Defense Infrastructure: Long-term Challenges in Managing the	 
Military Construction Program (24-FEB-04, GAO-04-288).		 
                                                                 
The Department of Defense's (DOD) military construction program  
provides funding for construction projects in the United States  
and overseas, and funds most base realignment and closure costs. 
Recent Office of the Secretary of Defense (OSD) estimates	 
indicate that it would cost as much as $164 billion to improve	 
facilities to a level that would meet the department's goals. GAO
was asked to report on the (1) steps OSD has taken to enhance	 
program management, (2) process of prioritizing and resourcing	 
military construction projects, and (3) advantages and		 
disadvantages of increasing the current funding thresholds for	 
constructing and repairing facilities.				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-288 					        
    ACCNO:   A09328						        
  TITLE:     Defense Infrastructure: Long-term Challenges in Managing 
the Military Construction Program				 
     DATE:   02/24/2004 
  SUBJECT:   Federal funds					 
	     Funds management					 
	     Military facility construction			 
	     Strategic planning 				 
	     Program management 				 
	     Prioritizing					 
	     Construction costs 				 
	     Congressional oversight				 
	     Funding increases					 

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GAO-04-288

United States General Accounting Office

GAO

Report to the Subcommittee on

        Military Construction, Committee on Appropriations, U.S. Senate

February 2004

DEFENSE INFRASTRUCTURE

       Long-term Challenges in Managing the Military Construction Program

GAO-04-288

Highlights of GAO-04-288, a report to the Subcommittee on Military
Construction, Senate Committee on Appropriations

The Department of Defense's (DOD) military construction program provides
funding for construction projects in the United States and overseas, and
funds most base realignment and closure costs. Recent Office of the
Secretary of Defense (OSD) estimates indicate that it would cost as much
as $164 billion to improve facilities to a level that would meet the
department's goals. GAO was asked to report on the (1) steps OSD has taken
to enhance program management, (2) process of prioritizing and resourcing
military construction projects, and (3) advantages and disadvantages of
increasing the current funding thresholds for constructing and repairing
facilities.

GAO recommends that OSD (1) complete the management tools for
standardizing construction practices and costs, (2) reevaluate the time
frames for completing the key objectives, and (3) develop a mechanism for
periodically reassessing military construction priorities for facility
categories that fall outside DOD's specific areas of emphasis. GAO also
suggests that Congress may wish to consider the advantages and
disadvantages of increasing the funding thresholds for minor construction
projects. In commenting on a draft of this report, DOD agreed or partially
agreed with the recommendations and indicated that some actions are being
taken to address them.

www.gao.gov/cgi-bin/getrpt?GAO-04-288.

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 [email protected].

February 2004

DEFENSE INFRASTRUCTURE

Long-term Challenges in Managing the Military Construction Program

Recognizing the need to halt the degradation of defense facilities, OSD
took a number of steps to enhance the management of the military
construction program by providing guidance through a facilities strategic
plan and by standardizing practices through selected management tools.
However, some of these tools are not completed, and others have weaknesses
that further hinder efforts to improve facilities. OSD's strategic plan
outlines long-term goals but lacks comprehensive information on the
actions, time frames, responsibilities, and resources that are needed to
meet DOD's vision for facilities. OSD has also established key financial
objectives for the services to improve the condition of their facilities.
Given competing funding pressures and that the process of realigning and
closing bases to reduce excess infrastructure will take several years to
accomplish, improvements in facilities will likely require much longer
than suggested by OSD's objectives.

DOD's process of prioritizing and resourcing military construction
projects provides an important means of improving whole categories of
facilities but can repeatedly postpone addressing important projects
outside of those categories. If left unchecked without periodic
reassessments, the process can continually defer projects important to
installations' ability to accomplish their mission and improve
servicemembers' quality of life. As much as 77 percent of military
construction funds appropriated in any one year are distributed among
specific areas of emphasis, such as housing, leaving a significantly
smaller portion that is insufficient to repair the remaining categories of
facilities. Some projects are not submitted for funding consideration
because they do not fall within the specific areas of emphasis and thus
are perceived as being highly unlikely to receive funding. Also, some
high-cost priority projects are postponed for future years' funding
because their addition would exceed the services' funding level
established for that year. Congress may add projects during the
appropriations process, addressing what it has considered as inadequate
requests for funding. These projects may require adjustments in DOD's
plans since they may not always align with DOD's short-term priorities.

Increasing current funding thresholds for unspecified minor military
construction projects would give DOD installations more flexibility, but
might need to be balanced against reducing congressional oversight.
Construction costs have increased as much as 41 percent since the
thresholds were last adjusted upward. As a result, fewer projects that are
smaller in scope can now be completed using these types of funds.
Additionally, installation officials often scale back the scope of a
project in order to meet the current thresholds, compromising design
characteristics in the process. However, if the thresholds were increased,
Congress could lose oversight of the additional projects funded under
these thresholds because such construction projects are not specifically
identified in the President's budget submissions. Yet, there are
alternatives, such as coupling the increased thresholds with periodic
reports on the usage of those funds.

Contents

  Letter

Results in Brief
Background
Strategic Plan and Management Tools Weaknesses Limit Efforts to

Improve Facilities Prioritizing and Resourcing Process Serves an Important
Function but Has Limitations Increasing the Current Funding Thresholds
Gives DOD Additional

Flexibility but Could Lessen Congressional Oversight Conclusions
Recommendations for Executive Action Matters for Congressional
Consideration Agency Comments and Our Evaluation

                                       1

                                      4 8

13

23

30 34 35 36 36

  Appendix I Scope and Methodology

     Appendix II     Section 2805 of Title 10, United States Code (2003)   41 
    Appendix III   DOD's Prioritization and Resourcing Process for       
                              Military Construction Projects             
     Appendix IV          Services' Plans to Meet OSD's Three Key        
                                   Investment Objectives                 
     Appendix V           Comments from the Department of Defense        

  Tables

Table 1: Comparison of the Military Services' Priorities for Military
Construction Projects, Fiscal Year 2004 46 Table 2: Comparison of the
Military Services' Systems to Prioritize Military Construction Projects,
Fiscal Year 2004 49

Table 3: Planned Status for Achieving OSD's Objective of Fully Funding
Sustainment by Military Service and DOD-wide, Fiscal Years 2004 through
2009 51

Table 4: Planned Status for Achieving OSD's Objective of Attaining a
67-Year Recapitalization Rate by Military Service and DOD-wide, Fiscal
Years 2004 through 2009 52

  Figures

Figure 1: Examples of Pre-World War II-Era Facilities 15 Figure 2:
Examples of Undersized or Inadequate Facilities 16 Figure 3: Percent
Distribution of Military Construction Funding by

Specific Area of Emphasis in the Military Construction Appropriation Act
for Fiscal Year 2004 24 Figure 4: Summary of the Military Construction
Process, Fiscal Year 2005 44 Figure 5: Military Services' Planned Annual
Restoration and Modernization Funding, Fiscal Years 2004 through 2009 53

Abbreviations

DOD Department of Defense
OSD Office of the Secretary of Defense

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United States General Accounting Office Washington, DC 20548

February 24, 2004

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

The Department of Defense's (DOD) military construction program
provides funding for construction projects in the United States and
overseas, and funds most base realignment and closure costs. In recent
years, military construction funding has averaged $8-10 billion per year,
but recent estimates from the Office of the Secretary of Defense (OSD)
indicate that it would cost between $62 billion and $164 billion in total
to
adequately improve facilities to a level that would meet the department's
facility condition goals. DOD attributes this high cost estimate to the
fact
that many DOD installations and facilities have not been sufficiently
maintained or renovated for many years. Defense facilities include
buildings such as barracks, administrative space, classrooms, hangars,
warehouses, maintenance buildings, churches, and child development
centers, as well as nonbuildings such as runways, roads, railroads, piers,
and utility structures and systems. Including family housing, DOD's
facilities and structures number more than 600,000, with a replacement
value of about $600 billion. In the absence of proper maintenance,
referred
to as "sustainment" by DOD, these facilities deteriorate prematurely.1
Without periodic recapitalization, facilities can become obsolete and can
no longer be cost-effectively renovated and must be replaced with new
construction.2 Consequently, DOD and active military service officials
report that some facilities are in such a deteriorated condition that they
adversely affect missions supported by such facilities and negatively
affect
the quality of life of military personnel and their families. DOD and

1 Sustainment includes the recurring maintenance and repair activities
necessary to keep an inventory of facilities in good working condition.

2 Recapitalization includes the major renovations or reconstruction
activities (including facility replacement) needed to keep facilities
modern and efficient in an environment of changing standards and missions.

Congress have recognized the need to fully fund the maintenance and
recapitalization of facilities, as well as to reduce DOD's inventory of
facilities through an upcoming round of domestic base realignments and
closures authorized for fiscal year 2005.3 DOD is also reexamining
worldwide basing requirements, which could potentially lead to significant
changes in facility requirements over a period of years.

Military construction4 funds may be used for the restoration and
modernization5 of existing facilities or to fund the construction of new
buildings and other facilities, referred to by DOD as "new footprint"
projects. Operation and maintenance funds can also be used to pay for
restoration, modernization, and small construction projects. However,
operation and maintenance funds are used primarily to support sustainment
activities, which are designed to keep facilities in good working order.
Sustainment covers expenses for all recurring maintenance costs and
contracts, as well as for major repairs of nonstructural facility
components (e.g., replacing a roof or repairing an air-conditioning
system) that are expected to occur during a facility's life. In 1982
Congress established maximum amounts of funds that could be applied to
unspecified minor military construction projects and upwardly adjusted
these amounts, or thresholds, through 1991 and 2001.6 Currently, an
unspecified minor military construction project is a military construction
project that has an approved cost estimate equal to or less than $1.5
million, or equal to or less than $3 million if the project is intended

3 As authorized by Congress in 2001-the National Defense Authorization Act
for Fiscal Year 2002 (Pub. L. No. 107-107, sec. 3001 (Dec. 28, 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 the department has
from 20 to 25 percent excess capacity in its facilities. Accordingly, as a
result of the round of base realignments and closures anticipated in
fiscal year 2005, the military services and defense agencies will have to
adjust their facility maintenance and recapitalization plans.

4 Military construction, as defined in 10 U.S.C. 2801 (2003) "includes any
construction, development, conversion, or extension of any kind carried
out with respect to a military installation." Construction projects
consist of all types of buildings, roads, airfield pavements, and utility
systems costing $750,000 or more.

5 Restoration includes repair and replacement work to restore facilities
damaged by inadequate sustainment, excessive age, natural disaster, fire,
accident, or other causes. Modernization includes altering or modernizing
facilities to meet new or higher standards, accommodate new functions, or
replace structural components.

6 See section 2805 of Title 10, United States Code (2003), which is
reproduced in appendix II.

solely to correct a deficiency that threatens life, health, or safety. In
addition to the use of military construction funds for unspecified minor
construction projects, service Secretaries may use operation and
maintenance funds for such projects with estimated costs of not more than
$750,000 for any other unspecified minor military construction project or
$1.5 million to correct deficiencies threatening life, health, or safety.

In 2003 we issued two reports on the funding and planning to improve the
condition of facilities for the active services and reserve components.7
In those reports, we focused on issues associated with the sustainment of
facilities and reported that the funding spent on facility sustainment had
not been sufficient to halt the deterioration of facilities. In response
to your request, this report discusses (1) the steps that OSD has taken to
enhance the management of the military construction program, (2) whether
the process by which military construction projects are prioritized and
resourced ensures that all categories of facilities that affect the
services' ability to accomplish their mission and improve quality of life
are reached, and (3) the advantages and disadvantages of increasing the
current funding thresholds for constructing and repairing facilities. This
report focuses on nonhousing issues concerning military construction
inside the United States and generally does not address issues associated
with military family housing and overseas construction programs.8

In conducting our review, we interviewed OSD and service officials to
obtain information related to OSD's roles, policies, directives,
procedures, and practices for managing the military construction program
and to assess the military construction prioritization and programming
process.

7 See 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) and
U.S. General Accounting Office, Defense Infrastructure: Changes in Funding
Priorities and Management Processes Needed to Improve Condition and Reduce
Costs of Guard and Reserve Facilities, GAO-03-516 (Washington, D.C.: May
15, 2003).

8 The conference report (H.R. Conf. Rep. No. 108-342 [2003]), accompanying
H.R. 2559, directed DOD to prepare detailed comprehensive master plans
starting in 2006 for the changing infrastructure requirements for U.S.
military facilities within each of its overseas regional commands. The
Senate Report (S. Rep. No. 108-82 [2003] at p. 14) directed GAO to monitor
the infrastructure master plans being developed and implemented for the
overseas regional commands and to provide the congressional defense
committees with a report by May 15 of each year giving an assessment of
the status of the plans, associated costs, burden-sharing implications,
and other relevant information involving property returns to host nations,
restoration issues, and residual values.

  Results in Brief

We also visited 20 military installations and eight major commands to
observe the condition of the facilities, and to discuss their role in the
military construction program, the impact of projects added by Congress
during the appropriation process, and the impact of legislative threshold
levels for funding military construction projects. We conducted our work
from February through November 2003 in accordance with generally accepted
government auditing standards. A more thorough description of our scope
and methodology is presented in appendix I.

Recognizing the need to halt the degradation of defense facilities, OSD
has taken a number of steps to enhance the management of the military
construction program by providing guidance through a facilities strategic
plan and by standardizing practices through selected management tools.
However, some of these tools are not completed, and others have weaknesses
that hinder DOD's efforts to sustain and recapitalize facilities. In the
1990s the services did not allocate full funding for their facilities-
sustainment averaged about 75 percent of identified needs, and facilities
recapitalization averaged about 35 percent of the services' requirements-
resulting in too many deteriorated and obsolete facilities. Consequently,
in recent years, OSD has sought to strengthen its role in guiding and
overseeing facilities improvements. For example, OSD developed an
installation readiness reporting system in 1999 to provide a top-level
assessment of the condition of its facilities and to ascertain the effect
that facility conditions have on readiness. However, the system does not
provide consistent information between the services on the condition of
facilities. Another OSD management tool, a defense facilities strategic
plan,9 outlines long-term strategic goals for installations and
facilities. Yet, the plan, which is under revision, lacks comprehensive
information on the specific actions, time frames, assigned
responsibilities, and resources that are needed to meet DOD's vision for
facilities. OSD also developed an initial DOD-wide system to calculate the
recapitalization rate associated with given amounts of military
construction funding and to generate an annual funding requirement for
recapitalization.10 DOD plans to upgrade

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

10 DOD defines the recapitalization rate as the number of years required
to replace or renovate facilities at a given level of investment. The rate
is computed by dividing recapitalizable plant replacement value by total
restoration and modernization investments. The recapitalizable plant
replacement value, as defined by DOD, is the cost of replacing an existing
facility of the same size at the same location, using today's building
standards.

and recalibrate this metric in the near future. Additionally, OSD
established three key objectives for the services to sustain and improve
the conditions of their facilities in its Defense Planning Guidance for
fiscal year 2004.11 Currently, these objectives are to fully fund
sustainment starting in fiscal year 2004, reach a 67-year average
recapitalization rate by fiscal year 2008, and improve the condition of
facilities so that deficiencies have only a limited effect on mission
performance by fiscal year 2010.12 However, because of competing funding
priorities and programs within the defense budget, the services do not
plan to meet OSD's facility objectives within the expected time frames
and, in those instances where the services do indicate or intend to meet
the objectives, their plans are based on future funding that requires
unrealistically high rates of increase when compared with previous funding
trends and when considered against other defense priorities. Given DOD's
competing funding pressures and given that (1) the process of realigning
and closing bases to reduce DOD's excess infrastructure from the 2005
round of closures and (2) a reexamination of worldwide basing requirements
will take several years to accomplish, improvements in facilities will
likely require much longer to accomplish than suggested by DOD's three key
objectives.

DOD's process of prioritizing and resourcing military construction
projects provides an important means of improving whole categories of
facilities but can repeatedly postpone addressing important projects
outside of those categories. If left unchecked without periodic
reassessments, the process can continually defer projects important to
installations' ability to accomplish their mission and improve
servicemembers' quality of life. As much as 77 percent of military
construction funds appropriated in any one year are distributed among
specific areas of emphasis, including housing, annual unspecified cost
estimates, and the services' major priorities. For example, OSD has made
the quality of housing-including military family housing and barracks-one
of the department's highest priorities, amounting to approximately 54
percent of military construction funding appropriated in fiscal year 2004.
In addition, funding for annual unspecified costs-which includes base
realignment and closure activities,

11 The Secretary of Defense and his staff prepare the Defense Planning
Guidance, issue policy, and articulate strategic objectives that reflect
the national military strategy. The Defense Planning Guidance includes the
Secretary's force and resource guidance to the military departments, other
combat support agencies, and the unified combatant commands.

12 DOD has periodically revised the objectives for improving facilities on
the basis of the services' ability to meet them.

the North Atlantic Treaty Organization facility contribution, and facility
planning and design-was approximately 9 percent of the military
construction budget in fiscal year 2004.13 Funding for the services' major
priorities, such as physical fitness facilities and aircraft hangars, was
approximately 14 percent in fiscal year 2004. The remaining 23 percent of
military construction funding for installations was insufficient to repair
the remaining categories of facilities, including those affecting the
services' ability to accomplish their mission and improve servicemembers'
quality of life. For example, even though installation and major command
officials have a large list of military construction projects in backlog,
only a small fraction of these projects are submitted for consideration
each year. In practice, installation officials often do not submit
projects that do not fall into the specific areas of emphasis and
sometimes are directed by the major commands to limit the number of
projects that they can submit for consideration. Furthermore, annually,
some high-priority, high-cost projects are postponed to future years
because their addition to the current year's military construction program
causes an increase in the total funding that exceeds the services'
predetermined military construction funding level for that funding year.
Often, officials would replace these high-cost projects with several
lower-priority, lower-cost projects to come as close as possible to, but
not exceed, this established funding level. In recent years, Congress has
added various military construction projects during the annual
appropriations process to address what it has considered as inadequate
requests for military construction funding. Funding of these projects may
require adjustments in DOD's plans since they may not always align with
DOD's short-term priorities.

Increasing current funding thresholds for using construction funds and
operation and maintenance funds for unspecified minor military
construction projects would give DOD more funding flexibility at the
installation level but might need to be balanced against reducing
congressional oversight of funding for the projects affected by these
thresholds. Construction costs have increased 41 percent since the
existing $1.5 million threshold for using unspecified minor construction
funds and 7 percent since the existing $750,000 threshold for using
operation and maintenance funds were last adjusted respectively upward in
1991 and 2001. As a result, fewer projects that are smaller in scope can
now be completed using unspecified minor military construction funds or
operation and maintenance funds. Additionally, some installation officials

13 Annual unspecified costs are not justified on the basis of specific
projects.

often scale back the scope of a project in order to meet the current
thresholds. In doing so, however, they can compromise design
characteristics with a facility that lacks capacity for future growth,
making it potentially inadequate in future years. When projects are funded
under the statutory thresholds, they can be completed during the same year
as identified without seeking approval through the traditional, multiyear
military construction prioritization and resourcing process. As a result,
service and installation officials stated that the thresholds limit their
ability to quickly respond to unanticipated, urgent construction
requirements. If the thresholds were increased, Congress could lose
oversight of the additional projects funded under these thresholds because
such construction projects are not specifically identified in the
President's budget submissions. Yet, there are alternatives to preserve
oversight, such as coupling the increased thresholds with periodic reports
on the usage of those funds.

We recognize that fully reversing DOD's deteriorating infrastructure may
take many years to be realized. A key step in the process is reducing
excess infrastructure-as expected in the upcoming base realignment and
closure round-which would permit a greater concentration of available
resources on enduring facilities. Beyond that, improvements can be made in
various management tools and processes for deciding military construction
priorities. Accordingly, we are making recommendations to (1) complete the
management tools, including the revision of the defense facilities
strategic plan, for standardizing military construction and costs and
improving facilities; (2) reevaluate the time frames for completing the
three key objectives to reflect that there are competing funding
priorities and that the process of realigning and closing domestic bases
to reduce DOD's excess infrastructure and realigning overseas facilities
will take several years to accomplish and could affect meeting facilities'
investment goals; and (3) develop a mechanism for periodically reassessing
military construction priorities for facility categories that fall outside
the department's specific areas of emphasis to ensure that the risk of
delaying proposed military construction projects with potential
operational and quality of life impacts is being given appropriate
consideration. We are also suggesting that Congress may wish to consider
the advantages and disadvantages of increasing the funding thresholds for
unspecified minor construction projects.

In comments on a draft of this report, DOD concurred or partly concurred
with our recommendations. The department also provided technical
clarifications, which we incorporated as appropriate.

Background

DOD manages the world's largest dedicated infrastructure, covering more
than 46,000 square miles of land and facilities worth more than $600
billion. To enhance and maintain this infrastructure, two separate defense
appropriations are written annually: (1) military construction
appropriations dedicated to military construction and (2) national defense
appropriations, including operation and maintenance funding for facility
sustainment and minor construction.14 There are also supplemental
appropriations. The military construction appropriations fund construction
projects and some of the facility sustainment, restoration, and
modernization of the active Army, Navy and Marine Corps, Air Force, and
their reserve components;15 additional defensewide construction; U.S.
contributions to the North Atlantic Treaty Organization security
investment program;16 and military family housing operation and
construction. These military construction appropriations also provide
funding for base realignment and closure activities, including the
construction of new facilities for transferred personnel and functions,
and environmental cleanup at closing sites. According to DOD, such costs
are still being incurred from prior base closure rounds and are likely to
be significant for the 2005 round if a large number of closures and
realignments are approved. However, such costs may be viewed as a
necessary upfront investment if significant reductions in excess
facilities are to be made. Over the long term, such reductions could be
key to rationalizing DOD's facilities infrastructure and permitting a
greater concentration of available facilities funding to enduring
facilities. In addition, construction and sustainment of morale, welfare,
and recreationrelated facilities are partially funded through proceeds of
commissaries, recreation user fees, and other nonappropriated income. At
installations located overseas, host-nation-funded construction programs
are often a

14 The subcommittees of the House and Senate Appropriations Committees are
Military Construction, which drafts legislation for the military
construction appropriation, and Defense, which drafts legislation for the
national defense appropriation. The Subcommittee on Readiness of the House
Armed Services Committee and the Subcommittee on Readiness and Management
Support of the Senate Armed Services Committee draft legislation to
authorize military construction appropriations.

15 The six military reserve components consist of the Army National Guard,
Army Reserve, Naval Reserve, Marine Corps Reserve, Air National Guard, and
Air Force Reserve.

16 The security investment program is the U.S. contribution to alliance
funds for the construction of facilities and the procurement of equipment
essential to the wartime support of operational forces in the common
defense of the North Atlantic Treaty Organization region. Facilities
funded by this program include airfields, naval bases, communication
facilities, pipelines, and radar and missile installations.

part of the burden-sharing arrangement between the United States and the
host country and represent a large source of major construction funds for
these U.S. installations.17

Sustainment, Restoration, and Modernization

Operation and maintenance funds are used mostly to support facility
sustainment, which covers the day-to-day expenditures associated with
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.
Both operation and maintenance funds and military construction funds can
be used to finance facility restoration and modernization activities.
Military construction and operation and maintenance funds designated for
facility restoration are used to repair and replace items damaged by
inadequate sustainment, excessive age, natural disaster, fire, accident,
or other nonroutine causes. Funds designated for modernization are used to
alter or modernize facilities to meet new or higher standards, accommodate
new functions, or replace structural components. In addition, the
construction of new facilities is mostly funded with the military
construction appropriations. Conference reports accompanying military
construction funding bills specify the amounts and the projects for which
military construction appropriations are to be used.

According to DOD, providing funds for full sustainment 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, 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

17 See U.S. General Accounting Office, Defense Infrastructure: Basing
Uncertainties Necessitate Reevaluation of U.S. Construction Plans in South
Korea, GAO-03-643 (Washington, D.C.: July 15, 2003).

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.

    Military Construction Prioritization and Resourcing Process

The process for identifying construction needs, obtaining military
construction funds, and completing a project typically lasts from 5 to 8
years. During this period, OSD and the services review each construction
project and request individual project funding approval from Congress.

The DOD prioritization and resourcing process for military construction
projects flows from OSD's and the services' guidance. This guidance
describes OSD's objectives for improving facilities, identifies the
services' categories of facilities that would receive priority in funding
military construction projects, and assigns organizational
responsibilities for the process. On the basis of this guidance, each
installation identifies needed construction projects and develops the
description and justification for each project. Installation officials are
supposed to prioritize their projects and submit their highest priorities
to their respective major commands. Major commands verify the various
installation submissions, review and validate the cost estimates, compile
the installations' lists into one command list, prioritize the command's
list, and submit that list to the service headquarters. In addition, a
major command may add its own military construction projects to its
list.18 Similarly, the service headquarters review and validate the cost
estimates and compile the major commands' lists into one service list. The
service identifies projects on the list that must be funded in the
immediate fiscal year and places those projects at the top of its priority
list. Next, the service assigns a numerical rating to the remaining
projects that reflects the projects' mission and impact. The projects with
the highest rating based on this scoring process are combined with the
"must-fund" projects to form the service's priority list of proposed
military construction projects. A similar process is used for military
construction projects planned for installations located overseas.

18 The guard and reserve commands, using a similar process, submit their
military construction requirements separately from the active components.
Nevertheless, the guard and reserve must compete with their active
counterparts for the available military construction dollars available
each year.

OSD reviews each of the services' submissions to ensure that the projects
comply with financial requirements and the department's objectives and
guidance, such as the 67-year average recapitalization rate and the
maximum, allowable military construction funding for the budget year. The
Office of the Under Secretary of Defense (Comptroller),19 in conjunction
with other OSD offices-such as the Office of the Under Secretary of
Defense for Acquisition, Technology and Logistics20-reviews proposed
construction projects to confirm and adjust requirements as necessary. The
Comptroller issues program budget decisions to the services, which
communicate his decision on projects. Once OSD has approved the projects,
it submits a listing of approved projects to the Office of Management and
Budget, which approves and submits the final construction project budgets
to Congress as part of DOD's overall annual budget submission. The budget
request for military construction funding each fiscal year includes major
construction, project planning and design, and unspecified minor
construction. Congress annually specifies the amounts and the projects for
which military construction appropriations are to be used. A more thorough
description of the department's prioritization and resourcing process for
military construction projects is presented in appendix III.

    Prior GAO Reports on DOD's Facilities Management Program

We have conducted a number of reviews that identified areas in which DOD
and the services could improve their facilities management program. Since
1997 we have identified DOD infrastructure management as a highrisk area.
In September 1999 we reported on the management of DOD's facility
maintenance and repair programs and recommended that the Secretary of
Defense (1) develop a way to link the department's needs assessment with
both resource allocations and tracking systems that show whether
high-priority needs are receiving funding, (2) establish standardized
condition assessment criteria, and (3) have the services adopt a valid
engineering-based assessment system for facilities

19 The Under Secretary of Defense (Comptroller) is the principal advisor
to the Secretary of Defense for budgetary and fiscal matters, DOD program
analysis and evaluation, and general management improvement programs.

20 The Under Secretary of Defense for Acquisition, Technology and
Logistics is the principal advisor to the Secretary of Defense for all
matters relating to the DOD acquisition system; research and development;
advanced technology; developmental test and evaluation; production;
logistics; installation management; military construction; procurement;
environment security; and nuclear, chemical, and biological matters.

maintenance.21 In 2001 we reported that DOD needed to develop a
comprehensive long-range plan for its facilities infrastructure that
addresses facility requirements, recapitalization, and maintenance and
repair needs.22 In a June 2002 report, we examined the condition of
barracks used to house military recruits in basic training and concluded
that, to varying degrees, most barracks were in significant need of
repair, although some were in better condition than others.23 In January
2003 we designated federal real property governmentwide as a new high-risk
area.24

In February 2003 we reported that DOD's three objectives for sustainment
and improvement of facility conditions may not be achievable because
services do not propose to fully fund them or have developed funding plans
that have unrealistically high rates of increase in the out-years when
compared with previous funding levels and against other defense
priorities.25 We found that while deteriorated facilities are common on
many installations, there is 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. In reviewing a draft of
this report, officials clarified that mission impact, and not facility
condition alone, drives the allocation of funds to where they are most
needed. We also found that while the services had originally planned to
fund sustainment at no less than 78 percent of requirements in fiscal year
2002, officials determined that these levels of funding could not be
achieved if needs such as civilian pay, emergency needs, and "must-pay"
bills were to be funded. In May 2003 we reported that the reserve
components are unlikely to meet DOD's three objectives as well.26 Some
officials acknowledged that even when their components have expressed
intent to

21 See U.S. General Accounting Office, Military Infrastructure: Real
Property Management Needs Improvement, GAO/NSIAD-99-100 (Washington, D.C.:
Sept. 7, 1999).

22 See U.S. General Accounting Office, High-Risk Series: An Update,
GAO-01-263 (Washington, D.C.: January 2001).

23 See U.S. General Accounting Office, Defense Infrastructure: Most
Recruit Training Barracks Have Significant Deficiencies, GAO-02-786
(Washington, D.C.: June 13, 2002).

24 See U.S. General Accounting Office, High-Risk Series: An Update,
GAO-03-119 (Washington, D.C.: January 2003), and High-Risk Series: Federal
Real Property, GAO-03-122 (Washington, D.C.: January 2003).

25 See GAO-03-274.

26 See GAO-03-516.

  Strategic Plan and Management Tools Weaknesses Limit Efforts to Improve
  Facilities

meet DOD's objectives, their funding plans included unrealistically high
rates of increase during the out-years when compared to previous funding
trends and against other defense priorities. We also concluded that the
reserve components face challenges in implementing two potential
cost-saving initiatives-joint construction projects and real property
exchanges-and that OSD has not provided overall direction for the program,
thus risking the exchange of property that may be needed by other DOD
components.

Recognizing the need to halt the degradation of defense facilities, OSD
has taken a number of steps to enhance the management of the military
construction program by providing guidance through a facilities strategic
plan and by standardizing practices via a number of selected management
tools. In the 1990s the services did not allocate full funding for their
facilities, resulting in too many deteriorated and obsolete facilities.
However, some of OSD's tools are not completed and others have weaknesses
that limit efforts to improve facilities. For example, the installation
readiness reporting system does not have consistent information on the
condition of facilities, the defense facilities strategic plan lacks
comprehensive information and is being revised, and the recapitalization
model to generate an annual recapitalization requirement is not yet
completed. Furthermore, the services do not plan to meet OSD's key
objectives for improving facilities in the near future because of
competing funding priorities and programs within the defense budget. In
those instances where service officials have indicated their intent to
meet the objectives in future years, their plans are based on future
funding that requires unrealistically high rates of increase in
appropriations when compared with previous funding trends and when
considered against other defense priorities.

    Underfunding of Sustainment and Recapitalization Led to Facility
    Deterioration and Obsolescence

DOD and service officials have said that past underfunding for sustainment
and recapitalization has led to the deterioration and obsolescence of
facilities used by the military services. In the 1990s the services did
not allocate full funding for their facilities-sustainment averaged about
75 percent, and facilities recapitalization averaged about 35 percent of
the services' requirements-resulting in too many deteriorated and obsolete
facilities. For example, Army officials have testified that available
sustainment funding since the early 1990s was approximately 60 percent of
what was needed. Air Force officials also testified that facility
sustainment funding shortfalls have hindered the service's efforts to
sustain and operate Air Force facilities and limited the

Air Force to providing day-to-day maintenance for facilities. Navy and
Marine Corps officials also testified that their services have
consistently underfunded facility sustainment. As a result of this
underfunding, the services' repair backlogs increased significantly, from
$8.9 billion to $14.6 billion during fiscal years 1992 through 1998. Also,
68 percent of DOD's facility classes-which are groupings of like
facilities, such as operations and training, mobility, and supply-were
rated C-3 (significant facility deficiencies that prevent it from
performing some missions) or C-4 (major facility deficiencies that
preclude satisfactory mission accomplishment) in fiscal year 2001-a slight
improvement from the 69 percent rate in 2000.

After these years of neglect, some important missions remain in pre-World
War II-era structures that were built for purposes other than their
current use and require more frequent restoration and sustainment. (See
fig. 1.) For example, the Army uses horse stables constructed in 1934 as a
vehicle maintenance shop at Fort Benning, Georgia, and the Marine Corps
uses deteriorated brick and steel hangars constructed in 1935 to house
helicopters at Marine Corps Air Station Quantico, Virginia.

Figure 1: Examples of Pre-World War II-Era Facilities

During our visits to installations, we found that the services also
sometimes work in maintenance facilities, training facilities, supply and
storage facilities, airfields, and deployment facilities that are
deteriorated and/or do not meet standards. Maintenance bays, runway
aprons, and other facilities are often undersized or inadequate for the
mission, as illustrated in figure 2.

Figure 2: Examples of Undersized or Inadequate Facilities

Military services officials attributed this consistent underfunding to
constrained defense budgets and competing priorities. They also reflect
insufficient efforts to reduce excess facilities and concentrate resources
on enduring facilities. The services have also routinely traded off
infrastructure and modernization funding to shore up other readiness
activities. Past sustainment and military construction funding levels
allowed the services to provide only minimal day-to-day critical
maintenance of their facilities and infrastructure. While installations
continue to operate, local personnel and service members are increasingly

required to develop workarounds-or adjustments to normal operating
procedures to compensate for deteriorated or inadequate facilities-which
affected their operational efficiency. This underfunding was recognized in
the 1997 Quadrennial Defense Review report,27 which noted that the
department should "program more accurately for the costs of operating the
defense establishment." However, as discussed below, this underfunding
continues today.

    OSD Took Steps to Provide a More Consistent Approach to Facilities, but Some
    Steps Remain Incomplete

Recognizing the need to halt the degradation of defense facilities, OSD
took a number of steps-such as developing an installation readiness
reporting system, a facilities strategic plan, and other management tools-
to help standardize the facility sustainment and recapitalization process
and to plan military construction projects; however, some of these
management tools are incomplete. Historically, each service had
established its own criteria for assessing the condition of its properties
and the urgency for repairs, prioritizing maintenance needs, and deciding
how much to allocate for maintenance and military construction funding. At
the same time, each service had different standards for sustaining and
recapitalizing facilities. As a result, the services had created widely
varying living and working conditions.

In an attempt to provide Congress with a measure of facilities' conditions
and their ability to support military missions, DOD issued its first
installations' readiness report in 1999.28 DOD developed the report to
fulfill its reporting requirement to Congress under section 117 of title
10 of the United States Code, which specifies that DOD measure the
capability of defense installations and facilities to provide appropriate
support to forces in the conduct of their wartime missions. Within the
report, each military facility falls under one of nine facility classes,
which are groupings of like facilities, such as operations and training,
mobility, and supply. The services' major commands assign condition
ratings to each facility class 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

27 See Department of Defense, Report of the Quadrennial Defense Review
(Washington, D.C.: May 1997).

28 See Department of Defense, Installations' Readiness Report (Washington,
D.C.: 1999).

preclude satisfactory mission accomplishment. According to DOD's guidance,
the services were permitted to report readiness without modifying their
existing assessment processes. As a result, all four services are using
different systems and criteria to assess facility conditions and develop
condition ratings. Consequently, in February 2003 we reported that the
services used different kinds of facility raters and procedures,
assessment scopes and frequencies, appraisal scales, and validation
procedures, all of which resulted in inconsistencies and a lack of
comparability in their ratings.29 Without a consistent cross-service
system for assessing facility conditions and developing ratings, DOD and
the services cannot be assured that their funding decisions effectively
target facilities in the greatest need and that the reported ratings
accurately measured progress in facility condition improvements. This
system is currently under review by the department.

OSD's first defense facilities strategic plan, published in August 2001,
30 was the result of years of work with the services and defense agencies
to standardize and develop terminology, concepts, and models, and to shape
the information into an achievable long-range plan. The vision set forth
in the plan is to have installations and facilities available when and
where needed to effectively and efficiently support missions. To achieve
this vision, the strategic plan outlines four long-term strategic goals.
These 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. The plan is intended to
provide a unifying framework for the department in achieving these
strategic goals and identifies several key initiatives to achieve OSD's
vision of modern, cost-efficient installations and facilities supporting
operational readiness. However, in February 2003 we reported that the plan
lacked the comprehensive information that makes a strategic plan useful
and that most strategic plans encompass.31 For example, it did not contain
detailed

29 See GAO-03-274.
30 See Defense Installations 2001: The Framework for Readiness in the 21st
Century.
31 See GAO-03-274.

information on (1) the specific actions that are needed to achieve each of
the four goals; (2) the methods or processes that would be used to achieve
each goal; (3) the amount of funding or other resources needed to reach
the goals; (4) the time frames and milestones; (5) the assignment of
responsibilities (in other words, the entity accountable for completing
each goal); and (6) the performance measurement tools to use to determine
the progress being made toward each goal. At that time, we recommended
that OSD revise its defense facilities strategic plan to include detailed
information on specific actions, time frames, responsibilities, and
funding levels. OSD officials said the plan is being revised and is
expected to be completed in early 2004.

In 2001 OSD began using its initial facilities recapitalization metric,
which provides a uniform mechanism for tracking recapitalization
investments through the military construction accounts, augmented in some
cases with operation and maintenance funds or working capital funds.
Before that time, no single tool was employed DOD-wide to calculate the
recapitalization rate associated with programmed funding levels. Each
military service used its own metrics and accounting constructs to perform
these computations. Implementing the Secretary's guidance required the
development of a standard metric that would be relatively transparent
within the programming and budgeting process. The metric considers the
combined effect of construction and other investments on the physical
plant. The metric is computed by dividing the recapitalizable plant
replacement value by the total annual restoration and modernization
investment.32 However, OSD officials plan to upgrade and recalibrate this
metric and expect the upgrade to be completed in late 2004. Once
completed, effective use of the tool will require a consistent level of
funding each year to ensure that the projected recapitalization rate is
realized.

In addition to its strategic plan and newly developed management tools,
OSD has taken other steps to improve the management of its facilities,

32 DOD defines "recapitalizable plant replacement value" as the cost of
replacing an existing facility with a facility of the same size at the
same location using today's building standards, but it does not include
facilities planned for demolition, disposal by transfer to other entities,
and one-time use, as well as facilities recapitalized by appropriations
other than regular military construction or operation and maintenance
funds (such as military family housing), and facilities recapitalized by
sources outside DOD (such as facilities in Japan).

enhance accountability, and better measure and track performances,
including the following:

o  	Facilities assessment database. In 1997 OSD created an integrated
facilities assessment database from the services' real property database
inventories. This database has transitioned into the source database for
other DOD-wide databases and management tools, including the facilities
sustainment model discussed below. It tracks key facility inventory and
cost data, including the quantity, type, location, and status of
buildings, structures, and all other military facility assets. Although
the database provides an informative picture of the overall installation
readiness levels organized by facility categories within the major
commands and individual installations, it does not provide enough detail
to determine the individual facility deficiencies that generate the
readiness ratings.

o  	Facilities pricing guide. In 1999 OSD issued its first defense
facilities cost factors handbook, now combined with the DOD Facilities
Pricing Guide.33 The purpose of the pricing guide is to standardize the
method by which the services determine the sustainment and military
construction costs of their facilities. The cost factors are intended for
macro-level analysis and planning, not for individual projects. Where
possible, the pricing guide uses commercial benchmark costs to determine
the annual cost per square foot (or similar unit of measure) to sustain
and construct each facility type. However, the pricing guide does not take
into account other factors affecting the cost of military construction,
such as regional economic conditions that can affect construction cost
significantly.

o  	Facilities sustainment model. In 1999 OSD developed the facilities
sustainment model, which estimates the annual sustainment cost
requirement, adjusted for area costs, for each service and defense agency,
on the basis of the number, type, location, and size of its total
inventory of facilities. The model generates an annual funding requirement
that would sustain DOD's facilities throughout the budget year. As shown
in appendix IV, however, the military services do not plan to fully fund
their sustainment requirements before fiscal year 2008. In addition,
service officials expressed concern that the model does not provide
accurate sustainment funding at the installation

33 See U.S. Department of Defense, DOD Facilities Pricing Guide, Version
5, March 2003.

level-especially at installations with aging infrastructure that require a
large amount of sustainment funds to maintain.

o  	Unified facilities criteria. In 2001 OSD created a series of
documents, referred to as the "unified facilities criteria," to provide
facility planning, design, construction, sustainment, restoration, and
modernization criteria for DOD components. As of December 2003, only 71 of
the required 161 documents had been issued on various construction
standards, such as energy conservation, structural design, fire
protection, and seismic design. The building and construction codes and
guidance established in these documents are designed to standardize and
streamline the process for developing, maintaining, and disseminating
criteria in support of the military construction program. For example, as
part of the unified facilities criteria, DOD Antiterrorism Standards, DOD
Instruction Number 2000.16, requires DOD components to adopt and adhere to
common criteria and minimum construction standards to mitigate
antiterrorism vulnerabilities and terrorist threats. OSD plans to complete
the unified facilities criteria in fiscal year 2009.

o  	Improved budgeting methods. In 2002 OSD replaced the operation and
maintenance-funded real property maintenance program with two distinct
activities and accounting structures for (1) sustainment and (2)
restoration and modernization, having already created a separate structure
for demolition and disposal in fiscal year 1999. By tracking each element
separately, it is now possible to link programs and budgets directly to
program objectives and to better track performance relative to the
objectives.

OSD also developed and implemented the facilities demolition and disposal
program, by which the military services and defense agencies have
demolished more than 80 million square feet of excess and obsolete
facilities during fiscal years 1998 through 2003. The defense drawdown had
left many military bases with structures that the services no longer need,
are in poor condition, or have no remaining value. While demolishing these
structures entails up-front spending, it allows the services to avoid
sustainment, restoration, and modernization costs for these facilities.
Estimates by OSD suggest that demolition projects pay for themselves in as
little as 5 years. Notwithstanding these efforts, OSD and service
officials maintain that the department's inventory of real property will
still contain excess structures after the demolition program is completed.
One previous estimate by the department in 1998 indicated that it might
have 20 to 25 percent excess capacity in facilities. By closing some
domestic installations and consolidating overlapping activities

within and across the services, OSD also intends to gain efficiencies and
further reduce its inventory of facilities through the upcoming round of
base realignments and closures authorized to start in 2005 by Congress.34
The process of realigning and closing bases, however, will take some years
to accomplish and, while it is expected to produce significant long-term
savings, it has typically required considerable up-front expenses. In
addition, OSD and the services are reexamining worldwide basing
requirements, which could potentially lead to significant changes in
facility requirements over the next several years. Over the long-term, the
elimination of excess facilities should permit a greater concentration of
resources on enduring facilities.

Finally, OSD established three key objectives for the services to sustain
and improve the conditions of their facilities in its Defense Planning
Guidance for fiscal year 2004. Currently, these objectives are to fully
fund sustainment starting in 2004, reach a 67-year average
recapitalization rate by fiscal year 2008, and improve the condition of
facilities so that deficiencies have only a limited effect on mission
performance by fiscal year 2010. While OSD has periodically revised these
investment objectives on the basis of the services' ability to meet them,
the military services do not plan to fund most objectives in the near
future because of competition for funds from other defense programs and
priorities. Also, even when service officials indicate an intent to meet
the objectives in future years, their funding plans suggest that they are
unlikely to do so, given their unrealistically high rates of increase in
the future when compared with previous funding trends and when considered
against other defense priorities and programs, including the Global War on
Terrorism, Operation Enduring Freedom, and other ongoing efforts such as
the Balkans, military readiness, weapons procurement, and research and
development. In addition, earlier this year we reported that the reserve
components were unlikely to achieve OSD's investment objectives for
improving facilities.35 At that time, reserve component officials were
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, from past
experience. They also said that 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. Given
DOD's competing funding

34 Pub. L. No. 107-107, Sec. 3001, (Dec. 28, 2001). 35 See GAO-03-516.

  Prioritizing and Resourcing Process Serves an Important Function but Has
  Limitations

pressures and given that the process of realigning and closing bases to
reduce DOD's infrastructure will take several years to accomplish,
improvements in meeting facility investment goals will likely require much
longer than suggested by OSD's three key objectives. A more thorough
description of the services' plans relative to OSD's three key investment
objectives is presented in appendix IV.

DOD's process of prioritizing and resourcing military construction
projects provides an important means of improving whole categories of
facilities but can repeatedly postpone addressing important projects
outside of those categories. If left unchecked without periodic
reassessments, the process can continually defer projects important to
installations' ability to accomplish their mission and improve
servicemembers' quality of life. As much as 77 percent of military
construction funds are distributed among specific areas of emphasis,
leaving a significantly small portion for individual installation
requirements that affect the services' ability to accomplish their mission
and improve servicemembers' quality of life. In addition, installations
and major commands do not submit many restoration and modernization
projects for funding consideration because the projects do not fall within
the specific areas of emphasis and thus are perceived as being highly
unlikely to receive funding. Also, some high-cost priority projects are
postponed for future years' funding because their addition would exceed
the services' military construction funding level established for that
budget year. Instead, they are replaced with multiple lower-cost projects
whose total costs better fit the established funding level. Although
Congress may add several projects during the appropriations process each
year, addressing what it has considered as inadequate requests for
military construction funding, the adds may not always reach the services'
and installations' highest priorities.

    Specific Areas of Emphasis Leave Little Funding for Other Facility Needs

Most of the military construction funds appropriated in any one year are
distributed among specific areas of emphasis, leaving a significantly
smaller portion for other facility categories-some that affect mission
operations and quality of life. OSD and the services have three specific
areas of emphasis: housing, other annual unspecified costs, and the
services' major priorities. About $2.2 billion (23 percent) of the $9.3
billion appropriated in fiscal year 2004 remains to fund installations'
other military construction needs-including some that affect the services'
ability to accomplish their mission and improve servicemembers' quality of
life-after the three areas of emphasis are addressed. (See fig. 3.)

Figure 3: Percent Distribution of Military Construction Funding by
Specific Area of Emphasis in the Military Construction Appropriation Act
for Fiscal Year 2004

Overall funding for housing and barracks in the Military Construction
Appropriations Act, 200436 was approximately $5 billion (54 percent of the

total amount appropriated). In its 2001 defense facilities strategic plan,
OSD made the quality of housing-military family housing and barracks- one
of the department's highest priorities. At that time, DOD estimated that
of the nearly 300,000 family housing units, two-thirds were in need of
significant restoration, modernization, or outright replacement. DOD
estimated that using traditional military construction to complete
renovations and replacements would cost $20 billion and take approximately
30 years. Funding for family housing is $3.9 billion in fiscal year
2004-$1.1 billion for family housing construction and privatization and
$2.8 billion for family housing operation and maintenance. Funding for
barracks is $1.2 billion in fiscal year 2004. Barracks are a high DOD
priority because the department plans to eliminate common bath and

36 Pub. L. No. 108-132 (Nov. 22, 2003).

shower facilities, or gang latrines, in barracks by 2008.37 In order to
accomplish this objective, the services are not only renovating existing
barracks but building new ones as well. These efforts are intended to
improve the quality of life for junior service members, which in turn may
improve morale, retention, and operational readiness.

Estimated funding for other annual unspecified costs-such as facility
planning and design, base realignment and closure activities, and the
North Atlantic Treaty Organization's security investment program-in the
Military Construction Appropriations Act, 2004,38 was approximately $833
million (9 percent of the total amount appropriated). These annual
unspecified costs are not justified on the basis of specific projects. For
example, planning and design funds can be used for future projects that
have not yet been appropriated or for completing the planning and design
phase of appropriated projects. Base realignment and closure funds in
fiscal year 2004 are mainly to finance environmental cleanup, caretaker,
and property disposal activity costs. Historically, these funds have
supported a wide range of requirements, ranging from a high of $3.9
billion in fiscal year 1996 to a low of $370 million in fiscal year 2004.
Minor military construction funds are used for projects that fall under
specific thresholds and are approved internally by OSD and the services.
Finally, funds for the North Atlantic Treaty Organization's security
investment program are for the collective defense of the North Atlantic
Treaty area.

Funding for the services' major priorities in the Military Construction
Appropriations Act, 2004,39 was approximately $1.3 billion (14 percent of
the total amount appropriated). Projects that fit within the services'
priorities are given a higher ranking and are more likely to receive
funding. The services' major priorities are unique to the objectives of
the services. Recently, the Army identified five categories of priorities,
which include training ranges, mobilization, transformation, antiterrorism
and force protection, and the Army's focus facility strategy to address
Army National

37 In November 1995 DOD adopted a new barracks construction standard,
referred to as the 1+1 design standard, for servicemembers permanently
assigned to an installation. The standard, which does not apply to
barracks for members in basic recruit or initial skill training, provides
each junior enlisted member with a private sleeping room and with a
kitchenette and bath shared by one other member. The Marine Corps has a
permanent waiver from the Secretary of the Navy to use a different
barracks design standard-one sleeping room and bath are shared by two
junior Marines.

38 Pub. L. No. 108-132 (Nov. 22, 2003).

39 Pub. L. No. 108-132 (Nov. 22, 2003).

Guard readiness centers, Army Reserve centers, physical fitness
facilities, trainee barracks or complexes, general instruction classrooms,
vehicle maintenance and hardstand facilities, and chapels. Funding for
these projects was $741 million of the military construction funding
appropriated for fiscal year 2004. Funding for the Navy's major
priorities, such as piers and hangars, was $266 million of the military
construction funding appropriated for fiscal year 2004. Funding for the
Air Force's priorities-consisting of new mission requirements,
environmental compliance, and fitness centers-was $304 million of the
military construction funding appropriated for fiscal year 2004. The
Marine Corps does not have stated priorities for facilities-it is small
enough to review and prioritize all proposed military construction
projects submitted by its installations and commands.

While DOD's process of prioritizing and resourcing military construction
projects provides an important means of improving whole categories of
facilities, it can repeatedly postpone addressing important projects
outside of those categories. If left unchecked periodically, the process
can continually defer projects important to installations' ability to
accomplish their mission and improve servicemembers' quality of life. The
following are examples:

o  	Army officials told us that nearly all garrison projects at Aberdeen
Proving Ground, Maryland, have not received funding because these projects
are not considered a high enough priority. As a result, the installation
rated three of its five facility categories as having significant
deficiencies that limit it from performing some missions. For example, a
centralized information science and supercomputing facility has been
placed in the future years' defense plan and has been delayed for 10
years. Currently, computers and personnel are dispersed in several
buildings, which significantly impairs operations and lengthens completion
timelines. Officials predict that with the growing need for classified
computer systems owing to such missions as transformation and future
combat system development, the current facilities will be inadequate.

o  	A runway at Offutt Air Force Base, Nebraska, originally constructed in
1944, has not received funding since fiscal year 2001, even with Air
Combat Command sponsorship, because it was not considered a high enough
priority to be included in the budget request. In 1999 a recommendation
was made to limit the runway to emergency use only. Annual maintenance
costs amount to over a reported $400,000, and are rising. In addition, the
Air Force's structural analysis indicates that the

Offut runway must be replaced in fiscal year 2005 or face a significant
chance of experiencing catastrophic failure resulting in significant
damage to aircraft and loss of personnel.

o  	A bridge on Cheatam Annex, Yorktown Naval Weapons Station, Virginia,
was found to be structurally unsound by the Navy and could not safely
support munitions vehicles. The installation has submitted bridge
replacement projects annually since 1996 but the project has not been
prioritized high enough to secure funding. In the meantime, munitions
trucks were required to detour 21 miles. By considering the bridge as part
of the entire road system, the station received approval to finance the
project with operation and maintenance funds in fiscal year 2003.

o  	Aircraft parking aprons at Langley Air Force Base, Virginia, failed
several inspections for safety in 1995, 1999, and 2002. Currently, its
poor condition requires constant foreign object damage inspections and
maintenance totaling 23,000 hours and at a reported $85,000 annually to
maintain its limited usability. While the installation has submitted
projects annually to repair the aprons, these projects have not been
funded because other projects were considered by the Air Force to be
higher in priority.

    Installations and Major Commands Submit a Small Percentage of the Identified
    Military Construction Projects Each Year

Every year, the number of military construction projects forwarded by
installations and major commands to the next higher level for funding
consideration is a small percentage of their identified requirements-
including those that affect the services' ability to accomplish their
mission and improve servicemembers' quality of life. Also, even though
installation officials have dozens of unfunded military construction
projects in backlog, one as many as 10 years old, they submit only a small
portion of these projects for funding consideration, knowing that only a
limited number would get funded. For example, Marine Corps Camp Pendleton,
California, submitted 5 projects for funding consideration in fiscal year
2004 even though it had identified 30 projects for the installation. In
some instances, the major commands directed installations to limit the
number of projects submitted for funding consideration. For example, Army
instructions for submitting unspecified minor military construction
projects dictate that the installation management agency can submit only
up to 14 projects. It also notes that because of limited funding, only the
top-priority projects are likely to receive funding. Other requests to
limit the number of projects submitted for funding consideration appear to
be based on unwritten guidance, which assumes that there would be only a

very limited amount of military construction funding available to fulfill
requirements.

Furthermore, after compiling and prioritizing the installations' lists of
projects, major commands submit a small percentage of the installations'
projects to the services. For example, the Air Force's Air Combat Command
submitted 10 projects for funding consideration in fiscal year 2004 even
though its subordinate installations had submitted 100 projects for
funding consideration. Often, it uses a rule-of-thumb that about half of
its submissions to the Air Force would be forwarded to OSD. In practice,
DOD and the active services have come to rely on additional funding
provided by Congress beyond the department's budget request to meet
reserve component requirements while requesting funding for other
priorities within DOD's budgetary constraints. Reserve component officials
said they submit fewer military construction projects than their
requirements, choosing to depend on the congressional adds. However,
reserve component officials said many of their identified construction
projects still go unfunded.

    High Cost Projects Are Postponed to Future Years

Some high-cost, high-priority military construction projects are postponed
to future years' funding plans because the projects' cost would push the
cumulative amount of funding over the services' military construction
funding level established for that budget year. Often, officials would
replace these high-cost projects with several lower-priority, lower-cost
projects to come as close as possible to, but not exceed, the established
funding level. For example, at Fort Leavenworth, Kansas, a high-priority
project to renovate an instruction facility was delayed twice in the 2002
and 2003 fiscal year budgets and moved to fiscal year 2005 because its
estimated cost exceeded the Army's military construction funding level
established for the earlier fiscal years. By delaying the project, the
estimated cost for the project increased from $75 million to $79 million
during this period. At the Naval Submarine Base New London, Connecticut,
the Navy delayed replacing a pier from fiscal year 2004 to fiscal year
2005 because of the project's high cost.

Congressional Adds Congress may add various projects during the
appropriations process, Address Long-term Service addressing what it has
considered as inadequate requests for military Needs but May Require
construction funding. Funding of these projects generally address long

term service and installation needs but may require adjustments in
DOD'sAdjustments in DOD plans since they may not always align with DOD's
short-term priorities.Planning

For example, Congress added 123 and 120 projects in fiscal years 2003 and
2004, respectively, that were in addition to the 366 and 280 projects that
DOD requested during the same periods. According to DOD officials, while
projects that are added by Congress during the appropriation process may
match long-term military construction requirements they may not always
address the services' highest priorities for the affected appropriation
year and require adjustments. The following examples illustrate this
point:

o  	In fiscal year 2003, Congress moved up and appropriated military
construction funds for an Army National Guard readiness center originally
programmed for fiscal year 2007.

o  	In fiscal year 2003, Congress moved up and appropriated military
construction funds for a Navy fire station originally planned for fiscal
year 2007.

o  	In fiscal year 2004, Congress moved up and appropriated military
construction funds for a Marine Corps ground combat training range that
was originally programmed for fiscal year 2009. This project was added
ahead of some other Marine Corps projects already programmed for
construction in earlier fiscal years.

o  	In fiscal year 2002, Congress moved up and appropriated military
construction funds for an Army maneuver area training equipment site that
was not in the Army's future years defense plan.

o  	In fiscal year 2002, Congress added 21 Air Force projects that were
not in the Air Force's near-term integrated priority list. In addition,
during fiscal year 2003, Congress added 25 projects that did not appear in
the Air Force integrated priority list. However, Air Force officials
indicated that many of the projects were in the Air Force's long-term
plan.

  Increasing the Current Funding Thresholds Gives DOD Additional Flexibility but
  Could Lessen Congressional Oversight

Increasing current funding thresholds for using construction funds and
operation and maintenance funds for unspecified minor military
construction projects would give DOD installation officials more funding
flexibility but might need to be balanced against reducing congressional
oversight of projects affected by these thresholds. Construction costs
have increased 41 percent since the $1.5 million threshold for using
unspecified minor construction funds was last adjusted upward in 1991 and
7 percent since the $750,000 threshold for using operation and maintenance
funds was last adjusted upward in 2001. As a result, fewer projects that
are smaller in scope can now be completed using these funds. Additionally,
installation officials sometimes scale back the scope of a project in
order to meet the current thresholds. In doing so, however, they can
compromise the design characteristics of a facility that lacks capacity
for future growth, making the facility potentially inadequate in future
years. When projects are funded under the statutory thresholds, they can
be completed during the same year as identified without seeking approval
through the traditional, multiyear military construction prioritization
and resourcing process. As a result, service and installation officials
stated that the thresholds limit their ability to quickly respond to
unanticipated, urgent requirements. However, increasing these thresholds
could reduce congressional oversight of the projects affected by these
thresholds, unless offset by other means, such as coupling the increased
thresholds with periodic reports on the usage of those funds.

Congress established maximum amounts of funds applicable to unspecified
minor military construction projects in 1982 and upwardly adjusted these
amounts, or thresholds, through 2001. Currently, an unspecified minor
military construction project is a military construction project that has
an approved cost equal to or less than $1.5 million. Such a project can
have an approved cost equal to or less than $3 million if the project is
intended solely to correct a deficiency that threatens life, health, or
safety. Generally, as long as the minor construction project's cost
estimates are below $750,000, no advance service Secretary's approval and
congressional notification are required. Otherwise, the project may then
be carried out only after the end of a 21-day period after notification is
received by Congress. In addition to the authorized use of military
construction appropriations for unspecified minor projects, service
Secretaries may use appropriated operation and maintenance funds for such
projects estimated to cost not more than $1.5 million to correct
deficiencies threatening life, health, or safety and $750,000 for any
other unspecified minor military construction project.

    Existing $1.5 Million Unspecified Minor Construction Fund Threshold Limits
    the Size and Scope of Projects

The existing $1.5 million and $3 million cost estimate thresholds for
using unspecified minor construction funds limit the size and scope of
facilities to be constructed. (See appendix II for section 2805(a)(1) of
Title 10, United States Code.) When projects are funded with unspecified
minor military construction funds under these thresholds, they can be
completed during the same year as identified without seeking approval
through the traditional, multiyear military construction prioritization
and resourcing process. However, because of the 41 percent increase in
construction costs since 1991, when the threshold was last changed, fewer
projects can now use minor military construction funds. Moreover, the
scope of the projects that can be funded in this way is smaller than in
1991. Increasing the thresholds for minor construction projects would
allow DOD components to respond more quickly to urgent, unanticipated
requirements without seeking approval through the traditional, multiyear
military construction prioritization and resourcing process. Depending on
the size of an increase in the thresholds, OSD officials state that about
20 to 30 projects could be affected annually and would reduce the number
of projects requiring approval through the traditional, multiyear military
process. The number of projects eligible for funding would still be
contingent upon the total amount of military construction funds
appropriated by Congress for unspecified minor military construction,
regardless of the threshold being increased.

Increasing the funding thresholds for using unspecified minor military
construction funds would help installations quickly respond to a greater
number of smaller military construction projects that could also address
priority needs. For example, officials at Fort McPherson, Georgia-
intending to stay below the $3 million threshold for using unspecified
minor military construction funds for projects involving life-, health-,
or safety-threatening deficiencies-estimated the cost to construct an
installation gate entrance at $2.85 million in fiscal year 2003. This
project was identified as urgent because of force protection reasons,
making the higher funding threshold of $3 million for unspecified minor
military construction funds applicable. However, because contractor bids
for constructing the project were in excess of $3 million, officials could
not use unspecified minor construction funds. Instead, officials used
emergency supplemental funds already allocated for another installation
gate project. This resulted in deferring the other gate project to fiscal
year 2004. In another example, Naval Station Bremerton, Washington,
officials modified part of a former coal storage facility to accommodate
space suitable for housing computer equipment to respond quickly to
unanticipated and urgent requirements. In an effort to remain under the
$1.5 million threshold, they incorporated the minimum requirements for

the building-such as replacing flooring, securing unneeded exterior
access, and including mechanical and electrical utility service-at a cost
of $1.49 million. While officials told us the facility meets the bare
minimum requirements, they stated that had the threshold been higher or
the budget process faster, the project would have included better
flooring, better climate control, and better ventilation. As a result, the
existing facility lacks capacity for future growth, making it potentially
inadequate in future years. Similarly, at Scott Air Force Base, Illinois,
officials reduced the scope for a medical supply warehouse project from $2
million to $1.5 million by reducing the overall facility's square footage
from 10,000 to 8,600 feet to meet the current $1.5 million threshold for
unspecified minor military construction.

Unspecified minor military construction projects funded with military
construction funds are included only in the department's annual review
process and are not individually submitted to Congress for review and
funding. Congress provides a lump sum amount for each of the services to
execute such unspecified minor military construction projects. If the
thresholds were increased, Congress could lose some oversight of those
additional projects funded with unspecified minor military construction
funds. Nevertheless, there are alternative oversight measures in addition
to the 21-day notification and waiting period that could be employed to
minimize the loss of oversight, such as a requirement for DOD to
periodically report on the status of such projects.

    Existing $750,000 Operation and Maintenance Fund Threshold Also Limits
    Project Size and Scope

The existing $750,000 and $1.5 million thresholds for using operation and
maintenance funds limit the size and scope of facilities to be constructed
with this type of fund. (See appendix II for section 2805(a)(1) of Title
10, United States Code.) When projects are funded with operation and
maintenance funds under these thresholds, they can be completed during the
same year as identified without seeking approval through the traditional,
multiyear military construction prioritization and resourcing process.
Military construction costs have increased 7 percent since these
thresholds were last changed in 2001. According to installation officials,
very few restoration and modernization projects can be completed for less
than $750,000. Also, OSD reported that an increase in the existing
thresholds would allow DOD components to respond to unforeseen
requirements with more properly sized and scoped facilities, reducing the
recapitalization rate faster by allowing more projects to be funded with
operation and maintenance funds instead of using the traditional,
multiyear military construction process. Still, since operation and
maintenance funds are limited in terms of the amount allocated to each

installation, service officials would have to weigh the alternatives of
using the funds-either for minor construction projects, sustainment, or
base operations support.

Increasing the funding thresholds for using operation and maintenance
funds for unspecified minor military construction projects would allow
installations to respond more effectively to urgent and unforeseen minor
projects. For example, at Fort Rucker, Alabama, operation and maintenance
funds were used to build a storage facility to support the aviation museum
in fiscal year 2002 because the project could not compete well with
higher-priority operational projects during the annual budget process. To
accommodate the $750,000 operation and maintenance fund threshold,
officials downsized the facility from a 20,000-square-foot requirement to
an 8,000-square-foot, bare-minimum storage facility with no heating or air
conditioning, no finished space for offices or storage, no brick exterior,
and limited phone service. Installation officials stated that the
reduction in space requirements limits future storage needs but
accommodates immediate requirements. In another example, Scott Air Force
Base, Illinois, officials reduced the scope of a communications equipment
warehouse project from a cost estimate of $1.1 million to $750,000 in
order to use operation and maintenance funding in fiscal year 2004. To
achieve this reduction, officials eliminated a paved road to the facility,
reduced the warehouse space by 12 percent from the initial 5,350 square
feet, and reduced office space by half. Also at Scott Air Force Base,
officials reduced the estimated cost for an addition to the Airman
Leadership School from $1.0 million to $750,000 in order to use operation
and maintenance funds in fiscal year 2003. To achieve this reduction,
officials reduced the finished area of the facility and eliminated showers
in two bathrooms and landscaping. At Langley Air Force Base, Virginia,
officials decided to reduce facility design requirements for an avionics
building to stay below the $750,000 threshold for using operation and
maintenance funds for minor construction. In doing so, according to one
installation official, interior features were eliminated to the point that
the structure will be little more than "a climate-controlled shell."

Unspecified minor military construction projects funded with operation and
maintenance funds can be executed within the year that the project is
identified without congressional notice or review. Congress established a
$200,000 threshold for using operation and maintenance funding for
unspecified minor military construction projects in 1986. It increased
this threshold to $300,000 in 1991, to $500,000 in 1996, and to $750,000
in 2001-the last time the thresholds were changed. If the thresholds were
increased, Congress might lose some oversight of those projects funded

Conclusions

with operation and maintenance funds falling under the increased
thresholds because they are not specifically identified in the President's
budget submissions. Usually, major command and installation officials
determine how to use operation and maintenance funds for unspecified minor
military construction projects, which are not individually presented in
the President's budget submission. Again, however, Congress could restore
some oversight by using other means of monitoring, such as annual
reporting.

While OSD has sought to adopt various management tools and objectives for
standardizing military construction and costs and improving facilities,
some are not completed and others have weaknesses, which if improved upon
over time could help strengthen the management of DOD facilities. However,
because of competing priorities, DOD is not likely to realize its
investment objectives for facilities in the near term. More specifically,
the services do not propose to fully fund all of OSD's objectives for
improving facilities or, in some instances, the services have developed
funding plans that have unrealistically high rates of increase in the
out-years compared with previous funding trends and other defense
priorities. The base realignment and closure round authorized for fiscal
year 2005, while it carries with it a significant up-front investment cost
to implement realignment and closure decisions, offers an important
opportunity to reduce excess facilities and achieve greater efficiencies
in sustaining and recapitalizing the remaining facilities if sufficient
funding levels are maintained into the future. Additionally, DOD is
reexamining its worldwide basing requirements, which could potentially
lead to significant changes in facility requirements over the next several
years. As these decisions are implemented over the next several years,
this should permit DOD and the services to increasingly concentrate future
resources on enduring facilities. Because of DOD's approach to assigning
priority to proposed projects in special areas of emphasis and since
certain categories of facilities continue to receive little or no military
construction funding, it is not clear to what extent DOD has a mechanism
for periodically reassessing military construction priorities to ensure
that the risk of delaying proposed military construction projects that
fall outside the specific areas of emphasis are being given appropriate
consideration. Under the current process of prioritizing and resourcing
military construction projects, those facilities-including both mission
performance and quality of life facilities-not in the specific areas of
emphasis may not always receive military construction funding for long
periods of time even if their deterioration is significant. Unless DOD has
a mechanism for periodically reassessing military construction priorities
for

facility categories that fall outside the department's specific areas of
emphasis to ensure that the risk of delaying proposed military
construction projects is being given appropriate consideration, certain
categories of deteriorated and inadequate facilities will continue to
receive no military construction funding year after year. Consequently,
neglected facilities will continue to deteriorate over time, affecting the
services' ability to accomplish their mission and improve servicemembers'
quality of life.

While there are several advantages to increasing the funding thresholds
for selected minor construction projects, these actions would also have to
be balanced against the potential for reducing congressional oversight of
those projects affected by the thresholds. Yet, changing the thresholds
would increase installations' flexibility to address more of their
facility problems quicker. The existing thresholds may not provide the
funding levels needed on the basis of current construction costs. Lacking
higher thresholds, installations will continue to use the multiyear
prioritization and resourcing process for relatively inexpensive, minor
military construction projects. Alternatives, such as a reporting
requirement, could ensure some continued congressional oversight of those
projects affected by easing the funding thresholds for unspecified minor
construction projects.

To help strengthen OSD's management and improve the condition of DOD
facilities, we recommend that the Secretary of Defense direct the Under
Secretary of Defense for Acquisition, Technology, and Logistics to take
the following three actions:

o  	complete the department's management tools, including the revision of
defense facilities strategic plan, to provide a more consistent approach
to managing facilities and planning construction projects and costs;

o  	reevaluate the time frames for completing the three key objectives to
reflect that there are competing funding priorities and that the process
of realigning and closing domestic bases to reduce DOD's excess
infrastructure and realigning overseas facilities will take several years
to accomplish and could affect meeting facilities' investment goals; and

o  	develop a mechanism for periodically reassessing military construction
priorities for facility categories that fall outside the department's
specific areas of emphasis to ensure that the risk of delaying proposed

  Recommendations for Executive Action

Matters for Congressional Consideration

  Agency Comments and Our Evaluation

military construction projects with potential operational and quality of
life impacts are being given appropriate consideration.

Congress may wish to consider the advantages and disadvantages of
increasing the military construction funding thresholds and operation and
maintenance funding thresholds for unspecified minor military construction
projects.

In commenting on a draft of this report, the Principal Assistant Deputy
Under Secretary of Defense (Installations and Environment) concurred or
partially concurred with our recommendations and indicated some actions
that are being taken to address them. DOD's comments are included in this
report in appendix V. DOD also provided technical changes, which we
incorporated as appropriate, including adjustments in values associated
with selected areas of emphasis in military construction.

We are sending copies of this report to the appropriate congressional
committees, as well as 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 will be available at no
charge
on GAO's Web site at http://www.gao.gov.

Please contact me at (202) 512-8412, or my Assistant Director, Mark
Little,
at (202) 512-4673 if you or your staff have any questions regarding this
report. Robert B. Brown, Daniel Chen, J. Andrew Walker, R.K. Wild, and
Jay Willer were major contributors to this report.

Barry W. Holman, Director
Defense Capabilities and Management

                       Appendix I: Scope and Methodology

To assess the steps that the Office of the Secretary of Defense (OSD) has
taken to enhance the management of the military construction program, we
met with officials of OSD, military services, National Guard and Reserves,
the Defense Logistics Agency, Tricare Management Activity, Department of
Defense Education Activity, Central Command, Special Operations Command,
Naval Sea Systems Command, Naval Facilities Engineering Command, U.S. Army
Corps of Engineers, and the U.S. Army Installation Management Agency. At
each organization, we discussed OSD's role in managing elements of the
military construction program, OSD's management tools to standardize
military construction and costs, and OSD's objectives for improving
facilities. We also examined key documents related to OSD's efforts to
standardize military construction and costs: the defense facilities
strategic plan, installation readiness reporting system, facilities
assessment database, facilities pricing guide, facilities sustainment
model, recapitalization rate process, unified facilities criteria, and
improved budgeting methods. To view the condition of facilities and new
military construction projects first hand, we visited and met with
officials from 20 installations across the country: Aberdeen Proving
Ground, Maryland; Fort Belvoir, Virginia; Fort Benning, Georgia; Fort
Lewis, Washington; Fort Stewart, Georgia; Naval Air Station Whidbey
Island, Washington; Naval Shipyard Puget Sound, Washington; Naval Station
Coronado, California; Naval Station Everett, Washington; Naval Station
Bremerton, Washington; Naval Station San Diego, California; Naval Station
Norfolk, Virginia; Naval Submarine Base Bangor, Washington; Naval Weapons
Station Yorktown, Virginia; Marine Corps Base Quantico, Virginia; Marine
Corps Base Camp Pendleton, California; Andrews Air Force Base, Maryland;
MacDill Air Force Base, Florida; Langley Air Force Base, Virginia; and
McChord Air Force Base, Washington. We selected these installations
because they represent a range of facility conditions, missions, major
commands, and geographic locations. During our visits, we met with the
facilities' occupants and obtained pictures that document facility
conditions. To assess the likelihood that the military services will meet
OSD's three objectives for improving facilities, we examined the services'
current and projected funding plans for sustaining, restoring, and
modernizing facilities to determine whether these plans would allow them
to meet OSD's objectives by specified deadlines. We also compared the
services' prior obligations for sustainment, restoration, and
modernization with their future funding projections designed to reach
OSD's objectives to determine whether the services' plans to address these
issues are credible and realistic. We did not validate the services'
reported sustainment or recapitalization requirements.

Appendix I: Scope and Methodology

To determine whether the process by which military construction projects
are prioritized and resourced ensures that all categories of facilities
that affect the services' ability to accomplish their mission and improve
quality of life are reached, we spoke with officials of the military
services' headquarters, National Guard and Reserves headquarters, the
Defense Logistics Agency, Tricare Management Activity, Department of
Defense Education Activity, Central Command, Special Operations Command,
Naval Sea Systems Command, Naval Facilities Engineering Command, Army
Corps of Engineers, the U.S. Army Installation Management Agency, and Air
Mobility Command, and visited Aberdeen Proving Ground, Maryland; Fort
Belvoir, Virginia; Fort Benning, Georgia; Fort Lewis, Washington; Fort
Stewart, Georgia; Naval Air Station Whidbey Island, Washington; Naval
Shipyard Puget Sound, Washington; Naval Station Coronado, California;
Naval Station Everett, Washington; Naval Station Bremerton, Washington;
Naval Station San Diego, California; Naval Station Norfolk, Virginia;
Naval Submarine Base Bangor, Washington; Marine Corps Base Quantico,
Virginia; Marine Corps Base Camp Pendleton, California; Andrews Air Force
Base, Maryland; MacDill Air Force Base, Florida; Langley Air Force Base,
Virginia; and McChord Air Force Base, Washington. At each command or
installation, we discussed the process by which military construction
projects are prioritized and resourced and how significant facility needs
are addressed during the process. Using budget data for fiscal years 1995
through 2004, we determined the impact of funding military family housing
and barracks, annual unspecified cost estimates, and the services' major
priorities on the amount of military construction funds remaining for
individual installation needs. To determine whether the services' and
installations' priority projects receive funding, we compared
installations' and services' project priority lists for fiscal years 2002
and 2003 with the (1) list of projects approved by each service, (2) list
of projects that accompanied the President's budget submission, and (3)
list of projects that were approved and funded by Congress. During our
visits to installations, we identified unfunded critical military
construction projects, the reasons why they were not funded, and the
effects of not funding these projects. Finally, we identified the number
of military construction projects added during the annual appropriations
process and compared these adds with the installations' and services'
priorities for military construction.

To assess the advantages and disadvantages of changing existing funding
and approval thresholds for constructing and repairing facilities, we met
with officials of OSD and the military services. At each organization, we
discussed the appropriateness of existing funding thresholds for
unspecified minor construction projects, the effectiveness of the

Appendix I: Scope and Methodology

requirement for initiating congressional notification for reprogramming
military construction funds, and the department's legislative proposals to
increase the funding and approval thresholds and to change the
notification requirement. We also reviewed the proposed legislative
language and justification. To discuss the advantages and disadvantages of
changing current funding and approval thresholds for constructing and
repairing facilities at the installation level, we visited and met with
officials from Aberdeen Proving Ground, Maryland; Fort Belvoir, Virginia;
Fort Benning, Georgia; Fort Lewis, Washington; Fort Stewart, Georgia;
Naval Air Station Whidbey Island, Washington; Naval Shipyard Puget Sound,
Washington; Naval Station Coronado, California; Naval Station Everett,
Washington; Naval Station Bremerton, Washington; Naval Station San Diego,
California; Naval Station Norfolk, Virginia; Naval Submarine Base Bangor,
Washington; Marine Corps Base Quantico, Virginia; Marine Corps Base Camp
Pendleton, California; Andrews Air Force Base, Maryland; MacDill Air Force
Base, Florida; Langley Air Force Base, Virginia; and McChord Air Force
Base, Washington. In addition, we documented the increase in construction
costs since fiscal year 1982 according to the national income and product
account tables for military structures, Bureau of Economic Analysis,
Department of Commerce, and through discussions with OSD, service
headquarters, and installation officials, and determined the effect of
this increase on the ability of local and regional facility managers to
execute unspecified minor construction projects under existing thresholds.
We also interviewed officials at OSD, the services' headquarters, and
installations to identify the impact of the waiting period and
notification requirement for reprogramming military construction funds
while facility managers wait for congressional approval.

In addition, our review focused on nonhousing issues concerning military
construction inside the United States and generally did not address issues
associated with military family housing and overseas construction
programs. These facilities ranged from administrative offices, airfields
and terminals, and piers to classrooms and other training buildings, water
treatment plants, warehouses, barracks, and child development centers. 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 the defense health program (hospitals and medical
clinics).

In performing this review, we used the same accounting records and
financial reports that the Department of Defense (DOD) and reserve

Appendix I: Scope and Methodology

components use to manage and justify budgets for their facilities. We did
not independently determine the reliability of the reported financial
information. We conducted our work from February through November 2003 in
accordance with generally accepted government auditing standards.

Appendix II: Section 2805 of Title 10, United States Code (2003)

Section 2805 of Title 10, United States Code (unspecified minor
construction), states:

"(a)(1) Except as provided in paragraph (2), within an amount equal to 125
percent of the amount authorized by law for such purpose, the Secretary
concerned may carry out unspecified minor military construction projects
not otherwise authorized by law. An unspecified minor military
construction project is a military construction project that has an
approved cost equal to or less than $1,500,000. However, if the military
construction project is intended solely to correct a deficiency that is
life-threatening, health-threatening, or safety-threatening, an
unspecified minor military construction project may have an approved cost
equal to or less than $3,000,000.

(2) A Secretary may not use more than $5,000,000 for exercise-related
unspecified minor military construction projects coordinated or directed
by the Joint Chiefs of Staff outside the United States during any fiscal
year.

(b)(1) An unspecified minor military construction project costing more
than $750,000 may not be carried out under this section unless approved in
advance by the Secretary concerned. This paragraph shall apply even though
the project is to be carried out using funds made available to enhance the
deployment and mobility of military forces and supplies.

(2) When a decision is made to carry out an unspecified minor military
construction project to which paragraph (1) is applicable, the Secretary
concerned shall notify in writing the appropriate committees of Congress
of that decision, of the justification for the project, and of the
estimated cost of the project. The project may then be carried out only
after the end of the 21-day period beginning on the date the notification
is received by the committees.

(c)(1) Except as provided in paragraphs (2) and (3), the Secretary
concerned may spend from appropriations available for operation and
maintenance amounts necessary to carry out an unspecified minor military
construction project costing not more than-

(A) $1,500,000, in the case of an unspecified minor military construction
project intended solely to correct a deficiency that is life-threatening,
health-threatening, or safety-threatening; or

(B) $750,000, in the case of any other unspecified minor military
construction project.

Appendix II: Section 2805 of Title 10, United States Code (2003)

(2) The authority provided in paragraph (1) may not be used with respect
to any exercise-related unspecified minor military construction project
coordinated or directed by the Joint Chiefs of Staff outside the United
States.

(3) The limitations specified in paragraph (1) shall not apply to an
unspecified minor military construction project if the project is to be
carried out using funds made available to enhance the deployment and
mobility of military forces and supplies.

(d) Military family housing projects for construction of new housing units
may not be carried out under the authority of this section."

Appendix III: DOD's Prioritization and Resourcing Process for Military
Construction Projects

Military construction appropriations are one of several annual pieces of
legislation that provide DOD with funding for national defense. Other
major appropriations legislation includes the defense appropriations bill,
which provides funds for all nonconstruction military activities of DOD
and constitutes more than 90 percent of national-security-related
spending, and the energy and water development appropriations bill, which
provides funding for atomic energy defense activities of the Department of
Energy and for civil projects carried out by the U.S. Army Corps of
Engineers. Another source of military construction funding is supplemental
appropriations. Military construction appropriations are the major, but
not the sole, source of funds for facility investments by the military
services and defense agencies. Defense appropriations provide some funds
for facility sustainment in operation and maintenance and minor
construction accounts. In addition, funds for construction and maintenance
of morale, welfare, and recreation-related facilities are partially
provided through proceeds of commissaries, recreation user fees, and other
nonappropriated income. Because of the long-term nature of construction
projects, military construction funds can generally be obligated for up to
5 fiscal years, reflecting the long-term nature of capital building
programs.

The DOD prioritization and resourcing process for military construction
projects flows from OSD and service guidance. This guidance describes
OSD's objectives for improving facilities, identifies the services'
categories of facilities that will receive priority in funding military
construction projects, and assigns organizational responsibilities for the
process. The program also involves a sequence of reviews by installations,
major commands, the office of the Secretary of the military services, OSD,
the Office of Management and Budget, and Congress. (See fig. 4.) During
even years, the services, DOD, and the President submit a 2-year military
construction budget to Congress. Typically, Congress will authorize and
appropriate funds for only the first year of that budget. To update and
adjust the second year's budget, as necessary, an amended budget review is
conducted in the odd year. It is important to note that project
identification, master planning, and programming activities are not to be
paid for with military construction funds-these costs are normally met
with operation and maintenance funds.

Appendix III: DOD's Prioritization and Resourcing Process for Military
Construction Projects

Figure 4: Summary of the Military Construction Process, Fiscal Year 2005

Note: While the figure indicates that the process takes 5 years, in
practice it can typically last up to 8 years or more.

Appendix III: DOD's Prioritization and Resourcing Process for Military
Construction Projects

Per the military service and major command instructions, an installation
will first identify and document its construction needs. It will also
develop the DD Form 1391 in support of all its projects, including
tenant-sponsored and centrally managed program projects. DD Form 1391
contains four primary categories of information: (1) description of the
project, (2) construction cost, (3) justification, and (4) back-up data.
The document must be clear, concise, logical, and complete, and must
effectively describe, justify, and price the project. This responsibility
also includes those projects that may be developed through support from
the U.S. Army Corps of Engineers, Naval Facilities Engineering Command, or
architect-engineers. The installation will then prioritize its projects,
and prepare and submit completed project documentation on designated
projects forward through its major command.

The major command (to include the Army's Installation Management Agency
and the Navy's Commander Navy Installations) will ensure that all project
documentation, including the DD Forms 1391, is complete and properly
addresses the requirement. Complete documentation is usually a criterion
for prioritizing at the service level, and incomplete documentation could
result in a lower ranking of the project. The command will review the
documentation of each project to ensure that the requirement is valid and
conforms to current service objectives, policies, and procedures. It will
also determine whether a survey of the site has been conducted, available
records reviewed, and appropriate environmental analyses completed, and
whether the site is free from pollutants, contaminants, and ordnance and
explosive waste that would affect the start of construction. The command
also considers whether force protection considerations have been addressed
and documented properly. Furthermore, the command will certify that all
planning and related coordination have been accomplished on all budget
year projects and that there is sufficient information to begin concept or
parametric design before submission to the service headquarters. In
addition, a major command may add its own military construction projects
to the list of projects. Finally, the command will prioritize its
projects, and prepare and submit the completed documentation on designated
projects forward through the service headquarters.

The service headquarters will review all submissions for compliance with
service priorities, policies, procedures, and environmental laws. As shown
in table 1, priorities vary depending on a services' mission. For example,
the Army has made transformation a priority in order to support brigades
that can mobilize in a minimal amount of time. In comparison, the Navy has
made barracks, piers, and hangars its priorities and the Air Force has

Appendix III: DOD's Prioritization and Resourcing Process for Military
Construction Projects

made facilities that support new missions and weapons systems, such as the
C-17, its top priority. The Marine Corps does not have specific categories
but states that it will fund its most essential needs.

Table 1: Comparison of the Military Services' Priorities for Military
Construction Projects, Fiscal Year 2004

Army Navy Air Force

Barracks Piers New mission

o  	Facilities to support new mission requirements.

                           Transformation Hangars                Fact of life 
             o  Facilities to support new          o  Compliance with federal 
            missions, such as Stryker                 and state environmental 
                                brigades.                laws or regulations. 

Training ranges Barracks Corporate adjustments

o  	Projects approved and planned by the Air Force Chief of Staff or
Secretary of the Air Force. Examples include quality of life projects from
the dormitory and fitness center master plans.

        Army power projection program Facilities to support mobilization

Antiterrorism and force protection (considered in all facility
construction)

Focus facility strategy

o  	Army National Guard readiness centers.

o  Army Reserve centers.

o  Physical fitness facilities.

o  Trainee barracks.

o  General instruction classrooms.

o  Vehicle maintenance.

o  Chapels.

Source: Military services.

Note: The Marine Corps does not have specific priorities.

The service identifies projects on the list that must be funded in the
immediate fiscal year and places those projects at the top of its priority
list. Next, each service headquarters rates the proposed projects in a

Appendix III: DOD's Prioritization and Resourcing Process for Military
Construction Projects

manner that reflects the projects' mission and impact. The Army, Navy, and
Air Force assign numerical ratings to the proposed projects that reflect
the projects' priority in terms of its impact on the services' mission.
(See table 2.) The Marine Corps also assigns priority ratings to its
projects but does not utilize a category-driven prioritization process
like the other services. As illustrated, the Army uses a 100-point system
to prioritize its projects. A project receives up to 50 points, depending
on where the project lies within the major command's priority list (the
number 1 priority automatically receives 50 points, and the remaining
projects receive fewer points, depending on the facility's replacement
value and number of projects); up to 20 points, depending on the facility
condition rating from the installation status report (projects that are
poor in quality or quantity according to the installation status report's
rating receive more points); up to 20 points, depending on the major
command's presentation to the annual project review board; and up to 10
points if the project follows certain leadership criteria (4 points,
depending on whether or not the demolition amount is equal to, greater
than, or less then the facility scope; 2 points if the project is a new or
existing facility; 2 points for headquarters assessment for facilities not
covered by the Army's criteria; and 2 points for having a correct DD form
1391). Instead of a 100-point system, the Navy uses a more complex
weighting system without a predetermined maximum number of points. A
project receives up to 700 points, depending on where the project lies
within the major command's priority (higher-priority projects receive more
points); up to 500 points, depending on what function a project fulfills
(projects that fall in OSD and Navy priorities receive more points); and
up to 200 points are given to a project, depending on the service
headquarters' assessment of the project's priority. In addition, if a
project relates to bachelor quarters, it can receive up to an additional
75 points, depending on the number of bachelor quarters at the
installation, and receives the sum of points on the basis of factors-such
as demolition, joint use, and political interest-that range from 100 to
negative 200. For example, projects previously approved automatically
receive 40 points, projects to reduce sustainment automatically receive 35
points, and projects to eliminate group latrines in barracks automatically
receive 30 points. The Air Force uses a 100-point system for projects that
do not fall within the services' top priorities- overseas projects receive
automatically an additional 2 points. Projects that support the Air
Force's priorities listed in table 1 are not ranked in this system because
they are automatically classified as the top priorities for funding
considerations. A project receives up to 60 points, depending on where the
project lies within the major command's priority list (the number 1
priority automatically receives 60 points, and the remaining projects
receive fewer points, depending on the total amount of

Appendix III: DOD's Prioritization and Resourcing Process for Military
Construction Projects

submissions from the major command); up to 35 points, depending on the
facility's mission (core modernization or force structure change,
readiness and sustainability, people, and infrastructure and other) and
how the facility deficiency affects the mission (critical, degraded, and
enhancement); up to 2 points, depending on the Air Force corporate panel's
opinion on whether a project must, should, or could receive funding
immediately (a project that must receive funding in the immediate year
receives 2 points, a project that should receive funding receives 1 point,
and a project that can be delayed receives no points); and up to 3 points
for projects that address efficiencies (1.25 point), mission timing (1
point), demolition (0.75 point), and overseas presence (2 points). Marine
Corps officials said that owing to its smaller size, the Marine Corps is
able to review and prioritize all proposed military construction projects
submitted by its installations and commands. A headquarters staff team
personally reviews all the proposed projects within the Marine Corps
before the first prioritization meeting of the facilities program
evaluation group. The group, representing all major commands and warfare
areas within the Marine Corps, prioritizes the proposed projects utilizing
cost and benefit analysis, determining how the projects fulfill
requirements necessary for the Marine Corps to accomplish its mission and
assessing the overall impact that each project will have on the Marine
Corps as a whole.

Appendix III: DOD's Prioritization and Resourcing Process for Military
Construction Projects

Table 2: Comparison of the Military Services' Systems to Prioritize
Military Construction Projects, Fiscal Year 2004

Army Navy Air Force

Major command priority Installation management Major command priority

(50 points) claimant priority (700 points)

                                  (60 points)

Installation status report score Programmatic categories Matrix model
score (20 points) (500 points) (35 points)

             Project review board Headquarters'            Panel points score 
                            score assessment             
                      (20 points)           (200 points)           (2 points) 
                                                Barracks             Military 
              Leadership criteria                                construction 
                      (10 points)            (75 points)   issue process team 
                                                                   (3 points) 

Special considerations Overseas presence

(The sum of factors that range (2 points if applicable)
from 100 to negative 200
points)

Source: Military services.

Note: The Marine Corps does not use a numerical weighting system in its
prioritization process.

After all the projects are identified and prioritized, the service
headquarters forms its overall priority list to create the service's
military construction program. The service's budget director, who also
presents adjustments to the military construction program, then verifies
the budget estimates on the basis of the priority list. Once the proposed
adjustments and estimates are approved, the military construction program
is then submitted to the service Secretary and chief of staff. Upon
approval, the service Secretary will then submit the military construction
program with completed project documentation forward to OSD. In addition,
the service's budget director will send a justification book to OSD, which
contains a DD Form 1391 for each requirement in the military construction
program.

The Office of the Under Secretary of Defense (Comptroller), in conjunction
with other OSD offices-such as the Office of the Under Secretary of
Defense for Acquisition, Technology, and Logistics-reviews the services'
proposed construction projects to confirm and adjust requirements as
necessary. Also, members of the defense resources board, the Assistant
Secretary of Defense program managers, or commanders develop program
review proposals-each proposal contains projects recommended for addition
or deletion without changing the overall

Appendix III: DOD's Prioritization and Resourcing Process for Military
Construction Projects

amount of the services' proposed military construction budget. In
addition, officials of OSD and the Office of Management and Budget conduct
a joint budget review of the services' military construction program,
focusing on proper pricing, reasonableness, ability to execute, and
validity of requirements. Similar to the processes used in the services,
every project submitted is reviewed, and a decision is issued on each.
Through program budget decisions, the OSD and Office of Management and
Budget can choose to approve, disapprove, ask that the project be revised,
or defer the project to a future year. Before the Under Secretary of
Defense signs a program budget decision, the service can challenge the
program budget decision. OSD will then review the challenge and with
senior-level negotiations, issue a final program budget decision on the
project. Once signed by the Under Secretary of Defense, the program budget
decisions are sent to the appropriate service official to be incorporated
in the services' military construction programs to be combined in the
President's budget submission to Congress. The budget request for military
construction funding for each fiscal year includes major construction,
project planning and design, and unspecified minor construction.

Appendix IV: Services' Plans to Meet OSD's Three Key Investment Objectives

While OSD has periodically revised its three key investment objectives on
the basis of the services' ability to meet them, the services still do not
plan to meet most of them within the expected time frames and, in those
instances where the service officials have indicated an intent to meet the
objectives, their plans are based on future funding that requires
unrealistically high rates of increase when compared with previous funding
trends and when considered against other defense priorities.

First, the military services do not plan to fully fund their sustainment
requirements in fiscal year 2004-one of OSD's key objectives for improving
facilities. (See table 3.) We found that sustainment funding must compete
with other traditional operation and maintenance funding priorities, such
as base operations, organizational supplies and equipment, environmental
concerns, training, and travel. Facility sustainment often rates a lower
funding priority than other operation and maintenance functions because
the services have been reluctant to fund facilities when they have other
unfunded priorities and programs. Officials want to do more but are
limited by competing demands within their respective service. In addition,
sustainment fundseven when appropriately budgetedare often
reallocated, with the end result that the programmed sustainment funding
never fully reaches the intended installations.

Table 3: Planned Status for Achieving OSD's Objective of Fully Funding
Sustainment by Military Service and DOD-wide, Fiscal Years 2004 through
2009

                                  Fiscal year

                Defense component  2004    2005    2006   2007   2008    2009 
                             Army      No   No      No     No    Yes      Yes 
                             Navy      No   No      No     No    Yes      Yes 
                        Air Force      No   No      No     No    Yes      Yes 
                     Marine Corps      No   No      No     No     No     No   
                         DOD-wide      No   No      No     No    Yes      Yes 

Source: DOD.

Note: The Marine Corps fully funded sustainment in fiscal year 2003.

Second, as shown in table 4, the military services plan to achieve the
recapitalization objective beginning in fiscal year 2008, with the
exception of the Army. According to Army officials, the Army will not meet
this objective during fiscal years 2004 through 2009 because of competing
funding priorities, especially force transformation.

Appendix IV: Services' Plans to Meet OSD's Three Key Investment Objectives

Table 4: Planned Status for Achieving OSD's Objective of Attaining a
67-Year Recapitalization Rate by Military Service and DOD-wide, Fiscal
Years 2004 through 2009

                                  Fiscal year

                Defense component  2004    2005    2006   2007   2008    2009 
                             Army   No      No      No     No     No     No   
                             Navy   No      No      No     No    Yes      Yes 
                        Air Force   No      No      No     No    Yes      Yes 
                     Marine Corps   No      No      No     No    Yes      Yes 
                         DOD-wide   No      No      No     No    Yes      Yes 

Source: DOD.

However, to achieve the 67-year recapitalization rate, all the services
call for rapid increases in restoration and modernization funding from
fiscal year 2004 through fiscal year 2009, but this growth appears
unrealistic when compared with prior funding levels. As shown in figure 5,
using constant fiscal year 2004 dollars, the Army proposes to increase its
restoration and modernization funding 134 percent from $1.14 billion in
fiscal year 2004 to $2.67 billion in fiscal year 2009. Under its funding
proposal, the Navy plans to increase its funding 227 percent from $750
million to $2.45 billion during the same period. More than half of this
increase is planned during 3 fiscal years, from fiscal year 2007 through
fiscal year 2009, when the Navy proposes to increase its funding by 87
percent to $2.45 billion from $1.31 billion. From a low of $710 million in
fiscal year 2004, the Air Force proposes to increase its restoration and
modernization funding 254 percent to $2.51 billion in fiscal year 2009.
Most of this increase occurs from fiscal year 2005 through fiscal year
2006, when it plans to increase its funding $1.04 billion (106 percent).
The Marine Corps plans a 317 percent increase in restoration and
modernization funding, from a low of $118 million in fiscal year 2006 to
$500 million in fiscal year 2009.

Appendix IV: Services' Plans to Meet OSD's Three Key Investment Objectives

Figure 5: Military Services' Planned Annual Restoration and Modernization
Funding, Fiscal Years 2004 through 2009

The services' rapid increases in restoration and modernization funding
from fiscal year 2004 through fiscal year 2009 appear uncertain when
compared with the need for funds for other defense priorities, such as the
war on terrorism, weapon systems modernization, and force transformation.
In practice, proposed funding for future years' military construction
programs are often reduced as the budget year approaches. As a result of
the war on terrorism, DOD is seeking higher than previously planned
funding during this period for a number of pressing priorities against
which facilities restoration and modernization must compete, including the
Global War on Terrorism, Operation Enduring Freedom, the Balkans, military
readiness, weapons procurement, and research and development. Moreover,
some of the services have specific funding priorities. For example, Army
officials told us that funding for transformation is the service's highest
funding priority. At the Navy, officials said the fleet modernization
program is the service's highest funding priority. In the case of the Air
Force, officials said new aircraft

Appendix IV: Services' Plans to Meet OSD's Three Key Investment Objectives

procurement and associated facilities are the Air Force's funding
priorities. The Marine Corps' highest funding priority is power
projection.

Third, the military services are unlikely to achieve OSD's objective to
improve the quality of facilities from the current C-4 and C-3 ratings to
C-2 by the end of 2010. To improve the overall condition of facilities,
DOD set an objective for the military services to concentrate funding in
order to eliminate C-3 and C-4 facility ratings, bringing them up to a
minimal C-2 level by fiscal year 2010. However, at the time of our review,
service officials said the Navy, the Air Force, and the Marine Corps were
not planning to meet this objective owing to a lack of expected funding.
Army officials stated that the Army could meet the objective if the
required funding were provided. To achieve this objective, the Army would
have to, at the very minimum, fund the rapid increase in restoration and
modernization funding shown in figure 5. Even this minimum funding level
appears unlikely when compared with previous funding levels and
considering other future Army priorities and programs. DOD estimates that
it would cost $62 billion (or $7 billion annually during fiscal years 2002
through 2010) to achieve this objective departmentwide. DOD also estimates
that it would cost more than $164 billion over the same time period to
reach a C-1 level for all facilities.

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