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 [email protected].

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
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its entirety without further permission from GAO. However, because this
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copyright holder may be necessary if you wish to reproduce this material
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

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                        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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