Vandenberg AFB
    8.  Western (Beale, F.E. Warren, Malmstrom, and Whiteman AFBs)
    9.  BLB (Barksdale, Bolling, and Langley AFBs)

    43. Senator Blumenthal. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, what was the reason for the withholding and what 
steps are being taken to rectify identified problems?
    Secretary McCarthy. The primary reason for MHPI company incentive 
fee withholding has been work order response times and completion times 
that are outside of acceptable limits. Many MHPI companies have 
responded to incentive fee deductions by hiring new maintenance staff 
and improving maintenance procedures to address these deficiencies.
    Secretary Modly. No incentive fees have been paid or withheld in 
2019.
    Secretary Barrett. The Air Force discovered maintenance data 
anomalies and directed those project owners to conduct an independent 
audit of their maintenance programs, assess oversight and quality 
control, identify specific actions to remedy deficiencies, ensure 
maintenance and work order processes are compliant with Air Force 
requirements, and make required adjustments to current and past 
performance incentive fee payments. Additionally, the Air Force is 
withholding performance incentive fees on these projects and will make 
adjustments, as appropriate, to future payments upon analysis of the 
data. Allegations or concerns that may be criminal in nature were 
referred to the Air Force Office of Special Investigations (AFOSI). 
AFOSI is investigating Allegations and closely coordinating with the 
other military criminal investigative organizations and the Department 
of Justice as appropriate.
                              health care
    44. Senator Blumenthal. Ms. Field, do you think that the Pentagon 
should issue guidance to all commanders at MTFs to expedite referrals 
to civilian providers?
    Ms. Field. The scope of our audit work for our recently issued 
report on hazards in privatized military housing (GAO-20-281), as well 
as prior work we've completed specific to MHPI, did not include the 
military health system referral process. While we have not reviewed the 
referral process as it relates to privatized housing, in June 2019 we 
examined the extent to which the referral management process 
facilitates the coordination of primary and specialty care for TRICARE 
Prime beneficiaries. \3\ We found that DOD's Defense Health Agency 
(DHA) has limited information about the extent to which the referral 
management process facilitates the coordination of primary and 
specialty care for beneficiaries enrolled in TRICARE Prime--a managed 
care option--because information about their specialty care referrals 
is not always complete or accurate. As such, we recommended that the 
Secretary of Defense direct DHA to ensure that military health system 
referral management center staff are trained to process and accurately 
document information in their electronic health record system about 
specialty care referrals, including the receipt of reports from 
civilian specialty care providers, the submission of referral results, 
and the closure of referrals. Moving forward, we will closely monitor 
DOD's implementation of our recommendation.
---------------------------------------------------------------------------
    \3\ GAO, DOD HEALTH CARE: Improvements Needed for Tracking 
Coordination of Specialty Care Referrals for TRICARE Prime 
Beneficiaries, GAO-19-488, (Washington, D.C.: Jun. 12, 2019).

    45. Senator Blumenthal. Ms. Field, what is the Department of 
Defense doing to ensure that military health care providers are 
appropriately educated and trained in treating signs and symptoms of 
environmental illness, especially symptoms resultant from mold?
    Ms. Field. The scope of our audit work for our recently issued 
report on hazards in privatized military housing (GAO-20-281), as well 
as prior work we've completed specific to MHPI, did not include 
information specific to the military health system. As such, we have 
not conducted the work necessary to answer this question.
    While not specific to training or the ability to treat the 
conditions, the Fiscal Year 2020 NDAA includes a provision directing 
the Director of the Defense Health Agency to develop and publish 
uniform processes and procedures to be used by medical providers in 
military medical treatment facilities to make determinations regarding 
whether environmental hazards within housing units serve as causative 
factors for medical conditions being evaluated and treated in military 
medical treatment facilities or through the TRICARE provider network.

    46. Senator Blumenthal. Ms. Field, how would you recommend that 
Congress and the Pentagon work together to ensure that the private 
contractors are held responsible for the medical costs induced by poor 
military housing conditions?
    Ms. Field. The scope of our audit work for our recently issued 
report on hazards in privatized military housing (GAO-20-281), as well 
as prior work we've completed specific to MHPI, did not include 
information specific to medical costs associated with privatized 
housing or related health impacts. As such, we have not conducted the 
work necessary to answer this question.
    As you know, the Fiscal Year 2020 NDAA includes provisions for the 
establishment of a process by which the DOD can seek reimbursement for 
any costs incurred by DOD to provide medical evaluations and treatment 
to tenants, if it has been determined that the tenant's medical 
conditions were caused by unsafe and unsanitary conditions of the 
housing unit. Therefore, if the private partners reimburse DOD for this 
care, they have in essence paid for any resident's medical care related 
to the unsafe and unsanitary condition of the home that was provided by 
DOD. The Fiscal Year 2020 NDAA also directs private housing partners to 
pay, under specific circumstances, reasonable relocation costs--
permanent or temporary--associated with the relocation of a tenant to 
different housing due to health or environmental hazards.

    47. Senator Blumenthal. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, have you formalized a process for sharing 
information with VA about these conditions that are a direct result of 
exposure to environmental hazards and toxic substances encountered 
during military service? If not, will you commit to do so?
    Secretary McCarthy, Secretary Modly, Secretary Barrett. All housing 
related medical conditions are documented in a Servicemember's or 
beneficiary's electronic health record in accordance with appropriate 
diagnostic coding practices. Service Treatment Records for VA eligible 
Servicemembers and beneficiaries are transferred from the military 
service to the VA along standard transition practices. The DOD/VA 
Deployment Health Working Group meets monthly and on an ad hoc basis to 
discuss issues that relate to servicemembers and veterans. 
Environmental exposures are frequent topics.

    48. Senator Blumenthal. Ms. Field, what should we do to ensure that 
family members who have experienced health problems due to housing 
conditions are not burdened with long-term medical bills?
    Ms. Field. The scope of our audit work for our recently issued 
report on hazards in privatized military housing (GAO-20-281), as well 
as prior work we've completed specific to MHPI, did not include 
information specific to medical costs associated with privatized 
housing or related health impacts. As such, we have not conducted the 
work necessary to answer this question.
    As you know, the Fiscal Year 2020 NDAA includes provisions for the 
establishment of a process by which DOD can seek reimbursement for any 
costs incurred by DOD to provide medical evaluations and treatment to 
tenants if it has been determined that the tenant's medical conditions 
were caused by unsafe and unsanitary conditions of the housing unit. 
Therefore, if the private partners reimburse DOD for this care, they 
have in essence paid for any resident's medical care related to the 
unsafe and unsanitary condition of the home that was provided by DOD. 
The statute also directs private housing partners to pay, under 
specific circumstances, reasonable relocation costs--permanent or 
temporary--associated with the relocation of a tenant to a different 
housing due to health or environmental hazards.
                              retaliation
    49. Senator Blumenthal. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, how are you working to prevent retaliation and 
encourage military families to continue to report substandard housing 
conditions?
    Secretary McCarthy. I have directed that the Army use all available 
avenues to communicate to both Army personnel and MHPI company 
leadership that the Army has a zero tolerance policy to soldiers or 
family members being retaliated against for reporting deficient housing 
conditions. In addition, the Army is actively working to develop and 
implement messaging strategies that encourage prompt reporting of 
housing deficiencies by residents to minimize the likelihood that small 
maintenance issues escalate into life, health, or safety issues.
    The Army is implementing new performance metrics for payment of 
MHPI property management incentive fees that stress the importance of 
timely, quality responsiveness to residents' maintenance requests. My 
expectation is that these new metrics will incentivize property 
managers to noticeably improve the timeliness and quality of their 
response to resident maintenance requests, thereby restoring residents' 
confidence that reporting issues will result in their being properly 
addressed. Over time I believe these actions will restore residents' 
confidence that issues reported will be properly addressed, thereby 
encouraging residents to report issues when they are first identified.
    Secretary Modly. Our primary focus has been to engage our leaders 
as active participants in the housing program. We cannot outsource this 
responsibility. Since that time, Navy and Marine Corps leaders achieved 
100 percent contact with all sailors and marines to inquire about 
housing concerns and to offer a home visit. Every Navy and Marine Corps 
installation also held town halls with residents, and each installation 
now offers a combination of quarterly or monthly meetings to provide 
residents with information and access to installation and partner 
representatives. Additionally, we have implemented structured training 
for all leaders addressing the check-in process to help them better 
understand the housing program, specific housing conditions, and local 
procedures available to assist their sailors and marines. By getting 
leadership involved in the early stages and throughout the housing 
process, we aim to make sailors and marines feel comfortable reporting 
substandard housing conditions and to provide them multiple avenues to 
do so.
    Secretary Barrett. The Air Force does not tolerate retaliation. On 
1 April 19, the Secretary of the Air Force, the Chief of Staff of the 
Air Force, and the Chief Master Sergeant of the Air Force issued a 
letter reiterating chain of command responsibilities to ensure the 
safety and welfare of airmen. Separately, in a 23 April 19 letter, they 
reinforced with airmen and their families that they should report 
problems through the chain of command without fear of retaliation. 
Finally, when airmen report retaliation or fear of reprisal, their 
issues are referred to the Air Force Inspector General for further 
investigation and action.

    50. Senator Blumenthal. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, what additional steps will you take to ensure that 
no military family experiences retaliation from the chain of command or 
a private housing company?
    Secretary McCarthy. I have directed the Army to use all available 
avenues to communicate to Army personnel that retaliating against 
soldiers or family members who have reported deficient housing 
conditions is forbidden. In addition, I have directed the Assistant 
Secretary of the Army for Installations, Environment & Energy, to 
ensure that the senior management of all companies that own and operate 
privatized housing on Army installations are informed that the Army 
will not tolerate any form of retaliation by their companies against 
soldiers and family members as a result of their reporting deficient 
housing conditions. All allegations of retaliation will be reported 
immediately to the Army Inspector General for investigation. Verified 
allegations of retaliation will be addressed immediately.
    Secretary Modly. Trust and confidence are the bedrock of effective 
command, and the sailors and marines in our care must be confident that 
their leadership will advocate tirelessly on their behalf. Navy and 
Marine Corps leaders achieved 100 percent contact with all sailors and 
marines to inquire about housing concerns and offer a home visit. Every 
Navy and Marine Corps installation also held town halls with residents 
allowing them to voice all their concerns including retaliation 
experiences. In addition, each installation now offers a combination of 
quarterly or monthly meetings to provide residents with information and 
access to installation and partner representatives. We are also 
currently undergoing a large hiring process to provide additional 
housing personnel and resident advocates to address residents' 
concerns. Additionally, we have implemented structured training for all 
leaders addressing the check-in process to help them better understand 
the housing program, specific housing conditions, and local procedures 
available to assist their sailors and marines. By involving the entire 
chain of command, we aim to add layers of protection from retaliation 
for all of our sailors and marines.
    Secretary Barrett. We provided increased training to commanders on 
their authorities in privatized housing and responsibility to support 
airmen when issues arise. We are also diversifying the avenues 
available for airmen to provide feedback by creating Resident Councils, 
establishing Resident Advocate positions, and expanding the 1-800 line 
to 24/7, 365 days a year.

    51. Senator Blumenthal. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, will you commit to holding accountable any 
commanders within your chains of command found to have engaged in 
retaliatory behavior against military families?
    Secretary McCarthy. Yes.
    Secretary Modly. Yes, any commander who engages in retaliatory 
behavior will be held accountable.
    Secretary Barrett. Yes.
                               __________
                Questions Submitted by Senator Tim Kaine
                        headquarters' reductions
    52. Senator Kaine. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, to what extent have the headquarters reductions, 
mandated by recent defense authorization bills, affected the ability of 
each military department to retain housing support personnel to address 
the current challenges with privatized housing?
    Secretary McCarthy. The Department of the Army's Installations, 
Energy, and Environment Secretariat and the G-9 housing sections' staff 
reductions limited the ability to provide complete oversight of all 
housing programs and resulted in the transfer of duties to non-
specialized housing entities, and an increase of the workload of the 
remaining housing personnel, resulting in delays and incomplete work.
    Secretary Modly. Budget reductions taken since Sequestration in 
fiscal year 2013 resulted in across-the-board cuts to nearly every 
installation operating account, including those that provide oversight 
of privatized housing. Major Headquarters Activity (MHA) reductions 
resulted in the direct elimination of one full-time employee at the 
Department level that provided oversight for the privatized housing 
program.
    Secretary Barrett. We cut personnel too much and did not provide 
the necessary privatized housing oversight. Some reductions were a 
result of defense authorization cuts, but others were caused by process 
streamlining and a decision to accept certain risks in the housing 
portfolio.

    53. Senator Kaine. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, how many housing support positions have been 
eliminated since the reductions were mandated by headquarters cuts in 
the recent defense authorization bills?
    Secretary McCarthy. The Department of the Army's Installations, 
Energy, and Environment Secretariat and the G-9 housing sections' staff 
were reduced by 33 percent.
    Secretary Modly. The Department eliminated one position at the 
Department level, but did not eliminate any housing positions at the 
Echelon II, Regional, or Installation levels due to Major Headquarters 
Activity (MHA) reductions.
    Secretary Barrett. The Air Force eliminated approximately 76 
positions. Some reductions were a result of defense authorization cuts; 
others were caused by process streamlining and a decision to accept 
certain risks in the housing portfolio.
                               __________
            Questions Submitted by Senator Elizabeth Warren
                           renters insurance
    54. Senator Warren. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, when servicemembers and their families move into on-
base privatized housing, they are strongly encouraged to purchase 
renter's insurance but are not required to so. If a home is deemed 
unlivable due to mold infestation, the privatized housing company will 
relocate the family to a temporary home until the problem is fixed. 
Yet, due to mold contamination, their household goods remain in the 
house to be further contaminated. In most cases, families have to 
replace the damaged goods. A servicemember can file for reimbursement 
when household goods are damaged because of issues with their 
government housing or their privatized housing and are encouraged to 
request assistance from their installation's government housing office. 
However, when base housing offices are contacted, they are often unable 
to explain the process. Unfortunately, privatized renter's insurance 
does not cover individual cases (e.g. cases involving mold, toxic 
water, asbestos, radon, and soil contamination), and the family is 
forced to pay out of pocket to replace their goods. In the majority of 
cases that have been reported, families are paying upwards of $10,000 
to replace their damaged goods. Are you aware that this has been an 
issue, and what steps have you or your staff taken to address this 
issue?
    Secretary McCarthy. We are aware of issues raised by Army soldiers 
and their families concerning contaminated household goods. Army 
leadership at each installation is tracking all displaced residents and 
issues which have been raised. The Army will continue to be directly 
involved in the oversight of each MHPI company's engagement with 
displaced residents.
    The Army is working with all of the MHPI companies to develop a 
consistent portfolio-wide policy, which details the minimum standards 
and/or conditions within a housing unit that will require the 
displacement of a resident if the minimum standards are not met. This 
policy will also address minimum entitlements that a displaced resident 
will be provided during the displacement time period. The policy will 
be issued in the near future.
    Secretary Modly. Yes, the Department of the Navy is aware of this 
issue. Previous incidents of personal property damage required 
resolution directly between the tenant and Public Private Venture (PPV) 
partner, and to address this issue, we are strengthening our existing 
informal issue resolution processes and ensuring installation housing 
offices are engaged in resolving resident concerns. We are working to 
develop a Disputes Resolution Process where residents and the PPV 
partners will have the opportunity to make their case to an independent 
3rd party. Region Legal Service Offices are also available to provide 
free legal advice and consultation to military tenants and their 
families living in PPV housing.
    Secretary Barrett. We are aware that this has been an issue and 
installation judge advocate offices are able to provide legal 
assistance to service-members who have suffered property damage because 
of the negligence of housing contractors. With the passing of the 
Tenant Bill of Rights in the Fiscal Year 2020 NDAA, we are engaging in 
further efforts to educate our airmen about the additional assistance 
available to them from their chain of command and from all Wing support 
agencies on these issues.
                               healthcare
    55. Senator Warren. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, what is DOD doing to ensure that those responsible 
for writing military health policies are issuing directives that aid 
providers in recognizing, diagnosing, and treating the various forms of 
environmental illness associated with contaminated housing buildings?
    Secretary McCarthy. Army healthcare providers screen patients for 
risk of exposure to environmental health hazards, such as lead and 
mold. Testing is completed during every well-child check from birth to 
age 6 and also for children who are at high risk. If an elevated blood 
lead level is identified, a housing assessment and an investigation is 
completed to identify the source of lead exposure. All elevated blood 
lead levels are reported to the state and local public health 
departments, and to the DOD system of record for reportable illnesses.
    If a patient reports health concerns associated with mold exposure, 
the provider completes a questionnaire with the patient to determine 
indoor mold exposure levels. If responses to the questionnaire 
indicates high exposure, healthcare providers document the exposure in 
the medical record, request case management, and complete a housing 
assessment to evaluate the environmental conditions. The results of the 
housing assessment are stored in the DOD's system of record.
    Additionally, the Army developed a comprehensive checklist to 
determine the environmental health and safety of homes. It addresses 
lead, mold, asbestos, and radon and a wide range of safety 
considerations, such as smoke alarms, egress, height of window ledges, 
and function of HVAC equipment. The checklist is based on the 
recommendations from the National Center for Health Homes and aligns 
with the Environmental Protection Agency, the Centers for Disease 
Control, and Housing and Urban Development, as well as Unified 
Facilities Criteria standards. This checklist will be used to evaluate 
the health and safety of homes between occupancy per the Residential 
Communities Initiative Portfolio and Asset Management Handbook and will 
be included in relevant Army policy, such as AR 420-1 (Facilities 
Management).
    Secretary Modly. A draft Directive-Type Memorandum (DTM), 
``Managing Health and Safety Risks in Housing,'' from the Under 
Secretary of Defense for Personnel and Readiness (USD P&R) is being 
formally coordinated with the Military Departments. Specifically, the 
draft DTM:

      Directs the Military Departments on the appropriate and 
consistent management of housing safety and health hazards reported by 
residents.
      Directs the Assistant Secretary of Defense for Health 
Affairs to create consistent clinical response guidelines associated 
with a resident's report of health concerns from military housing to 
their primary health care provider. In addition, the Navy has issued 
policy and clinical guidelines as follows.
       Memorandum from Chief, Bureau of Medicine and Surgery 
(BUMED): ``Health Hazards from Environmental Exposures in Military 
Housing'' (March 18, 2019)
      Navy and Marine Corps Public Health Center (NMCPHC): 
``Guide for Clinicians Caring for Patients with Mold-Related 
Complaints'' (April 1, 2019).

    Secretary Barrett. The Air Force follows well established Federal 
and State guidelines for surveillance, prevention, and control of 
various environmental concerns in buildings, including mold. The Air 
Force Medical Service updated guidance to medical commanders and 
physicians in May 2019 for evaluation of mold exposure. The updated 
guidance included an evidence-based ``Guide for Clinicians Caring for 
Patients with Mold-related Complaints''. Subject matter experts at the 
Environmental, Safety, and Occupational Health Service Center at the 
USAF School of Aerospace Medicine at Wright-Patterson Air Force Base, 
Ohio, are also available to assist providers.

    56. Senator Warren. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, who is ultimately responsible to ensure that 
military healthcare providers are appropriately educated and trained 
and are subsequently able to perform the proper diagnostic work on 
patients with signs and symptoms indicative of environmental illness 
resultant from exposures in negligently built and maintained military 
housing?
    Secretary McCarthy. The Surgeon General is ultimately responsible 
for ensuring providers are appropriately educated, trained, and capable 
of performing proper diagnostic workup on patients. The Surgeon General 
accomplishes this through regulation and Joint Commission accreditation 
standards to ensure each provider has appropriate credentials, 
training, and clinical competency to provide care in their respective 
field.
    Secretary Modly. Per a March 18, 2019 memorandum from Chief, Bureau 
of Medicine and Surgery (BUMED), titled ``Health Hazards from 
Environmental Exposures in Military Housing,'' Navy Medicine regions 
must ensure clinicians are educated on this topic for evaluating 
patients. This would be delegated to the medical treatment facility 
(MTF) command level. The memorandum provides educational resources for 
this purpose, as well as the ability for MTF providers to consult with 
their MTF public health experts (e.g., Occupational and Environmental 
Medicine, Preventive Medicine, and Industrial Hygiene) who can liaise 
with the Navy Housing Service Centers to further investigate 
environmental conditions of a home on a case-by-case basis. In 
addition, the Navy and Marine Corps Public Health Center (NMCPHC) 
developed a ``Guide for Clinicians Caring for Patients with Mold-
Related Complaints'' dated April 1, 2019. Links for additional 
educational resources are found on the NMCPHC website. Navy Medicine 
regularly reviews provider competence and performance, which is subject 
to both supervisor evaluation and peer review of the medical records. 
This includes checking competence in addressing environmental-related 
medical concerns. Providers evaluate and treat patients with concerns 
about environmental exposures and illness based on symptoms and 
history, which guide the physical exam, evaluation, tests, other 
studies, diagnosis, and treatment. Of note, there are often confounding 
factors in the home with respect to environmental exposures and disease 
causation. Symptoms potentially related to housing environmental 
exposures such as mold are also triggered by numerous other common 
exposures in the home (e.g., dust mites, pet dander, cockroaches, mice 
droppings, pollen, second-hand smoke, scented candles, air fresheners, 
plants, etc.). Some people are sensitive to environmental exposures 
such as mold, which can exacerbate pre-existing health issues such as 
allergies and asthma. Per the Centers for Disease Control and 
Prevention, allergic response symptoms like those to pollen or animal 
dander are the most common types of symptoms related to environmental 
exposure to mold (e.g., nasal stuffiness, throat irritation, sneezing, 
coughing or wheezing, eye irritation, or skin irritation). Chronic 
respiratory complaints, such as allergies and asthma, are often multi-
factorial, and it is not possible to quantify the contribution of any 
particular environmental irritant or allergen to such a disease 
process.
    Secretary Barrett. The Surgeon General is ultimately responsible to 
ensure military providers are appropriately educated and trained. 
Military Treatment Facility Commanders are responsible for granting 
provider privileges to practice medicine based on their credentials, 
which routinely includes diagnostic workup on patients with illness 
from exposure irrespective of the source.

    57. Senator Warren. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, many military families have reported that the 
military providers at their local MTF are unable to recognize, 
diagnose, and treat the symptoms of illnesses caused by living in 
contaminated housing. These families are then forced to seek diagnoses 
and treatment from civilian providers. Are there plans to ensure that 
military providers are knowledgeable about the scientifically proven 
ability of mold and other contaminants found in buildings to cause 
debilitating cognitive and neurological injuries?
    Secretary McCarthy. The Army published new policy in April 2019 to 
protect soldiers and families from potential health impacts related to 
residential indoor environmental mold exposure. It includes policy-
reinforcing educational materials to healthcare providers that provide: 
1) guidance on mold-related hazards; 2) recommendations for testing and 
management of suspected illnesses related to mold exposure; 3) 
information on how to document mold-related illness in the patient's 
medical record; and 4) information on how to educate patients on mold 
mitigation measures.
    In addition to provider education, the Army is also developing 
educational material for soldiers and families. This includes 1) facts 
about mold; 2) strategies to prevent mold growth; and 3) recommended 
actions when one suspects or has detected mold growth within their 
home.
    Secretary Modly. The Navy and Marine Corps Public Health Center 
(NMCPHC) developed a ``Guide for Clinicians Caring for Patients with 
Mold-Related Complaints,'' dated April 1, 2019, explaining that mold 
exposure is sometimes associated with adverse health effects, including 
infections, hypersensitivity disorders, and toxic or irritant effects 
from mold by-products. The National Academy of Sciences (NAS) conducted 
a comprehensive literature review and analysis and found there was 
sufficient evidence to link mold and other factors related to damp 
indoor environments with some upper respiratory tract symptoms, 
coughing, wheezing, and asthma in sensitized persons, people who 
already have respiratory problems, the elderly, or the very young. 
However, NAS found there was not enough evidence to make conclusions 
for many other health outcomes, including rheumatologic and other 
inflammatory diseases, neurological symptoms, cancer, and reproductive 
effects [per National Toxicology Program, https://www.niehs.nih.gov/
health/materials/mold--508.pdf]. Provider competence and knowledge of 
medicine in general includes competence in addressing household mold-
related medical concerns in the general population. Navy medical 
providers dealing with especially complex patient mold-related medical 
issues (e.g., patients with HIV, those on immunosuppressant therapy or 
cancer chemotherapy, or patients with poorly controlled diabetes 
mellitus) know to refer patients to the appropriate specialist as 
necessary (e.g., Allergy/Immunology, Infectious Disease, or Neurology, 
as deemed appropriate). There is no clear evidence for specific direct 
association of mold exposure with debilitating cognitive and 
neurological injuries. Most peer reviewed studies investigating 
neurologic disorders and fungal exposure have described complaints in 
vague terms and did not define specific neurologic deficits or use 
objective testing or findings to confirm any neurologic dysfunction. 
``Despite many reported subjective complaints, there is no objective 
evidence for neurological compromise caused by indoor mold exposure'' 
(Indoor Mold, Toxigenic Fungi, and Stachybotrys chartarum: Infectious 
Disease Perspective, D. M. Kuhn and M. A. Ghannoum, CLINICAL 
MICROBIOLOGY REVIEWS, Jan. 2003, p. 159). For individuals who have 
medical conditions exacerbated by or related to indoor environment 
triggers, controlling or eliminating the sources of indoor/building 
mold and other indoor allergens, along with medical treatment, should 
lead to improvement or resolution of symptoms.
    Secretary Barrett. Air Force providers utilize the updated ``Guide 
for Clinicians Caring for Patients with Mold-related Complaints'' which 
contains the latest information regarding the debilitating cognitive 
and neurological effects of mold.

    58. Senator Warren. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, some military physicians have acknowledged that they 
do not know how to treat building related illnesses. They are writing 
medically necessary referrals to mold-literate environmental 
physicians, but these referrals are often denied by MTF commands, 
despite the fact that Tricare is approving and agreeing to pay for the 
services. Why are the referrals being denied?
    Secretary McCarthy. All patients with potential mold-associated 
symptoms or health concerns are evaluated and managed in accordance 
with safe and effective clinical protocols. Testing for mold and other 
allergies may include a skin or blood test to measure a patient's 
sensitivity to specific types of mold, and treatments for mold 
allergies may include corticosteroids, antihistamines, decongestants, 
or immunotherapy.
    We are aware of requests for mycotoxin testing, a test to quantify 
mold exposure, being denied. That particular test is not a TRICARE 
covered benefit because urine mycotoxin tests are not approved by the
    U.S. Food and Drug Administration and are not recommended by the 
Centers for Disease Control and Prevention for diagnostic purposes. 
Using non-validated tests could potentially lead to misdiagnoses and 
perhaps even harmful medical interventions. The Army Office of The 
Surgeon General has asked the Defense Health Agency to review mycotoxin 
testing as a TRICARE covered benefit based on multiple requests for 
this testing.
    Secretary Modly. We have no knowledge of Commanders/Commanding 
Officers denying referrals.
    Secretary Barrett. We are not ordering Military Treatment Facility 
commanders to deny referrals, nor are we aware of any denial of 
necessary referrals to mold-literate environmental physicians. Care not 
available at a Military Treatment Facility is referred to the 
appropriate specialist, ideally within the military health system, 
based on the diagnosis of the patient.

    59. Senator Warren. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, who is ordering the commanders at the MTFs to deny 
these referrals?
    Secretary McCarthy. The Army Office of The Surgeon General is not 
aware of MTF Commanders denying medically necessary referrals. Army 
Medical Department healthcare providers assess patients in accordance 
with prescribed clinical practice guidelines. Patients are referred to 
specialized medical experts (e.g., board certified allergists and 
immunologists) when deemed appropriate by the treating healthcare 
provider.
    Secretary Modly. We have no knowledge of Commanders/Commanding 
Officers denying referrals.
    Secretary Barrett. As mentioned in the previous response, we are 
not ordering Military Treatment Facility commanders to deny referrals, 
nor are we aware of any denial of necessary referrals to mold-literate 
environmental physicians.

    60. Senator Warren. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, what is being done to ensure that the cost of 
medically necessary care, resultant from exposures to negligently built 
and maintained military housing, is subrogated to the privatized 
housing landlords and/or their property casualty insurers?
    Secretary McCarthy. The existing Medical Affirmative Claims (MAC) 
program would be the avenue by which the Army would assert such a 
claim. The Army has not yet asserted a MAC against a privatized 
landlord or its insurer for the cost of medical care expended to treat 
an illness resulting from conditions in housing. Establishing a causal 
nexus between the condition in housing (e.g., the presence of lead, 
mold, or asbestos) and the resulting ailment would be difficult as both 
sides would have experts that would differ on the source of the 
illness. We will look to add additional paths forward through the 
dispute resolution process.
    Secretary Modly. The Department of the Navy's (DON) first priority 
is to ensure prompt and appropriate treatment of all medical conditions 
of servicemembers and their family members. Medical conditions for 
servicemembers and family members are documented in each individual's 
medical treatment record. Navy Medicine has issued policy to all 
medical treatment facilities (MTF) directing that internal processes be 
developed that facilitate 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 by 
the Primary Care manager at the MTF, the TRICARE network is used to 
ensure all required care is received and tracked. The DON is committed 
to ensuring the readiness, health, and safety of our sailors, marines, 
and their families. Currently, the DON is not considering legal action 
to recover health care costs of servicemembers or family members from 
the companies providing privatized housing.
    Secretary Barrett. The Air Force has an established process to 
recoup medical treatment costs for Active Duty, dependent, or retiree 
privatized housing residents when those costs are associated with 
negligence on the part of third parties such as project owners or their 
property casualty insurers.

    61. Senator Warren. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, will a military housing registry, similar to the 
lead registry, be developed and implemented to track the health issues 
that have arisen from exposures to mold, toxic water, asbestos, radon, 
and soil contamination?
    Secretary McCarthy. All housing-related health concerns and 
potential environmental health hazards in housing may be reported to 
the Housing Environmental Health Response Registry.
    The Housing Environmental Health Response Registry is available for 
residents to: 1) report concerns about housing and related health 
issues; 2) obtain additional information on housing environmental 
health hazards; and 3) receive assistance in seeking medical care for 
any housing-related illnesses or concerns. The goal of the Housing 
Environmental Health Response Registry is to allow the military to link 
housing, occupants, and potential health hazard data to: 1) understand 
the health effects of potential environmental hazards in housing; 2) 
assess future needs for health interventions and health education; and 
3) inform individual occupants regarding potential exposure and adverse 
health impacts.
    As of November 30, 2019, 323 families have enrolled in the Housing 
Environmental Health Response Registry. One hundred fifty-seven of the 
323 families reported specific hazards in their homes, the majority of 
which are mold and dampness. One hundred forty-six families requested 
additional contact with a public health professional from the Army 
Public Health Center, which is ongoing.
    The Army Medical Command published Operations Order 20-10 (MEDCOM 
Support to Garrison Quarterly Town Hall Engagements) which directs 
medical, dental, and public health participation at Garrison town hall 
engagements to address concerns about housing and to encourage and 
assist with enrollment in the Housing Environmental Health Response 
Registry to residents who have housing related health concerns.
    Secretary Modly. Similar to medical encounters for lead exposure 
and all other medical encounters, visits and potential treatments for 
conditions that are reported by the patient as being housing-related 
are documented in their electronic health record for tracking and 
follow-up by the attending provider. Additionally, the Navy, Navy 
Installations Command (CNIC), and Public Private Venture (PPV) partners 
maintain databases (i.e., Enterprise Military Housing [eMH] and Yardi) 
that track the historical record of residents in every home, including 
all maintenance and service calls that are environmental (e.g., mold), 
health, and safety related. If deemed medically necessary, a medical 
professional can obtain information from CNIC to link patients and 
military housing history.
    Secretary Barrett. Any health related concern that arises is 
referred to the Air Force Environmental, Safety, and Occupational 
Health (ESOH) Service Center, which maintains a database.
                             incentive fees
    62. Senator Warren. Secretary Barrett, there have been several 
reports of providers at different Air Force installations falsifying 
documents in order to capture incentive fees. Does the Air Force have a 
plan to recoup that money?
    Secretary Barrett. Yes. The Air Force directed project owners with 
data integrity issues to conduct independent third-party audit of their 
maintenance programs. The Air Force is withholding property management 
performance incentive fees to projects with validated work-order 
discrepancies and will recoup fees, as appropriate, upon analysis of 
the data.

    63. Senator Warren. Secretary Barrett, if so, when do you expect 
the Air Force to get that money back?
    Secretary Barrett. Once AFOSI analyzes the independent maintenance 
program audits for these projects, the Air Force will determine what 
fees should be returned to the projects.
                              retaliation
    64. Senator Warren. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, we continue to hear from military family members who 
remain fearful of speaking out about the poor conditions of their on 
base housing. How many instances of retaliation have been reported in 
your respective military departments?
    Secretary McCarthy. Since February 2019, 11 potential cases of 
retaliation or reprisal by military officials or MHPI Company employees 
against servicemembers and family members for raising housing 
complaints have been reported to the Department of the Army Inspector 
General. After conducting thorough inquiries of the 11 potential cases, 
2 were founded, 4 were unfounded, and 5 complaints were withdrawn by 
the complainant. In the two founded cases, the MHPI company employee 
was reprimanded for their behavior. There were no founded cases 
concerning military officials. We have thorough systems in place to 
address any reports of retaliation or reprisal. All allegations of 
retaliation will be reported immediately to the Army Inspector General 
for investigation. Verified allegations of retaliation will be 
addressed immediately.
    Secretary Modly. The Marine Corps Inspector General reviewed all 
fiscal year 2018 and fiscal year 2019 cases in its database for 
incidents of reprisal or retaliation for speaking out about the poor 
conditions of their on-base housing. While there were a couple 
complaints about living conditions, there were no reported incidents of 
reprisal or retaliation for speaking out about poor housing conditions. 
The Naval Inspector General executed a search of their case management 
database and identified four reported incidents of reprisal or 
retaliation for speaking out about poor housing conditions.
    Secretary Barrett. Nine airmen have reported retaliation or fear of 
retaliation. Each of these instances was referred to the Air Force 
Inspector General for review and appropriate action.

    65. Senator Warren. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, will you commit that any reported and confirmed 
instances of retaliation will not be tolerated and those officials who 
engage in retaliation against the servicemember, including to his or 
her family, will be punished accordingly?
    Secretary McCarthy. Yes. Retaliation and reprisal are violations of 
Army regulations and inconsistent with our values and the sacrifice of 
soldiers and their families. Inspectors General thoroughly analyze all 
complaints of retaliation and reprisal received through IG channels, 
and report such occurrences to appropriate officials to ensure the 
cases are inquired into and resolved in a timely and thorough manner. 
We will not tolerate retaliation and reprisal against soldiers and 
their families by our military members nor our MHPI companies.
    Secretary Modly. Yes, retaliation is not tolerated in the 
Department of the Navy. Officials who engage in retaliation against 
servicemembers or their families will be disciplined as appropriate.
    Secretary Barrett. Yes.
                               __________
             Questions Submitted by Senator Joe Manchin III
               reporting and tracking of medical history
    66. Senator Manchin. Secretary McCarthy, Secretary, Modly, and 
Secretary Barrett, the hearing made it clear that there were avenues to 
self-report medical issues arising from unsafe or unsanitary housing 
conditions, but due to the fact that self-reporting is considered 
epidemiologically unreliable, I'm afraid this data will be useless to 
servicemembers and their dependents when exploring redress in the 
future for medical problems developed as a direct result of having to 
live in housing with contaminants. Are there plans in any of the 
services currently to pull from reliable data sources, such as official 
occupancy records, and record that data not only in military databases, 
but also in servicemembers and dependents medical records so that it is 
readily accessible and usable for them in the future should medical 
problems develop?
    Secretary McCarthy. The Army is developing a Housing Environmental 
Health Response Registry that will integrate two DOD systems of records 
to link housing, occupants, and potential health hazard data. Phase 1 
of the registry, the Rapid Response Registry, was established in mid-
April 2019. This 24 hours a day / 7 days a week hotline provides 
housing residents with health information and access to healthcare and 
housing resources. As of November 30, 323 families have enrolled in the 
registry. Phase 2 is underway and consists of populating two DOD 
databases (enterprise Military Housing (eMH) and the Defense 
Occupational Environmental Health Readiness System (DOEHRS)) with Rapid 
Response Registry enrollee data. Phase 3 allows for linking Rapid 
Response Registry enrollees with housing assessment data to: 1) 
understand health effects of housing hazards; 2) assess future health 
interventions and health education; and 3) inform individuals of 
potential exposures and adverse health impacts.
    Secretary Modly. Responding to health and safety concerns of 
military housing residents requires an integrated team approach by 
staff from housing offices, facilities maintenance, safety, public 
health, and health care providers. When residents report potential 
health or safety hazards in Department of Defense (DOD)-owned housing 
to the supporting housing office or facility manager, that information 
is tracked in the DOD component's authoritative database for housing 
management (i.e., Enterprise Military Housing [eMH]). The reported 
issue and resolution are recorded in the database and can be referenced 
in the future for historical information. When residents report 
potential health or safety hazards in privatized family housing to the 
privatized housing manager, that information is logged in the Public 
Private Venture (PPV) partners' maintained database (i.e. Yardi). 
Similar to the DOD database for housing management (eMH), the reported 
issue and resolution are recorded in the PPV partner's database and can 
be referenced in the future for historical information. When residents 
report potential health or safety issues to their health care 
providers, the providers evaluate the medical condition and record the 
diagnosis in the electronic health record. This can provide reliable 
and historical information on diagnoses. If deemed medically necessary, 
a medical professional can obtain information from the DOD component's 
housing offices to link patients and military housing history. Of note, 
there are often confounding factors in the home with respect to 
environmental exposures and disease causation. Nevertheless, 
information in the electronic health record would be readily accessible 
and useful in case future medical problems develop. Medical records 
only contain information about historical housing occupancy as offered 
by the patient to the provider, or the current address in the 
demographic section of the electronic medical record. Due to Health 
Insurance Portability and Accountability Act (HIPAA) and privacy 
concerns, medical records do not interface with other non-medical 
military and housing databases; it is important to maintain this 
separation.
    Secretary Barrett. Yes, there is an on-going Joint Service effort 
to develop an application utilizing the Enterprise Military Housing 
(eMH) database to collect and maintain health related items, to include 
but not limited to lead, radon, mold, HVAC, other indoor air quality 
issues, asbestos, and drinking water issues. The eMH database is the 
DOD's authoritative data source for all military housing assets in DOD 
real property databases.
                   management of business agreements
    67. Senator Manchin. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, it seems that there is a lot of confusion 
surrounding the business agreements due to differences in 
implementation among the services. This is manifested in differing ways 
survey questions are asked, how incentive payments are distributed, and 
even conflict resolution through the chains of command. Has the 
decision to allow the services to independently manage their own 
business agreements caused some of the issues and would it benefit the 
services to be working under a uniform set of policies and procedures 
to enforce when dealing with private housing companies?
    Secretary McCarthy. It would benefit the services to have a uniform 
set of policies and procedures when it is feasibly possible. We 
frequently participate in cross-service meetings to ensure lessons 
learned are incorporated into our housing management and quality 
assurance practices and that we are working under a similar set of 
policies and procedures to enforce life, health, and safety when 
dealing with MHPI companies.
    The Army's MHPI program is defined as an institutional multi-family 
company portfolio with commercial debt facilities and three partial 
government loan guarantees. Agreement objectives and business terms are 
essentially the same across the Army MHPI portfolio with only regional, 
local, and company-specific arrangements as the primary 
differentiation. Contract Cancellations
    Secretary Modly. The Military Housing Privatization Initiative 
legislation enabled the use of different tools to establish the Public 
Private Venture programs. The Office of the Secretary of Defense/Tri-
Services initiatives on standard incentive fee structures, the Tenant 
Bill of Rights, universal lease and dispute resolution will create a 
standardized property management approach across the Department of 
Defense. This will greatly enhance the resident experience for our 
military families.
    Secretary Barrett. The differences in implementation by the 
respective services are not a significant contributor to the challenges 
we face today. Each service has a different organizational structure 
and culture driving different approaches. However, the services are 
working together on areas of mutual interest and meet weekly with 
counterpart Assistant Secretaries and the Office of the Secretary 
Defense.
                         contract cancellations
    68. Senator Manchin. Secretary McCarthy, Secretary Modly, and 
Secretary Barrett, the evidence has continued to mount in both the 
media reports and as a result of congressional hearings that there has 
been some serious neglect and poor business practices surrounding the 
safety and health of our servicemembers and their dependents living in 
certain military housing projects. While it appears that the 
departments are making incremental improvements, there are still 
conditions that are unacceptable and new problems being reported. Are 
there stipulations in the contracts or actions being taken by any of 
the services towards cancellation of any contracts due to the egregious 
nature of these lapses, and if so, how far along are the processes?
    Secretary McCarthy. The Army has the authority to compel 
termination of any property management service providers who fail to 
provide habitable housing and do not take action to cure housing 
deficiencies in a commercially reasonable period of time. While there 
are still housing issues that have not been resolved, the Army believes 
that all of the housing service providers are currently making 
substantial progress in resolving the issues that remain. As a result, 
there are currently no plans by the Army to compel termination of any 
privatized military housing property manager contract.
    Secretary Modly. The governing agreements for Department of the 
Navy (DON) privatization projects provide several mechanisms for the 
DON to address instances of unacceptable performance or, when 
necessary, default. 1. Removal of Property Manager: In the event of 
unacceptable performance by a property manager, governing project 
agreements give the DON the right to direct the company to terminate 
the property management agreement and replace the property manager 
without terminating the LLC agreements or removing the Managing Member. 
2. Issue Cure Notice to Managing Member: In cases where the Managing 
Member has defaulted on its obligations, the DON can issue a written 
cure notice. According to project operating agreements, default events 
include the violation of any provision of the agreement. The cure 
notice serves to set the timeline to remedy or cure such violation. 3. 
Default Managing Member: The DON has the right to default the Managing 
Member of the LLC. A replacement Managing Member would assume all 
rights and obligations of the Managing Member and the existing LLC 
entity construct would continue to own and operate the housing. 
Alternatively, the DON may cause the project or the Managing Member's 
interest to be sold to a third party in accordance with the terms of 
the agreements. Either remedy must be coordinated with the bondholders. 
4. Terminate the Project: In an extreme case, where the DON is unable 
to replace the Managing Member, the ground lease could be terminated 
for cause and the project entity itself may be dissolved and 
liquidated. The bondholders would require debt repayment for which the 
government could be potentially liable. The DON would be responsible 
for ownership and operation of the housing project. In the event of 
Government re-acquisition, resident leases would be terminated and 
payment of Basic Allowance for Housing (BAH) to military members ceased 
in accordance with 37 U.S.C. Section 403. Per fiscal law (10 U.S.C. 
Section 2821), sufficient appropriated resources would be required to 
sustain the housing for military families. Although the circumstances 
did not reach the event of a default, in 2007 the DON caused the 
Managing Member's interest in the LLC to be sold to a third party in 
the Navy's Pacific Northwest project. That third party stepped in and 
assumed ownership and operation of the housing without disruption to 
the residents. The DON is continuing to work with the Managing Members 
to ensure that, where deficiencies have been identified, corrective 
steps are being taken. The language of the business agreements provides 
the framework and the aforementioned steps DON would take to address 
unacceptable performance. To date, no actions have been taken to 
terminate any of the agreement
    Secretary Barrett. The Air Force cannot unilaterally terminate 
privatized housing agreements. Existing authorities allow the Air Force 
to place underperforming project owners on corrective action plans, 
require performance improvement plans, withhold performance incentive 
fees, require independent audits, and if appropriate, initiate formal 
action and exercise our contractual right to demand failures be cured. 
A failure to cure may result in default and have serious financial and 
operational consequences for a housing project. In the event of 
default, the private lender controls project cash flow. The Air Force 
would then ensure the project owner meets its obligation to provide 
safe and habitable homes while the parties determine a path forward. If 
no agreement is reached, an event of default can lead to termination of 
the property management agreement and/or the ground lease. Currently, 
we have one project owner on a performance improvement plan and two 
project owners on corrective action plans.
               tenant rights and homeowners associations
    69. Senator Manchin. Ms. Field, the proposed tenant bill of rights 
from the services and in the fiscal year 2020 National Defense 
Authorization Act addresses significant gaps such as dispute resolution 
through mediation and arbitration, withholding of basic allowance for 
housing, and non-refundable fees. However, I am concerned that this 
still leaves the tenants of military housing reliant on interactions 
between the military chain of command and the private housing 
companies, excluding their voices in many cases. Within the structure 
of the current contracts, is there an avenue for and benefit to 
allowing tenants to form a homeowners association type organization in 
order to consolidate and address future grievances directly to private 
housing companies, to include civil legal action?
    Ms. Field. Although exploring the possibility of homeowners 
associations was not within the scope of our audit work, we are not 
aware of anything that would preclude the creation of such entities by 
residents of privatized housing. It is not clear exactly what such an 
association's rights would be in terms of negotiating either with the 
private housing companies or the DOD or military departments, which is 
something that would need to be explored, should DOD pursue this 
option. It is worth noting that the right for individual tenants to 
take civil legal action against the private companies does exist, 
should less formal dispute resolution steps prove unsatisfying to a 
tenant. Some such lawsuits have happened in the past and some are 
ongoing at present. \4\
---------------------------------------------------------------------------
    \4\ For some examples of such lawsuits, see, Michael J. Daniels and 
Barbara High-Daniels, et al., v. AETC II Privatized Housing, LLC, et 
al. (U.S. District Court for the Western District of Texas, San Antonio 
Division) (Case No. 5:19-cv-01280); Lenz, et al. v. The Michaels 
Organization, LLC, et al. (U.S. District Court for the Middle District 
of Florida, Tampa Division) (Civil Action No. 8:19-cv-2950-T-30AEP); 
Barber, et al. v. Ohana Military Communities, LLC (U.S. District Court 
for the District of Hawaii) (Civil No. 14-00217 HG-KSC); Addi, et al. 
v. Corvias Management-Army, LLC, et al. (U.S. District Court for the 
District of Maryland)(Case No. 1:2019cv03253, Filed Nov. 12, 2019)

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