Defense Infrastructure: Challenges Facing DOD in Implementing Reform
Initiatives (Testimony, 03/18/98, GAO/T-NSIAD-98-115).

GAO discussed selected Defense Reform Initiatives pertaining to
facilities infrastructure, focusing on the: (1) need for infrastructure
reform; (2) significant challenges the Department of Defense (DOD) faces
in implementing its infrastructure initiatives and achieving significant
savings in the short term; and (3) need to integrate these initiatives
into an overall facilities infrastructure plan.

GAO noted that: (1) infrastructure reform within DOD is an extremely
difficult task but one that is very much needed; (2) therefore, GAO
strongly supports the need to further reduce excess support
infrastructure, as well as the need for improved planning to address
remaining infrastructure needs; (3) GAO's work continues to show that
significant opportunities remain to further streamline operations,
consolidate functions, eliminate duplication of effort, and improve
efficiency; (4) GAO is concerned about DOD's ability to achieve the
expected level of savings and questions whether many of the initiatives
can overcome significant challenges and be implemented in a timely,
efficient, and effective manner; (5) GAO's work relating to various
defense reform initiatives shows that estimated savings often are not as
great as first estimated and that the initiatives often take much longer
than expected to be achieved; (6) the following are some key points GAO
believes Congress and DOD should take into consideration as they assess
expected results of the Defense Reform Initiative Report initiatives
involving facilities infrastructure: (a) the military housing
privatization initiative offers a powerful new tool to help address the
military's housing problem, however, implementation is off to a slow
start and it is unclear whether the initiative will result in overall
budget savings; (b) demolition can be a viable option for reducing
excess structures and operating costs on military basis, however, while
this program recently has received increased emphasis within DOD, the
availability of funding, against other competing priorities in a
constrained budget environment, could affect implementation over time;
(c) despite their potential, most of the initiatives to consolidate,
restructure, and regionalize many of its support agencies have been
going on for several years and still face implementation challenges; and
(d) while GAO believes there are significant savings from prior base
realignment and closure rounds, questions continue to exist about the
magnitude of savings; (7) the Secretary of Defense's identification of
the need to shed excess infrastructure as a key component of the Defense
Reform Initiatives has brought high-level attention to this area; (8)
however, the services currently lack comprehensive long-range plans to
guide them in reducing excess infrastructure and better managing
remaining assets; and (9) the need for such planning is underscored by
the requirements of the Government Performance and Results Act.

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

 REPORTNUM:  T-NSIAD-98-115
     TITLE:  Defense Infrastructure: Challenges Facing DOD in 
             Implementing Reform Initiatives
      DATE:  03/18/98
   SUBJECT:  Defense cost control
             Privatization
             Military housing
             Strategic planning
             Federal agency reorganization
             Future budget projections
             Defense economic analysis
             Military facilities
             Base closures
             Military downsizing
IDENTIFIER:  DOD Reform initiative
             DOD Quadrennial Defense Review
             DOD Future Years Defense Program
             DOD Military Housing Privatization Initiative
             Navy Regional Maintenance Program
             DOD Vision 21 Plan
             
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Cover
================================================================ COVER


Before the Subcommittee on Military Installations and Facilities,
Committee on National Security, House of Representatives

For Release on Delivery
Expected at
2:00 p.m., EST
Wednesday,
March 18, 1998

DEFENSE INFRASTRUCTURE -
CHALLENGES FACING DOD IN
IMPLEMENTING REFORM INITIATIVES

Statement of Barry W.  Holman, Associate Director, Defense Management
Issues, National Security and International Affairs Division

GAO/T-NSIAD-98-115

GAO/NSIAD-98-115T

Defense Infrastructure

(709334)


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

  BRAC - base realignment and closure
  DFAS - Defense Finance and Accounting Service
  DOD - Department of Defense
  DOE - Department of Energy
  DRI - Defense Reform Initiative
  O&M - operations and maintenance
  OMB - Office of Management and Budget

============================================================ Chapter 0

Mr.  Chairman and Members of the Subcommittee: 

We are pleased to be here today to provide our observations on
selected Defense Reform Initiatives pertaining to facilities
infrastructure.  You have recently expressed concern about the
Department of Defense's (DOD) management and upkeep of its
infrastructure and its long-term plans for facilities modernization
and recapitalization.  Our statement today discusses (1) the need for
infrastructure reform; (2) the significant challenges DOD faces in
implementing its infrastructure initiatives and achieving significant
savings in the short term; and (3) the need to integrate these
initiatives into an overall facilities infrastructure plan. 

In the November 1997 Defense Reform Initiative (DRI) Report, the
Secretary of Defense emphasized the need to reduce excess Cold War
infrastructure to free up resources that otherwise could be spent on
modernization.  Specific initiatives cited in the report included
privatizing military housing and utility systems, emphasizing
demolition of excess buildings, consolidating and regionalizing many
defense support agencies, and requesting legislative authority to
conduct two additional base closure rounds.  The Secretary noted that
DOD continued to be weighed down by facilities that are too extensive
for its needs, more expensive than it can afford, and detrimental to
the efficiency and effectiveness of the nation's armed forces. 
Likewise, he noted that DOD must do a better job of managing facility
assets on its remaining bases. 

Before discussing our specific observations, we would like to briefly
summarize our key points. 


   RESULTS IN BRIEF
---------------------------------------------------------- Chapter 0:1

First, infrastructure reform within DOD is an extremely difficult
task but one that is very much needed.  Therefore, we strongly
support the need to further reduce excess support infrastructure, as
well as the need for improved planning to address remaining
infrastructure needs.  Our work continues to show that significant
opportunities remain to further streamline operations, consolidate
functions, eliminate duplication of effort, and improve efficiency. 
These opportunities must be fully embraced if DOD is to achieve the
level of savings it is expecting for use on other priorities.  Our
work to date shows that DOD has had little success in shifting
resources from inefficient activities to other priorities. 

Second, we are concerned about DOD's ability to achieve the expected
level of savings and question whether many of the initiatives can
overcome significant challenges and be implemented in a timely,
efficient, and effective manner.  Our work relating to various
defense reform initiatives shows that estimated savings often are not
as great as first estimated and that the initiatives often take much
longer than expected to be achieved.  The following are some key
points we believe the Congress and DOD should take into consideration
as they assess expected results of DRI initiatives involving
facilities infrastructure: 

  -- The military housing privatization initiative offers a powerful
     new tool to help address the military's housing problem. 
     However, implementation is off to a slow start and it is unclear
     whether the initiative will result in overall budget savings. 
     Other concerns include risks associated with long-term
     privatization agreements for on-base housing and the need for
     better integration of this initiative with other available tools
     for addressing the services' housing needs. 

  -- Demolition can be a viable option for reducing excess structures
     and operating costs on military bases.  However, up-front
     investment costs are required and can vary by type of structure. 
     While this program recently has received increased emphasis
     within DOD, the availability of funding, against other competing
     priorities in a constrained budget environment, could affect
     implementation over time. 

  -- Despite their potential, most of the initiatives to consolidate,
     restructure, and regionalize many of its support agencies have
     been going on for several years and still face implementation
     challenges.  Interservicing support offers the services
     opportunities to achieve savings, but individual service
     prerogatives and institutional resistance can constrain their
     use on a large-scale basis. 

  -- While we believe there are significant savings from prior base
     realignment and closure (BRAC) rounds, questions continue to
     exist about the magnitude of savings.  Higher than initially
     estimated up-front costs caused savings not to be realized as
     quickly as hoped.  Also, because DOD had not adequately tracked
     changes in initial savings estimates, questions have existed
     about the reliability of the savings projections.  The magnitude
     of savings expected from the two additional rounds of military
     base closures, which have been requested by DOD, can only be
     roughly approximated at this time, and as was the case with
     prior rounds, successful implementation will require substantial
     up-front costs. 

Third, the Secretary of Defense's identification of the need to shed
excess infrastructure as a key component of the Defense Reform
Initiatives has brought high-level attention to this area.  However,
the services currently lack comprehensive long-range plans to guide
them in reducing excess infrastructure and better managing remaining
assets.  Plans that have existed have not provided comprehensive
strategies for facilities revitalization, replacement, and
maintenance, and they have not been adequately tied to measurable
goals to be accomplished over specified time frames with linkages to
expected funding.  The need for such planning is underscored by the
requirements of the Government Performance and Results Act. 


   BACKGROUND
---------------------------------------------------------- Chapter 0:2

The Secretary's November 10, 1997, DRI was DOD's latest effort to
reform operations and processes.  The report was an outgrowth of
recommendations made in the Report of the Quadrennial Defense
Review.\1 The Quadrennial Defense Review report noted that, while DOD
had reduced active duty personnel by 32 percent between 1989 and
1997, it had reduced the number of people performing infrastructure
functions by only 28 percent.  That report called for significant
additional reductions in military and civilian personnel.  Reductions
called for by the Quadrennial Defense Review and others already
planned by DOD would reduce military and DOD civilian personnel
end-strength levels by an additional 59,000 and 130,000 positions,
respectively, below their fiscal year 1998 levels. 

The DRI report also lays out plans to reduce support costs by
emphasizing demolition of excess buildings, consolidating and
regionalizing many defense support agencies, and requesting
legislative authority to conduct two additional base closure rounds. 
Privatization initiatives involving housing and utilities were
described by the DRI report as a means of leveraging private sector
capital to revitalize those facility areas that continue to be needed
by the military. 

Most infrastructure savings identified by the DRI report were
expected from additional BRAC rounds.\2 The Secretary of Defense
recently submitted a legislative proposal to the Congress requesting
authority for two additional BRAC rounds, one in 2001 and another in
2005.  The DRI report acknowledges up-front investment costs will be
required to implement those rounds, but projects that each of them
would provide annual recurring savings of $1.4 billion after the
closures have been implemented. 

An important element of the Defense Reform Initiative is that the
Secretary has established a Defense Management Council to serve, in
effect, as DOD's internal board of directors.  The primary mission of
this Council, which is chaired by the Deputy Secretary of Defense and
includes many of DOD's senior managers, is to monitor progress of the
management reforms, seek new solutions and reengineering
opportunities, and assist the Secretary in overseeing the activities
of the military departments and defense agencies.  This Council, if
it operates as described, should bring a heightened awareness and
sense of importance to DOD's management reforms. 


--------------------
\1 The Quadrennial Defense Review was required by the National
Defense Authorization Act for Fiscal Year 1997; it was intended to
provide an examination of America's defense needs from 1997 to 2015,
including a blueprint for a strategy-based, balanced, and affordable
defense program. 

\2 Apart from BRAC, the largest category of other savings identified
in the DRI report are those that are expected to be realized from
outsourcing competitions involving commercial activities.  DOD is
expecting to realize $6 billion in savings from these studies over
the next 5 years, and $2.5 billion each year thereafter. 


   INFRASTRUCTURE REFORM IS NEEDED
   TO AVOID WASTING SCARCE
   RESOURCES
---------------------------------------------------------- Chapter 0:3

DOD is faced with transforming its Cold War operating and support
structure in much the same way it has been working to transform its
military force structure.  Making this transition is a complex,
difficult challenge that will affect hundreds of thousands of
civilian and military personnel at activities in many states across
the nation.  However, if DOD does not address this challenge now,
pressing needs will go unmet, while scarce defense resources will be
wasted or used inefficiently.  For example, according to DOD, most of
its family housing is old, has not been adequately maintained and
modernized, and needs to be renovated or replaced.  Additionally,
many installation commanders previously have told us that constrained
repair and maintenance funding was causing them to forego regular
preventive maintenance and respond more to emergency breakdowns as
they occur.  Yet, funds are being spent to operate and maintain aging
and underutilized buildings, roads, and other infrastructure that
will likely be declared excess by DOD in the near future. 

Reducing the cost of excess infrastructure activities is critical to
maintaining high levels of military capabilities and adequately
maintaining needed facilities infrastructure.  Expenditures on
wasteful or inefficient activities divert limited defense funds from
more pressing needs.  DOD has identified net infrastructure savings
as a funding source for modernization; however, thus far, anticipated
savings have not occurred.  As a result, DOD has been unable to shift
funds to modernization as planned.  At the same time, members of
Congress continue to express concern about unmet needs in the
facilities infrastructure area. 

Since its Bottom-Up Review in 1993, DOD repeatedly has stated that it
must reduce its infrastructure to offset the cost of future modern
weapon systems.  DOD's 1998 Future Years Defense Program projects
that infrastructure activities will represent a smaller percentage of
the defense budget than projected in the previous plan.  However, in
October 1997, we reported that there is substantial risk that the
budget will not be implemented as planned.\3 For example, DOD's plan
projects billions of dollars in savings due to management initiatives
but does not have details on how all the savings will be achieved. 
Another reason we believe the program is at risk is that DOD's
estimates for procurement spending, in relation to its total budget
and operations and maintenance (O&M) projections, run counter to
actual experience over the last 30 years.  Since 1965, O&M spending
has increased consistently with increases in procurement spending. 
However, the 1998 program shows that DOD plans to change that
historical relationship by increasing procurement while decreasing
O&M spending. 

The Congress has focused on the issue of infrastructure reductions
and recently directed DOD to implement numerous initiatives and
report on a variety of issues.  The National Defense Authorization
Act for Fiscal
Year 1998 required DOD to implement initiatives and develop reports
on opportunities for infrastructure reduction.  For example, the act
requires DOD to reduce the number of management headquarters and
headquarters support activities personnel by 25 percent between
October 1, 1997, and October 1, 2002.  The act also requires the
Secretary of Defense to report on the costs and savings of previous
BRAC actions and the need, if any, for additional BRAC rounds. 


--------------------
\3 Future Years Defense Program:  DOD's 1998 Plan Has Substantial
Risk in Execution (GAO/NSIAD-98-26, Oct.  23, 1997). 


   INFRASTRUCTURE INITIATIVES FACE
   SIGNIFICANT CHALLENGES
---------------------------------------------------------- Chapter 0:4

The DRI report identifies a range of facility infrastructure
initiatives designed to revitalize some facilities; eliminate excess
structures; and consolidate, restructure, and regionalize many
support agencies and activities.  However, the report states that
additional BRAC rounds are needed to fully deal with the DOD's
problem of excess infrastructure.  Now, let me make some observations
about individual reform initiatives on the basis of results of our
work in those areas. 


      MILITARY HOUSING
      PRIVATIZATION INITIATIVE
      SHOWS PROMISE BUT PROGRESS
      IS SLOW
-------------------------------------------------------- Chapter 0:4.1

DOD's housing privatization initiative is designed to leverage
private sector resources to address pressing needs for military
housing much quicker than would be possible relying on traditional
military construction funding.  However, our ongoing work indicates
that efforts to implement recent privatization legislation is off to
a slow start within each of the services, potentially endangering
DOD's current goal of eliminating all inadequate housing by fiscal
year 2010.  Questions exist about the costs and savings associated
with the new initiative, as well as concerns about the extent to
which this new program will be able to address the full range of
military housing needs. 


         PRIVATIZATION IS INTENDED
         TO IMPROVE HOUSING
         QUICKLY AND EFFICIENTLY
------------------------------------------------------ Chapter 0:4.1.1

As the nation's largest landlord, DOD owns and operates about 300,000
family housing units and about 400,000 unaccompanied barrack spaces. 
Yet, DOD officials testified in March 1997 that about two-thirds of
its family units and about 60 percent of its barrack spaces were
below acceptable standards and needed to be renovated or replaced. 
Given expected budgets and using the traditional approaches,
officials said that it would take 30 to 40 years and more than $30
billion to bring these units up to acceptable standards. 

To improve housing faster and more economically, the Congress
authorized the Military Housing Privatization Initiative in 1996 to
encourage private sector financing, ownership, operation, and
maintenance of both military family and unaccompanied housing.\4
Under this initiative, DOD will test out over a 5-year period a
variety of tools to obtain private sector financing, expertise, and
management to revitalize both family and unaccompanied housing. 
These tools permit DOD to provide direct loans and loan guarantees to
private entities, convey or lease existing property and facilities to
private entities, and allow developers to build military housing
using local standards and practices instead of using military
construction specifications.  As tenants in the privatized housing,
whether on base or off, military occupants would receive a housing
allowance and pay rent.  The goal of this program is to speed the
revitalization and replacement of military housing by encouraging the
private sector to invest at least $3 for each $1 that the government
invests.  In this way, DOD plans to build or renovate three times as
many units compared with the amount renovated under traditional
approaches and, hopefully, eliminate all inadequate housing by fiscal
year 2010. 


--------------------
\4 The Congress also authorized a precursor privatization initiative
for the Navy in 1995.  Under this earlier initiative, the Navy
entered into limited partnership agreements with private developers
to build new off-base housing in Corpus Christi, Texas, and Everett,
Washington. 


         PRIVATIZATION IS OFF TO A
         SLOW START
------------------------------------------------------ Chapter 0:4.1.2

The housing privatization initiative clearly offers a powerful new
tool to help address DOD's housing problem.  However, our ongoing
review of the initiative has shown that the initiative is off to a
slow start and may not achieve the desired results within the
expected time frame.  Two years have passed since the new authorities
were signed into law, but no new agreements have been finalized to
build or renovate military housing.  Although more than a dozen
projects are currently being considered and many others have been
proposed, only two projects are close to contract signing.  According
to DOD, progress has been slower than expected because the initiative
represents a new way of doing business for both the military and the
private sector and many legal, financial, and contractual issues had
to be addressed and resolved.  While officials believe that progress
will accelerate after the learning curve of the first few deals is
passed, the slow progress to date raises questions about whether
sufficient experience will be gained within the 5-year test period to
enable DOD to decide whether to request permanent authorities. 


         QUESTIONS ABOUT SAVINGS
------------------------------------------------------ Chapter 0:4.1.3

Substantial amounts of military construction funds would be needed in
the near-term to solve DOD's housing problems more quickly.  The new
privatization initiative should allow DOD to accelerate
revitalization of its housing inventory by securing private sector
financing.  However, it is unclear precisely what impact the
privatization program will have on infrastructure outlays in either
the short- or long-term.  Some upfront investments still will be
required.  For example, traditional military construction funding
still will be needed as the seed money for privatization projects and
for projects not suitable for privatization.  Also, until many more
units are renovated or built on bases under the program, DOD will
need substantial outlays to operate and maintain existing units. 
Finally, as additional units become privatized, the O&M savings that
DOD realizes largely will be offset by increased budgeting for the
military personnel account to cover the payment of housing allowances
to more families.  Service officials believe that the program may, in
fact, be budget neutral. 

The amount of long-term infrastructure savings are also uncertain. 
While more data will be needed before any conclusions can be drawn,
DOD's life-cycle cost analyses for its first two projects at Fort
Carson and Lackland Air Force Base showed that, compared with
traditional military construction financing costs, the government
will achieve significant savings--24 percent at Fort Carson and 29
percent at Lackland.  However, our review of these analyses found
that DOD's savings estimates were somewhat high.  For example, DOD
did not consider all costs and, in some instances, estimates were not
based on actual budgeted amounts for O&M costs under the military
construction alternative.  After adjusting for these factors over the
expected 50-year life of these projects, we estimate costs from
privitization will be about 7 to 10 percent less than costs using
traditional military construction financing.\5

In addition to questions concerning costs, privatization includes
other questions and concerns.  For example, many privatization
projects under consideration propose long-term, 50-year agreements
between DOD and the developer.  Such agreements present several
risks, including increased potential that the housing may not be
needed in the future, the contractor might not operate and maintain
the housing as expected, and civilians might occupy on-base housing
if it is not fully used by military members. 

Even if the approach is cost-effective, barriers may exist to using
the privatization initiative to improve barracks housing.  This is
because of a determination that the services' mandatory assignment of
single junior enlisted personnel to barracks constitutes an occupancy
guarantee.  Under the budgetary scoring rules established by the
Office of Management and Budget (OMB) for the privatization
initiative, if members are not free to decline assignment to
privatized housing, DOD must set aside funds to cover the entire
value of this guarantee up front.  Because the value of this
guarantee could approximate the amount required under traditional
military construction financing, funding for a privatized barracks
project would not meet DOD's leveraging goals.  This matter is not an
issue in family housing because married members are not mandatorily
assigned to family housing units.  An additional barrier to
privatizing barracks is that funds to cover housing allowances for
such personnel are not certain since these funds would need to come
from the base operations account--an account that has traditionally
been underfunded.  Due to these barriers, officials doubt that
privatization funds will be used extensively to improve the condition
of the services' unaccompanied housing inventory.\6

A further concern is that DOD may not have optimally integrated this
initiative with the other tools available for addressing housing
problems.  For example, in September 1996, we reported that DOD could
make greater use of available housing in local communities, as called
for in its housing policy.\7 Our report noted that maximizing
referrals to such housing is important since the government's annual
costs are about $5,000 per unit lower on average when acceptable and
affordable housing can be found in the community than when on-base
housing is provided.  Although sufficient quantities of affordable
civilian housing are not available at many installations, greater
adherence to this policy in other instances and an improved housing
requirements determination process are needed if DOD is to avoid
building or revitalizing more housing than is needed under both
military construction and privatization programs. 

We have also found that DOD often views and manages military
construction, privatization, and housing allowances as separate
tools, rather than considering them in ways that achieve an optimum,
synergistic impact.  For example, our work has shown that the two
separate DOD organizations that manage allowances and government
housing, while ostensibly coordinating with one another, frequently
manage their respective programs with limited knowledge of their
impact on other aspects of DOD's housing program.  To illustrate,
when the new housing allowance program indexed to local housing costs
was implemented this year, service housing officials could not tell
us how the program will affect the privatization initiative. 
Coordination on this new initiative would appear to be important,
since housing allowances could rise in some areas, thereby making
more local housing affordable to servicemembers and lessening the
need for renovation and construction.  Capitalizing on the strengths
of each housing tool through a more integrated approach is critical
for DOD to ensure that the military's housing needs are met as
efficiently as possible. 


--------------------
\5 Our analysis differed from DOD's in that we (1) estimated housing
O&M costs using the fiscal year 1999 budget request, (2) estimated
allowances using the proposed occupancy paygrades and the 1998
housing allowance rates, (3) added an estimate for utility costs at
Fort Carson, (4) added an estimate for management costs at Lackland
Air Force Base, and (5) used the 1998 Office of Management and Budget
discount rate. 

\6 No projects have been approved and a $5 million appropriation made
to the Unaccompanied Housing Improvement Fund for this purpose
remains largely unused. 

\7 Military Family Housing:  Opportunities Exist to Reduce Costs and
Mitigate Inequities (GAO/NSIAD-96-203, Sept.  13, 1996). 


      DEMOLITION OF EXCESS
      FACILITIES IS AN OPTION FOR
      REDUCING EXCESS
      INFRASTRUCTURE
-------------------------------------------------------- Chapter 0:4.2

In May 1997, we reported that opportunities existed for DOD
components to use demolition as an option for eliminating old, excess
buildings that are relatively costly to maintain and can be a drain
on declining O&M funding.\8 The need for such an effort was
illustrated by our findings that over a 10-year period, from fiscal
year 1987 to 1996, total O&M annual budget authority declined by 25
percent in real terms, reflecting the overall decline in defense
spending.  However, annual O&M obligations for facilities maintenance
and repair, excluding family housing, declined by 38 percent on
average in real terms during the period.\9 The Army had the steepest
decline of all, about 49 percent.  The problem was further
illustrated by available data that indicated that, although
servicewide maintenance and repair obligations had fallen about 38
percent over a 10-year period, reductions in square footage of space
owned and managed by the services in the United States and overseas
were much less--about 10 percent. 

The DRI report identified 8,000 buildings totaling 50 million square
feet of space as no longer needed and candidates for disposal.  The
DRI report indicates that DOD would be increasing funding for
demolition to eliminate all of these buildings by 2003.  Available
data suggested the cost of demolition projects could be recouped in
about 3 years depending on the type of structure, with annual savings
in maintenance and repair, and utility costs to accrue thereafter. 
However, we noted the potential for demolition costs to vary,
depending on the type of construction and environmental
considerations, and thus cautioned that it would be important for the
services to continue to examine the cost-effectiveness of demolition
on an ongoing basis as part of their future planning. 

We reported that demolition offers a viable option for further
infrastructure reductions and millions of dollars in savings, but it
requires an up-front cost.  We have also noted that the services
differ in the extent to which they have developed formal demolition
programs.  The Army is planning the most aggressive program and
accounts for the majority of planned demolitions. 

DOD indicated it prefers to use O&M funding for demolition not
associated with new construction.  The extent to which demolition is
aggressively pursued in the future could be affected by future trends
in this funding source and other competing priorities.  Various
service officials have expressed the view that earmarking and
centrally controlling funds for demolition might help ensure funds
are used for demolition.  However, officials told us they were
opposed to fencing funds for demolition because it constrained their
flexibility to use the funds for higher priorities. 


--------------------
\8 Defense Infrastructure:  Demolition of Unneeded Buildings Can Help
Avoid Operating Costs (GAO/NSIAD-97-125, May 13, 1997). 

\9 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. 


   MILITARY SERVICES AND DEFENSE
   AGENCIES NEED TO CAPITALIZE ON
   CONSOLIDATION AND
   REGIONALIZATION OPPORTUNITIES
---------------------------------------------------------- Chapter 0:5

The DRI report includes several military service and support agency
consolidation, restructuring, and regionalization initiatives that
are intended to make DOD activities more efficient and support DOD's
planned personnel reductions.  Overall, we support these initiatives
but, on the basis of our past and ongoing work, believe their
potential has not yet been fully realized.  As with the reengineering
initiatives, most of these initiatives have been going on for several
years but still face implementation challenges. 


      NAVY REGIONAL MAINTENANCE
      PROGRAM MAY NOT MEET ITS
      GOALS
-------------------------------------------------------- Chapter 0:5.1

In 1996, the Navy reported that it applied more than $8.5 billion of
Navy resources to maintenance programs in support of fleet ships and
aircraft.  In response to force structure reductions and subsequent
defense planning guidance to reduce excess maintenance
infrastructure, the Chief of Naval Operations early in 1993 tasked
the commanders of the Atlantic and Pacific Fleets to develop a
strategy for streamlining and consolidating their maintenance
functions.  This led to the Navy's establishing the Regional
Maintenance program in March 1994.  In addition to reducing
infrastructure and saving money, the program is designed to improve
maintenance processes, integrate supply support and maintenance
functions, and provide compatible data systems for the different
maintenance functions.  The program was to be implemented in three
overlapping phases during fiscal years 1995-99 and was expected to
save substantial amounts of money.  In its 1995 program review, for
example, the Navy decreased its planned O&M budgets for fiscal years
1995-99 by about $1.3 billion in anticipation of such savings. 

To date the Navy has focused its efforts on establishing a management
structure and process for realigning and reducing its maintenance
infrastructure at eight Navy regions.  It has also been developing
regional maintenance business plans, including initiatives and
estimates of savings to be achieved.  Subsequent to the start of the
program, however, the Navy reduced the program savings' estimate to
about $944 million for 102 projects to be implemented between fiscal
year 1994 and 2001. 

In a recent report on the Regional Maintenance program,\10 we
reported that the Navy had made substantial progress in establishing
a structured program but that savings had not materialized as
anticipated.  Further, the accuracy of savings that had been claimed
by the Navy was questionable because they are not tracked and
verified.  Consequently, the Navy's actual savings may be far less
than $944 million and may not be achieved as soon as expected. 
Because reductions had already been made to spending plans in
anticipation of these savings, we reported that maintenance programs,
the overall material readiness of ships and aircraft, or future fleet
readiness could be negatively affected.  For example, Navy officials
told us they have thus far been able to absorb the reductions with no
impact on readiness by fixing specific problems rather than
performing scheduled depot-level overhauls.  They were concerned,
however, that this approach might adversely affect the condition of
ships over the long term. 

Nevertheless, we felt the Navy could still achieve significant
savings by moving more quickly to implement the savings initiatives
that had been identified and, where appropriate, implementing other
initiatives that could yield savings without affecting readiness.  To
do this, however, the Navy had to overcome parochial and
institutional resistance to the program's objectives.  These include
resistance to efforts that might eliminate organizations, reduce
jobs, and or reduce a command's or an organization's control over
resources.  Other barriers that also had to be addressed were (1) the
lack of management visibility over all maintenance-related costs; (2)
multiple, unconnected management information systems that do not
provide adequate data for regional maintenance planning and
decision-making; and (3) significant differences in the number of
shore duty intermediate-level maintenance positions needed to support
the Navy's sea-to-shore rotation program and the number of personnel
needed to perform the work.  Although the Navy has established
regional maintenance working groups and committees to address these
issues, continued high-level commitment, cooperation, and
coordination from the Chief of Naval Operations, the fleet, and type
and systems commanders will be required to ensure that regional
initiatives reach fruition and achieve the savings projected. 


--------------------
\10 Navy Regional Maintenance:  Substantial Opportunities Exist to
Build on Infrastructure Streamlining Progress (GAO/NSIAD-98-4, Nov. 
13, 1997). 


      INCREASED USE OF
      INTERSERVICING SUPPORT
      ARRANGEMENTS COULD PROVIDE
      SAVINGS OPPORTUNITIES
-------------------------------------------------------- Chapter 0:5.2

Our April 1996 report on interservicing\11 found that, even after
several years of defense downsizing,\12 DOD operates hundreds of
major military bases and many smaller facilities in the United
States.  These bases range in size from less than 10 acres to several
hundred thousand acres.  Further, some bases are adjacent to each
other such as Fort Bragg and Pope Air Force Base in North Carolina;
others, while not adjacent, are within a relatively short distance
from each other.  We reported that DOD has long recognized the
potential for savings in base support services through interservicing
and many interservicing agreements exist on a limited basis. 
However, our work suggested that the military services have not taken
sufficient advantage of potential opportunities to achieve
significant savings in base operating support costs through greater
reliance on larger-scale interservicing arrangements. 

In completing our study of interservicing, our discussions with DOD
and service officials at all levels pointed to a variety of problems
and impediments that they believed historically had limited base
support consolidation and interservicing--problems that continued to
exist.  Some reluctance to embrace increased interservicing was
attributed to service parochialism, commanders' concerns about losing
direct control over their support assets, and loss of ability to
influence servicing priorities that commanders deemed important. 
Likewise, differences in traditions, cultures, practices, and
standards among the services were often cited as inhibiting greater
emphasis on interservicing arrangements.  Base housing was often
cited as an area having the greatest potential for interservicing. 
However, within the services, we found widely held views about
differences in quality of on-base housing provided to service
personnel among the services, with the Air Force being known for
providing a higher standard of housing than the other services.  More
generally, the perception often existed that the Air Force had a
higher quality-of-life standard and was willing or able to devote
more resources to maintaining that standard than the other services. 

Differences between the services were seen as having significant
implications for interservicing arrangements and were factors in a
failed Hawaii housing consolidation effort in 1994.  For that reason,
we found it interesting that the DRI report noted that "in areas of
heavy concentration of installations, we can save funds by sharing
infrastructure and services across commands, bases, and the Services. 
.  .  .  The Joint Staff is now analyzing regionalization across all
Services in Hawaii." We applaud the efforts of the Joint Staff, but,
on the basis of our previous work, suggest that such changes may be
difficult to achieve quickly and may require special steps to ensure
long-term success.  A number of service officials with whom we
discussed such issues previously pointed to the relatively short
tours of duty of base commanders that can limit institutional
knowledge of long-term needs and can often result in commanders
focusing on short-term projects and not on major changes in base
operations involving long-term planning and implementation. 

We also were told that differences in philosophy from one commander
to another can sometimes lead to a reversal of previously initiated
interservicing efforts.  Some service officials suggested that these
impediments could be overcome either through greater reliance on
civilian management of base operations or by basing a portion of an
installation commander's proficiency assessment on the commander's
efforts to foster greater efficiencies in base operations.  Our
general management work has shown that continuity of management is a
key factor to ensuring the ultimate success of major initiatives in
other federal agencies. 


--------------------
\11 Military Bases:  Opportunities for Savings in Installation
Support Costs Are Being Missed (GAO/NSIAD-96-108, Apr.  23, 1996). 

\12 Interservicing refers to reliance of one service on another,
typically in the base operations support area.  Base supporting
services vary and can include property maintenance, logistics,
transportation and equipment maintenance, personnel and professional
support, and service to individuals, such as food, housing,
recreation, or education. 


      THE FINANCE AND ACCOUNTING
      INFRASTRUCTURE--POTENTIAL
      FOR FURTHER REDUCTIONS
-------------------------------------------------------- Chapter 0:5.3

The Defense Finance and Accounting Service (DFAS) was established in
1991 to consolidate and streamline DOD's finance and accounting
operations.  In May 1994, after several false starts, DOD announced
that DFAS would begin consolidating the finance and accounting
infrastructure in fiscal year 1995.  At that time, the plan was to
reduce the number of sites where finance and accounting activities
were conducted from over 330 to 26.  The 26 sites included the 5
existing large finance centers (Columbus, Cleveland, Denver,
Indianapolis, and Kansas City) and 21 new sites called operating
locations.  As part of this consolidation, DFAS expected to reduce
its staffing levels from about 27,000 to 23,000 people.  DFAS told us
that, as of September 30, 1997, it had reduced staffing to about
21,900 people and opened 18 of the 21 operating locations.\13

We have issued several reports that questioned the need for 21
operating locations.\14

Our primary concern was that DOD used a flawed process to identify
the size and location of its consolidated operations.  Among other
things, we reported that the planned infrastructure was larger than
necessary, primarily because DOD had not considered the impact that
future business improvements would have on the finance and accounting
workload.  We concluded that, as these business improvements were
adopted, DFAS would have to consolidate its activities once again. 
We also pointed out that an earlier DFAS analysis had concluded that
the existing five finance centers and six operating locations was the
optimum structure for conducting finance and accounting operations. 

A recent DFAS analysis has concluded that the finance and accounting
infrastructure does, in fact, need to be further consolidated.  This
analysis, which assessed each finance and accounting function carried
out at operating locations (such as vendor pay, civilian pay, travel
pay, and accounting), showed that DFAS would be able to reduce the
number of employees from about 21,400 in fiscal year 1998 to about
15,350 by the end of fiscal year 2003.  These reductions would be
realized, in part, by technology initiatives underway at DFAS and, if
they occur, would leave DFAS with about 38 percent excess facility
capacity. 

The analysis did not translate this excess capacity into a specific
number of locations that should be eliminated.  Nevertheless, the DRI
report stated that DFAS would continue its consolidation initiatives
by eliminating 8 of its 26 finance and accounting facilities.  DFAS
is currently developing criteria to help it determine which locations
should be eliminated.  Once these criteria are approved, which is
expected by May 1998, DFAS plans to take from 3 to 6 months to
further study its infrastructure needs and select the sites that will
be closed.  At this point, DFAS does not expect to close more than
eight facilities. 


--------------------
\13 One of the 18 operating locations (Memphis) is under the control
of the US Army Corps of Engineers and supports the Corps' accounting
and finance operations. 

\14 DOD Infrastructure:  DOD's Planned Finance and Accounting
Structure Is Not Well Justified (GAO/NSIAD-95-127, Sept.  18, 1995);
DOD Infrastructure:  DOD Is Opening Unneeded Finance and Accounting
Offices (GAO/NSIAD-96-113, Apr.16, 1996); and Defense Infrastructure: 
Budget Estimates for 1996-2001 Offer Little Savings for Modernization
(GAO/NSIAD-96-131, Apr.  4, 1996). 


      DEFENSE INFORMATION SYSTEMS
      AGENCY--STATUS OF
      CONSOLIDATING ITS
      MEGACENTERS
-------------------------------------------------------- Chapter 0:5.4

The DRI report calls for the Defense Information Systems Agency to
reduce its infrastructure from 16 to 6 large processing facilities. 
This initiative is a continuation of DOD efforts that began in 1990. 
Since that time, the Defense Information Systems Agency was created
and eventually consolidated many of DOD's computer operations by
moving workload and equipment from 194 computer centers to 16
megacenters.  These actions were taken to better meet DOD's
information processing needs at lower costs.  The megacenters operate
as part of the defense working capital fund and bill their customers
for the processing support they provide.  We should note that the
military services and defense agencies also operate many processing
centers and, like the Defense Information Systems Agency, also have
consolidated some of their information processing facilities. 

Our previous work on information processing center consolidations
pointed out that, although DOD had recognized the need to continue to
reduce the cost of its computer center operations, it had not
established an effective framework for making these decisions.\15
Such a framework would help DOD determine the number of processing
centers needed, the way to consolidate the various computer
operations, and the numbers and skill mix of staff needed to operate
the consolidated centers.  We believed this framework or plan was
needed because our work documented that, although additional
efficiencies could be realized, it was not clear whether these would
be best achieved by further consolidations or outsourcing.  DOD
partially agreed with our point, stating that it would comply with
the Clinger-Cohen Act and develop a framework to determine whether
processing centers should remain in-house or be considered for
outsourcing studies.\16

The Defense Megacenter Business Strategy, dated October 1997, states
that the Defense Information Systems Agency's plan to reduce the
16 megacenters to 6 megacenters could result in annual savings of
$202 million starting in fiscal year 2003.  Moreover, the strategy
estimates that total savings over a 10-year period (fiscal years 1998
through 2007) will be approximately $1.5 billion.  We have not done
any work to examine this strategy or substantiate these savings. 
These savings should help reduce infrastructure costs and, thereby,
result in lower prices to its customers.  We are reviewing how the
Defense Information Systems Agency establishes the prices it charges
its customers.  In the future, we intend to review the cost of the
consolidation effort and the impact it is having on customer service. 


--------------------
\15 Defense IRM:  Investments at Risk for DOD Computer Centers
(GAO/AIMD-97-39, Apr.  4, 1997). 

\16 The Clinger-Cohen Act of 1996 (P.L.  104-106) requires that
federal agencies establish performance measures that measure how well
their information technology supports their missions and programs and
that evaluations be made of the results achieved from their
information technology investments. 


      FUTURE PLANS TO ADDRESS
      EXCESS CAPACITY IN RESEARCH,
      DEVELOPMENT, TEST, AND
      EVALUATION LABORATORIES ARE
      UNCLEAR
-------------------------------------------------------- Chapter 0:5.5

Each of the military services operate (1) research and development
laboratories to develop new or enhance existing military technology
and (2) test and evaluation centers to demonstrate and validate the
capabilities of these technologies.  DOD's research, development,
test, and evaluation facilities employ about 100,000 people in 67
federally owned facilities located primarily in the continental
United States.  For fiscal year 1997, the DOD budget for these
laboratories totaled just over $37 billion. 

Our most recent work, completed in January 1998,\17 pointed out that
DOD's research, development, test, and evaluation infrastructure
continues to have excess capacity--an estimated 35 percent in its
laboratories and an estimated 52 percent in its test and evaluation
centers in the air vehicles, electronic combat, and armaments/weapons
areas.  This condition exists even though DOD will have reduced
funding, personnel, and force structure and closed 62 research,
development, test, and evaluation sites and activities at host sites
as part of the previous BRAC process. 

The focus of our recent work was primarily on how best practices
might be used to reduce excess capacity in DOD, the Department of
Energy (DOE), and the National Aeronautics and Space Administration. 
These agencies represent about 72 percent of all federal investment
in research and development and own most of the infrastructure. 
During this work, we identified five critical elements that led to
the successful downsizing of unneeded laboratory infrastructure at
the Boeing Company's Information, Space, & Defense Systems Group and
the Defence Research Agency within the British Ministry of Defence. 
These elements were (1) a "crisis" that served as a catalyst to spark
action; (2) an independent authority to overcome parochialism and
political pressures that, if left unchallenged, would have impeded
decision making; (3) core research, development, test, and evaluation
missions focused to support the organization's overall goals and
strategies; (4) the infrastructure needed to support the overall
goals and strategies clearly defined; and (5) accurate, reliable, and
comparable data that captured total infrastructure cost and
utilization rates for each research, development, test, and
evaluation activity.  According to officials managing these
restructurings, their success depended on using all five of the
elements together. 

Our report also discusses the actions that DOD has taken to address
its excess research, development, test, and evaluation
infrastructure.  For example, after full implementation of previous
BRAC recommendations, DOD and the Congress realized that the
infrastructure was still too large.  Consequently, the National
Defense Authorization Act for Fiscal Year 1996 (sec.  277) directed
the Secretary of Defense to develop a 5-year plan to consolidate and
restructure DOD's research, development, test, and evaluation
facilities for the 21st century.  The Secretary was to identify the
administrative and legislative actions needed to consolidate
facilities into as few as practical and possible by October 1, 2005. 
The Secretary responded with a plan and developed a legislative
package entitled Defense Research, Development, Test, and Evaluation,
Vision 21, Reduction, Restructuring, and Revitalization Act of 1997
(commonly referred to as Vision 21).  However, while the legislative
package was being reviewed for interagency coordination, officials
from the Office of Management and Budget told DOD to include a
provision for an independent commission, since DOD historically has
been unable to reduce significantly its research, development, test,
and evaluation infrastructure.  This commission--similar to previous
BRAC commissions--would make the final realignment and closure
recommendations to the Congress. 

After the Quadrennial Defense Review was completed in May 1997, DOD
decided not to submit the Vision 21 legislative package to the
Congress, opting instead to include research, development, test, and
evaluation infrastructure consolidations and reductions in any future
BRAC rounds.  DOD also emphasized that significant reductions could
only be achieved under a BRAC-like authority. 

With Vision 21 on hold and future BRAC legislation uncertain, it is
unclear at this time to what extent DOD will attempt to consolidate
and restructure its research, development, test, and evaluation
infrastructure and how it might proceed.  The DRI report briefly
discusses the issue but provides no further information on how DOD
will deal with infrastructure reduction.  It states that each
military department will review its research, development, test, and
evaluation facilities to identify restructuring opportunities.  As we
stated in our report, we believe the extent to which DOD's Vision 21
effort proceeds may be largely dependent on continuing congressional
support for reductions.  Moreover, we endorsed DOD's view that an
independent BRAC-like authority, such as that provided by the Vision
21 legislative package, is needed to reduce DOD's research,
development, test, and evaluation infrastructure. 


--------------------
\17 Best Practices:  Elements Critical to Successfully Reducing
Unneeded RDT&E Infrastructure (GAO/NSIAD/RCED-98-23, Jan.  8, 1998). 


      QUESTIONS ABOUT SAVINGS AND
      OTHER ISSUES SURROUND
      DISCUSSION OF AUTHORIZING
      FUTURE BASE CLOSURE ROUNDS
-------------------------------------------------------- Chapter 0:5.6

While the Secretary of Defense wants congressional authority to close
additional military bases, questions remain about the extent of
savings from prior closures, and concerns exist about how some
decisions were implemented as part of BRAC 1995.  Legislation
governing BRAC rounds held in 1991, 1993, and 1995 is viewed by many
as a good starting point for considering future legislation. 

The DRI, the 1997 Quadrennial Defense Review, and the 1997 report of
the congressionally mandated National Defense Panel each cited the
problem of continuing excess infrastructure within DOD and
recommended that additional BRAC rounds be held.  The Secretary of
Defense recently submitted a legislative proposal to the Congress
requesting authority to conduct additional BRAC rounds in 2001 and
2005.  The legislation proposed was similar to the Defense Base
Closure and Realignment Act of 1990
(P.L.  101-510) which authorized BRAC closure rounds in 1991, 1993,
and 1995 and helped overcome legal impediments to base closures
enacted during the 1970s.  The 1990 legislation expired at the end of
1995.  The most recent legislative request followed an unsuccessful
effort last year by the Secretary of Defense to win congressional
approval for additional BRAC rounds. 

After considering the Secretary's request last year for additional
BRAC round authority, the Congress enacted section 2824 of the
National Defense Authorization Act for Fiscal Year 1998.  This
section requires that the Secretary of Defense provide the Congress
with an extensive report on BRAC costs and savings and other issues. 
The report is to be submitted to the congressional defense committees
not later than the date on which the President submits to the
Congress the budget for fiscal year 2000.  We understand that the
Secretary expects to submit that report to the Congress in April
1998.  We are monitoring DOD's development of that report, as
required by section 2824 and will be working to more fully assess and
provide the Congress with our assessment of the Secretary's report
once it is provided to the Congress. 

Closing unneeded defense facilities has historically been difficult
because of public concern about the economic effects of closures on
communities and the perceived lack of impartiality of the
decision-making process.  Legislation enacted authorizing BRAC rounds
and its implementation in BRAC rounds held between 1988 and1995
helped to mitigate those concerns.  However, certain implementation
actions related to the 1995 BRAC round have resulted in questions
about the impartiality of those actions.  In addition, concerns about
the actual costs and savings from BRAC, and the economic impact on
affected communities, have caused some to question whether future
BRAC rounds should be authorized.  Ultimately, the Congress will
decide whether to approve future BRAC rounds. 

Although questions continue to exist about savings from prior BRAC
rounds, our work has shown that net savings from prior BRAC rounds
are expected to be substantial but will not occur as quickly as
originally expected.  Also, because DOD has not adequately tracked
changes in initial savings estimates, questions have existed about
the reliability of the savings projections.  On a number of
occasions, we have cited the need for DOD to improve its process for
tracking and updating BRAC savings estimates.\18 Questions also exist
about the magnitude of savings likely to occur from any future BRAC
rounds.  However, credible savings projections concerning any future
rounds are likely to be difficult to obtain until such time as actual
closure recommendations are known along with the details of how
individual closure actions would be executed. 

We reported last year that the 1990 legislation, which expired in
1995, was seen by many officials as a starting point for considering
new legislation should the Congress decide that it wants to authorize
any future BRAC rounds.\19 Key elements of the BRAC legislation that
DOD and BRAC commission officials said contributed to the success of
prior rounds included (1) the establishment of an independent
commission and nomination of commissioners by the President, in
consultation with the congressional leadership; (2) the development
of clearly articulated, published criteria for decision making; (3)
use of data certified as to its accuracy; (4) the requirement that
the President and the Congress accept or reject in their entirety the
lists of closures adopted by the BRAC commission; and (5) the
creation of tight time frames to force the process to reach decisions
in a timely manner.  The legislation also required that we analyze
DOD's BRAC decision-making process and recommendations.  Additional
audit coverage by the DOD Inspector General and service audit
agencies associated with the process evolved over time and helped
ensure the accuracy of data and analyses associated with the
decision-making process. 

We recognize that no public policy process, especially one as open as
BRAC, can be completely removed from the U.S.  political system. 
However, the processes used between 1988 and 1995 had several checks
and balances to keep political influences to a minimum.  At the same
time, the success of these provisions requires that all participants
of the process adhere to the rules and procedures. 


--------------------
\18 Military Bases:  Lessons Learned From Prior Base Closure Rounds
(GAO/NSIAD-97-151, July 25, 1997); Military Bases:  Closure and
Realignment Savings Are Significant, but Not Easily Quantified
(GAO/NSIAD-96-67, Apr.  8, 1996). 

\19 Military Bases:  Lessons Learned From Prior Base Closure Rounds
(GAO/NSIAD-97-151, July 25, 1997). 


   LONG-RANGE FACILITY PLANS ARE
   NEEDED
---------------------------------------------------------- Chapter 0:6

Our February 1997 high-risk report on infrastructure\20 noted that,
to its credit, DOD has programs to identify potential infrastructure
reductions in many areas.  However, breaking down cultural resistance
to change, overcoming service parochialism, and setting forth a clear
framework for a reduced defense infrastructure are key to avoiding
waste and inefficiency.  To do this, we noted that the Secretary of
Defense and the service secretaries needed to give greater structure
to their efforts by developing a more definitive facility
infrastructure plan.  We said the plan needed to establish time
frames and identify organizations and personnel responsible for
accomplishing fiscal and operational goals. 

We suggested that this plan be presented to the Congress in much the
same way that DOD presented its plan for force structure reductions
in the Bottom-Up Review.  This would provide a basis for the Congress
to oversee DOD's plan for infrastructure reductions and allow the
affected parties to see what is going to happen and when.  We noted
that, in developing the plan, DOD should use a variety of means to
achieve reductions, including such things as consolidations,
privatization, outsourcing, reengineering, and interservicing
agreements.  We also said it should also consider the need for and
timing for future BRAC rounds.  Likewise, such a plan should also
encompass recapitalization and upkeep of remaining infrastructure. 


--------------------
\20 High-Risk Series:  Defense Infrastructure (GAO/HR-97-7, Feb. 
1997). 


      EXISTING PLANS HAVE
      IMPORTANT LIMITATIONS
-------------------------------------------------------- Chapter 0:6.1

Our May 1997 report on demolition noted that planning by the Office
of the Secretary of Defense and the services for facilities
maintenance and repair, including revitalization of facilities
infrastructure, was limited.\21 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 specified time frames or
linked to funding. 

The Deputy Under Secretary of Defense (Industrial Affairs and
Installations) testifying before this Subcommittee on February 26,
1998, recognized the absence of and need for improved planning for
facilities infrastructure.  The Deputy Under Secretary stated that to
"ensure the best allocation of our resources, the Department has
initiated a process to establish long-range facilities plans for each
Service.  This cross-functional effort, an outgrowth of the
Quadrennial Defense Review, is intended to guide the development of
future programs and budgets and evaluate their effectiveness". 

The need for improved 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 agency wide strategic plans by September 30, 1997, and annual
program performance reports beginning March 21, 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. 

Improved infrastructure planning can help agency components and
programs to develop outcome-oriented goals and performance measures
that are linked to and support agencywide goals.  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. 

Mr.  Chairman, this concludes my prepared remarks.  We would be
pleased to answer any questions that you or members of the
Subcommittee might have. 





--------------------
\21 In July 1997, OMB provided guidance to federal agencies on the
planning, budgeting, and acquisition of capital assets in its Capital
Programming Guide, which was a supplement to OMB Circular A-11, Part
3.  This guidance integrated the various administration and statutory
asset management initiatives into a single, integrated capital
programming process to ensure that capital assets contributed to the
achievement of agency strategic goals and objectives. 


RELATED GAO PRODUCTS
=========================================================== Appendix 1

Defense Management:  Challenges Facing DOD in Implementing Defense
Reform Initiatives (GAO/T-NSIAD/AIMD-98-122, Mar.  13, 1998). 

DOD's Government Performance and Results Act Implementation
(GAO/NSIAD/GGD-97-65R, Jan.  31, 1997). 

Best Practices:  Elements Critical to Successfully Reducing Unneeded
RDT&E Infrastructure (GAO/NSIAD/RCED-98-23, Jan.  8, 1998). 

Navy Regional Maintenance:  Substantial Opportunities Exist to Build
on Infrastructure Streamlining Progress (GAO/NSIAD-98-4, Nov.  13,
1997). 

Future Years Defense Program:  DOD's 1998 Plan Has Substantial Risk
in Execution (GAO/NSIAD-98-26, Oct.  23, 1997). 

Military Bases:  Lessons Learned From Prior Base Closure Rounds
(GAO/NSIAD-97-151, July 25, 1997). 

1997 Defense Reform Bill:  Observations on H.R.  1778
(GAO/T-NSIAD-97-187, June 17, 1997). 

Defense Infrastructure:  Demolition of Unneeded Buildings Can Help
Avoid Operating Costs (GAO/NSIAD-97-125, May 13, 1997). 

DOD High-Risk Areas:  Eliminating Underlying Causes Will Avoid
Billions of Dollars in Waste (GAO/T-NSIAD/AIMD-97-143, May 1, 1997). 

Defense Budget:  Observations on Infrastructure Activities
(GAO/NSIAD-97-127BR, Apr.  4, 1997). 

Defense IRM:  Investments at Risk for DOD Computer Centers
(GAO/AIMD-97-39, Apr.  4, 1997). 

Defense Outsourcing:  Challenges Facing DOD as It Attempts to Save
Billions in Infrastructure Costs (GAO/T-NSIAD-97-110, Mar.  12,
1997). 

Military Bases:  Cost to Maintain Inactive Ammunition Plants and
Closed Bases Could Be Reduced (GAO/NSIAD-97-56, Feb.  20, 1997). 

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

Air Force Depot Maintenance:  Privatization-in-Place Plans Are Costly
While Excess Capacity Exists (GAO/NSIAD-97-13, Dec.  31, 1996). 

Army Depot Maintenance:  Privatization Without Further Downsizing
Increases Costly Excess Capacity (GAO/NSIAD-96-201, Sept.  18, 1996). 

1997 DOD Budget:  Potential Reductions to Operation and Maintenance
Program (GAO/NSIAD-96-220, Sept.  18, 1996). 

Defense Acquisition Infrastructure:  Changes in RDT&E Laboratories
and Centers (GAO/NSIAD-96-221BR, Sept.  13, 1996). 

Military Family Housing:  Opportunities Exist to Reduce Costs and
Mitigate Inequities (GAO/NSIAD-96-203, Sept.  13, 1996). 

Navy Financial Management:  Improved Management of Operating
Materials and Supplies Could Yield Significant Savings
(GAO/AIMD-96-94, Aug.  16, 1996). 

Defense Infrastructure:  Costs Projected to Increase Between 1997 and
2001 (GAO/NSIAD-96-174, May 31, 1996). 

Military Bases:  Opportunities for Savings in Installation Support
Costs Are Being Missed (GAO/NSIAD-96-108, Apr.  23, 1996). 

Defense Depot Maintenance:  Privatization and the Debate Over the
Public-Private Mix (GAO/T-NSIAD-96-146, Apr.  16, 1996). 

DOD Infrastructure:  DOD Is Opening Unneeded Finance and Accounting
Offices (GAO/NSIAD-96-113, Apr.  16, 1996). 

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

Defense Infrastructure:  Budget Estimates for 1996-2001 Offer Little
Savings for Modernization (GAO/NSIAD-96-131, Apr.  4, 1996). 

Defense Transportation:  Streamlining of the U.S.  Transportation
Command Is Needed (GAO/NSIAD-96-60, Feb.  22, 1996). 

Best Management Practices:  Reengineering the Air Force's Logistics
System Can Yield Substantial Savings (GAO/NSIAD-96-5, Feb.  21,
1996). 

DOD Infrastructure:  DOD's Planned Finance and Accounting Structure
Is Not Well Justified (GAO/NSIAD-95-127, Sept.  18, 1995). 

Financial Management:  Challenges Confronting DOD's Reform
Initiatives (GAO/T-AIMD-95-146, May 23, 1995). 

Military Bases:  Analysis of DOD's 1995 Process and Recommendations
for Closure and Realignment (GAO/NSIAD-95-133, Apr.  14, 1995). 

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