Military Base Realignments and Closures: Estimated Costs Have	 
Increased and Estimated Savings Have Decreased (12-DEC-07,	 
GAO-08-341T).							 
                                                                 
The Department of Defense (DOD) is currently implementing	 
recommendations from the 2005 Base Realignment and Closure (BRAC)
round, which is the fifth round undertaken by DOD since 1988. The
2005 round is, by GAO's assessment, the biggest, most complex,	 
and costliest BRAC round ever, in part because, unlike previous  
rounds, the Secretary of Defense viewed the 2005 round as an	 
opportunity not only to achieve savings but also to assist in	 
transforming the department. GAO's testimony addresses (1) GAO's 
role in the BRAC process, and (2) how DOD's current cost and	 
savings estimates to implement the 2005 recommendations compare  
to the 2005 Defense Base Closure and Realignment Commission's	 
(the Commission) cost and savings estimates. This testimony is	 
based primarily on the report GAO issued yesterday (GAO-08-159)  
on the overall changes to DOD's cost and savings estimates for	 
the 2005 BRAC round. To analyze these changes, GAO compared the  
Commission's estimates in its 2005 report to DOD's estimates in  
its fiscal year 2008 BRAC budget submission. This testimony is	 
also based on several reports GAO has issued on the		 
implementation of selected recommendations, and GAO's prior work 
assessing the 2005 decision-making process. GAO's work was	 
performed in accordance with generally accepted government	 
auditing standards.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-341T					        
    ACCNO:   A78830						        
  TITLE:     Military Base Realignments and Closures: Estimated Costs 
Have Increased and Estimated Savings Have Decreased		 
     DATE:   12/12/2007 
  SUBJECT:   Base closures					 
	     Base realignments					 
	     Cost analysis					 
	     Cost control					 
	     Defense budgets					 
	     Defense cost control				 
	     Interagency relations				 
	     Military bases					 
	     Military budgets					 
	     Military cost control				 
	     Military facilities				 
	     Military facility construction			 
	     Military personnel 				 
	     Program evaluation 				 
	     Strategic planning 				 
	     Cost estimates					 
	     Program coordination				 
	     DOD Base Realignment and Closure Program		 

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GAO-08-341T

   

     * [1]Summary
     * [2]Background
     * [3]GAO's Role in the BRAC Process
     * [4]Estimated Costs Have Increased and Savings Have Decreased

          * [5]Estimated Onetime Costs Have Increased and Could Continue to
          * [6]Annual Savings Have Decreased and May Be Overstated
          * [7]DOD Will Take Longer to Recoup Up-Front Costs

     * [8]Contact and Acknowledgments
     * [9]GAO Contact
     * [10]Acknowledgments
     * [11]GAO's Mission
     * [12]Obtaining Copies of GAO Reports and Testimony

          * [13]Order by Mail or Phone

     * [14]To Report Fraud, Waste, and Abuse in Federal Programs
     * [15]Congressional Relations
     * [16]Public Affairs

Testimony

Before the Subcommittee on Readiness, Committee on Armed Services, House
of Representatives

United States Government Accountability Office

GAO

For Release on Delivery
Expected at 10:00 a.m. EST
Wednesday, December 12, 2007

MILITARY BASE REALIGNMENTS AND CLOSURES

Estimated Costs Have Increased and Estimated Savings Have Decreased

Statement of Brian J. Lepore, Director
Defense Capabilities and Management

GAO-08-341T

Mr. Chairman and Members of the Subcommittee:

I appreciate the opportunity to be here today to discuss the projected
costs and savings associated with implementing the 2005 Base Realignment
and Closure (BRAC) round. The Department of Defense (DOD) is currently
implementing recommendations from the 2005 BRAC round, which is the fifth
BRAC round undertaken by DOD since 1988. Based on our work to date, the
2005 round is the biggest, most complex, and costliest BRAC round ever, in
part because, unlike previous rounds, the Secretary of Defense viewed the
2005 round as an opportunity not only to achieve savings but also to
assist in transforming the department. As a result, the 2005 round differs
from previous rounds in terms of the number of actions, projected costs to
implement the actions, and projected savings. My testimony today addresses
(1) GAO's role in the BRAC process and (2) how DOD's cost and savings
estimates for the 2005 round, as reported in its fiscal year 2008 BRAC
budget submission, compare to the 2005 Defense Base Closure and
Realignment Commission's (the Commission) cost and savings estimates.

My testimony is based largely on our report reviewing the changes to the
overall cost and savings estimates associated with the 2005
recommendations, which we issued yesterday.^1 In that report we found that
estimated costs to implement the 2005 BRAC round have increased and
estimated savings have decreased. To analyze the changes in the estimated
costs and savings, we compared the Commission's estimates, as reported in
the Commission's 2005 report,^2 to DOD's estimates in its fiscal year 2008
BRAC budget submission. Additionally, we reported that DOD's projected net
annual recurring savings may be overstated by 46 percent due to the lack
of a distinction between savings from transferring military personnel from
one location to another, which do not produce tangible savings outside of
the military personnel account, and savings from reduced operating costs
that will make funds available for other uses. We recommended that DOD
better explain its net annual recurring savings; DOD concurred with this
recommendation and plans to address it in its next budget submission. I
will more fully discuss the findings of our cost and savings report that
we released yesterday later in my statement. My testimony is also based on
our prior work assessing the 2005 BRAC decision-making process issued in
July 2005, as statutorily required, and several reports we have issued
over the past year on the implementation of selected recommendations. Our
work was performed in accordance with generally accepted government
auditing standards. A listing of our related products is at the end of
this statement.

^1GAO, Military Base Realignments and Closures: Cost Estimates Have
Increased and Are Likely to Continue to Evolve, [17]GAO-08-159
(Washington, D.C.: Dec. 11, 2007).

^2Defense Base Closure and Realignment Commission, 2005 Base Closure and
Realignment Commission Report to the President (Arlington, Va.: Sept. 8,
2005).

Summary

GAO has played two long-standing roles in the BRAC process. First, as
requested by congressional committees in the 1988 round or mandated by law
since 1990, we have served as an independent and objective observer of the
BRAC process and have assessed and reported on DOD's decision-making
processes leading up to proposed realignment and closure recommendations.
In our assessment of the 2005 round, we reported that DOD's
decision-making process for developing its recommendations was generally
logical, well documented, and reasoned. Our assessment of the process does
not constitute endorsement of any recommendations as it was the
Commission's responsibility, not ours, to approve DOD's recommendations.
We identified some limitations with cost and savings estimates, some
recommendations that will take longer than expected to recoup up-front
costs, and some with limited savings relative to implementation costs. Our
second role has focused on reviewing the implementation of realignment and
closure actions once the recommendations became effective, just as we
review the effectiveness and efficiency of numerous programs authorized or
mandated by Congress. In addition to the report we issued yesterday, we
have issued several reports on DOD's implementation of its 2005 BRAC
recommendations affecting the Air National Guard, Army Reserve components,
and business process reengineering in the Navy and the Defense Logistics
Agency. We will continue to review DOD's implementation of the 2005
recommendations, and the House Armed Services Committee directs us to
monitor and report annually on DOD's progress with a final report to be
issued within 1 year after the end of the 6-year BRAC implementation
period, which ends in September 2011.^3

DOD plans to spend more and save less than originally estimated for the
2005 BRAC round. Based on DOD's fiscal year 2008 budget submission, DOD's
cost estimates to implement the 2005 recommendations have increased by 48
percent through the 6-year implementation period, from $21 billion to $31
billion, compared to the Commission's cost estimates.^4 Our analysis
indicates that nearly two-thirds of the $10 billion cost increase is due
to increased projected military construction costs, while inflation,
environmental restoration costs, and other costs, such as operations and
maintenance, account for the remaining one-third of the cost increase. Six
recommendations account for half of the increase in military construction
costs. For example, the military construction cost to relocate the Army's
armor school from Fort Knox, Kentucky, to Fort Benning, Georgia, increased
by nearly $670 million because the Army identified additional projects
that were not included in the original cost estimates.^5 Additionally, the
projected military construction cost to support the relocation of
personnel from Fort Monmouth, New Jersey, has increased by more than $550
million, largely because the Army needed to build new facilities instead
of renovating existing facilities at one location and build new facilities
instead of sharing existing facilities at another location.^6 Overall, we
believe there is potential for further increases in construction costs due
to uncertainty in whether the Army's new initiative designed to reduce
construction costs will achieve the planned results. If the Army is unable
to achieve these reduced costs, the effect on BRAC implementation costs
could be considerable and costs would rise. While DOD's projected onetime
costs have increased, projected net recurring savings as reported in DOD's
fiscal year 2008 budget submission have decreased about 5 percent, from
$4.2 billion to $4.0 billion annually, compared to the Commission's
estimates.^7 DOD attributed the decrease in its savings estimates
primarily to changes in initial assumptions or plans. Based on our work to
date, DOD's annual recurring savings estimate may be overstated by about
46 percent due to the inclusion of $1.85 billion in military personnel
entitlements--such as salaries and housing allowances--for military
personnel that DOD plans to shift to other positions but does not plan to
eliminate. While DOD disagrees with us, we do not believe that
transferring personnel to other locations produces tangible dollar savings
outside the military personnel accounts that DOD can use to fund other
defense priorities since these personnel will continue to receive salaries
and benefits. Because DOD's BRAC budget submission does not explain the
difference between net annual recurring savings attributable to military
personnel entitlements, which personnel would still receive, and net
annual recurring savings from reduced operating costs that would make
funds available for other uses, DOD could generate a false sense that all
of its reported savings could be used to fund other defense priorities. As
such, we recommended in the report that we issued yesterday that DOD
better explain its net annual recurring savings--a recommendation with
which DOD has concurred and plans to address in its next budget
submission. Finally, our analysis shows that accumulated savings are
projected to offset accumulated costs in 2017--12 years after the
beginning of the implementation period for the 2005 round, which is 4
years longer than the Commission's estimate of 2013. This extended payback
period includes the savings estimates from military personnel entitlements
and Cannon Air Force Base, New Mexico, that we question, which if
excluded, would increase the time needed to recoup up-front costs still
further to 19 years, or the year 2025. While DOD should reach the overall
break-even point for its 2005 recommendations in less than 20 years, the
number of individual recommendations that are not expected to break even
within 20 years has increased from 30, as estimated by the Commission, to
73, based on DOD's fiscal year 2008 budget submission.

^3H.R. Rep. No. 110-146, at 514 (2007).

^4The Commission reported its estimates in constant fiscal year 2005
dollars (i.e., excludes projected inflation), while DOD reported BRAC
estimates in the fiscal year 2008 President's budget submission in current
dollars (i.e., includes projected inflation).

^5The overall cost of the recommendation to relocate the Army's armor
school from Fort Knox, Kentucky, to Fort Benning, Georgia, has increased
by more than $680 million.

^6The overall cost of the recommendation to close Fort Monmouth, New
Jersey, has increased by almost $678 million.

^7The Commission reported its estimates in constant fiscal year 2005
dollars (i.e., excludes projected inflation), while DOD reported BRAC
estimates in the fiscal year 2008 President's budget submission in current
dollars (i.e., includes projected inflation). When the effect of inflation
is eliminated, DOD's estimated net annual recurring savings decreased by
more than $800 million to about $3.4 billion--a 20 percent decrease.

Background

DOD has undergone four BRAC rounds since 1988 and is currently
implementing its fifth round.^8 In May 2005, the Secretary of Defense made
public more than 200 recommendations that DOD estimated would generate net
annual recurring savings of about $5.5 billion beginning in fiscal year
2012. In making its 2005 realignment and closure proposals, DOD applied
legally mandated selection criteria that included military value as the
primary consideration, as well as expected costs and savings, economic
impact to local communities, community support infrastructure, and
environmental impact. Military value, which includes such considerations
as an installation's current and future mission capabilities, condition,
ability to accommodate future needs, and cost of operations, was the
primary consideration for making recommendations as mandated by BRAC law
and as reported by both DOD and the Commission. Additionally, the
Secretary of Defense established three goals for the 2005 BRAC round: (1)
transforming DOD by aligning the infrastructure with the defense strategy,
(2) fostering jointness across DOD, and (3) reducing excess infrastructure
and producing savings.

^8The first round in 1988 was authorized by the Defense Authorization
Amendments and Base Closure and Realignment Act, as amended (Pub. L. No.
100-526, Title II, (1988)). Subsequently, additional BRAC rounds were
completed in 1991, 1993, and 1995 as authorized by the Defense Base
Closure and Realignment Act of 1990, as amended (Pub. L. No.101-510, Title
XXIX (1990)). The latest round--BRAC 2005--was authorized by the National
Defense Authorization Act for Fiscal Year 2002 (Pub. L. No. 107-107, Title
XXX (2001)).

The 2005 round is unlike previous BRAC rounds due to the Secretary of
Defense's emphasis on transformation and jointness, rather than just
reducing excess infrastructure. For example, as part of its efforts to
transform its forces, the Army included actions to restation forces from
Europe and Korea to domestic installations, which were part of its larger
review of bases worldwide. The 2005 round also differs from previous BRAC
rounds in terms of the number of closure and realignment actions. While
the number of major closures and realignments is a little greater than
individual previous rounds, the number of minor closures and realignments
is significantly greater than those in all previous rounds combined, as
shown in table 1.^9 DOD plans to execute over 800 closure and realignment
actions as part of the 2005 BRAC round, which is more than double the
number of actions completed in the prior four rounds combined. The large
increase in the number of minor closures and realignments is primarily
attributable to the more than 500 actions involving the Army National
Guard and Army Reserve, representing over 60 percent of the BRAC actions.

^9DOD defines major closures as installations recommended for closure with
plant replacement value exceeding $100 million and major realignments as
installations losing more than 400 military and civilian personnel. Minor
closures and realignments are those closures and realignments that do not
meet the definitions above.

Table 1: Comparison of BRAC 2005 with Previous Rounds

Round: 1988; 
Major closures: 16; 
Major realignments: 4; 
Minor closures and realignments: 23; 
Total actions: 43; 
Costs through implementation (dollars in billions): $2.7; 
Net annual recurring savings (dollars in billions): $0.9. 

Round: 1991; 
Major closures: 26; 
Major realignments: 17; 
Minor closures and realignments: 32; 
Total actions: 75; 
Costs through implementation (dollars in billions): 5.2; 
Net annual recurring savings (dollars in billions): 2.0. 

Round: 1993; 
Major closures: 28; 
Major realignments: 12; 
Minor closures and realignments: 123; 
Total actions: 163; 
Costs through implementation (dollars in billions): 7.6; 
Net annual recurring savings (dollars in billions): 2.6. 

Round: 1995; 
Major closures: 27; 
Major realignments: 22; 
Minor closures and realignments: 57; 
Total actions: 106; 
Costs through implementation (dollars in billions): 6.5; 
Net annual recurring savings (dollars in billions): 1.7. 

Round: Total; 
Major closures: 97; 
Major realignments: 55; 
Minor closures and realignments: 235; 
Total actions: 387; 
Costs through implementation (dollars in billions): $22.0; 
Net annual recurring savings (dollars in billions): $7.2. 

Round: 2005; 
Major closures: 22[A]; 
Major realignments: 33[A]; 
Minor closures and realignments: 757[B]; 
Total actions: 812; 
Costs through implementation (dollars in billions): $31.2[C]; 
Net annual recurring savings (dollars in billions): $4.0[C]. 

Source: Defense Base Closure and Realignment Commission, DOD, and GAO
analysis of Commission and DOD data.

^aThe number of major realignments and closures is as reported by the
Commission in 2005.

^bAn individual base may be affected by more than 1 realignment.

^cCost and savings estimates for the 2005 round are DOD's estimates as
reported in the fiscal year 2008 BRAC budget submission.

Also, as shown in table 1, the 2005 round is expected to cost more to
implement than all of the previous BRAC rounds combined and save more than
any single round. I will discuss the projected costs and savings of the
2005 round later in my statement.

As in all previous BRAC rounds, DOD used the Cost of Base Realignment
Actions (COBRA) model to provide a standard quantitative approach to
compare estimated costs and savings across various proposed
recommendations. The COBRA model relies to a large extent on standard
factors and averages but is not intended to and consequently does not
present budget quality estimates. As a result, COBRA-developed cost and
savings estimates cannot be assumed to represent the actual costs that
Congress will need to fund through appropriations to complete
implementation of BRAC recommendations, nor will they fully reflect the
savings intended to be achieved after implementation. In other words, as
we reported in our review of the 1995 and 2005 BRAC rounds,^10 the costs
identified in COBRA are most likely to be different than the costs that
DOD will actually incur and Congress will be asked to fund to complete
implementation. We have examined COBRA in the past, as well as during our
review of the 2005 BRAC round, and, given the quality of the data and
assumptions used in the model, found it to be a generally reasonable
estimator for comparing potential costs and savings among alternative
closure and realignment scenarios with the caveat that the estimates do
not represent budget-quality data, as we previously reported in our
assessments of the 1995 and 2005 BRAC rounds. In this and previous BRAC
rounds, DOD subsequently developed budget-quality estimates after BRAC
decisions were made.

^10GAO, Military Bases: Analysis of DOD's 1995 Process and Recommendations
for Closure and Realignment, [18]GAO/NSIAD-95-133 (Washington, D.C.: Apr.
14, 1995) and Military Bases: Analysis of DOD's 2005 Selection Process and
Recommendations for Base Closures and Realignments, [19]GAO-05-785
(Washington, D.C.: July 1, 2005).

The Commission was an independent body that reviewed and had the authority
to change the Secretary's recommendations if it determined that the
Secretary deviated substantially from the legally mandated selection
criteria and DOD's force structure plan. After the Commission's review in
2005, it forwarded a list of 182 recommendations for base closures or
realignments to the President. The Commission estimated that its
recommendations would cost $21 billion and generate net annual recurring
savings of $4.2 billion beginning in fiscal year 2012. The Commission's
recommendations were accepted in their entirety by the President and
Congress,^11 and became effective on November 9, 2005. The BRAC
legislation requires DOD to complete closure and realignment actions
within a 6-year time frame ending September 15, 2011.

GAO's Role in the BRAC Process

GAO has two long-standing roles in the BRAC process. First, as requested
by congressional committees for the 1988 BRAC round and mandated by law
since 1990, we have served as an independent and objective observer of the
BRAC process and have assessed and reported on DOD's decision-making
processes leading up to proposed realignment and closure recommendations.
The law authorizing the 2005 BRAC round required us to independently
assess DOD's process and recommendations and to submit a report by July 1,
2005.^12 To make an informed and timely assessment, we operated in a
real-time setting and had access to significant portions of the process as
it evolved, thus affording the department an opportunity to address any
concerns we raised in a timely manner. From our vantage point, we were
looking to see to what extent DOD followed a logical, well-reasoned, and
well-documented process, where we could see a logical flow between DOD's
analysis and its proposed recommendations. In our July 2005 report, we
stated that DOD's decision-making process for developing its
recommendations was generally logical, well documented, and reasoned.^13
We also stated that DOD established a structured and largely sequential
process for obtaining and analyzing data that provided an informed basis
for identifying and evaluating BRAC options. Our conclusion does not
constitute endorsement of any recommendation, as it was the Commission's
responsibility, not ours, to approve DOD's recommendations. However, we
identified some limitations with DOD's cost and savings estimates, some
recommendations having lengthy payback periods, and some recommendations
with limited savings relative to costs.

^11The President was required to approve or disapprove the Commission's
recommendations in their entirety by September 23, 2005. After they were
approved, the recommendations were forwarded to Congress, which had 45
days or until the adjournment of Congress to disapprove the
recommendations on an all-or-none basis; otherwise, the recommendations
became binding.

^12Pub. L. No. 107-107, Title XXX (2001).

Once the recommendations become effective, our role is to review DOD's
efforts to implement the realignment and closure actions, just as we
routinely review the efficiency and effectiveness of congressionally
mandated or authorized programs across the government. We generally do our
BRAC work under the authority of the Comptroller General to conduct
reviews on his own initiative because of the broad congressional interest
in the base closure process, which allows us to provide information
broadly and generally without restriction.^14 Yesterday we issued our most
recent report reviewing the changes to the overall cost and savings
estimates associated with the 2005 recommendations, which I will discuss
later in my statement. We have previously reported on DOD's efforts to
implement recommendations affecting the Air National Guard, Army reserve
components, business process reengineering efforts in the Navy and Defense
Logistics Agency, and environmental restoration costs.^15 These reports,
as well as the report we issued yesterday, show that although DOD is
making progress in implementing BRAC recommendations, it is facing some
implementation challenges, such as synchronizing personnel movements with
planned infrastructure improvements and the need to coordinate actions
among multiple services and agencies. We will continue to review DOD's
implementation of the 2005 recommendations,^16 and the House Armed
Services Committee directs us to monitor and report annually on DOD's
progress and issue a final report within 1 year after the end of the
6-year BRAC implementation period, which ends in September 2011.^17

13 [20]GAO-05-785 .

^1431 U.S.C. S 717.

Estimated Costs Have Increased and Savings Have Decreased

DOD plans to spend more and save less than originally estimated for the
2005 round, as we discuss in the report we issued yesterday. Based on
DOD's fiscal year 2008 BRAC budget submission, estimated onetime costs
have increased by 48 percent through the 6-year implementation period
compared to the Commission's cost estimates and could continue to
increase.^18 On the other hand, DOD's projected net savings have decreased
about 5 percent compared to the Commission's estimates and may be
overstated due to the inclusion of savings for transferring military
personnel positions while continuing to pay the same salary and
benefits.^19 As a result, savings from the 2005 round are projected to
offset costs in 2017--4 years longer than the BRAC Commission estimate. If
the estimated savings from military personnel entitlements and Cannon Air
Force Base, New Mexico, that we question are excluded, the round will not
reach the break-even point until the year 2025.

^15GAO, Military Base Closures: Management Strategy Needed to Mitigate
Challenges and Improve Communication to Help Ensure Timely Implementation
of Air National Guard Recommendations, [21]GAO-07-641 (Washington, D.C.:
May 16, 2007); Military Base Realignments and Closures: Plan Needed to
Monitor Challenges for Completing More Than 100 Armed Forces Reserve
Centers, [22]GAO-07-1040 (Washington, D.C.: Sept. 13, 2007); Military Base
Closures: Projected Savings from Fleet Readiness Centers Likely Overstated
and Actions Needed to Track Actual Savings and Overcome Certain
Challenges, [23]GAO-07-304 (Washington, D.C.: June 29, 2007); Military
Base Realignments and Closures: Transfer of Supply, Storage, and
Distribution Functions from Military Services to Defense Logistics Agency,
[24]GAO-08-121R (Washington, D.C.: Oct. 26, 2007); and Military Base
Closures: Opportunities Exist to Improve Environmental Cleanup Cost
Reporting and to Expedite Transfer of Unneeded Property, [25]GAO-07-166
(Washington, D.C.: Jan. 30, 2007).

^16As part of our ongoing reviews of DOD's implementation of the 2005
recommendations, we plan to review the methodology of DOD's forthcoming
report addressing human capital issues related to the closure of Fort
Monmouth, New Jersey.

^17H.R. Rep. No. 110-146, at 514 (2007).

^18The BRAC Commission reported its estimates in constant fiscal year 2005
dollars (i.e., excludes projected inflation), while DOD reported BRAC
estimates in the fiscal year 2008 President's budget submission in current
dollars (i.e., includes projected inflation). However, when the effect of
inflation is eliminated, projected costs have increased $7.5 billion, or
36 percent.

Estimated Onetime Costs Have Increased and Could Continue to Increase

Since the BRAC Commission issued its cost and savings projections in 2005,
DOD's cost estimates to implement the 2005 recommendations, as reported in
DOD's fiscal year 2008 budget submission, have increased by 48 percent,
from $21 billion to $31 billion.^20 The majority of the projected cost
increase is due to increased military construction requirements, as shown
in table 2.

Table 2: Increases in Onetime Costs

Category: Military construction; 
Amount (dollars in millions): $6,451; 
Percentage: 64. 

Category: Inflation; 
Amount (dollars in millions): 2,589; 
Percentage: 25. 

Category: Environmental cleanup[A]; 
Amount (dollars in millions): 589; 
Percentage: 6. 

Category: Other (including operations and maintenance); 
Amount (dollars in millions): 506; 
Percentage: 5. 

Category: Total; 
Amount (dollars in millions): $10,135; 
Percentage: 100. 
Source: GAO analysis of DOD data.

Note: Totals may not sum due to rounding.

^aAdditional environmental cleanup costs typically are incurred after the
implementation period.

Two of the cost elements listed in table 2--inflation and environmental
cleanup--were intentionally not considered in the initial estimates
produced by COBRA. Inflation, which accounts for 25 percent of the
increase, was not included in the Commission's analysis because costs were
presented in constant dollars.^21 Further, expected environmental cleanup
cost estimates, which account for about 6 percent of the cost increase,
were not included in the Commission's analysis because DOD has had a
long-standing policy of not considering environmental cleanup costs in its
BRAC decision making. We have agreed with DOD's position that such costs
are a liability to DOD regardless of its base closure recommendations.
Some environmental restoration may be necessary to protect human health
and safety, whether or not a base is closed. While such costs are not
included in the COBRA model, they are included in developing BRAC
implementation budgets and recorded as a BRAC cost. We reported in January
2007 that environmental cleanup costs are likely to increase and Congress
does not have full visibility over the total expected cost of DOD's
BRAC-related environmental cleanup efforts.^22

^19The BRAC Commission reported its estimates in constant fiscal year 2005
dollars (i.e., excludes projected inflation), while DOD reported BRAC
estimates in the fiscal year 2008 President's budget submission in current
dollars (i.e., includes projected inflation). However, when the effect of
inflation is eliminated, projected net annual recurring savings have
decreased about $800 million, or 20 percent.

^20The BRAC Commission reported its estimates in constant fiscal year 2005
dollars (i.e., excludes projected inflation), while DOD reported BRAC
estimates in the fiscal year 2008 President's budget submission in current
dollars (i.e., includes projected inflation). However, when the effect of
inflation is eliminated, projected costs have increased $7.5 billion, or
36 percent.

A limited number of recommendations account for the majority of the
increase in military construction costs. Specifically, six recommendations
associated with moving activities from leased space to military
installations, closing and realigning Army installations, and realigning
medical activities account for half of the increase in military
construction costs:

           o Activities in leased space: The military construction cost for
           the recommendation to consolidate the National
           Geospatial-Intelligence Agency at Fort Belvoir, Virginia, has
           increased by nearly $350 million, in part because the agency
           identified the need for additional supporting facilities, such as
           a technology center and additional warehouse space.^23 Likewise,
           the military construction cost for the recommendation to move
           various DOD activities from leased space to Fort Belvoir and Fort
           Lee, Virginia more than doubled to nearly $1 billion, an increase
           of more than $500 million, largely because of changes to
           facilities at the receiving locations.^24 For example, DOD
           determined a parking garage, rather then a parking lot, was needed
           to accommodate the increase in personnel at Fort Belvoir, which
           increased the original estimate of $3 million to $160 million.

           o Closing and realigning Army installations: The military
           construction cost for the recommendation to relocate the Army's
           armor school from Fort Knox, Kentucky, to Fort Benning, Georgia,
           to support the creation of a maneuver school has increased by
           nearly $670 million--98 percent of the total increase in onetime
           costs for this recommendation--largely because the Army identified
           about $400 million in additional projects that were not originally
           included in the cost estimates, such as training ranges, medical
           facilities, and a child development center, as well as $280
           million in infrastructure support, such as water, sewer, and gas
           lines.^25 Further, the military construction cost for the
           recommendation to close Fort Monmouth, New Jersey has more than
           doubled to almost $1 billion--an increase of more than $550
           million--due to the need to build new facilities rather than
           renovate existing facilities at Aberdeen Proving Ground, Maryland,
           ($375 million) and build new facilities rather than share
           facilities at West Point, New York, to accommodate the U.S. Army
           Military Academy Preparatory School ($175 million).^26

           o Realigning medical activities: The military construction cost
           for the recommendation to realign the Walter Reed Army Medical
           Center in the District of Columbia and relocate medical care
           functions to the National Naval Medical Center, Bethesda,
           Maryland, and Fort Belvoir, Virginia, has increased by almost $440
           million to over $1 billion, largely because of additional
           facilities needs, such as a parking structure and a larger
           addition to the medical center, that were not included in the
           original estimate.^27 Likewise, the military construction cost for
           the recommendation to consolidate medical enlisted training and
           establish the San Antonio Regional Medical Center at Fort Sam
           Houston, Texas, has increased by almost $540 million, largely
           because planning officials identified requirements to move
           inpatient care functions that were not in the original
           estimate.^28 Additionally, DOD determined that more instructional
           and laboratory space was required to accommodate the increased
           number of students expected to receive medical training at Fort
           Sam Houston. The number of students expected to attend the center
           annually was underestimated by more than 2,700 students, or 44
           percent.
			  
^21The increase in costs due to inflation occurred because the Commission
presented its estimates using constant fiscal year 2005 dollars, which
does not include the effects of projected inflation, whereas DOD's
budgeted estimates were presented in current dollars because budget
requests take into consideration projected inflation.

^22 [26]GAO-07-166 .

^23The overall cost for the recommendation to consolidate the National
Geospatial-Intelligence Agency at Fort Belvoir, Virginia, has increased by
about $974 million.

^24The overall cost of the recommendation to move various DOD activities
from leased space to Fort Belvoir and Fort Lee, Virginia, has increased
nearly $600 million.

^25The overall net cost of the recommendation to relocate the Army's armor
school from Fort Knox, Kentucky, to Fort Benning, Georgia, has increased
by more than $680 million.

^26The overall cost of the recommendation to close Fort Monmouth, New
Jersey, has increased by almost $678 million.

^27The overall cost of the recommendation to realign the Walter Reed Army
Medical Center in the District of Columbia and relocate medical care
functions to the National Naval Medical Center, Bethesda, Maryland, and
Fort Belvoir, Virginia, has increased by nearly $700 million.

           Based on our analysis, the projected costs for the 2005 round
           could continue to increase because of uncertainty over U.S. Army
           Corps of Engineers efforts to reduce construction costs by 15
           percent. The Army has already incorporated a 15 percent reduction
           into a majority of its BRAC construction estimates based on the
           U.S. Army Corps of Engineers' efforts to reengineer its process to
           manage and contract for military construction projects and
           budgeted accordingly. While U.S. Army Corps of Engineers officials
           expressed optimism that these cost savings will be realized and
           preliminary results are promising, these results are based on
           limited experience.^29 In September 2007 we reported that the Army
           could be challenged in realizing the cost savings from this
           transformation effort.^30 If the Army is unable to achieve its
           projected 15 percent savings overall, the effect on overall BRAC
           construction costs could be considerable because the Army is
           expected to incur 60 percent ($12 billion) of the estimated BRAC
           construction costs.

           Moreover, BRAC implementing officials expressed concern that
           construction costs have the potential to increase in areas such as
           San Antonio, Texas, and the National Capital Region, Washington,
           D.C., that are already experiencing high commercial construction
           demands. DOD estimates it will cost about $3.4 billion for
           BRAC-related construction in the National Capital Region and about
           $1.3 billion in San Antonio, Texas, alone. U.S. Army Corps of
           Engineers officials expressed concern about the effect
           construction demand might have on bid proposals given the sizable
           amount of construction to take place in a limited amount of time
           to meet the BRAC statutory completion time frame. The large volume
           of anticipated BRAC construction combined with ongoing
           reconstruction due to damage from Hurricane Katrina could also
           lead to increased construction costs, according to service
           officials from various installations.

^28The overall cost for the recommendation to consolidate medical enlisted
training and establish the San Antonio Regional Medical Center at Fort Sam
Houston, Texas, has increased by about $550 million.

^29The U.S. Army Corps of Engineers initiated five construction projects
in 2006, all of which were awarded under its price limit.

^30 [27]GAO-07-1040 .

           Annual Savings Have Decreased and May Be Overstated

           After DOD has implemented the 2005 BRAC recommendations, based on
           estimates in its fiscal year 2008 BRAC budget submission, DOD
           expects to save about $4.0 billion annually--a 5 percent decrease
           from the $4.2 billion the Commission estimated.^31 DOD attributed
           the decrease in its savings estimate primarily to changes in
           initial assumptions or plans. For example:

           o $80 million decrease in the estimated savings to close three
           chemical demilitarization depots,^32 largely because the Army does
           not expect to close these facilities within the BRAC statutory
           implementation time frame because DOD must complete the chemical
           demilitarization mission first to comply with treaty obligations
           before these facilities can close and completion necessitates
           these facilities to remain open after 2011. We raised this issue
           in our July 2005 assessment of the 2005 round.^33

           o $70 million decrease in the estimated savings of establishing
           joint bases at multiple locations, largely because the Army did
           not include its share of the expected savings due to unresolved
           issues concerning joint base operations, while the other services
           included the COBRA-generated savings in DOD's fiscal year 2008
           budget submission.

           o $50 million decrease in the estimated savings for realigning the
           Defense Logistics Agency's supply, storage, and distribution
           network, largely because of the need to retain higher inventory
           levels than anticipated and less personnel elimination.

           While a better, more precise estimate of net annual recurring
           savings for the 2005 round may not be known until 2012, based on
           our work to date we believe that the net annual recurring savings
           estimates included in DOD's fiscal year 2008 budget submission may
           be overstated by 46 percent because DOD's estimates include (1)
           $1.85 billion in estimated savings from military personnel
           entitlements without a corresponding reduction in end strength,
           with personnel continuing to receive pay and benefits accounted
           for as savings, (2) $60 million from closing Cannon Air Force
           Base, New Mexico, although the base will actually remain open, and
           (3) erroneously reporting $25 million in onetime savings as annual
           recurring savings for the recommendation to establish fleet
           readiness centers.
			 
^31The BRAC Commission reported its estimates in constant fiscal year 2005
dollars (i.e., excludes projected inflation), while DOD reported BRAC
estimates in the fiscal year 2008 President's budget submission in current
dollars (i.e., includes projected inflation). However, when the effect of
inflation is eliminated, projected net annual recurring savings have
decreased about $800 million, or 20 percent.

^32The three chemical demilitarization depots are Deseret Chemical Depot,
Utah; Newport Chemical Depot, Indiana; and Umatilla Chemical Depot,
Oregon.

^33 [28]GAO-05-785 .

           DOD's estimated annual recurring savings resulting from BRAC may
           be overstated by about 46 percent. About $2.17 billion of DOD's
           total estimated annual recurring savings of about $4 billion is
           due to eliminated overhead expenses such as the costs to operate
           and maintain closed or realigned bases that will no longer be
           operated or maintained by DOD and reductions in civilian salaries
           for positions that are eliminated, which will free up funds that
           DOD can then use for other defense priorities. However, DOD's
           annual recurring savings estimate also includes $1.85 billion in
           military personnel entitlements--such as salaries and housing
           allowances--for military personnel that DOD plans to shift to
           other positions rather than eliminate. DOD considers these savings
           because they allow DOD to transfer these military personnel to
           other positions. We agree that transferring military personnel to
           other positions may enhance capabilities and allow DOD to redirect
           freed up resources to another area of need. However, while DOD
           disagrees with us, we do not believe that such transfers produce a
           tangible dollar savings that DOD can apply to fund other defense
           priorities outside the military personnel accounts because these
           personnel will remain in the end strength and will continue to
           receive salaries and benefits. Because DOD's BRAC budget
           submission does not explain the difference between net annual
           recurring savings attributable to military personnel entitlements
           for personnel that will continue to receive pay and benefits and
           net annual recurring savings from no longer operating and
           maintaining closed bases that will make funds available for other
           uses, DOD could generate a false sense that all of its reported
           savings could be used to fund other defense priorities. As such,
           in the report we issued yesterday, we recommended that DOD explain
           its estimated savings to Congress, thus providing more
           transparency over these savings. DOD concurred with our
           recommendation and has stated that it will take action to address
           our recommendation in its next BRAC budget submission.

           Additionally, DOD claimed about $60 million in annual recurring
           savings for closing Cannon Air Force Base, New Mexico, although
           the base will actually remain open to support a new mission.^34
           DOD recommended closing Cannon in its May 2005 submission to the
           Commission. However, in September 2005, the Commission recommended
           closing Cannon unless the Secretary of Defense identified a new
           mission for the base by December 31, 2009, and relocated the
           base's fighter wing elsewhere. Subsequently, DOD announced in June
           2006 that Cannon would remain open and some Air Force Special
           Operations units would relocate to Cannon. Nevertheless, DOD still
           reported about $60 million in annual recurring savings for
           categories such as base operation and facilities maintenance.
           Officials at the Air Force BRAC office told us that they claimed
           these savings because they disestablished the fighter wing at
           Cannon.^35 We are currently reviewing the implementation of this
           recommendation and plan to issue a report in January 2008.

           Finally, in June 2007 we reported that the Navy erroneously
           reported $25 million in onetime savings associated with inventory
           reductions as annual savings in the recommendation to establish
           fleet readiness centers.^36 DOD officials agreed with our analysis
           and agreed to update their savings estimate.
			  
^34DOD also claimed nearly $200 million in annual savings for military
personnel entitlements for closing Cannon Air Force Base, which is
included in the $1.85 billion mentioned above.

^35In commenting on a draft of the report we issued yesterday, the Air
Force BRAC office stated that it claimed these savings because the
decision to reallocate Air Force resources and mission to Cannon was made
after the BRAC recommendation was approved and was, therefore, a non-BRAC
programmatic decision.

^36 [29]GAO-07-304 .		

           DOD Will Take Longer to Recoup Up-Front Costs

           As a result of the increasing costs and decreasing savings for the
           2005 BRAC round, our analysis of the Commission's cost and savings
           estimates and DOD's estimates included in its fiscal year 2008
           budget submission shows that the time required to recoup up-front
           investment costs, also called the payback period, has lengthened
           from 8 years, initially breaking even in 2013 to 12 years,
           breaking even in 2017, as shown in figure 1.

Figure 1: Comparison of Time to Recoup BRAC Costs Using the Commission's
and DOD's Fiscal Year 2008 Budget Estimates

This extended payback period includes the savings estimates that we
question. When the estimated savings from military personnel entitlements
and Cannon Air Force Base, New Mexico, are removed, the payback period
increases to 19 years, breaking even in 2025. In prior rounds, it has
taken DOD about 6 1/2 years to recoup up-front costs for implementing BRAC
actions.

While the overall payback period for DOD's BRAC recommendations is less
than 20 years, our analysis showed that, as a result of increasing costs
and decreasing savings, the number of recommendations that do not pay back
within 20 years increased from 30 recommendations in the Commission's
report to 73 recommendations in DOD's fiscal year 2008 budget request.
(See app. I for a listing of these recommendations.) About half of these
recommendations primarily involve closing or realigning National Guard or
Reserve facilities and nearly 20 percent primarily involve closing or
realigning active duty Army installations. In our July 2005 report we
noted that DOD officials acknowledged that the additional objectives of
fostering jointness and transformation had some effect on generating
recommendations with longer payback periods.^37 Our analysis indicates
there were a total of 6 recommendations that did not pay back within 20
years for the three most recent BRAC rounds, in contrast to the 73 that do
not pay back in 20 years in the 2005 round.

Mr. Chairman, this concludes my statement. I would be pleased to answer
any questions you or any members may have at this time.

Contact and Acknowledgments

For further information regarding this statement, please contact Brian J.
Lepore at (202) 512-4523. Contact points for our Offices of Congressional
Relations and Public Affairs may be found on the last page of this
testimony. GAO staff making major contributions to this testimony are
included in appendix II.

^37 [30]GAO-05-785 .

Appendix I: BRAC Recommendations DOD Expects Not to Pay Back over a
20-Year Period (Fiscal Years 2006 through 2025)

The 2005 Defense Base Closure and Realignment Commission (the Commission)
estimated that 30 recommendations would not pay back--meaning recoup
up-front costs--within 20 years. Our analysis of the Department of
Defense's (DOD) fiscal year 2008 Base Realignment and Closure (BRAC)
budget submission shows that 73 recommendations will not pay back within
20 years. Table 3 shows a list of these 73 recommendations, the
Commission's reported estimates, and DOD's estimates of the 20-year cost.
Positive dollar amounts indicate a cost, while negative dollar amounts,
shown in parentheses, indicate a savings.

Table 3: BRAC Recommendations DOD Expects Not to Pay Back over a 20-Year
Period (Fiscal Years 2006 through 2025)

Recommendation: Realign Operational Army (Integrated Global Presence 
and Basing Strategy)*; 
Commission's reported 20-year net present value estimates[A]: 
$7,846.70; 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
$5,833.87. 

Recommendation: Realign Fort Hood, TX*; 
Commission's reported 20-year net present value estimates[A]: 980.40; 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
1,671.42. 

Recommendation: Close National Geospatial-Intelligence Agency leased 
locations and realign others at Fort Belvoir, VA; 
Commission's reported 20-year net present value estimates[A]: (535.10); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
1,376.91. 

Recommendation: Realign Fort Bragg, NC*; 
Commission's reported 20-year net present value estimates[A]: 639.16; 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
704.00. 

Recommendation: Realign to establish Joint Strike Fighter initial joint 
training site at Eglin Air Force Base, FL*; 
Commission's reported 20-year net present value estimates[A]: 226.30; 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
504.47. 

Recommendation: Establish San Antonio Regional Medical Center and 
realign enlisted medical training to Fort Sam Houston, TX; 
Commission's reported 20-year net present value estimates[A]: (476.20); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
468.00. 

Recommendation: Realign Martin State Air Guard Station, MD*; 
Commission's reported 20-year net present value estimates[A]: 353.66; 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
430.00. 

Recommendation: Co-locate miscellaneous OSD, defense agency, and field 
activity leased locations; 
Commission's reported 20-year net present value estimates[A]: (256.41); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 358.51. 

Recommendation: Co-locate military department investigation agencies 
with DOD Counterintelligence and Security Agency at Marine Corps Base 
Quantico, VA; 
Commission's reported 20-year net present value estimates[A]: (166.36); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 206.82. 

Recommendation: Consolidate correctional facilities into joint regional 
correctional facilities; 
Commission's reported 20-year net present value estimates[A]: (11.22); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
167.36. 

Recommendation: Co-locate miscellaneous Air Force leased locations and 
National Guard Headquarters leased locations; 
Commission's reported 20-year net present value estimates[A]: (308.18); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
162.62. 

Recommendation: Realign Great Falls International Airport Air Guard 
Station, MT*; 
Commission's reported 20-year net present value estimates[A]: 7.23; 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
155.24. 

Recommendation: Realign Otis Air National Guard Base, MA, and Lambert-
St. Louis International Airport Air Guard Station, MO; 
Commission's reported 20-year net present value estimates[A]: (305.40); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
148.29. 

Recommendation: Realign to create joint centers of excellence for 
chemical, biological, and medical research and development and 
acquisition; 
Commission's reported 20-year net present value estimates[A]: (39.54); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
138.20. 

Recommendation: Reserve Component Transformation, NY*; 
Commission's reported 20-year net present value estimates[A]: 46.50; 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
97.16. 

Recommendation: Realign March Air Reserve Base, CA; 
Commission's reported 20-year net present value estimates[A]: (6.10); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
92.88. 

Recommendation: Co-locate defense and military department adjudication 
activities; 
Commission's reported 20-year net present value estimates[A]: (11.30); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
87.88. 

Recommendation: Reserve Component Transformation, MA*; 
Commission's reported 20-year net present value estimates[A]: 60.40; 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
80.37. 

Recommendation: Relocate miscellaneous Department of the Navy leased 
locations; 
Commission's reported 20-year net present value estimates[A]: (164.68); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
79.55. 

Recommendation: Reserve Component Transformation, AR*; 
Commission's reported 20-year net present value estimates[A]: 38.20; 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
79.15. 

Recommendation: Realign Nashville International Airport Air Guard 
Station, TN*; 
Commission's reported 20-year net present value estimates[A]: 261.30; 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
60.46. 

Recommendation: Realign to relocate undergraduate pilot and navigator 
training; 
Commission's reported 20-year net present value estimates[A]: (174.20); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
50.11. 

Recommendation: Relocate Army headquarters and field operating 
activities; 
Commission's reported 20-year net present value estimates[A]: (122.90); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
48.46. 

Recommendation: Reserve Component Transformation, OH*; 
Commission's reported 20-year net present value estimates[A]: 1.30; 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
47.46. 

Recommendation: Realign Naval Station Newport, RI; 
Commission's reported 20-year net present value estimates[A]: (2.10); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
43.29. 

Recommendation: Close Deseret Chemical Depot, UT; 
Commission's reported 20-year net present value estimates[A]: (407.45); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
39.72. 

Recommendation: Realign to create an integrated weapons and armaments 
specialty site for guns and ammunition at Picatinny Arsenal, NJ; 
Commission's reported 20-year net present value estimates[A]: (51.78); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
38.06. 

Recommendation: Reserve Component Transformation, TX; 
Commission's reported 20-year net present value estimates[A]: (133.20); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
37.08. 

Recommendation: Realign Defense Intelligence Agency functions; 
Commission's reported 20-year net present value estimates[A]: (52.80); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
35.47. 

Recommendation: Realign Bradley International Airport Air Guard 
Station, CT; 
Commission's reported 20-year net present value estimates[A]: (17.78); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
34.82. 

Recommendation: Reserve Component Transformation, WY*; 
Commission's reported 20-year net present value estimates[A]: 9.00; 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
32.71. 

Recommendation: Reserve Component Transformation, OR*; 
Commission's reported 20-year net present value estimates[A]: 19.80; 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
31.97. 

Recommendation: Reserve Component Transformation, VT*; 
Commission's reported 20-year net present value estimates[A]: 41.70; 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
29.54. 

Recommendation: Reserve Component Transformation, IN*; 
Commission's reported 20-year net present value estimates[A]: 6.10; 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
27.20. 

Recommendation: Consolidate media organizations into a new agency for 
media and publications at Fort Meade, MD; 
Commission's reported 20-year net present value estimates[A]: (89.00); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
26.93. 

Recommendation: Reserve Component Transformation, MN*; 
Commission's reported 20-year net present value estimates[A]: 17.10; 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
26.93. 

Recommendation: Reserve Component Transformation, CT*; 
Commission's reported 20-year net present value estimates[A]: 47.50; 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
26.01. 

Recommendation: Reserve Component Transformation, IL; 
Commission's reported 20-year net present value estimates[A]: (6.50); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
24.54. 

Recommendation: Reserve Component Transformation, OK; 
Commission's reported 20-year net present value estimates[A]: (63.80); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
22.82. 

Recommendation: Realign Niagara Falls Air Reserve Station, NY*; 
Commission's reported 20-year net present value estimates[A]: 1.19; 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
22.65. 

Recommendation: Realign to relocate Army Prime Power School training at 
Fort Leonard Wood, MO; 
Commission's reported 20-year net present value estimates[A]: (0.80); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
22.05. 

Recommendation: Realign to establish centers for rotary wing air 
platform Development, and Acquisition, Test and Evaluation Center at 
Patuxent River, MD and Redstone Arsenal, AL*; 
Commission's reported 20-year net present value estimates[A]: 11.80; 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
20.53. 

Recommendation: Realign to establish centers for fixed wing air 
platform research, development, and acquisition, test and evaluation at 
Wright Patterson Air Force Base, OH and Naval Air Weapons Station China 
Lake, CA; 
Commission's reported 20-year net present value estimates[A]: (17.90); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
17.71. 

Recommendation: Reserve Component Transformation, PR; 
Commission's reported 20-year net present value estimates[A]: (8.60); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
15.75. 

Recommendation: Realign Portland International Airport Air Guard 
Station, OR*; 
Commission's reported 20-year net present value estimates[A]: 19.93; 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
14.80. 

Recommendation: Realign Capital Airport Air Guard Station, IL; 
Commission's reported 20-year net present value estimates[A]: (1.62); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
14.47. 

Recommendation: Realign Andrews Air Force Base, MD; 
Commission's reported 20-year net present value estimates[A]: (69.98); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
13.95. 

Recommendation: Realign Mansfield-Lahm Air Guard Station, OH; 
Commission's reported 20-year net present value estimates[A]: (79.57); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
13.57. 

Recommendation: Realign Naval Shipyard Detachments; 
Commission's reported 20-year net present value estimates[A]: (20.70); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
11.68. 

Recommendation: Realign Rock Island Arsenal, IL; 
Commission's reported 20-year net present value estimates[A]: (13.80); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
11.68. 

Recommendation: Realign to establish joint center for religious 
training and education at Fort Jackson, SC; 
Commission's reported 20-year net present value estimates[A]: (11.90); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
9.63. 

Recommendation: Realign to consolidate ground vehicle development and 
acquisition in a joint center at Detroit Arsenal, MI; 
Commission's reported 20-year net present value estimates[A]: (17.10); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
8.93. 

Recommendation: Close Umatilla Chemical Depot, OR; 
Commission's reported 20-year net present value estimates[A]: (347.88); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
8.60. 

Recommendation: Realign Fairchild Air Force Base, WA; 
Commission's reported 20-year net present value estimates[A]: (6.74); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
8.56. 

Recommendation: Realign Hector International Airport Air Guard Station, 
ND; Commission's reported 20-year net present value estimates[A]: 
(12.92); DOD's fiscal year 2008 budget 20-year net present value 
estimates[A]: 8.02. 

Recommendation: Reserve Component Transformation, MT*; 
Commission's reported 20-year net present value estimates[A]: 4.30; 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
7.87. 

Recommendation: Relocate Air Force Real Property Agency; 
Commission's reported 20-year net present value estimates[A]: (7.90); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
7.83. 

Recommendation: Reserve Component Transformation, ND*; 
Commission's reported 20-year net present value estimates[A]: 8.00; 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
7.10. 

Recommendation: Realign Ellington Field Air Guard Station, TX; 
Commission's reported 20-year net present value estimates[A]: (2.71); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
6.33. 

Recommendation: Close Navy Supply Corps School Athens, GA*; 
Commission's reported 20-year net present value estimates[A]: 1.36; 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
5.19. 

Recommendation: Close W.K. Kellogg Airport Air Guard Station, MI; 
Commission's reported 20-year net present value estimates[A]: (11.16); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
4.50. 

Recommendation: Close Newport Chemical Depot, IN; 
Commission's reported 20-year net present value estimates[A]: (132.61); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
4.10. 

Recommendation: Realign Ship Intermediate Maintenance Activity Norfolk, 
VA; 
Commission's reported 20-year net present value estimates[A]: (104.30); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
3.99. 

Recommendation: Realign Key Field Air Guard Station, MS; 
Commission's reported 20-year net present value estimates[A]: (2.56); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
3.92. 

Recommendation: Reserve Component Transformation, DE*; 
Commission's reported 20-year net present value estimates[A]: 0.90; 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
3.71. 

Recommendation: Realign to create an air integrated weapons and 
armaments research, development, and acquisition, test and evaluation 
center at Eglin Air Force Base, FL; 
Commission's reported 20-year net present value estimates[A]: (17.90); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
3.65. 

Recommendation: Realign Springfield-Beckley Municipal Airport Air Guard 
Station, OH; 
Commission's reported 20-year net present value estimates[A]: (5.41); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
2.72. 

Recommendation: Reserve Component Transformation, CA; 
Commission's reported 20-year net present value estimates[A]: (46.00); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
2.41. 

Recommendation: Reserve Component Transformation, TN*; 
Commission's reported 20-year net present value estimates[A]: 1.10; 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
1.93. 

Recommendation: Realign Boise Air Terminal Air Guard Station, ID; 
Commission's reported 20-year net present value estimates[A]: (57.04); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
1.78. 

Recommendation: Realign to consolidate sea vehicle development and 
acquisition to Naval Surface Warfare Center Carderock Division, MD, and 
Naval Sea Systems Command, DC; 
Commission's reported 20-year net present value estimates[A]: (2.00); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
1.32. 

Recommendation: Realign Officer Training Command, Naval Air Station 
Pensacola, FL; 
Commission's reported 20-year net present value estimates[A]: (7.61); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
0.35. 

Recommendation: Realign Single Drill Sergeant School to Fort Jackson, 
SC; 
Commission's reported 20-year net present value estimates[A]: (31.35); 
DOD's fiscal year 2008 budget 20-year net present value estimates[A]: 
0.12. 

Source: Commission and DOD data.

Note: Shaded recommendations were estimated by the Commission to not pay
back within the 20-year period. In addition to the recommendations
included in the table, the Commission reported that the following
recommendations would not pay back within the 20-year period: Reserve
Component Transformation, NH; Realign Army Reserve Command and Control -
Southwest; Realign Fort Smith Municipal Airport Air Guard Station, AR;
Realign Beale Air Force Base, CA; and Close Navy Broadway Complex, San
Diego, CA. With the exception of the recommendation to close Navy Broadway
Complex, which is not included in DOD's fiscal year 2008 BRAC budget
submission, DOD estimates that these recommendations will pay back within
20 years in its fiscal year 2008 BRAC budget submission.

^aPositive dollar amounts indicate an estimated cost over the 20-year
period. Negative dollar amounts, shown in parentheses, indicate an
estimated savings over the 20-year period.

Appendix II: GAO Contact and Staff Acknowledgments

GAO Contact

Brian J. Lepore, (202) 512-4523 or [31][email protected] .

Acknowledgments

In addition to the individual named above, Hilary Murrish Benedict, Susan
Ditto, Mike Kennedy, Tom Mahalek, Julie Matta, Charlie Perdue, Jim
Reifsnyder, Laura Talbott, and Ben Thompson made key contributions to this
statement.

Related GAO Products

Military Base Realignments and Closures: Cost Estimates Have Increased and
Are Likely to Continue to Evolve. [32]GAO-08-159 . Washington, D.C.:
December 11, 2007.

Military Base Realignments and Closures: Impact of Terminating,
Relocating, or Outsourcing the Services of the Armed Forces Institute of
Pathology. [33]GAO-08-20 . Washington, D.C.: November 9, 2007.

Military Base Realignments and Closures: Transfer of Supply, Storage, and
Distribution Functions from Military Services to Defense Logistics Agency.
[34]GAO-08-121R . Washington, D.C.: October 26, 2007.

Defense Infrastructure: Challenges Increase Risks for Providing Timely
Infrastructure Support for Army Installations Expecting Substantial
Personnel Growth. [35]GAO-07-1007 . Washington, D.C.: September 13, 2007.

Military Base Realignments and Closures: Plan Needed to Monitor Challenges
for Completing More than 100 Armed Forces Reserve Centers. [36]GAO-07-1040
. Washington, D.C.: September 13, 2007.

Military Base Realignments and Closures: Observations Related to the 2005
Round. [37]GAO-07-1203R . Washington, D.C.: September 6, 2007.

Military Base Closures: Projected Savings from Fleet Readiness Centers Are
Likely Overstated and Actions Needed to Track Actual Savings and Overcome
Certain Challenges. [38]GAO-07-304 . Washington, D.C.: June 29, 2007.

Military Base Closures: Management Strategy Needed to Mitigate Challenges
and Improve Communication to Help Ensure Timely Implementation of Air
National Guard Recommendations. [39]GAO-07-641 . Washington, D.C.: May 16,
2007.

Military Base Closures: Opportunities Exist to Improve Environmental
Cleanup Cost Reporting and to Expedite Transfer of Unneeded Property.
[40]GAO-07-166 . Washington, D.C.: January 30, 2007.

Military Bases: Observations on DOD's 2005 Base Realignment and Closure
Selection Process and Recommendations. [41]GAO-05-905 . Washington, D.C.:
July 18, 2005.

Military Bases: Analysis of DOD's 2005 Selection Process and
Recommendations for Base Closures and Realignments. [42]GAO-05-785 .
Washington, D.C.: July 1, 2005.

Military Base Closures: Observations on Prior and Current BRAC Rounds.
[43]GAO-05-614 . Washington, D.C.: May 3, 2005.

Military Base Closures: Updated Status of Prior Base Realignments and
Closures. [44]GAO-05-138 . Washington, D.C.: January 13, 2005.

Military Base Closures: Assessment of DOD's 2004 Report on the Need for a
Base Realignment and Closure Round. [45]GAO-04-760 . Washington, D.C.: May
17, 2004.

Military Base Closures: Observations on Preparations for the Upcoming Base
Realignment and Closure Round. [46]GAO-04-558T . Washington, D.C.: March
25, 2004.

(351121)

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Highlights of [55]GAO-08-341T , a report to the Subcommittee on Readiness,
Committee on Armed Services, House of Representatives

December 12, 2007

MILITARY BASE REALIGNMENTS AND CLOSURES

Estimated Costs Have Increased and Estimated Savings Have Decreased

The Department of Defense (DOD) is currently implementing recommendations
from the 2005 Base Realignment and Closure (BRAC) round, which is the
fifth round undertaken by DOD since 1988. The 2005 round is, by GAO's
assessment, the biggest, most complex, and costliest BRAC round ever, in
part because, unlike previous rounds, the Secretary of Defense viewed the
2005 round as an opportunity not only to achieve savings but also to
assist in transforming the department. GAO's testimony addresses (1) GAO's
role in the BRAC process, and (2) how DOD's current cost and savings
estimates to implement the 2005 recommendations compare to the 2005
Defense Base Closure and Realignment Commission's (the Commission) cost
and savings estimates.

This testimony is based primarily on the report GAO issued yesterday
(GAO-08-159) on the overall changes to DOD's cost and savings estimates
for the 2005 BRAC round. To analyze these changes, GAO compared the
Commission's estimates in its 2005 report to DOD's estimates in its fiscal
year 2008 BRAC budget submission. This testimony is also based on several
reports GAO has issued on the implementation of selected recommendations,
and GAO's prior work assessing the 2005 decision-making process. GAO's
work was performed in accordance with generally accepted government
auditing standards.

GAO has played two long-standing roles in the BRAC process. First, as
requested by congressional committees in the 1988 round or mandated by law
since 1990, GAO has served as an independent and objective observer of the
BRAC process and has assessed and reported on DOD's decision-making
processes leading up to proposed realignment and closure recommendations.
GAO reported in its assessment of the 2005 round that DOD's
decision-making process for developing its recommendations was generally
logical, well documented, and reasoned. However, GAO identified some
limitations with cost and savings estimates, some BRAC recommendations
having lengthy payback periods, and some with limited savings relative to
implementation costs. GAO's second role has focused on reviewing the
implementation of realignment and closure actions once the BRAC
recommendations became effective in November 2005. GAO has issued several
reports on DOD's implementation of its 2005 BRAC recommendations. GAO will
continue to review the implementation of the 2005 BRAC recommendations,
including a final report to be issued within 1 year after the end of the
6-year BRAC implementation period, which ends in September 2011.

DOD plans to spend more and save less than originally estimated for the
2005 BRAC round. DOD's cost estimates to implement the 2005
recommendations, as reported in its fiscal year 2008 BRAC budget
submission, have increased by 48 percent, from $21 billion to $31 billion,
for the 6-year implementation period. Nearly two-thirds of the expected
cost increase is due to increased military construction costs. For
example, the expected military construction cost to close Fort Monmouth,
New Jersey, has increased by more than $550 million, largely because the
Army decided to build new facilities instead of renovating existing
facilities at one location and share existing facilities at another
location. GAO believes there is potential for further cost increases due
to uncertainty in whether the Army's new initiative designed to reduce
construction costs will achieve the planned results. While projected costs
have increased, projected net annual recurring savings have decreased
about 5 percent, from $4.2 billion to $4.0 billion annually. DOD
attributed the decrease in its savings estimate primarily to changes in
initial assumptions or plans. GAO believes that DOD's reported savings
estimates may be overstated by $1.85 billion largely because the estimates
include savings from military personnel entitlements without a
corresponding reduction in end strength. As a result of the increases in
costs and decreases in savings, GAO's analysis shows that accumulated
savings are projected to offset accumulated costs in 2017 rather than 2013
as projected by the Commission. The time required for accumulated savings
to offset accumulated costs would increase to 2025 with the exclusion of
the expected savings from military personnel entitlements and Cannon Air
Force Base, New Mexico, that GAO questions. While the overall payback
period for DOD's BRAC recommendations is less than 20 years, the number of
individual recommendations that are not expected to pay back within 20
years has increased from 30, as estimated by the Commission, to 73, based
on DOD's fiscal year 2008 budget submission.

References

Visible links
  17. http://www.gao.gov/cgi-bin/getrpt?GAO-08-159
  18. http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-95-133
  19. http://www.gao.gov/cgi-bin/getrpt?GAO-05-785
  20. http://www.gao.gov/cgi-bin/getrpt?GAO-05-785
  21. http://www.gao.gov/cgi-bin/getrpt?GAO-07-641
  22. http://www.gao.gov/cgi-bin/getrpt?GAO-07-1040
  23. http://www.gao.gov/cgi-bin/getrpt?GAO-07-304
  24. http://www.gao.gov/cgi-bin/getrpt?GAO-08-121R
  25. http://www.gao.gov/cgi-bin/getrpt?GAO-07-166
  26. http://www.gao.gov/cgi-bin/getrpt?GAO-07-166
  27. http://www.gao.gov/cgi-bin/getrpt?GAO-07-1040
  28. http://www.gao.gov/cgi-bin/getrpt?GAO-05-785
  29. http://www.gao.gov/cgi-bin/getrpt?GAO-07-304
  30. http://www.gao.gov/cgi-bin/getrpt?GAO-05-785
  31. mailto:[email protected]
  32. http://www.gao.gov/cgi-bin/getrpt?GAO-08-159
  33. http://www.gao.gov/cgi-bin/getrpt?GAO-08-20
  34. http://www.gao.gov/cgi-bin/getrpt?GAO-08-121R
  35. http://www.gao.gov/cgi-bin/getrpt?GAO-07-1007
  36. http://www.gao.gov/cgi-bin/getrpt?GAO-07-1040
  37. http://www.gao.gov/cgi-bin/getrpt?GAO-07-1203R
  38. http://www.gao.gov/cgi-bin/getrpt?GAO-07-304
  39. http://www.gao.gov/cgi-bin/getrpt?GAO-07-641
  40. http://www.gao.gov/cgi-bin/getrpt?GAO-07-166
  41. http://www.gao.gov/cgi-bin/getrpt?GAO-05-905
  42. http://www.gao.gov/cgi-bin/getrpt?GAO-05-785
  43. http://www.gao.gov/cgi-bin/getrpt?GAO-05-614
  44. http://www.gao.gov/cgi-bin/getrpt?GAO-05-138
  45. http://www.gao.gov/cgi-bin/getrpt?GAO-04-760
  46. http://www.gao.gov/cgi-bin/getrpt?GAO-04-558T
  47. http://www.gao.gov/
  48. http://www.gao.gov/
  49. http://www.gao.gov/fraudnet/fraudnet.htm
  50. mailto:[email protected]
  51. mailto:[email protected]
  52. mailto:[email protected]
  53. http://www.gao.gov/cgi-bin/getrpt?GAO-08-341T
  54. mailto:[email protected]
  55. http://www.gao.gov/cgi-bin/getrpt?GAO-08-341T
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