Military Bases: Cost to Maintain Inactive Ammunition Plants and Closed
Bases Could Be Reduced (Letter Report, 02/20/97, GAO/NSIAD-97-56).

Pursuant to a congressional request, GAO reviewed two issues related to
the Department of Defense's (DOD) management of real property, focusing
on the: (1) opportunities to reduce the cost of maintaining inactive
Army ammunition plants; and (2) same issue as it relates to military
bases among all the services that were closed during the 1988 and 1991
base realignment and closure (BRAC) process.

GAO found that: (1) the annual cost of maintaining the Army's inactive
ammunition plants, which totalled about $118 million since 1990, has
decreased over the years; (2) this decrease is the result of various
initiatives, including downsizing projects, reduced maintenance
requirements, more rigorous contract negotiations with operating
contractors, and the Armament Retooling and Manufacturing Support (ARMS)
Act of 1992; (3) the ARMS program provides financial incentives to
ammunition plant contractors to reuse idle capacities by attracting
commercial tenants to the facility; (4) the contractors act as landlords
with authority to lease buildings and equipment to commercial producers,
and the revenue generated is used to offset the ammunition plants'
maintenance costs; (5) it should be noted that, while the ARMS
initiative has offset some of the Army's maintenance costs, maintaining
ammunition plants in inactive status still represents a significant cost
to the federal government; (6) while some initial investments will
likely be necessary, the Army could further decrease its infrastructure
costs by disposing of unneeded property; (7) the Kansas, Louisiana, and
Sunflower plants, three of the six inactive plants retained for
replenishment purposes, contain 37,000 acres of unneeded land,
facilities, and infrastructure that could be declared excess; (8) none
of the four inactive plants retained for their unique capabilities,
Badger, Indiana, Longhorn, and Volunteer, are needed because alternative
sources exist to provide the capabilities these plants provide; (9) the
overall cost to maintain bases closed in the 1988 and 1991 rounds was
approximately $290 million through fiscal year 1996; (10) no trends in
costs are discernable because most bases have been closed only a few
years and because costs at individual bases vary widely, given their
different sizes, varying infrastructure, and diverse locations; (11)
maintenance costs are higher than they need to be because DOD does not
tie maintenance levels to the amount of time it takes to transfer bases
to the community. The services seldom reduce the maintenance levels,
even when progress toward reuse is slow; (12) continuing maintenance at
initial levels keeps maintenance costs high and reduces the savings from
base closure; (13) contractors at inactive ammunition plants and closed
bases GAO visited were satisfying the terms outlined in their maintenan*

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

 REPORTNUM:  NSIAD-97-56
     TITLE:  Military Bases: Cost to Maintain Inactive Ammunition Plants 
             and Closed Bases Could Be Reduced
      DATE:  02/20/97
   SUBJECT:  Federal property management
             Military downsizing
             Privatization
             Base closures
             Facility maintenance
             Military bases
             Property disposal
             Maintenance costs
             Military cost control
             Army facilities

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


Report to Congressional Requesters

February 1997

MILITARY BASES - COST TO MAINTAIN
INACTIVE AMMUNITION PLANTS AND
CLOSED BASES COULD BE REDUCED

GAO/NSIAD-97-56

Military Bases

(709191)


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

  ARMS - Armament Retooling and Manufacturing Support
  BRAC - base realignment and closure
  DOD - Department of Defense
  IOC - Industrial Operations Command

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


B-272660

February 20, 1997

The Honorable Ronald V.  Dellums
Ranking Minority Member
Committee on National Security
House of Representatives

The Honorable Gene Taylor
House of Representatives

As requested, we reviewed two issues related to the Department of
Defense's (DOD) management of real property.  First, we assessed the
opportunities to reduce the cost of maintaining inactive Army
ammunition plants.  Second, we assessed the same issue as it relates
to military bases among all the services that were closed during the
1988 and 1991 base realignment and closure (BRAC) process. 


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

In accordance with the Defense Planning Guidance, the Army bases its
ammunition requirements on projected training, testing, and war
reserve requirements for two major regional contingencies.  However,
this requirement is subject to review as (1) DOD rethinks its
requirements to respond to the two major concurrent regional
conflicts, (2) war-fighting strategies and weapons technology reduce
current ammunition requirements, and (3) DOD seeks to fund weapon
modernization costs through infrastructure cost reductions. 

In 1993, the Army's Industrial Operations Command (IOC), the Army's
single manager for conventional ammunition, restructured its
ammunition industrial base to include 9 active and 10 inactive
plants.  (See fig.  1.) Of the 10 inactive plants, 6 would be used to
replenish ammunition inventories after two major regional conflicts
and 4 have unique capabilities that, according to the Army, make them
potentially important for future production needs.  The Kansas,
Louisiana, Mississippi, Riverbank, Scranton, and Sunflower ammunition
plants are the six plants that would be used to replenish ammunition. 
The Mississippi plant is to produce the replenishment requirement for
16 percent of the shell metal parts and 78 percent of the grenade
metal parts and provide 40 percent of the load, assemble, and pack
capability.  The Badger, Indiana, Longhorn, and Volunteer ammunition
plants are the four plants that have unique capabilities. 

   Figure 1:  Active and Inactive
   Army Ammunition Plants

   (See figure in printed
   edition.)

After bases are closed, a disposal process is initiated.  The
property is first offered to other federal agencies, then to state
and local agencies, and then to the public.  Some property has
remained in DOD's possession for many years while the communities
have sought ways to use it.  Meanwhile, DOD is responsible for the
expense of protecting and maintaining these bases.  Maintenance is
conducted under a contract with a private entity or a cooperative
agreement between base and community authorities.  Our review of
bases closed as a result of the BRAC process was restricted to the
1988 and 1991 rounds because sufficient time has not passed for the
others in subsequent rounds to take effect. 


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

The annual cost of maintaining the Army's inactive ammunition plants,
which totaled about $118 million since 1990, has decreased over the
years.  This decrease is the result of various initiatives, including
downsizing projects, reduced maintenance requirements, more rigorous
contract negotiations with operating contractors, and the Armament
Retooling and Manufacturing Support (ARMS) Act of 1992.  The ARMS
program provides financial incentives to ammunition plant contractors
to reuse idle capacities by attracting commercial tenants to the
facility.  The contractors act as landlords with authority to lease
buildings and equipment to commercial producers, and the revenue
generated is used to offset the ammunition plants' maintenance costs. 
It should be noted that, while the ARMS initiative has offset some of
the Army's maintenance costs, maintaining ammunition plants in
inactive status still represents a significant cost to the federal
government. 

While some initial investments will likely be necessary, the Army
could further decrease its infrastructure costs by disposing of
unneeded property.  The Kansas, Louisiana, and Sunflower
plants--three of the six inactive plants retained for replenishment
purposes--contain 37,000 acres of unneeded land, facilities, and
infrastructure that could be declared excess.  None of the four
inactive plants retained for their unique capabilities--Badger,
Indiana, Longhorn, and Volunteer--are needed because alternative
sources exist, such as other active ammunition plants or the private
sector, to provide the capabilities these plants provide. 

The overall cost to maintain bases closed in the 1988 and 1991 rounds
was approximately $290 million through fiscal year 1996.  No trends
in costs are discernable because most bases have been closed only a
few years and because costs at individual bases vary widely, given
their different sizes, varying infrastructure, and diverse locations. 
Maintenance costs are higher than they need to be because DOD does
not tie maintenance levels to the amount of time it takes to transfer
bases to the community.  The services seldom reduce the maintenance
levels, even when progress toward reuse is slow.  Continuing
maintenance at initial levels keeps maintenance costs high and
reduces the savings from base closure. 

Contractors at inactive ammunition plants and closed bases we visited
were satisfying the terms outlined in their maintenance contract. 
The Federal Property Management Regulation allows for some
deterioration of buildings and equipment that are not considered
critical to reactivation.  During our visits, we observed peeling
paint and disassembled production lines at several ammunition plants;
however, these conditions were within contract maintenance
requirements. 

We are recommending that DOD dispose of all unneeded property at
inactive Army ammunition plants.  We are also recommending that DOD
establish incentives for communities to speed up the transfer of
closed bases and, after the initial maintenance period has elapsed,
DOD should establish criteria for a phased drawdown of maintenance
until minimum levels are reached. 


   MAINTENANCE COSTS AT INACTIVE
   AMMUNITION PLANTS HAVE
   DECREASED
------------------------------------------------------------ Letter :3

As shown in table 1, costs to the Army to maintain the 10 inactive
ammunition plants have decreased from $21.8 million in fiscal year
1995 to $15 million in 1996.  These costs do not include the cost of
ARMS or other costs.  As of May 31, 1996, $57.5 million had been
obligated for ARMS projects. 



                                Table 1
                
                Maintenance Costs of Inactive Ammunition
                                 Plants

                         (Dollars in millions)

Ammunition plant                  FY1994         FY1995         FY1996
-------------------------  -------------  -------------  -------------
Badger                              $5.3           $5.6           $3.9
Indiana                              2.0            0.5              0
Kansas                               0.1            0.2              0
Longhorn                               0            0.4            0.7
Louisiana                            0.5            1.6            0.7
Mississippi                          4.3            3.4            3.0
Riverbank                            3.1            3.3            1.5
Scranton                              \a              0            0.2
Sunflower                             \a            3.1            2.2
Volunteer                            3.7            3.7            2.8
======================================================================
Total                              $19.0          $21.8          $15.0
----------------------------------------------------------------------
\a Plants were still in an active status. 


      REASONS FOR COST DECREASE
---------------------------------------------------------- Letter :3.1

In 1993, IOC began identifying and implementing downsizing projects
that reduced ammunition plant maintenance requirements and costs. 
Downsizing projects included decontaminating and selling excess
equipment, removing sensitive items, documenting excess real
property, deactivating utilities, removing asbestos, consolidating
activities, and closing buildings.  These measures reduce the cost to
maintain these plants.  For example, removing sensitive items reduces
security costs, while deactivation reduces operation and maintenance
costs.  Further, excessing personal property reduces fire protection
requirements and property management costs. 

IOC officials also state that they have reduced inactive plants'
maintenance costs by streamlining maintenance requirements and more
rigorously negotiating contracts.  IOC has started concentrating its
maintenance requirements on facilities that are critical to
production requirements, while reducing requirements at facilities
that are less critical.  For example, IOC used to maintain all of the
Indiana plant.  IOC had estimated that the maintenance cost for
Indiana from 1993 to 1997 would be $53.5 million.  In 1993, IOC
determined that only the black powder capability was required to be
maintained for its unique capability and subsequently put 8,976 of
the 9,790 total acres in modified caretaker status.  This action
contributed to reducing maintenance costs by an estimated $47.5
million from 1993 to 1997.  In another case, IOC did not renew a
contract when the contractor's proposal for the scope of work was
four times higher than IOC's estimates. 

IOC has increased the number of technical staff who evaluate and
annually renegotiate the maintenance contracts.  As a result, IOC has
been able to reduce costs by negotiating reductions in the number of
contractor personnel.  On the basis of their technical expertise, IOC
staff determine the maintenance required to keep each plant in a
state of readiness and the minimum number of personnel needed.  For
example, at the Indiana plant, 32 positions were eliminated in 1994. 

The ARMS initiative has contributed to a reduction in maintenance
costs at inactive plants.  Under that initiative, the Army authorizes
the ammunition plant contractor under a facility use contract to
lease buildings and equipment to commercial tenants.  The terms and
payments of these third-party leases remain between the facility use
contractor and the tenant, simplifying the Army's involvement.  In
return for this authority, the facility use contractor reduces or
offsets its charges to the Army for maintenance at that plant. 

There are facility use contracts in effect at nine of the inactive
plants.  At all of these plants, the ARMS initiative has produced
revenue used to offset all or part of the maintenance costs.  Revenue
generated through leasing activities at both Indiana and Kansas has
helped to offset the cost of maintenance; contractors at both of
these plants provide the required maintenance at no cost to the Army. 
Maintenance costs at the Mississippi, Riverbank, Sunflower, and
Volunteer plants have been substantially reduced, and IOC projects
that within the next few years, these plants will also be free of
maintenance costs.  For example, at Mississippi, leasing activities
have helped reduce maintenance costs from $4.3 million in fiscal year
1994 to the current $3 million in fiscal year 1996.  According to IOC
officials and the facility use contractor, the cost to IOC to protect
and maintain Mississippi should be zero by 1999.  As leasing activity
continues, IOC will likely realize further cost reductions at the
other inactive ammunition plants.  An IOC official explained that
because of the funding delays, the full impact of the ARMS initiative
was not realized until 1996. 


      COST OF ARMS INITIATIVE
---------------------------------------------------------- Letter :3.2

In 1992, under the ARMS initiative, the Congress appropriated $200
million to encourage commercial use of ammunition plants, for the
purpose of reducing costs, creating private sector jobs, and
retaining critical skills.  IOC has obligated $57.5 million in ARMS
initiative funding at the inactive plants.  To date, $21.6 million
has been spent on various projects, including development of
strategic plans, marketing, plant and tenant modifications, and a
variety of feasibility studies for reuse of existing production
equipment.  For example, $15 million has been obligated and $3.4
million spent to help generate interest in commercial leasing
activity at the Mississippi plant.  Table 2 shows the total amount of
ARMS funds obligated at the inactive plants and the amount of funds
actually spent on ARMS projects. 



                                Table 2
                
                Amount Obligated and Total Disbursements
                    of ARMS Funds as of May 31, 1996

                                                                 Total
Ammunition plant                  Obligated amount       disbursements
------------------------------  ------------------  ==================
Badger                                    $364,000            $364,000
Indiana                                 21,011,000          12,725,000
Kansas                                     722,000             544,000
Longhorn                                   916,000             916,000
Louisiana                                  401,000              32,000
Mississippi                             15,818,000           3,428,000
Riverbank                                6,963,000           1,374,000
Scranton                                   559,000             559,000
Sunflower                                  513,000             511,000
Volunteer                               10,254,000           1,135,000
======================================================================
Total                                  $57,521,000         $21,588,000
----------------------------------------------------------------------
IOC received $10 million in initial ARMS funding in the third-quarter
of 1993 but did not receive any additional funds until the
first-quarter of fiscal
year 1995.  At that time, the Army released an additional $40
million, followed by $50 million in the fourth-quarter of the same
year.  In the fourth-quarter of fiscal year 1995, the Army
reprogrammed $100 million of the $200 million ARMS appropriation to
fund other Army programs. 

In addition to the ARMS initiative, there are costs of downsizing and
modernization that are part of retaining inactive plants.  For
example, downsizing projects at the inactive plants have cost the
Army a total of $56.2 million since 1990.  In the last decade, over
$52 million has been appropriated for modernization projects at the
Badger plant.  The plant has not been reactivated and the upgraded or
new facilities have never been used. 


   OPPORTUNITIES TO REDUCE
   INFRASTRUCTURE COSTS EVEN
   FURTHER
------------------------------------------------------------ Letter :4

Retention costs of inactive plants could be eliminated if the Army
determines that these plants are unneeded and declares them excess. 
Currently, the Army retains plants or large portions of plants that
are in excess of its mission requirements.  The Federal Property
Management Regulation requires agencies to conduct annual reviews of
real property to ensure prompt identification and release of unneeded
or underutilized property.  Additionally, each agency is to maintain
the minimum inventory necessary to conduct its mission. 


      EXCESS REPLENISHMENT
      PROPERTY THAT COULD BE
      ELIMINATED AT THREE PLANTS
---------------------------------------------------------- Letter :4.1

In 1996, IOC prepared an economic analysis of the 10 inactive plants. 
This analysis shows that six of these plants might be needed to meet
inventory replenishment requirements following two concurrent major
regional conflicts.  However, this requirement is subject to review
as (1) DOD rethinks its requirements to respond to the two major
concurrent regional conflicts, (2) war-fighting strategies and
weapons technology reduce current ammunition requirements, and (3)
DOD seeks to fund weapon modernization costs through infrastructure
cost reductions. 

Even if the Army retains all six replenishment plants, only a portion
of the property and infrastructure at the Kansas, Louisiana, and
Sunflower plants is needed to meet replenishment requirements.  Table
3 shows that there are over 37,000 acres of property in excess of
what is needed for replenishment requirements at these plants. 



                                Table 3
                
                Acreage in Excess of IOC's Replenishment
                              Requirement

                                                  Acres
                                           retained for
Ammunition plant             Total acres  replenishment         Excess
-------------------------  -------------  -------------  -------------
Kansas                            13,727            121         13,606
Louisiana                         14,974             90         14,884
Mississippi                        4,377          4,377              0
Riverbank                            168            168              0
Scranton                            15.3           15.3              0
Sunflower                          9,500            400          9,100
----------------------------------------------------------------------
IOC officials state that they are unable to excess most of this
property, given the environmental contamination and the prohibitive
cost of remediation.  Nevertheless, in July 1996, the Army Materiel
Command, IOC's parent command, tasked IOC to review its requirements
for real property and to document any excess property.  The Army
Materiel Command recommended that preliminary reports of excess
property be submitted without the extensive environmental
documentation that normally accompanies the report.  According to IOC
officials, they are in the process of reviewing all of their property
holdings.  Further, an internal memo states that the Army should no
longer retain title to plants unless it has a bona fide production
requirement.  Recent amendments to the Comprehensive Environmental
Response, Compensation, and Liability Act could ease the transfer of
contaminated property. 


      FOUR PLANTS THAT COULD BE
      ELIMINATED
---------------------------------------------------------- Letter :4.2

IOC officials state that the Badger, Indiana, Longhorn, and Volunteer
plants are retained for their unique production capabilities that
could be vital for future needs.  However, according to Department of
Army guidance, these plants must be economical to retain.  IOC
contends that the alternative sources it has identified for the items
produced at these plants have experienced production delays and that
the risks of not being able to obtain these items justify the cost of
maintaining these plants.  Table 4 lists the four plants' unique
capabilities and the alternative sources available. 



                                Table 4
                
                Alternative Production Sources for Items
                Produced at Inactive Plants Retained for
                          Unique Capabilities

                                        Alternate sources currently
Plant               Item                identified
------------------  ------------------  ------------------------------
Badger              Propellent          Radford Ammunition Plant
                    Ball propellent     Olin-St. Marks

Indiana             Black powder        Goex, Inc.

Longhorn            HMX (MUSALL)        Holston Ammunition Plant

Volunteer           Trinitrotoluene     Radford Ammunition Plant
                    (TNT)
----------------------------------------------------------------------
The Badger and Volunteer plants are retained to back up Radford, an
active plant.  IOC retains these plants because Radford has
experienced production delays due to explosions.  However, after the
last explosion in 1985 impaired Radford's ability to manufacture an
item that could be produced at Badger, IOC did not reactivate Badger;
instead, it used a commercial supplier.  According to an IOC
official, reactivating Badger would have been administratively
difficult and too expensive.  In addition, IOC justifies retaining
the Indiana plant on the basis of its being the only government
source of black powder.  However, IOC purchases black powder from a
commercial supplier to meet its requirements. 

In June 1996, IOC declared Longhorn excess to its mission, when the
operating contractor's proposal to maintain the facility was higher
than IOC's estimates.  According to an IOC official, on the basis of
the economic analysis, excessing the Longhorn plant was the most
cost-effective option.  Nevertheless, the Army has yet to formally
excess Longhorn or initiate the disposal process. 

Even if the Army believes that the unique capabilities justify the
cost of retaining these plants, only a small portion of the
facilities at the Indiana and Badger plants is needed to meet those
requirements.  The map in
figure 2 shows the small portion of the Indiana plant that is
retained for the black powder capability.  A similar situation exists
at the Badger plant. 

   Figure 2:  Indiana Army
   Ammunition Plant

   (See figure in printed
   edition.)

Source:  U.S.  Army. 


   MAINTENANCE COSTS DIFFER AT
   BASES CLOSED UNDER THE BRAC
   PROCESS
------------------------------------------------------------ Letter :5

Maintenance costs at each base vary depending on its size,
infrastructure, location, and the extent and conditions of leases. 
Maintenance costs at the 35 bases in our review ranged from $13,000
to $9 million in
fiscal year 1996.  (App.  II shows maintenance costs at these bases.)
For example, maintaining Moffet Field Naval Air Station (which was
originally 1,577 acres, of which 1,440 acres were transferred to the
National Aeronautics and Space Administration) cost $13,000.  At the
other extreme, DOD spent $9 million at Loring Air Force Base.  The
high cost of maintenance at Loring Air Force Base relates to its size
(8,700 acres), infrastructure (over 3 million square feet of
facilities), and location (the most northernly portion of Maine,
where the winter is harsh). 

There is no set formula for establishing maintenance levels at each
base.  For example, not all housing has heat and air-conditioning
provided--only those units identified with reuse potential are
maintained.  The services are supposed to collaborate with the
community to determine what maintenance levels will be performed.  In
cases where communities are not actively involved in reuse, the
services will establish maintenance levels on their own.  The level
of activities is related to the community's intended reuse, the
amount and type of infrastructures, the base's size, and climatic
conditions. 

The cost of maintaining bases is also affected by leasing.  Leasing
is encouraged by the services, because it reduces the level of
funding they must provide to closed installations but still preserves
federal assets.  Leasing is also valued by communities, as it can
both provide a source of revenue and stimulate redevelopment on the
base.  Leases may be for rent or maintenance services.  In general,
leasing decreases the services' maintenance costs, because either
tenants' rental payments offset the services' costs or tenants
provide these services in lieu of rent. 

Although the first round of base closure decisions occurred in 1988,
it is too early to determine trends in maintenance costs.  Because
these bases did not close immediately after they were identified for
closure, not enough data are available for identifying cost trends. 
For example, George Air Force Base closed in December 1992, 4 years
after it was identified in the BRAC 1988 round.  Further complicating
the analysis, closures often occurred midyear and the associated
maintenance costs reflect only that period.  Those costs cannot be
compared with a full year of maintenance cost to determine if costs
are increasing or decreasing.  Additionally, one-time costs
associated with the closure, such as purchasing maintenance uniforms
and computers or the movement of personnel, may or may not be
included in the first year's costs and thus make comparisons with the
second year's cost data difficult. 


      MAINTENANCE LEVELS ARE NOT
      TIED TO AMOUNT OF TIME IT
      TAKES TO TRANSFER A BASE TO
      COMMUNITY
---------------------------------------------------------- Letter :5.1

As a benefit to the community, the services usually continue
maintaining closed bases at initial levels until the property is
conveyed.  In most cases, it takes several years--sometimes 6 or
more--before final agreements are reached with the community to
convey the property.  The length of time that the services are
required to maintain these properties at initial levels varies
depending on the closure round.  Levels of initial maintenance for
bases closed in the 1988 round could be reduced by late 1995;
maintenance levels at bases closed in the 1991 round could be reduced
as of mid-1996.\1 Once the period for the initial levels of
maintenance elapses, the services are to reduce the levels of
maintenance consistent with federal government standards for surplus
property.  However, if requested by the communities, these initial
levels can be extended by the service secretaries. 

Service officials told us that, in general, maintenance levels have
not been reduced from their initial levels, even where progress
toward reuse has been slow.  They noted that the communities strongly
advocate maintaining existing levels of maintenance and that the
Congress and the President have supported efforts to assist
communities experiencing base closures.  Further, the services'
maintenance manuals recognize that the public and the Congress expect
facilities to be maintained to support reuse. 

While we understand that there is a need to provide maintenance,
there are indications the cost of doing this may be higher than
necessary.  For example, service and Office of the Secretary of
Defense officials note that, while they are committed to supporting
communities' reuse of the property, maintenance costs are not
declining and may extend beyond the 6-year BRAC time frame for
closures.  To contain these costs the services are considering ways
to tie maintenance funding to each community's redevelopment
progress.  For example, the services are developing criteria to
assess community redevelopment efforts.  Recently, when the Air Force
was negotiating provisions for the extension of the cooperative
agreement for maintenance at Loring, the Office of the Secretary of
Defense suggested that the Air Force negotiate some performance
criteria (e.g., leases signed, jobs created, areas occupied, or
increases in state or local expenditures on the reuse implementation
effort) to assess the community's efforts to develop the property. 

Navy officials stated that they have an obligation to maintain BRAC
property at initial levels for some period of time.  However, to
address the ongoing costs of providing maintenance, the Navy plans to
implement a policy to control maintenance costs at BRAC bases by
tying levels of maintenance to the communities' redevelopment plans
and establishing clear limits on the level and amount of funding that
will be provided to those bases that are not in active reuse.  The
Navy policy would decrease the amount of funding available over the
6-year period in which closures must take place.  By the 6th year, if
the property was not in active reuse, the Navy would turn off
utilities, abandon unoccupied facilities, and provide only minimal
security to prevent trespassing. 

This policy would give the Navy some leverage at sites where the
community has expressed interest in the property, but progress toward
reuse appears minimal.  For example, the Navy has been negotiating
the disposal of Hunters Point Annex with the city of San Francisco,
but agreeing on the terms of transfer has been difficult.  The Navy
has entered into many small-business leases at the base, but the
leases generate only about $1 million in revenue, compared with the
$3 million the Navy now spends on providing caretaker services at the
site.  An established Navy policy of reduction in services could
provide some incentive to settle the terms of transfer. 


--------------------
\1 Subsequently, in the 1993 and 1995 rounds, the time frame for
reducing the initial maintenance levels was shortened to 1 year after
operational closure or 180 days after the record of disposal was
approved by the service secretary. 


   CONTRACTOR MAINTENANCE IS
   ADEQUATE
------------------------------------------------------------ Letter :6


      AMMUNITION PLANTS
---------------------------------------------------------- Letter :6.1

Inactive plants are maintained by the contractors who formerly
operated them; IOC retains the operating contractors for their
technical expertise and to ensure that critical skills are preserved. 
IOC determines what maintenance tasks are required at each facility
to ensure that the plant can meet its production commitment in the
required time frames.  These tasks are contained in the scope of work
or maintenance plan. 

At the plants we visited, contractors were satisfactorily performing
the maintenance tasks called for in the scope of work established by
IOC.  Civilian Army personnel were ensuring that the tasks were
completed properly.  During site visits, we compared activities in
the scope of work with the physical conditions at the plant.  We
verified by comparing requirements with maintenance records that
contractors were meeting their contract commitments.  According to
IOC officials, they monitor the contractors to ensure they fulfill
their contractual obligations and, if problems are identified,
processes exist to ensure they are corrected. 

The Army contracts only for a level of maintenance necessary to allow
a plant to reactivate and meet production levels within a required
time frame.  This does not require keeping plants in a higher
operating condition.  For example, we inspected the Mississippi
plant, randomly selecting buildings and equipment, and saw some
deterioration.  We observed peeling paint and disassembled production
lines.  Figure 3 shows disassembled equipment at the Mississippi
plant.  Contractor and Army personnel explained that (1) the paint
was peeling off of galvanized steel and would not impair production
capabilities and (2) production equipment is disassembled and left at
its original location to facilitate reassembly, prevent the potential
loss of components, and eliminate the cost of storage.  The
conditions we saw at Mississippi were not unique; we found similar
conditions at other plants.  Army and contractor personnel explained
that these were common occurrences and were appropriately addressed
given the scope of work requirements. 

   Figure 3:  Disassembled
   Equipment at Mississippi Plant

   (See figure in printed
   edition.)


      CLOSED BASES
---------------------------------------------------------- Letter :6.2

The bases we selected for site inspection were maintained according
to contracts or agreements with DOD.  We visited six BRAC bases and
compared the maintenance levels with the physical conditions at all
six bases.  We randomly selected buildings and toured the premises,
finding that the majority of the buildings and grounds were being
maintained according to the levels set forth in the cooperative
agreement or maintenance contract.  Additionally, civilian military
and service personnel were in most cases ensuring that the tasks were
completed.  Most community officials were likewise satisfied with the
bases' conditions.  Figures 4 and 5 show the condition of the bases
we visited. 

   Figure 4:  Housing, Loring Air
   Force Base

   (See figure in printed
   edition.)

   Figure 5:  Housing, Fort
   Sheridan

   (See figure in printed
   edition.)

At each selected base, we inspected the premises for evidence of
deterioration.  In the majority of cases, the buildings were weather
tight and secure.  However, in one instance, we found substantial
deterioration.  At Brooklyn Naval Station, buildings were vandalized
and looted.  (See
fig.  6.) External and internal plumbing, stoves and refrigerators,
and essentially anything that was removable were taken.  Naval
personnel explained that the vandalism occurred between 1991 and
1994, when the Navy essentially provided no maintenance other than
heat and electricity.  According to the Commanding Officer, the Navy
abandoned Brooklyn to minimize its expenses.  However, a full-time
security force now patrols the base 7 days a week, 24 hours a day. 

   Figure 6:  Naval Hospital,
   Brooklyn Naval Station

   (See figure in printed
   edition.)


   RECOMMENDATIONS
------------------------------------------------------------ Letter :7

We recommend that the Secretary of the Army begin the disposal
determination process for (1) all excess real property not needed for
replenishment requirements at the Kansas, Louisiana, and Sunflower
Army ammunition plants and (2) all inactive plants retained only for
their unique capabilities when those capabilities can be adequately
provided by other sources.  An integral part of this process will be
identifying the costs involved in accomplishing the disposal of
unneeded properties. 

We also recommend that the service secretaries establish incentives
for communities to speed up the transfer of closed bases. 
Specifically, after the initial maintenance period has elapsed, which
varies by BRAC rounds, the services should establish criteria for a
phased drawdown of maintenance until minimum maintenance levels are
reached. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :8

Our review included the 10 inactive army ammunition plants and the 35
bases closed in the 1988 and 1991 BRAC rounds that had maintenance
contracts or cooperative agreements in place.\2 We selected the 1988
and 1991 rounds because cost information was available.  Cost
information for the 1993 or 1995 rounds is generally not available,
since operational closure in the majority of cases has not yet
occurred.  We performed work at the Pentagon, Army Material Command,
Industrial Operations Command, Air Force Base Conversion Agency, and
the Naval Facilities Engineering Command.  We interviewed DOD
officials, operating contractors, local reuse authorities, and
tenants.  We obtained and reviewed information provided by the
services and visited the following selected sample of installations: 
Badger Army Ammunition Plant, Wisconsin; Indiana Army Ammunition
Plant, Indiana; Mississippi Army Ammunition Plant, Mississippi; and
Volunteer Army Ammunition Plant, Tennessee; Brooklyn Naval Shipyard,
New York; Fort Sheridan, Illinois; Hunters Point Annex, California;
Jefferson Proving Ground, Indiana; Loring Air Force Base, Maine; and
Williams Air Force Base, Arizona.  We chose these bases because they
were located across the continental United States and in both urban
and rural areas and were generally among the most costly. 

To calculate the cost to maintain all 35 military installations in
our sample, we collected and analyzed historical cost information. 
In the sample selected for site visits, we also reviewed contracts or
cooperative agreements for maintenance and contractor cost data.  The
scope of our work did not include an in-depth review of the cost of
the ARMS program. 

We did not review or test the reliability of DOD's reported cost
information discussed in this report as part of this assignment. 
However, DOD has acknowledged, and our financial statement audit work
has consistently confirmed, significant problems with the
comprehensiveness and accuracy of DOD's reported cost information. 
We present this cost information because it was the only relevant
data readily available and because it was not practical within the
constraints of this review for us to identify and accumulate more
reliable cost information from other sources.  Consequently, the
DOD-reported cost information presented in this report should be
considered as an order of magnitude estimate of actual costs.  As
such, actual costs may be significantly greater or less than DOD's
reported costs. 

To determine if inactive facilities are still needed, we reviewed the
Defense Planning Guidance, which is used to established requirements
for facilities.  We reviewed documents to identify facilities or
portions of facilities needed to satisfy the requirements.  We
interviewed agency officials to confirm the requirements.  We
reviewed the Federal Property and Administrative Services Act of
1949, as amended, and the Federal Property Management Regulation to
determine what should be done with facilities that are no longer
needed. 

To determine the adequacy of contractor maintenance, we reviewed
maintenance contracts or agreements and compared maintenance
procedures with requirements.  For the ammunition plants, we reviewed
the procedures followed by IOC and contractor personnel for assessing
the maintenance required to ensure the plants could be remobilized
and meet production in the required time frames.  We did not test to
determine whether the levels of maintenance contained in the scope of
work would allow a plant to meet remobilization time frames.  We did
randomly inspect facilities to ensure that maintenance procedures
were followed and completed as stipulated in the contract or
cooperative agreement.  In addition, we interviewed Administrative
Contracting Officers, Contracting Officer Representatives, and site
managers to assess services' performance in ensuring that contract
requirements are met.  We performed our review in accordance with
generally accepted government auditing standards between April and
November 1996. 


--------------------
\2 Forty-two major bases in total were closed during the 1988 and
1991 closure rounds.  However, only 35 bases had either cooperative
agreements or maintenance contracts in place. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :9

In commenting on a draft of this report, DOD partially concurred with
the report, partially concurred with the first recommendation, and
concurred with the second recommendation.  DOD said that the Army is
currently assessing the ammunition industrial base and the assessment
is to be completed and submitted to the Congress by June 1997. 
Therefore, at this time, DOD only agreed with the disposal of
Longhorn Army Ammunition Plant and said that it would address the
other plants in its June report to the Congress.  DOD's comments are
provided in appendix I. 

We are sending copies of this report to the Secretaries of Defense,
the Army, the Navy, and the Air Force; the Director, Office of
Management and Budget; and other interested parties.  We will also
make copies available to others upon request. 

Please contact me at (202) 512-8412 if you or your staff have any
questions concerning this report.  Major contributors to this report
are listed in appendix III. 

David R.  Warren, Director
Defense Management Issues




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



(See figure in printed edition.)



(See figure in printed edition.)


PROTECTION AND MAINTENANCE COSTS
AT CLOSED BASES
========================================================== Appendix II

                              (Dollars in millions)

                                Closure
                                date       FY 1994   FY 1995   FY 1996     Total
------------------------------  --------  --------  --------  --------  ========
Army Installation
Army Material Technology        9/95            \a        \a    $1.702    $1.702
 Laboratory, Mass.
Fort Sheridan, Ill.             5/93        $2.965    $3.912     3.045     9.922
Fort Wingate, N.Mex.            1/93         0.639     0.222     0.334     1.195
Hamilton Army Airfield, Calif.  10/93           \b     0.929     0.414     1.343
Jefferson Proving Ground, Ind.  9/95         0.054     0.910     0.333     1.297
Woodbridge Research Facility,   9/94            \a     0.400     0.232     0.632
 Va.
================================================================================
Total Army                                  $3.658    $6.373    $6.060   $16.091
Navy Installation
Brooklyn Naval Station, N.Y.    7/93            \b    $1.717    $1.429    $3.146
Davisville Naval Construction   4/94            \b     0.757     0.712     1.469
 Battalion Center, R.I.
Hunters Point Annex, Calif.     4/94        $0.809     4.059     3.456     8.324
Long Beach Naval Hospital,      3/94            \b     0.332     0.229     0.561
 Calif.
Long Beach Naval Station,       10/94           \b     0.485     1.116     1.601
 Calif.
Moffett Field Naval Air         7/94            \b     0.026     0.013     0.039
 Station, Calif.
Philadelphia Naval Hospital,    9/93            \b     1.598     0.373     1.971
 Pa.
Philadelphia Naval Station,     1/96            \b     0.436     5.381     5.817
 Pa.
Puget Sound Naval Station       9/95            \b     1.229     1.892     3.121
 (Sand Point), Wash.
Warminster Naval Air Warfare    3/97            \b        \a     0.098     0.098
 Center, Pa.
================================================================================
Total Navy                                  $0.809   $10.639   $14.701   $26.149
Air Force Installation
Carswell Air Force Base, Tex.   9/93        $7.540    $4.117    $4.354   $16.011
Castle Air Force Base, Calif.   9/95         0.300     4.060     4.468     8.828
Chanute Air Force Base, Ill.    9/93         8.162     5.845     2.399    16.406
Eaker Air Force Base, Alaska    12/92        3.521     4.205     2.267     9.993
England Air Force Base, La.     12/92        4.156     8.009     0.854    13.019
George Air Force Base, Calif.   12/92        4.919     4.716     1.813    11.448
Grissom Air Force Base, Ind.    9/94         5.285     3.268     1.640    10.193
Loring Air Force Base, Maine    9/94         9.054     7.091     9.063    25.208
Lowry Air Force Base, Colo.     9/94         7.686     6.128     2.665    16.479
Mather Air Force Base, Calif.   9/93        11.559     6.888     4.864    23.311
Myrtle Beach Air Force Base,    3/93         2.725     3.139     2.715     8.579
 S.C.
Norton Air Force Base, Calif.   3/94         8.530     5.486     3.810    17.826
Pease Air Force Base, N.H.      3/91         8.350     7.581     1.246    17.177
Richards-Gebaur Air Reserve     9/94         2.113     2.085     0.858     5.056
 Station, Mich.
Air Force Installation
Rickenbacker Air Guard Base,    9/94        $1.732    $3.539    $4.082    $9.353
 Ohio
Williams Air Force Base, Ariz.  9/93         5.102     4.615     3.354    13.071
Wurtsmith Air Force Base,       6/93        11.440     9.619     5.237    26.296
 Mich.
================================================================================
Total Air Force                           $102.174   $90.391   $55.689  $248.254
================================================================================
Total DOD                                 $106.641  $107.403   $76.450  $290.494
--------------------------------------------------------------------------------
Notes:

1.  The table excludes environmental remediation costs.

2.  Figures at Army installations exclude onetime costs funded by the
base closure and realignment process.

3.  The table excludes Chase Naval Station and Salton Sea Test Base
because the Navy did not provide figures due to minimal costs at
these bases. 

\a Not applicable because the services indicated that costs were not
incurred. 

\b Data were not provided by the services. 

Source:  Army, Navy, Air Force


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================= Appendix III

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

James F.  Wiggins
John J.  Klotz

DALLAS FIELD OFFICE

Patricia J.  Nichol

SAN FRANCISCO FIELD OFFICE

Gary W.  Ulrich
Leo G.  Acosta
Julie M Hirshen
Jonathan Silverman


RELATED GAO PRODUCTS
========================================================== Appendix IV

Military Bases:  Update on the Status of Bases Closed in 1988, 1991,
and 1993 (GAO/NSIAD-96-149, Aug.  6, 1996). 

Military Bases:  Closure and Realignment Savings Are Significant, but
Not Easily Quantified (GAO/NSIAD-96-67, Apr.  8, 1996). 

Closing Maintenance Depots:  Savings, Workload, and Redistribution
Issues (GAO/NSIAD 96-29, Mar.  4, 1996). 

Military Bases:  Case Studies on Selected Bases Closed in 1988 and
1991 (GAO//NSIAD-95-139, Aug.  15, 1995). 

Military Bases:  Challenges in Identifying and Implementing Closure
Recommendations (GAO/T-NSIAD-95-107, Feb.  23, 1995). 

Military Bases:  Environmental Impact at Closing Installations
(GAO/NSIAD-95-70, Feb.  23, 1995). 

Military Bases:  Reuse Plans for Selected Bases Closed in 1988 and
1991 (GAO/NSIAD-95-3, Nov.  4, 1994). 

*** End of document. ***