    Defense Infrastructure: Changes in Funding Priorities and
    Management Processes Needed to Improve Condition and Reduce Costs
    of Guard and Reserve Facilities (15-MAY-03, GAO-03-516).

    GAO prepared this report under its basic legislative
    responsibilities. Its objectives are threefold: (1) to examine
    the reserve forces' trends for facility maintenance and
    construction funding and the condition of their facilities, (2)
    to assess the likelihood that they will meet the Department of
    Defense's (DOD) objectives for improving facilities, and (3) to
    discuss the challenges in implementing two potential cost saving
    initiatives--joint construction projects and real property
    exchanges.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-03-516
        ACCNO:   A06895
      TITLE:     Defense Infrastructure: Changes in Funding Priorities and
    Management Processes Needed to Improve Condition and Reduce Costs
    of Guard and Reserve Facilities
         DATE:   05/15/2003
      SUBJECT:   Facility maintenance
    	     Facility repairs
    	     Financial management
    	     Military facility construction
    	     Strategic planning
    	     Military cost control
    	     Military reserve personnel
    	     Defense cost control

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    GAO-03-516

                                           A

    Report to Congressional Committees

    May 2003 DEFENSE INFRASTRUCTURE Changes in Funding Priorities and
    Management Processes Needed to Improve Condition and Reduce Costs of Guard
    and Reserve Facilities

    GAO- 03- 516

    Letter 1 Results in Brief 3 Background 5 While Funding Has Increased, Most
    Facilities Are Considered

    Inadequate 13 Reserve Components Are Unlikely to Meet All of DOD*s
    Objectives

    for Improving Facilities 29 Challenges Exist in Implementing Joint
    Construction Projects and

    Real Property Exchanges 36 Conclusions 44 Recommendations for Executive
    Action 45 Matter for Congressional Consideration 46 Agency Comments and
    Our Evaluation 46

    Appendixes

    Appendix I: Scope and Methodology 50

    Appendix II: Comments from the Department of Defense 56

    Appendix III: GAO Contact and Staff Acknowledgments 59 Tables Table 1:
    Number of Locations and Facilities by Reserve Component

    as of September 30, 2002 6 Table 2: Military Construction Backlog by
    Reserve Component,

    Fiscal Years 1998 through 2001 17 Table 3: Listing of Various Reserve
    Component Locations GAO

    Visited 51 Figures Figure 1: Requested, Congressionally Designated
    Initially, and

    Reported Obligated Facility Maintenance Funding Levels for the Reserve
    Components, Fiscal Years 1998 through 2002 14 Figure 2: Requested and
    Appropriated Military Construction

    Funding Levels for the Reserve Components, Fiscal Years 1998 through 2003
    16 Figure 3: Percent of Reserve Component Facilities Considered

    Inadequate, Fiscal Years 1998 through 2003 18 Figure 4: Typical Examples
    of Newly Constructed or Renovated

    Facilities at Various Reserve Component Locations 20

    Figure 5: Typical Examples of Facility Improvements at Various Reserve
    Component Locations 21 Figure 6: Examples of Deteriorated Ramp, Runway,
    and Driveways at Various Reserve Component Locations 22

    Figure 7: Examples of Damage at Various Reserve Component Facilities 24
    Figure 8: Examples of Inadequate Space for Equipment at Various

    Reserve Component Facilities 25 Figure 9: Examples of Inadequate Storage
    Space at Various

    Reserve Component Facilities 27 Figure 10: Average Annual Sustainment
    Funding as a Percent of

    Requirement by Reserve Component, Aggregate for Fiscal Years 2003 through
    2009 30 Figure 11: Average Annual Recapitalization Rate by Reserve

    Component, Aggregate for Fiscal Years 2003 through 2009 32 Figure 12:
    Current and Projected Restoration and Modernization Funding by Reserve
    Component, Fiscal Years 2003 through 2009 34

    Figure 13: Current and Proposed Fire Station at Parks Reserve Forces
    Training Area, California, as of November 2002 41

    Abbreviation

    DOD Department of Defense

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    materials separately from GAO*s product.

    Letter

    May 15, 2003 Congressional Committees The Department of Defense*s (DOD)
    six reserve components* Army National Guard, Army Reserve, Naval Reserve,
    Marine Corps Reserve, Air National Guard, and Air Force Reserve* operate
    and maintain more

    than 41,000 buildings and structures sited in about 5,000 locations in the
    United States and its territories in which Congress provided about $950
    million in funds for fiscal year 2003. The number of reserve facilities
    has grown by about one- third during the past 10 years, primarily due to
    new mission requirements and the transfer of certain active services*
    facilities from bases that were either closed or realigned during the base
    closure process. While the number of facilities has grown, the reserve
    components consider 64 percent of their facilities to be inadequate. In
    the absence of proper maintenance, these facilities deteriorate
    prematurely, which could adversely affect missions supported by these
    facilities.

    Without consistent periodic recapitalization, they can become obsolete and
    no longer be cost- effectively renovated and must be replaced with new
    construction if there is a continuing need. 1 DOD and Congress have
    recognized the need to fully fund maintenance and recapitalization of
    facilities, as well as to reduce DOD*s inventory of facilities through an

    upcoming round of base realignments and closures scheduled for fiscal year
    2005. 2

    1 Recapitalization includes major renovation or reconstruction activities
    (including facility replacements) needed to keep facilities modern and
    efficient in an environment of changing standards and missions.

    2 As authorized by Congress in 2001, DOD intends to reduce its inventory
    of facilities by closing some installations and by consolidating
    overlapping activities within and across the services through a round of
    base realignments and closures in fiscal year 2005. DOD officials have
    testified that 20 to 25 percent of DOD*s infrastructure capacity is not
    needed to meet current mission requirements. Accordingly, as a result of
    the round of base realignments and closures in fiscal year 2005, DOD and
    the reserve components will have to

    adjust their facility maintenance and recapitalization plans.

    In August 2001, DOD issued a facility strategic plan 3 and has recently
    established three objectives for improving its facilities: achieve 100
    percent sustainment funding starting in fiscal year 2004, 4 achieve a 67-
    year average recapitalization rate by fiscal year 2007, 5 and improve the
    condition of facilities so that deficiencies have only a limited effect on
    mission performance by fiscal year 2010. In addition, as a way to achieve
    potential cost savings, the reserve components have initiated joint
    military construction projects, where two or more components combine their
    space requirements into one facility. They also have participated in real
    property exchanges, where they trade real property with other public or

    private entities in return for the construction of new facilities of equal
    or greater value.

    We prepared this report under our basic legislative responsibilities as
    authorized by 31 U. S. C. S: 717 and are providing it to you because of
    your Committee*s oversight responsibilities for DOD*s facilities. This
    report on the reserve components (1) examines their funding trends for
    facility maintenance and construction since fiscal year 1998 and the
    condition of their facilities over this same time period, (2) assesses the
    likelihood that they will meet DOD*s objectives for improving facilities,
    and (3) discusses the challenges in implementing two potential cost saving
    initiatives* joint construction projects and real property exchanges. This
    is one of several

    reviews that we have completed or have underway examining various aspects
    of facility conditions in DOD. For example, we recently reported that
    funding for facility maintenance and military construction has fallen
    short of what was needed to halt the deterioration of facilities used by
    the active military services. 6 Furthermore, we noted that there was a
    lack of consistency in the active services* information on facility
    conditions and

    3 U. S. Department of Defense, Defense Installations 2001: The Framework
    for Readiness in the 21 st Century (Washington, D. C.: August 2001). 4
    Sustainment funding provides resources primarily from operation and
    maintenance funds for recurring maintenance and repair activities
    necessary to keep an inventory of facilities in good working order.

    5 The recapitalization rate is calculated by dividing recapitalizable
    plant replacement value by the total of restoration and modernization
    funding. The recapitalizable plant replacement value, as defined by DOD,
    is the cost of replacing an existing facility with a facility of the same
    size at the same location, using today*s building standards.

    6 U. S. General Accounting Office, Defense Infrastructure: Changes in
    Funding Priorities and Strategic Planning Needed to Improve the Condition
    of Military Facilities, GAO- 03- 274 (Washington, D. C.: Feb. 19, 2003).

    that DOD*s facilities strategic plan and three key objectives to sustain
    and improve facilities have weaknesses that affected their effectiveness.
    In addition, we are currently reviewing the management of housing for
    unaccompanied personnel and the reserve components* acquisition of
    facilities from prior base realignment and closure actions.

    In performing our work, we examined DOD*s budget for facilities
    maintenance and construction from fiscal years 1998 through 2002. We
    performed our work at, and met with officials from, the Office of the

    Assistant Secretary of Defense for Reserve Affairs and the headquarters of
    the six reserve components* Army National Guard, Army Reserve Command,
    Naval Reserve Forces Command, Marine Forces Reserve, Air National Guard,
    and Air Force Reserve Command. We also visited 20 Army National Guard, 11
    Army Reserve, 9 Naval Reserve, 7 Marine Corps Reserve, 5 Air National
    Guard, and 5 Air Force Reserve sites to discuss these issues further and
    to tour various facilities to observe their physical condition. We did not
    validate the reserve components* requirements for

    facilities or reported requirements for the sustainment of their
    facilities, nor did we validate their recapitalization requirements. A
    more thorough description of our scope and methodology is presented in
    appendix I.

    Results in Brief Although funding for maintaining and constructing reserve
    component facilities has increased since fiscal year 1998, reserve
    components report that the condition of most of their facilities are
    inadequate and that their construction backlog has increased to $12.2
    billion. Reported obligations for maintaining facilities increased about
    70 percent, from $444 million to $750 million from fiscal year 1998 to
    fiscal year 2002. In general, the increase in obligations resulted from
    the components* higher annual funding requests, except in fiscal year
    2000, and the movement of funds into facility maintenance from other
    operating accounts at the end of each fiscal year. Similarly, annual
    appropriations for military construction increased 49 percent, from $461
    million to $688 million from fiscal year 1998 to fiscal year 2003. 7 Of
    these appropriations, more than half came from add- ons by Congress. Even
    with these funding increases, reserve components rated the condition of 64
    percent of their facilities as inadequate for fiscal year 2003. While
    deteriorated facilities are common, there is a lack of consistency in the
    reserve components* information on

    7 During this period, military construction appropriations peaked at $954
    million in fiscal year 2002.

    facility conditions, making it difficult to direct funds to facilities
    where they are most needed and to accurately gauge facility conditions.

    The reserve components are unlikely to meet all of DOD*s three objectives
    for improving facilities. While reserve components plan to meet some of
    the objectives from year to year, none are expecting enough funds to
    consistently meet DOD*s objective to fully fund sustainment from fiscal

    years 2003 through 2009, and only the Marine Corps Reserve and the Air
    National Guard are expecting to reach a 67- year average recapitalization
    rate during this period. In addition, all reserve components call for
    rapid increases in restoration and modernization funding at some point
    during this period. Assuming that all of the facilities are needed,
    reserve component officials also estimate that it would cost $7.8 billion
    to achieve DOD*s objective to concentrate funding to eliminate the most
    significant facility deficiencies by fiscal year 2010. However, some
    officials acknowledged that even when their components have expressed
    their intent to meet DOD*s objectives, their funding plans might include
    unrealistically high rates of increases during the out- years when
    compared to previous funding trends and against other defense priorities.

    The reserve components face challenges in implementing two potential cost-
    saving initiatives: joint construction projects and real property
    exchanges. First, the Office of the Assistant Secretary of Defense for
    Reserve Affairs has estimated that joint construction projects could save
    up to 20 percent over the cost of two separate projects; reserve component
    officials said that the challenge to implementing these projects is the
    difficulty in simultaneously programming them in each of their respective
    budget requests. Recognizing this, in April 2001, the Office of the
    Secretary

    of Defense established a separate budget structure for funding joint use
    military construction projects, but it has not yet programmed any funds
    for this purpose. As a result, many joint construction projects that had
    the potential to generate future cost savings might not be initiated.
    Second, while Congress has provided the Secretary of Defense with
    authority to use real property exchanges, 8 the Office of the Secretary of
    Defense has not provided overall direction for the program. Currently,
    only the Army Reserve is using this authority and plans to use this
    authority to recapitalize

    8 See 10 U. S. C. S: 18233. The Secretary of Defense may delegate this
    authority to any department, agency, or officer of DOD.

    10 percent of its facilities. Officials from the other reserve components
    said they were not aware of this authority and only now are exploring its
    potential use. While the Army Reserve has issued guidance and is gaining
    experience in implementing this authority, there is no process for
    collecting and sharing lessons learned with other reserve components.
    According to officials with the Office of the Secretary of Defense
    Installation and Environment, the Office of the Assistant Secretary of
    Defense for Reserve Affairs, and the active and reserve components of the
    Army, there is no method to assure that real property needed by other DOD
    components or for future missions is not being exchanged. Although DOD
    provides little

    guidance for real property exchanges, it does require the components to
    obtain the department*s approval when the real property being exchanged is
    valued at more than $1 million or involves more than 1,000 acres. 9
    However, the Army Reserve has interpreted this guidance to mean that it

    will notify DOD if the value of the real property received exceeds the
    value of the real property exchanged by $1 million, regardless if the real
    property exchanged is worth several millions of dollars.

    We are making several recommendations to address funding priorities and
    management processes needed to improve the condition and reduce the costs
    of the reserve components* facilities. To help promote increased
    consideration of joint construction projects, we are also suggesting that
    Congress may want to consider designating a portion of its military

    construction appropriations for DOD*s newly established budget structure
    to fund joint use military construction projects. In commenting on a draft
    of this report, DOD concurred with our recommendations.

    Background The six reserve components* Army National Guard, Army Reserve,
    Naval Reserve, Marine Corps Reserve, Air National Guard, and Air Force
    Reserve* are responsible for maintaining facilities in almost 5,000
    different locations within the United States and its territories, with an
    estimated plant replacement value of over $57 billion. These facilities
    consist of readiness and reserve centers plus other buildings and
    structures to equip, train, sustain, and deploy the reserve forces. These
    facilities are typically used to train reserve component members and units
    in classrooms and drill halls and to conduct other tasks such as unit
    planning; record keeping; storing of individual and unit equipment,
    weapons, and supplies; and

    9 DOD Instruction 1225.8, Programs and Procedures for Reserve Component
    Facilities and Unit Stationing, enclosure 3, para. E3.1.2.9, September 6,
    2001.

    maintaining vehicles and aircraft. The number of reserve component
    facilities has grown by 30 percent in the past decade, mostly due to new
    mission requirements and the transfer of certain facilities from
    installations that were either closed or realigned during the base closure
    process. Table 1 shows the number of locations and facilities by reserve
    component as of September 30, 2002.

    Table 1: Number of Locations and Facilities by Reserve Component as of
    September 30, 2002

    Buildings and Readiness or

    Reserve component Facility locations structures reserve centers

    Army National Guard 3, 158 28,540 3, 040 Army Reserve 1, 178 4,475 742
    Naval Reserve 181 1,178 153 Marine Corps Reserve 183 564 22 Air National
    Guard 176 5,231 0 Air Force Reserve 70 1, 278 0

    Total 4, 946 41,266 3, 957

    Source: Office of the Assistant Secretary of Defense (Reserve Affairs).
    Note: Facility locations are counted as separate pieces of property; the
    number of buildings and structures includes maintenance shops, aircraft
    hangers, warehouses, equipment centers, and administrative buildings that
    are separately listed on the reserve components* real property database;
    and readiness and reserve centers are the number of armories or centers
    where the reserve component unit drills.

    With DOD*s increased reliance on the reserve components and the activation
    of about 224,500 reservists as of the end of April 2003, the reserve
    components have increasingly become an important resource in the
    implementation of DOD*s national defense strategy. Increased reliance on
    the reserve components to assume new missions, support overseas
    deployments, and provide support for homeland defense has highlighted the
    importance of adequate facilities to train reservists for their
    operational missions.

    Funding for Facilities Funding for sustaining and constructing facilities
    primarily comes from two separate appropriations* operation and
    maintenance and military

    construction. Operation and maintenance funds are used mostly to support
    sustainment, which covers the day- to- day expense of routine maintenance
    such as repairing or replacing broken windows, doors, or restroom
    plumbing, as well as larger repair and maintenance projects such as
    installing a new roof or air conditioning and heating systems. Congress
    indicates how it expects these funds to be spent by designating specific
    amounts at the subactivity group level such as for facilities sustainment,
    restoration, and modernization activities found in the operation and
    maintenance tables for each reserve component included in the
    appropriations act*s conference report. 10 Both the operation and

    maintenance and the military construction appropriations can be used to
    fund facility restoration and modernization activities. Restoration funds
    are used to repair and replace items not considered routine, such as
    repairing or replacing items damaged by inadequate sustainment, excessive
    age, natural disaster, fire, accident, or other causes. Modernization
    funds are used to alter or modernize facilities to meet new or higher
    standards, accommodate new functions, or replace structural components. In
    addition, construction of new facilities is mostly funded with the
    military construction appropriation. Congress specifies the amounts and
    the projects for which military construction appropriations are to be
    used.

    The reserve components compete for funds in the planning, programming, and
    budgeting process with their active service counterparts for operation and
    maintenance funding and military construction funding. The Office of the
    Secretary of Defense (Comptroller) and the active components review

    reserve component funding requirements and adjust the budget request based
    on DOD and service programs and priorities. The reserve components submit
    to Congress their own budget request submission separately from the active
    services as part of the President*s budget submission. Congress makes
    appropriations for each of the six reserve

    10 DOD financial management regulations, which reflect agreements between
    DOD and congressional authorization and appropriations committees, provide
    general guidelines for various reprogramming actions. For example,
    congressional notification was required for operation and maintenance
    reprogramming actions of $15 million or more in fiscal year 2002. These
    DOD regulations also limit the amount of operation and maintenance funds
    that can be used for new construction and the alteration or conversion of
    existing facilities: a maximum of $750,000 per project or up to $1. 5
    million if the project is designed to correct a deficiency that threatens
    life, health, or safety. See DOD Financial Management Regulation 7000. 14-
    R, Budget Formulation and Presentation, vol. 2B, ch. 8, sec. 080201, June
    2002.

    components in a separate operation and maintenance appropriation and a
    separate military construction appropriation* often adding construction
    projects to the appropriations. These appropriated funds are then managed
    by each reserve component command rather than by a centralized authority
    like the Office of the Assistant Secretary of Defense for Reserve Affairs,
    which generally serves as a liaison with the Office of the Secretary of
    Defense and provides policy and advisor- type functions among the active
    and reserve components. The Army has made recent changes to centralized
    facility management that now includes the Army Reserve. However, it is too
    early to assess how the management of sustainment, restoration, and
    modernization funds will change. The Navy has regional programs to manage
    its active installations and reserve component facilities and is

    moving toward a more centralized management structure similar to the
    Army*s facility management program by October 2003.

    In addition, individual states contribute funds to maintain Army National
    Guard and Air National Guard facilities as outlined in National Guard
    Bureau regulations. 11 Funding for facility maintenance of Army National
    Guard state- owned facilities is based on cooperative agreements between
    the respective states and the federal government and the type of facility
    involved. For example, the states are typically expected to contribute to
    the cost of repairs at their 3,040 readiness centers* up to 50 percent of
    the cost for major repairs, such as replacing roofs and air conditioning
    systems, and 100 percent of the cost for minor repairs, such as unclogging
    toilets and painting walls. The states are also required to contribute up
    to 25 percent of the costs for both major and minor repairs to their
    equipment maintenance

    shops, but they are not required to contribute to facility maintenance of
    the Army National Guard*s training centers, local training areas, aviation
    support facilities, maneuver training equipment sites, unit training
    equipment sites, and facilities for civil support teams if weapons of mass
    destruction are used. Most of the Air National Guard facilities are
    located at airports, which are federally leased property, or are
    collocated on DOD installations. Thus, states do not contribute to the
    cost of sustaining many of these facilities.

    11 Departments of the Army and the Air Force, National Guard Bureau,
    Grants and Cooperative Agreements, NGR 5- 1/ ANGI 63- 101 (Washington, D.
    C.: July 7, 2000).

    Facility Strategic Plan and In August 2001, DOD issued a facility
    strategic plan that outlined four

    Objectives long- term strategic goals for installations and facilities. 12
    The strategic goals are to (1) locate, size, and configure defense
    installations and

    facilities to meet the requirements of today*s and tomorrow*s force
    structures; (2) acquire and sustain defense installations and facilities
    to provide mission- ready installations with quality living and work
    environments; (3) leverage resources* money, people, and equipment* to
    achieve the proper balance between requirements and available funding;

    and (4) improve facility management and planning by embracing best
    business practices and taking advantage of modern asset- management
    techniques and performance- assessment metrics. In addition to the broad
    goals set forth in the strategic plan, DOD also established three key

    objectives to improve the condition of facilities: (1) fully fund
    sustainment starting in fiscal year 2004; (2) achieve an average
    recapitalization rate of 67 years by fiscal year 2007; and (3) improve the
    condition of facilities so

    that deficiencies have only a limited effect on mission performance by
    fiscal year 2010. In an attempt to standardize the rating of facilities
    across the services and to provide Congress with a measure of facility
    conditions and their ability to support military missions, DOD issued its
    first Installations* Readiness Report in 1999. Within the report, the
    services* major commands report on the condition of their facilities using
    a scale of C- 1 through C- 4: C- 1 facilities have only minor deficiencies
    with negligible impact on

    capability to perform missions; C- 2 facilities have some deficiencies
    with limited impact on capability to perform missions; C- 3 facilities
    have significant deficiencies that prevent performing some missions; and
    C- 4 facilities have major deficiencies that preclude satisfactory mission
    accomplishment. According to DOD*s guidance, the services could implement
    this readiness reporting system without modifying their existing
    assessment processes. As a result, all four services are using different
    systems to assess facility conditions and develop C- ratings.

    12 U. S. Department of Defense, Defense Installations 2001: The Framework
    for Readiness in the 21 st Century (Washington, D. C.: Aug. 2001).

    According to DOD, providing full sustainment funding is the most cost-
    effective approach to managing facilities because it provides the most
    performance over the longest period for the least investment. Without
    adequate sustainment, the expected life of a facility is reduced and
    facilities must be recapitalized sooner, although, even with adequate
    sustainment, facilities eventually wear out or become obsolete over time.
    An obsolete facility is one that is irrelevant to present- day missions
    regardless of its condition; for example, a maintenance shop built in the
    1950s may be too narrow and small to accommodate large tanks and vehicles.
    Once a facility reaches the end of its expected service life, it must be
    recapitalized* that is, replaced or extensively renovated or modernized.
    DOD estimates that an average recapitalization rate of 67 years allows
    fully sustained facilities to meet the department*s requirements.
    Recapitalization

    investments can also be made periodically throughout a facility*s service
    life, which extends service life and delays the need for replacement.
    Moreover, even after recapitalization investments are made, facility
    performance can rapidly decline in the absence of adequate sustainment.

    Use of Joint Construction According to officials of the Office of the
    Assistant Secretary of Defense

    Projects for Reserve Affairs, joint construction is when two or more
    components

    agree to consolidate space requirements and build one facility to share
    instead of building separate facilities. The reserve components are
    required by 10 U. S. C. S: 18234 to pursue the joint use of facilities by
    two or more components to the greatest extent practicable. DOD implemented
    this statutory requirement by establishing a Joint Service Reserve
    Component Facility Board in every state. Once a year, these boards are
    expected to

    review all proposed military construction projects and identify those for
    joint construction potential. In April 2001, DOD created a budget
    structure for the exclusive use of funding joint use military construction
    projects between two or more service components, whether active, reserve,
    or guard.

    Use of Real Property Real property exchange is a method the reserve
    components can use to

    Exchanges construct or renovate facilities in exchange for military- owned
    real

    property. When most of the reserve components* infrastructure was built
    prior to 1970, many facilities were originally located outside or near
    metropolitan areas. However, these properties are now in prime locations
    and are candidates for real property exchanges because of urban growth and
    the various complexes* such as shopping centers, commercial or industrial
    parks, and residential housing developments* that surround the properties.
    The reserve components can use the authority contained in 10 U. S. C. S:
    18233 to acquire real property from a private or public entity in exchange
    for military- owned real property. The reserve components can also seek a
    congressionally directed exchange authority specific to an individual
    exchange project that typically has been included in defense
    authorization, appropriation, or military construction acts. Exchanging
    real property with a private or public entity is a method of obtaining new
    facility construction without the need for additional appropriated funds
    for property acquisition. 13

    Prior GAO Reports Since 1997, 14 we have identified DOD infrastructure
    management as a high- risk area and, as such, we have issued several
    reports that address areas where DOD and the services could improve their
    facilities management program. In 2001, we reported that DOD needed to
    address facility requirements, recapitalization, and maintenance and
    repair needs. 15 In a January 2003 report, we continued to identify DOD
    infrastructure management as a high- risk area and to report that
    transforming DOD*s

    support infrastructure remains a long- term challenge. 16 In addition, for
    the 13 At the request of the Chairman, Committee on the Budget, United
    States Senate, we are identifying capital financing approaches that depart
    from a long- standing budget concept calling for the budget to include the
    full range of federal activities. Real property exchanges are one such
    approach.

    14 U. S. General Accounting Office, High- Risk Series, GAO/ HR- 97- 7
    (Washington, D. C.: February 1997). 15 U. S. General Accounting Office,
    High- Risk Series: An Update, GAO- 01- 263 (Washington, D. C.: January
    2001). 16 U. S. General Accounting Office, Major Management Challenges and
    Program Risks: Department of Defense, GAO- 03- 98 (Washington, D. C.:
    January 2003).

    first time we added federal real property as a high- risk area due to
    significant property repair and restoration needs, among other reasons. 17

    In February 2003, we reported that, while funding for facility maintenance
    and military construction for active services* facilities increased during
    the past few years, the amounts had fallen short of what is needed to halt
    the deterioration of facilities used by the active military forces. 18 In
    addition, we found that there was a lack of consistency in the services*
    information on facility conditions, making it difficult for Congress, DOD,
    and the services to direct funds to facilities where they are most needed
    and to measure progress in improving facilities. We also reported that
    DOD*s facilities strategic plan and three key objectives for the services
    to sustain and improve the condition of their facilities have weaknesses
    that affect their effectiveness. We recommended that the Secretary of
    Defense (1) direct the services to reassess their funding priorities for
    facilities; (2) implement a consistent departmentwide process to assess,
    rate, and validate facility conditions; (3) revise DOD*s facilities
    strategic plan to include information on specific actions, time frames,
    responsibilities, and funding levels; (4) clarify DOD*s guidance by
    specifying the organizational level at which its facility improvement
    objectives should be achieved; and (5) direct the services to develop
    comprehensive performance plans to sustain and recapitalize their
    facilities. In commenting on a draft of that report, DOD concurred with
    our recommendations and outlined steps it was taking to address our
    concerns.

    17 U. S. General Accounting Office, High- Risk Series: Federal Real
    Property, GAO- 03- 122 (Washington, D. C.: January 2003). 18 See GAO- 03-
    274.

    While Funding Has While funding for maintaining and constructing reserve
    component Increased, Most

    facilities has increased since fiscal year 1998, reserve components report
    that most of their facilities are inadequate and that their construction
    Facilities Are

    backlog had increased to $12.2 billion in fiscal year 2001. Reported
    Considered Inadequate

    obligations for facility maintenance increased about 70 percent from
    fiscal year 1998 to fiscal year 2002 and appropriations for military
    construction increased about 49 percent from fiscal year 1998 to fiscal
    year 2003. Even with these increases in funding, reserve components rated
    64 percent of their facilities as inadequate for fiscal year 2003. Our
    visits to

    57 reserve components sites showed that the condition of facilities ranged
    from good to inadequate, and we observed unit inefficiencies and
    workarounds at some deteriorated facilities.

    Funding Increased for DOD*s reported obligations for facility maintenance,
    funded with operation

    Facility Maintenance and maintenance monies, show an increase between
    fiscal year 1998 and

    fiscal year 2002. Reported obligations for facility maintenance increased
    about 70 percent, from $444 million to $750 million during this period. As
    figure 1 shows, the request for facility maintenance also increased from
    $320 million to $705 million during the same period, representing an
    increase of 120 percent.

    Figure 1: Requested, Congressionally Designated Initially, and Reported
    Obligated Facility Maintenance Funding Levels for the Reserve Components,
    Fiscal Years 1998 through 2002 Dollars in millions 800

    750 705 707 700

    640

    600

    578 539 546

    500

    444 445

    410 400

    344 320

    299 300 306

    300 200 100

    0 1998

    1999 2000 a

    2001 2002 Fiscal year

    Requested Congressionally designated initially

    b Reported obligations

    c Sources: DOD and Congress. a In fiscal year 2000, Congress, in its
    conference report, moved funds requested for quality of life enhancements
    into facility maintenance. b The term *congressionally designated* refers
    to amounts set forth at the budget activity, activity group,

    and subactivity group level in an appropriation act*s conference report.
    These recommended amounts are not binding unless they are also
    incorporated directly or by reference into an appropriation act or other
    statute. c DOD reported obligated amounts to Congress in its budget
    submissions.

    In general, these funding increases resulted from two primary sources: the
    reserve components* higher annual funding requests* except in fiscal year
    2000* and the movement of funds into facility maintenance from other
    operation and maintenance accounts at the end of each fiscal year.
    However, reserve officials said that even with these additional funds,
    they

    are still not funding all of their facility maintenance requirements.
    Reserve officials said that they have the flexibility to move funds out of
    the facility maintenance accounts early in the fiscal year and, as the
    year unfolds, move funds back into these accounts in addition to other
    funds that were not executed in other operation and maintenance accounts.
    It is difficult to determine what specific accounts these funding
    increases came from because funds moved out of one account cannot
    generally be traced directly to another account.

    To prevent the movement of facility maintenance funds, the Army took
    action to establish a new organization* the Installation Management
    Agency* in October 2002. Reporting directly to the Army Assistant Chief of
    Staff for Installation Management, the new agency will oversee and manage
    all facility maintenance funds centrally as well as implement consistent
    standards across the Army. It will also manage facility funding for Army
    Reserve facilities but not the Army National Guard because officials said
    the Installation Management Agency might interfere with state rights. It
    is too early to assess the potential success of the Army*s facility
    management program.

    Appropriations Increased During the same time period that the reserve
    components reported for Military Construction

    obligations for facility maintenance increased, appropriations for
    military construction also increased. From fiscal years 1998 through 2003,
    Congress consistently appropriated more military construction funds than
    the reserve components requested by mostly appropriating additional funds
    for projects already identified by the reserve components for funding in
    the out- years. As shown in figure 2, appropriations for military
    construction increased about 49 percent, from $461 million to $688 million
    from fiscal year 1998 to fiscal year 2003. During this period, military
    construction appropriations peaked at $954 million in fiscal year 2002.

    Figure 2: Requested and Appropriated Military Construction Funding Levels
    for the Reserve Components, Fiscal Years 1998 through 2003

    Dollars in millions 1,000

    954

    900 800 700

    695 693

    688 615

    600 500

    461 480

    400

    319

    300

    256 222

    200

    181 180

    100 0

    1998 1999 2000 2001 2002 2003

    a

    Fiscal year

    Requested Appropriated

    Source: Office of the Assistant Secretary of Defense (Reserve Affairs).
    Note: Obligated amounts for military construction are not shown because
    such funds are available for obligation over a 5- year period. For
    example, funds appropriated for military construction in fiscal year 1998
    can be obligated through fiscal year 2002. a Fiscal year 2003 requested
    and appropriated amounts include emergency response funds.

    More than half of these aggregate appropriations came from add- ons by
    Congress. Reserve component officials stated that DOD and the active
    services have come to rely on these congressional increases while
    requesting funding for other priorities within DOD*s budgetary
    constraints. For example, Congress appropriated additional funding for 48
    more projects than what was in the reserve components* budget request for
    fiscal year 2003. However, even with these congressional increases,
    various reserve component officials said that many of their construction
    projects go unfunded. As shown in table 2, the backlog of military
    construction projects has increased from $7 billion to $12.2 billion from
    fiscal year 1998

    to fiscal year 2001. However, if certain active services* facilities from
    bases that were either closed or realigned during the base closure process
    were transferred to the reserve components, it could have a positive or
    negative impact on reducing the backlog of military construction projects.

    Table 2: Military Construction Backlog by Reserve Component, Fiscal Years
    1998 through 2001

    Dollars in billions

    Reserve component 1998 1999 2000 2001

    Army National Guard $2.5 $2.5 $5.5 $7.1 Army Reserve 1. 9 1.9 2. 1 2.1
    Naval Reserve 0. 4 0.4 0. 3 0.3 Marine Corps Reserve 0. 3 0.1 0. 3 0.3 Air
    National Guard 1. 3 1.2 1. 5 1.7 Air Force Reserve 0. 6 0.6 0. 6 0.7

    Total $7.0 $6.7 $10.3 $12.2

    Source: Office of the Assistant Secretary of Defense (Reserve Affairs).
    Note: At the time of our review, data on the military construction backlog
    had not been collected for fiscal year 2002.

    Reserve Components While funds devoted to facility maintenance and
    military construction have

    Consider Many of Their increased, the overall condition of facilities has
    not improved significantly. Facilities to Be Inadequate

    At the beginning of fiscal year 2003, the reserve components considered 64
    percent of their buildings and structures to be inadequate (see fig. 3).
    19 While deteriorated facilities are common at many locations, reserve
    component officials have said that the age and size of these facilities
    contribute to them being inadequate because many facilities built in the
    1950s and 1960s have not been modernized or expanded to accommodate
    changes in missions and equipment requirements.

    19 This percentage compares with 68 percent of active component facilities
    reported as inadequate in fiscal year 2001.

    Figure 3: Percent of Reserve Component Facilities Considered Inadequate,
    Fiscal Years 1998 through 2003

    100 Percent 90 80 70

    64 64 64 62 61 60

    53

    50 40 30 20 10

    0 1998

    1999 2000 2001 2002 2003 Fiscal year Source: Office of the Assistant
    Secretary of Defense (Reserve Affairs).

    Notes: According to reserve component officials, the variation from fiscal
    years 2001 through 2003 is primarily the result of changes in the
    procedures used to assess facility conditions such as weight factors for
    individual facility components that can change the facility condition
    assessment and not necessarily the result of a significant change in
    facility conditions.

    Fiscal year 2003 data represents facility conditions as of September 30,
    2002.

    In our February 2003 report on the active services* facilities, we noted
    there was a lack of consistency in the services* information on facility
    conditions, making it difficult for Congress, DOD, and the services to
    direct funds where they are most needed and to measure progress in
    improving facilities. 20 Our analysis showed differences among the
    services in terms of facility raters and procedures, assessment scopes and
    frequencies, appraisal scales, and validation procedures, all of which
    result in inconsistencies and a lack of comparability in the ratings. The
    reserve components follow the policies and procedures directed by the
    active services in rating facility conditions. Without a consistent cross-
    service system for assessing facility conditions and developing ratings,
    DOD and the reserve components cannot be assured that their funding
    decisions effectively target facilities in greatest need and reported
    ratings accurately measure progress in facility condition improvements. In
    our prior report, we recommended that the Secretary of Defense instruct
    the military services to implement a consistent departmentwide process to
    assess and validate facility conditions. In commenting on a draft of that
    report, DOD concurred with our recommendation and outlined steps for
    implementing a departmentwide process.

    Conditions of Reserve During our visits to 57 reserve component sites
    across the country, we

    Components* Facilities We observed a variety of conditions ranging from
    newly constructed facilities Visited Ranged from Good

    that were in good condition to outdated and deteriorated facilities that
    to Inadequate

    were inadequate and led to inefficiencies and workarounds. While we did
    not see any facilities that were not in use except those scheduled for
    demolition, the upcoming base realignment and closure round is expected to
    evaluate the extent reserve component facilities are utilized. Among the
    newly constructed or renovated facilities we observed were a newly
    constructed air traffic control tower; new reserve centers and fire
    stations; installed air conditioning and heating units; replaced roofs,
    windows, and doors; renovated restrooms, showers, and locker areas; and
    upgraded electrical systems. Some examples of these facilities are shown
    in figure 4.

    20 See GAO- 03- 274.

    Figure 4: Typical Examples of Newly Constructed or Renovated Facilities at
    Various Reserve Component Locations

    Source: GAO. (Clockwise from top left): A newly constructed air traffic
    control tower at Selfridge Air National Guard Base, Michigan; a renovated
    Army Reserve facility at the Army National Guard Maneuver Training Center,
    Fort Pickett, Virginia; a newly constructed distance- learning center at
    an Army National Guard facility in Taylor, Michigan; and a renovated
    dining facility at Parks Reserve Forces Training Area, California.

    We also observed facilities* such as classrooms, restrooms, and offices*
    that were being constructed or undergoing restoration and repairs. We saw
    maintenance and repair activities in progress, such as replacing roofs,
    remodeling office space, laying new floor tile, maintaining heating units,
    and paving parking lots. Some of the facility improvement projects we
    observed are shown in figure 5.

    Figure 5: Typical Examples of Facility Improvements at Various Reserve
    Component Locations

    Source: GAO. (Clockwise from top left): The construction of a Marine Corps
    Reserve facility at Grissom Air Reserve Base, Indiana; a restoration
    project for the Air Force Reserve Command headquarters building at Robins
    Air Force Base, Georgia; a renovation project for an Air National Guard
    facility at Harrisburg International Airport, Harrisburg, Pennsylvania;
    and the replacement of a roof at the Naval Reserve's Naval Support
    Activity in New Orleans, Louisiana.

    In contrast, we observed many facilities that were degraded and
    deteriorated, such as cracked building foundations and walls; crumbling
    taxiways and driveways; water damaged walls, ceilings, and aircraft
    parking ramps; inadequate electrical power systems; poor heating,
    ventilation, and air conditioning systems; peeling lead paint; and leaking
    roofs. Some examples of a deteriorated ramp, runway, and driveways that we
    observed are shown in figure 6.

    Figure 6: Examples of Deteriorated Ramp, Runway, and Driveways at Various
    Reserve Component Locations

    Source: GAO. (Clockwise from top left): A water damaged parking ramp for
    C- 130 aircraft at Dobbins Air Reserve Base, Georgia; a damaged runway
    with cracks and humps at Grissom Air Reserve Base, Indiana; a deteriorated
    driveway with potholes, and cracked and missing pavement at a Marine Corps
    Reserve facility in Detroit, Michigan; and a washed- out, deteriorated
    driveway at the Army National Guard Maneuver Training Center, Fort
    Pickett, Virginia.

    At Dobbins Air Force Base, Georgia, we observed a C- 130 parking ramp that
    sustained water damage as pictured in figure 6. With limited funds to
    repair the ramp for an estimated cost of $40,000, base officials
    concentrated on higher- priority items, leaving the ramp problem
    unresolved for about a year. DOD officials stated they intend to repair
    the ramp with unobligated funds available at year- end. At Grissom Air
    Reserve Base, Indiana, Air Force Reserve officials told us that the
    condition of the taxiways is so deteriorated in spots that pilots must
    taxi further distances up the runway to avoid damaging their aircraft, as
    also pictured in figure 6. Officials told us that when they acquired the
    property through the base

    realignment and closure process, they were not familiar with managing
    runways and thus the runways deteriorated faster because of base
    maintenance inexperience. At the Marine Corps Reserve Center in Detroit,
    Michigan, the driveway leading into the facility had several large
    potholes with cracked and missing pavement. Officials told us that due to
    other priorities, funds were not available to fix the driveway, leaving
    the problem unresolved. While at the Army National Guard Maneuver Training
    Center, Fort Pickett, Virginia, we saw a washed- out, deteriorated
    driveway that officials said had existed for years and occurred because of
    inadequate water drainage that resulted in land erosion. At this location,
    we saw other washed- out driveways, walkways, and stairs due to inadequate
    water drainage.

    We also noted facility damage at various facilities that were in use, such
    as broken windows, cracks in walls and floors, crumbling floor and ceiling
    tiles, peeling lead paint, and leaky roofs. Officials told us that,
    although several self- help projects have been done to improve the
    condition of these facilities, renovations are still needed. Some examples
    of damage to facilities that we observed are shown in figure 7.

    Figure 7: Examples of Damage at Various Reserve Component Facilities

    Source: GAO. (Clockwise from top left): Crumbling tile in a shower that is
    currently in use at a Naval Reserve facility at Selfridge Air National
    Guard Base, Michigan; broken windows at an Army National Guard facility in
    Fort Worth, Texas; a cracked wall with floor separating from foundation at
    a Naval Reserve facility at Selfridge Air National Guard Base, Michigan;
    and damaged ceiling caused by a hurricane over 4 years ago at an Air
    National Guard facility at Harrisburg International Airport, Harrisburg,
    Pennsylvania.

    During our visits to selected sites, we were told about and observed
    examples of inadequate space for equipment at various reserve component
    facilities, as shown in figure 8.

    Figure 8: Examples of Inadequate Space for Equipment at Various Reserve
    Component Facilities

    Source: GAO. (Clockwise from top left): An aircraft hangar too small to
    completely cover a C- 5 aircraft for maintenance purposes at Robins Air
    Force Base, Georgia; an aircraft hangar too small to completely cover a
    KC- 135 aircraft for maintenance purposes at Grissom Air Reserve Base in
    Indiana; earthmoving engineering equipment that cannot fit into
    maintenance bays built in the 1940s at an Army Reserve facility at the
    National Guard Training Center, Fort Indiantown Gap, Pennsylvania; and a
    helicopter maintenance area that has limited space because of changed
    mission requirements at an Army National Guard facility at the National
    Guard Training Center, Fort Indiantown Gap, Pennsylvania.

    As shown in figure 8, hangers at Robins Air Force Base, Georgia, and at
    Grissom Air Reserve Base, Indiana, were too small to hold an entire C- 5
    and KC- 135 aircraft, respectively. Maintenance work on the hydraulics
    gear located on the aircraft*s tail must be done in an enclosed space. To
    work on the hydraulics gear, engineers at Robins Air Force Base designed
    and built

    an extension that is large enough to enclose the aircraft*s tail and that
    can be rolled up next to the hangar. At the National Guard Training
    Center, Fort Indiantown Gap, we saw heavy earth- moving vehicles that
    could not fit into maintenance bays that were built during World War II.
    As a result, vehicle maintenance and training must be done outdoors, which
    creates unsafe working conditions during the winter because of the snow
    and ice. Also at the National Guard Training Center, Fort Indiantown Gap,
    Pennsylvania, we saw a helicopter maintenance facility that could hold
    four of the unit*s older 2- rotor blade helicopters but only one of the
    unit*s newer 4- rotor

    blade helicopters in the same space. Maintenance officials told us that
    the inadequate space requires a constant workaround effort to contend with
    various sizes of the aircraft to maximize facility usage. For example, it
    now

    takes them longer to conduct maintenance because they take the rotor
    blades off the newer helicopters in order to fit more helicopters into the
    maintenance hanger.

    At other locations, we saw overcrowded and outdated supply and storage
    areas, as shown in figure 9.

    Figure 9: Examples of Inadequate Storage Space at Various Reserve
    Component Facilities

    As shown in figure 9, we saw a small arms vault used by an Army National
    Guard military police unit that no longer stored all of the required
    weapons at one location with the unit. According to unit officials,
    members of the police unit are required to travel to several different
    storage locations to obtain all of their required equipment. Consequently,
    they noted that if the police unit had to rapidly respond to an emergency,
    such as a terrorist attack, the unit would not have immediate access to
    all of its weapons and the response time would be longer. At an Armed
    Forces Reserve Center in California, additional secured storage containers
    were built to store

    controlled unit equipment in the drill hall area. Subsequently, a Marine
    Corps Reserve unit that shares this facility with the Army Reserve stopped
    drilling in this space because it could no longer accommodate the 100
    personnel unit. While at a Marine Corps Reserve facility in Michigan,
    officials told us that the overcrowded vehicle maintenance bay lacks
    adequate space for its purpose as well as office space for maintaining
    required maintenance records. At an Army National Guard facility in
    California, the unit was forced to store crates of packed camouflage
    netting outdoors due to a lack of covered storage space. When the crates
    became

    wet, $50,000 worth of packed netting subsequently rotted. It is difficult
    to quantify the effect of deteriorated facilities on mission readiness,
    but we observed that deteriorated facilities could create operating
    inefficiencies. This was also recognized in the Air Force*s

    Facility Investment Plan, which states that degraded facilities create
    inefficiencies, workarounds, and higher costs to meet mission readiness.
    21 It also noted that the higher costs created by these inefficiencies
    have often been borne by military and civilian personnel who are willing
    to devote extra time and effort to their tasks and who endure disruptive
    work schedules and difficult working conditions.

    It is also difficult to quantify the states* role in funding portions of
    facility maintenance on the overall condition of Army National Guard
    facilities given the absence of a central data source for this
    information. However, at some locations we visited, Army Guard officials
    told us that certain types of facilities are better maintained than others
    where the federal percentage of funding is higher relative to others where
    it is less based on the cooperative agreement. 22 For example, Army
    National Guard officials told us that usually their vehicle maintenance
    shops are consistently in better shape than their readiness centers
    because maintenance shops can receive up to 75 percent federal funding for
    repairs whereas readiness centers can receive up to 50 percent federal
    funding for repairs. Also, facilities for the Army National Guard training
    centers and areas are usually in better shape than maintenance shops and
    readiness centers because they are 100 percent federally supported for
    facility repairs. However, National Guard Bureau officials told us it was
    difficult to provide us with 21 U. S. Department of the Air Force, United
    States Air Force Facilities Investment Plan (Washington, D. C.: Aug. 14,
    2002).

    22 Departments of the Army and the Air Force, National Guard Bureau,
    Grants and Cooperative Agreements, NGR 5- 1/ ANGI 63- 101 (Washington, D.
    C.: July 7, 2000).

    information on the states* share of facility funding because, depending on
    the cooperative agreement between the state and the federal government,
    cost data will vary from state to state and by facility type. Also, as
    noted, data on state contributions are not aggregated at a central
    location.

    Reserve Components Similar to the situation we found with the active
    services, the reserve

    Are Unlikely to Meet components are unlikely to meet all of DOD*s three
    objectives for

    improving facilities: achieve 100 percent sustainment funding starting in
    All of DOD*s Objectives fiscal year 2004; reach a 67- year average
    recapitalization rate by fiscal year

    for Improving Facilities 2007; and improve the condition of facilities so
    that deficiencies have only a

    limited effect on mission performance by fiscal year 2010. While we did
    not see any facilities that were not in use, except those scheduled for
    demolition, the upcoming base realignment and closure round is expected to
    evaluate the extent reserve component facilities are utilized. At the same
    time, reserve component officials are concerned that the components may
    not receive significant funding increases for facility recapitalization
    activities in the out- years because the reserve components are considered
    a low priority based on prior experiences. They also said that the reserve
    components do not compete well with their active counterparts and
    facilities generally do not compete well with other DOD programs and
    priorities when formulating budget requests.

    Reserve Components Do None of the reserve components are projecting enough
    funds to

    Not Plan to Consistently consistently meet DOD*s objective to fully fund
    facility sustainment

    Meet DOD*s Objective to requirements during fiscal years 2003 through
    2009. To stop the further

    Fully Fund Facility deterioration of facilities, DOD issued budget
    planning guidance

    instructing the services to fund their sustainment requirements at
    Sustainment

    100 percent starting in fiscal year 2004. According to DOD, fully funding
    sustainment is the most cost- effective approach to managing facilities
    because it provides the most performance over the longest period of time
    for the least investment. However, average planned sustainment funding
    from fiscal years 2003 through 2009 by the reserve components ranges from
    61 percent to 99 percent (see fig. 10).

    Figure 10: Average Annual Sustainment Funding as a Percent of Requirement
    by Reserve Component, Aggregate for Fiscal Years 2003 through 2009 Percent
    of requirement

    DOD*s objective to fully fund sustainment

    100 99

    93 89

    90 90

    80 78

    70 61 60

    50 40 30 20 10

    0 Army

    Army Naval

    Marine Corps Air National

    Air Force National

    Reserve Reserve

    Reserve

    a

    Guard Reserve

    Guard

    Source: Office of the Deputy Under Secretary of Defense for Installations
    and Environment. a Marine Corps Reserve sustainment funding covers fiscal
    years 2004 through 2009. In fiscal year 2003, DOD used a new model to
    calculate facilities sustainment requirements that DOD intended to be
    applied to a large population of facilities. Instead, the model
    incorporated the Marine Corps Reserve*s smaller sustainment requirements
    in with its active service's requirements for fiscal year 2003.

    As shown in figure 10, the Air Force Reserve plans to fund more of its
    sustainment requirements than any of the other reserve components. While
    it is also the only component expressing the intent to meet DOD*s
    objective in fiscal years 2004 and 2005, available data suggest it will
    not reach that goal in the other out- years. The Air Force Reserve is
    expecting to decrease its sustainment funding to 88 percent and 86 percent
    in fiscal years 2006 and 2007, respectively, then increase funding to 91
    percent in fiscal years 2008 and 2009. None of the other reserve
    components, however, plan to

    meet DOD*s fully fund sustainment objective during fiscal years 2004
    through 2009, as the following examples show:

     The Army National Guard expects to fund its sustainment requirements at
    93 percent in fiscal year 2004, decrease funding to 74 percent in fiscal
    year 2005, and then gradually increase funding to 94 percent by fiscal
    year 2009.

     The Army Reserve plans to follow a funding pattern similar to the Army
    Guard for future funding of its sustainment requirement. It plans to fund
    at 93 percent in fiscal year 2004, decrease funding to 72 percent in
    fiscal year 2005, then increase funding to 96 percent of its sustainment
    requirements by fiscal year 2007, and then stay at 96 percent for fiscal
    years 2008 and 2009.

     The Naval Reserve plans to fund its sustainment requirements at 89
    percent in fiscal year 2004, then gradually decrease sustainment funding
    each fiscal year until fiscal year 2007 when it expects to fund its
    sustainment requirements at 69 percent. After which, it plans to increase
    funding to 77 percent the next fiscal year and then decrease funding to 76
    percent for fiscal year 2009.

     The Marine Corps Reserve intends to fund its sustainment requirements at
    69 percent starting in fiscal year 2004, then decrease funding to 64
    percent in fiscal year 2005, and then decrease funding again to 57 percent
    of its sustainment requirements in fiscal year 2007. In fiscal years 2008
    and 2009, it expects a slight increase in funding to 58 percent

    of sustainment requirements.  The Air National Guard plans to fund
    sustainment at 81 and 82 percent, respectively, in fiscal years 2004 and
    2005, then increase funding to

    91 percent of its sustainment requirement during fiscal years 2006 to
    2008, and then increase funding slightly to 92 percent in fiscal year
    2009.

    Most Reserve Components Averaging the projected restoration and
    modernization funding during Are Unlikely to Achieve a

    fiscal years 2003 through 2009, four of the six reserve components will
    not 67- Year Average

    meet DOD*s objective to achieve a 67- year average recapitalization rate.
    Recapitalization Rate Facilities must be replaced or extensively renovated
    or modernized once they reach the end of their expected service life if
    they are to continue to provide adequate performance. DOD estimates that
    an average recapitalization rate of 67 years allows fully sustained
    facilities to meet this

    requirement, and recapitalization rates higher than 67 years means it will
    take longer to recapitalize facilities. The recapitalization rate is based
    on funding to restore and modernize facilities and is defined as the
    number of years it would take to restore or replace facilities at a given
    level of investment. Only the Marine Corps Reserve and the Air National
    Guard are planning to reach the 67- year average recapitalization rate.
    Overall, the average projected recapitalization rate by the reserve
    components ranges

    from 21 years to 183 years during fiscal years 2003 through 2009 (see fig.
    11).

    Figure 11: Average Annual Recapitalization Rate by Reserve Component,
    Aggregate for Fiscal Years 2003 through 2009 Years 200

    183

    180 160

    DOD's objective of a 67- year average recapitalization rate

    140 120

    107

    100

    81 84

    80 60

    48

    40

    21

    20 0

    Army Army

    Naval Marine Corps

    Air National Air Force National

    Reserve Reserve

    Reserve Guard

    Reserve Guard

    Source: Office of the Deputy Under Secretary of Defense for Installations
    and Environment.

    During the period depicted above, each reserve component*s average
    recapitalization rate varies widely from year to year. For example, the:

     Army National Guard is expecting to achieve a recapitalization year rate
    ranging from 388 years in fiscal year 2004 to 101 years in fiscal year
    2009* short of DOD*s objective in every year.

     Army Reserve is expecting to achieve a recapitalization year rate
    ranging from 152 years in fiscal year 2004 to 41 years in fiscal year
    2009* meeting DOD*s objective in fiscal years 2008 and 2009.

     Naval Reserve is expecting to achieve a recapitalization year rate
    ranging from 515 years in fiscal year 2007 to 59 years in fiscal year
    2003* meeting DOD*s objective only in fiscal year 2003.

     Marine Corps Reserve is expecting to achieve a recapitalization year
    rate ranging from 895 years in fiscal year 2006 to 5 years in fiscal year
    2003* meeting DOD*s objective in fiscal years 2003, 2004, 2007, and 2008.

     Air National Guard is expecting to achieve a recapitalization year rate
    ranging from 170 years in fiscal year 2004 to 31 years in fiscal year
    2008* meeting DOD*s objective in fiscal years 2006 through 2009.

     Air Force Reserve is expecting to achieve a recapitalization year rate
    ranging from 197 years in fiscal year 2003 to 50 years in fiscal year
    2006* meeting DOD*s objective in fiscal years 2006 and 2007.

    To achieve these recapitalization rates, all of the reserve components
    call for rapid increases in restoration and modernization funding at some
    point during fiscal years 2003 through 2009 (see fig. 12). However,
    according to reserve component officials, they are concerned that the
    components may not receive significant funding increases for facility
    recapitalization activities in the out- years because the reserve
    components are considered a low priority, based on past experience. They
    also said the reserve components do not compete well with the active
    services and facilities generally do not compete well with other DOD
    programs and priorities during the budgeting process. Further, reserve
    component officials told us that they doubt that funding increases of the
    size indicated in figure 12 will occur given the low funding levels in the
    past and the uncertainty of future funding priorities.

    Figure 12: Current and Projected Restoration and Modernization Funding by
    Reserve Component, Fiscal Years 2003 through 2009

    Officials told us that, historically, budget plans for maintaining real
    property have had more dollars programmed in the out- years than were
    submitted in budget requests to Congress. As shown in figure 12, this may

    be the case with respect to most reserve components expecting significant
    funding increases to restore and modernize their facilities. For example,
    in constant fiscal year 2003 dollars, the

     Army National Guard is expecting a 283 percent funding increase from $76
    million to $291 million from fiscal year 2004 to fiscal year 2009,

     Army Reserve is anticipating a 268 percent funding increase from $67
    million to $247 million from fiscal year 2004 to fiscal year 2009,  Naval
    Reserve is expecting a 532 percent funding increase from

    $6 million to $40 million from fiscal year 2004 to fiscal year 2009,  Air
    National Guard is expecting nearly a 200 percent funding increase

    from $91 million to $272 million from fiscal year 2005 to fiscal year 2006
    and a 422 percent funding increase from $62 million to $325 million from
    fiscal year 2004 to fiscal year 2009, and

     Air Force Reserve is anticipating a 188 percent funding increase from
    $31 million to $90 million from fiscal year 2004 to fiscal year 2006.
    Fully Eliminating the Most

    As with DOD*s 67- year average recapitalization rate, eliminating the most
    Deteriorated Facilities by

    deteriorated reserve component facilities requires funding that the Fiscal
    Year 2010 Is Likely to

    components are unlikely to obtain. To improve the overall condition of Be
    a Challenge facilities, the reserve components estimate that it would cost
    $7.8 billion to achieve DOD*s objective to concentrate funding to
    eliminate C- 3 and C- 4 facility ratings by fiscal year 2010. This amount
    would be enough to bring all facilities up to the minimal C- 2 level or
    improve the condition of facilities so that deficiencies have only a
    limited effect on mission performance in DOD*s rating system. However, as
    shown in figure 12, collectively these funding increases remain
    unrealistic when compared to prior funding levels, the disproportionate
    reliance on high levels of funding in the out- years, and the need for
    funds for other defense priorities. Further, officials of the Army
    National Guard, the Army Reserve, the Air

    Force Reserve, and the Air National Guard said that they expect to meet
    DOD*s objective to eliminate facilities rated C- 3 and C- 4 by 2010, but
    only if expected restoration and modernization funding levels stay on
    target. However, they said the expected out- year amounts are generally
    reduced

    when the out- years get closer to the budget year because expected funds
    are likely to be budgeted for other DOD program priorities. A Naval
    Reserve official told us they are uncertain about funding increases
    because, starting in October 2003, facility funds will be managed by its
    active counterpart as part of a Navywide reorganization to streamline
    facility management. The Marine Corps Reserve officials said that they do
    not expect to eliminate their most deteriorated facilities by fiscal year
    2010 but plan to meet this DOD objective in fiscal year 2013.

    Challenges Exist in The reserve components have made use of two
    approaches* joint

    Implementing Joint construction projects and real property exchanges* to
    achieve improved

    facilities and potential cost savings; however, the reserve components
    face Construction Projects

    challenges in implementing the approaches. The Office of the Assistant and
    Real Property

    Secretary of Defense for Reserve Affairs estimated that joint construction
    Exchanges

    projects could save up to 20 percent of the total cost of two separate
    projects. However, reserve component officials told us that a major
    challenge to implementing joint construction projects involved achieving
    effective coordination among the components to simultaneously program

    the projects in their respective budget requests. Concerning real property
    exchanges, Congress has provided the reserve components with authority to
    use real property exchanges, but the overall program direction is limited.

    Challenges in Implementing The reserve components stated that the funding
    for joint construction

    Joint Construction Projects projects* where two or more components share
    space requirements and

    build one facility* is difficult to coordinate. Although Congress, the
    Assistant Secretary of Defense for Reserve Affairs, and the six reserve
    commands have all acknowledged the economic advantages to constructing
    more facilities jointly and have expressed a desire to achieve more joint
    construction projects, few projects have actually resulted. For example,
    reserve components* data show that a little more than 1 percent of the 41,
    266 reserve facilities are considered joint facilities. 23 Reserve
    officials said that joint construction projects require the reserve

    components to simultaneously program the projects in their budget 23
    According to officials in the Office of the Assistant Secretary of Defense
    for Reserve Affairs, the exact number of jointly constructed facilities is
    not known because of varied interpretations of the definition of jointness
    by the reserve components, but they suggested it might even be lower than
    1 percent.

    requests, but that the various service component priorities made this
    difficult to accomplish.

    The reserve components are required by 10 U. S. C. S: 18234 to pursue the
    joint use of facilities to the greatest extent practicable. This statutory
    requirement was implemented by establishing a Joint Service Reserve
    Component Facility Board in every state. 24 These boards are expected to
    meet at least once a year to validate future military construction
    projects

    and recommend specific projects for joint construction. According to the
    Office of the Assistant Secretary of Defense for Reserve Affairs, these
    boards did a good job of identifying joint projects. Of 714 projects, 101
    were identified by the boards as having joint construction potential in
    2002.

    Joint construction of military facilities offers opportunities to achieve
    cost savings and efficiencies through sharing of common space* as much as
    20 percent savings according to an estimate provided by the Office of the
    Assistant Secretary of Defense for Reserve Affairs. These dollar savings
    would be achieved as a result of reduced construction requirements as well
    as reduced costs to design and construct a project. Furthermore, the
    savings typically continue after a joint project is completed due to
    reduced requirements to sustain joint common areas, such as administrative
    space, classrooms, dining facilities, restrooms, medical examination
    rooms, drill

    halls, and assembly areas. Joint construction among reserve components
    also increases a facility*s utilization because they can alternate drill
    weekends and use a single facility more often than two separate buildings.
    For example:

     A joint Armed Forces Reserve Center at Gray, Tennessee, which combined
    construction projects for the Army Reserve, the Army National Guard, and
    the Marine Corps Reserve into a single facility

    project, as reported by DOD, saved millions of dollars by not constructing
    three separate facilities. 25

     At Sand Springs, Oklahoma, the Army National Guard and the Army Reserve
    estimated that if they constructed their facilities separately, it

    24 DOD Directive 1225.7, Reserve Component Facilities Programs and Unit
    Stationing,

    June 6, 2001, and DOD Instruction 1225.8, Programs and Procedures for
    Reserve Component Facilities and Unit Stationing, enclosure 3, para.
    E3.1.2.9, September 6, 2001. 25 See DOD*s Defense Installations 2001: The
    Framework for Readiness in the 21 st Century (Washington, D. C.: August
    2001).

    would cost almost $21 million. However, by jointly constructing a single
    facility, they expect the cost to be about $13.4 million, resulting in an
    anticipated savings of $7.3 million, or 35 percent. This savings only
    included lower construction and contract design and planning costs* not
    anticipated savings from reduced sustainment costs.

    Officials at all of the reserve components said that the principal
    challenge to implementing joint construction projects was the lack of
    funding coordination between the components. These officials stated that
    it was difficult for the components to simultaneously program the joint
    projects in their respective budget requests because of different service
    component priorities. For example, most joint construction projects
    identified by the Joint Service Reserve Component Facility Boards do not
    have funds programmed because, according to reserve component officials,
    the reserve components* projects do not compete well when they are
    assessed along with the active services* construction projects during the
    budget

    process. As a consequence, reserve projects tend to be lower on the active
    services* list of priorities for military construction funds, making the
    simultaneous funding from two or more reserve components difficult to
    achieve. For example, several joint construction projects, such as those
    in Augusta, Georgia, Mobile, Alabama, and Kansas City, Kansas, were not

    initiated because the different reserve components could not coordinate
    the funding. Often, while one reserve component might be able to program
    the funds it needs for a joint construction project, the other component
    involved cannot get funds programmed into its budget, or the funds are
    programmed so far into the future that the project is unlikely to be
    completed.

    Not only is funding for joint construction projects difficult to
    coordinate between different reserve components, such as the Naval Reserve
    and the Air Force Reserve, it is also difficult to coordinate the funding
    between two components within the same service, such as the Army National
    Guard and the Army Reserve. For example, at Moreno Valley, California, the
    Army National Guard and the Army Reserve wanted to construct a joint
    facility

    reviewed by the California Joint Service Reserve Component Facility Board,
    but the Army National Guard obtained funds for the project in fiscal year
    2003 whereas the Army Reserve planned to request funds in fiscal year
    2007. The Army National Guard will be proceeding with its construction
    plans unilaterally because it needs the facility now to activate a new
    unit. The Army Reserve is negotiating with the Naval Reserve and the
    Marine Corps Reserve about jointly constructing a facility at Moreno
    Valley.

    In April 2001, the Office of the Secretary of Defense established a
    separate budget structure for funding joint construction projects, but it
    has not yet programmed any funds for this purpose. 26 According to DOD

    officials, the services are reluctant to fund joint projects using the
    newly created budget structure because of concerns that their budgets will
    be reduced elsewhere.

    Challenges in Implementing Congress has provided the reserve components
    with authority to

    Real Property Exchanges participate in real property exchanges, but DOD
    has provided little overall

    direction for the real property exchange program. The Army Reserve is
    using its real property exchange authority the most and is planning on
    using this authority to recapitalize 10 percent of its facilities
    involving real

    property valued at hundreds of millions of dollars. Having the potential
    to avoid military construction costs, the other reserve components are
    just now exploring its use. However, a process to collect and share the
    Army Reserve*s lessons learned with other reserve components does not
    exist. Further, DOD does not have a method to ensure that real property
    needed by other DOD components or for future missions is not being given
    up, nor does it have assurances that the reserve components are seeking
    its approval for exchanges valued at more than $1 million, as called for
    in DOD instruction. 27

    Congress Has Provided Congress has provided the reserve components with
    authority to use real

    Authority for Real Property property exchanges as contained in 10 U. S. C.
    S: 18233; to date, only the

    Exchanges, but DOD Has Not Army Reserve is making use of the authority.
    Other reserve components

    Provided Overall Direction have indicated they are only now exploring
    using it. At the same time, the

    Office of the Secretary of Defense has not provided overall direction for
    the real property exchange program. 28 Specifically, DOD and reserve
    component officials could not direct us to any comprehensive guidance on
    real property exchanges except for guidance prepared by the Army

    26 DOD established a new program element in its Future Years Defense
    Program structure for its Program Objective Memorandum 2003- 2007 to fund
    joint use military construction projects.

    27 DOD Instruction 1225.8, Program and Procedures for Reserve Component
    Facilities and Unit Stationing, enclosure 3, para. E3.1.2.9, September 6,
    2001. 28 In addition to this authority, individual legislative provisions
    may authorize real property exchanges affecting specific reserve component
    locations.

    Reserve. 29 DOD officials told us they delegated authority to acquire and
    manage facilities to the service secretaries and the reserve components.
    30 An official in the Office of the Secretary of Defense said DOD does not
    always provide written direction for all congressional authorities the
    military departments use and is not planning on developing policy for
    exchanges conducted under 10 U. S. C. S: 18233 because of concerns that
    DOD might be micromanaging the reserve components. On the other hand, we
    believe that some oversight might be beneficial in ensuring lessons
    learned are captured and shared across the reserve components.

    Army Reserve Plans to Increase Using the exchange authority, the Army
    Reserve plans to identify Its Use of Exchange Authority

    80 real property exchanges in order to recapitalize 10 percent of its
    facilities over the next 8 years. The Army Reserve has already identified
    about $500 million in potential exchange projects and has signed exchange
    agreements for four projects, as of February 2003. In contrast, officials
    from the other reserve components said they were not aware of this
    congressional authority and are only now exploring its use.

    At Parks Reserve Forces Training Area, California, the Army Reserve signed
    an exchange agreement with a private land developer in October 2002 for
    about 11 acres at the training area in exchange for construction of a fire
    station. The developer wanted the land to construct an access road

    into its new housing development. In exchange for the property, appraised
    at $1.8 million, the Army Reserve will receive a new fire station valued
    at $3.9 million. Figure 13 shows the fire station scheduled for
    replacement and an architectural drawing of the proposed new fire station.

    29 Army Regulation 140- 483, Army Reserve Land and Facilities Management,
    July 30, 1994. 30 DOD Directive 5100.10, Delegation of Authority With
    Respect to Reserve Forces Facilities, March 16, 1972.

    Figure 13: Current and Proposed Fire Station at Parks Reserve Forces
    Training Area, California, as of November 2002

    A description of the three other Army Reserve projects follows:  At East
    Windsor, Connecticut, the Army Reserve exchanged about

    6 acres of its property with a local automobile wholesaler that wanted the
    land to facilitate its operations. In exchange for the property, the
    Reserve received almost 8 acres of land contiguous to the Army Reserve
    Center as well as a maintenance bay and paving, landscaping, and

    fencing improvements. The Reserve exchanged land appraised at $270, 000
    for other land and improvements valued at $450, 000. The deed exchange
    occurred in January 2003.

     At Fort Snelling, Minnesota, the Army Reserve exchanged about 7 acres of
    its property with the Minnesota Department of Transportation and the
    Metropolitan Council for constructing a highway interchange and expanding
    a light rail train system. In exchange for the property appraised at $2
    million, the Army Reserve received a 38,000- square foot

    addition to its permanent facility worth about $5.1 million. The bill of
    sale occurred in November 2002.

     Also at Fort Snelling, the Army Reserve exchanged about 11 acres of its
    property with the Metropolitan Airport Commission in order to expand the
    runway at the Minneapolis- St. Paul International Airport. In exchange for
    the property appraised at $1.4 million, the Reserve will receive a newly
    constructed maintenance facility in St. Joseph, Minnesota, valued at $1.7
    million. The exchange agreement was signed August 2002.

    Lessons Learned Not Being While the Army Reserve is gaining experience in
    implementing the

    Captured authority to conduct real property exchanges, it has not
    established a

    process for collecting and sharing its lessons learned with other reserve
    components. One such lesson regards the appraisal value of real property
    being considered in an exchange. The Army Reserve*s policy requires it to
    obtain no less than the fair market value for the real property to be

    exchanged. In obtaining fair market value, there are multiple methods to
    appraise real property, and appraisals can fluctuate greatly depending on
    the approach used by an appraiser. For example, the exchange at Parks
    Reserve Forces Training Area, California, included land that was initially
    valued at $75,500 by the developer based on the land*s condition at that
    time, which the appraiser considered to be agricultural. However, the
    appraised value significantly underestimated the fair market value because
    the appraiser did not consider the potential best use of the property by
    the

    developer and the value and use of land nearby. The Army Corps of
    Engineers reappraised the land, taking into consideration these factors.
    This new appraisal puts the value of the land at $1.8 million.

    In addition, the Army Reserve expects to gain additional experience as it
    begins to actively solicit public or private interest in exchange
    projects. Previously, the Army Reserve would only start an exchange
    project when a private or public entity approached it with an offer to
    exchange real property. However, officials told us that they are now
    taking a more proactive approach by advertising the availability of
    property and obtaining best financial offers for consideration. For
    example, the Army Reserve is considering a process to request price
    proposals from public or private

    entities to exchange 187 acres at Parks Reserve Training Area, in return
    for renovating about 40 buildings, also at Parks. The value of this land
    was estimated to be at $200 million to $300 million at the time of our
    review.

    Navy Reserve officials said they will need to look to the Army Reserve as
    a guide as the Navy Reserve plans to implement the exchange program using
    the exchange authority and considers whether to implement a competitive

    approach to its exchanges. The Navy Reserve has begun to assess the
    potential for exchanges at its 181 sites in anticipation that it may
    identify 20 to 30 real property exchange projects in the near future. In
    addition, these officials said that the Navy Reserve is interested in the
    competitive

    exchange approach and will be looking for lessons learned from the Army
    Reserve. Officials of the other four reserve components said they do not
    plan to use this authority for their exchange projects.

    No Method to Ensure That According to officials of the Office of the
    Secretary of Defense Installations

    Needed Property Is Not Being and Environment, the Office of the Assistant
    Secretary of Defense for

    Exchanged by the Reserve Reserve Affairs, the Army, and the Army Reserve,
    there is no method to

    Components ensure that real property needed by other DOD components or for
    future

    missions is not being exchanged by the reserve components. DOD officials
    told us that because the department has delegated authority to manage
    facilities to the service secretaries, they do not oversee exchanges by
    the reserve components. As such, the Department of the Army provides
    oversight for Army Reserve real property exchanges by determining that
    each exchange is within the proper authority, approving each exchange at
    the concept stage and again at the execution stage, and conducting the
    required notification to Congress. However, neither the Army nor the Army
    Reserve determines if the land to be exchanged is needed (1) by the other
    reserve components or the active services or (2) for future missions.
    Several reserve component officials stated they believe that the Joint
    Service Reserve Component Facility Boards, as discussed earlier in this
    report, could serve in this role.

    Although DOD requires approval of high value exchanges involving property
    valued at more than $1 million or 1,000 acres, the Army Reserve has
    interpreted DOD*s guidance to only apply to an exchange where the
    difference in the value of the property exchanged exceeds $1 million. 31
    As such, Army Reserve officials said that they notify DOD of an exchange
    only

    31 DOD Instruction 1225.8, Programs and Procedures for Reserve Component
    Facilities and Unit Stationing, September 6, 2001.

    if the value of the real property received exceeds the value of the real
    property exchanged by $1 million. In practice, the Army Reserve has not
    been seeking DOD*s approval of its exchanges. For example, the Army
    Reserve would notify DOD of the exchange if land valued at $50 million was
    exchanged for recapitalized facilities valued at more than $51 million
    because the net value was more than $1 million. The Army Reserve would
    not, on the other hand, notify DOD if the exchanged land valued at $50
    million was exchanged for recapitalized facilities also valued at $50
    million because the net value was zero. As a result, DOD is not aware of
    the Army Reserve*s high value exchanges, which can involve many millions
    of dollars in real property.

    Conclusions Despite recent efforts to have the military services increase
    their sustainment funding, DOD did not make sustaining and improving
    reserve

    component facilities a funding priority prior to fiscal year 2004 because
    of other defense programs and emerging requirements. While DOD has issued
    guidance emphasizing the need to improve funding of sustainment and
    recapitalization of facilities, funding trends and priorities create an
    uncertain picture regarding the extent to which facility improvements and
    achievement of DOD*s objectives are likely to be realized. Continuation of
    this trend will make it difficult for reserve components to meet all of
    DOD*s objectives for sustaining and improving facilities, which may lead
    to further deterioration of facilities and increase the use of workarounds
    to meet mission requirements. However, the upcoming base realignment and
    closure round, which is expected to evaluate the extent reserve component
    facilities are utilized, could affect the reserve components* expected
    need for facilities and their plans to met DOD*s objectives.

    Even though the reserve components are not likely to consistently meet
    DOD*s objectives, they have initiated joint construction projects to
    achieve potential cost savings and have participated in real property
    exchanges to replace older buildings* a practice that can serve to better
    leverage the use of available resources than otherwise would have
    occurred. However, without better funding coordination for joint
    construction projects or

    utilization of DOD*s newly established budget structure for joint use
    military construction projects, many projects that have the potential to
    generate future cost savings might not be initiated. In addition, the
    reserve components can also participate in real property exchanges to
    replace older facilities. Without procedures in place for cross service
    coordination as the number and size of projects grow, the reserve
    components risk exchanging real property that is needed by other DOD
    components or for

    future missions. Although DOD*s guidance requires approval of exchanges
    where the real property is valued at more than $1 million, the Army
    Reserve only notifies DOD of exchanges where the net value exceeds $1
    million. Thus, DOD is not always aware nor approves of exchanges involving
    high value property. While the Army Reserve is expanding its program under
    the authority to conduct real property exchanges and is using competitive
    offers to exchange property, there is no method to capture lessons learned
    and to share them with the other reserve components. As a result, the
    other reserve components may incur unnecessary costs when they initiate
    exchanges without the benefit of the Army Reserve*s experience.

    Recommendations for We recommend that the Secretary of Defense direct the
    secretaries of the

    Executive Action military departments, in consultation with their
    respective reserve

    components, to periodically review and reevaluate the priorities given to
    sustaining and improving the condition of reserve components* facilities
    if the reserve components are expected to meet DOD*s objectives for
    improving facilities. In addition, we recommend that the Secretary of
    Defense direct the Deputy Under Secretary of Defense for Installations and

    Environment, in consultation with the reserve components and the active
    services, to  facilitate the coordination among the reserve components
    and their

    service counterparts for programming identified military joint
    construction projects in their future budgets;

     examine ways to employ the budget structure DOD established for funding
    high priority joint construction projects;

     establish a method to ensure that real property to be exchanged is not
    needed by the other reserve components or the active services or for
    future missions; and

     clarify DOD*s guidance requiring approval of exchanges when the real
    property is valued at more than $1 million. Finally, we recommend that the
    Secretary of Defense direct the Office of the Assistant Secretary of
    Defense for Reserve Affairs to monitor the Army Reserve*s experience with
    implementing the authority to conduct real property exchanges and assist
    it in capturing lessons learned for the benefit of other reserve
    components, especially as the Army Reserve expands its use of a more
    competitive process.

    Matter for To further encourage the use and funding of joint construction
    projects, Congressional

    Congress may want to consider designating a portion of its military
    construction appropriations for DOD*s newly established budget structure
    Consideration

    to fund joint use military construction projects. Agency Comments and

    In commenting on a draft of this report, the Assistant Secretary of
    Defense Our Evaluation

    for Reserve Affairs concurred with our recommendations and indicated that
    actions were underway or planned to deal with our recommendations. In
    commenting on our recommendation for the services to review and reevaluate
    the priorities to sustain and improve the condition of reserve facilities,
    DOD stated it has implemented our recommendation and has directed the
    services to fund sustainment at 100 percent in fiscal year 2006 and
    achieve a 67- year recapitalization rate in fiscal year 2008. However, as
    we pointed out in the report, achieving these goals call for rapid
    increases in restoration and modernization funding that are unlikely when
    compared to prior funding trends and with the need to fund other defense
    priorities and programs. Similarly, the Assistant Secretary of Defense for
    Reserve Affairs noted that a key component of the budget process is
    setting priorities and accepting risks in certain areas and that DOD has
    accepted various infrastructure risks during the budget process. He also
    acknowledged that reserve components have more requirements than

    requested funds and that they do not expect to meet DOD*s objective of a
    67- year recapitalization rate, even with increases in obligations and
    congressional add- ons. Accordingly, we believe that this issue requires
    continued reevaluation and have modified this recommendation to reflect

    the need to periodically reassess the priorities given to sustaining and
    improving the condition of reserve components* facilities. DOD*s comments
    are included in appendix II of this report. We are sending copies of this
    report to the Secretaries of Defense, the Army, the Navy, and the Air
    Force; the Commandant of the Marine Corps; and the Director, Office of
    Management and Budget. We will also make copies available to others upon
    request. In addition, the report is available at no charge on GAO*s Web
    site at www. gao. gov.

    Please contact me on (202) 512- 8412 if you or your staff have any
    questions regarding this report. Key contributors to this report are
    listed in appendix III.

    Barry W. Holman, Director Defense Capabilities and Management

    List of Congressional Committees

    The Honorable John Warner Chairman The Honorable Carl Levin Ranking
    Minority Member Committee on Armed Services United States Senate

    The Honorable Ted Stevens Chairman The Honorable Daniel K. Inouye Ranking
    Minority Member Subcommittee on Defense Committee on Appropriations United
    States Senate

    The Honorable Kay Bailey Hutchison Chairman The Honorable Dianne Feinstein
    Ranking Minority Member Subcommittee on Military Construction Committee on
    Appropriations United States Senate

    The Honorable Duncan Hunter Chairman The Honorable Ike Skelton Ranking
    Minority Member Committee on Armed Services House of Representatives

    The Honorable Jerry Lewis Chairman The Honorable John P. Murtha Ranking
    Minority Member Subcommittee on Defense Committee on Appropriations House
    of Representatives

    The Honorable Joe Knollenberg Chairman The Honorable Chet Edwards Ranking
    Minority Member Subcommittee on Military Construction Committee on
    Appropriations House of Representatives

    Appendi Appendi xes x I

    Scope and Methodology We prepared this report under our basic legislative
    responsibilities as authorized by 31 U. S. C. S: 717. We performed our
    work at, and met with officials from, the Office of the Assistant
    Secretary of Defense for Reserve Affairs; the Army National Guard; the Air
    National Guard; and the headquarters of the Army Reserve Command, Naval
    Reserve Forces Command, Marine Forces Reserve, and Air Force Reserve
    Command. We also visited 20 Army National Guard, 11 Army Reserve, 9 Naval
    Reserve, 7 Marine Corps Reserve, 5 Air National Guard, and 5 Air Force
    Reserve sites, as shown in table 3. During our visits, we toured various
    facilities to observe their physical condition. We discussed funding
    trends, systems for assessing facility conditions, and plans for improving
    facilities to include the funding for joint construction projects and the
    participation in real property exchanges. Our review covered only those
    facilities funded by operation and maintenance and military construction
    funds and not by other sources, such as revolving and management funds,
    military family housing and overseas facilities funds, and defense health
    program funds for

    hospitals and medical clinics.

    Table 3: Listing of Various Reserve Component Locations GAO Visited
    Reserve component Facility or installation Location

    Army National Guard Army National Guard Arlington, Virginia National Guard
    Training Center at Fort Indiantown Gap Annville, Pennsylvania Army
    National Guard Maneuver Training Center at Fort Pickett Blackstone,
    Virginia Harrisburg Military Post Harrisburg, Pennsylvania Readiness
    Center Detroit, Michigan Readiness Center Grand Prairie, Texas Readiness
    Center Concord, California Readiness Center Hershey, Pennsylvania
    Readiness Center Lebanon, Pennsylvania Readiness Center Moreno Valley,
    California Readiness Center Norfolk, Virginia Readiness Center Pittsburg,
    California Readiness Center Portsmouth, Virginia Readiness Center
    Richmond, California Readiness Center Suffolk, Virginia Readiness Center
    Taylor, Michigan Readiness Center Vallejo, California Readiness Center
    Virginia Beach, Virginia Readiness Center at Cobb Park Fort Worth, Texas
    Readiness Center at Sandage Fort Worth, Texas Readiness Center at
    Shoreview Fort Worth, Texas Army Reserve Army Reserve Command Atlanta,
    Georgia

    Armed Forces Reserve Center Concord, California Armed Forces Reserve
    Center Southfield, Michigan Armed Forces Reserve Center Harrisburg,
    Pennsylvania Reserve Center Moreno Valley, California Reserve Center Grand
    Prairie, Texas Reserve Center at East Point Atlanta, Georgia Reserve
    Center at Forest Park Atlanta, Georgia Reserve Center at Fort Indiantown
    Gap Annville, Pennsylvania Reserve Center at Fort Pickett Blackstone,
    Virginia Army Reserve at Selfridge Air National Guard Base Mount Clemens,
    Michigan Parks Reserve Forces Training Area Dublin, California

    (Continued From Previous Page)

    Reserve component Facility or installation Location

    Naval Reserve Naval Reserve Forces Command New Orleans, Louisiana Naval
    Air Reserve Activity at Selfridge Air National Guard Base Mount Clemens,
    Michigan Naval Air Station Joint Reserve Base Fort Worth, Texas Naval Air
    Station Joint Reserve Base New Orleans, Louisiana Naval and Marine Corps
    Reserve Center Alameda, California Naval and Marine Corps Reserve Center
    Harrisburg, Pennsylvania Naval and Marine Corps Reserve Center Moreno
    Valley, California Naval Reserve Center Southfield, Michigan Naval Reserve
    Center Detroit at Selfridge Air National Guard Base Mount Clemens,
    Michigan

    Naval Support Activity New Orleans, Louisiana Marine Corps Reserve Marine
    Forces Reserve New Orleans, Louisiana

    Armed Forces Reserve Center Concord, California Armed Forces Reserve
    Center Grand Prairie, Texas Marine Corps Reserve Center Detroit, Michigan
    Marine Corps Reserve Center Newport News, Virginia Marine Corps Reserve
    Center at Naval Air Station Joint Reserve Base Fort Worth, Texas Marine
    Corps Reserve Center at Selfridge Air National Guard Base Mount Clemens,
    Michigan Naval and Marine Corps Reserve Center Harrisburg, Pennsylvania
    Air National Guard Air National Guard at Andrews Air Force Base Camp
    Springs, Maryland

    Air National Guard at Fort Indiantown Gap Annville, Pennsylvania Air
    National Guard at Harrisburg International Airport Harrisburg,
    Pennsylvania Air National Guard at March Air Reserve Base Riverside,
    California Air National Guard at Naval Air Station Joint Reserve Base Fort
    Worth, Texas Selfridge Air National Guard Base Mount Clemens, Michigan Air
    Force Reserve Air Force Reserve Command at Robins Air Force Base Macon,
    Georgia Air Force Reserve at Naval Air Station Joint Reserve Base Fort
    Worth, Texas

    Air Force Reserve at Selfridge Air National Guard Base Mount Clemens,
    Michigan Dobbins Air Reserve Base Marietta, Georgia Grissom Air Reserve
    Base Peru, Indiana March Air Reserve Base Riverside, California Source:
    GAO.

    To examine the reserve components* funding trends for facility maintenance
    and construction since fiscal year 1998 and the condition of the
    components* facilities over this same time period, we analyzed the reserve
    components* budgets for operation and maintenance funding and military
    construction funding and the military construction backlogs and visited 57
    reserve locations. For facility maintenance, we analyzed budget

    data from the reserve components* sustainment, restoration, and
    modernization subactivity group in their operation and maintenance
    appropriations. We compared the amounts that the reserve components
    requested in their budget submissions with the amounts that Congress
    designated in conference reports for the Department of Defense (DOD)
    appropriation acts and with the amounts the reserve components reported as
    obligated in their budget submissions for fiscal years 1998 through 2002.
    We also looked at the reserve components* military construction budget
    requests and congressional designations for fiscal years 1998 through
    2003. For military construction, we compared the amounts that the reserve
    components requested in budget submissions with amounts that Congress
    designated in its conference reports for DOD military construction
    appropriation acts. We discussed amount differences for operation and
    maintenance and military construction with DOD and reserve component
    officials to obtain a better understanding about overall fund movements.
    We did not review the obligated amounts for military construction because

    such funds are available for obligation over a 5- year period and cannot
    easily be tied back to the year requested.

    To determine the impact of historical and current funding on the condition
    of reserve facilities, the factors that have led to the deterioration of
    facility conditions, and the effect of deteriorated facilities, we met
    with officials from the Army National Guard; U. S. Army Reserve Command;
    Commander, Naval Reserve Forces; Marine Forces Reserve Command; Air Force

    Reserve Command; and the Air National Guard. To view the condition of
    facilities firsthand, we visited 57 reserve locations across the country.
    Given the large number of reserve component facilities to select from, we
    relied on suggestions from reserve component officials. We visited
    facilities that ranged from good to poor condition for the six reserve
    components throughout the United States. During our visits, we met with
    the facilities* occupants and took pictures to document facility
    conditions. The conditions we observed at these 57 locations might not be
    representative of conditions at other reserve facilities. We did not
    examine the individual

    states* required share of the costs for major repairs to Army National
    Guard facilities. However, we obtained an understanding of how state
    funding differs according to the type of facility needing repair, such as
    a readiness center, a maintenance shop, or a training facility. Officials
    with the National Guard Bureau told us that specific data on facility
    maintenance contributions were retained by the states and were not readily
    available. This was not a limitation with the Air National Guard because
    many of its facilities are located at airports, which are federally leased
    property. Thus, states do not contribute to the cost of maintaining these
    facilities.

    To assess the likelihood that the reserve components will meet DOD*s three
    objectives for improving facilities, we examined the reserve components*
    current and projected funding plans for sustaining, recapitalizing,
    restoring, and modernizing facilities to determine whether these plans
    would allow them to meet DOD*s objectives by specified deadlines. We did
    not validate the reserve components* reported requirements for the
    sustainment and recapitalization of their facilities.

    To identify challenges in implementing two potential cost saving
    initiatives* joint construction projects and real property exchanges* we
    met with officials at the reserve components* headquarters and discussed
    the benefits and challenges of the initiatives. To determine the
    challenges faced with implementing joint construction projects, we met
    with officials at the Office of the Assistant Secretary of Defense for
    Reserve Affairs and the headquarters of the six reserve components and
    contacted the Office of the Under Secretary of Defense (Comptroller). We
    examined the funding

    provisions available to implement joint construction projects and
    discussed with officials the challenges in implementing these funding
    provisions for joint construction projects. To assess the reserve
    components* participation in real property exchanges, we reviewed 10 U. S.
    C. S: 18233 authorizing such exchanges and related guidance and
    regulations associated with these exchanges. We met with officials from
    DOD*s Office of the Deputy Under Secretary of Defense for Installations

    and Environment, the Office of the Assistant Secretary of Defense for
    Reserve Affairs, the Army*s offices of the Assistant Secretary for
    Installations and Environment and the Army Reserve, and the Army Corps of
    Engineers to understand real property exchanges.

    In performing this review, we used the same accounting records and
    financial reports DOD and reserve components use to manage and justify
    budgets for their facilities. We did not independently determine the
    reliability of the reported financial information. However, in our recent
    audit of the federal government*s financial statements, including DOD*s
    and the reserve components* statements, we questioned the reliability of
    reported financial information because not all obligations and
    expenditures are recorded to specific financial accounts. 1 In addition,
    we did not validate DOD*s reported requirements for the sustainment of its
    facilities, nor did we validate its facility inventory database.

    1 GAO- 03- 98.

    We conducted our work from May 2002 through February 2003 in accordance
    with generally accepted government auditing standards.

    Appendi x II Comments from the Department of Defense

    Appendi x III

    GAO Contact and Staff Acknowledgments GAO Contact Mark A. Little (202)
    512- 4673 Acknowledgments In addition to the individual named above,
    Janine Cantin,

    George Duncan, Oscar Mardis, Malvern Saavedra, Laura Talbott, and R. K.
    Wild made key contributions to this report.

    (350199)

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    a

    GAO United States General Accounting Office

    Funding for maintaining and constructing reserve component facilities has
    increased. Obligations for facility maintenance rose by about 70 percent
    from fiscal year 1998 to fiscal year 2002 and annual appropriations for
    military construction rose 49 percent from fiscal year 1998 to fiscal year
    2003. Despite the increases, reserve components rated the condition of 64
    percent of their facilities as inadequate, and GAO*s visits to
    installations document the deteriorated condition of facilities. While GAO
    did not see any facilities that were not in use, the upcoming base
    realignment and closure round is expected to include an evaluation of
    reserve component facilities.

    The reserve components are unlikely to meet all of DOD*s three objectives
    for improving facilities: achieve 100 percent sustainment funding starting
    in fiscal year 2004; reach a 67- year average recapitalization rate by
    fiscal year

    2007; and improve the condition of facilities so that deficiencies have
    only a limited effect on mission performance by fiscal year 2010.
    Furthermore, some officials acknowledged that even when their components
    have expressed intent to meet DOD*s objectives, their funding plans might
    include unrealistically high rates of increases during the out- years when
    compared to previous funding trends and against other defense priorities.

    The reserve components face challenges in implementing two potential cost
    saving initiatives* joint construction projects and real property
    exchanges. Reserve component officials said that funding joint
    construction projects* where two or more components share space
    requirements and build one facility* is difficult to coordinate. In
    addition, while Congress has provided the components with authority to
    exchange real property with other public or private entities in return for
    the construction of new facilities of equal or greater value* the Office
    of the Secretary of Defense has not provided overall direction for the
    program, thus risking the exchange of property that may be needed by other
    DOD components. GAO prepared this report under

    its basic legislative responsibilities. Its objectives are threefold: (1)
    to examine the reserve forces* trends for facility maintenance

    and construction funding and the condition of their facilities, (2) to
    assess the likelihood that they will meet the Department of Defense*s
    (DOD) objectives for improving facilities, and (3) to discuss the

    challenges in implementing two potential cost saving initiatives* joint
    construction projects and real property exchanges.

    GAO is recommending that the Secretary of Defense direct the services to
    review and reevaluate the priorities to sustain and improve the condition
    of reserve

    facilities. GAO also recommends that the Secretary direct the Deputy Under
    Secretary of Defense for Installations and Environment to facilitate the
    coordination funding for joint construction projects among active and
    reserve components, and to establish a method to ensure that real property

    to be exchanged is not needed by other DOD components. GAO is also
    suggesting that Congress consider using DOD*s newly established budget
    structure to better coordinate and fund high priority joint construction
    projects.

    In commenting on a draft of this report, DOD agreed with the
    recommendations.

    www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 516. To view the full product,
    including the scope and methodology, click on the link above. For more
    information, contact Barry W. Holman at (202) 512- 8412 or holmanb@ gao.
    gov. Highlights of GAO- 03- 516, a report to

    Congressional Committees

    May 2003

    DEFENSE INFRASTRUCTURE

    Changes in Funding Priorities and Management Processes Needed to Improve
    Condition and Reduce Costs of Guard and Reserve Facilities

    Page i GAO- 03- 516 Defense Infrastructure

    Contents

    Contents

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    Appendix I

    Appendix I Scope and Methodology

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    Appendix I Scope and Methodology

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    Appendix I Scope and Methodology

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    Appendix I Scope and Methodology

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    Appendix I Scope and Methodology

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    Appendix II

    Appendix II Comments from the Department of Defense

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    Appendix II Comments from the Department of Defense

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    Appendix III

    United States General Accounting Office Washington, D. C. 20548- 0001
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    Presorted Standard Postage & Fees Paid

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