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Military Bases: Closure and Realignment Savings Are Significant, but Not Easily Quantified (Letter Report, 04/08/96, GAO/NSIAD-96-67).

Pursuant to a congressional request, GAO reviewed the Department of
Defense's (DOD) cost and savings estimates for past base realignment and
closure (BRAC) actions, focusing on the: (1) extent to which DOD is
achieving actual savings from BRAC; and (2) adequacy of the DOD process
for developing the cost and savings estimates reported in its annual
budget submissions.

GAO found that: (1) although BRAC savings should be substantial, the
total amount of actual savings is uncertain because DOD systems do not
provide adequate information or isolate their impact from that of other
DOD initiatives; (2) DOD plans to reduce spending for base support
programs substantially and there is evidence that actual base support
costs have been reduced at closed bases; (3) DOD will not be able to
ensure the quality of future base support services or fund future
programs at planned levels if it does not fully achieve estimated BRAC
savings; and (4) DOD has complied with legislative requirements for
submitting annual cost and savings estimates, but the estimates'
usefulness is limited because estimates are not budget-quality, the
inclusion of estimates of reduced military personnel costs is not
uniform, and certain community assistance and other costs are excluded.

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

     TITLE:  Military Bases: Closure and Realignment Savings Are 
             Significant, but Not Easily Quantified
      DATE:  04/08/96
   SUBJECT:  Base closures
             Military downsizing
             Military cost control
             Future budget projections
             Statistical methods
             Management information systems
             Military budgets
             Military bases
             Base realignments
IDENTIFIER:  DOD Base Realignment and Closure Account
             KC-135 Aircraft
             FB-111 Aircraft
             DOD Cost of Base Realignment Action Model
             Civilian Health and Medical Program of the Uniformed 
             Defense Business Operations Fund
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================================================================ COVER

Report to the Chairman, Subcommittee on National Security,
International Affairs, and Criminal Justice, Committee on Government
Reform and Oversight, House of Representatives

April 1996



Military Bases


=============================================================== ABBREV

  BRAC - base realignment and closure
  CHAMPUS - Civilian Health and Medical Program of the Uniformed
  COBRA - Cost of Base Realignment Actions
  DBOF - Defense Business Operations Fund
  DOD - Department of Defense
  FYDP - Future Years Defense Program

=============================================================== LETTER


April 8, 1996

The Honorable William H.  Zeliff, Jr.
Chairman, Subcommittee on National Security,
 International Affairs, and Criminal Justice
Committee on Government Reform and Oversight
House of Representatives

Dear Mr.  Chairman: 

At your request, we examined cost and savings estimates for past base
realignment and closure (BRAC) actions.  Specifically, we are
reporting on (1) the extent to which the Department of Defense (DOD)
is achieving actual savings from BRAC and (2) the adequacy of DOD's
process for developing the cost and savings estimates reported in its
annual budget submissions. 

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

The Congress passed initial legislation in October 1988 to bring
DOD's base structure into line with its smaller post-Cold War force
structure.  Generally, the process, as modified by subsequent
legislation, called for (1) establishing independent commissions to
recommend installations for realignment or closure and (2)
implementing the commissions' recommendations within 6 years of the
date the President sends the commissions' recommendations to the

The realignment of underutilized bases and closure of unnecessary
bases were expected to result in significant savings, primarily from
reduced base support costs.  The February 1992 DOD Base Structure
Report defined base support costs as the overhead cost of providing,
operating, and maintaining the defense base structure, including real
property maintenance and repair costs, base operations costs, and
family housing costs.  According to historical information in DOD's
Future Years Defense Program (FYDP) database, in fiscal year 1988
base support costs totaled $41 billion.\1 During that year, most base
support costs were paid from the operations and maintenance account
(54 percent); the military personnel account (23 percent); and the
family housing account (10 percent). 

The Congress recognized that an up-front investment was necessary to
achieve the savings and established two accounts\2 to fund certain
implementation costs.  These costs included (1) constructing new
facilities at gaining bases to accommodate organizations transferred
from closing bases, (2) remedying environmental problems on closing
bases, and (3) moving personnel and equipment from closing to gaining
bases.  In addition, revenue generated when land at closing bases is
sold is deposited in the BRAC accounts and used to offset one-time
implementation costs.  Moreover, the legislation required that DOD
submit annual budgets estimating the cost and savings of each closure
or realignment, as well as the period in which savings were to be

According to its February 1995 budget submission, DOD estimated that,
for the first three BRAC rounds, one-time implementation costs will
$16.3 billion and savings will total $16.1 billion, for a net cost of
$189.6 million over the period.\3

According to DOD, the $16.1 billion in estimated savings have been or
will be reflected as reductions in DOD component appropriation
accounts.  Once the implementation of the three BRAC rounds is
completed in fiscal year 1999, DOD estimates that annual net savings
will be $4.1 billion. 

\1 For consistency, we converted all cost data to fiscal year 1996
dollars using deflators in the DOD Comptroller's March 1995 National
Defense Budget Estimates for Fiscal Year 1996. 

\2 There are two BRAC accounts.  BRAC I was established to fund base
closures in the 1988 round.  BRAC II was established to fund base
closures in the 1991, 1993, and 1995 rounds. 

\3 Budget years for BRACs I through III cover fiscal years 1990
through 1999.  Budget years for each are as follows:  BRAC I--fiscal
years 1990-95; BRAC II--fiscal years 1992-97; and BRAC III--fiscal
years 1994-99. 

------------------------------------------------------------ Letter :2

Our analysis of base support costs in the FYDP and at nine closing
installations indicates that BRAC savings should be substantial. 
However, DOD's systems do not provide information on actual BRAC
savings.  Therefore, the total amount of actual savings is uncertain. 
If DOD does not fully achieve estimated BRAC savings, it will affect
DOD's ability to fund future programs at planned levels. 

DOD has complied with the legislative requirement for submitting
annual cost and savings estimates, but there are limitations to the
submissions' usefulness.  For example, the Air Force's savings
estimates were not based on budget-quality data, and the Army's
estimates excluded reduced military personnel costs that the Navy and
the Air Force included in their estimates.  Further, BRAC cost
estimates excluded more than $781 million in economic assistance to
local communities as well as other costs.  Consequently, the Congress
does not have an accurate picture of the savings achieved by the BRAC

------------------------------------------------------------ Letter :3

Our analysis of the FYDP indicates that DOD plans to substantially
reduce spending for base support programs.  Furthermore, our analysis
of operations and maintenance costs at nine closing installations
indicates that actual base support costs have been reduced at those
installations and therefore savings should be substantial.  However,
the DOD FYDP and service accounting systems are not configured to
provide information concerning actual BRAC savings, and failure to
achieve them would affect the quality of base support services or
DOD's ability to fund other programs. 

---------------------------------------------------------- Letter :3.1

Table 1 shows that by fiscal year 1997 DOD expects to reduce annual
base support costs by about $11.5 billion from a fiscal year 1988
baseline.  The cumulative reduction over the period is about $59
billion.  DOD's information system does not indicate how much of the
reduction is due to BRAC versus force structure or other changes.  In
addition, an Office of the Deputy Assistant Secretary of Defense
(Installations) official stated that DOD is reviewing the
classification of base support programs in the FYDP, which could
affect future analyses. 

                                Table 1
                Analysis of Base Support Cost Reduction
                       From Fiscal Years 1988-97

                 (Fiscal year 1996 dollars in billions)

                            Base support    Change from     Cumulative
Fiscal year                      costs\a  1988 baseline      reduction
-------------------------  -------------  -------------  -------------
1988                               $41.0              0              0
1989                                40.1           $0.9           $0.9
1990                                38.3            2.7            3.6
1991                                37.9            3.1            6.7
1992                                36.7            4.3           11.0
1993                                34.2            6.8           17.8
1994                                32.4            8.6           26.4
1995                                30.6           10.4           36.8
1996                                30.3           10.7           47.5
1997                                29.5           11.5           59.0
\a Does not include base support costs paid by the Defense Business
Operations Fund (DBOF) and includes only those military construction
costs that are related in the FYDP to base operations and real
property programs. 

Our analysis of the FYDP shows that, within reduced overall base
support spending levels, DOD plans to increase average spending on
family housing from $1,880 to $2,730 for each active duty military
person between fiscal years 1988 and 1997.  Average spending for the
remaining base support activities is expected to remain relatively
stable over the 10-year period.  However, table 2 shows that, over
the period, DOD's force structure is expected to be reduced by
680,000 military personnel and average base operations and real
property support costs are expected to fall slightly to about $16,600
per person. 

                                Table 2
                    Analysis of Base Support Costs,
                  Excluding Family Housing Costs, and
                  Military Personnel Levels for Fiscal
                        Years 1988 through 1997

                                and real      Number of
                                property    active duty  Average costs
                           support costs       military     per person
                           (FY96 dollars      personnel  (FY96 dollars
Fiscal year                 in billions)    (thousands)  in thousands)
-------------------------  -------------  -------------  -------------
1988                               $36.9          2,209          $16.7
1989                                36.0          2,202           16.3
1990                                34.6          2,143           16.1
1991                                34.1          2,077           16.4
1992                                32.6          1,880           17.3
1993                                30.1          1,776           16.9
1994                                28.7          1,678           17.1
1995                                27.0          1,588           17.0
1996                                26.2          1,550           16.9
1997                                25.3          1,529           16.6

---------------------------------------------------------- Letter :3.2

Key requirements for calculating actual BRAC savings include
information on decreased support costs at closing bases and the
offsetting increases at gaining bases.  DOD cannot provide accurate
information on actual savings because (1) information on base support
costs was not retained for some closing bases and (2) the services'
accounting systems cannot isolate the effect on support costs at
gaining bases.  DOD officials stated that designing and implementing
a system for collecting actual BRAC savings information would be
difficult and extremely expensive, and they questioned the value of
such a system. 

According to DOD officials, the accounting systems were not designed
to isolate the impact of specific initiatives, such as BRAC, on base
support costs.  With the disestablishment of the 509th Bombardment
Wing and closure of Pease Air Force Base, for example, the Wing's
FB-111 bombers were placed in storage as part of a force structure
change, while its KC-135 refueling aircraft were transferred to five
gaining bases along with their crews, support personnel, and
equipment.  The largest group of aircraft, six KC-135s, was
transferred to Fairchild Air Force Base.  According to Air Force
officials, their systems would not allow them to determine

  how much of the reduction in Pease Air Force Base support costs was
     due to the changing strategic bomber force structure as opposed
     to the closure of Pease Air Force Base and

  how much of any increase in Fairchild Air Force Base support costs
     was due to the arrival of Pease aircraft.  Officials stated
     that, since the arrival of the 6 KC-135 aircraft from Pease,
     Fairchild has received over 50 KC-135 tankers from other bases. 

The Army Audit Agency had similar difficulties in determining the
actual savings from the closure of 10 Army BRAC I installations. 
According to the Agency's November 1995 report, the Army's system of
management controls did not ensure that adequate documentation was
retained to determine actual savings or reliable estimates of
savings.  The report stated, for example, that auditors were unable
to locate the accounting records necessary to determine base support
cost savings at one site.  In addition, they could not determine
incremental base support cost increases at gaining installations
because the Army's accounting system did not contain all the
necessary information. 

We analyzed base support costs paid from the operations and
maintenance account for the eight installations for which data were
available.  The analysis shows that the closures will have a combined
net cost of $7.6 million for the implementation period, and an annual
recurring savings of $212.8 million thereafter.  As table 3 shows,
four bases (Chase Field, the Long Beach Naval Hospital, Pease, and
Williams) are expected to have a net savings at the end of the
implementation period, indicating a payback period of less than 6
years.  The longest payback period is Fort Devens at about 11 years. 

                                Table 3
                     Base Support Savings and BRAC
                     Implementation Costs for Eight

                 (Fiscal year 1996 dollars in millions)

                            6-year                   6-year
                              base        6-year        net     Annual
                           support  implementati   savings/  recurring
Installation               savings    on costs\a    (costs)    savings
-----------------------  ---------  ------------  ---------  ---------
Bergstrom Air Force              0             0          0          0
Chase Field Naval Air        $74.0         $28.8      $45.2      $15.1
Fort Benjamin Harrison       163.6         170.4      (6.8)       35.4
Fort Devens                   83.8         169.2     (85.4)       24.5
Long Beach Naval              27.7          10.3       17.4        7.0
Moffett Field Naval Air       98.6         137.2     (38.6)       25.2
Pease Air Force Base         178.5         159.4       19.1       38.1
Sacramento Army Depot         76.9         144.5     (67.6)       36.4
Williams Air Force Base      162.0          52.9      109.1       31.1
Total                       $865.1        $872.7     $(7.6)     $212.8
\a Implementation costs were based on information in DOD's 1995
budget submission. 

\b Baseline base support cost data were not available. 

\c Current base support costs for reserve and other units at Moffett
Field were not considered since those costs were excluded from the
baseline provided by the Navy. 

Our estimates reflect force structure savings at closing bases and do
not reflect incremental base support cost increases at gaining bases
unless they were readily identifiable.  Additionally, estimated
implementation costs do not include economic assistance costs to the
area affected by the closure or other costs not reported in DOD's
budget submission.  Including these factors would reduce the net
savings.  However, our estimates also do not reflect savings due to
reduced base support costs paid from the military personnel and
military construction accounts or reduced family housing costs, which
would increase savings.  For example, at the three Air Force bases we
reviewed, the Air Force estimated military personnel savings at
$669.6 million over the implementation period and $156.6 million
annually thereafter. 

---------------------------------------------------------- Letter :3.3

DOD expects BRAC savings to provide much of the funding necessary for
quality-of-life initiatives and defense modernization efforts.  In
November 1994, for example, the Secretary of Defense stated that the
fiscal year 1996 DOD budget will increase funding by $94 million for
community and family support projects, including increasing
eligibility for child care support by up to 38,000 families and
strengthening programs aimed at preventing family violence. 

Additionally, in January 1996, the Secretary stated that DOD will
need to increase modernization programs to ensure the long-term
readiness of defense forces.  According to the Secretary, failure to
achieve savings from earlier initiatives required DOD to restructure
the budget.  DOD stated that estimated savings from BRAC are taken
out of the services' budgets up front.  This is the same process that
was followed in implementing budget reductions under the defense
management review initiatives.  To the extent BRAC savings are not
realized at the levels that were anticipated, it could have similar
effects on DOD's FYDP. 

------------------------------------------------------------ Letter :4

DOD's savings estimates are inconsistent because the services used
different estimating methodologies, and are unreliable because the
services excluded some savings and did not update some estimates to
reflect revised closure schedules.  In addition, DOD's cost estimates
are incomplete because the services did not include many BRAC-related
nondefense costs. 

---------------------------------------------------------- Letter :4.1

The methodologies used for developing the savings estimates differed
among the services.  The Air Force used savings estimates that were
developed through the Cost of Base Realignment Actions (COBRA)
model,\4 with adjustments for inflation and recurring cost increases
at gaining bases, as the basis for its estimates.  The adjustments
accounted for differences in the way inflation and recurring costs
were treated in the COBRA and budget estimates.  According to an Air
Force official, however, major commands and installations were not
requested to provide budget- quality data to revise the COBRA savings
estimates for their bases. 

The Navy, on the other hand, used its Comptroller's analyses of
expected increases and decreases in each base's costs, but no
documentation was available to show how specific estimates were
calculated.  For example, the Navy's estimate for the Long Beach
Naval Hospital savings assumed, among other things, that the Civilian
Health and Medical Program of the Uniformed Services (CHAMPUS) costs
at gaining bases would be reduced by about $143 million over the
6-year implementation period and about $38 million for each year
thereafter.  The Navy Comptroller was unable to provide documentation
to show how that estimate was calculated. 

The Army based its estimates on detailed implementation plans
prepared by major commands after the BRAC Commissions announced their
decisions.  Unlike the Navy, however, the Army eliminated CHAMPUS
savings from its estimates.  Also, unlike the other services, the
Army excluded savings from military personnel reductions from its
BRAC II and III savings estimates.  The Air Force, the Navy, and DOD
agencies estimated that BRACs II and III would eliminate the need for
about 28,000 military personnel and save about $3.9 billion during
the 6-year implementation periods.  An Army official stated that
military personnel savings were excluded because the reductions had
already been recognized in previous initiatives.  Closure
implementation plans for the three Army bases we examined stated that
the installations were authorized 475 military personnel for base
support functions. 

Further, a Navy official stated that Navy estimates were reviewed
annually and revised during the budget review process.  According to
Army and Air Force officials, their savings estimates are not
routinely updated, even though some bases close faster than initial
estimates, thereby resulting in increased savings.  For example, the
1995 Fort Benjamin Harrison savings estimate, which has not changed
since it was initially submitted in 1992, does not reflect
significant operation and maintenance savings until fiscal year 1995. 
Our analysis indicates that savings started in fiscal year 1992 and
totaled over $92 million by fiscal year 1995. 

According to a DOD Comptroller official, the Office of the Secretary
of Defense provided no additional guidance to the services on
developing savings estimates other than the guidance on preparing
COBRA estimates.  He said that DOD headquarters and the services
focused most of their attention on monitoring and managing BRAC costs
rather than savings. 

\4 According to DOD, COBRA provides a methodology for consistently
estimating costs and savings from alternative closure options and was
not intended to provide budget-quality estimates. 

---------------------------------------------------------- Letter :4.2

In March 1996, we reported that DOD's cost estimates for closing
maintenance depots excluded some BRAC-related costs that have been or
will be paid from DBOF or the operation and maintenance account.\5
For example, the Navy estimates that, through fiscal year 1995,
closing naval aviation depots and shipyards would have an accumulated
operating loss of about $882 million that would be recouped from its
operation and maintenance account ($695 million) or written off
within DBOF ($187 million).  Some of this loss was directly related
to depot closures.  We also reported that closing Army depots had
closure-related costs and losses that were financed by DBOF.  In
fiscal year 1993, for example, the Sacramento Army Depot charged
about $12 million in closure-related costs, including employees'
voluntary separation incentive pay,\6 to DBOF instead of the BRAC
account.  The Navy and other organizations charge separation
incentive pay to their BRAC account.  In addition to depot-related
closure costs, DOD estimates do not include $781 million for the
following BRAC-related economic assistance costs, much of which is

  The Economic Development Administration began providing funds for
     BRAC-related activities in fiscal year 1992, and has obligated
     about $371 million for them between fiscal years 1992 and 1995. 

  The Federal Aviation Administration provided about $182 million to
     BRAC bases through fiscal year 1995. 

  The Department of Labor said it could not readily tell how much it
     spent on BRAC-related activities between 1988 and 1990.  It
     spent about $103 million on BRAC-related activities from fiscal
     years 1991 through 1995.  This does not include funds
     distributed to states under block grants or funds spent on DOD
     demonstration projects, such as projects at Philadelphia and
     Charleston, because these funds are administered by the states. 

  DOD's Office of Economic Adjustment provided $125 million to BRAC
     bases from fiscal years 1988 to 1995. 

In addition, DOD paid about $500 million in unemployment compensation
to civilian employees who lost their jobs from fiscal years 1990
through 1995.  According to DOD, the BRAC process resulted in the
elimination of about 31,000 civilian positions during that period,
which indicates that some unemployment costs could be categorized as
BRAC related. 

Because much of the information necessary to prepare comprehensive
and reliable savings estimates for all the installations is no longer
available, we are not recommending the revision of these estimates. 
However, should there be future BRACs, we believe the Secretary of
Defense should provide and the services should implement guidance to
ensure estimates are comprehensive, consistent, and well-documented. 

\5 Closing Maintenance Depots:  Savings, Workload, and Redistribution
Issues (GAO/NSIAD-96-29, Mar.  4, 1996.)

\6 To encourage voluntary departures, DOD gave employees at closing
bases up to $25,000 if they voluntarily retired or resigned. 
According to its fiscal year 1995 budget submission, the Army used
its operation and maintenance account to reimburse DBOF for voluntary
separation incentives in fiscal year 1994, and it increased customer
rates to pay for these costs in fiscal year 1995. 

------------------------------------------------------------ Letter :5

We recommend that the Secretary of Defense, at a minimum, explain the
methodology used to estimate savings in future BRAC budget
submissions.  Also, the submissions should note that all BRAC-related
costs are not included. 

------------------------------------------------------------ Letter :6

In commenting on a draft of this report, DOD indicated that the
inconsistencies in its budget savings estimates we cited were the
result of an attempt to give the services reporting flexibility.  DOD
acknowledged that cost estimates in BRAC budget submissions do not
include some costs that were paid from other DOD accounts or from
non-DOD appropriations.  DOD agreed that the BRAC budget submissions
should include an advisory statement that economic assistance and
non-DOD costs are not included.  DOD also indicated that it was
willing to consider including a brief statement that the BRAC budget
submissions are based on the initial cost and savings estimates,
which are subsequently refined through the use of site surveys. 
However, DOD did not believe that using different methodologies was a
weakness that needed to be reported. 

To clarify the inconsistencies we found among the services, we have
expanded the report to show the differences in (1) the extent to
which COBRA estimates were updated and (2) the treatment of military
personnel and CHAMPUS savings in the services' budget estimates.  We
believe that eliminating the inconsistencies in the preparation of
savings estimates for future BRACs would enhance the usefulness of
the budget submissions.  However, we deleted the term weakness in
describing the differences in the various methodologies.  With
regards to non-DOD costs, the information on many excluded costs is
readily available.  For example, information on $781 million in
BRAC-related economic assistance costs incurred through fiscal year
1995 was readily available from various agencies.  We also believe
that including information from the other agencies would give the
Congress a more comprehensive overview to use in evaluating the
success of BRAC implementation.  DOD comments are presented in their
entirety in appendix I. 

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

We reviewed reports, documents, and legislation relevant to BRAC cost
and savings estimates.  We also interviewed BRAC and Comptroller
officials from the Office of the Secretary of Defense and the
military services.  From officials of the Departments of Labor and
Commerce and the Federal Aviation Administration, we obtained data on
their BRAC-related costs. 

Our examination of cost and savings estimates focused on BRACs I
through III because DOD had not yet developed BRAC IV estimates at
the time we initiated our review.  In addition, we focused our
analysis of actual costs and savings on BRACs I and II because many
BRAC III installations were still being closed. 

For our analysis of actual savings, we analyzed trend data from DOD's
historical and current FYDP databases, which were updated through
June 1995.  We identified base support costs by examining program
element titles and discussing the costs with officials in DOD's
Office of Program Analysis and Evaluation and from the military
services.  We did not assess the reliability of the FYDP database. 

We also attempted to obtain information on actual base support costs
for nine closures.  We selected the closures from a listing of BRACs
I and II to obtain three closing installations from each of the
military services, and to ensure each closing installation was from a
different major command.  For one of the nine installations selected,
base support cost data was not available.  Where possible, we
obtained actual base support cost data for the operation and
maintenance account from the responsible major command.  Our
estimates of base support cost reductions at closing installations
and incremental increases at gaining bases were based on major
command estimates or our analysis of trends in the closing and
gaining bases' actual support costs.  We estimated fiscal years 1995
and 1996 costs on the basis of fiscal year 1994 costs.  Our analysis
of the nine bases cannot be projected to all BRAC bases.  While
overall trends indicate substantial savings, it is possible that net
savings may not be achieved at an individual location. 

We conducted our work from March 1995 to February 1996 in accordance
with generally accepted government auditing standards. 

---------------------------------------------------------- Letter :7.1

Unless you publicly announce its contents earlier, we plan no further
distribution of this report until 10 days after its issue date.  At
that time, we will send copies 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.  If you have any questions
concerning this report, please call me on (202) 512-8412.  Major
contributors to this report are listed in
appendix II. 

Sincerely yours,

David R.  Warren, Director
Defense Management Issues

(See figure in printed edition.)Appendix I
============================================================== Letter 

(See figure in printed edition.)

(See figure in printed edition.)

(See figure in printed edition.)

(See figure in printed edition.)

(See figure in printed edition.)

========================================================== Appendix II


James Wiggins
John Klotz
Richard Meeks
Barbara Wooten


John Schaefer
Eddie Uyekawa

*** End of document. ***