Defense Infrastructure: Demolition of Unneeded Buildings Can Help Avoid
Operating Costs (Letter Report, 05/13/97, GAO/NSIAD-97-125).

Pursuant to a congressional request, GAO reviewed selected aspects of
the services' management of facilities infrastructure and their use of
demolition as an element of facilities management, focusing on: (1) the
services' funding obligations for maintenance and repair over the last
10 years, changes in building square footage in the space to be
maintained, and the impact of the changes on facility maintenance and
repair; (2) the potential for demolition to reduce excess facilities
infrastructure and avoid recurring costs; (3) the services' plans for
demolition; and (4) their overall infrastructure management strategies.

GAO noted that: (1) over the past 10 years, the reduction in the number
of DOD facilities worldwide as measured by square footage of space, was
only about 10 percent; (2) however, funding by the services for real
property maintenance during the same time period decreased almost 40
percent; (3) as a result, installations have growing backlogs of
deferred maintenance and repair projects; (4) DOD and the services do
not currently have complete, reliable information on the costs
associated with either maintaining their current facilities or with
infrastructure reduction options; (5) each of the services is
recognizing the importance of demolition as an option for eliminating
old, excess buildings that are relatively costly to maintain and a drain
on declining operation and maintenance funding; (6) demolition offers a
viable option for further infrastructure reductions and millions of
dollars in savings, but it requires up-front cost; (7) data related to
previous demolition projects suggests that demolition costs can be
recouped within a few years, thereafter avoiding millions of dollars in
recurring maintenance and repair costs and utility costs; (8) the
services differ in the extent to which they have developed formal
demolition programs; (9) the Army uses the greatest amount of funding
for demolition and is planning the most aggressive demolition program;
(10) conversely, the Air Force has the least centralized program and
relies on installation commanders to identify and fund demolition
efforts; (11) although requiring specific funding for demolition could
strengthen program emphasis and management and ensure that demolition
occurs, it could also limit the services' flexibility to shift funds
within their own operation and maintenance accounts to meet the most
pressing operational needs; (12) most service officials do not want to
require funding to be used exclusively for demolition but would rather
continue to use operation and maintenance funding specifically for
demolition as they deem necessary; (13) overall strategic plans for
maintenance and repair of facilities infrastructure at the service
headquarters and Office of Secretary of Defense levels appeared to be
limited; and (14) the plans lacked comprehensive strategies for
facilities revitalization, replacement, and maintenance tied to
measurable goals, specific time frames, and expected funding.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-97-125
     TITLE:  Defense Infrastructure: Demolition of Unneeded Buildings 
             Can Help Avoid Operating Costs
      DATE:  05/13/97
   SUBJECT:  Military downsizing
             Surplus federal property
             Military cost control
             Property disposal
             Military facilities
             Facility maintenance
             Maintenance costs
             Military budgets
             Budget obligations
             Base closures

             
**************************************************************************
* This file contains an ASCII representation of the text of a GAO        *
* report.  Delineations within the text indicating chapter titles,       *
* headings, and bullets are preserved.  Major divisions and subdivisions *
* of the text, such as Chapters, Sections, and Appendixes, are           *
* identified by double and single lines.  The numbers on the right end   *
* of these lines indicate the position of each of the subsections in the *
* document outline.  These numbers do NOT correspond with the page       *
* numbers of the printed product.                                        *
*                                                                        *
* No attempt has been made to display graphic images, although figure    *
* captions are reproduced. Tables are included, but may not resemble     *
* those in the printed version.                                          *
*                                                                        *
* A printed copy of this report may be obtained from the GAO Document    *
* Distribution Facility by calling (202) 512-6000, by faxing your        *
* request to (301) 258-4066, or by writing to P.O. Box 6015,             *
* Gaithersburg, MD 20884-6015. We are unable to accept electronic orders *
* for printed documents at this time.                                    *
**************************************************************************


Cover
================================================================ COVER


Report to the Chairman, Subcommittee on Military Installations and
Facilities, Committee on National Security,
House of Representatives

May 1997

DEFENSE INFRASTRUCTURE -
DEMOLITION OF UNNEEDED BUILDINGS
CAN HELP AVOID OPERATING COSTS

GAO/NSIAD-97-125

Defense Infrastructure

(703166)


Abbreviations
=============================================================== ABBREV

  BRAC - Base Realignment and Closure
  CONUS - continental United States
  DOD - Department of Defense
  O&M - operation and maintenance
  OSD - Office of the Secretary of Defense

Letter
=============================================================== LETTER


B-276460

May 13, 1997

The Honorable Joel Hefley
Chairman, Subcommittee on Military Installations
 and Facilities
Committee on National Security
House of Representatives

Dear Mr.  Chairman: 

This report responds to your request that we examine selected aspects
of the services' management of facilities infrastructure and their
use of demolition as an approach to reducing excess facilities and
avoiding unnecessary operating costs.  This report addresses (1) the
services' funding obligations for maintenance and repair over the
last 10 years, changes in building square footage in space to be
maintained, and the impact of the changes on facility maintenance and
repair; (2) the potential for demolition to reduce excess facilities
infrastructure and avoid recurring costs; (3) the services' plans for
demolition; and (4) their overall infrastructure management
strategies. 


   BACKGROUND
------------------------------------------------------------ Letter :1

Since the mid-1980s, the Department of Defense (DOD) has undergone
significant reductions in its budget, personnel, force structure, and
basing infrastructure.  From fiscal years 1987 to 1996, DOD's overall
budget was reduced in real terms by 31 percent.  By fiscal year 1996,
active military and civilian personnel were reduced by 32 and 26
percent, respectively.  During the same period, there were
significant reductions in the stationing of U.S.  forces overseas and
increased reliance on power projection of forces from bases in the
United States.  In addition, DOD and the services completed four
rounds of domestic base realignment and closure (BRAC) actions
between 1988 and 1995 that, when fully implemented, were expected to
reduce the number of major domestic bases by approximately 21 percent
by 2001. 

Despite reductions in DOD's basing infrastructure, various DOD and
service officials have continued to indicate that they still have
excess, aging facilities and insufficient funding to maintain,
repair, and update them.  At the same time, other DOD officials are
looking for reductions in infrastructure costs to free up funding for
weapon system modernization. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :2

Over the past 10 years, the reduction in the number of DOD facilities
worldwide, as measured by square footage of space, was only about 10
percent.  This amount is much less than expected, considering the
amount of budget reductions and the execution of four base
realignment and closure rounds since 1988.  However, funding by the
services for real property maintenance during the same time period
decreased almost 40 percent.\1 As a result, installations have
growing backlogs of deferred maintenance and repair projects. 

DOD and the services do not currently have complete, reliable
information on the costs associated with either maintaining their
current facilities infrastructure or with infrastructure reduction
options.  Such information will be needed to develop a departmentwide
strategic plan that considers difficult infrastructure options to
meet requirements of the Government Performance and Results Act.\2

It will also be critical to meet the requirements for more complete
disclosure of the costs, associated with facilities' deferred
maintenance and demolition in financial statements, called for by the
Chief Financial Officers Act of 1990. 

Each of the services is recognizing the importance of demolition as
an option for eliminating old, excess buildings that are relatively
costly to maintain and a drain on declining operation and maintenance
funding.  The Army has given the greatest emphasis to demolition in
recent years, demolishing about 39 million square feet of space since
1992.  Demolition offers a viable option for further infrastructure
reductions and millions of dollars in savings, but it requires an
up-front cost.  In fiscal year 1997, the services plan to spend about
$50 million of operation and maintenance funds to demolish excess
space.  Data related to previous demolition projects suggests that
demolition costs can be recouped within a few years, thereafter
avoiding millions of dollars in recurring maintenance and repair
costs and utility costs.  However, future demolition costs are
expected to rise as the services move beyond demolition of simple
World War II-era wooden structures to other structures in which
environmental factors, such as asbestos and lead paint removal, will
likely play an increasing role. 

The services differ in the extent to which they have developed formal
demolition programs.  The Army uses the greatest amount of funding
for demolition and is planning the most aggressive demolition
program.  Conversely, the Air Force has the least centralized program
and relies on installation commanders to identify and fund demolition
efforts.  Although requiring specific funding for demolition could
strengthen program emphasis and management and ensure that demolition
occurs, it could also limit the services' flexibility to shift funds
within their own operation and maintenance accounts to meet the most
pressing operational needs.  Most service officials do not want to
require funding to be used exclusively for demolition but would
rather continue to use operation and maintenance funding specifically
for demolition as they deem necessary. 

Overall strategic plans for maintenance and repair of facilities
infrastructure at the service headquarters and Office of Secretary of
Defense levels appeared to be limited.  The plans lacked
comprehensive strategies for facilities revitalization, replacement,
and maintenance tied to measurable goals, specific time frames, and
expected funding. 


--------------------
\1 This report focuses on operation and maintenance (O&M) funding for
real property maintenance, the principal source of such funding.  It
also focuses on facilities infrastructure, excluding family housing. 

\2 The Government Performance and Results Act (P.L.  103-62) requires
federal agencies to develop agencywide strategic plans.  The plans
must describe how an agency intends to achieve its goals through its
activities and its human, capital, information, and other resources,
such as facilities.  Agencies must also prepare annual performance
plans that include measurable performance goals and indicators for
measuring performance. 


   FASTER REDUCTIONS IN FUNDING
   THAN IN SPACE TO BE MAINTAINED
------------------------------------------------------------ Letter :3

In the past 10 years, maintenance and repair obligations for
facilities, excluding family housing, have fallen faster than the
square footage of space maintained by the services.  Various DOD and
service officials are concerned about the impact of declining budgets
on infrastructure condition. 

The O&M appropriation account provides the principal source of funds
the services use to pay for day-to-day activities at the
installations and bases, including maintenance and repair of most
facilities.\3 From fiscal years 1987 to 1996, total O&M annual budget
authority declined 25 percent in real terms, reflecting the overall
decline in defense spending.\4 However, annual O&M obligations for
facilities maintenance and repair, excluding family housing, declined
38 percent in real terms during the same period--a much steeper
decline than that for total O&M obligations.\5 Table 1 shows changes
in obligations for each service between fiscal years 1987 and 1996
(in fiscal year 1997 dollars).\6



                                Table 1
                
                 Percent Change in O&M Obligations for
                 Maintenance and Repair Between Fiscal
                          Years 1987 and 1996

                 (Fiscal year 1997 dollars in millions)

                                              FY      FY       Percent
Service                                     1987    1996        change
----------------------------------------  ------  ------  ------------
Army                                      $2537.  $1,288           -49
                                               4      .4
Air Force                                 2,764.  1,709.           -38
                                               9       7
Navy                                      1,404.  1,014.           -28
                                               3       8
Marine Corps                               451.8  440.1\            -3
                                                       a
======================================================================
Total                                     $7,158  $4,453           -38
                                              .4      .0
----------------------------------------------------------------------
\a The Marine Corps' fiscal year 1996 obligations are actually much
higher than the previous year due to a one-time increase of about
$100 million for maintenance and repair that year.  In fiscal year
1995, the Corps' obligations for maintenance and repair were about
$294 million.  Over the 10-year period, the Corps' obligations for
maintenance and repair peaked in fiscal year 1988 and did not
approach that level again until fiscal year 1996. 

Source:  Our analysis of service data. 

Although servicewide maintenance and repair obligations fell about 38
percent between fiscal years 1987 and 1996, reductions in square feet
of space owned and managed by the services in the United States and
overseas were much less--about 10 percent.\7 Figure 1 shows the
percent change in facilities square footage by service during that
time. 

   Figure 1:  Percent Change in
   Facilities Square Footage
   Between Fiscal Years 1987 and
   1996

   (See figure in printed
   edition.)

Source:  Our analysis of service data. 

The types of facilities and the relative percentage of subcategories
did not change significantly between fiscal years 1987 and 1995.\8
For example, the Army's administration buildings comprised about 6
percent of its total square footage in fiscal year 1987 and accounted
for about 8 percent of the total in fiscal year 1995.  Other types of
facilities managed by the services include training, utilities, troop
housing, shipyard maintenance, and communication facilities. 

Although combined U.S.  and overseas facilities space managed by the
services fell about 10 percent between fiscal years 1987 and 1996,
the percentage change in the continental United States (CONUS)
facilities was much smaller--4 percent.  Figure 2 shows the percent
change in square footage for CONUS facilities. 

   Figure 2:  Percent Change in
   Square Footage for CONUS
   Facilities Between Fiscal Years
   1987 and 1996

   (See figure in printed
   edition.)

Source:  Our analysis of service data. 

One factor limiting the reduction in square footage to date is
facilities yet to close under the BRAC process.\9 Although some BRAC
actions call for the closure of a base, others call for portions of
the land and facilities of a base slated for closure to be
transferred to an adjacent base.  BRAC closures are often predicated
on construction of new facilities at another base slated to receive
missions from a closing base.  Further, quality-of-life initiatives,
such as new and renovated barracks and family housing and new child
care centers, have added square footage requirements.  These
initiatives will likely continue to add square footage for a number
of years. 

According to the services, square footage will likely decline about
an additional 144 million square feet between fiscal years 1997 and
2001 due to remaining BRAC actions.\10 DOD officials estimated that
the four BRAC rounds would result in about a 21-percent reduction in
the plant replacement value for domestic bases.\11 Although square
footage reductions have been limited, even with the results of four
BRAC rounds, DOD still projects that it will realize significant
recurring dollar savings from the BRAC process--the largest portion
of which are associated with reductions in personnel and base
operating costs. 


--------------------
\3 Maintenance and repair activities can be funded from different
sources.  Thus, because of difficulties in combining all funding
sources for maintenance and repair to make meaningful comparisons
with other infrastructure data, this report focuses principally on
O&M funding and other comparable infrastructure data for analyses. 

\4 This report focuses on obligations rather than budget requests or
appropriations because obligations provide an accounting of how funds
are used for maintenance and repair activities.  In addition,
although information on actual expenditures and costs would be
preferable over obligations, DOD has acknowledged that its inability
to accumulate accurate and complete cost information is a
departmentwide problem. 

\5 Available budget data indicates that further reductions in funding
of maintenance and repair are planned in most services for fiscal
years 1998 and 1999.  Although budget projections for future years
show an upward trend in funding after 1999, many service officials
questioned whether this trend was likely to occur. 

\6 Maintenance and repair obligations include spending for facilities
measured in square feet and other types of infrastructure, such as
runways, that are measured using different metrics.  The services
were unable to break out obligations by type of measurement but told
us that the majority of maintenance and repair obligations were for
facilities measured in square feet. 

\7 This figure excludes property for which title is held by the
services but used by defense agencies and others. 

\8 The services were not able to provide this breakout for fiscal
year 1996 in time for our review. 

\9 Although four rounds of BRAC were held between 1988 and 1995, BRAC
legislation provides up to 6 years to close facilities; thus, some
BRAC closures may not occur until closer to 2001. 

\10 This figure also includes reductions in family housing, which we
were unable to break out separately for the Army and the Air Force. 
If these reductions occur, then the CONUS facilities reductions would
increase to 14 percent.  However, even that amount is not likely
because of increases in square footage in future years not related to
BRAC, but we were unable to obtain data on precise amounts for such
increases. 

\11 Plant replacement value is defined as the cost to replace current
facilities using today's construction costs and standards. 


      ADEQUACY OF FUNDING IS A
      GROWING CONCERN
---------------------------------------------------------- Letter :3.1

Absolute standards for funding maintenance and repair activities do
not exist.  However, recommendations of two study groups in recent
years offer some perspective on DOD's current level of funding. 
DOD's 1989 report to the Congress recommended that the services
annually budget a minimum of 1.75 percent of the plant replacement
value for maintenance and repair, excluding backlogs.\12

A 1990 report from the Building Research Board recommended that
federal agencies, including DOD, budget about 2 to 4 percent of the
plant replacement value for maintenance and repair.\13 The report
also suggests that an even higher level of funding would be required
to address maintenance and repair backlogs.  Since 1990, the report
has been widely quoted, but according to a Federal Facilities Council
official, many federal agencies have not been able to use it because
it is too general.  In 1996, the Federal Facilities Council initiated
a study to develop more specific guidelines.  According to a council
official, the study should be completed by January 1998. 

In contrast with these recommended funding levels, the services'
obligations for maintenance and repair activities in fiscal year 1996
equaled 1.3 percent of the applicable plant replacement value.  Table
2 indicates the level of maintenance and repair funding as a
percentage of plant replacement value. 



                                Table 2
                
                 O&M-Funded Maintenance and Repair as a
                 Percent of Plant Replacement Value in
                            Fiscal Year 1996

                 (Fiscal year 1996 dollars in millions)

                              Facilities                    Percent of
                                   plant    Maintenance          plant
                             replacement     and repair    replacement
Service                            value    obligations          value
-------------------------  -------------  -------------  -------------
Army                            $134,409         $1,257            0.9
Air Force                        113,940          1,668            1.5
Navy                              59,900            990            1.6
Marine Corps                      25,760          429\a          1.7\a
======================================================================
Total                           $334,009         $4,344            1.3
----------------------------------------------------------------------
\a The Marine Corps experienced a one-time increase of about $100
million for maintenance and repair in 1996.  Without this increase,
the percent of plant replacement value represented by maintenance and
repair would be about 1.2 percent. 

Source:  Our analysis of service data. 

According to a Federal Facilities Council official, there is no
industry standard for maintenance and repair funding on a square
footage basis.  The official indicated that funding requirements vary
by building type, age, and level of use.  The Army has developed a
model that suggests, in the aggregate, $4 per square foot is
required; this figure includes some funding to begin addressing
deferred maintenance and repair. 

Our analysis of current spending levels found that O&M obligations
for maintenance and repair declined by 31 percent, from $3.89 per
square foot in fiscal year 1987 to $2.69 in fiscal year 1996. 
However, table 3 shows the differences in obligations between the
services. 



                                Table 3
                
                Percent Change in Maintenance and Repair
                   Obligations per Square Footage of
                Facility Space Between Fiscal Years 1987
                                and 1996

                                              FY      FY       Percent
Service                                     1987    1996        change
----------------------------------------  ------  ------  ------------
Army                                       $3.07   $1.93           -37
Air Force                                  $5.46   $3.73           -32
Navy                                       $3.39   $2.41           -29
Marine Corps                               $4.82  $4.10\         -15\a
                                                       a
----------------------------------------------------------------------
\a The Marine Corps experienced a one-time increase of about $100
million for needed maintenance and repair in 1996, which temporarily
increased the dollar-per-square foot amount in 1996.  Without this
additional funding, the dollar-per-square foot amount would have been
about $2.76, and the percentage change would have been -43 percent. 

Source:  Our analysis of service data. 

The impact of reduced funding on the services' infrastructure is not
clear.  Installation officials we contacted during this review cited
increases in backlogs of deferred maintenance and repair projects in
recent years; however, reliable composite information was not
available due to differences in how the services develop and maintain
this data.  Further, recent efforts by OSD to develop a comprehensive
system for performing facilities condition assessments have not been
successful.  Even though the services have their own approaches to
performing condition assessments, each of these systems has important
limitations.  (See app.  I for further discussion of this issue.)

Under the Chief Financial Officers Act of 1990, as amended, and the
Federal Financial Management Improvement Act of 1996, DOD and the
services are required to prepare financial statements and have them
audited.  Beginning in fiscal year 1998, these statements must (1)
identify and disclose the estimated cost of deferred maintenance for
DOD's facilities that are being used and (2) include the cost of any
planned facility demolitions.  Such information will also be critical
if DOD is to effectively put in place the results-oriented program
decision-making structure envisioned by the Government Performance
and Results Act.  Our previous work has shown that the quality of
existing DOD data on the costs associated with its existing
infrastructure has eroded its usefulness to decisionmakers.  In
addition, DOD has acknowledged its departmentwide problem in
capturing accurate and complete cost information for its operations. 



--------------------
\12 Renewing the Built Environment, Department of Defense, March
1989.  This study, sponsored by the Office of the Secretary of
Defense (OSD), found that differences exist in how the services
calculate plant replacement value.  A triservice study team reviewing
plant replacement value in 1994 recommended that OSD hire a
contractor to review all of the services' databases, assign uniform
facility category codes, and establish a standard unit of
measurement.  OSD did not hire a contractor because of the cost. 
Therefore, the plant replacement values presented here can provide a
useful frame of reference, but they should not be considered
absolute. 

\13 Committing to the Cost of Ownership, Building Research Board,
National Research Council, 1990.  The study was requested by the
Federal Facilities Council, which operates under the auspices of the
Board on Infrastructure and the Constructed Environment of the
National Research Council.  The council is the operating arm of the
Academy of Engineering and the National Academy of Sciences. 


      DETERIORATING FACILITIES IS
      A GROWING CONCERN
---------------------------------------------------------- Letter :3.2

Despite the absence of reliable trend data, many installation
officials told us that recent reductions in funding and personnel had
caused them to defer maintenance and repair activities and forego
recurring preventive maintenance.\14 This is a growing concern
because of its potential to impact operations as well as increase
costs.  The National Research Council reported that it is often
difficult to discern the direct consequences of neglect of
maintenance and repair because the physical evidence may not be
immediately visible.  However, the council notes that a decline in
appearance, increased operating costs, and premature service failures
eventually occur. 

At the installations we visited, facilities were in various states of
maintenance and repair.  For example, at Foot Hood, Texas, new
barracks construction and renovation were taking place (see fig.  3),
and facilities overall appeared to be in much better condition than
at Fort Eustis, Virginia, where less new construction has occurred. 
However, officials at both installations cited growing backlogs in
maintenance and repair in other base facility areas, such as sewer
and water systems. 

   Figure 3:  New Army Barracks at
   Fort Hood, Texas

   (See figure in printed
   edition.)

Army headquarters officials told us that many of its installations
are in a "breakdown maintenance mode," resulting in increases in
emergency repairs and equipment breakdowns.  Officials at Fort Eustis
told us that their emergency work orders increased from less than 300
for fiscal year 1992 to over 20,000 for fiscal year 1996.  The
officials also said that over 45 waterlines broke in fiscal year
1996.  Available data on the condition of the Army's infrastructure
suggests that these conditions exist throughout the Army. 

At Langley Air Force Base, Virginia, many facilities were in good
condition, supporting a view generally held by many service officials
that the Air Force spends more on facilities than the other services. 
However, base engineering officials expressed concern about being
able to maintain and repair their facilities as they have in the
past.  Engineering officials at Langley's Air Combat Command--the Air
Force's largest command--said that base in-house maintenance and
repair funding for fiscal years 1997 through 1999 will remain
constant but that contracts for maintenance and repair jobs too large
for in-house personnel would decline from $211 million in fiscal year
1996 to about $6 million by fiscal year 1997.  Officials expect the
$6 million to decline to almost zero by fiscal year 1999. 

Navy headquarters officials told us funding levels allow only
preventive maintenance on mission-critical systems, such as
electrical and water pump distribution systems.  The preventive
maintenance is limited to inexpensive repairs that take as little as
15 minutes.  An official from the U.S.  Atlantic Fleet in Norfolk,
Virginia, said most of its bases were reacting to emergencies and
were not able to be proactive in trying to prevent them.  Norfolk
Naval Station engineering officials said they only do some preventive
maintenance.  At the Naval Station in Norfolk (see fig.  4), about
half the piers are 50 years old and too narrow to accommodate today's
larger ships.  Many piers were in poor condition and, according to
Navy officials, limited the Navy's ability to berth ships in transit
and support its deck side requirements, such as loading supplies. 

   Figure 4:  Portion of Aging
   Pier Structure at Norfolk Naval
   Station, Virginia

   (See figure in printed
   edition.)

The Marine Corps' Cherry Point and Camp Lejeune, North Carolina,
installations appeared in good condition.  However, Marine Corps
headquarters officials said bases on the West Coast, such as Camp
Pendleton and Camp Barstow, California, were in worse condition.  The
officials attribute the poor condition of these bases to a large
inventory of World War II-era wood facilities, strict State of
California environmental oversight, and high contract and labor
costs. 


--------------------
\14 Preventive maintenance is defined as the planned, scheduled
periodic inspection, adjustment, cleaning, lubrication, parts
replacement, and minor repair of equipment and systems. 


   DEMOLITION COULD REDUCE
   MAINTENANCE AND REPAIR COSTS
------------------------------------------------------------ Letter :4

Faced with reductions in personnel and funding available to maintain
their facilities, many service officials recognize that they continue
to have more facilities than they can afford to maintain.  One means
of reducing facility maintenance costs is to demolish older
structures that may be relatively more expensive to maintain when
they become excess to the services' needs.\15 In fiscal year 1997,
the services plan to set aside about $50 million of O&M funds for
demolition.\16

Army officials state that they have spent as little as $2.50 per
square foot to demolish old World War II-era barrack-type structures
that were unoccupied, but the officials consider $10 per square foot
a more reasonable amount for future demolition projects.  This amount
is more than the Marine Corps' estimate of $8 but less than the Air
Force's $11 and Navy's estimate of $12 per square foot.  Costs vary
depending on size and type of construction and presence of
environmental contaminants.  Demolition costs, once recouped, can
provide the basis for recurring savings to maintenance and repair and
utility costs, which service officials consider to be substantial. 
For example, with demolition costs of $10 per square foot and
operating costs totaling $3.50 per square foot (maintenance and
repair costs of $2.50 per square foot and utility costs of $1 per
square foot), the cost of demolition could be recouped in about
3 years.\17 The $3.50 per square foot used in this example is a rough
estimate of actual expenditures across the entire building inventory. 
Actual expenditures could be considerably less, depending on building
occupancy.  Data were not available to predict with accuracy
potential savings or pay back period for an accelerated demolition
program.  In any case, once up-front costs have been recouped, annual
savings in maintenance and repair, as well as utility costs, would
begin. 

On the basis of the preceding example and the services' estimates of
square footage to be demolished, we believe the potential exists for
avoiding recurring costs of hundreds of millions of dollars once
initial investment costs are recouped.\18 However, various officials
indicated that demolition costs are likely to rise in the future with
the elimination of simpler structures, such as the World War II-era
wooden barracks-type structures, particularly those that were no
longer occupied.  Increases are expected in the future as more
demolition projects require relocation of occupants out of buildings
slated for demolition.\19

These additional costs, along with the potential for demolition costs
to increase due to environmental considerations, will make it
important to continue to examine the cost-effectiveness of demolition
projects on an individual basis. 


--------------------
\15 Before a building is demolished, DOD must comply with legislation
that governs the preservation of historic buildings.  The National
Historic Preservation Act (16 U.S.C.  ï¿½ 470h-2) can prevent the
services from demolishing a historic building, even though the
building is costly to maintain.  DOD must also comply with
legislation concerning the use of unutilized and underutilized
facilities to assist the homeless.  The McKinney Act (42 U.S.C.  ï¿½
11411) requires DOD to work with the Department of Housing and Urban
Development to determine if such facilities are suitable for use by
the homeless before the buildings can be demolished. 

\16 These funds are in addition to normal demolition associated with
new construction, which is typically funded as part of a military
construction or family housing military construction authorization. 

\17 Utility costs used in this example are a rough approximation
based on Army data, which divides total expenditures on electricity
by square footage of facility space. 

\18 Although recurring costs may be avoided in the future, we were
unable to calculate precisely the total amount that could be avoided
because, except for the Army, the services do not know the exact
amount of excess space they have. 

\19 Relocations costs can also include the minor alterations of
facilities at receiving sites. 


      SERVICE VIEWS ON FUNDING
---------------------------------------------------------- Letter :4.1

The services can derive benefits from formally earmarking, or
"fencing," funds for demolition.  Fencing funds ensures that the
funds will be used to accomplish a specific objective.  For example,
Navy funds are fenced for family housing maintenance and repair. 
Family housing officials at the U.S.  Atlantic Fleet said they were
able to better meet needed maintenance and repair needs due to the
fenced funds.  Family housing maintenance and repair funds are also
fenced for the other services. 

Various service officials expressed the view that earmarking and
centrally controlling funds for demolition at the service
headquarters level may help ensure that funds are used for
demolition.  However, officials told us they were against fencing
funds for demolition, citing the lack of flexibility to use funds for
higher priorities. 

In deliberations on the Fiscal Year 1997 Department of Defense
Authorization Bill, specific authorization for demolition was
considered but ultimately not approved (H.R.  3230, 104th Cong., 2d
sess.).  The bill had proposed adding $30 million for demolition ($10
million for each service).  The authorization would have limited O&M
demolition projects to no more than $300,000 and required demolition
projects more than this amount to be funded by the military
construction appropriation.  Under the same provision, demolition
projects over $500,000 had to be reported to the Congress. 

In response to the bill, DOD said it preferred to use O&M funds for
demolition.  DOD further said the bill would prevent O&M funds from
being used for projects costing over $300,000 and require significant
administrative burdens and delays without clear benefits.  In
addition, base commanders' authority and flexibility would be
severely limited in responding to demolition and funding
opportunities as they arise. 

By setting aside funds at the headquarters level, many service
officials think they have taken appropriate steps to ensure that
funds would be used for demolition purposes but still maintain
flexibility to use funds to meet other requirements.  Generally, the
services were opposed to more restrictive funding.  Navy and Marine
Corps officials said they would not be opposed to fencing funds for
demolition if the funds were in addition to their O&M funds. 
Officials preferred using O&M funds for demolition, even though the
funds could be used for higher priorities if necessary. 

Service officials agreed that they wanted commanders to use available
O&M funds for demolition.  As a result, the services, except for the
Air Force, centrally control the approval and funding for demolition. 
According to Air Force officials, they will allow base commanders to
identify, fund, and demolish excess facilities on their own
initiative. 

Officials from the Army, the Navy, and the Marine Corps told us they
used most of the O&M funds they earmarked for demolition.  The
services, except for the Navy, do not have a separate demolition
account in their O&M accounts, so we were not able to compare the
amount they earmarked to the amount they obligated for demolition. 
Service officials provided us with a summary of what they obligated
for demolition for a specific time period by summing up obligations
from individual demolition projects.  For example, in fiscal year
1996, the Navy obligated all of the $6.4 million it earmarked, and
the Marine Corps obligated over 80 percent of the $4 million it
earmarked.  The Army did not earmark funds but had a target goal to
reduce square footage by about 5 million, which it met by obligating
about $15 million.  Air Force headquarters does not currently
allocate demolition dollars every year; however, major commands
accomplish demolition using their own funds when available. 

Army, Navy, and Marine Corps officials told us that demolition of
facilities, which appears to happen mostly in the last quarter of the
fiscal year, is not done at that time for lack of planning for
demolition or use of end-of-year funds.  Navy and Marine Corps
officials said that it can take until the last quarter of the fiscal
year for bases to complete their project designs and go through
contracting procedures. 



   FORMAL DEMOLITION PROGRAMS VARY
   BY SERVICE
------------------------------------------------------------ Letter :5

The services vary in the scope of their efforts and the way in which
they administer their programs (centralized or decentralized).  Table
4 compares each of the service's programs.



                                Table 4
                
                      Service Demolition Programs

                 (Square feet and dollars in millions)

                                     Square
                                 footage to
                                         be         Square     Funding
                                 demolished  footage to be  designated
                                  in fiscal  demolished in         for
Service                           year 1997     the future  demolition
-----------------------------  ------------  -------------  ----------
Army                                    3.3         60.0\a      $620\a
Navy                                    1.5             \b       147\a
Marine Corps                            0.5          1.4\c        16\c
Air Force\d                             4.2         15.1\a          \b
----------------------------------------------------------------------
\a These figures are through fiscal year 2003. 

\b These figures are unknown. 

\c These figures are through fiscal year 2000. 

\d The Air Force does not have an approved servicewide plan for
facilities demolition.  While the Air Force had established a
percentage goal to reduce space, it had not identified, until
recently, specific square footage to be demolished.  Recently, Air
Force headquarters surveyed its major commands to identify square
footage they planned to demolished. 

Source:  Our analysis of service data. 


      ARMY
---------------------------------------------------------- Letter :5.1

The Army has the largest and most centrally directed demolition
program, and it is targeting the largest amount of funds for
demolition among the services--$620 million through fiscal year 2003. 
The Army facilities demolition program began in 1992 and was included
in the service's October 1993 Long-Range Facilities Plan.\20 Since
then, Army officials report they have spent approximately $95 million
demolishing about 39 million square feet. 

The Army determines excess space by using a model that compares an
installation's inventory of space to standard Army requirements,
which are based on the installation's mission.  On the basis of this
model, the Army determined in 1996 that it had an excess of about 134
million square feet.  In fiscal year 1997, the Army plans to spend
$20 million and demolish 3.3 million square feet.  Starting in fiscal
year 1998, the service plans to spend $100 million in O&M funds per
year through fiscal year 2003 to eliminate excess space at an
estimated cost of $10 per square foot.  Therefore, we calculated that
it would take the Army about 13 years to eliminate the excess space
at a cost of about $1.3 billion. 

The Army's demolition program is being given strong top-down emphasis
with project funding approved at the service headquarters level. 
Installations propose demolition projects to the Army's Installation
Management Office at headquarters, where they are reviewed and
approved.  Projects are approved based on the amount of square feet
to be demolished and demolition costs.  The Army funds the projects
out of O&M funds set aside and retained at the headquarters level for
demolition. 

Headquarters officials said that in fiscal year 1998 they will use an
accounting code to track and ensure that the funds are used for
approved demolition projects.  If installation commanders do not use
the funds as designated, the installation will not be provided with
more funds, according to headquarters officials.  Before this central
control, headquarters officials provided the installations with a
target amount of square feet to be demolished, but funds were not
always used for demolition. 

According to headquarters officials, the Army plans to approve those
projects that will demolish the most square footage at the least
cost.  They believe this process will help achieve the goal of
eliminating approximately 60 million square feet of World War II-era
wood buildings included in the 134 million total excess square
footage that will be demolished first. 

The Army's demolition program is also being done along with
restrictions on the amount of square feet that can be added to
installations through new construction.  The program requires the
Army to dispose of one square foot of facilities to offset each
square foot of new construction added to the inventory.  According to
headquarters officials, the Army has had this requirement since the
early 1980s and kept the restriction as part of its more recent
facilities reduction program that started in fiscal year 1992.  This
requirement will help to control the growth of excess square footage
of space.  (The other services do not use this restriction in
managing their infrastructure.)

According to Army officials, environmental costs and relocation
expenses associated with the Army's demolition have not thus far been
significant and have been funded out of O&M funds.  Funds to cover
these expenses in the future are included in the $100 million the
Army has earmarked for demolition. 

In demolishing facilities, the Army has used contractors as well as
in-house civilian engineering personnel.  For example, at Fort Hood,
a 55,000-square foot World War II-era building was being used as a
troop laundry facility for cleaning sheets, bedding, and towels. 
According to an engineering official, the roof continued to leak,
even though it had been fixed several times; the laundry equipment
was outdated; and the building could not accommodate new equipment. 
In-house engineering staff bulldozed the building late in fiscal year
1996 at a total cost of about $134,000.  A new laundry facility was
not built, since the installation contracted with a private laundry
company.  The space is currently being used as a parking lot and
marshalling area for troops. 


--------------------
\20 This plan provides a statement of broad principles and objectives
for installation planning, such as citing the need to establish and
fund a capital investment plan to ensure installation revitalization,
replacement, and maintenance of facilities infrastructure.  It is not
much more specific on how this broad objective will be accomplished
over any specific time frame or at what cost. 


      MARINE CORPS
---------------------------------------------------------- Letter :5.2

The Marine Corps' emphasis on demolition began in fiscal year 1994
but was given additional emphasis with the Commandant's fiscal year
1996 budget guidance, which directed headquarters to sponsor a
program to prioritize the demolition of unneeded structures.\21 Since
1994, the Corps has demolished about 1.5 million square feet of space
at a cost of about $8.3 million.  The Corps plans to demolish an
additional 1.8 million square feet and spend about $4 million each
year from fiscal years 1997 to 2000.  The Corps developed its
demolition goal by asking its bases to determine what they would like
to demolish.  According to Corps officials, the amount of excess
space may be based on requirements, since the base commanders know
their mission and the infrastructure needed to
support it. 

The Marine Corps' facility database indicates that the Corps has an
excess of 1 million square feet, which is less than the amount of
space that the Corps plans to demolish by fiscal year 2000.  Corps
officials told us that facilities marked as excess in its asset
database may not be necessarily marked for demolition.  It is not
clear how many facilities designated as excess by the Corps' database
will actually be demolished.  However, Corps officials told us they
are in the process of reconciling the amount of square footage in
demolition plans with the amount of square footage that bases
reported as excess. 

Marine Corps headquarters centrally funds and manages the demolition
program.  The program is supported by O&M funds, which allows the
Marine Corps flexibility to use the funds for unforeseen mission
requirements.  Demolition projects originate at the base level and
are reviewed and selected by headquarters.  Marine Corps officials
said that they have funded, at a minimum, all design costs for
demolition projects.  They have also funded related environmental
cleanup as needed in demolition projects.  However, according to a
headquarters official, no projects have required the relocation of
personnel or minor alterations.  The officials said the costs of
these requirements will be made on a case-by-case basis to determine
whether they are to be funded at the base or headquarters levels. 


--------------------
\21 Demolition plans are included in the Marine Corps' infrastructure
plan, known as the Installations and Logistics Campaign Plan, which
was finalized and signed by the Commandant in 1996.  The plan
outlines a goal of improving operations, processes, and systems in
support of the Corps and ensuring the best products and services at
the least cost.  The five key areas of emphasis in the plan include
combat service support, material support management, logistics
information resources, supporting establishment (infrastructure), and
contracting. 


      NAVY
---------------------------------------------------------- Letter :5.3

The Navy describes its demolition program as a centralized initiative
funded from O&M funds and managed by its military construction
division at headquarters.  The Navy's formal emphasis on demolition
began in fiscal year 1996.  However, according to service officials,
some buildings were demolished in prior years when funding was
available, but program data was not developed on a centralized basis. 
In fiscal year 1996, the Navy demolished about 400,000 square feet at
a cost of about $4.8 million and spent $1.6 million to demolish other
facilities not measured in square feet, such as fuel tanks, for a
total of $6.4 million. 

The Navy's current program is not based on a projected goal of
reducing a set amount of square footage; rather, it hinges on the
expected availability of O&M funding to demolish facilities that are
(1) in excess of current requirements, (2) costly to maintain and
operate, (3) unsafe or potentially harmful to the environment, and
(4) unsightly and not in keeping with the concept of "installations
of excellence."\22 Because the program is only
1 year old, a Navy headquarters official said the Navy expected the
program to become more formalized as it progresses.  Navy officials
told us they planned to spend about $25 million for demolition in
fiscal year 1997.  After that time, they tentatively plan to spend
$13 million each year through 2000 for demolition.  From fiscal year
2001 to 2003, the Navy plans to spend a total of $83 million on
demolition, but this goal may be adversely affected by declining O&M
funds.  Navy officials stated that they had established funding
levels from O&M funds for the demolition program but suggested that
the amount spent could be less if O&M funds are needed to meet
unforeseen requirements in other areas. 

Proposed Navy demolition projects originate at the activity level and
are forwarded to the claimant level, such as the Commander in Chief,
U.S.  Atlantic Fleet.  At the claimant level, projects are reviewed
and prioritized and then forwarded to Navy headquarters for further
review, when factors such as potential cost avoidance and O&M savings
are considered.  Although Navy demolition projects are approved and
funded at the headquarters level, the Navy does not currently include
funding for any environmental cleanup or relocation of functions to
other facilities.  The Navy is in the process of developing a system
to track and monitor the execution of demolition projects.  A Navy
official said that headquarters staff currently make site visits to
ensure completion of projects. 


--------------------
\22 The Navy has drafted its Shore Support Infrastructure Vision and
Strategic Plan, which outlines a broad strategy for reducing
infrastructure costs and applying business practices to meet the
Navy's fleet support mission.  The plan cites demolition as the
primary tool to reduce costs.  The plan does not identify cost and
time frames for completion of the strategy. 


      AIR FORCE
---------------------------------------------------------- Letter :5.4

The Air Force has had the least centralized demolition program among
the services.  Air Force officials state that they have demolished
structures using available O&M funding.  However, funding was not
tracked until fiscal year 1996 when, according to officials, the Air
Force spent $52 million to demolish about 5 million square feet. 

The Air Force has drafted a tentative goal to reduce its facilities
square footage by a net of 3 percent each year between fiscal years
1997 and 2005 through consolidation and demolition.\23 However, it
has not developed detailed plans to accomplish this goal.  According
to officials, if a plan to reduce its square footage is implemented,
base commanders would use O&M, military construction, or military
family housing funds for demolition.  Program initiatives are the
responsibility of individual commanders who identify, fund, and
execute individual demolition projects.  In October 1996, the Air
Force began an initiative to develop a way to identify and track
excess square footage.  As of February 1997, the Air Force was still
planning how it would implement this initiative.  Tentative plans are
to task major commands with collecting the information. 


--------------------
\23 This goal is included in a draft strategic plan developed by the
Air Force in 1996.  The Air Force expected to publish the plan in
April 1997.  The draft plan addresses four civil engineering core
functions:  combat and contingency engineering; base operations,
maintenance, and development; environmental leadership; and housing
excellence.  The plan sets forth goals in each core function, such as
building a smart facility investment strategy and increasing the
effectiveness and reducing the cost of doing business.  Each goal has
objectives to achieve, but the plan does not address the amount of
funding needed to implement the goals and objectives or set
year-to-year goals. 


   EMPHASIS ON STRATEGIC PLANNING
   HAS BEEN LIMITED
------------------------------------------------------------ Letter :6

OSD's and the services' strategic planning for facilities maintenance
and repair, including the revitalization of facilities
infrastructure, was limited.  Those plans that did exist were not
focused on long-term comprehensive strategies for facilities
revitalization, replacement, and maintenance, and they were not tied
to measurable goals to be accomplished over specific time frames or
linked to funding. 

Over the past 7 years, we have called attention to critical
government operations that are highly vulnerable to waste, fraud,
abuse, and mismanagement by designating them as high-risk areas.  One
area of focus has been accountability and cost-effective management
of defense programs.  Our February 1997 high-risk series of reports
included defense infrastructure as a new high-risk area.\24 The
defense infrastructure report noted that DOD is spending funds to
operate and maintain an aging, underutilized, and excess facilities
infrastructure.  It noted that setting forth a clear framework for a
reduced defense infrastructure is key to avoiding waste and
inefficiency.  It further noted that the Secretaries of Defense, the
Army, the Navy, and the Air Force need to give greater structure to
their efforts to attain infrastructure reductions by developing an
overall strategic plan.  Such a plan could be expected to encompass
needed demolition as well as facilities revitalization. 

The need for strategic planning for facilities infrastructure is also
underscored by the requirements of the Government Performance and
Results Act.  The act requires federal agencies, including DOD, to
develop agencywide strategic plans by September 30, 1997, annual
performance plans for fiscal year 1999 and beyond, and annual program
performance reports beginning March 31, 2000.  The strategic plans
must cover at least a 5-year period and include an agency's mission
statement and goals.  They must also describe how an agency plans to
achieve its goals through its activities and its human, capital,
information, and other resources, such as facilities. 

Performance plans must include measurable performance goals, where
feasible, and the indicators for measuring performance.  Performance
reports must compare actual performance with performance goals and
explain what needs to be done when goals are not met.  Such
performance reporting for DOD's infrastructure should include, as
part of DOD's assessment of the program's efficiency in meeting
performance goals, the measurement of actual against expected
facility infrastructure maintenance costs.  Such periodic reporting
should also identify and facilitate monitoring estimates of the costs
associated with deferred facility maintenance. 

Strategic planning can help agency components and programs to develop
outcome-oriented goals and performance measures that are linked to
and support agencywide goals.\25 Our report on DOD's implementation
of the Government Performance and Results Act notes that the Senate
and House reports on the legislation anticipate that strategic
planning will be institutionalized and practiced at all
organizational levels throughout the federal government.  Our report
on DOD's Logistics Strategic Plan notes the need to link
organizational components' plans to agencywide strategic plans. 

Our executive guide to implementing the act notes that several
organizations, in implementing management reforms similar to those
required by the act, found a key to successful implementation was to
create clear, hierarchically linked goals and performance measures
that cascaded from the top to the bottom levels of the organization. 
Such hierarchies of goals and measures provide a straightforward road
map showing how the work of managers and staff throughout an
organization contributes to attaining organizationwide strategic
goals.  The guide stresses that performance measurement is one of the
most important features of the act.  According to the guide,
performance measures at each organizational level should be outcome
oriented to allow demonstrating results, limited to those that are
responsive to multiple priorities, and linked to responsible
programs.  Key to assessing performance is the need to collect
sufficiently complete, accurate, and consistent data. 


--------------------
\24 High-Risk Series:  Defense Infrastructure (GAO/HR-97-7, Feb. 
1997). 

\25 See DOD's GPRA Implementation (GAO/NSIAD/GGD-97-65R, Jan.  31,
1997), Logistics Planning:  Opportunities for Enhancing DOD's
Logistics Strategic Plan (GAO/NSIAD-97-28, Dec.  18, 1996), and
Executive Guide:  Effectively Implementing the Government Performance
and Results Act (GAO/GGD-96-118, June 1996). 


   CONCLUSIONS
------------------------------------------------------------ Letter :7

Disproportionate reductions have occurred in funding devoted to
maintenance and repair compared with reductions in space being
managed by the services over the last 10 years.  This finding is
consistent with concerns of various service officials that they
continue to retain more facilities than they can afford to maintain. 
Demolition is one means of addressing this problem on installations
that are being retained by the services, and it can also help avoid
unnecessary maintenance and repair and utility costs in a period of
declining resources.  Each of the services has some plans to
emphasize the demolition of excess facilities, but the Army appears
to be providing the strongest program emphasis.  Even though stronger
emphasis in the other services might be desirable, it appears that
declining O&M funding levels could have the potential to constrain
the existing plans of each of the services. 

Changes in square footage of space being maintained by the services
can provide an important basis for assessing progress of demolition
and other facility reduction measures.  Such data can also provide a
basis for assessing changes in funding for repair and maintenance. 
Trend analyses of this data could help DOD measure performance and
meet reporting requirements under the Chief Financial Officers Act. 
These analyses could also be important to making more informed
operational decisions concerning facilities infrastructure programs,
as contemplated by the Government Performance and Results Act.  It is
critical that DOD make marked strides to improve its ability to
develop and disclose a complete picture of the actual costs incurred
to maintain its infrastructure, as well as estimates of the costs it
may incur to carry out facility maintenance that was previously
deferred. 


   RECOMMENDATIONS
------------------------------------------------------------ Letter :8

We recommend that the Secretary of Defense

  direct the services to use consistent and common criteria, to the
     extent feasible, for developing (1) accurate and reliable trend
     data on infrastructure condition, including square footage,
     plant replacement value, and other relevant measurements, and
     (2) costs associated with their current infrastructure and
     possible reduction options, including information on deferring
     facility maintenance and demolishing excess facilities;

  use the trend data as a starting point in formulating an overall
     strategic plan for facilities infrastructure that links to the
     departmentwide strategic planning requirements set forth in the
     Government Performance and Results Act; and

  require the Air Force, the Navy, and the Marine Corps to demolish
     excess infrastructure to the maximum extent feasible when
     facilities are being replaced by new construction. 


   MATTER FOR CONGRESSIONAL
   CONSIDERATION
------------------------------------------------------------ Letter :9

The Congress may wish to consider requiring DOD and the services to
provide 7 to 10 years of comparable trend data on square footage of
space being maintained and other measurements, such as plant
replacement value and other facility unit measures, along with their
O&M budget submissions and justifications each year. 


   AGENCY COMMENTS AND OUR
   EVALUATION
----------------------------------------------------------- Letter :10

DOD concurred with our recommendations.  However, DOD took exception
to our observation that it did not currently have complete, reliable
information.  DOD stated that, as is the case with any similar,
large, complex organization, all existing information is not and
should not be immediately available at the headquarters level.  It
also took the position that the standard of "complete" information
was too extreme and that each proposal to collect data at the
headquarters level must be carefully evaluated for its
cost-effectiveness. 

Our statement regarding complete, reliable information was made in
the context of the need for information and cost associated with
either maintaining DOD's current facilities infrastructure or
reducing it.  We also note important limitations in DOD and service
trend data.  Therefore, we continue to believe that it is beneficial
for DOD and the services to develop more complete data on a
consistent and continual basis to provide information for meaningful
trend analyses.  Although complete information is desirable, our
recommendation did not use that term.  Rather, we stipulated that the
services needed to use consistent and common criteria, to the extent
feasible, for developing accurate and reliable trend data on
infrastructure condition and costs. 

DOD also expressed the view that using 1987 as the beginning point
for our analysis of changes in square footage of space being managed
understated DOD's accomplishments, since the recent BRAC efforts did
not get underway until 1991, and would continue until 2001.  It
further noted that fiscal years 1987-1990 represented 4 years of
physical plant growth before beginning to count the square footage
drawdown. 

For purposes of analysis, we chose a 10-year period, as suggested by
the requester, because of his interest in having data commencing
before the onset of the most recent BRAC rounds.  Even extending out
to 2001, the reductions in square footage are much less than
typically might be expected given the approximately 21 percent
reduction in domestic infrastructure often cited by DOD in reporting
the results of its BRAC actions.  That is one of the reasons we
recommended DOD require the demolition of excess infrastructure to
the maximum extent feasible when facilities are being replaced by new
construction.  The complete text of DOD's response is included as
appendix III.  The scope and methodology of our review appears in
appendix II. 

We conducted our review between July 1996 and February 1997 in
accordance with generally accepted government auditing standards. 


--------------------------------------------------------- Letter :10.1

Unless you publicly announce the contents of this report earlier, we
plan no further distribution of it until 15 days from its issue date. 
At that time, we will send copies to the Chairmen and Ranking
Minority Members of the Senate and House Committees on Appropriations
and on the Budget, the Senate Committee on Armed Services, and the
House Committee on National Security; 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. 

Please contact me on (202) 512-5140 if you have any questions
concerning this report.  Major contributors to this report are listed
in appendix IV. 

Sincerely yours,

Mark E.  Gebicke
Director, Military Operations
 and Capabilities Issues


SYSTEMS FOR ASSESSING
INFRASTRUCTURE CONDITION
=========================================================== Appendix I

The Department of Defense (DOD) has recognized the need for a
standard data system that would provide comprehensive trend data on
infrastructure condition by service.  However, it has not been
successful in implementing such a system.  A recent study sponsored
by the Office of the Secretary of Defense (OSD) to develop such a
system never progressed beyond the pilot phase.  Consequently, DOD
and the services use their own unique systems, all of which have
significant limitations in providing trend data and relating
infrastructure condition to readiness. 


   DOD
--------------------------------------------------------- Appendix I:1

In the conference report accompanying the fiscal year 1992 Defense
Appropriations Act, the Congress provided for the implementation of a
pilot test program to conduct comprehensive maintenance surveys at
selected bases.  The surveys, referred to collectively as the
Condition Assessment Survey, were a comprehensive effort led by OSD
to develop a consistent assessment of the condition of DOD
facilities.  The Senate report stated that $50 million should be used
for the pilot test, noting that a lack of accurate and meaningful
budget information on repair and maintenance had precluded obtaining
a reasonable assessment of DOD's needs.  The conference report
directed DOD to use funds from the real property maintenance account
to cover the cost of each survey.  The survey was then tested at 12
installations servicewide. 

The pilot test of the survey was completed in 1995 and, according to
an OSD report, achieved all its goals set by the Congress and DOD to
improve the accuracy, consistency, and credibility of maintenance and
repair data.  A feature of the survey was the ability of its
information system to calculate costs for repair and replacement and
a condition index scale of 0 (poor) to 100 (excellent).  In addition,
the system automatically determined when a repair should be done in a
given time period based on data for the facility's return on
investment.  Despite these accomplishments, service officials told us
that the system's information management system was labor intensive
and expensive to implement and maintain.  DOD projected the cost to
implement the survey servicewide would be about $715 million, but the
services would be responsible for funding about $270 million of this
cost.  According to an OSD official, the survey was not implemented
beyond the initial pilot phase primarily because of the costs. 


   ARMY
--------------------------------------------------------- Appendix I:2

To assess the condition of its infrastructure, the Army started using
the Installation Status Report in 1995.  The report is a three-part
information system that is intended to provide decisionmakers with an
objective assessment of the infrastructure, environment, and services
at Army installations.  The report provides installation status in
the form of C-ratings, which are also used in the Army's familiar
Unit Status Report. 

Part I of the report on infrastructure provides 2 years of data for
fiscal years 1995 and 1996.  It shows the status of installations
grouped into five broad areas:  mission facilities, strategic
mobility facilities, housing facilities, community facilities, and
installation support.  Part I also provides separate C-ratings that
indicate whether the Army has enough facilities and the facilities
meet Army standards. 

The report does not provide trend data because the system has not
been fully implemented.  According to Army officials, reliable trend
data from the report will not be available until fiscal year 2000. 
Until then, the Army will be validating data and refining its data
collection techniques.  Examples of these refinements include
revising inspection standards for utilities and including
semipermanent buildings in inspections.  Additionally, the report
does not relate infrastructure condition to readiness.  Army
officials said they have not determined a measurement for this
relationship. 


   AIR FORCE
--------------------------------------------------------- Appendix I:3

In September 1992, the Air Force began looking for a statistical tool
to support requirements for maintenance and repair.  The Air Force's
Civil Engineering and Studies and Analysis groups jointly developed
an assessment process called the Commanders' Facility Assessment. 
The assessment system was designed to link facility condition to
mission requirements to ensure that resources for maintenance,
repair, and minor construction are allocated to the most critical
mission needs of field commanders.  Commanders are to use the
assessments to stratify their real property maintenance and repair
and military construction requirements. 

The assessment requires field commanders to identify recurring and
nonrecurring requirements.  Recurring requirements include those that
are necessary to accomplish day-to-day maintenance to preclude
further deterioration of the real property facilities and
infrastructure.  Nonrecurring requirements are broken down into three
levels of facility requirements.  Level I (unsatisfactory) reflects
deficiencies that cause frequent mission interruptions, accelerate
facility deterioration, resulting in high life-cycle maintenance
costs, curtail or eliminate some operations, and degrade livability
and workplace conditions.  These deficiencies require a major upgrade
within 2 years.  Level II (degraded) reflects deficiencies that
impair mission support, reduce effectiveness of the work force, and
speed deterioration of the facility.  These deficiencies require a
major upgrade within 2 to 6 years.  Level III (adequate) reflects
facilities that do not impair mission accomplishment, although minor
deficiencies may exist.  These requirements improve operational
productivity and reduce operation costs, such as facility
consolidations, demolitions, and energy conservation measures. 

The assessment includes six major areas:  real property maintenance
(host and tenant); current mission military construction (host and
tenant); all medical facility requirements; nonappropriated fund
activities; Defense Business Operations Fund--Transportation (unique
to the Air Mobility Command); and Defense Maintenance Industrial
Fund--Research, Development, Test, and Evaluation (unique to the Air
Force Material Command).  However, the assessment excludes other
areas, such as new mission military construction, military family
housing, and environmental compliance. 

The assessment only provides condition data for Air Force facilities
for fiscal years 1993 and 1995.  Air Force officials cited several
areas that need improvement, such as clarifying guidance to the field
and improving the assessment's software.  They also said that
assessment training was poor and that the assessment was too complex
and labor intensive.  The Air Force recently completed the validation
of 1995 data.  It plans to implement the assessment again in fiscal
year 1997 and complete an upgrade of the software in fiscal year
1998.  Air Force officials were reluctant to state that the
assessment would provide an indication of how infrastructure related
to readiness.  They stated that the assessment was more oriented
toward linking facilities to mission requirements rather than
readiness. 


   NAVY
--------------------------------------------------------- Appendix I:4

The Navy assesses the condition of its facilities through the Annual
Inspection System, which is prepared by each activity (i.e., a base). 
According to Navy officials, the system started in the 1960s.  The
objective of the system is to provide an annual condition assessment
report of unfunded repair and maintenance deficiencies.  The system
report classifies its facilities maintenance requirements into two
categories:  critical and deferrable.  Critical requirements need to
be completed in
12 months, whereas deferrable requirements are not as pressing, and
thus corrective actions are not critical.  Each activity reports its
backlog of critical deficiencies to the Navy, which uses this
information to prepare its departmentwide system report.  Navy
officials said they consider the system to be an assessment of the
condition of their facilities, even though the system only tracks
backlogs. 

The system is a compilation of inspections performed throughout the
assessment year, but not all facilities are inspected each year. 
Inspections performed through the year are control inspections on the
physical condition of structural, mechanical, and electrical
facilities; preventive maintenance inspections on critical dynamic
equipment, such as electrical and water pump distribution systems;
and inspections of operator-assigned major equipment.  Navy guidance
requires all facilities to be inspected completely within a 3-year
cycle.  Navy activities prepare annual maintenance action plans that
are their management tools for performing repair and maintenance
activities.  The plans provide data that is incorporated into the
system and updated annually. 

Although historical data from the system is available, Navy officials
told us that they are concerned about the quality of this data.  One
official told us that the data suffers from the lack of consistent
and standardized guidelines for the inspections.  That official also
indicated that the quality of the inspections could vary with the
experience and expertise of the inspectors.  A 1995 report of the
Navy Internal Audit Office's review of the U.S.  Atlantic Fleet's
annual inspection process cited the lack of a centrally managed
quality assurance program.  In response, the Commander, Atlantic
Fleet, contracted with the Navy's Public Works Center to conduct all
fleet annual inspection reports to ensure greater consistency and
accuracy in reporting its backlog of repair and maintenance.  Fleet
officials told us that they are now more confident with their system
data but that only 1 year of data is currently available.  The
quality of previous data is problematic in terms of establishing
trends. 

The Navy also started a Shore Base Readiness Reporting System in
1982.  The system was created to link financial data to shore-based
readiness missions.  The system measures personnel, facilities, and
equipment by their ability to support mission operations.  Assets are
rated from C1 to C4, and C3 and C4 ratings indicate that the assets
are only marginally or not meeting mission requirements.  The data is
not tied to funding requirements.  The system is prepared by
commanding officers and staff at the activity level who review data
from the annual inspection system and determine a rating by mission
categories.  The Navy was able to provide trend data by activity on
the number of facilities that were rated C1 to C4. 


   MARINE CORPS
--------------------------------------------------------- Appendix I:5

The Marine Corps determines its infrastructure condition by
inspections, which have been done since the 1960s.  Each organization
has a maintenance or inspection office to perform these inspections. 
The inspectors are trained for performing various types of reviews,
such as electrical and utilities.  Before the inspections, the
inspectors examine data on backlogs in the particular area they are
about to review.  The inspectors use engineering performance
standards and estimate the cost of repair, labor, and material, using
industry information and catalogs.  The activity control office
generally manages the standard documentation from the inspections. 

The Marine Corps' annual control inspection is required to identify
the base's total maintenance and repair requirements, assess physical
condition, update real property records, and determine the
effectiveness of maintenance programs.  The inspection integrates
data from various base inspections, such as preventive, cyclic, and
operator inspections.  Results from the inspections help build the
Marine Corps bases' long-range maintenance and annual work plans. 
Data from the annual control inspection appears in the Marine Corps'
Backlog of Maintenance and Repair report.  This report contains only
valid items of maintenance and repair work that remain as firm
requirements in annual work plans but could not be funded in the
fiscal year.  The Marine Corps includes all maintenance deficiencies
in its report. 

The Marine Corps is in the process of developing a Commanders'
Readiness Reporting System to link facility condition and mission
readiness.  A Marine Corps official told us that the first readiness
report was expected to be prepared by April 1997.  The Marine Corps
has a system to report trend data on its backlog of maintenance and
repair. 


SCOPE AND METHODOLOGY
========================================================== Appendix II

To determine the extent that the services' obligations for
maintenance and repair correlate to changes in building square
footage, we obtained worldwide operation and maintenance (O&M)
funding information for maintenance and repair and minor construction
obligations.\1 We limited the scope of our review to active Army, Air
Force, Navy, and Marine Corps forces only.  We selected data for
fiscal years 1987 through 1996 because those years comprise the most
recent 10-year period and represent a point in time before the onset
of the recent period of Base Realignment and Closure (BRAC) actions. 

We focused on maintenance and repair and minor construction
obligations because obligations from these accounts directly affect
the condition of facilities and represent the day-to-day care and
upkeep of the services' facilities.  We focused on budget obligations
rather than budget requests or appropriations because obligations
provide a more complete accounting of funds used for maintenance and
repair activities than budgets or budget requests.\2 Obligations
represent commitment of funds, such as contracts awarded.  The
liquidation of such obligations may not occur for some time after
they are recorded. 

We also obtained a breakdown of O&M funding in the continental United
States and overseas from the Army and the Marine Corps; however, the
Air Force and the Navy were unable to provide such a breakdown
because these services do not track obligation data this way.  As a
result, we were not able to make DOD-wide comparisons between
overseas and continental U.S.  obligations.  In analyzing obligation
data, we converted the obligation amounts for different years into
constant fiscal year 1997 dollars so that the dollar amounts of the
different years could be compared without the impact of inflation. 
We excluded military family housing from our review because we were
unable to obtain complete obligation and square footage data
comparable to the data we obtained for other types of facilities and
because military family housing is not funded by the regular O&M
funded budget. 

We also obtained and evaluated data showing changes in square footage
of facilities owned and managed by the services for fiscal years 1987
through 1996 as well as the changes projected to occur in future
years.  We selected square footage as an indicator of infrastructure
size because square footage is a consistent measure across services. 
Although the services' total infrastructure is measured by factors
other than square footage and includes other measures, such as linear
feet of runways, service officials told us that square footage
represents the best measure for the majority of their facilities. 
Also, the majority of O&M funded maintenance and repair obligations
are used to maintain and repair facilities measured in square feet. 

Due to time constraints, we did not assess the services' internal
controls associated with infrastructure data management, including
the validity of the square footage data provided for our review. 
However, we determined the extent to which the services had validated
their data to provide an indication of the data's relative level of
accuracy and completeness.  We relied on the services to provide us
the best representative data regarding square footage, and the rigor
of the data depended partly on whether the service used square
footage to manage its infrastructure. 

The Army used square footage to manage its infrastructure, and Army
officials stated that recent data is about 85 to 90 percent accurate
because of initiatives undertaken in the early 1990s to improve the
integrity of the data.  These initiatives included the use of a
contractor to ensure and then update the accuracy of the Army's data,
reliance on Army Audit Agency audits, and BRAC certifications.  The
square footage data for fiscal years 1987 through 1990 for the Army
may not be as reliable as data after 1990 because the Army initiated
its efforts to ensure square footage accuracy after that date. 
However, Army officials said that the data for 1987 through 1990
provided to us was the best available data for that time.  We found
that the data for these 4 years was generally in line with the Army's
overall square footage data. 

Navy and Marine Corps officials expressed confidence in the accuracy
of their data.  A February 1995 audit by the Naval Audit Service,
performed along with the 1995 BRAC process, indicated a 90-percent
accuracy rate for data sampled. 

We had some initial concerns about the completeness and accuracy of
the Air Force data.  We encountered discrepancies in some initial
data sets provided by Air Force officials and therefore requested the
Air Force to provide us with revised data sets.  The Air Force
provided us with data on the square footage of space it owned and
managed for 3 fiscal years--1987, 1995, and 1996--but it could not
readily provide such data for fiscal years 1988 through 1994.  Air
Force officials said that the square footage data they provided us
was the best available. 

In analyzing our data to determine the correlation between
obligations and square footage, we compared the percent change in
obligations to the percent change in square footage between fiscal
years 1987 and 1996.  We made these calculations by service and then
calculated a servicewide figure.  We tried to determine if the
decline in obligations had impacted the condition of the services'
facilities over the 10-year period.  We asked the services for trend
data on the condition of their facilities and the level of emergency
work orders and other work orders done at the installation and base
levels.  The Army was the only service that had a system that
conveyed the actual physical condition of its facilities; however,
the Army implemented the system in 1995, and service officials
indicated that additional work was still needed to refine and
accumulate data before meaningful trends could be developed.  Trend
data on emergency work orders and other types of work orders at the
installation and base levels was not available for the 10-year
period, and this information was not summarized beyond the
installation and base levels. 

To determine the extent that the services examined the potential for
long-term savings in demolishing excess infrastructure, we sought
cost-benefit analyses in this area.  Each of the services provided
estimates for the potential savings per square foot.  However, we
found these estimates were often rule-of-thumb estimates or were
based on simple averages associated with prior demolition activities
rather than formal cost-benefit analyses. 

All of the services, except the Air Force, provided the amount of
excess facilities for 1996.  Air Force officials told us their major
commands had been required to submit annual reports on the extent
that their excess facilities could be demolished, but the Air Force
discontinued this requirement several years ago because the report
was considered unnecessary.  The Army had the most rigorous method to
determine excess space.  The Army developed a model that compared
required square footage based on mission needs with actual square
footage.  This data could be summarized at the installation, major
command, or headquarters level.  The Navy obtained one estimate of
excess from its asset database.  However, in terms of identifying
square footage of space for demolition purposes, the Navy relies on
its bases to estimate the amount of square footage to be reduced from
demolition.  For the Marine Corps, headquarters officials
periodically ask the bases to report the amount of square footage
they consider excess and want to demolish. 

To determine the extent that the services developed a formal
demolition program as a means of reducing excess space as part of an
overall infrastructure management plan, we reviewed the services'
demolition programs and plans and evaluated the extent to which they
were included as part of overall service infrastructure management
plans.  We interviewed service officials responsible for
infrastructure planning to determine the services' current efforts to
include demolition, condition assessment survey data, and funding
needs in their overall infrastructure plans.  We visited the
following locations: 


--------------------
\1 Although maintenance and repair activities are funded from
different sources, we focused on O&M because it provides between 73
and 98 percent of each service's maintenance and repair funds. 

\2 See Operation and Maintenance Funding:  Trends in Army and Air
Force Use of Funds for Combat Forces and Infrastructure
(GAO/NSIAD-96-141, June 4, 1996). 


      OFFICE OF THE SECRETARY OF
      DEFENSE
------------------------------------------------------ Appendix II:0.1

Office of the Deputy Under Secretary of Defense, Industrial Affairs
and Installations, Washington, D.C. 

Directorate of Installation Management, Arlington, Virginia

Readiness, Programs, and Assessment Directorate, Washington, D.C. 

Comptroller, Military Construction, Washington, D.C. 


      DEPARTMENT OF THE ARMY
------------------------------------------------------ Appendix II:0.2

Assistant Secretary of the Army, Financial Management (Business
Resources), Washington, D.C. 

Office of the Assistant Chief of Staff, Installation Management,
Washington, D.C. 

Resource Integration Office, Installation Management, Washington,
D.C. 

Facilities and Housing Directorate, Washington, D.C. 

Army Forces Command, Fort McPherson, Georgia

Army Training and Doctrine Command, Fort Monroe, Virginia

Army Base, Fort Eustis, Virginia

Army Base, Fort Hood, Texas

Center for Public Works, Army Corp of Engineers, Fort Belvoir,
Virginia

Army Military District of Washington, Fort McNair, Washington, D.C. 

Army Materiel Command, Alexandria, Virginia


      DEPARTMENT OF THE
      AIR FORCE
------------------------------------------------------ Appendix II:0.3

Air Force Deputy Chief of Staff for Installations and Logistics,
Office of the Civil Engineer, Washington, D.C. 

Office of the Assistant Secretary of the Air Force, Financial
Management, Budget Operations Division, Washington, D.C. 

Air Force Real Estate Agency, Bolling Air Force Base, Washington,
D.C. 

Air Combat Command, Langley Air Force Base, Virginia

1st Fighter Wing, Langley Air Force Base, Virginia


      DEPARTMENT OF THE NAVY
------------------------------------------------------ Appendix II:0.4

Office of the Assistant Secretary of the Navy, Financial Management
Comptroller, Washington, D.C. 

Naval Facilities Engineering Command Headquarters, Alexandria,
Virginia

Naval Facilities Engineering Command--Atlantic Division (Engineering
Field Division), Norfolk, Virginia

Chief of Naval Operations, Shore Installation Management Office,
Crystal City, Virginia

Commander in Chief, U.S.  Atlantic Fleet, Norfolk, Virginia

Norfolk Naval Station, Norfolk, Virginia

Navy Public Works Center, Norfolk, Virginia


      COMMANDANT OF THE
      MARINE CORPS
------------------------------------------------------ Appendix II:0.5

Marine Corps Headquarters, Installation and Logistics
Department--Facilities Branch, Housing Management Section, and
Land Use and Military Construction Branch, Arlington, Virginia

Marine Corps Air Station, Cherry Point, North Carolina

Marine Corps Base, Camp Lejeune, North Carolina


      OTHER
------------------------------------------------------ Appendix II:0.6

The Association of Higher Education Facilities Officers, Alexandria,
Virginia

Federal Facilities Council, Washington, D.C. 




(See figure in printed edition.)Appendix III
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
========================================================== Appendix II



(See figure in printed edition.)


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix IV

NATIONAL SECURITY AND
INTERNATIONAL AFFAIRS DIVISION. 
WASHINGTON, D.C. 

Sharon A.  Cekala
Karen S.  Blum
Barry W.  Holman
Janice V.  Morrison
Charles W.  Perdue
Donna M.  Rogers

ATLANTA FIELD OFFICE

Lorelei H.  Hill
Harry F.  Jobes
Karen B.  Thompson

OFFICE OF THE GENERAL COUNSEL

Richard Seldin


*** End of document. ***