    Defense Infrastructure: Factors Affecting U.S. Infrastructure
    Costs Overseas and the Development of Comprehensive Master Plans
    (15-JUL-04, GAO-04-609).

    Since the end of the Cold War, U.S. military overseas presence
    has changed dramatically. The Department of Defense (DOD) has
    been reexamining overseas basing requirements, and it expects to
    make a number of changes to provide greater flexibility for U.S.
    forces in Western Europe and Northeast Asia. Concerns over the
    potential use of funds for what may soon be obsolete basing
    projects prompted congressional action directing DOD to prepare
    and submit with next year's budget request comprehensive master
    plans for changing infrastructure requirements under each
    overseas command. GAO was also directed to report on the
    development and implementation of these plans. GAO completed an
    advance review to identify opportunities to make the plans more
    informative for Congress and DOD in their oversight
    responsibilities. This report addresses: (1) the development of
    overseas regional commands' comprehensive master plans, and (2)
    the factors affecting U.S. infrastructure costs overseas and the
    development and implementation of comprehensive master plans.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-04-609
        ACCNO:   A10921
      TITLE:     Defense Infrastructure: Factors Affecting U.S.
    Infrastructure Costs Overseas and the Development of
    Comprehensive Master Plans
         DATE:   07/15/2004
      SUBJECT:   Armed forces abroad
    	     Base closures
    	     Base realignments
    	     Defense agreements
    	     Defense economic analysis
    	     Foreign governments
    	     International relations
    	     Military bases
    	     Military cost control
    	     Military facilities
    	     Military facility construction
    	     Military forces
    	     Proposed legislation
    	     Regional planning
    	     Strategic forces
    	     Strategic planning
    	     Asia
    	     DOD Integrated Global Presence and
    	     Basing Strategy

    	     DOD Quadrennial Defense Review
    	     Europe
    	     United States-South Korean Land
    	     Partnership Plan

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    GAO-04-609

                     United States Government Accountability Office

                         GAO Report to Congressional Committees

    July 2004

    DEFENSE INFRASTRUCTURE

      Factors Affecting U.S. Infrastructure Costs Overseas and the Development of
                               Comprehensive Master Plans

                                           a

    GAO-04-609

    Highlights of GAO-04-609, a report to congressional committees

    Since the end of the Cold War, U.S. military overseas presence has changed
    dramatically. The Department of Defense (DOD) has been reexamining
    overseas basing requirements, and it expects to make a number of changes
    to provide greater flexibility for U.S. forces in Western Europe and
    Northeast Asia. Concerns over the potential use of funds for what may soon
    be obsolete basing projects prompted congressional action directing DOD to
    prepare and submit with next year's budget request comprehensive master
    plans for changing infrastructure requirements under each overseas
    command. GAO was also directed to report on the development and
    implementation of these plans. GAO completed an advance review to identify
    opportunities to make the plans more informative for Congress and DOD in
    their oversight responsibilities. This report addresses: (1) the
    development of overseas regional commands' comprehensive master plans, and
    (2) the factors affecting U.S. infrastructure costs overseas and the
    development and implementation of comprehensive master plans.

    GAO recommends that overseas regional commands identify several specific
    factors, such as residual property value and environmental issues, when
    developing and reporting to Congress on their master plans. DOD partially
    concurred.

    www.gao.gov/cgi-bin/getrpt? -GAO-04-609.

    To view the full product, including the scope and methodology, click on
    the link above. For more information, contact Barry W. Holman at (202)
    512-8412 or holmanb@gao.gov.

    July 2004

    DEFENSE INFRASTRUCTURE

    Factors Affecting U.S. Infrastructure Costs Overseas and the Development of
    Comprehensive Master Plans

    At the time of our review, overseas regional commands had not yet begun
    developing the comprehensive master plans required to be submitted with
    the fiscal year 2006 budget submission in early 2005, but are working on
    creating and implementing plans for installations that they believe will
    have an enduring presence. According to command officials, the development
    of the master plans depends upon the outcome of the not-yet-completed DOD
    effort to develop an Integrated Global Presence and Basing Strategy, as
    well as guidance that the Office of the Secretary of Defense (OSD) is
    finalizing for the regional commands. In March 2003, the Secretary of
    Defense requested that the Under Secretary of Defense for Policy and the
    Chairman, Joint Chiefs of Staff, develop an Integrated Global Presence and
    Basing Strategy that may change the global positioning of forces and the
    supporting infrastructure overseas. Until results of the strategy are
    released and OSD guidance is finalized, command officials are limiting
    their development and implementation of the master plans to installations
    that they believe will have an enduring presence. These plans include
    moving military personnel from near the demilitarized zone to other sites
    in South Korea; reducing U.S forces' land use by over 12,000 acres in
    Okinawa, Japan; and consolidating 13 installations into a single location
    near Grafenwo:hr, Germany.

    Various factors can affect U.S. infrastructure costs overseas and the
    development and implementation of the overseas regional commands'
    comprehensive master plans. These factors include cash and other cost
    burden-sharing contributions from host nations; property returns to host
    nations; the environmental remediation of property returned to host
    nations; and the receipt of residual value from host nations for returned
    property. The extent to which these factors affect costs can vary by
    regional command and by international agreements reached with host
    nations. Furthermore, overseas commands have several U.S. sources to help
    fund ongoing and future infrastructure changes, including operation and
    maintenance and contingency operations appropriations in addition to
    military construction appropriations, which includes exercise-related
    construction. GAO agrees that OSD's preliminary guidance-directing the
    overseas regional commands to address the precise facility requirements,
    properties being returned to host nations, funding requirements, and the
    division of funding responsibilities between the United States and
    cognizant host nations in their comprehensive master plans-is appropriate.
    However, the extent to which the commands' plans and status reports will
    address other factors- such as residual property value and environmental
    remediation issues, and multiple U.S. funding sources-that are not clearly
    specified by congressional or OSD's preliminary guidance remains unclear.
    Addressing the applicability of these factors in the development of the
    master plans and annual status reports would make them more useful to the
    services and overseas regional commands in managing U.S. military
    infrastructure and associated costs overseas, and provide Congress and OSD
    with more complete information for their oversight responsibilities.

    Contents

      Letter

    Results in Brief
    Background
    Overseas Regional Commands Have Not Yet Begun Development

    of the Comprehensive Master Plans

    Various Factors Can Affect Infrastructure Costs Overseas and the
    Development and Implementation of Comprehensive Master
    Plans

    Conclusions
    Recommendations for Executive Action
    Agency Comments and Our Evaluation
    Scope and Methodology

    1

    4 10

    14

    16 25 26 26 27

    Appendix I GAO Briefing Slides

    Appendix II Comments from the Department of Defense

      Figure

    Figure 1: PACOM, EUCOM, and CENTCOM Geographic Areas of Responsibility

    Abbreviations

    AAFES Army and Air Force Exchange Service
    CENTCOM Central Command
    DOD Department of Defense
    EUCOM European Command
    NATO North Atlantic Treaty Organization
    OSD Office of the Secretary of Defense
    PACOM Pacific Command
    SOCOM Special Operations Command
    USFK United States Forces Korea

    This is a work of the U.S. government and is not subject to copyright
    protection in the United States. It may be reproduced and distributed in
    its entirety without further permission from GAO. However, because this
    work may contain copyrighted images or other material, permission from the
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    separately.

    United States Government Accountability Office Washington, DC 20548

    July 15, 2004

    Congressional Committees

    Since the end of the Cold War and the fall of the Berlin Wall in 1989,
    U.S. military overseas presence has changed dramatically. Force structure
    has been reduced in some commands, and the number of overseas military
    installations has decreased. The U.S. European Command alone has closed
    about 560 installations over the last decade. New threats, new deployment
    concepts, and geopolitical realities have emerged, yet much of the
    Department of Defense's (DOD) overseas infrastructure-installations and
    facilities used to support U.S. forces overseas-remains organized around
    Cold War strategic concepts. Consequently, in recent years the department
    has been examining the potential for additional changes in overseas
    basing. In September 2001, DOD issued the Quadrennial Defense Review
    Report,1 which indicated the need to reorient U.S. global military posture
    to develop a basing system that provides greater flexibility for U.S.
    forces in critical areas of the world, placing emphasis on additional
    bases and stations in Western Europe and Northeast Asia. Subsequently, DOD
    initiated several basing studies including the Overseas Basing and
    Requirements Study, the Overseas Presence Study, and the U.S. Global
    Posture Study, as well as initiating some recent changes. For example, as
    we previously reported, U.S. military officials and the Republic of Korea
    (hereafter referred to as South Korea) entered into an agreement2 in March
    2002 to reduce the number of U.S. installations from 41 to 23 and provide
    new infrastructure and facilities funded primarily by the Government of
    South Korea.3 The initial Land Partnership Plan was predicated on
    continuing to maintain U.S. bases and facilities north of Seoul (near the
    demilitarized zone that separates North Korea and South Korea). However,

    1 U.S. Department of Defense, Quadrennial Defense Review Report
    (Washington, D.C.: Sept. 30, 2001).

    2 The agreement, known as the Land Partnership Plan, is a cooperative U.S.
    and South Korean effort to consolidate U.S. military installations and
    training areas, improve combat readiness, enhance public safety, and
    strengthen the U.S.-South Korean alliance by addressing some of the causes
    of periodic tension and discontent among South Koreans regarding the U.S.
    presence in South Korea.

    3 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).

    changing conditions caused significant revisions to that plan before its
    implementation, including new plans to reposition U.S. forces from areas
    north, to south of Seoul. In March 2003, the Secretary of Defense
    requested that the Under Secretary of Defense for Policy and the Chairman,
    Joint Chiefs of Staff, pull together existing studies and develop an
    Integrated Global Presence and Basing Strategy that may result in the
    global repositioning of U.S. forces and the supporting infrastructure
    overseas. The results of this effort may cause additional changes
    affecting U.S. basing in South Korea, Europe, and other locations
    overseas. The full results of these studies and related negotiations may
    not be available for several months; consequently, sufficient information
    is not currently available to determine the full magnitude of
    modifications to existing basing arrangements that will be required.

    For several years, the Senate Appropriations Committee has expressed
    concern that the overseas basing structure has not been updated to reflect
    the new realities of the post-Cold War world.4 The Committee also
    expressed concern about the use of military construction budget authority
    for projects at bases that may soon be obsolete due to changes being
    considered in overseas presence and basing. Consequently, the conference
    report5 accompanying the fiscal year 2004 military construction
    appropriation bill directed DOD6 to prepare detailed comprehensive master
    plans for overseas infrastructure requirements for U.S. military
    facilities7 and provide a baseline report with the fiscal year 2006
    military construction budget submission and annual reports on the status
    of those plans and their implementation with each military construction
    budget submission through fiscal year 2009-usually in February each year.
    In addition, a Senate report8 accompanying the fiscal year 2004 military

    4 S. Rep. No. 108-82, at 10 (2003).

    5 H.R. Conf. Rep. No. 108-342, at 17 (2003).

    6 Although not specifically requested in the conference report, the Office
    of the Secretary of Defense has asked the overseas regional commands to
    prepare comprehensive master plans for their areas of responsibility.

    7 For the purposes of this report, we focused our analysis on the
    activities of U.S. Forces Korea, Pacific Command, European Command, and
    Central Command. We were also requested to review Special Operations
    Command. We did not include Northern Command or Southern Command in our
    analysis because these commands have significantly fewer facilities
    overseas than the other regional commands in the Pacific, Europe, and
    Central Asia.

    8 S. Rep. No. 108-82, at 13-14 (2003).

    construction appropriation bill requires the plans to identify precise
    facility requirements, the status of properties being returned to host
    nations, and the funding requirements as well as the division of funding
    responsibilities between the United States and cognizant host nations.

    The Senate report also directed us to monitor the comprehensive master
    plans being developed and implemented for the overseas regional commands
    and to provide the congressional defense committees with an assessment
    report by May 15 of each year through fiscal year 2008. Our reports are to
    include an assessment of the status of the plans; the associated costs;
    host-nation burden-sharing9 implications; and other relevant information
    involving property returns to host nations, including residual values and
    environmental remediation issues.10 As requested, we completed an advance
    review to identify opportunities to make the plans more informative for
    Congress and DOD in their oversight responsibilities. We recently provided
    your offices with information summarizing our preliminary observations in
    a briefing format (see app. I). This report summarizes and updates our
    observations contained in the briefing materials in the following two
    areas: (1) the status of development of overseas regional commands'
    comprehensive master plans and (2) an assessment of factors-such as
    burden-sharing implications, planned property returns, residual property
    values, environmental remediation issues, and the associated U.S.-funded
    costs-that can affect U.S. infrastructure costs overseas, the development
    and implementation of comprehensive master plans, and how these factors
    can vary by individual overseas regional command.

    To address our objectives, we obtained information from overseas regional
    commands-U.S. Forces Korea (USFK) and U.S. Forces Japan within the Pacific
    Command (PACOM) area of responsibility, European Command (EUCOM), Central
    Command (CENTCOM), and Special Operations Command (SOCOM)-to identify the
    status of their comprehensive master plans, including associated
    U.S.-funded costs the commands may incur, burden-sharing implications,
    property returns to

    9 "Burden-sharing" refers to cash and other contributions that the
    host-nation government provides to support U.S. troops in the host nation.

    10 Residual value is the negotiated dollar value of U.S.-constructed or
    improved facilities that are turned over to host nations. DOD policy is to
    obtain the maximum residual value permissible. Often, actual or
    anticipated environmental remediation costs incurred by the host nation
    for DOD-caused contamination may be offset against the residual value of
    the facilities turned over to the host nation.

      Results in Brief

    host nations, environmental remediation issues, and residual value
    available from property returns to host nations. We also met with
    officials of the Office of Secretary of Defense (OSD) to determine the
    guidance and criteria provided to overseas regional commands for the
    development of comprehensive master plans. Through our review of the data,
    examination of specific data elements, and discussions with DOD officials,
    we believe the data gathered are sufficiently reliable for the purposes of
    this report, except for data generated by CENTCOM. Because of ongoing
    operations, we were not able to meet with CENTCOM officials to discuss the
    development of comprehensive master plans, factors that can affect U.S.
    costs or data reliability. However, we obtained written responses to
    questions on overseas presence and basing, U.S.-associated costs,
    burdensharing implications, property returns to host nations, potential
    U.S. liability for environmental remediation, and residual value likely
    for property returns to host nations.

    We conducted our work from November 2003 through April 2004 in accordance
    with generally accepted government auditing standards. Details about our
    scope and methodology appear at the end of this report.

    At the time of our review, overseas regional commands had not yet begun to
    develop comprehensive master plans that, consistent with the conference
    report, are due with the fiscal year 2006 budget submission. While
    overseas regional commands are awaiting decisions on the Integrated Global
    Presence and Basing Strategy and receipt of OSD final guidance for
    developing detailed comprehensive master plans, they have been working
    with OSD on the Integrated Global Presence and Basing Strategy and
    developing and implementing plans for installations they believe will have
    an enduring presence11 in future years (see app. I, slide 9). According to
    command officials, development of the master plans is dependent upon the
    completion of the ongoing Integrated Global Presence and Basing Strategy.
    In addition, OSD is finalizing guidance for the overseas regional commands
    to use in developing these master plans, including a template to ensure
    consistency across commands, to be issued later this year. OSD has
    provided preliminary guidance to the overseas regional commands that
    specifies that plans must identify precise facility requirements, funding
    requirements, the division of funding

    11 "Enduring presence" refers to installations the overseas commanders
    consider vital to the execution of their mission and worthy of regular
    funding and improvement.

    responsibilities between the United States and host nations, and the
    status of properties being returned to host nations-the same requirements
    outlined in the Senate report accompanying the fiscal year 2004 military
    construction appropriation bill. Until the global basing strategy is
    released and the guidance is finalized, the overseas regional commands
    cannot complete their comprehensive master plans and are continuing to
    develop and implement plans for installations they believe will have an
    enduring presence. For example, USFK has developed a plan to consolidate
    forces currently located near the demilitarized zone to Camp Humphreys
    south of Seoul,12 and EUCOM has a plan to consolidate 13 Army
    installations into one near Grafenwo:hr, Germany.

    In addition to the results of the Integrated Global Presence and Basing
    Strategy, various factors can affect U.S. infrastructure costs overseas
    and the development and implementation of the overseas regional commands'
    comprehensive master plans-factors that can vary significantly by
    individual overseas regional command and by agreements with host nations.
    Several of these factors depend largely on the economic conditions and
    political environment in host nations that can decrease host nations'
    overall support to U.S. forces and increase U.S.-funded costs for future
    infrastructure changes. These factors include the following:

    o  	Burden-sharing contributions from host nations. The extent to which
    overseas regional commands and their component commands13 rely on direct
    or indirect burden-sharing contributions14 from host nations varies by
    country and can affect the amount of military construction funding
    requested by overseas commands (see app. I, slides 11 and 12). The amount
    of host-nation funding has varied by agreement with individual host
    nations in the past and can be subject to changing economic

    12 United States Forces Korea, Camp Humphreys, Korea, Real Property Master
    Plan Future Development Framework (Mar. 2004).

    13 "Component commands" refers to the military services (i.e., the Army,
    the Navy, the Marine Corps, and the Air Force) that support the overseas
    regional commands.

    14 Direct contributions consist of cash payments for U.S. stationing costs
    to be used at the discretion of overseas regional commands and their
    components, including cash for renovation and construction of facilities.
    Indirect contributions are noncash contributions-often land and facilities
    provided free of charge by the host nation-as well as the host-nation
    sharing expenses, such as administration, planning, design, and associated
    overhead for construction, maintenance, and repair of new or existing
    facilities. Other examples of indirect contributions include cost
    avoidance or waivers of taxes, fees, and rents, and host nation-funded
    labor support.

    conditions. Historically, little or no U.S. military construction funding
    was needed in Japan, although the Government of Japan is expected to
    reduce its contribution level because of recent budgetary concerns. In
    addition, the extent to which host-nation funding would be available to
    support new basing requirements in any countries not currently hosting
    U.S. forces remains to be seen.

    o  	Property returns to host nations. Property returns are expected to be
    an integral part of future overseas basing changes and, depending on the
    circumstances, may or may not require replacement facilities overseas (see
    app. I, slide 13). For example, overseas regional commands have agreed to
    significant property returns to host-nation governments in South Korea,
    Japan, and Europe in response to force structure changes, new threats, and
    political and diplomatic considerations. For example, USFK plans to return
    31 installations to the Government of South Korea, and U.S. forces in
    Japan plan to return over 12,000 acres of land to the Government of Japan.
    Also, EUCOM has closed over 560 installations and returned the property
    and facilities to host nations over the last decade. However, as a result
    of potential changes in overseas basing identified in the ongoing
    Integrated Global Presence and Basing Strategy, more or less property may
    be returned to host-nation governments.

    o  	Receipt of residual value for returned property. The extent to which
    overseas regional commands and their component commands obtain residual
    value for properties returned to each host nation varies by status of
    forces agreements and other agreements between the U.S. and the host
    nation. This can affect the amount of military construction funding
    requested by overseas commands (see app. I, slides 16 and 17). In PACOM's
    area of responsibility, there is no need for international agreements to
    provide for residual value, because host nations provide replacement
    facilities. For instance, the South Korean government is expecting to sell
    property returned by USFK to raise capital to help finance the cost of
    moving U.S. forces south of Seoul. In EUCOM, international agreements have
    resulted in the receipt of approximately $175 million for property
    returned to nine countries since the early 1990s. Arrangements vary by
    country in CENTCOM, where six host nations have agreements to allow for
    residual value negotiations and nine countries have no such agreements.
    However, the amount of residual value the commands can expect to obtain in
    the future depends on how the host nation views the value of the returned
    property. Because of economically depressed markets-such as some countries
    within the EUCOM area of responsibility-coupled with reduced defense
    spending by some host nations and closure of their own military
    facilities, the market for property

    from closed U.S. military installations has dwindled, resulting in little,
    if any, residual value for returned properties.

    o  	Returned property environmental remediation. The extent to which
    overseas regional commands and their component commands incur costs for
    environmental remediation as a result of these property returns has varied
    by country, depending on agreements with individual host nations, and can
    affect U.S. infrastructure costs overseas (see app. I, slides 14 and 15).
    Historically, overseas regional commands have incurred limited costs for
    environmental remediation as a result of these property returns. For
    example, the component commands in South Korea and Japan have incurred
    limited costs to date, while EUCOM currently estimates its potential costs
    for environmental remediation at about $90 million, regardless of whether
    the property is returned in the future. However, in the future, there is
    less certainty regarding potential costs for environmental remediation
    because these issues are becoming an increasing concern in South Korea and
    Japan. For example, according to PACOM officials, South Korea has
    established procedures for addressing environmental remediation, and the
    Government of Japan is enacting more stringent environmental laws.

    o  	Multiple U.S. funding sources available to support future
    infrastructure changes. The level of U.S. funding required for overseas
    infrastructure costs varies by country-specific factors and can affect the
    development and implementation of comprehensive master plans (see app. I,
    slide 10). Overseas regional commands and their component commands
    historically have relied on funding through multiple U.S. organizations to
    pay for the costs associated with the planned infrastructure changes.15 In
    addition to military construction appropriations,16 these funding sources
    include operation and maintenance17 and contingency operations
    appropriations to

    15 However, not all future infrastructure changes are yet known. Until the
    Integrated Global Presence and Basing Strategy is completed, the overseas
    regional commands will remain uncertain of all future infrastructure
    changes. Also, without the approval and identification of all future
    infrastructure changes, the overseas regional commands will remain unable
    to identify all associated costs.

    16 Military construction, as defined in 10 U.S.C. S:2801 (2003) "includes
    any construction, development, conversion, or extension of any kind
    carried out with respect to a military installation."

    17 As defined in 10 U.S.C. S:2805 (2003), operation and maintenance
    appropriations may be used for unspecified minor military construction
    projects costing no more than $1.5 million and intended solely to correct
    a deficiency that is life-threatening, health-threatening, or
    safety-threatening, or $750,000 for any other unspecified minor military
    construction project.

    fund ongoing and future infrastructure changes. Also, under Title 10
    United States Code Section 2805, exercise-related construction authority
    is available for construction projects outside the United States of not
    more than $5 million as directed by the Joint Chiefs of Staff. For
    example, EUCOM uses exercise-related construction authority, generally in
    small amounts, for training exercises-such as constructing a refueling
    facility in Tunisia. CENTCOM has used operation and maintenance funds
    through its contractors, as well as military construction funds, to
    finance facility requirements for ongoing operations. The commands also
    have nonappropriated funds, such as Army and Air Force Exchange Service
    funding sources, to fund the construction of military exchange stores.
    Other funding sources include the DOD Medical Command, the Defense
    Logistics Agency, and the Defense Commissary Agency. However, given
    current budget constraints and other defense priorities, the ability of
    the overseas regional commands and their component commands to obtain the
    required U.S. funding levels for future infrastructure changes overseas
    may change.

    We agree that OSD's preliminary guidance-directing overseas regional
    commands to address the precise facility requirements, properties being
    returned to host nations, funding requirements, and the division of
    funding responsibilities between the United States and cognizant host
    nations in their comprehensive master plans-is appropriate. However, the
    extent to which the commands' plans will address the applicability of
    other factors-such as residual property value and environmental
    remediation issues, and multiple U.S. funding sources-that are not clearly
    specified in OSD's preliminary guidance remains unclear. Without
    descriptions of the extent to which residual value issues are likely to be
    applied to properties returned to each host nation and offset
    environmental remediation costs, the comprehensive master plans and the
    required periodic reporting on the status of their implementation may not
    fully identify all the expected capital available to help finance the cost
    of moving and consolidating U.S. forces overseas and improving their
    facilities. Also, without identification of potential multiple U.S.
    funding sources that may be available to support future infrastructure
    changes, the comprehensive master plans and status reports might not fully
    identify the extent to which overseas regional commands and their
    component commands plan to rely on these funding sources compared to
    host-nation contributions. Addressing the applicability of these
    additional factors in DOD's development of its master plans and the
    required periodic status reports would make them more useful as tools to
    the services and overseas regional commands in managing U.S. military
    infrastructure and associated costs overseas, and

    provide Congress and OSD with more complete information for their
    oversight responsibilities.

    To make future comprehensive master plans and periodic reporting to
    Congress on their implementation more useful in managing U.S. military
    infrastructure and associated costs and more informative for Congress and
    OSD in their oversight responsibilities, we are recommending that in
    developing their master plans overseas regional commands address the
    extent to which implementation of their plans could be affected by
    residual property value and environmental remediation issues, as well as
    multiple U.S. funding sources available to support future infrastructure
    changes and include this information in their comprehensive master plans.
    We are also recommending that they provide updated information on these
    factors in their annual status reports to Congress on the master plans. In
    comments on a draft of this report, DOD concurred that future
    comprehensive master plans should address environmental issues, but did
    not concur that master plans should include assessments of residual value
    or multiple funding sources. According to DOD, residual value is obtained
    through negotiations and cannot be predicted and therefore should not be
    assumed in a master plan. Likewise, master plans should not include
    multiple funding sources because military construction projects that would
    be eligible for these alternate funding sources are subject to funding
    thresholds. While we acknowledge the uncertainties of obtaining residual
    value for returned property and thresholds for multiple funding sources,
    we believe overseas regional commands should identify residual property
    value issues as they evolve, as well as identify multiple U.S. funding
    sources that may be available in their master plans and annual status
    reports to Congress. While our recommendations as originally written could
    have been interpreted as being applicable only to the commands' master
    plans, we have modified our recommendations to include addressing these
    factors in their annual status reports to Congress as well as in the
    master plans. We also modified our language to better recognize that
    complete information on these factors is likely to evolve over time. The
    department also provided technical comments, which we incorporated as
    appropriate.

    Background 	Military construction appropriations fund the planning,
    design, construction, alteration, and improvement of military facilities
    worldwide. As of fiscal year 2003, DOD had over 6,000 installations total,
    with 702 installations located overseas. Operational control of the U.S.
    combat forces and installations is assigned to the nation's five
    geographic unified combatant commands, which are responsible for the
    security environment as directed by the national security and military
    strategies. Composed of forces from two or more services, PACOM, EUCOM,
    and CENTCOM span numerous countries and even continents and encompass
    areas with economically, politically, and socially diverse regions. (See
    fig. 1.)

    waters of the Pacific. Additionally, the ongoing global war on terrorism
    has resulted in the deployment of much larger numbers of troops in
    theaters of operation in Iraq and Afghanistan.

    In September 2001, DOD issued the Quadrennial Defense Review Report, which
    addressed, among other issues, reorienting the U.S. military global
    posture. During the latter half of the 20th century, the United States
    developed a global system of overseas military bases primarily to contain
    aggression by the Soviet Union. U.S. presence is aligned closely with U.S.
    interests and likely threats to those interests (i.e., Western Europe and
    Northeast Asia). In recent years, DOD has been undergoing a transformation
    to meet changing global threats and focus on a defense strategy and force
    structure to keep the peace and defend freedom in the 21st century. The
    Quadrennial Defense Review Report called for developing a basing system
    that provides greater flexibility for U.S. forces in critical areas of the
    world, placing emphasis on additional bases and stations in Western Europe
    and Northeast Asia, and providing temporary access to facilities in
    foreign countries that enable U.S. forces to conduct training and
    exercises in the absence of permanent ranges and bases.

    In March 2002, military officials from the United States and the
    Government of South Korea entered into an agreement, known as the Land
    Partnership Plan, to consolidate U.S. installations and training areas,
    improve combat readiness, enhance public safety, and strengthen the
    U.S.-South Korean alliance. In July 2003, we reported that the ongoing
    reassessments of U.S. overseas presence and basing requirements could
    diminish the need for and alter the locations of many construction
    projects in South Korea, including those associated with the Land
    Partnership Plan and those unrelated to it.18 We also identified some key
    challenges that could adversely affect the implementation of the plan and
    future U.S. military construction projects throughout South Korea. First,
    the Land Partnership Plan would rely on various funding sources, including
    funding realized through land sales from property returned by the United
    States. The extent to which these sources of funding would be required and
    available for broader infrastructure changes is not yet clear. Second, a
    master plan would be needed to guide future military construction to
    reposition U.S. forces and basing in South Korea. Subsequent to the
    original Land Partnership Plan, DOD initiated the Integrated Global
    Presence and Basing Strategy that builds upon multiple DOD studies,

    18 See GAO-03-643.

    including the Overseas Basing and Requirements Study, the Overseas
    Presence Study, and the U.S. Global Posture Study. The completion of the
    Integrated Global Presence and Basing Strategy will likely change the
    number and locations of U.S. military bases in South Korea and in other
    overseas commands.

        Congressional Requirement for Detailed Comprehensive Master Plans

    For several years, the Senate Appropriations Committee has expressed
    concern that the overseas basing structure has not been updated to reflect
    the new realities of the post-Cold War world. The committee also expressed
    concern about the use of military construction budget authority for
    projects at bases that may soon be obsolete due to changes being
    considered in overseas presence and basing. Consequently, in the Senate
    report accompanying the fiscal year 2004 military construction
    appropriation bill, the Senate Appropriations Committee directed DOD to
    prepare comprehensive master plans for the changing infrastructure
    requirements for U.S. military facilities in each of its overseas regional
    commands. Subsequently, similar action was directed by the conference
    report accompanying the 2004 military construction appropriation bill.
    Within the department, the Under Secretary of Defense for Acquisition,
    Technology and Logistics has been tasked to respond to this legislative
    requirement; in turn, he has asked the overseas regional commands to
    prepare detailed comprehensive master plans for their area of
    responsibility. At a minimum, under the Senate Appropriations Committee
    mandate, the plans are to identify precise facility requirements, status
    of properties being returned to host nations, and funding requirements and
    the division of funding responsibilities between the United States and
    cognizant host nations. The conference report also required DOD to provide
    a report on the status and implementation of those plans with each yearly
    military construction budget submission through fiscal year 2009.

    The Senate Appropriations Committee also directed GAO to monitor the
    comprehensive 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,
    including environmental remediation issues and residual values.

      Overseas Regional Commands Have Not Yet Begun Development of the Comprehensive
      Master Plans

    At the time of our review, the overseas regional commands had not yet
    begun development of the comprehensive master plans, which are due with
    the fiscal year 2006 budget submission. Master plans are dependent upon
    the outcome of the not-yet-completed DOD Integrated Global Presence and
    Basing Strategy. While awaiting decisions on the Integrated Global
    Presence and Basing Strategy, the overseas regional commands have been
    working with OSD to implement plans for enduring installations in
    accordance with the global basing strategy. In addition, OSD is finalizing
    guidance for the commands to use in developing these master plans,
    including a template to ensure consistency across commands, that it
    expects to issue later this year. In February 2004, OSD provided
    preliminary guidance to the overseas regional commands that specified that
    plans must identify (1) precise facility requirements, (2) funding
    requirements, (3) the division of funding responsibilities between the
    United States and host nations, and (4) the status of properties being
    returned to host nations. In addition, OSD provided a proposed format for
    the master plans, which is still under review by the department. Until the
    Integrated Global Presence and Basing Strategy is released and OSD's
    guidance is finalized, the overseas regional commands have limited efforts
    under way to address the requirement for comprehensive plans.

    At the same time, overseas regional commands and their component commands
    are continuing to develop and implement plans for facilities they believe
    will have an enduring presence. For example:

    o  	USFK has an ongoing initiative to move military personnel located near
    the demilitarized zone to Camp Humphreys, South Korea (see app. I, slide
    21). This initiative will reduce major installations from 41 down to 10
    and provide new infrastructure and facilities funded primarily by the
    Government of South Korea, pending ratification by the South Korean
    National Assembly and completion of the Future of the Alliance talks.19

    Under a unique self-funding strategy, USFK will return 31 major
    installations, which will enable the Government of South Korea to sell
    land and fund the relocation and construction of new facilities at Camp
    Humphreys. In addition, USFK is studying options for relocating the units
    stationed at Yongsan Army Garrison in Seoul; however, specific timelines

    19 In December 2002, the U.S. Secretary of Defense and the Defense
    Minister of South Korea agreed to conduct a Future of the Alliance study
    to assess the roles, missions, capabilities, force structure, and
    stationing of U.S. forces, including having South Korea assume the
    predominant role in its defense and increasing both South Korean and U.S.
    involvement in regional security cooperation.

    have not been finalized. Two enduring installations being considered for
    these units are Osan Air Force Base and Camp Humphreys.

    o  	U.S. Forces Japan has an ongoing initiative to return over 12,000
    acres of land to reduce land use by U.S. forces in Okinawa under The
    Special Action Committee on Okinawa Final Report20 (see app. I, slide
    24).21 In

    exchange for this land, the Government of Japan will fund relocation of
    housing, communication sites, training areas, a hospital, the Marine Corps
    Air Station Futenma, and land at the Naha Port, in addition to other
    support facilities. The estimated cost of relocating the Air Station
    Futenma is more than $3 billion.

    o  	The U.S. Army Europe has an ongoing initiative-Efficient Basing
    Grafenwo:hr-to consolidate 13 installations into one single location near
    Grafenwo:hr, Germany (see app. I, slide 26). Efficient Basing Grafenwo:hr
    is an initiative to enhance readiness, gain efficiencies, and improve the
    well being of approximately 3,500 soldiers and 5,000 family members.
    According to EUCOM officials, this initiative will facilitate command and
    control, lower transportation costs, enable better force protection,
    improve access to training areas, eliminate over 5 million square feet of
    excess inventory, and reduce base operations costs by up to an estimated
    $19 million per year. In addition, U.S. Navy Europe is moving its
    headquarters south, from London in the United Kingdom, and consolidating
    with three subordinate staffs at Naval Support Activity Naples, Italy, to
    reduce costs while increasing operational effectiveness (see app. I, slide
    27). The Navy is also planning several different initiatives to
    consolidate missions in the Mediterranean and downsize Naval Air Station
    Keflavik in Iceland. U.S. Air Force Europe has an ongoing transition from
    Rhein-Main Air Base, Germany, to Ramstein and Spangdahlem bases, which is
    funded by various sources, including the North Atlantic Treaty
    Organization (NATO) and the Government of Germany (see app. I, slide 28).
    U.S. Air Force Europe received a reported $62.5 million for the return of
    some land based on an agreement signed in 1993 and is receiving an
    additional $425 million as a result of an agreement signed in 1999 for
    complete closure of Rhein-Main Air Base.

    20 The Ministry of Foreign Affairs of Japan, The Special Action Committee
    on Okinawa Final Report (Dec. 2, 1996).

    21 In addition to the land return initiatives, The Special Action
    Committee on Okinawa Final Report includes 16 initiatives in the areas of
    noise reduction, operations and training, and Status of Forces Agreements
    procedures.

      Various Factors Can Affect Infrastructure Costs Overseas and the Development
      and Implementation of Comprehensive Master Plans

    Various factors can affect U.S. infrastructure costs overseas and the
    development and implementation of the overseas regional commands'
    comprehensive master plans. The extent of their effect can vary by
    regional command as well as host-nation agreement. Several of these
    factors depend largely on the economic conditions and political
    environment in host nations that can decrease host nations' overall
    support to U.S. forces and increase U.S.-funded costs for future
    infrastructure changes. The level of burden-sharing contributions provided
    by host nations can affect the amount of military construction funding
    requested by overseas commands. In different instances, property returns
    may or may not require replacement facilities overseas, and the residual
    value that the United States receives from property returned to host
    nations varies by country and also can affect U.S.-funded infrastructure
    costs. Additionally, the United States could potentially incur costs for
    environmental remediation of returned property before the host-nation
    government will accept it. In addition to host-nation funding, overseas
    commands have multiple U.S. funding sources to support future
    infrastructure changes. As noted earlier, we agree that OSD's preliminary
    guidance-directing overseas regional commands to address the precise
    facility requirements, properties being returned to host nations, funding
    requirements, and the division of funding responsibilities between the
    United States and cognizant host nations in their comprehensive master
    plans-is appropriate. However, the extent to which the other relevant
    factors discussed previously will be addressed in these plans and the
    required periodic reporting on their implementation is not yet clear. More
    specifically, neither the Senate report nor OSD's preliminary guidance
    requires the plans to address residual property value and environmental
    remediation issues, or multiple U.S. funding sources compared to available
    host-nation funding for future infrastructure changes. Addressing the
    applicability of these factors would make the comprehensive master plans
    and periodic status reports on their implementation more useful as tools
    in managing U.S. military infrastructure and associated U.S.-funded costs,
    and provide Congress and OSD with more complete information for their
    oversight responsibilities.

    Overseas Regional Commands benefit from burden-sharing contributions
    provided by host Commands Benefit from nations, which in turn can reduce
    the commands' need for military Burden-Sharing construction appropriations
    (see app. I, slides 11-12). The extent to which Contributions overseas
    regional commands and their component commands rely on

    burden-sharing contributions from host nations varies by country and
    directly affects U.S. infrastructure costs overseas and the development
    and implementation of comprehensive master plans. Historically, overseas

    regional commands have relied on both types of contributions-direct and
    indirect burden sharing. For example, two countries in PACOM's area of
    responsibility-South Korea and Japan-provide about 73 percent of the total
    worldwide burden-sharing contributions to support U.S. troops, while
    countries within EUCOM's area of responsibility provide about 21 percent
    of total burden-sharing contributions worldwide. In CENTCOM's area of
    responsibility, countries only fund about 6 percent of U.S. contributions
    worldwide.22 However, the extent to which this will continue is uncertain
    because the level of contributions from some host-nation governments may
    change in the future.

    According to USFK officials, under the terms of the 2002-04 Special
    Measures Agreement, South Korea provides logistics, labor support, and
    host nation-funded construction valued at about $593 million for fiscal
    year 2004. Two programs that provide host nation-funded construction are
    the Combined Defense Improvement Projects and Republic of Korea Funded
    Construction. Under the Combined Defense Improvement Projects Program,
    South Korea supports facility requirements that are directly related to
    the combined U.S. and South Korean warfighting capabilities. The Republic
    of Korea Funded Construction Program is a cash contribution program where
    funds are transferred to the U.S. government for quality of life
    infrastructure, as well as warfighting facilities. This program is
    restricted from funding clubs, golf courses, theaters, and bowling alleys.
    In addition to the Special Measures Agreement, USFK expects the Government
    of South Korea to provide funds to replace facilities and land for the
    amended Land Partnership Plan before it relocates troops stationed near
    the demilitarized zone to the south at Camp Humphreys. Also, USFK expects
    the Government of South Korea to provide funds to relocate and replace
    facilities and land before it moves its personnel from the Yongsan Army
    Garrison to south of Seoul. Both of the planned troop relocations are not
    yet approved by the Government of South Korea and are pending approval
    through a vote by the South Korean National Assembly.

    U.S. Forces Japan, within PACOM's area of responsibility, and the
    Government of Japan have three burden-sharing programs that provide
    support to U.S. military personnel stationed there. First, according to
    PACOM officials, the Special Measures Agreement provides financial

    22 U.S. Department of Defense, Allied Contributions to the Common Defense
    (Washington, D.C.: July 2003). Data are from calendar year 2002.

    support for labor (salaries for Japanese nationals working on U.S. bases),
    utilities (electricity, gas, water, sewage, and heating fuels), and rent.
    Second, the Japan Facilities Improvement Program provides in-kind
    construction support,23 such as family housing and other service
    initiatives. The type of facility projects that cannot be supported are
    religious facilities, additional fuel and munitions storage, chemical and
    biological protection, facilities that Japan's government considered
    luxuries (i.e., bowling centers and golf courses), and some types of
    maintenance and repair services or facilities identified in the Status of
    Forces Agreement. Third, the Special Action Committee on Okinawa will fund
    replacement facilities when U.S. forces return over 12,000 acres of land
    in Okinawa, including the Marine Corps Air Station Futenma and land at the
    Naha Port. The Japanese relocation funding process is another source of
    host-nation support, separate and distinct from the above two programs.
    Japanesefunded relocation projects are provided on a quid pro quo basis;
    that is, the projects are provided in exchange for something else (e.g.,
    returned land). While the relocation program is also a Government of Japan
    initiative to reduce U.S. presence on Okinawa and strengthen the
    U.S.-Japanese alliance, its funding is voluntary. In addition, according
    to PACOM officials, the relocation funding process in Japan requires
    municipal approvals at both the returned and acquired locations.

    In EUCOM's area of responsibility, many European countries provide various
    types of host-nation support. For example, during calendar year 2001,
    Germany and Italy provided the largest contributions-a reported $862
    million and $324 million, respectively. In addition, the NATO Security
    Investment Program-which is dependent upon the diplomatically agreed upon
    financial contributions of member nations-provides funds for the
    construction of military facilities, upgrade and restoration of military
    facilities, acquisition of common-use systems and equipment, and other
    related programs and projects required by NATO to carry out its mission
    requirements. According to EUCOM officials, it is their policy for
    construction managers at all levels to review construction projects for
    NATO eligibility before committing U.S. funds. The program does not fund
    personnel support facilities such as barracks, family housing, or
    gymnasiums, all of which are considered the responsibility of individual
    member nations. Exceptions have been made to this policy to meet

    23 In lieu of cash payments, a country may choose payment-in-kind-such as
    construction of facilities for U.S. forces provided by the host
    nation-which, in turn, reduces U.S. expenditures.

    specific U.S. needs at Aviano Air Base, Italy. For example, since 1995,
    the program has provided a reported $195 million to upgrade support
    facilities at Aviano Air Base, Italy, to include providing a hospital,
    school, theater, post office, commissary, exchange, and child development
    centers. However, the extent to which contributions will continue is
    uncertain because of the economically constrained markets in some NATO
    countries, coupled with reduced defense spending by some host nations.

    In CENTCOM's area of responsibility, there are fewer burden-sharing
    contributions from host nations compared to EUCOM and PACOM. For example,
    prior to fiscal year 1999, the Kingdom of Saudi Arabia provided facility
    and assistance-in-kind support. However, according to CENTCOM officials,
    Saudi Arabia no longer provides any support. Currently, Qatar, Kuwait, and
    the United Arab Emirates either verbally or by signing an agreement have
    provided an estimated $534 million in support of U.S. facilities for
    fiscal year 1999 through the second quarter of fiscal year 2004. However,
    the extent to which such contributions may continue in the future is
    unknown and varies because of changing regional alliance considerations.

        Property Returns Are an Integral Part of Planned Overseas Basing Changes

    Property returns are expected to be an integral part of future overseas
    basing changes and, depending on the circumstances, may or may not require
    replacement facilities overseas. Over the past decade, overseas regional
    commands and their component commands have agreed to significant property
    returns to host-nation governments in South Korea, Japan, and Europe in
    response to force structure changes, new threats, and political and
    diplomatic considerations (see app. I, slide 13). However, the ongoing
    Integrated Global Presence and Basing Strategy may provide more changes in
    overseas basing that could result in additional property being returned to
    host-nation governments which, in turn, could affect future infrastructure
    requirements.

    In South Korea, USFK has two initiatives that will result in property
    being returned to the host nation (see app I, slides 18-22). First, as
    part of the amended Land Partnership Plan and U.S. plans to relocate
    troops from near the demilitarized zone to Camp Humphreys, USFK will
    reduce the number of major installations in South Korea from 41 down to
    10. The property and facilities on the 31 installations will be returned
    to the Government of South Korea for its use or disposition. Second, at
    the request of South Korea, USFK plans to move its personnel stationed at
    Yongsan Army Garrison and return the associated property and facilities;
    however, timelines have not been finalized. Two enduring installations

    being considered for these units are Osan Air Force Base and Camp
    Humphreys. It is too early in the process to know when all of the many
    different USFK units located on Yongsan Army Garrison will be relocated.

    In PACOM's area of responsibility, U.S. forces in Japan plan to return
    over 12,000 acres of land on Okinawa, including the Marine Corps Air
    Station Futenma and land at Naha Port, to the Government of Japan after
    replacement facilities are constructed (see app. I, slide 24). As of April
    2004, there were 10 remaining land transfers pending and 47 military
    construction projects to be completed-all to be funded by the Government
    of Japan.

    In EUCOM's area of responsibility, commands have closed over 560
    installations and returned the property and facilities to host nations
    over the last decade. In addition, U.S. Army Europe plans to close 13
    installations and facilities located throughout Germany-consisting of
    family housing, barracks, and training facilities-and consolidate them
    into a single location near Grafenwo:hr under its Efficient Basing
    Grafenwo:hr project (see app. I, slide 26). U.S. Navy Europe is planning
    to reduce overall facility requirements by consolidating its mission to
    its enduring bases in the Mediterranean Sea and at Naval Station Rota,
    Spain (see app. I, slide 27). For example, it plans to move the Command
    Navy Region Europe from London, United Kingdom, to Naples, Italy. The
    future disposition of the facilities in London has not yet been
    determined. Also, three parcels of land in Iceland have been nominated by
    U.S. Navy Europe for return to the host nation and are currently in the
    property return process.

    Also in EUCOM, U.S. Air Force Europe, at the request of the Government of
    Germany, plans to return all of the Rhein-Main Air Base to Germany (see
    app. I, slide 28). The base had been a co-use airfield with the Frankfurt
    International Airport, which the Germans wanted to expand. In order to
    satisfy the Frankfurt International Airport's requirement for additional
    land, a portion of the U.S. Air Force's mission was relocated to Ramstein
    Air Base, Germany, based on an agreement signed in 1993. This partial
    return moved the C-130 mission from Rhein-Main Air Base to Ramstein Air
    Base and returned 94 hectares of land to the Frankfurt International
    Airport. The facilities returned were valued at an estimated $62.5
    million, and in exchange, U.S. Air Force Europe received the same
    value-$62.5 million-for 12 projects at Ramstein Air Base funded by the
    Frankfurt International Airport. In 1999 an agreement was signed
    transferring the strategic airlift mission to Ramstein and Spangdahlem air
    bases to allow the complete closure of the Rhein-Main Air Base and return

    the remaining 188 hectares of property to the Frankfurt International
    Airport. U.S. Air Force Europe will return a reported $166.8 million in
    facilities in exchange for 37 projects (plus some minor replacement
    facility projects) worth an estimated $425 million. Of the $425 million,
    approximately $92 million is anticipated to come from NATO, while the
    Frankfurt International Airport, the Government of Germany, two German
    states, and the city of Frankfurt will fund the balance.

        Residual Value for Returned Property Varies by Country

    Residual value is dependent on the property returned to host-nation
    governments, which varies by status of forces agreements and other
    agreements between the United States and host nations. This can affect
    U.S. funding requirements overseas and the development and implementation
    of comprehensive master plans (see app. I, slides 16-17). Overseas
    regional commands can seek residual value for properties returned based on
    bilateral or supplementary international agreements with each host nation.
    However, the amount of money received from residual value programs has
    little to do with the amount originally invested; rather, proceeds are a
    function of current market conditions. The actual value of the returned
    property depends upon its reuse. As we previously reported, some countries
    approach residual value calculations differently than the United States,
    and unfortunately, in many cases there is not much of a market for
    operational military facilities, such as ammunition dumps.24 On the other
    hand, family housing may be reused and often results in residual value for
    the United States. The process must allow time for the marketing and sale
    of the properties, and as discussed previously, the residual value of the
    property returned may be offset by the cost of environmental remediation.

    In PACOM's area of responsibility, the agreements with South Korea and
    Japan differ from the agreements used in some other locations-such as
    Germany-in that South Korea and Japan are not obliged to compensate the
    United States for any improvements made in facilities or for the buildings
    and structures returned. According to PACOM officials, because South Korea
    and Japan generally provide replacement facilities, there is no need for
    international agreements to provide for residual value. For example, the
    South Korean government is expecting to sell property

    24 U.S. General Accounting Office, European Drawdown: Status of Residual
    Value Negotiations in Germany, GAO/NSIAD-94-195BR (Washington, D.C.: June
    23, 1994) and Overseas Installations: Efforts to Recoup Residual Value of
    Closed Facilities, GAO/NSIAD-96-35 (Washington, D.C.: Jan. 26, 1996).

    returned by USFK to raise capital to help finance the cost of moving U.S.
    forces near the demilitarized zone to areas south of Seoul and relocating
    the military personnel located at Yongsan Army Garrison.

    In EUCOM's area of responsibility, since the early 1990s, officials have
    reportedly recouped approximately $175 million in cash through negotiated
    settlements with nine European countries and returned these funds to the
    U.S. Treasury. EUCOM, in cooperation with the Department of State and its
    embassies, is currently involved in residual value negotiations with the
    German, Greek, British, Dutch, Belgian, Turkish, and Italian governments.
    However, these negotiations can take a long time. For example, in Germany
    negotiations usually take between 4 to 8 years in order for the Government
    of Germany to market and sell a facility. In Italy, the bilateral
    agreement states that if the Government of Italy reuses the returned
    property within 3 years, the United States may negotiate for residual
    value. EUCOM may be able to recoup residual value for parcels of land in
    Iceland; however, due to their military nature, they may not have any
    reuse value. DOD officials expressed concern about the likelihood of
    obtaining any significant residual value for future property returns.

    In CENTCOM's area of responsibility, arrangements vary by country-six host
    nations have agreements to allow for residual value negotiations, and nine
    countries have no such agreements. To date, CENTCOM has not recouped
    residual value from property returns.

    However, the amount of residual value the commands can expect to obtain in
    the future depends on how the host nation reuses the returned property. As
    with the level of burden-sharing-economically constrained markets, such as
    for some countries in EUCOM's area of responsibility, coupled with reduced
    defense spending by some host nations and closure of their own military
    facilities-the market for property from closed U.S. military installations
    has dwindled, which may result in little, if any, residual value for
    returned properties.

        United States May Incur Costs for Environmental Remediation of Property
        Returned to Host Nations

    In some instances, the United States could potentially incur costs for
    environmental remediation before the host-nation government will accept
    the returned property (see app. I, slides 14-15). The extent to which
    overseas regional commands incur costs varies by country and can affect
    U.S.-funded infrastructure costs and the development and implementation of
    comprehensive master plans. Historically, overseas regional commands have
    incurred limited costs for environmental remediation as a result of these
    property returns. DOD Instruction 4715.8 establishes policy and

    provides guidance for environmental remediation of overseas facilities.25
    Under this instruction, DOD components may be required to remediate
    property designated for return or returned to host nations if DOD-caused
    environmental contamination poses "known imminent and substantial
    endangerments to human health and safety" or there is a requirement by
    international agreement.

    Overseas commands' remediation experience varies by country. Environmental
    remediation has become a more important issue in recent years in some
    Asian countries, unlike countries in the EUCOM area of responsibility
    where environmental remediation has been an ongoing issue since at least
    the early 1990s. For example, the component commands in South Korea and
    Japan have incurred limited costs to date, while in EUCOM potential costs
    for environmental remediation are estimated at about $90 million,
    regardless of whether the property is returned. In the future, greater
    negotiations may be required to address environmental remediation, because
    environmental issues are becoming an increasing concern in South Korea and
    Japan. For example, the United States and South Korea recently set
    procedures for addressing environmental remediation,26 and the Government
    of South Korea is updating its environmental governing standards. In
    addition, according to PACOM officials, the Government of Japan is
    enacting more stringent environmental laws.

        Commands Have Multiple U.S. Funding Sources to Support Future Infrastructure
        Changes

    The level of U.S. funding required for overseas infrastructure costs
    varies by country-specific factors, and overseas commands have
    historically used various options to fund future infrastructure
    requirements, in addition to available host-nation funding (see app. I,
    slide 10). If history is a guide, once the Integrated Global Presence and
    Basing Strategy is complete and future infrastructure changes are fully
    identified, the overseas regional commands can be expected to use
    operation and maintenance and contingency operations appropriations, in
    addition to military

    25 DOD Instruction 4715.8, Environmental Remediation for DOD Activities
    Overseas (Feb. 2, 1998).

    26 Environmental Subcommittee under the United States and the Republic of
    Korea Status of Forces Agreement, Memorandum for the Joint Committee:
    Procedures for Environmental Survey and Consultation on Remediation for
    Facilities and Areas Designated to Be Granted or Returned (May 30, 2003).

    construction appropriations, including exercise-related construction
    authority, to fund ongoing and future infrastructure changes.

    In USFK, military infrastructure funding flows through nine
    organizations-the Army, the Navy, the Marine Corps, the Air Force, Special
    Operations, the Army and Air Force Exchange Service, the Defense Logistics
    Agency, the DOD Medical Command, and the Defense Commissary Agency. USFK
    plans to use military construction funds to upgrade a sewer system. It is
    also exploring "build to lease" housing at Camp Humphreys and other
    enduring installations in South Korea. Also, in PACOM's area of
    responsibility, little or no U.S. military construction funding is needed
    in Japan, because the Government of Japan historically funds most facility
    requirements. In EUCOM, the military components plan to fund a series of
    smaller forward-operating bases and forward-operating locations
    strategically located throughout their area of responsibility. For
    example, EUCOM plans to begin the $285,000 first phase of a five-phase
    exercise reception facility complex in Azerbaijan, using exercise-related
    construction authority. Also, EUCOM uses exercise-related construction
    authority, generally in small amounts, to set up training exercises at
    locations where the United States may not have permanent facilities, such
    as renovating a camp in Albania, repairing training bases in Bulgaria, and
    constructing an exercise refueling facility in Tunisia. In CENTCOM, the
    military components use operation and maintenance funds through
    contractors to finance facility requirements for ongoing operations in
    Iraq.

    Given current budget constraints and other defense priorities, the ability
    of the overseas regional commands and their component commands to obtain
    the required U.S. funding levels for future infrastructure changes without
    tradeoffs in other areas is unclear. To illustrate, the Comptroller
    General stated in the March 2004 updated strategic plan27 for GAO that
    events over the past 2 years have placed even greater strains on limited
    national resources. The long-range fiscal outlook appears to be
    unsustainable, given existing federal commitments. Policymakers are,
    therefore, increasingly being called on to distinguish wants from needs
    and to judge what the nation can afford and sustain, both now and in the
    longer term.

    27 U.S. General Accounting Office, Strategic Plan 2004-2009 (Washington,
    D.C.: March 2004).

        Opportunity to Strengthen Overseas Regional Commands' Comprehensive Master
        Plans and Periodic Status Reports

    While OSD's preliminary guidance directs the overseas regional commands to
    address the precise facility requirements, properties being returned to
    host nations, funding requirements, and the division of funding
    responsibilities between the United States and cognizant host nations in
    their comprehensive master plans, the extent to which the commands plan
    will address other factors-such as residual property value and
    environmental remediation issues, and multiple U.S. funding sources
    available to support future infrastructure changes-that are not clearly
    specified in OSD's preliminary guidance remains unclear. Continued
    monitoring and identification of these additional factors would make the
    comprehensive master plans and the required periodic report on the
    progress of their implementation more useful as tools to the services and
    overseas regional commands in managing U.S. military infrastructure and
    associated costs overseas, and provide Congress and OSD with more complete
    information for their oversight responsibilities.

                                      Conclusions

    While overseas regional commands are working on developing and
    implementing plans for installations they believe will have an enduring
    presence, they have limited efforts under way to address the requirements
    to develop comprehensive master plans as defined by the Senate report.
    Rather, they are awaiting the completion of the Integrated Global Presence
    and Basing Strategy and the receipt of OSD's finalized guidance for
    developing these plans. OSD's preliminary guidance directs the overseas
    regional commands to address several key factors-the precise facility
    requirements, properties being returned to host nations, funding
    requirements, and the division of funding responsibilities between the
    United States and cognizant host nations-in their comprehensive master
    plans. However, the extent to which the commands plan to address residual
    property value and environmental remediation issues and U.S.funded costs
    associated with future infrastructure changes remains unclear. However,
    including information on these factors could be important to ensuring more
    complete comprehensive plans. First, without addressing the extent to
    which DOD expects to obtain residual value for properties returned to each
    host nation, if any, and offset environmental remediation costs, the
    comprehensive master plans would fail to identify all the expected capital
    available to help finance the cost of moving and consolidating U.S. forces
    overseas and improving their facilities. Second, without addressing the
    potential for multiple U.S. funding sources available to support future
    infrastructure changes, the comprehensive master plans might not fully
    identify the extent to which overseas regional commands and their
    component commands plan to rely on these funding sources compared to
    host-nation contributions. Continued monitoring and

      Recommendations for Executive Action

    identification of these factors would make the comprehensive master plans
    and the required periodic status reports more useful as tools to the
    military services and overseas regional commands in managing U.S. military
    infrastructure and U.S.-funded associated costs overseas, and more
    informative for Congress and DOD in their oversight responsibilities.

    To make future comprehensive master plans and periodic reporting to
    Congress on their implementation more useful in managing U.S. military
    infrastructure and associated costs and more informative for Congress and
    OSD in their oversight responsibilities, we recommend that the Secretary
    of Defense direct the Under Secretary of Defense for Acquisition,
    Technology and Logistics to require that overseas regional commanders (1)
    address the extent to which implementation of their master plans will be
    affected by residual property value and environmental remediation issues,
    as well as multiple U.S. funding sources available to support future
    infrastructure changes and include this information in their comprehensive
    master plans, and (2) provide updated information on the applicability of
    residual property value and environmental remediation issues and multiple
    U.S. funding sources in their annual status reports to Congress on the
    master plans.

                                    Agency Comments
                                   and Our Evaluation

    In commenting on a draft of this report, the Principal Assistant Deputy
    Under Secretary of Defense (Installations and Environment) partially
    concurred with our recommendations. While DOD concurred that future
    comprehensive master plans should address environmental issues, the
    department did not concur that master plans should include assessments of
    residual value or multiple funding sources. According to DOD officials,
    residual value is obtained through negotiations and cannot be predicted
    and therefore should not be assumed in a master plan. Likewise, master
    plans should not include multiple funding sources because military
    construction projects that would be eligible for these alternate funding
    sources are subject to funding thresholds and should not appear on a
    master plan. While we acknowledge the uncertainties of obtaining residual
    value for returned property and thresholds for multiple funding sources,
    we believe overseas regional commands should identify residual property
    value issues as they evolve, as well as identify multiple U.S. funding
    sources that may be available to support future infrastructure changes,
    and include that information in their annual status reports to Congress on
    their master plans. Our recommendations as originally written could be
    interpreted as being applicable only to the commands' master plans.
    Instead, we have modified our recommendations to identify the extent to

      Scope and Methodology

    which implementation of their master plans will be affected by these
    factors as they evolve in DOD's annual status reports to Congress and to
    recognize that information on these issues may evolve over time. DOD's
    comments are included in this report as appendix II. DOD also provided
    technical changes, which we incorporated as appropriate.

    To determine the status of development of overseas regional commands'
    comprehensive master plans, we visited USFK, PACOM, EUCOM, and SOCOM to
    discuss the development of comprehensive master plans. We reviewed and
    analyzed policies, directives, reports, briefings, and information and
    guidance on overseas military construction. To assess the level of
    guidance available to the commands on development and implementation of
    comprehensive master plans, we met with OSD officials to discuss the
    status of guidance distributed to the commands.

    To assess factors-such as associated costs, burden-sharing implications,
    planned property returns, environmental remediation issues, and residual
    values-that can affect U.S. infrastructure costs overseas and the
    development and implementation of comprehensive master plans, we reviewed
    and analyzed available reports, documents, policies, directives,
    host-nation international agreements, and information and guidance on each
    of the above factors. We also discussed the effect of each of these issues
    on command master plans with USFK, PACOM, EUCOM, and SOCOM officials as
    well as officials at each of the component commands and agencies we
    visited-Eighth Army, South Korea; Army Installation Management Agency,
    South Korea Regional Office; Army Corps of Engineers, South Korea; 7th Air
    Force, South Korea; and U.S. Naval Forces, South Korea; U.S. Army,
    Pacific; U.S. Pacific Air Force; U.S. Pacific Fleet; U.S. Marine Forces,
    Pacific; U.S. Army, Europe; Army Installation Management Agency, Europe
    Regional Office; U.S. Air Force, Europe; and U.S. Navy, Europe. At each
    command, we discussed potential U.S.-associated costs for implementing
    such master plans, burden-sharing implications, property returns to host
    nations, the potential U.S. costs for environmental remediation, and
    residual value likely to be obtained by the United States as a result of
    those property returns. In South Korea, we met with the Deputy Chief of
    Mission at the U.S. Embassy South Korea to discuss the U.S. diplomatic
    perspective on potential basing changes in South Korea, burden-sharing
    implications, and the political sensitivities of environmental impacts. We
    also met with an official from the Republic of South Korea Ministry of
    National Defense to obtain a host-nation perspective on the status of
    implementation of master plans and burdensharing implications for
    relocation of U.S. facilities in South Korea and to

    discuss funding and time frames for decisions by the Republic of South
    Korea. We also discussed, from the host-nation perspective, potential U.S.
    costs for environmental remediation of property returns to the host
    nation. To obtain the DOD perspective on issues in South Korea and Japan,
    we met with officials in the Office of the Secretary of Defense,
    Asian-Pacific Affairs Office. We also met with officials in the Office of
    the Secretary of Defense to determine the guidance and criteria provided
    to overseas regional commands for development of comprehensive master
    plans. Through our review of the data, examination of specific data
    elements, and discussions with DOD officials, we believe the data gathered
    are sufficiently reliable for the purposes of this report, except for data
    generated by CENTCOM. Because of ongoing operations, we were not able to
    meet with CENTCOM officials to discuss the development of comprehensive
    master plans, factors that can affect U.S. costs or data reliability.
    However, we obtained written responses to questions on overseas presence
    and basing, U.S.-associated costs, burden-sharing implications, property
    returns to host nations, potential U.S. liability for environmental
    remediation, and residual value likely for property returns to host
    nations.

    We conducted our work from November 2003 through April 2004 in accordance
    with generally accepted government auditing standards.

    We are sending copies of this report to the Secretaries of Defense, the
    Army, the Navy, and the Air Force; the Commandant of the Marine Corps;
    and the Director, Office of Management and Budget. Copies will be made
    available to others upon request. In addition, this report will be
    available
    at no charge on our 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 has any further questions regarding
    this report. Major contributors to this report were Donna Rogers, Nelsie
    Alcoser, Ella Mann, and R.K. Wild.

    Barry W. Holman, Director
    Defense Capabilities and Management

    Congressional Committees

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

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

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

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

                            Appendix I: GAO Briefing Slides

                            Appendix I: GAO Briefing Slides

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                            Appendix I: GAO Briefing Slides

                            Appendix I: GAO Briefing Slides

    Appendix II: Comments from the Department of Defense

    Appendix II: Comments from the Department of Defense

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