Housing:

Limitations in the Air Force's Proposed Housing Plan for Spangdahlem Air Base, Germany

GAO-06-736R: Published: May 19, 2006. Publicly Released: May 19, 2006.

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The Air Force plans to construct 233 military housing units on Spangdahlem Air Base, Germany at a cost of $131.3 million spread over fiscal years 2006-2008, and to fund 270 build-to-lease units nearby at an annual cost of $32,888 per unit over 20 years. The Military Quality of Life and Veterans Affairs Appropriations Act for fiscal year 2006 directed the Secretary of the Air Force to submit to the Committees on Appropriations of both Houses of Congress a report containing a housing plan for Spangdahlem. The House Conference Report accompanying H.R. 2528 stipulated that the report must include a complete cost-benefit analysis of available housing options to include build-to-lease housing, and that none of the funds appropriated for family housing at Spangdahlem--nearly $45.4 million--may be obligated until the Secretary of the Air Force certified to the Appropriations Committees that the report had been completed and received the Committees' response or a 30-day period has elapsed after the Committees receive such report. In response to the mandate, the Air Force issued a report in January 2006 that compared its proposed plan with four other housing options that included a combination of traditional military construction, build-to-lease housing, and replacement of existing housing units to meet its housing requirements at Spangdahlem. In the report, the Air Force recommended implementation of its proposed plan and release of the military construction appropriations for fiscal year 2006. The Air Force also concluded that, depending on the results of its efforts to explore cooperative ventures with the local German government and communities and the potential for a larger build-to-lease program, the scope of its military construction projects for future years may need to be adjusted. The Air Force also stated it would provide a status report regarding these adjustments to Congress within 365 days of the Appropriations Committees' release of the fiscal year 2006 military construction appropriation. Specifically, the Air Force proposed to report on the results of the cooperative ventures, number of housing units procured in the fiscal year 2006 military construction project, and proposed adjustments in the scope of the fiscal years 2007 and 2008 military construction projects. In February 2006, the Appropriations Committees released nearly $45.4 million in fiscal year 2006 military construction budget authority for 79 housing units at Spangdahlem. During our ongoing review of the Department of Defense's (DOD) comprehensive overseas master plans, we met with Air Force officials and visited family housing units at Spangdahlem and the base's Bitburg Annex. We briefed Congress on the results of our site visits on February 27, 2006. Subsequently, on March 1, 2006, Congress requested that we review the assumptions and methodologies used in the Air Force's report issued in January 2006. This report responds to that request.

Although there is no basis to question whether the Air Force needs to upgrade its housing at Spangdahlem, key assumptions and methodology used in the Air Force report on housing plans for Spangdahlem, in some instances, were based on dated and incorrect information. As a result, there is uncertainty as to how many housing units are needed and which method--traditional military construction, build to lease, or other methods--is the most appropriate means to meet the housing requirement given costs and other considerations. The Air Force has recognized that there may be a need to adjust the scope of the military construction projects proposed for future years, and is in the process of updating its information and reassessing the mix of housing methods. Nevertheless, we identified several weaknesses in its 2006 report that the Air Force should address before it issues a status report to the Appropriations Committees. Air Force officials stated that they relied on a 2003 housing requirements and market analysis as the foundation to determine the need for family housing in the Air Force's 2006 Spangdahlem housing report. Although the 2003 analysis concluded that no additional family housing construction was needed, according to Air Force officials the analysis did not take into consideration the inadequate condition of some existing housing units and was based on outdated information, such as demographic data almost 2 decades old. Officials said that they also used other sources of information to develop the housing requirements identified in their 2006 report. While we reviewed these sources, we made no assessment of their suitability in determining the housing requirements. In the House Conference Report to H.R. 2528, the conferees urged the Air Force to consider all options to address the housing needs, and stated specifically that build-to-lease housing has the potential to provide quality housing quickly to the families at Spangdahlem, while also providing a more cost-effective and flexible option to the United States. Although the Air Force plans to use off-base, build-to-lease housing to meet over half of its requirements for new family housing in Spangdahlem, it did not recommend a larger number of build-to-lease units because it assumed that local conditions existed that limited support for such projects. As a result of its assumption, the Air Force may have underestimated the number of build-to-lease opportunities and overestimated the need for military construction funding or vice versa. We found that the Air Force did not follow Office of Management and Budget (OMB), DOD, and Air Force guidance on performing life-cycle cost analysis in two instances--when it used an incorrect discount rate to calculate the present value of the costs and benefits of the Air Force's proposed plan and four housing alternatives, and when it incorrectly calculated the remaining worth of the housing units funded with military construction appropriations after 20 years. However, our recalculations based on OMB, DOD, and Air Force guidance did not result in a significant variance from the Air Force's analysis, in that the estimated life-cycle costs of both analyses fell between the other alternatives. As a result, there is little, based on our recalculations of the life-cycle costs, to support a change in the Air Force's selected proposal, especially given the risk assessment criteria the Air Force assigned to compare the housing options. Nevertheless, the Air Force should use the correct discount rate and remaining worth of the housing in its analysis of the housing options presented in its upcoming status report to the Appropriations Committees.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Senate Report 109-286 accompanying the Military Construction and Veterans Affairs and Related Agencies Appropriation Bill, Fiscal Year 2007, discussed the committee's efforts to conduct an extensive review of the Air Force's housing plan for Spangdahlem, specifically referring to our report. The Senate report further stated that the committee did not expect to fund the Air Force's third phase of housing (94 units) proposed for fiscal year 2008 because other housing options are available at Spangdahlem to meet this need. European Command and Office of Secretary of Defense officials told us that they have removed the fiscal year 2008 project from the Spangdahlem housing plan and that they would look to existing rental units or build-to-lease housing to satisfy the remaining new housing requirements. As a result, the intent of our recommendation has been addressed.

    Recommendation: Because of the uncertainty associated with which factors the Air Force plans to consider when it adjusts the scope of the military construction projects proposed for fiscal years 2007-2008, the Secretary of the Air Force should include, at a minimum, the results of its new housing requirements and market analysis for Spangdahlem (scheduled to be completed in July 2006) in making the required adjustments.

    Agency Affected: Department of Defense: Department of the Air Force

  2. Status: Closed - Implemented

    Comments: The Senate Report 109-286 accompanying the Military Construction and Veterans Affairs and Related Agencies Appropriation Bill, Fiscal Year 2007, discussed the committee's efforts to conduct an extensive review of the Air Force's housing plan for Spangdahlem, specifically referring to our report. The Senate report further stated that the committee did not expect to fund the Air Force's third phase of housing (94 units) proposed for fiscal year 2008 because other housing options are available at Spangdahlem to meet this need. European Command and Office of Secretary of Defense officials told us that they have removed the fiscal year 2008 project from the Spangdahlem housing plan and that they would look to existing rental units or build-to-lease housing to satisfy the remaining new housing requirements. As a result, the intent of our recommendation has been addressed.

    Recommendation: To ensure that the status report is based upon sound economic assumptions and methods, the Secretary of the Air Force should calculate life-cycle costs in accordance with OMB guidance on the use of discount rates and in accordance with DOD and Air Force guidance on the use of depreciation to calculate the remaining worth of housing.

    Agency Affected: Department of Defense: Department of the Air Force

 

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