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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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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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 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
Official Business Penalty for Private Use $300 Address Service Requested

Presorted Standard Postage & Fees Paid

GAO Permit No. GI00
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