Defense Infrastructure: Continued Management Attention Is Needed 
to Support Installation Facilities and Operations (24-APR-08,	 
GAO-08-502).							 
                                                                 
The Department of Defense (DOD) manages and operates about	 
577,000 structures worldwide, valued at about $712 billion. DOD  
has worked for several years to develop models that can reliably 
estimate the installation support funds needed to sustain these  
facilities, and plans to spend over $55 billion to support these 
facilities and operate its bases in fiscal year 2008. Because GAO
has identified support infrastructure as a high-risk area that	 
affects DOD's ability to devote funds to other more critical	 
needs, GAO initiated this review under the Comptroller General's 
authority. This report discusses (1) the reliability of the	 
annual funding estimates produced by the facilities sustainment  
model, (2) DOD's progress in meeting funding goals for facility  
sustainment and recapitalization, (3) the extent to which DOD has
addressed deferred facility sustainment funding needs, and (4)	 
the status of DOD's efforts to develop a new installation	 
services model. To address these objectives, GAO reviewed the	 
accuracy and support for the model's key inputs, analyzed	 
pertinent documents, and visited eight judgmentally selected	 
installations.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-502 					        
    ACCNO:   A81867						        
  TITLE:     Defense Infrastructure: Continued Management Attention Is
Needed to Support Installation Facilities and Operations	 
     DATE:   04/24/2008 
  SUBJECT:   Cost analysis					 
	     Data integrity					 
	     Defense capabilities				 
	     Defense economic analysis				 
	     Defense procurement				 
	     Facility maintenance				 
	     Facility management				 
	     Facility repairs					 
	     Federal facilities 				 
	     Federal funds					 
	     Federal property management			 
	     Funds management					 
	     Military appropriations				 
	     Military bases					 
	     Military facilities				 
	     Military inventories				 
	     Program evaluation 				 
	     Program management 				 
	     Reporting requirements				 
	     Strategic planning 				 
	     Cost estimates					 
	     Program costs					 
	     Program goals or objectives			 
	     Program implementation				 

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GAO-08-502

   

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Report to Congressional Committees: 

United States Government Accountability Office: 

GAO: 

April 2008: 

Defense Infrastructure: 

Continued Management Attention Is Needed to Support Installation 
Facilities and Operations: 

Defense Infrastructure: 

GAO-08-502: 

GAO Highlights: 

Highlights of GAO-08-502, a report to congressional committees. 

Why GAO Did This Study: 

The Department of Defense (DOD) manages and operates about 577,000 
structures worldwide, valued at about $712 billion. DOD has worked for 
several years to develop models that can reliably estimate the 
installation support funds needed to sustain these facilities, and 
plans to spend over $55 billion to support these facilities and operate 
its bases in fiscal year 2008. Because GAO has identified support 
infrastructure as a high-risk area that affects DODï¿½s ability to devote 
funds to other more critical needs, GAO initiated this review under the 
Comptroller Generalï¿½s authority. This report discusses (1) the 
reliability of the annual funding estimates produced by the facilities 
sustainment model, (2) DODï¿½s progress in meeting funding goals for 
facility sustainment and recapitalization, (3) the extent to which DOD 
has addressed deferred facility sustainment funding needs, and (4) the 
status of DODï¿½s efforts to develop a new installation services model. 
To address these objectives, GAO reviewed the accuracy and support for 
the modelï¿½s key inputs, analyzed pertinent documents, and visited eight 
judgmentally selected installations. 

What GAO Found: 

Although the facilities sustainment model, implemented in 2003, 
provides a consistent and reasonable framework for preparing estimates 
of DODï¿½s annual facility sustainment funding requirements, accuracy and 
supportability issues with two of the modelï¿½s key inputs have affected 
the reliability of the modelï¿½s estimates. First, regarding the 
inventory quantity input, GAO found that the services had not complied 
with DOD regulations requiring verification of each real property 
inventory record. Without the verifications, DOD lacked assurance that 
the model used accurate inventory quantities, and GAOï¿½s analysis 
identified inaccuracies in some quantities used by the model. Second, 
regarding the sustainment cost factor input, GAO identified issues 
concerning some cost factors used by the model. For example, an 
independent study reported that only 13 of 45 cost factors evaluated 
were deemed to be reasonably accurate and adequately supported. Until 
DOD improves the accuracy of these two inputs, the modelï¿½s estimates of 
facility sustainment funding requirements will not be as reliable as 
possible. 

The military services have not met all of DODï¿½s goals for funding 
facility sustainment and recapitalization at levels to prevent 
deterioration and ensure that facilities are restored and modernized. 
Service officials stated that they generally did not meet the 
sustainment funding goals because resources were limited and programs 
such as force modernization often had higher funding priority. Although 
the services achieved more success in meeting DODï¿½s goal to fund 
recapitalization, funding remains an issue with the Army, the Navy, and 
the Air Force reporting recapitalization backlogs of over $50 billion 
at the end of fiscal year 2007. 

DOD has not taken actions to estimate and address its deferred facility 
sustainment requirements. In fiscal years 2005 through 2007, the 
services did not fund over $3.5 billion of their estimated annual 
facility sustainment requirements. The services do not have consistent 
estimates of their deferred sustainment requirements or plans to deal 
with these needs because DOD has not provided adequate guidance to 
clearly define deferred sustainment requirements, or direct the 
services to measure, track, and address these needs. As a result, DODï¿½s 
plans to address facility sustainment requirements do not include all 
deferred sustainment requirements, which could result in continued 
facility deterioration and increased future recapitalization costs. 

DODï¿½s progress in developing a new model to estimate funding 
requirements for installation services, such as airfield and port 
operations, has been slow. Although DODï¿½s goal is to establish common 
standards and metrics for installation services by the end of 2008, the 
services had agreed on common definitions and standards for only 2 of 
29 areas by the end of 2007. DOD officials stated that reaching 
agreement has been difficult for several reasons, such as differences 
among the services in how tasks for installation services are performed 
and managed. Without a reliable model, DOD cannot provide the Congress 
with a clear basis for making funding decisions. 

What GAO Recommends: 

GAO recommends that DOD take several actions to increase the facilities 
sustainment modelï¿½s reliability, address deferred facility sustainment 
funding requirements, and advance progress implementing the 
installation services model. DOD generally agreed with the 
recommendations. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-502]. For more 
information, contact Brian J. Lepore at (202) 512-4523 or 
[email protected]. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

Reliability of the Facilities Sustainment Model's Estimates Can Be 
Improved: 

Military Services Have Not Met All Funding Goals for Facility 
Sustainment and Recapitalization: 

DOD Has Not Taken Actions to Address Deferred Facility Sustainment 
Requirements: 

DOD's Progress in Developing an Installation Services Model Has Been 
Slow: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Current Methods Used by the Military Services to Estimate 
Installation Support Services Funding Requirements: 

Appendix III: Comments from the Department of Defense: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

Related GAO Products: 

Tables: 

Table 1: Selected Results from the Independent Validation and 
Verification Study of DOD's Sustainment Cost Factors: 

Table 2: Attainment of Sustainment Goals--Percentage of Requirement 
Funded, Fiscal Years 2005 through 2008: 

Table 3: DOD Facility Recapitalization Rates Expressed in Years: 

Table 4: Unfunded Annual Facility Sustainment Requirements: 

Figures: 

Figure 1: DOD's Planned Fiscal Year 2008 Funding for Installation 
Support: 

Figure 2: Leaking Pipes and Cracked Walls at a Damaged Warehouse 
Facility at Fort Sam Houston: 

Figure 3: Deteriorated Barracks Building at Fort Sam Houston: 

Figure 4: Standing Water on a Leaking Roof of a Weapons and Radar 
Training Building at an Oceana Naval Air Station Annex: 

Figure 5: Damaged Aircraft Hangar Doors at Oceana Naval Air Station: 

Figure 6: Leaking Windows and Electrical Panels that Created a Safety 
Hazard at a Deteriorated Aircraft Maintenance Hangar on Randolph Air 
Force Base: 

Figure 7: Cracking Aircraft Aprons at Randolph Air Force Base: 

United States Government Accountability Office: 

Washington, DC 20548: 

April 24, 2008: 

Congressional Committees: 

Since 1997, we have identified the Department of Defense's (DOD) 
management of its support infrastructure as a high-risk area because 
infrastructure costs have affected the department's ability to devote 
funds to other more critical programs and needs. DOD is one of the 
world's largest organizations in terms of physical plant, managing and 
operating about 577,000 buildings and structures at more than 5,300 
sites worldwide with a total replacement value of about $712 billion. 
In fiscal year 2008, DOD plans to spend more than $55 billion to 
support these facilities and operate its bases. DOD refers to this 
funding as installations support,[Footnote 1] which includes funds for 
facilities sustainment, facilities recapitalization, installation 
services, and facilities operation services.[Footnote 2] Accurate and 
consistent estimates of funding requirements for these areas can enable 
DOD to establish goals to optimally meet installation facility and 
operations needs and make informed decisions to more efficiently 
allocate resources at a time when our nation faces increased fiscal 
constraints. By providing adequate funding for facilities support to 
meet these goals, DOD can prevent facilities from becoming deteriorated 
and outdated faster than expected, and ensure that installations can 
provide the services needed to fully support military missions and 
personnel at the levels desired. 

DOD has worked for several years to develop models that can reliably 
estimate the funds needed in several installation support funding areas 
to effectively and efficiently support DOD's missions and personnel. To 
date, DOD has developed and implemented only one installation support 
funding model--the facilities sustainment model. This model has been 
used by the military services since fiscal year 2003 to estimate the 
annual sustainment funds the services need to budget to perform 
maintenance and repair activities necessary to keep their buildings and 
structures in good working order and maximize facility service life. To 
help estimate other installation facility and operations funding needs, 
DOD has used a metric for facility recapitalization,[Footnote 3] has 
developed and will soon implement a model for facilities operation 
services, and continues to work on a model for other installation 
services, such as installation airfield and port operations, security, 
and family support services. 

Because of the challenges the department has faced in budgeting for the 
significant funding required to support DOD installations and the 
importance of adequate installation support to DOD's missions and the 
quality of life for DOD personnel, we initiated this engagement under 
the authority of the Comptroller General of the United States to 
conduct evaluations on his own initiative.[Footnote 4] We are reporting 
the results of our evaluation to you because of expressed interest 
related to your committees' oversight responsibilities. This report 
discusses (1) the reliability of the annual funding estimates produced 
by the facilities sustainment model, (2) DOD's progress in meeting 
funding goals for facility sustainment and recapitalization, (3) the 
extent to which DOD has addressed deferred facility sustainment funding 
needs, and (4) the status of DOD's efforts to develop a funding 
requirements model for installation services. 

To address these questions, we (1) reviewed the adequacy of the 
documentation supporting the key inputs used by the facilities 
sustainment model as well as the military services' compliance with 
procedures designed to verify the accuracy of the inventory information 
used by the model; (2) compared DOD's goals for facility funding with 
accomplishments and discussed progress towards the goals with DOD and 
military service officials;[Footnote 5] (3) discussed with DOD and 
military service officials efforts to identify and address deferred 
facility sustainment requirements, determined the amount of the annual 
sustainment requirement that was not funded, and reviewed the deferred 
facility maintenance amounts reported in the military services' 
financial statements; and (4) documented the development history and 
status of the installation services model and discussed with DOD 
officials the remaining obstacles to the model's completion. We also 
visited eight judgmentally selected military installations, selected to 
represent several different geographic locations, to gain local-level 
insight into compliance with inventory verification procedures, the 
accuracy of real property inventory records, support funding issues, 
and the condition of facilities. We conducted this performance audit 
from May 2007 through April 2008, in accordance with generally accepted 
government auditing standards. Those standards require that we plan and 
perform the audit to obtain sufficient, appropriate evidence to provide 
a reasonable basis for our findings and conclusions based on our audit 
objectives. We believe that the evidence obtained provides a reasonable 
basis for our findings and conclusions based on our audit objectives. A 
detailed description of our scope and methodology is included in 
appendix I of this report. 

Results in Brief: 

Although the facilities sustainment model provides a consistent and 
reasonable framework for preparing estimates of DOD's annual facility 
sustainment funding requirements, accuracy and supportability issues 
with two of the model's key inputs--the inventory quantity and the 
sustainment cost factor associated with each of DOD's 448 facility 
categories--have affected the reliability of the model's estimates. 
Regarding the inventory quantity input, we found that the military 
services had not complied with DOD real property and financial 
regulations that require verification of each real property inventory 
record at least once every 5 years. For example, the Army and the Navy 
had not verified the accuracy of about 39 percent and 59 percent, 
respectively, of their real property inventory records during the 5 
years ending with fiscal year 2007. Without the verifications, which 
the services attributed to a lack of personnel, DOD lacked assurance 
that the inventory quantities used by the model were accurate, and our 
analysis identified inaccuracies in some inventory quantities 
subsequently used by the model. During our visits to several 
installations we also identified discrepancies between the inventory 
quantities used by the model and the quantities indicated in the 
supporting real property records. Regarding the sustainment cost factor 
input, we identified issues concerning the accuracy and supportability 
of some cost factors used by the model. For example, a contractor hired 
by DOD to independently verify and validate the model's cost factors 
reported in February 2006 that only 13 of 45 factors evaluated were 
deemed to be reasonably accurate and adequately supported. We also 
found that DOD did not maintain readily accessible information 
documenting how each factor was calculated or explaining the reasons 
that some factors changed from one year to the next, even when changes 
were significant, such as more than 50 percent. Furthermore, a change 
for fiscal year 2009 in DOD's method for calculating sustainment cost 
factors that are not based on independent data sources can result in 
reduced accuracy of those factors. Until DOD takes additional steps to 
improve the accuracy of its inventory quantity and sustainment cost 
factor inputs to the facilities sustainment model, the model's 
estimates of annual facility sustainment funding requirements will not 
be as reliable as possible, which could jeopardize DOD's ability to 
adequately provide for and report on its facility sustainment needs. 

The military services have not met all of DOD's goals for funding 
facility sustainment and recapitalization at levels to prevent 
deterioration and ensure that facilities are restored and modernized in 
accordance with established benchmarks. Noting in 2004 that full 
funding of sustainment requirements was the most economical approach 
over a facility's life cycle, DOD established a goal for the military 
services to fund sustainment at 95 percent of the requirement 
determined by the facilities sustainment model beginning in fiscal year 
2005, and at 100 percent of the requirement beginning in fiscal year 
2008. However, DOD actually funded 79 percent, 91 percent, and 90 
percent of its sustainment requirements in fiscal years 2005, 2006, and 
2007, respectively, falling short of the goal in each year. In fiscal 
year 2008, the Army, the Navy, the Air Force, and the Marine Corps 
budgeted funds to meet 89 percent, 83 percent, 92 percent, and 89 
percent of their sustainment requirements, respectively, and thus did 
not budget to meet the fiscal year's 100 percent funding goal. Service 
officials stated that they generally did not meet the sustainment 
funding goals because resources were limited and some programs, such as 
force modernization, often had a higher funding priority. Moreover, 
some budgeted sustainment funds were used to pay for other needs, such 
as unfunded facility restoration projects and bills for installation 
services, which reduced funding that would have been used to sustain 
facilities. At the eight installations we visited, facility sustainment 
requirements were not fully funded every year during fiscal years 2005, 
2006, and 2007, and some facilities had fallen into disrepair at most 
of these installations. In the facility recapitalization area, the 
military services achieved more success in meeting DOD's goal to fund 
recapitalization annually at levels that would result in replacing 
facilities every 67 years. For example, the Army, the Navy, and the Air 
Force exceeded the 67-year goal in some years since fiscal year 2005. 
However, the adequacy of recapitalization funding remains an issue 
because of underfunding in previous years. The Army, the Navy, and the 
Air Force reported recapitalization backlogs of about $20.4 billion, 
$27.6 billion, and $9.3 billion, respectively, at the end of fiscal 
year 2007 and some of the installations we visited also reported 
concerns over growing backlogs. As other important priorities, such as 
force modernization, compete for funding, DOD has been challenged to 
provide adequate resources for sustaining and recapitalizing its 
facilities. As a result, some facilities have not been sustained at a 
level to keep them in good working order and will likely experience 
reduced service lives, which in turn will lead to more costly 
recapitalization requirements in the future. 

DOD has not taken actions to estimate and address the military's 
deferred, or backlogged, facility sustainment requirements. Deferred 
sustainment requirements might not exist if the annual sustainment 
requirement were fully funded each year. However, as noted above, this 
has not been the case and, in fiscal years 2005 through 2007, the 
military services did not fund over $3.5 billion of their estimated 
annual facility sustainment requirements. According to DOD, needed 
sustainment work that is not performed will eventually result in 
damaged facilities, shortened facility service lives, and increased 
future costs for facility restoration. Yet, because DOD has not 
provided guidance that clearly defines deferred sustainment 
requirements, directs the services to consistently measure and track 
deferred sustainment needs, or establishes a goal to address these 
needs, the services do not have consistent estimates of their deferred 
sustainment requirements or plans to deal with these needs. As a 
result, DOD lacks a complete picture of its facility sustainment 
funding needs and DOD's current plans and goals to address facility 
sustainment requirements do not include all sustainment requirements, 
which could further jeopardize DOD's ability to adequately provide for 
its facility sustainment needs and result in continued facility 
deterioration and increased future recapitalization costs. In addition, 
the military services' financial reporting of deferred facility 
maintenance information has been inconsistent with financial reporting 
requirements intended to provide full disclosure of facility 
conditions. Largely because of a lack of clear guidance, the services' 
financial statements before fiscal year 2007 excluded required 
information concerning deferred facility sustainment requirements and 
included information that is not required concerning deferred facility 
modernization requirements. Although DOD issued revised guidance in 
September 2007 in part to address this issue, the guidance did not 
provide sufficient details to ensure that future financial reporting of 
deferred maintenance would be consistent with reporting requirements. 
As a result, the military services' financial reporting of deferred 
maintenance information may continue to be inconsistent with financial 
reporting requirements. 

DOD's progress in developing a model for estimating installation 
services funding requirements has been slow because DOD has been unable 
to overcome long-standing inconsistencies among the military services' 
definitions of support service functions and other obstacles that 
prevent such a model from being ready for use. In 2004, DOD's 
installation strategic plan noted the need to develop an analytical 
model based on common benchmarks to accurately forecast funding 
requirements for installation services. Although interservice teams 
have been studying installation support service areas since 2005 to 
develop common definitions, performance standards, metrics, and cost 
estimates, the military services had agreed on common definitions and 
standards for only 2 of 29 service areas by the end of calendar year 
2007. According to DOD officials, the difficulty in reaching agreement 
has been caused by several factors, such as traditional differences 
among the military services in how tasks and subtasks for installation 
services are grouped, performed, managed, and funded; differences in 
the value and emphasis placed on various support services, and 
differences in support service needs based on installation location and 
demographic characteristics. Although DOD's goal is to establish common 
standards and metrics for installation services by the end of 2008, DOD 
had not formally established a milestone for when the model will be 
implemented for use in estimating the military's installation services 
funding requirements. DOD officials stated that additional obstacles 
must be overcome to meet the 2008 goal and complete development of a 
reliable model. Key obstacles include overcoming differences among the 
military services in service program management and funding methods and 
identifying adequate information sources for estimating costs for the 
various installation services. In view of these remaining obstacles and 
prior progress, it is unclear whether the 2008 target will be met. In 
the absence of a DOD-wide model, each military service has developed 
methods to determine its installation services requirements and funding 
needs subject to its own definition of the types and levels of services 
it deems necessary. According to Army, Navy, and Air Force officials, 
funding for installation services in some instances has been inadequate 
and resulted in installations providing reduced services, which, in 
turn, adversely affected the quality of life of DOD personnel. Until a 
reliable model is implemented, DOD cannot know its installation 
services funding requirements with confidence, set installation 
services funding and performance benchmarks, measure the military 
services' progress in providing installation services, or provide the 
Congress with a clear, consistent basis for making related funding 
decisions. 

We are making several recommendations to increase the reliability of 
the facilities sustainment model, address deferred facility sustainment 
funding requirements, and advance progress towards implementing the 
installation services model. Specifically, we are recommending that DOD 
monitor and ensure compliance with guidance requiring verification of 
real property inventory records, maintain documentation on the basis 
for the sustainment cost factors used by the model, and revert to the 
previously used method to calculate sustainment cost factors that are 
not based on independent data sources. We also are recommending that 
DOD provide guidance that clearly defines deferred facility sustainment 
requirements, directs the services to consistently measure and track 
deferred sustainment needs, establishes a goal to address these needs, 
and ensures that the military services' financial reporting of deferred 
facility maintenance is consistent with financial reporting 
requirements. Further, we are recommending that DOD establish a 
milestone for implementing the installation services model and provide 
adequate senior-level oversight to ensure that the milestone is met. 

In written comments on a draft of this report, DOD generally agreed 
with our recommendations and stated that it had already initiated 
several of the recommended actions. However, DOD's comments and stated 
actions did not fully address some of our recommendations. 
Specifically, in addition to the steps that DOD stated it has taken or 
plans to take, we continue to believe that DOD needs to take further 
steps to monitor and ensure compliance with inventory verification 
guidance, provide a clear definition of deferred facility sustainment 
requirements, direct the military services to consistently measure and 
track deferred sustainment needs, ensure that the military services' 
financial reporting and disclosure information regarding deferred 
facility maintenance is consistent with financial reporting 
requirements, and provide adequate senior-level oversight to ensure 
that an installation services model is implemented as soon as possible. 
DOD's comments are discussed in more detail at the end of this report 
and are reproduced in full in appendix III. 

Background: 

Since 1997, we have identified management of DOD support infrastructure 
as a high-risk area because infrastructure costs have affected the 
department's ability to devote funds to other more critical programs 
and needs. In a January 2007 update to our high-risk series, we noted 
that DOD continued to face significant challenges in funding its 
installation support and sustainment, restoration, and modernization of 
its facilities, and questions persisted over the adequacy of funding 
provided to these areas.[Footnote 6] Further, we noted that because of 
these long-standing issues, DOD's management of support infrastructure 
remains a high-risk area. 

We have issued several reports in recent years highlighting the long- 
term challenges DOD faces in managing its portfolio of facilities and 
halting the degradation of facilities. For example, in February 2003, 
we found that funds designated for facilities sustainment were held 
back at the service headquarters, major command, and installation 
levels to cover more pressing needs or emerging requirements, which 
resulted in continued facility deterioration.[Footnote 7] In May 2003, 
we reported that although funding for maintaining and constructing 
reserve component facilities had increased by almost 50 percent during 
1998 through 2003, the reserve components indicated the condition of 
about 64 percent of their facilities was inadequate.[Footnote 8] In a 
June 2005 report, we found that DOD did not have a common framework for 
identifying base operating support functions and funding requirements 
to ensure adequate delivery of services, particularly in a joint 
environment.[Footnote 9] We also found that, because of a lack of a 
common terminology across the services in defining base support 
functions and the lack of a mature analytic process for developing 
credible and consistent requirements, the services moved hundreds of 
millions of operation and maintenance dollars designated for facilities 
sustainment and other purposes to pay for base operations support. 
While such funding movements are permissible, we found that they were 
disruptive to the orderly provision of services and contributed to the 
overall degradation of facilities. In another 2005 report, we found 
that many of DOD's training ranges were in deteriorated condition and 
lacked modernization, which adversely affected training activities and 
jeopardized the safety of military personnel.[Footnote 10] 

Funding of Installation Support: 

The Office of the Deputy Under Secretary of Defense for Installations 
and Environment has overall responsibility for DOD's facilities and 
installations, which includes about 577,000 buildings and structures at 
more than 5,300 sites worldwide with a total replacement value of about 
$712 billion. During fiscal year 2008, DOD plans to spend around $55 
billion to support its facilities and installations. DOD refers to this 
funding as installation support, which includes five broad categories 
of services, programs, and support activities--facilities, installation 
services, family housing, environment, and base realignment and 
closure. As shown in figure 1, the facilities category is composed of 
five subcategories--sustainment, recapitalization, disposal, facilities 
operation services, and new footprint, which includes facility 
construction related to new or expanded missions. 

Figure 1: DOD's Planned Fiscal Year 2008 Funding for Installation 
Support: 

This figure is a flowchart showing DOD's planned fiscal year 2008 
funding for installation support. 

[See PDF for image] 

Source: DOD. 

Note: The Congress appropriates funds according to the categories 
listed under the appropriation heading, and DOD classifies funds for 
installation support according to the categories in the chart. Numbers 
in the chart may not total correctly due to rounding. 

[End of figure] 

Of these installation support categories, this report focuses on 
facility sustainment, recapitalization, installation services, and 
facilities operation services--the categories where DOD has or intends 
to implement models to help estimate funding requirements. 

* Sustainment, funded primarily with operation and maintenance 
appropriations, includes the maintenance and repair activities 
necessary to prevent deterioration, maintain safety, and keep 
facilities in good working order over their service lives. Sustainment 
includes regularly scheduled adjustments and inspections, preventive 
maintenance tasks, and emergency response and service calls for minor 
repairs. Sustainment also includes major repairs or replacement of 
facility components that are expected to occur periodically throughout 
a facility's life cycle, such as regular roof replacement; refinishing 
wall surfaces; repairing and replacing electrical, heating, and cooling 
systems; and replacing tile and carpets. According to DOD, needed 
sustainment work that is not performed will eventually result in 
damaged facilities, shortened facility service lives, and increased 
future costs for facility restoration. 

* Recapitalization, funded primarily with operation and maintenance and 
military construction appropriations, provides for improving facilities 
through restoration and modernization. Restoration includes repair and 
replacement work needed to restore facilities degraded from several 
causes, such as natural disaster, fire, accident, excessive age, or 
inadequate sustainment. Modernization includes both renovation and 
replacement of existing facilities to implement new or higher 
standards, accommodate new functions, or replace building components 
that typically last more than 50 years. 

* Installation services, funded primarily with operation and 
maintenance appropriations, includes the personnel, support equipment, 
contracts, and associated costs to plan, manage, and deliver 
installation services and functions. Installation services consists of 
nine major program areas which include many diverse subfunctions, such 
as installation airfield and port operations; security; transportation; 
supply; communications; information management; personnel management; 
food services; administrative, legal, and financial services; 
unaccompanied personnel housing management; family and quality of life 
programs; and environmental compliance. 

* Facilities operation services, funded primarily with operation and 
maintenance appropriations, includes 10 facility-related services-- 
fire and emergency services, utilities, pavement clearance, refuse 
collection and disposal, real property leases, grounds maintenance, 
pest control, custodial services, real property management and 
engineering services, and engineering readiness. DOD previously 
referred to facility operations as real property services and, together 
with installation services, family housing, and environment, were 
referred to as base operations support. In general, the military 
services' budgets continue to refer to funding for installation 
services and facility operation services as base operations support 
funding. 

DOD Intends to Use Models to Estimate Funding Requirements: 

In order to more effectively and efficiently support DOD missions, 
several years ago the Office of the Deputy Under Secretary of Defense 
for Installations and Environment began to lead the military services 
in developing more accurate methods to estimate installation support 
funding requirements. According to DOD officials, in the past 
installation support funding requirements were often artificially 
derived, such as by basing funding needs on prior-year execution 
levels. DOD lacked departmentwide standards for determining future 
funding needs and did not have sufficient data to support informed 
decision making. DOD's solution was to develop models that could 
predict future requirements based on known inputs that were specific to 
a facility category type, service, and location. The idea was to better 
support funding decisions by developing models that used benchmarked 
and validated inputs, estimated needs based on service levels 
commensurate with industry standards, where applicable, and showed the 
impact if funds were not provided. According to DOD officials, models 
can improve consistency, increase credibility, establish an auditable 
process, and provide a tool for setting funding goals and measuring 
progress towards meeting those goals. The following is a summary status 
of DOD's model development for installation support as of January 2008. 

* The facilities sustainment model has been implemented and used by the 
military services to estimate the annual facility sustainment funding 
requirements since fiscal year 2003. The model estimates sustainment 
requirements for each of DOD's 448 facility categories. DOD determined 
the facility categories by grouping facilities with similar functions 
and units of measure to provide for consistent analysis and planning 
across the military. 

* The facilities modernization model is under development and DOD plans 
to begin using the model to estimate recapitalization funding 
requirements in fiscal year 2010. According to DOD, the model will 
estimate annual funding requirements and improve upon DOD's 
recapitalization metric that has been used for several years to help 
assess restoration and modernization funding needs. The 
recapitalization metric uses as a measure the number of years it would 
take for facilities to be replaced based on the annual funding provided 
for restoration and modernization. DOD's current goal is for military 
services to fund facility restoration and modernization in annual 
amounts that would result in facilities being replaced every 67 years. 
DOD established the 67-year benchmark after an assessment of DOD's real 
property inventory in the late 1990s. According to DOD, the facilities 
modernization model will determine funding needs based on DOD's real 
property inventory and the expected service life for each facility 
category, rather than using the 67-year average service life for all 
facility categories. 

* The facilities operation model has been under development since 
fiscal year 2005 and DOD plans for all military services to use the 
model to estimate the fiscal year 2010 facilities operation funding 
requirements. According to DOD, the model will use commercial 
benchmarks for similar services performed in the private sector. The 
Air Force used a prototype of the model to help estimate the Air Force 
fiscal year 2008 funding requirement for facilities operation. 

* The installation services model has been under development since 
2006, although work required to support the model, such as developing 
DOD-wide common definitions for support services, began in fiscal year 
2004. The model is intended to provide a consistent framework in which 
the military services can develop annual funding requirements for 
installation services. DOD's goal is to complete development of the 
model in calendar year 2008. DOD has not set a date for the military 
services to begin using the model to develop their installation 
services funding requirements. 

Reliability of the Facilities Sustainment Model's Estimates Can Be 
Improved: 

Although the facilities sustainment model provides a consistent and 
reasonable framework for preparing estimates of DOD's annual facility 
sustainment funding requirements, accuracy and supportability issues 
with two of the model's key inputs--the inventory quantity and the 
sustainment cost factor associated with each of DOD's 448 facility 
categories--have affected the reliability of the model's estimates. 
Regarding the inventory quantity input, we found that the military 
services had not verified the accuracy of the facility inventory 
records as required by DOD guidance, the model has used some inaccurate 
inventory quantities, and discrepancies existed between some facility 
inventory quantities used by the model and the quantities shown in 
supporting installation inventory records. Regarding the sustainment 
cost factor input, we identified issues concerning the accuracy and 
supportability of some cost factors used by the model. Because of these 
issues, the model's estimates of annual facility sustainment funding 
requirements are not as reliable as possible. 

Facilities Sustainment Model Provides a Consistent and Reasonable 
Framework for Preparing Funding Estimates: 

The facilities sustainment model provides a consistent and reasonable 
framework for estimating DOD's facility sustainment requirements, 
providing that the information input to the model is accurate. DOD 
officials stated that the model was designed to incorporate the basic 
characteristics of effective cost estimates[Footnote 11] and was 
independently validated prior to implementation. The model calculates 
annual facility sustainment funding requirements for each of DOD's 
facility categories by using an equation that considers four 
quantifiable variables: 

Sustainment requirement = (inventory quantity) times (sustainment cost 
factor) times (geographic location adjustment factor) times (inflation 
adjustment): 

The inventory quantities used by the model come from the real property 
inventory records maintained by military installations. Inventory 
quantities are totaled for each facility category and reported to DOD 
at the end of each fiscal year. Sustainment cost factors are estimates 
of the average annual unit cost to sustain the average size facility in 
each facility category--such as $2.53 per square foot for an aircraft 
maintenance hangar. DOD determines the sustainment cost factor from a 
variety of sources, such as private sector cost benchmarks for 
buildings and building components, other government agency standard 
cost estimates, and military-component-validated cost factors for 
facilities with no commercial counterpart. Although DOD prefers these 
sources to determine sustainment cost factors, DOD officials noted that 
such sources are not available for some facility categories. In these 
cases, DOD usually determines the cost factor based on costs from a 
separate but similar facility category. The model also adjusts 
sustainment costs to account for geographic location differences and 
annual inflation. To do this, the model applies a location factor 
developed by DOD to account for differences in labor, material, and 
equipment costs depending on where installations are located, and 
applies an inflation factor, determined by DOD, to account for cost 
escalation. Finally, the model makes adjustments to remove those 
facilities that are slated for closure or demolition in the near 
future, add those facilities under construction, account for some data 
differences among the military services, and categorize sustainment 
costs under the appropriate DOD organization and appropriation type. 

Facility Inventory Data Used in the Model Have Not Been Validated as 
Required: 

We found the model's estimates (output) were less reliable than 
possible in part because the facility inventory data used as an input 
by the model had not been validated as required. The model uses 
facility inventory information from each military installation as a key 
input in determining sustainment funding requirements, so the inventory 
information must be accurate if the model's estimates are to be 
accurate. To help ensure inventory accuracy, DOD guidance requires that 
DOD components verify the accuracy of each real property inventory 
record every 5 years.[Footnote 12] The instructions require that the 
verifications be based on a physical inventory, which can verify that 
the inventory records accurately describe all installation facilities 
and accurately record each facility's size, or quantity, using the unit 
of measure that DOD has prescribed for each facility category. The 
verification of real property inventory records also helps ensure the 
accuracy of facility-related information included in the military 
services' annual financial statements. 

Despite the guidance, we found that the military services had not 
verified the accuracy of all facility inventory records within the past 
5 years. According to service officials, the inventory verifications 
had not been performed because personnel resources at military 
installations were limited and the installations had higher priority 
work for the personnel who were available. The level of compliance with 
the verification requirements varied among the military services. 

* Army information showed that the inventory records for over 90,000 
Army facilities, about 39 percent of all Army facilities, had not been 
verified within the 5-year period ending with fiscal year 2007. 
Although some Army installations met the 5-year verification 
requirement, most installations did not. At some installations, a 
significant percentage of inventory records was not verified. For 
example, at Forts Irwin, Bragg, Shafter, and Polk, 93 percent, 83 
percent, 82 percent, and 75 percent, respectively, of the inventory 
records had not been verified within the past 5 years. 

* Navy information showed that Navy installations had not verified the 
accuracy of about 59 percent of their real property inventory records 
within the 5-year period ending with fiscal year 2007. More 
specifically, the inventory records for about 49 percent of the Navy's 
buildings, 58 percent of other Navy structures, and 80 percent of the 
Navy's utility facilities had not been verified within the required 
time frame. 

* Although Air Force headquarters did not track compliance with the 
real property inventory verification requirement, at our request the 
Air Force queried its major commands about compliance levels. The Air 
Education and Training Command reported that about 17 percent of its 
inventory records had not been verified within the past 5 years. The 
Air Combat Command, the Space Command, and Materiel Command reported 
that about 10 percent, 3 percent, and 2 percent, respectively, of their 
inventory records had not been verified within the past 5 years. 
Reported information from the remaining commands did not state their 
level of compliance but stated that the commands were verifying about 
20 percent of their inventory records each year. 

* Marine Corps headquarters also did not track compliance with the real 
property inventory verification requirement. However, in May 2007, the 
Naval Audit Service issued a report on the reliability of the real 
property information included in the Marine Corps' financial 
statements. The report stated that physical inventories of real 
property were not being performed every 5 years as required and that 
documentation supporting the performance of the physical inventories 
did not exist, except for critical facilities.[Footnote 13] 

During visits to eight installations, we found that while four 
installations had verified their facility inventory records within the 
past 5 years, the other four installations had not performed this 
verification. For example, Randolph Air Force Base officials stated 
that about 60 percent of the installation's real property inventory 
records had not been validated by a physical inventory within the past 
5 years because of limited personnel. The officials stated that 
inventory validations were one of the last tasks to be performed 
because other tasks were given higher priority. At Langley Air Force 
Base, officials stated that about 50 percent of the installation's real 
property inventory records had not been validated within the past 5 
years, also because of limited personnel. From a list of the inventory 
records that had been verified, we judgmentally selected and reviewed 
the documentation supporting the verifications of 10 records. We found 
discrepancies in 8 of the 10 records that raise questions about the 
reliability of the verifications at Langley Air Force Base. For 
example, the inventory verification documentation identified one 
facility as a billboard when the real property record identified the 
facility as a vehicle bridge, and the verification documentation 
identified another facility as a youth center when the real property 
record identified the facility as an Air Force clinic. In addition, the 
inventory verification documentation in some cases included no 
signature, date, or facility size, as required by installation 
procedures. 

Inaccurate Inventory Quantities Used by the Model: 

We also question the reliability of the facilities sustainment model's 
estimate (output), because we found several errors in the inventory 
quantities used as input to the model. As shown in the following 
examples, the inventory quantity errors caused inaccuracies in the 
model's funding estimates. 

* The inventory quantity used in the model to estimate sustainment 
requirements for the military services' vehicle maintenance facilities 
increased from 6,785 facilities in fiscal year 2006 to 14,760 
facilities in fiscal year 2007, an increase of 118 percent. The 
quantity then decreased to 6,599 facilities in fiscal year 2008. When 
we asked for an explanation for the fluctuation, DOD officials stated 
that the fluctuation was most likely caused by errors in five inventory 
records at one installation. These records used the wrong unit of 
measure in fiscal year 2007 to report inventory quantity. Specifically, 
the installation reported the square footage of the facilities as the 
inventory quantity instead of reporting the number of facilities. For 
example, a vehicle maintenance facility with 3,325 square feet was 
counted as 3,325 separate facilities. Because of this error, the 
facilities sustainment model overstated the sustainment requirement for 
vehicle maintenance facilities by about $12.0 million in fiscal year 
2007. 

* The inventory quantity used by the model to estimate sustainment 
requirements for the Navy's hazardous waste storage or disposal 
facilities increased from 399 facilities in fiscal year 2006 to 2,350 
facilities in fiscal year 2007, an increase of 489 percent. The 
quantity then decreased to 385 facilities in fiscal year 2008. When we 
asked for an explanation for the fluctuation, Navy officials stated 
that the fluctuation was caused by an error in reporting the inventory 
quantity in fiscal year 2007. Because of this error, the facilities 
sustainment model overstated the sustainment requirement for the Navy's 
hazardous waste storage or disposal facilities by about $10.8 million 
in fiscal year 2007. 

* The inventory quantity used by the model to estimate sustainment 
requirements for unsurfaced airfield pavement in the Army increased 
from 762,553 square yards in fiscal year 2005 to 2,634,221 square yards 
in fiscal year 2008, an increase of 245 percent. When we asked Army 
officials to explain the basis for the increase, Army officials stated 
that the Army had increased data emphasis and installations made great 
efforts to accurately capture their entire inventories. Although the 
dollar amount associated with this change in inventory is relatively 
small, the Army's statement indicates that the Army's previously 
reported inventory quantities for unsurfaced airfield pavement were not 
accurate. 

Discrepancies Existed between Quantities Used in the Model and 
Supporting Inventory Records: 

Our review also identified discrepancies between facility inventory 
quantities used by the facilities sustainment model and quantities 
shown in the supporting real property inventory records. We identified 
such discrepancies at five of the eight installations we visited. In 
many instances, the difference in the inventory quantities was 
relatively small. Nevertheless, local officials could not explain the 
differences, which cause the accuracy of the facility quantities used 
by the model to be questionable. The following examples illustrate 
discrepancies we identified during installation visits. 

* At Fort Eustis, we selected 39 facilities and for each facility 
compared the inventory quantity shown in the installation's real 
property inventory record with the inventory quantity used in the 
facilities sustainment model. In 36 of the 39 cases, the inventory 
quantities did not match and local officials could not explain why. For 
example, the Fort Eustis inventory record showed the size of a shore 
erosion prevention facility to be 9,333 linear feet but the inventory 
size used in the model was 30,839 linear feet, a difference of 230 
percent. In another instance, the Fort Eustis inventory record showed 
the size of a bulkhead facility to be 2,594 linear feet but the 
inventory size used in the model was 1,394 linear feet, a difference of 
86 percent. In neither case could Fort Eustis officials explain the 
discrepancy between the quantities contained in the facility inventory 
records and the quantities used by the model. 

* At Randolph Air Force Base, we selected 39 facilities and for each 
facility compared the inventory quantity shown in the installation's 
real property inventory record with the inventory quantity used by the 
facilities sustainment model. In 5 of the 39 cases, the inventory 
quantities did not match and local officials could not explain why. For 
example, the Randolph Air Force Base inventory record showed the size 
of a heat source facility to be 5,918 million British thermal units, 
but the inventory size used in the model was 27.15 million British 
thermal units. The quantity used by the model was a default reset value 
that the model used when the reported size for this facility type 
exceeded 500 million British thermal units and the reporting 
installation did not confirm that its reported facility size was 
correct. Randolph Air Force Base officials did not resolve the 
discrepancy during our visit. 

* At Camp Lejeune, we found discrepancies in several of the inventory 
records we checked. For example, the model estimated sustainment 
requirements for seven aircraft runways at Camp Lejeune. When we asked 
for the supporting facility inventory records in order to compare 
inventory quantities in the records with the quantities used by the 
model, Camp Lejeune officials stated that they could not locate the 
inventory record for one of the runways. The model had used an 
inventory size of 172,083 square yards for this runway and estimated 
that its annual sustainment requirement was about $207,000. Camp 
Lejeune officials did not resolve the discrepancy during our visit. 

An Independent Study Found Concerns with the Model's Sustainment Cost 
Factors: 

An independent study that found concerns with the sustainment cost 
factors used in the model contributed to our finding that the model's 
estimates were less reliable than possible. As with inventory 
quantities, the facility sustainment cost factors associated with each 
of DOD's 448 facility categories are a key input to the facilities 
sustainment model. The cost factors used by the model must be reliable 
in order for the model's requirements estimates to be reliable. To 
assess the quality of the factors, DOD hired a contractor in fiscal 
year 2005 to perform an independent validation and verification study. 
The contractor selected 45 cost factors, primarily from those factors 
associated with facility categories with the highest sustainment 
requirements, independently determined a value for each factor, and 
compared these values with the cost factor values used by DOD. The 
study, completed in February 2006, reported that only 13 of 45 factors 
evaluated were deemed to be reasonably accurate and adequately 
supported. The study concluded that 32 of DOD's cost factors were 
either overvalued or undervalued and recommended that DOD adjust its 
cost factor values in order to more accurately estimate sustainment 
requirements. Table 1 illustrates selected results from the study. 

Table 1: Selected Results from the Independent Validation and 
Verification Study of DOD's Sustainment Cost Factors: 

Facility category: Surfaced road; 
Unit of measure: Square yard; 
DOD's cost factor value[A]: $0.54; 
Study's estimated cost factor value[A]: $1.77; 
DOD's factor value less study's factor value: Amount: ($1.23); 
DOD's factor value less study's factor value: Percentage: -228. 

Facility category: Unsurfaced road; 
Unit of measure: Square yard; 
DOD's cost factor value[A]: 0.16; 
Study's estimated cost factor value[A]: 0.53; 
DOD's factor value less study's factor value: Amount: (0.37); 
DOD's factor value less study's factor value: Percentage: -231. 

Facility category: Operating fuel storage; 
Unit of measure: Gallon; 
DOD's cost factor value[A]: 0.08; 
Study's estimated cost factor value[A]: 0.26; 
DOD's factor value less study's factor value: Amount: (0.18); 
DOD's factor value less study's factor value: Percentage: - 225. 

Facility category: Sidewalk and walkway; 
Unit of measure: Square yard; 
DOD's cost factor value[A]: 0.86; 
Study's estimated cost factor value[A]: 1.84; 
DOD's factor value less study's factor value: Amount: (0.98); 
DOD's factor value less study's factor value: Percentage: - 114. 

Facility category: Vehicle bridge; 
Unit of measure: Square yard; 
DOD's cost factor value[A]: 76.42; 
Study's estimated cost factor value[A]: 37.79; 
DOD's factor value less study's factor value: Amount: 38.63; 
DOD's factor value less study's factor value: Percentage: 51. 

Facility category: Standby emergency power; 
Unit of measure: Kilowatt; 
DOD's cost factor value[A]: 17.17; 
Study's estimated cost factor value[A]: 10.43; 
DOD's factor value less study's factor value: Amount: 6.74; 
DOD's factor value less study's factor value: Percentage: 39. 

Facility category: Airfield pavement lighting; 
Unit of measure: Linear foot; 
DOD's cost factor value[A]: 3.30; 
Study's estimated cost factor value[A]: 2.30; 
DOD's factor value less study's factor value: Amount: 1.00; 
DOD's factor value less study's factor value: Percentage: 30. 

Facility category: General administration building; 
Unit of measure: Square foot; 
DOD's cost factor value[A]: 2.56; 
Study's estimated cost factor value[A]: 3.21; 
DOD's factor value less study's factor value: Amount: (0.65); 
DOD's factor value less study's factor value: Percentage: -25. 

Facility category: Fence and wall; 
Unit of measure: Linear foot; 
DOD's cost factor value[A]: 0.60; 
Study's estimated cost factor value[A]: 0.73; 
DOD's factor value less study's factor value: Amount: (0.13); 
DOD's factor value less study's factor value: Percentage: -22. 

Facility category: Potable water distribution line; 
Unit of measure: Linear foot; 
DOD's cost factor value[A]: 0.85; 
Study's estimated cost factor value[A]: 0.67; 
DOD's factor value less study's factor value: Amount: 0.18; 
DOD's factor value less study's factor value: Percentage: 21. 

Source: US COST, Facilities Sustainment Cost Factor Evaluation for the 
Office of the Secretary of Defense (February 2006). 

[A] Fiscal year 2005 dollars. 

[End of table] 

In response to the study's recommendations, DOD made changes to some 
but not all of the factors recommended for adjustment. Specifically, 
DOD cited the study as the basis for making changes to 16 cost factors 
when factors were adjusted for use in estimating the fiscal year 2009 
sustainment requirements. However, some of these changes were not 
consistent with the study's recommendations. For example, the study 
found that the factor for general administration buildings was 25 
percent too low and recommended a change. Although DOD made a change 
and attributed the study for the change, the revised cost factor was 
still 16 percent below the study's recommended amount after adjusting 
for inflation. The study also found that the factor for standby 
emergency power facilities was 39 percent too high and recommended a 
change. Although DOD made a change and attributed the study for the 
change, the revised cost factor was still 40 percent higher than the 
study's recommended amount after adjusting for inflation. 

DOD did not document the reasons why some of the study's 
recommendations were accepted and some were not, and in some cases 
DOD's decisions appeared inconsistent. For example, the study 
recommended increasing the cost factors for surfaced roads and 
unsurfaced roads. DOD accepted the recommendation for unsurfaced roads, 
which will result in adding over $90 million to the sustainment 
requirement, but did not accept the recommendation for surfaced roads. 
Because the reasons for these decisions were not documented, we asked 
DOD officials to explain the basis for the decisions. The officials 
stated that the recommendation for unsurfaced roads was accepted 
because a DOD panel decided that the data used to support the study's 
recommended cost factor value were superior to the data used to support 
DOD's cost factor value. However, because the data used by the study 
were readily available to DOD, it is unclear why the data were not 
already used as the basis for DOD's cost factor. The officials stated 
that the panel decided the opposite for surfaced roads--that the data 
used to support DOD's cost factor were superior to the data supporting 
the study's recommended cost factor. However, the basis for the panel 
decision is somewhat unclear because DOD's cost factor was based on a 
University of Kansas study and reasons were not stated to explain why 
that study was considered a superior source. 

It is important to note that the verification and validation study 
evaluated 45 (about 10 percent) of DOD's 448 sustainment cost factors 
and identified concerns with 32 (about 71 percent) of the factors 
evaluated. Of these 32 factors, DOD made changes to 16 factors and 
attributed the changes to the study. On the basis of these percentages, 
it appears likely that if further study and analysis were performed on 
the remaining 395 cost factors not subjected to an independent review, 
additional reliability concerns would be identified and DOD would be in 
a position to make adjustments to additional factors. 

Support for Some Sustainment Cost Factors Is Unclear: 

We identified issues concerning the supportability of some cost factors 
used by the facilities sustainment model. DOD officials stated that, as 
resources permit, several cost factors are refined each year in an 
effort to continually improve the accuracy of the model. However, DOD 
has not provided a clear audit trail with readily accessible 
information documenting the support or basis for each factor's value, 
such as the details on the calculations used and explanations for 
changes in factors from year to year. Without this documentation, the 
support for many factors is unclear, as illustrated below. 

* From fiscal year 2008 to 2009, DOD decreased the sustainment cost 
factor for potable water storage facilities and pedestrian bridges by 
90 percent and 88 percent, respectively. Because documentation did not 
explain the reason for these changes, we asked DOD officials for an 
explanation. The officials stated that the changes were made to correct 
a math error that had been made in the calculation of the previously 
used cost factor values. Such errors might be more easily detected if 
calculation details were provided in the documentation supporting the 
cost factors. 

* From fiscal year 2008 to 2009, DOD increased the sustainment cost 
factor for airfield pavement lighting by 90 percent. The February 2006 
verification and validation study had found this factor, before the 
increase, to be high. Because documentation did not explain the reason 
for the increase, we asked DOD officials for an explanation. The 
officials stated that the increase resulted from a change in the basis 
for the cost factor. The revised cost factor was based on a detailed 
cost analysis of a standard design using vendor quotes. Still, 
documentation showing the calculations and the number of vendors 
contacted to ensure competitive pricing would help support this cost 
factor change. 

* From fiscal year 2008 to 2009, DOD increased the sustainment cost 
factor for fences and walls by 92 percent. Because documentation did 
not explain the reason for the increase, we asked DOD officials for an 
explanation. The officials stated that the change resulted from a 
change in the planned design life for fences and walls from 50 to 26 
years. The February 2006 verification and validation study had 
recommended that this factor be increased by 22 percent but did not 
recommend a change in service life. Documentation showing the detailed 
reasons for the change and the calculations used would help support 
this cost factor change. 

* From fiscal year 2008 to 2009, DOD decreased the sustainment cost 
factor for sidewalks and walkways from $1.82 per square yard to $0. The 
change reduced DOD's sustainment requirements by about $98 million. 
Because documentation did not explain the reason for the decrease, we 
asked DOD officials for an explanation. The officials stated that the 
decrease resulted from a change in the planned design life for 
sidewalks and walkways from 50 to 28 years, which resulted in 
eliminating sustainment costs but increasing recapitalization costs. We 
asked facility maintenance personnel at four of the installations we 
visited whether they agreed with the change in the cost factor. In each 
case, the officials stated that they disagreed because sidewalks and 
walkways do have sustainment costs. Documentation showing the detailed 
reasons for the change and the calculations used would help support 
this cost factor change. 

The support for some sustainment cost factors was also unclear because 
of the method DOD used to determine the values for the factors. 
Specifically, DOD attempts to use independent data sources as the basis 
for determining sustainment cost factors. However, according to DOD 
officials, independent data sources are not available for some facility 
categories. To develop a sustainment cost factor for one of these 
facility categories, DOD normally performs a ratio analysis based 
primarily on costs from a similar facility category where costs are 
based on independent sources.[Footnote 14] For example, the sustainment 
cost factor for satellite communications buildings is based on a ratio 
of costs from communications buildings, where the sustainment cost 
factor is based on independent data sources. 

However, we found that the cost factors for some facility categories 
were based on costs from seemingly dissimilar facility categories. In 
such cases, the support for the factors was unclear because 
documentation did not explain the relationship between the facility 
categories. For example, the sustainment cost factor for petroleum 
pipelines, which are measured in miles, and the sustainment cost factor 
for aircraft fueling facilities, which are measured in gallons per 
minute, were both based on a ratio of costs from automobile service 
facilities, which are measured in square feet. DOD officials stated 
that sustainment costs for automobile service facilities include 
hydrant and fuel truck station records, periodic maintenance 
inspections, and replacement of worn parts, which are similar to costs 
associated with petroleum pipelines and aircraft fueling facilities. 
However, because automobile service facilities also include costs for 
items not clearly associated with petroleum pipelines and aircraft 
fueling facilities, such as linoleum flooring, painted walls, water 
heaters, and heating and air conditioning systems, the connection 
between these facility categories remains unclear. 

DOD's Fiscal Year 2009 Calculation Method Can Reduce the Accuracy of 
Sustainment Cost Factors Not Based on Independent Data Sources: 

Each year since the facilities sustainment model was implemented in 
2003, DOD has adjusted the sustainment cost factors for estimated 
inflation. However, for fiscal year 2009, DOD changed the calculation 
method used to make the inflation adjustment and the change can result 
in reduced accuracy for those sustainment cost factors that are not 
based on independent data sources but rather are based on ratio 
analyses. As discussed above, when independent data sources are not 
available to estimate a sustainment cost factor for a facility 
category, DOD normally estimates the unknown cost factor by performing 
a ratio analysis based on costs from a similar facility category where 
the costs are based on independent sources. DOD's premise is that 
because there is a similar relationship between the sustainment and 
replacement cost factors for the two facility categories, a ratio 
analysis can be used to estimate the unknown sustainment cost 
factor.[Footnote 15] DOD uses ratio analyses to estimate the 
sustainment cost factors for approximately one-third of DOD's facility 
categories. 

DOD officials stated that because several years had passed since the 
facilities sustainment model was implemented and the actual inflation 
rates for each of those years was known, DOD decided that it could 
improve the accuracy of the factors if they were recomputed using the 
actual prior year inflation rates. Thus, in developing the cost factors 
to be used in estimating DOD's fiscal year 2009 facility sustainment 
funding requirements, DOD recomputed all cost factors using actual 
prior year inflation rates. 

The recomputation should result in increased accuracy for those 
sustainment cost factors that are based on independent data sources. 
However, depending on the method used to make the inflation adjustment 
for those cost factors that are based on ratio analyses, the 
recomputation can also result in decreased accuracy for those factors. 
To illustrate, for cost factors based on ratio analyses, DOD previously 
made inflation adjustments by first applying the estimated annual 
inflation rate to the individual sustainment and replacement cost 
factors and then using a ratio analysis to calculate the unknown 
sustainment cost factor. DOD did not use this method for fiscal year 
2009. Instead, DOD used the value of the sustainment cost factor that 
was determined in the first year that a ratio analysis was used and 
then applied actual prior year inflation to recompute the cost factor's 
value for fiscal year 2009. DOD's new method would be appropriate and 
result in accurate estimates under two circumstances--if the similar 
relationship between the two facility categories used in the ratio 
analyses existed only in the first year that the ratio analysis was 
used, or if the relationship between the known sustainment and 
replacement cost factors used in the ratio analysis remained the same 
from the original year to the current year. However, according to DOD 
officials and our review of supporting documentation, neither 
circumstance is applicable. More specifically, DOD officials stated 
that the similar relationship between the facility categories continues 
from year to year and our review found that the relationship between 
the known sustainment and replacement cost factors often do not stay 
the same because the individual costs can change at different rates 
from year to year. 

For example, the cost factor for retaining structure facilities is not 
based on independent data sources but rather on a ratio analysis of 
costs from fence and wall facilities. To adjust the retaining structure 
facilities' cost factor for fiscal year 2009, DOD applied actual 
inflation rates to the factor's value in 2005, the year that the factor 
was first determined using a ratio analysis. The result was a 
sustainment cost factor of $11.57 per linear foot. However, if DOD had 
used its previously used method and calculated the cost factor using a 
ratio analysis after the individual costs used in the analysis had been 
adjusted for actual inflation, the sustainment cost factor would have 
been $21.99 per linear foot, or 90 percent more. Using the previously 
used calculation method would have increased the accuracy of the cost 
factor because costs would continue to be based on a current year ratio 
analysis and actual prior year inflation would still be considered 
because the individual costs used in the ratio analysis would have been 
adjusted for actual prior year inflation. Based on DOD's inventory of 
retaining structure facilities, the difference resulted in the 
facilities sustainment model estimating about $13 million less for 
sustaining these facilities in fiscal year 2009. 

As another example, the cost factor for petroleum pump station 
facilities is not based on independent data sources but rather on a 
ratio analysis of costs for automobile service facilities. To adjust 
the petroleum pump station facilities' cost factor for fiscal year 
2009, DOD applied actual inflation rates to the factor's value in 2006, 
the year that the factor was first determined using a ratio analysis. 
The result was a sustainment cost factor of $20.85 per square foot. 
However, if DOD had calculated the cost factor using the previously 
used method, the sustainment cost factor would have been $18.56 per 
square foot, or 11 percent less. Based on DOD's inventory of petroleum 
pump station facilities, the difference resulted in the model 
estimating about $2.4 million more for sustaining these facilities in 
fiscal year 2009. 

In commenting on the calculation method used for fiscal year 2009 and 
the resulting impact on those factors based on ratio analyses, DOD 
officials stated that the intent was to reduce the number of variables 
and unknowns in developing the cost factors and inflating the original 
calculation appeared to be the least complicated method. Although the 
method used by DOD for fiscal year 2009 may provide for some 
consistency, the method does not appear to be any less complicated than 
the previously used method, does not appear to reduce any variables or 
unknown quantities, and can result in reduced accuracy for those cost 
factors that are determined by a ratio analysis. 

Military Services Have Not Met All Funding Goals for Facility 
Sustainment and Recapitalization: 

The military services have not met all of DOD's goals for funding 
facility sustainment and recapitalization at levels to prevent 
deterioration and ensure that facilities are restored and modernized in 
accordance with established benchmarks. Full funding of sustainment 
requirements is the most cost-effective approach to managing facilities 
because it provides the most performance over the longest period for 
the least investment. However, the military services collectively have 
not met DOD's facility sustainment funding goals each year since goals 
were established in fiscal year 2005, and some facilities had fallen 
into disrepair at most installations we visited. As a result, some 
facilities have deteriorated and will likely experience reduced service 
lives, which, in turn, will lead to more costly recapitalization 
requirements in the future. Although the military services achieved 
more success in meeting DOD's recapitalization goals--largely because 
of factors outside the normal facility recapitalization funding 
process--service officials noted concern over the shortage of 
restoration and modernization funds and a growing backlog of 
restoration and modernization requirements. 

Full Funding of Sustainment Requirements Is Cost Effective: 

According to DOD, full funding of sustainment requirements is the most 
cost effective approach to managing facilities because it provides the 
most performance over the longest period for the least investment. 
However, as other important priorities, such as force modernization, 
have competed for funding, DOD has been challenged to provide adequate 
resources for sustaining and recapitalizing its facilities. In April 
2007 testimony, DOD noted that full funding of facilities sustainment 
had been and continued to be the foundation of the department's long- 
term facilities strategy and goals in order to optimize DOD's facility 
investment and ensure facility readiness.[Footnote 16] When full 
sustainment funding is not provided, service officials noted that 
facility deterioration accelerates, facility service lives shorten, 
mission capabilities and quality of life decrease, and expected future 
costs increase. In view of these positions and recognizing that funding 
of sustainment requirements had been a challenge because of competing 
budget priorities, DOD's 2004 installations strategic plan established 
a goal for the military services to fund sustainment at 95 percent of 
the requirement determined by the facilities sustainment model 
beginning in fiscal year 2005, and at 100 percent of the requirement 
beginning in fiscal year 2008. Because the facilities sustainment model 
provides a consistent and reasonable framework for estimating 
sustainment requirements, use of the model for setting funding goals 
appears reasonable, even though the reliability of the model's 
estimates can be improved. 

Military Services Have Not Met Sustainment Goals: 

Collectively, the military services did not meet DOD's sustainment 
funding goal in fiscal years 2005 through 2007 and they did not budget 
funds to meet the goal in fiscal year 2008. As shown in table 2, during 
fiscal years 2005 through 2007, only the Marine Corps met or exceeded 
the goal by funding over 100 percent of the Marine Corps' annual 
sustainment requirement in fiscal years 2006 and 2007, thus reducing 
some of the Marine Corps' backlog of deferred sustainment needs. 

Table 2: Attainment of Sustainment Goals--Percentage of Requirement 
Funded, Fiscal Years 2005 through 2008: 

Component: Army; 
Fiscal year 2005: Goal: 95; 
Fiscal year 2005: Actual: 64; 
Fiscal year 2006: Goal: 95; 
Fiscal year 2006: Actual: 88; 
Fiscal year 2007: Goal: 95; 
Fiscal year 2007: Actual: 73; 
Fiscal year 2008: Goal: 100; 
Fiscal year 2008: Budgeted: 89. 

Component: Navy; 
Fiscal year 2005: Goal: 95; 
Fiscal year 2005: Actual: 90; 
Fiscal year 2006: Goal: 95; 
Fiscal year 2006: Actual: 79; 
Fiscal year 2007: Goal: 95; 
Fiscal year 2007: Actual: 92; 
Fiscal year 2008: Goal: 100; 
Fiscal year 2008: Budgeted: 83. 

Component: Air Force; 
Fiscal year 2005: Goal: 95; 
Fiscal year 2005: Actual: 78; 
Fiscal year 2006: Goal: 95; 
Fiscal year 2006: Actual: 84; 
Fiscal year 2007: Goal: 95; 
Fiscal year 2007: Actual: 88; 
Fiscal year 2008: Goal: 100; 
Fiscal year 2008: Budgeted: 90. 

Component: Marine Corps; 
Fiscal year 2005: Goal: 95; 
Fiscal year 2005: Actual: 94; 
Fiscal year 2006: Goal: 95; 
Fiscal year 2006: Actual: 126; 
Fiscal year 2007: Goal: 95; 
Fiscal year 2007: Actual: 113; 
Fiscal year 2008: Goal: 100; 
Fiscal year 2008: Budgeted: 89. 

Component: DOD-wide[A]; 
Fiscal year 2005: Goal: 95; 
Fiscal year 2005: Actual: 79; 
Fiscal year 2006: Goal: 95; 
Fiscal year 2006: Actual: 91; 
Fiscal year 2007: Goal: 95; 
Fiscal year 2007: Actual: 90; 
Fiscal year 2008: Goal: 100; 
Fiscal year 2008: Budgeted: 88. 

Source: DOD. 

[A] Also includes data from the Tricare Management Activity and the DOD 
Education Activity. 

[End of table] 

Service officials stated that they generally did not meet the 
sustainment funding goals because resources were limited and some 
programs, such as force modernization, often had higher funding 
priority. In addition, in some cases funds budgeted for sustainment 
needs were used to pay for other needs, such as unfunded facility 
restoration projects or unfunded bills for installation services. When 
sustainment funds are used to pay for other needs, the result is that 
even more facility sustainment requirements are unmet, which could lead 
to additional restoration and modernization requirements in the future. 
The following is a summary of the comments on this issue from the 
military services. 

* Army officials stated that the Army achieved a lower facility 
sustainment rate than budgeted in some years because facility 
sustainment funds were used to make up for funding shortages in 
installation services by covering some must-pay bills. In fiscal year 
2005, the officials stated about $600 million of budgeted sustainment 
funds were used to pay for installation support services. The officials 
also noted that, because sustainment requirements have not been fully 
funded, using sustainment funds for other purposes amplifies the impact 
on facilities by causing additional deterioration. 

* Navy officials also stated that budgeted sustainment funds were used 
to pay for other critical unfunded needs. The officials stated that 
about $200 million in budgeted sustainment funds were used each year to 
pay for critical restoration and modernization projects. In addition, 
Navy officials told us that about $195 million and $184 million of 
budgeted sustainment funds in fiscal years 2005 and 2006, respectively, 
were used to pay for installation support services. Navy officials also 
stated that although other critical needs were met with the sustainment 
funds, the result was the deferment of a significant amount of needed 
sustainment work. 

* Air Force officials noted that in some instances installations have 
used sustainment funds to pay for unfunded restoration and 
modernization projects in order to repair damaged facilities or prevent 
catastrophic facility failures so that missions were met. The officials 
stated that in fiscal year 2005 and also in fiscal year 2006, about 
$250 million of budgeted sustainment funds were used each year to pay 
for facility restoration projects. Although the result was less funding 
for needed sustainment work, the officials stated that the funds were 
still used on facility needs rather than on other needs, such as 
installation services. 

* Marine Corps officials stated that nearly all budgeted sustainment, 
restoration, and modernization funds have been used as intended. 

Underfunding of Sustainment Requirements Has Resulted in Some 
Deteriorated Facilities: 

Although many facilities are in good condition, service officials 
stated that underfunding of sustainment requirements over many years 
has resulted in some deteriorated facilities. Deteriorated facilities 
will likely experience reduced service lives, which, in turn, will lead 
to more costly recapitalization requirements in the future. Army 
officials noted that when sustainment funding is inadequate, planned 
projects are delayed, which sometimes causes further deterioration, 
such as damage to interior walls and floors from leaking roofs. Navy 
and Air Force officials also stated that inadequate facility 
sustainment funding has resulted in deteriorated facilities, reduced 
mission capabilities, and lower quality of life for installation 
personnel. Navy officials stated that in some instances installation 
aircraft runways have been closed because sustainment funds were not 
available to perform needed repairs. 

At the eight installations we visited, facility sustainment 
requirements were not fully funded every year during fiscal years 2005, 
2006, and 2007. At some, but not all, of the installations, local 
officials stated that sustainment funding had not been available to 
accomplish all needed work and, as a result, many installation 
facilities were in a deteriorated condition. For example, officials at 
Fort Sam Houston stated that the foundation of a warehouse facility had 
shifted, which caused cracks in the walls, warped door frames, and 
leaking pipes (see fig. 2). Repairs had not been completed because 
adequate sustainment funds were unavailable. Fort Sam Houston officials 
also noted that several barracks buildings, which were still in use, 
had deteriorated because of inadequate funding. For example, porch 
surfaces were crumbling, paint was peeling, and windows needed repair 
(see fig. 3). 

Figure 2: Leaking Pipes and Cracked Walls at a Damaged Warehouse 
Facility at Fort Sam Houston: 

This figure is a photograph of leaking pipes and cracked walls at a 
damaged warehouse facility at Fort Sam Houston. 

[See PDF for image] 

Source: GAO. 

[End of figure] 

Figure 3: Deteriorated Barracks Building at Fort Sam Houston: 

This figure is a photograph of deteriorated barracks building at Fort 
Sam Houston. 

[See PDF for image] 

Source: GAO. 

[End of figure] 

Officials at Oceana Naval Air Station stated that many facility roof 
structures at the installation had exceeded their service lives and 
some were leaking, causing damage to interior building components. The 
officials noted that the roof of a weapons and radar training building 
at an Oceana Naval Air Station annex had standing water and leaked, 
which caused problems inside the building (see fig. 4). Local officials 
stated that the roof repair would cost about $2.3 million and had been 
deferred because of inadequate sustainment funding. Oceana officials 
also stated that needed repairs to several aircraft hangar doors at the 
installation had been deferred due to inadequate sustainment funding 
(see fig. 5). Because hangar door motors did not work, employees used a 
tow tractor to open and close the doors, which resulted in additional 
damage to the doors. The officials also stated that an employee had 
been injured by a hangar door because the door's safety device did not 
work. 

Figure 4: Standing Water on a Leaking Roof of a Weapons and Radar 
Training Building at an Oceana Naval Air Station Annex: 

This figure is a photograph of standing water on a leaking roof of a 
weapons and radar training building at an Oceana Naval Air Station 
Annex. 

[See PDF for image] 

Source: GAO. 

[End of figure] 

Figure 5: Damaged Aircraft Hangar Doors at Oceana Naval Air Station: 

This figure is a combination of two photographs showing damaged 
aircraft doors at Oceana Naval Air Station. 

[See PDF for image] 

Source: GAO. 

[End of figure] 

At Randolph Air Force Base, officials stated that although an aircraft 
maintenance hangar needed substantial window repairs or replacement to 
prevent safety violations, funds were not available to accomplish the 
work. The officials noted that the facility's window frames were 
corroded, which allowed rain water to enter the building. The windows 
were located directly above electrical panels and water ran over the 
panels when it rained, creating a safety hazard (see fig. 6). On 
occasion, water in the building had caused aircraft maintenance 
operations to temporarily shut down. The officials told us that the 
facility had already received one safety violation and another one 
could permanently shut down the facility. Randolph Air Force Base 
officials also stated that some aircraft runways and aprons had 
deteriorated due to inadequate sustainment funding. The officials said 
the concrete on some runways and aprons was old and prone to cracking, 
which could cause concrete pieces to break off, creating a foreign 
object hazard to aircraft engines (see fig. 7). The officials explained 
that some holes had been patched as a temporary fix, but that the 
patches tended to crack and pop out. The officials stated that projects 
costing about $56 million were needed to complete all needed runway and 
apron repairs. 

Figure 6: Leaking Windows and Electrical Panels that Created a Safety 
Hazard at a Deteriorated Aircraft Maintenance Hangar on Randolph Air 
Force Base: 

This figure is a combination of two photographs, one of leaking windows 
and the other of electrical panels, both of which created a safety 
hazard at a deteriorated aircraft maintenance hangar on Randolph Air 
Force Base. 

[See PDF for image] 

Source: GAO. 

[End of figure] 

Figure 7: Cracking Aircraft Aprons at Randolph Air Force Base: 

This figure is a photograph of two cracking aircraft aprons at Randolph 
Air Force Base. 

[See PDF for image] 

Source: GAO. 

[End of figure] 

Military Services Achieved More Success in Attaining Recapitalization 
Goals: 

In comparison to facility sustainment goals, the military services have 
achieved more success in attaining DOD recapitalization goals. Although 
DOD has not used a standardized model to determine facilities 
recapitalization funding requirements, for several years the department 
has used a metric that measures the number of years that would be 
required to replace the facility inventory on the basis of the annual 
funding provided for restoration and modernization. According to 
February 2006 testimony, DOD's recapitalization rate in fiscal year 
2001 was 192 years, a rate that DOD considered inadequate in view of 
DOD's current goal of 67 years and similar private sector industries, 
which replace their facilities every 50 years, on average.[Footnote 17] 

Since fiscal year 2001, DOD's recapitalization rate has improved and, 
as shown in table 3, the military services have met or bettered the 67 
year benchmark in many instances. For example, the Army bettered the 
goal in fiscal years 2005, 2006, and 2007, the Navy bettered the goal 
in fiscal years 2006 and 2007, and the Air Force bettered the goal in 
fiscal year 2005. 

Table 3: DOD Facility Recapitalization Rates Expressed in Years: 

Component: Army; 
Fiscal year 2005: 62; 
Fiscal year 2006: 61; 
Fiscal year 2007: 42; 
Fiscal year 2008[A]: 72. 

Component: Navy; 
Fiscal year 2005: 77; 
Fiscal year 2006: 48; 
Fiscal year 2007: 62; 
Fiscal year 2008[A]: 66. 

Component: Air Force; 
Fiscal year 2005: 66; 
Fiscal year 2006: 69; 
Fiscal year 2007: 71; 
Fiscal year 2008[A]: 97. 

Component: Marine Corps; 
Fiscal year 2005: 72; 
Fiscal year 2006: 97; 
Fiscal year 2007: 119; 
Fiscal year 2008[A]: 83. 

Component: DOD-wide[B]; 
Fiscal year 2005: 67; 
Fiscal year 2006: 60; 
Fiscal year 2007: 59; 
Fiscal year 2008[A]: 74. 

Source: DOD. 

Note: To exceed DOD's 67-year recapitalization rate goal, the number of 
years must be less than 67. 

[A] Budgeted. 

[B] Also includes data from the Defense Logistics Agency, the Tricare 
Management Activity, and the DOD Education Activity. 

[End of table] 

According to DOD officials, one reason for greater success in meeting 
recapitalization goals is that additional restoration and modernization 
funds were provided from programs outside of the normal funding 
process. For example, the officials stated that many installations have 
received additional recapitalization funding as the result of decisions 
related to the implementation of base realignment and closure 
recommendations, the global basing strategy, and the Army's 
restructuring initiative. 

Although the military services met recapitalization goals in some 
years, the adequacy of restoration and modernization funding remains an 
issue, particularly in view of existing backlogs of needed restoration 
and modernization work. Army officials stated that Army restoration and 
modernization needs were not fully funded in fiscal years 2005 and 
2006, and at the end of fiscal year 2007 the Army reported a backlog of 
restoration and modernization needs of about $20.4 billion. Navy 
officials stated that the Navy's restoration and modernization backlog 
grew from about $13.3 billion in fiscal year 2005 to about $27.6 
billion at the end of fiscal year 2007, an increase of 108 percent. Air 
Force officials stated that restoration and modernization requirements 
had not been adequately funded and that the Air Force had a restoration 
and modernization backlog of about $9.3 billion at the end of fiscal 
year 2007. Marine Corps officials stated that the Marine Corps had a 
restoration and modernization backlog of about $1 billion at the end of 
fiscal year 2007. Without adequate restoration and modernization 
funding, facilities cannot be restored, improved, or modernized in 
accordance with military needs and expectations. 

Officials at some of the installations we visited also stated that 
inadequate funding for restoration and modernization needs was a 
concern. For example, officials at Fort Sam Houston stated that the 
installation's backlog of restoration and modernization requirements 
grew from about $341 million in fiscal year 2005 to about $456 million 
in fiscal year 2007, an increase of about $115 million (34 percent). At 
Langley Air Force Base, officials stated that the installation's 
backlog of restoration and modernization requirements grew from about 
$24 million in fiscal year 2005 to about $46 million in fiscal year 
2007, an increase of about $22 million (92 percent). 

DOD Has Not Taken Actions to Address Deferred Facility Sustainment 
Requirements: 

DOD has not taken actions to estimate and address the military's 
deferred facility sustainment requirements. Deferred facility 
sustainment requirements--specifically unfunded facility sustainment 
needs that carry over from one year to the next--can eventually result 
in damaged facilities, shortened facility service lives, and increased 
future costs for facility restoration. However, because DOD has not 
provided guidance that clearly defines deferred sustainment 
requirements, directs the services to consistently measure and track 
deferred sustainment needs, or establishes a goal to address these 
needs, the military services do not have consistent estimates of their 
deferred sustainment requirements or plans to deal with these needs. As 
a result, DOD lacks a complete picture of its facility sustainment 
funding needs and DOD's current plans and goals to address facility 
sustainment requirements do not include all sustainment requirements. 
In addition, without consistent estimates, the military services' 
annual financial statements have not included the cumulative amount of 
deferred facility sustainment requirements as required by Federal 
Financial Accounting Standards in order to provide full disclosure of 
facility conditions. 

DOD Has Not Provided Adequate Guidance on Deferred Sustainment 
Requirements: 

The military services do not have consistent estimates of their 
deferred sustainment requirements or plans to deal with these needs 
because DOD has not provided adequate guidance on deferred sustainment 
requirements. Although DOD guidance provides a clear definition of work 
classified as facility sustainment and DOD's facilities sustainment 
model provides a framework for estimating and addressing annual 
facility sustainment funding requirements, DOD has not provided a clear 
definition of work that should be classified as deferred facility 
sustainment or issued guidance for estimating and addressing deferred 
sustainment funding requirements. According to DOD officials, deferred 
sustainment has not been emphasized because the goal has been for the 
military services to fully fund their annual sustainment requirements. 
If the annual sustainment requirements were fully funded each year, 
then facilities could be optimally maintained and needed sustainment 
work would not be deferred, so deferred sustainment requirements would 
not exist. However, this has not been the case. As shown in table 4, 
the military services did not fund over $3.5 billion of their annual 
sustainment requirements in fiscal years 2005 through 2007. According 
to DOD, needed sustainment work that is not performed--specifically 
unfunded facility sustainment needs that carry over from one year to 
the next--will eventually result in damaged facilities, shortened 
facility service lives, and increased future costs for facility 
restoration. 

Table 4: Unfunded Annual Facility Sustainment Requirements: 

(Dollars in millions). 

Component: Army; 
Fiscal year 2005: $918; 
Fiscal year 2006: $574; 
Fiscal year 2007: $735; 
3-year total: $2,228. 

Component: Navy; 
Fiscal year 2005: 34; 
Fiscal year 2006: 61; 
Fiscal year 2007: 121; 
3-year total: 216. 

Component: Air Force; 
Fiscal year 2005: 375; 
Fiscal year 2006: 418; 
Fiscal year 2007: 214; 
3-year total: 1,007. 

Component: Marine Corps; 
Fiscal year 2005: 70; 
Fiscal year 2006: 47; 
Fiscal year 2007: (15)[A]; 
3-year total: 102. 

Total; 
Fiscal year 2005: $1,398; 
Fiscal year 2006: $1,100; 
Fiscal year 2007: $1,056; 
3-year total: $3,553. 

Source: DOD. 

Note: The amounts shown reflect the difference between each service's 
annual facility sustainment requirements, as determined by the 
facilities sustainment model, and the amount each service spent on 
facility sustainment. The actual unfunded facility sustainment 
requirements could differ from the estimates due to concerns with the 
model's inputs that we discussed earlier in this report. Numbers in the 
table may not total correctly due to rounding. 

[A] The Marine Corps funded more than its annual sustainment 
requirement in fiscal year 2007. 

[End of table] 

Services Do Not Have Consistent Estimates of Deferred Sustainment Needs 
and Preparing These Estimates Can Be Difficult: 

Without guidance that places emphasis on deferred facility sustainment 
needs, the military services and the installations we visited did not 
have consistent estimates of their deferred sustainment needs, and DOD 
officials noted that preparing these estimates is difficult for several 
reasons. Although each service knew the amount of its annual 
sustainment requirements that was not funded, they did not know the 
amounts of their deferred sustainment requirements and each service 
expressed a different view of the issue. For example, Army officials 
stated that although the Army does not have information documenting its 
cumulative deferred sustainment requirements, deferred sustainment 
needs were being addressed with the Army's current funding of its 
annual sustainment, restoration, and modernization programs. However, 
the Army did not fund over $735 million of its annual sustainment 
requirements in fiscal year 2007 and budgeted funds to pay for only 89 
percent of the Army's fiscal year 2008 sustainment requirements. 
Meanwhile, Navy officials stated that it did not need to estimate 
deferred sustainment needs because sustainment work that is deferred 
becomes a restoration and modernization requirement. However, according 
to DOD definitions, deferred sustainment does not become a restoration 
requirement until it results in damaging a facility, and it could take 
several years before deferred sustainment work actually damages a 
facility to the point that it must undergo restoration. In contrast, 
officials from the Air Force stated that deferred sustainment 
requirements should be estimated and added to the annual sustainment 
requirements in order to see the total sustainment funding requirement, 
even though the cost to fund the total requirement would be too high to 
be fully funded considering other Air Force budget priorities. Finally, 
Marine Corps officials stated that, based on periodic facility 
inspections, it has an estimate of total facility needs that includes 
all deferred sustainment, restoration, and modernization requirements. 
However, this estimate does not distinguish the deferred sustainment 
requirement from the restoration and modernization requirement, which 
means that the Marine Corps does not know its actual deferred 
sustainment requirement. The Marine Corps also stated that funding over 
100 percent of the annual sustainment requirement, as it did in fiscal 
year 2007, would be required to reduce the size of the deferred 
sustainment requirement. 

At some of the installations we visited, officials noted that deferred 
sustainment requirements needed to be adequately estimated and 
addressed if facilities are to be sustained at an optimum level. For 
example, officials at Langley Air Force Base stated that because the 
facilities sustainment model only estimated the annual sustainment 
requirement and did not address deferred sustainment, deferred facility 
sustainment needs at many installations would not be met even if the 
installations were funded at the amounts estimated by the model. The 
officials also stated that deferred sustainment requirements needed to 
be specifically recognized and a plan developed to address these 
requirements. At Camp Lejeune, officials noted that the facilities 
sustainment model was based on facility life-cycle costs and the 
model's annual funding estimates were based on the assumption that 
facilities were fully sustained in the past and were in good condition. 
However, the officials stated that this is not the case at many 
installations because years of inadequate funding had resulted in a 
backlog of deferred sustainment requirements. Fort Sam Houston 
officials stated that although a backlog of deferred sustainment needs 
existed, it was difficult to quantify the size of the backlog because 
the installation lacked the personnel required to fully inspect all 
installation facilities and catalogue all of the needed sustainment 
work and projects. Similarly, Randolph Air Force Base officials stated 
that all deferred sustainment needs at the installation had not been 
identified partly because there was little confidence that the work 
would be funded even if the effort were expended to document the 
requirement. 

Although Federal Real Property Council guidance requires federal 
activities to know the repair needs of their facilities,[Footnote 18] 
DOD officials indicated that for several reasons, determining deferred 
facility sustainment needs is not an easy task. First, DOD officials 
noted that all unfunded annual sustainment requirements do not become 
deferred requirements. To illustrate, if a facility has an annual 
inspection requirement and the inspection is not performed, the 
inspection cost would not become a deferred sustainment requirement 
because two annual inspections would not be required in the following 
year and the facilities sustainment model would include the annual 
inspection cost in the subsequent year's funding estimate. However, if 
a facility were scheduled for a roof replacement and roof was not 
replaced, the cost of the replacement would become a deferred 
requirement because it would still be needed and the cost would not be 
included in the subsequent year's funding estimate. 

Second, DOD officials also noted that the facilities sustainment model 
estimates the average annual sustainment funding requirements for each 
facility category but does not identify the actual sustainment work 
that each installation facility needs. The officials noted that a model 
might be developed that could provide reliable estimates of deferred 
sustainment requirements. However, according to the officials, actual 
facility sustainment needs can only be determined through facility 
inspections in which actual conditions are determined, needed repair 
and maintenance work is documented, and costs to complete this work are 
estimated. A comparison of an installation's actual facility 
sustainment needs with the installation's annual sustainment funding 
would provide an estimate of the installation's deferred sustainment 
requirement. Of the military services, only the Marine Corps 
systematically inspected its facilities and documented needed repairs 
and improvements so that actual deferred facility needs were known. 
However, because the documentation did not distinguish facility 
sustainment needs from restoration and modernization needs, the Marine 
Corps did not know its actual deferred sustainment funding 
requirements. The Army used a facility inspection method that provided 
an estimate of facility funding needs based on facility condition 
assessments. However, the method did not document each facility's 
actual needed sustainment, restoration, and modernization projects. The 
Navy stopped performing facility condition inspections after fiscal 
year 2005 because of the high cost of the inspections. Although the 
Navy plans to implement a model beginning in fiscal year 2008 designed 
to estimate facility conditions and funding needs, the model will not 
document each facility's actual needed sustainment, restoration, and 
modernization projects. Air Force officials stated that its facilities 
are inspected as funds permit and facility deficiencies, work requests, 
and projects are documented. However, the officials stated that the 
list of needed work was not considered all inclusive and did not 
categorize needed work as sustainment, restoration, or modernization. 

Third, as noted previously, estimating deferred sustainment 
requirements can be further complicated by DOD's definition of facility 
restoration and the associated decisions on when deferred sustainment 
requirements become restoration requirements. Specifically, DOD defines 
restoration as including repair and replacement work to restore 
facilities damaged by inadequate sustainment, excessive age, disaster, 
accident, or other causes. Marine Corps officials noted that it can be 
difficult to determine when deferred sustainment work actually damages 
a facility and thus should be reclassified from a sustainment funding 
requirement to a restoration funding requirement. 

Lack of Clear Guidance Impedes Reliable Financial Reporting of Deferred 
Sustainment Costs: 

The military services' financial reporting of deferred facility 
maintenance information is not consistent with federal financial 
reporting requirements due to a lack of clear DOD reporting guidance. 
We found that prior to fiscal year 2007, the services' financial 
statements excluded required information concerning deferred facility 
sustainment requirements and included information concerning deferred 
facility modernization requirements. Including deferred facility 
modernization requirements is not consistent with federal financial 
reporting requirements because these requirements pertain to activities 
intended to expand or upgrade facility capacity. Although DOD issued 
revised guidance in September 2007 in part to address these issues, the 
guidance did not provide sufficient details to ensure that future 
financial reporting of deferred maintenance would be consistent with 
reporting requirements. Unreliable deferred maintenance information, 
could further jeopardize DOD's ability to adequately provide for its 
facility sustainment needs and result in continued facility 
deterioration and increased future recapitalization costs. 

Federal financial accounting standards require that federal entities 
that own property, plant, and equipment include information in their 
financial statements disclosures related to the condition and the 
estimated deferred maintenance costs of these assets.[Footnote 19] The 
accounting standards define maintenance as the act of keeping fixed 
assets in acceptable condition, including preventive maintenance, 
normal repairs, replacement of parts and structural components, and 
other activities needed to preserve the asset so that it continues to 
provide acceptable services and achieves its expected life. The 
distinction between maintenance and deferred maintenance is that 
deferred maintenance is maintenance that was not performed when it 
should have been or was scheduled to be and which, therefore, was put 
off or delayed for a future period. By definition, both maintenance and 
deferred maintenance exclude activities aimed at expanding the capacity 
of an asset or otherwise upgrading it to serve needs different from, or 
significantly greater than, those originally intended. In other words, 
expenditures to modernize or upgrade property, plant, and equipment 
should not be reported as maintenance costs. 

According to DOD officials, prior to fiscal year 2007, the military 
services' financial statement reports included disclosures pertaining 
to only to the annual amount of their sustainment requirements, as 
determined by the facilities sustainment model, which was not funded. 
In addition, the military services' financial statement disclosures for 
deferred maintenance also included information on the cumulative 
deferred restoration and modernization requirements as a component of 
the reported deferred maintenance amounts. Reporting deferred 
modernization requirement amounts is not consistent with reporting 
standards because modernization includes facility work to implement new 
or higher facility standards, accommodate new functions, or replace 
building components that have exceeded their useful life, typically 
about 50 years. However, DOD guidance did not clearly instruct the 
military services to exclude deferred modernization requirement amounts 
from the amounts they reported for deferred maintenance. Thus, the 
reporting of deferred modernization requirements as part of deferred 
facility maintenance in the financial statements results in misleading 
deferred maintenance disclosures and is not consistent with what is 
called for by federal accounting standards. 

DOD officials further stated that while in the process of updating DOD 
financial regulations in 2007, DOD recognized that the financial 
statements should include the cumulative, not just the annual, deferred 
sustainment amounts. To address this issue beginning with the fiscal 
year 2007 financial statements, an official in the Office of the 
Secretary of Defense (Comptroller) stated that the military services 
were directed to begin reporting deferred maintenance amounts that 
include cumulative deferred sustainment requirements. However, because 
the military services did not have estimates of their deferred 
sustainment requirements, DOD officials stated that the military 
services were directed to estimate their total deferred maintenance 
needs based on each service's facility quality ratings. Facility 
quality ratings, prepared for each real property inventory asset, 
reflect each facility's condition at a specific point in time and the 
estimated cost to correct existing deficiencies to bring the facility 
to a fully serviceable operating condition. 

Although DOD decided to use the facility quality ratings for estimating 
and reporting deferred maintenance, DOD's guidance for determining the 
quality ratings specifically excluded consideration of sustainment 
requirements and specifically included all restoration and 
modernization requirements, except for construction of new facility 
capacity.[Footnote 20] To address this issue, DOD issued new guidance 
on September 5, 2007.[Footnote 21] The new guidance directed the 
military services to begin including sustainment requirements in the 
facility quality ratings and to exclude restoration and modernization 
requirements that were related to facility conversion and construction 
of new facility capacity. However, the guidance did not provide details 
to the military services on how to do implement these changes and 
permitted each service to decide on a method, as long as the service 
validated the accuracy of the method used. 

Although the military services attempted to implement the new guidance 
in reporting deferred maintenance information in their fiscal year 2007 
financial statements, the reported information was still inconsistent 
and incomplete. First, because the new guidance did not provide details 
on how to implement the changes, each service used its own methods. 
Yet, according to a May 2006 report commissioned by DOD to provide an 
independent verification and validation of the services' facility 
quality ratings, the services used inconsistent methods to determine 
facility conditions, which resulted in inconsistent estimates of needed 
maintenance costs.[Footnote 22] Second, with the new guidance being 
issued on September 5, 2007, the military services had little time to 
make any adjustments to their facility quality ratings prior to 
preparation of their fiscal year 2007 financial statements, which were 
due in November 2007. According to Navy officials, Navy facility 
quality ratings had not been updated since 2005 because the Navy 
stopped performing facility inspections. Third, when reporting deferred 
facility maintenance amounts in its fiscal year 2007 financial 
statement, the Air Force included a note stating that the use of 
facility quality ratings as a basis for calculating deferred 
maintenance did not seem prudent because the quality of the information 
used to determine the ratings was questionable. Without guidance 
providing for consistent methods for measuring deferred sustainment 
requirements and determining which portion of the deferred restoration 
and modernization requirements to include in the financial statements, 
the military services' financial reporting of deferred maintenance 
information may continue to be inconsistent with financial reporting 
requirements, which could further jeopardize DOD's ability to 
adequately provide for its facility sustainment needs and result in 
continued facility deterioration and increased future recapitalization 
costs. 

DOD's Progress in Developing an Installation Services Model Has Been 
Slow: 

DOD's progress in developing a model for estimating installation 
services funding requirements has been slow because DOD has been unable 
to overcome long-standing inconsistencies among the military services' 
definitions of support service functions and other obstacles that 
prevent such a model from being ready for use. In an effort to ensure 
consistent delivery of adequate installation services among DOD 
components and provide the Congress with a clearer basis for making 
funding decisions, DOD began in 2004 to develop an analytically sound 
model for determining installation services funding requirements. 
However, progress has been slow and it is unclear whether DOD's target 
for completing this work will be met. Without a DOD-wide model, the 
military services have used various methods to estimate their support 
services requirements subject to their own definition of the types and 
levels of services deemed necessary. On the basis of these estimates, 
Army, Navy, and Air Force officials have raised concerns about the 
adequacy of support services funding from fiscal years 2005 through 
2007, stating that this funding was less than the amounts needed to 
provide services at the levels desired and resulted in some 
installations providing reduced services, which caused the quality of 
life of DOD personnel in some instances to be negatively affected. 

Efforts to Develop an Installation Services Model Began in 2004: 

DOD's efforts to develop a model for estimating installation services 
funding requirements began in 2004, when the Office of the Deputy Under 
Secretary of Defense for Installations and Environment designated the 
improvement of installation services management as a priority. 
According to officials from this office, DOD's and the military 
services' ability to forecast installation services requirements and 
funding needs had been hindered by the lack of a common terminology 
across the military services and the lack of common definitions had 
caused differing expectations for service support when multiple 
military services were collocated on a single installation.[Footnote 
23] The 2004 Defense Installations Strategic Plan articulated the need 
to define common standards and performance metrics for managing 
installation support and established goals to implement DOD-wide 
support service standards and to develop an analytical model based on 
common benchmarks to accurately forecast installation services funding 
requirements. The plan noted that installation services included a 
large collection of diverse functions and that work towards a model 
would first focus on services related to real property--work that 
subsequently resulted in DOD's facilities operation model--and then on 
all other installation services--work now directed at developing the 
installation services model. 

Also in 2004, in an effort to promote joint installation management, 
DOD established a working group to develop policy and create a 
strategic framework for delivery of installation services. The 
framework was to include the establishment of common definitions, 
tiered performance standards, and performance measures to assist in 
managing support services resources and help ensure the common delivery 
of applicable support services across all military installations. To 
support this effort, service standards teams, composed of members from 
each military service, were formed and charged with developing common 
output-level standards, which include common definitions, performance 
standards, metrics, and unit cost estimates for each installation 
support service. The common output-level standards would also provide a 
key component needed to develop an installation services model. 

Service standards teams were formed to develop common definitions and 
standards for 29 different support services. The initial goal was for 
the teams to complete their work by February 2006. According to DOD 
officials, from the beginning the teams had difficulty completing their 
work and obtaining agreement from all military services on the common 
definitions and standards. By December 2007, the military services had 
accepted the common definitions and service standards for only 2 of the 
29 support services addressed by the service standards teams, and the 
target date for completing the work had slipped to March 2008. DOD's 
2007 Defense Installation Strategic Plan set a goal to establish common 
standards and metrics for installation services and complete the model 
by the end of 2008. 

Several Factors Have Hampered Progress in Developing an Installation 
Services Model: 

According to DOD officials, several factors have hampered progress 
towards completing the common output-level standards and developing the 
installation services model. For example, each military service has its 
own long-standing policies and practices on how tasks and subtasks for 
each installation service are grouped, performed, managed, and funded. 
Also, differences in the military services' policies, practices, and 
traditions have resulted in service differences in (1) the value of and 
emphasis placed on the various support services, (2) views on whether 
service programs should be managed and funded centrally or not, and (3) 
support service requirements based on installation location and 
demographic characteristics. For example, remote installations might 
provide some services that are normally provided by local communities 
in more populated areas, and installations with a high percentage of 
young, single personnel might provide some services not provided at 
installations with different demographics. 

As one example of an installation support service that is managed 
differently among the military services, DOD cited differences in the 
management of chaplain services. According to DOD officials, the Navy, 
in accordance with its policy, donates all funds collected during on- 
base religious services to charities. The other military services, in 
accordance with their policies, use funds collected during on-base 
religious services to directly support the chaplain program, such as 
paying for program expenses. Thus, in order to reach a common 
definition and service standard for the chaplain program, this 
difference among the military services must be resolved. 

Office of the Deputy Under Secretary of Defense for Installations and 
Environment officials, who were overseeing the development of the 
model, stated that resolving the differences in support service 
definitions and service standards remains a key obstacle to completing 
an installation services model that can reliably estimate the funds 
required to provide services at appropriate levels across all 
installations. The officials also noted that other obstacles exist and 
must be overcome before a model is completed. For example, because each 
of the installation services is unique, a separate model will be 
required for each service. Thus, the installation services model will 
be a collection of many separately developed, service-specific models. 
According to the officials, a few service standards teams believe the 
services they studied will be difficult to model. Further, it may also 
be difficult to identify adequate information sources for estimating 
the standard costs for some installation services, such as for mission- 
based services, including airfield and port operations, and regulatory 
services, including environmental services. The problem is that 
historical metrics and costs for some services are not readily 
available within DOD, and private sector data sources may not be 
suitable for services that are performed differently by the private 
sector and DOD. Given these obstacles and the slow pace of prior 
progress in developing the common definitions and standards, it is 
unclear whether the 2008 target in DOD's plan will be met. In addition, 
the plan did not establish a milestone for when the model will be 
implemented for use in estimating the military's installation services 
funding requirements. Until DOD formally establishes a milestone for 
when the installation services model will be implemented and provides 
adequate senior-level oversight to ensure that the milestone is met, 
DOD may not have the necessary impetus to resolve these obstacles so 
that development of the model can be completed. 

Adequacy of Installation Services Funding Has Been a Concern: 

The adequacy of funding for installation services has been a concern 
for the military services. Without a DOD-wide model, each military 
service has developed methods to estimate its installation services 
requirements and funding needs subject to its own definition of the 
types and levels of services it deems necessary. Appendix II provides a 
brief description of the methods used by each military service to 
estimate installation services funding requirements. On the basis of 
these estimates and other information, Army, Navy, and Air Force 
officials stated that installation services funding for fiscal years 
2005 through 2007 was less than the amounts needed to provide services 
at the levels desired. For example, according to Army officials, 
installation services and facility operations services--collectively 
classified as base operations support in the Army's budget--were funded 
at about 80 percent, 82 percent, and 87 percent of requirements in 
fiscal years 2005, 2006, and 2007, respectively. Of the military 
services, only the Marine Corps stated that its installation services 
and facility operations services were adequately funded during these 
fiscal years. 

Although it was beyond the scope of our review to assess the impacts 
that resulted from less than full funding of installation services, we 
did ask the military services for their views. Army officials stated 
that, because of inadequate funding levels, installation services were 
reduced and provided at lower than optimum levels at some 
installations, which reduced the support provided to military 
personnel. Navy officials stated that effects of inadequate funding 
included (1) reduced operating hours at some installation entrance 
gates, which slowed base access; (2) reduced law enforcement patrols, 
pier security, and surveillance detection, which increased security 
risks; (3) cutbacks in facility cleaning contracts, which caused mold 
and mildew growth, which could potentially create health issues; (4) 
closure of some installation swimming pools and automobile hobby shops, 
which affected personnel quality of life; and (5) scaled back special 
events, which reduced the connection between some bases and the local 
communities. Air Force officials stated that inadequate installation 
services funding resulted in reduced in-house and contractual support 
for day-to-day operations at some installations in areas such as 
installation security, transportation, and supply. In addition, the 
quality of life for service members was affected at some installations 
by the closure of dining and fitness facilities and decreased library 
hours and other contractual services supporting base personnel. 

Officials at some of the installations we visited also commented that 
because of inadequate funding, some installation services and facility 
operations services were reduced causing negative effects on the 
quality of life of installation personnel. At Fort Eustis, for example, 
officials estimated that custodial services were funded at about 25 
percent of the amount needed to meet normal requirements. The officials 
stated that custodial services no longer provided for cleaning carpets 
or windows and only provided for cleaning restrooms once a week. At 
Langley Air Force Base, officials stated that, although essential 
services were being provided, funding shortages had caused the 
installation to reduce custodial and ground maintenance services and 
close one dining facility. 

Conclusions: 

Although the facilities sustainment model provides a consistent and 
reasonable framework for preparing estimates of DOD's annual facility 
sustainment funding requirements, accuracy and supportability issues 
with two of the model's key inputs--the inventory quantity and the 
sustainment cost factor associated with each of DOD's 448 facility 
categories--have affected the reliability of the model's estimates. In 
particular, the military services had not complied with DOD guidance 
that requires verification of real property inventory records and 
consequently the inventory records contained inaccuracies and 
discrepancies, information documenting the basis for each sustainment 
cost factor was not readily available, and the fiscal year 2009 method 
for calculating sustainment cost factors that are not based on 
independent data sources can reduce the accuracy of these factors. 
Until DOD takes additional steps to improve the accuracy and 
supportability of its inventory quantity and sustainment cost factor 
inputs to the facilities sustainment model, the model's estimates of 
annual facility sustainment funding requirements will not be as 
reliable as possible, which could jeopardize DOD's ability to 
adequately provide for its facility sustainment needs. 

Furthermore, because the military services do not have consistent 
estimates of their deferred facility sustainment requirements, DOD 
lacks a complete picture of its facility sustainment funding needs. 
Thus, current plans and goals to address sustainment needs do not 
include all sustainment requirements, which could further jeopardize 
DOD's ability to adequately sustain its facilities and result in 
continued facility deterioration and increased future restoration 
costs. In addition, largely because of lack of clear guidance, the 
military services' financial reporting of deferred facility maintenance 
information has been inconsistent with financial reporting requirements 
intended to provide full disclosure of facility conditions. Until DOD 
provides guidance that clearly defines deferred sustainment 
requirements, directs the services to consistently measure and track 
deferred sustainment needs, establishes a goal to address these needs, 
and ensures that the military services' financial reporting of deferred 
facility maintenance is consistent with financial reporting 
requirements, the services will not have consistent estimates of their 
total facility sustainment requirements, will be unable to develop 
plans to address these needs, and may continue to report deferred 
maintenance information that is inconsistent with financial reporting 
requirements. 

DOD has yet to overcome long-standing inconsistencies among the 
military services' definitions of support service functions, as well as 
other obstacles, to complete a model for estimating installation 
services funding requirements. Until a reliable model is implemented, 
DOD cannot know its installation services funding requirements with 
confidence, set installation services funding and performance 
benchmarks, measure the military services' progress in providing 
installation services, or provide the Congress with a clear, consistent 
basis for making related funding decisions. DOD has a goal to establish 
common standards and metrics for installation services by the end of 
2008. However, until DOD formally establishes a milestone for when the 
installation services model will be implemented and provides adequate 
senior-level oversight to ensure that the milestone is met, DOD may not 
have the necessary impetus to complete the model as quickly as 
possible. 

Recommendations for Executive Action: 

To improve the support provided for DOD's facilities and installation 
services, we recommend that the Secretary of Defense direct the Deputy 
Under Secretary of Defense (Installations and Environment) to take the 
following five actions in order to increase the reliability of the 
facilities sustainment model, address deferred facility sustainment 
funding requirements, and advance progress towards implementing the 
installation services model: 

* Monitor and ensure compliance with guidance requiring verification of 
real property inventory records. 

* Maintain documentation regarding the basis for the sustainment cost 
factors used by the model to include the calculations used to determine 
each factor as well as the reasons for any changes from year to year. 

* Revert to the previously used ratio analysis method to calculate the 
values of those sustainment cost factors that are not based on 
independent data sources. 

* Issue guidance to the military services that (1) provides a clear 
definition of deferred facility sustainment requirements and explains 
when deferred facility sustainment becomes a facility restoration 
requirement, (2) directs the military services to consistently measure 
and track deferred sustainment needs, (3) establishes a goal to address 
deferred facility sustainment needs, and (4) ensures that the military 
services' financial reporting and disclosure information regarding 
deferred facility maintenance is consistent with financial reporting 
requirements. 

* Establish a milestone for implementing the installation services 
model for use in estimating DOD's installation services funding 
requirements and provide adequate senior-level oversight to ensure that 
the milestone is met. 

Agency Comments and Our Evaluation: 

In written comments on a draft of this report, DOD concurred with four 
recommendations, partially concurred with one recommendation, and 
stated that it had already initiated several of the recommended 
actions. However, DOD's comments and stated actions did not fully 

address some of our recommendations. While DOD's actions represent 
positive first steps, we believe that DOD needs to take additional 
steps to fully address the issues discussed in this report. 
Specifically, in addition to the steps that DOD stated it has taken or 
plans to take, we continue to believe that DOD needs to take further 
steps to monitor and ensure compliance with inventory verification 
guidance, provide a clear definition of deferred facility sustainment 
requirements, direct the military services to consistently measure and 
track deferred sustainment needs, ensure that the military services' 
financial reporting and disclosure information regarding deferred 
facility maintenance is consistent with financial reporting 
requirements, and provide adequate senior-level oversight to ensure 
that an installation services model is implemented as soon as possible. 

DOD concurred with our recommendation to monitor and ensure compliance 
with guidance requiring verification of real property inventory 
records. DOD stated that it added a data element to its real property 
inventory records that will record the most recent date that each 
facility was inspected. DOD stated that this data, which it expects 
will be available by fiscal year 2009, will provide a means of 
identifying the verification dates and taking action to update them as 
required. However, as noted in this report, data are already available 
showing facility inspection dates and the data show that the military 
services have not complied with verification requirements. Our 
recommendation is that DOD ensure compliance with the guidance in order 
to help ensure inventory accuracy and it is not clear that DOD's action 
of adding a data element to its inventory records will improve 
compliance. We continue to believe that additional steps are needed to 
monitor and ensure compliance with guidance requiring verification of 
real property inventory records. 

DOD concurred with our recommendation that it maintain documentation 
regarding the basis for the sustainment cost factors used by the model 
to include the calculations used to determine each factor as well as 
the reasons for any changes from year to year. DOD stated that it has 
maintained documentation for sustainment cost factors since the 
inception of the facilities sustainment model. However, as noted in 
this report and as we discussed with DOD officials during our review, 
the documentation did not always show the basis for the sustainment 
cost factors, the calculations used to determine each factor, or the 
reasons for any changes from year to year and that is the basis for our 
recommendation. DOD also stated that it has revised its documentation 
standards to improve the level of detail and accessibility. If fully 
implemented, DOD's action should result in an improved audit trail 
documenting the basis for each factor's value. 

DOD concurred with our recommendation that it revert to the previously 
used ratio analysis method to calculate the values of those sustainment 
cost factors that are not based on independent data sources. DOD stated 
that it will adopt the GAO-preferred method to inflate the small number 
of sustainment cost factors generated by ratios beginning in fiscal 
year 2009. As noted in this report, the "GAO-preferred" method is the 
method that can result in greater accuracy of the sustainment cost 
factor values. Also, regarding the "small" number of sustainment cost 
factors generated by ratios, as noted in this report, DOD has used a 
ratio analysis to estimate the sustainment cost factors for 
approximately one-third of DOD's 448 facility categories. 

DOD concurred with our recommendation related to deferred facility 
sustainment requirements stating that it had issued guidance in 
September 2007 that revised the definition of facility quality ratings 
to represent deferred sustainment and restoration, revised its 
methodology for estimating deferred maintenance in its financial 
reports by using the facility quality ratings, and planned to develop 
program guidance with the fiscal year 2011 budget process to establish 
goals to address deferred sustainment requirements. As noted in this 
report, we were aware of the September 2007 guidance. However, we made 
our recommendation because our review found that the guidance did not 
provide a clear definition of deferred facility sustainment 
requirements, details to the military services on how to implement the 
revised quality rating guidance, or sufficient details to ensure that 
future financial reporting of deferred maintenance would be consistent 
with reporting requirements. We continue to believe that additional 
guidance is needed to provide a clear definition of deferred facility 
sustainment requirements, direct the military services to consistently 
measure and track deferred sustainment needs, and ensure that the 
military services' financial reporting and disclosure information 
regarding deferred facility maintenance is consistent with financial 
reporting requirements. 

DOD partially concurred with our recommendation to establish a 
milestone for implementing the installation services model for use in 
estimating DOD's installation services funding requirements and provide 
adequate senior-level oversight to ensure that the milestone is met. 
DOD stated that it had established a milestone to implement an 
installation services model in support of the fiscal year 2012 budget 
and had made initial progress toward that goal. However, DOD stated 
that the development process had revealed several obstacles that may 
require it to reevaluate the goal for at least some installation 
service functions. Although we believe that DOD's action to establish 
an implementation goal is a step in the right direction, we also 
recommended and continue to believe that adequate senior-level 
oversight is needed to ensure that an installation services model is 
implemented as soon as possible. DOD's comments did not explain to what 
extent it plans to do this. 

DOD's comments are reproduced in full in appendix III. 

We are sending copies of this report to the Secretaries of Defense, the 
Army, the Navy, and the Air Force; the Commandant of the Marine Corps; 
and the Director, Office of Management and Budget. We will provide 
copies of this report to others upon request. In addition, the report 
will be available at no charge on the GAO Web site at [hyperlink, 
http://www.gao.gov]. 

If you or your staff have any questions on the information discussed in 
this report, please contact me on (202) 512-4523 or [email protected]. 
Contact points for our Offices of Congressional Relations and Public 
Affairs may be found on the last page of this report. GAO staff who 
made key contributions to this report are listed in appendix IV. 

Signed by: 

Brian J. Lepore: 

Director Defense Capabilities and Management: 

List of Committees: 

The Honorable Carl Levin: 
Chairman: 
The Honorable John McCain: 
Ranking Member: 
Committee on Armed Services: 
Unites States Senate: 

The Honorable Daniel K. Inouye: 
Chairman: 
The Honorable Ted Stevens: 
Ranking Member: 
Subcommittee on Defense: 
Committee on Appropriations: 
Unites States Senate: 

The Honorable Tim Johnson: 
Chairman: 
The Honorable Kay Bailey Hutchison: 
Ranking Member: 
Subcommittee on Military Construction, Veterans' Affairs, and Related 
Agencies: 
Committee on Appropriations: 
Unites States Senate: 

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

The Honorable John P. Murtha: 
Chairman: 
The Honorable C.W. Bill Young: 
Ranking Member: 
Subcommittee on Defense: 
Committee on Appropriations: 
House of Representatives: 

The Honorable Chet Edwards: 
Chairman: 
The Honorable Zach Wamp: 
Ranking Member: 
Subcommittee on Military Construction, Veterans' Affairs, and Related 
Agencies: 
Committee on Appropriations: 
House of Representatives: 

[End of section] 

Appendix I: Scope and Methodology: 

To determine the reliability of the annual funding estimates produced 
by the facilities sustainment model, we reviewed the documentation 
supporting the model's analytic framework--including the model's 
inputs, calculations, and assumptions--to determine whether the model 
provides a consistent and reasonable framework for estimating 
sustainment funding requirements. In addition, we assessed the accuracy 
and supportability of the model's key inputs--the inventory quantity 
and the sustainment cost factor. Regarding inventory quantity, we 
reviewed DOD regulations that require periodic verification of the 
accuracy of real property inventory information, determined the extent 
to which the military services had complied with these regulations, and 
discussed with service officials the reasons for noncompliance. During 
visits to eight military installations,[Footnote 24] we compared the 
inventory information contained in selected installation real property 
records with the inventory information used by the model and asked 
local officials to explain discrepancies. We judgmentally selected the 
records to include a variety of facility categories. At the 
installations visited, we also determined compliance with the required 
procedures for verifying real property inventory accuracy and, at one 
installation, we reviewed the records that documented the compliance. 
In addition, we analyzed the inventory quantities used by the model for 
each facility category during fiscal years 2005 through 2008 to 
identify large fluctuations from one year to the next and asked DOD and 
service headquarters officials to explain some of the fluctuations. In 
cases where the fluctuations were caused by an error, we determined the 
resulting impact on the model's sustainment cost estimate by 
recomputing sustainment costs based on the correct inventory quantity. 
Although we assessed the accuracy of selected real property inventory 
information, which is discussed in this report, we did not assess the 
overall reliability of DOD's real property inventory records. Regarding 
sustainment cost factors, we discussed the development of the factors 
with DOD officials, reviewed the findings of a study designed to 
provide an independent verification and validation of the sustainment 
cost factors used by the model, and documented DOD's response to the 
study's recommendations. In addition, we reviewed the documentation 
supporting the factors for each facility category to determine whether 
the documentation provided a clear basis for each factor's value. 
Further, we analyzed the impact of a revised method used by DOD to 
adjust factors for use in fiscal year 2009 by comparing the values of 
selected factors adjusted under the revised and the previously used 
methods. 

To determine DOD's progress in meeting funding goals for facility 
sustainment and recapitalization, we reviewed DOD's installation 
strategic plans to identify DOD's goals for facility sustainment and 
recapitalization. We also reviewed DOD information showing the amounts 
budgeted for facility sustainment, restoration, and modernization for 
fiscal years 2005 through 2008 and the amounts spent for fiscal years 
2005 through 2007 and compared these amounts to the corresponding 
goals.[Footnote 25] The amounts budgeted and spent represented DOD 
official financial information and we did not independently verify the 
amounts. In addition, we reviewed prior DOD testimony on installation 
support funding goals and we discussed the goals and DOD's progress in 
meeting the goals with DOD and service headquarters officials. To the 
extent that goals were not met, we asked DOD and service officials to 
explain why and describe the associated consequences on installation 
facilities. We also reviewed the restoration and modernization backlog 
amounts reported by the military services. At each of the installations 
visited, we asked local officials to describe the impacts when 
sustainment and recapitalization funding goals were not met. Further, 
we observed and took photographs of installation facilities that were 
in a deteriorated condition because of a shortage of sustainment funds. 

To determine the extent to which DOD has addressed deferred facility 
sustainment funding needs, we compared the military services' annual 
sustainment funding requirements with the amounts actually funded to 
determine the annual unfunded sustainment requirements for fiscal years 
2005 through 2007. We discussed the issue with DOD and military service 
officials and reviewed DOD guidance and definitions related to facility 
maintenance. We also reviewed prior DOD testimony on installation 
support and DOD's installation strategic plans for information on 
deferred sustainment requirements. We asked officials in each military 
service whether any difficulties or obstacles existed in developing 
estimates of deferred sustainment needs, whether the service had 
estimated its deferred sustainment funding requirements, and whether 
the service had plans or goals to address deferred sustainment 
requirements. In addition, we reviewed federal financial accounting 
requirements pertaining to the reporting of deferred property 
maintenance and compared these requirements to the information reported 
in the military services' financial statements. Further, we reviewed 
the military services' efforts to respond to September 2007 DOD 
guidance that was intended to improve the military services' reporting 
of deferred maintenance amounts. 

To determine the status of DOD's efforts to develop a funding 
requirements model for installation services, we obtained and reviewed 
documentation on the history of the model's development and interviewed 
DOD officials concerning past progress on the model, the model's status 
at the end of calendar year 2007, and future plans for completing and 
implementing the model. We also documented the timeline of DOD's 
efforts since DOD decided to develop the model and compared various 
developmental milestones with actual progress. Further, we discussed 
with DOD officials the factors that have affected progress in 
developing the model and asked the officials to identify any remaining 
obstacles that must be overcome before the model could be completed and 
used to estimate DOD's installation services funding requirements. In 
the absence of a DOD-wide model, we also interviewed officials from 
each of the military services and reviewed related information to 
document the methods used by each military service to determine 
installation services funding needs. Further, we asked service 
headquarters officials and officials at the installations we visited to 
explain the consequences when installation services funding was less 
than required. 

We conducted this performance audit from May 2007 through April 2008, 
in accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. 

[End of section] 

Appendix II: Current Methods Used by the Military Services to Estimate 
Installation Support Services Funding Requirements: 

The Army determines its installation services funding requirements 
primarily through the Army's base operations support requirements 
model. This model uses Army-defined service standards and a costing 
methodology that estimates costs for 95 different installation services 
across Army installations based on cost pacing measures and data unique 
to each support service. Examples of cost pacing measures include 
population served, facility square footage, and number of transactions 
required. According to the Army, the model's process results in 
estimated funding requirements for what each support service should 
cost based on a predefined level of support. The Army adjusts the 
model's funding estimate to include costs for some services that are 
not modeled and determines the amount of funding actually budgeted 
based upon the availability of resources and Army priorities. Beginning 
with its fiscal year 2010 budget, the Army plans to use the facilities 
operation model to estimate support services funding requirements for 
the facility-related services included in that model.[Footnote 26] 

The Navy determines its installation services funding requirements 
primarily from the Navy's base operating support model. This model 
estimates the funding required for 18 Navy service support functions, 
which represent about 67 percent of all Navy support services costs. 
Funding estimates for 9 other service support functions are not modeled 
but are determined primarily from prior-year costs for the required 
level of support. For each of the 18 modeled service support functions, 
the model estimates funding requirements for four separate standard 
levels of service by multiplying a unit factor, such as square feet of 
a building, by a unit cost factor for each of the four levels of 
service that could be provided. According to the Navy, the unit costs 
used by the model are established in several ways, including Navy 
historical costs and commercial estimating manuals and data sources. 
Each year senior Navy leadership decides which of the four levels of 
service will be provided for each service support function at naval 
installations. On the basis of these decisions and information from the 
model, the Navy determines its installation services funding 
requirement. Beginning with its fiscal year 2010 budget, the Navy plans 
to use the facilities operation model to estimate support services 
funding requirements for the facility-related services included in that 
model. 

The Air Force used a prototype of the facilities operation model to 
estimate its fiscal year 2008 funding requirements for the 10 facility- 
related support services included in that model. Even though the model 
was not yet at full operational capability, the Air Force decided that 
the model provided a more realistic estimate of facility-related 
service funding requirements than the Air Force's previously used 
method, which was based on historical costs. The Air Force plans to 
continue to use this model. To estimate its funding requirements for 
several other installation services that are not included in the model, 
including security forces, airfield operations, installation 
administration, food services, and lodging, the Air Force uses a cost 
projection formula. The formula primarily uses the number of personnel 
assigned to each installation and the value of the installation's 
facilities as key inputs to determining its funding requirements 
estimates. The Air Force does not use a model or formula for some 
installation services, such as environmental conservation and 
compliance, pollution prevention, unaccompanied personnel housing, 
child development centers, and base communications and multimedia 
activities. According to Air Force officials, the Air Force leadership 
makes final decisions on the annual installation services budget based 
on Air Force priorities and budget constraints. 

The Marine Corps currently does not use a comprehensive model to 
estimate funding requirements for installation services except for 
utility costs. For utilities, Marine Corps officials stated that 
funding requirements are based on a model that organizes and aggregates 
available consumption and cost data by utility type and predicts future 
costs to support budgeting and programming needs. For all other 
installation support service areas, the Marine Corps estimates funding 
requirements primarily by direct review of historical program execution 
and future needs. During its budget development process, the Marine 
Corps makes final decisions on funding levels based on needs, 
resources, and priorities. Beginning with its fiscal year 2010 budget, 
the Marine Corps plans to use the facilities operation model to 
estimate support services funding requirements for the facility-related 
services included in that model. 

[End of section] 

Appendix III: Comments from the Department of Defense: 

Office Of The Under Secretary Of Defense: 
3000 Defense Pentagon: 
Washington, Dc 20301-3000: 

Acquisition Technology And Logistics: 

April 18, 2008: 

Mr. Brian Lepore: 
Director, Defense Capabilities and Management: 
U.S. Government Accountability Office: 
441 G Street, N.W.: 
Washington, DC 20548: 

Dear Mr. Lepore: 

This is the Department of Defense (DoD) response to the GAO draft 
report, GAO-08-502, `Defense Infrastructure: Continued Management 
Attention Is Needed to Support Installation Facilities and Operations,' 
dated March 3, 2008 (GAO Code 351029). The Department had already 
initiated several of the recommended actions and appreciates GAO's 
support for further improving DoD's facilities budget models. Specific 
comments are enclosed. 

Sincerely, 

Signed by: 

Alex A. Buhler: 

for: 

Wayne Amy: 

Deputy Under Secretary of Defense (Installations and Environment): 

Enclosure: 
As stated: 

GAO Draft Report - Dated March 3, 2008 GAO Code 351029/GAO-08-502 

"Defense Infrastructure: Continued Management Attention Is Needed to 
Support Installation Facilities and Operations" 

Department Of Defense Comments To The Recommendations:  

Recommendation 1: The GAO recommends that the Secretary of Defense 
direct the Deputy Under Secretary of Defense (Installations and 
Environment) to monitor and ensure compliance with guidance requiring 
verification of real property inventory records. 

DOD Response: Concur. DoD has added a new data element to its Real 
Property Inventory Requirements (RPIR) document to address this issue 
as part of the department's overall effort to transform business 
processes and improve the quality of real property inventory data. The 
new data element, "Asset Review Date," provides visibility of the most 
recent inspection date for each asset. This data element will provide a 
direct means of identifying verification dates in the inventory and 
taking action to update them as required. DoD initiated this data 
element in FY 2007 and expects to fully populate the date for all 
records by FY 2009. 

Recommendation 2: The GAO recommends that the Secretary of Defense 
direct the Deputy Under Secretary of Defense (Installations and 
Environment) to maintain documentation regarding the basis for the 
sustainment cost factors used by the model to include the calculations 
used to determine each factor as well as the reasons for any changes 
from year to year. 

DOD Response: Concur. DoD has maintained documentation for sustainment 
cost factors since the inception of the facilities sustainment model, 
and has revised the standards to improve the level of detail and 
accessibility for the FY 2008 cost factor documentation, now in 
progress. 

Recommendation 3: The GAO recommends that the Secretary of Defense 
direct the Deputy Under Secretary of Defense (Installations and 
Environment) to revert to the previously used ratio analysis method to 
calculate the values of those sustainment cost factors that are not 
based on independent data sources. 

DOD Response: Concur. DoD will adopt the GAO-preferred method to 
inflate the small number of sustainment cost factors generated by 
ratios beginning in FY 2009. 

Recommendation 4: The GAO recommends that the Secretary of Defense 
direct the Deputy Under Secretary of Defense (Installations and 
Environment) to issue guidance to the Services that (1) provides a 
clear definition of deferred facility sustainment requirements and 
explains when deferred facility sustainment becomes a facility 
restoration requirement, (2) directs the Services to consistently 
measure and track deferred sustainment needs, (3) establishes a goal to 
address deferred facility sustainment needs, and (4) ensures that the 
Services' financial reporting and disclosure information regarding 
deferred facility maintenance is consistent with financial reporting 
requirements. 

DOD Response: Concur. DoD issued guidance in September 2007 that 
revised the definition of facility quality ratings (Q-ratings) to 
represent deferred sustainment and restoration. Military Services are 
required to establish Q-ratings and report them in their real property 
inventories for each asset. Effective with the end-of-FY 2007 financial 
report on deferred maintenance, DoD revised its methodology for 
estimating real property deferred maintenance to incorporate the 
revised Q-ratings, and expects this change to be fully implemented with 
the next annual report on deferred maintenance. DoD agrees that 
establishing goals to address deferred sustainment requirements would 
be useful and plans to develop program guidance with the FY 2011 budget 
process. 

Recommendation 5: The GAO recommends that the Secretary of Defense 
direct the Deputy Under Secretary of Defense (Installations and 
Environment) to establish a milestone for implementing the installation 
services model for use in estimating DoD's installation services 
funding requirements and provide adequate senior level oversight to 
ensure that the milestone is met. 

DOD Response: Partially concur. DoD has established a milestone to 
implement an installation services model in support of the FY 2012 
budget and has made initial progress toward that goal. However, the 
development process has revealed several obstacles that may require DoD 
to re-evaluate this goal for at least some installation service 
functions. As a result, DoD may adjust its milestone.

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

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

Acknowledgments: 

In addition to the contact named above, Mark Little, Assistant 
Director; Bonita Anderson; Harry Knobler; Mary Jo Lacasse; Josh 
Margraf; and Gary Phillips made significant contributions to this 
report. 

[End of section] 

Related GAO Products: 

Cost Assessment Guide: Best Practices for Estimating and Managing 
Program Costs. Exposure Draft. GAO-07-1134SP. Washington, D.C.: July 
2007. 

High-Risk Series: An Update. GAO-07-310. Washington, D.C.: January 
2007. 

Defense Infrastructure: Issues Need to Be Addressed in Managing and 
Funding Base Operations and Facilities Support. GAO-05-556. Washington, 
D.C.: June 15, 2005. 

Military Training: Better Planning and Funding Priority Needed to 
Improve Conditions of Military Training Ranges. GAO-05-534. Washington, 
D.C.: June 10, 2005. 

Defense Infrastructure: Changes in Funding Priorities and Management 
Processes Needed to Improve Condition and Reduce Costs of Guard and 
Reserve Facilities. GAO-03-516. Washington, D.C.: May 15, 2003. 

Defense Infrastructure: Changes in Funding Priorities and Strategic 
Planning Needed to Improve the Condition of Military Facilities. GAO- 
03-274. Washington, D.C.: February 19, 2003. 

[End of section] 

Footnotes: 

[1] Installation support includes five categories of services and 
support activities through which DOD manages and funds the life-cycle 
of its installations--facilities, installation services, family 
housing, environment, and base realignment and closure. 

[2] Facility sustainment provides for the maintenance and repair needed 
to keep facilities in good working order over their service lives. This 
includes major repairs or replacement of facility components, such as 
roof replacements. Facility recapitalization consists of restoration 
(repair and replacement work) and modernization (alteration of existing 
facilities). Installation services consist of many diverse program 
areas, such as installation airfield and port operations, security, 
legal and financial services, and family and quality of life programs. 
Facilities operation services include facility-related services, such 
as utilities, leases, and custodial services, and grounds maintenance. 
In their budgets, the military components generally continue to refer 
to funding for installation services and facilities operation services 
as base operations support funding. 

[3] DOD's recapitalization metric uses as a measure the number of years 
that will elapse before facilities will be replaced based on the annual 
funding provided for restoration and modernization. DOD's current goal 
is for military components to fund facility restoration and 
modernization in annual amounts that would result in facilities being 
replaced every 67 years. DOD is developing a new facilities 
modernization model intended to improve upon the existing 
recapitalization metric and directly estimate annual funding 
requirements for facility recapitalization by considering the expected 
service life for each facility category. 

[4] 31 U.S.C. 717 (b) (1). 

[5] In addition to data from the military services, some of the data 
related to facility funding goals in this report include data from the 
Defense Logistics Agency, the Tricare Management Activity, and the DOD 
Education Activity. However, we did not include these components in our 
review. 

[6] GAO, High-Risk Series: An Update, GAO-07-310 (Washington, D.C.: 
January 2007). 

[7] GAO, Defense Infrastructure: Changes in Funding Priorities and 
Strategic Planning Needed to Improve the Condition of Military 
Facilities, GAO-03-274 (Washington, D.C.: Feb. 19, 2003). 

[8] GAO, Defense Infrastructure: Changes in Funding Priorities and 
Management Processes Needed to Improve Condition and Reduce Costs of 
Guard and Reserve Facilities, GAO-03-516 (Washington, D.C.: May 15, 
2003). 

[9] GAO, Defense Infrastructure: Issues Need to Be Addressed in 
Managing and Funding Base Operations and Facilities Support, GAO-05-556 
(Washington, D.C.: June 15, 2005). 

[10] GAO, Military Training: Better Planning and Funding Priority 
Needed to Improve Conditions of Military Training Ranges, GAO-05-534 
(Washington, D.C.: June 10, 2005). 

[11] See GAO, Cost Assessment Guide: Best Practices for Estimating and 
Managing Program Costs, Exposure Draft, GAO-07-1134SP (Washington, 
D.C.: July 2007). 

[12] See DOD Instruction No. 4165.14, Real Property Inventory and 
Forecasting (Mar. 31, 2006) and DOD Financial Management Regulation 
7000.14-R, vol. 4, ch. 6, Property, Plant, and Equipment (July 2006). 

[13] Naval Audit Service, Independent Attestation Report--Agreed-Upon 
Procedures Attestation Engagement of Marine Corps Real Property 
Financial Statement Information, N2007-0031 (May 7, 2007). 

[14] The premise is that there is a similar relationship between the 
sustainment and replacement cost factors for two facility categories. 
The replacement cost factor is DOD's estimate of the average unit cost 
to replace a facility in a given facility category based on the 
category's prescribed unit of measure. Thus, when the sustainment and 
replacement cost factors for the first facility category are known and 
the replacement cost factor of the second facility category is known, a 
ratio analysis can be used to estimate the unknown sustainment cost 
factor of the second facility category by multiplying the ratio of the 
cost factors from the first facility category by the replacement cost 
factor of the second facility category. 

[15] See note 14. 

[16] Statement of Mr. Philip W. Grone, Deputy Under Secretary of 
Defense (Installations and Environment), before the Subcommittee on 
Readiness and Management Support, Senate Armed Services Committee (Apr. 
10, 2007). 

[17] Statement of Mr. Philip W. Grone, Deputy Under Secretary of 
Defense (Installations and Environment), before the Military Quality of 
Life and Veterans Affairs Subcommittee, House Appropriations Committee 
(Feb. 15, 2006). 

[18] Federal Real Property Council, 2007 Guidance for Real Property 
Inventory Reporting (June 8, 2007). 

[19] Statement of Federal Financial Accounting Standards No. 6, 
Accounting for Property, Plant, and Equipment (June 1996) and Statement 
of Federal Financial Accounting Standards No. 14, Amendments to 
Deferred Maintenance Reporting (April 1999). 

[20] See Department of Defense Instruction No. 4165.14, Real Property 
Inventory and Forecasting (Washington, D.C.: Mar. 31, 2006). 

[21] See Under Secretary of Defense (Acquisition, Technology and 
Logistics) Memorandum, Facility Quality Rating Guidance (Washington, 
D.C.: Sept. 5, 2007). 

[22] Black & Veatch, DOD Facility Quality IVV Report - Independent 
Verification and Validation of Condition Reporting for Defense 
Facilities (May 16, 2006). 

[23] See GAO-05-556. 

[24] To gain insight at the installation level into the accuracy of 
real property inventory records, compliance with inventory verification 
procedures, support funding issues, and the condition of facilities, we 
visited the following eight installations: Fort Eustis, Virginia; Fort 
Sam Houston, Texas; Naval Air Station Oceana, Virginia; Naval Station 
Mayport, Florida; Langley Air Force Base, Virginia; Randolph Air Force 
Base, Texas; Marine Corps Base Quantico, Virginia; and Marine Corps 
Base Camp Lejeune, North Carolina. We judgmentally selected these 
installations because they represented two installations from each of 
the military services and were located in several different geographic 
locations. We recognize that information obtained from these 
installations, as well as the facility conditions observed, may or may 
not be representative of other military installations. 

[25] In addition to data from the military services, some of the data 
related to facility funding goals in this report include data from the 
Defense Logistics Agency, the Tricare Management Activity, and the DOD 
Education Activity. However, we did not include these components in our 
review. 

[26] Since fiscal year 2005, DOD has been developing a model to 
estimate funding requirements for 10 facility-related services--fire 
and emergency services, utilities, pavement clearance, refuse 
collection and disposal, real property leases, grounds maintenance, 
pest control, custodial services, real property management and 
engineering services, and engineering readiness. According to DOD, the 
model will use commercial benchmarks for similar services performed in 
the private sector. DOD plans for all military components to use the 
model to estimate the fiscal year 2010 facilities operation funding 
requirements. 

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