Defense Management:

Comprehensive Cost Information and Analysis of Alternatives Needed to Assess Military Posture in Asia

GAO-11-316: Published: May 25, 2011. Publicly Released: May 25, 2011.

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The Department of Defense (DOD) is currently conducting the largest transformation of military posture in the Pacific region since the end of World War II. Transforming posture in Korea, Japan, and Guam will affect tens of thousands of military personnel and their families and require the construction of hundreds of new facilities and more than 3,500 housing units. GAO was asked to examine: (1) initiatives in Korea, their cost implications, and the basis for "tour normalization;" (2) initiatives in Japan and Guam and their cost implications; and (3) the extent to which DOD estimates the total cost of posture and addresses affordability issues. GAO assessed DOD policies and procedures, interviewed relevant DOD and State Department officials, and analyzed cost data from the military services

DOD is transforming the facilities and infrastructure that support its posture in Asia without the benefit of comprehensive cost information or an analysis of alternatives that are essential to conducting affordability analysis. In South Korea, DOD is transforming its military posture through a series of four interrelated posture initiatives. GAO obtained DOD cost estimates that total $17.6 billion through 2020 for initiatives in South Korea, but DOD cost estimates are incomplete. One initiative, to extend the tour length of military service members and move thousands of dependents to South Korea--called "tour normalization"--could cost DOD $5 billion by 2020 and $22 billion or more through 2050, but this initiative was not supported by a business case analysis that would have considered alternative courses of action and their associated costs and benefits. As a result, DOD is unable to demonstrate that tour normalization is the most cost-effective approach to meeting its strategic objectives. This omission raises concerns about the investments being made in a $13 billion construction program at Camp Humphreys, where tour normalization is largely being implemented. DOD is also transforming its military posture in Japan, Okinawa, and Guam but has not estimated the total costs associated with these initiatives. Based on an October 2006 Government of Japan budget estimate study for realignment costs and limited cost information developed by DOD, GAO identified approximately $29.1 billion--primarily just construction costs--that is anticipated to be shared by the United States and Japan to implement these initiatives. DOD officials stated total cost estimates for its initiatives were not available because of the significant uncertainty surrounding initiativeimplementation schedules. The Senate Appropriations Committee recently directed DOD to provide annual status updates on posture initiatives in Korea, Japan, Guam, and the Northern Mariana Islands. If DOD is fully responsive to the Committee's reporting direction, these updates should provide needed visibility into initiative cost and funding requirements. DOD's posture planning guidance does not require the U.S. Pacific Command to include comprehensive cost data in its theater posture plan, and as a result, DOD lacks critical information that could be used by decision makers as they deliberate on posture requirements and affordability. GAO analysis shows that of the approximately $24.6 billion obligated by the military services to support installations in Asia from 2006 through 2010, approximately $18.7 billion (76 percent) was for operation and maintenance of these facilities. The services estimate that operation and maintenance costs would be about $2.9 billion per year through 2015. However, this estimate appears to be understated, and DOD's initiatives may significantly increase those costs. For example, DOD has yet to estimate costs associated with furnishing and equipping approximately 321 new buildings and 578 housing units in Okinawa. Without comprehensive and routine reporting of posture costs, DOD decision makers will not have the full fiscal context in which to develop posture plans and requirements, and congressional committees will lack a full understanding of the potential funding requirements associated with DOD budget requests. GAO recommends that DOD develop a business case analysis for its strategic objectives related to tour normalization in Korea, limit investments at Camp Humphreys until the business case is completed, and develop comprehensive cost estimates of posture in the Pacific. DOD generally agreed with GAO's recommendations, but it did not specify what corrective actions it would take or time frames for completion.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To provide DOD and Congress with comprehensive posture cost information that can be used to fully evaluate investment requirements and the affordability of posture initiatives, the Secretary of Defense should direct the Secretaries of the military departments to provide these cost estimates to the Combatant Commander in a time frame to support development of the annual theater posture plan.

    Agency Affected: Department of Defense

    Status: Open

    Comments: The Department of Defense is taking steps to address our recommendations associated with global defense posture costs in the Pacific; however, DOD has not yet finalized its actions. For example, the Joint Staff has rewritten Enclosure D of the 2011 Joint Strategic Capabilities Plan to include that Combatant Commanders, in their Theater Posture Plans, shall report construction cost estimates, and operations and maintenance costs for new posture initiatives. These construction costs should include a breakdown of expected host-nation contributions. Although these changes have been made to reflect the costs of new posture initiatives, the revised Joint Strategic Capabilities Plan and Theater Posture Plans have not been finalized. According to OSD Policy officials, further changes to reporting guidance and procedures for global posture costs will be outlined in the forthcoming Global Defense Posture DOD-Instruction; however, as of August 2013, that instruction remained in draft.

    Recommendation: To provide DOD and Congress with comprehensive posture cost information that can be used to fully evaluate investment requirements and the affordability of posture initiatives, the Secretary of Defense should direct the Secretaries of the military departments to develop annual cost estimates for DOD posture in the U.S. Pacific Command area of responsibility that provide a comprehensive assessment of posture costs, including costs associated with operating and maintaining existing posture as well as costs associated with posture initiatives, in accordance with guidance developed by the Under Secretary of Defense (Comptroller).

    Agency Affected: Department of Defense

    Status: Open

    Comments: The Department of Defense is taking steps to address our recommendations associated with global defense posture costs in the Pacific; however, DOD has not yet finalized its actions. For example, the Joint Staff has rewritten Enclosure D of the 2011 Joint Strategic Capabilities Plan to include that Combatant Commanders, in their Theater Posture Plans, shall report construction cost estimates, and operations and maintenance costs for new posture initiatives. These construction costs should include a breakdown of expected host-nation contributions. Although these changes have been made to reflect the costs of new posture initiatives, the revised Joint Strategic Capabilities Plan has not been finalized. According to OSD Policy officials, further changes to reporting guidance and procedures for global posture costs will be outlined in the forthcoming Global Defense Posture DOD-Instruction; however, as of August 2013, that instruction remained in draft.

    Recommendation: To provide DOD and Congress with comprehensive posture cost information that can be used to fully evaluate investment requirements and the affordability of posture initiatives, the Secretary of Defense should identify and limit investments and other financial risks associated with construction programs at Camp Humphreys--funded either by direct appropriations or through alternative financing methods such as the Humphreys Housing Opportunity Program--that are affected by decisions related to tour normalization until a business case analysis for the strategic objectives that have to this point driven the decision to implement tour normalization in South Korea, is reviewed and the most cost-effective approach is approved by the Secretary of Defense.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: In May 2011, we provided the Senate's Appropriations Military Construction, Veterans' Affairs, and Related Agencies Subcommittee our report on Comprehensive Cost Information and Analysis of Alternatives Needed to Assess Military Posture in Asia. We reported that the decision to move forward with the tour normalization initiative, which would increase the tour lengths of personnel stationed in South Korea and move thousands of military dependents to South Korea, was not supported by a business case analysis, a thorough examination of the potential benefits, advantages, disadvantages, and affordability of viable alternatives. We recommended that the Secretary of Defense identify and limit investments and other financial risks associated with construction programs at Camp Humphreys - funded either by direct appropriations or through alternative financing methods such as the Humphreys Housing Opportunity Program - that are affected by decisions related to tour normalization until a business case analysis for the strategic objectives that have to this point driven the decision to implement tour normalization in South Korea is reviewed and the most cost-effective approach is approved by the Secretary of Defense. In response, United States Forces Korea conducted a series of consultations with the services and Congress to evaluate the costs and benefits - a business case analysis - associated with the tour normalization initiative. On March 29, 2012, General Thurman, Commander United States Forces Korea, testified that the United States would not be moving forward with the tour normalization initiative, because it was unaffordable. As a result, based on the completed business case analysis that identified the investments and other financial risks associated with tour normalization in South Korea, DOD chose to cancel the tour normalization initiative in South Korea as the most cost-effective approach and thereby limited its investments and other financial risks associated with tour normalization in South Korea.

    Recommendation: To provide DOD and Congress with comprehensive posture cost information that can be used to fully evaluate investment requirements and the affordability of posture initiatives, the Secretary of Defense should, through the Chairman of the Joint Chiefs of Staff, direct the Commander, United States Forces Korea, to provide a detailed accounting of the funds currently being applied and requested to construct new facilities at Camp Humphreys, identify construction projects that will be affected---directly or indirectly--by a decision to fully implement tour normalization, and provide that information to the Office of the Secretary of Defense with sufficient time to limit investments associated with tour normalization as recommended below.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: In May 2011, we provided the Senate's Appropriations Military Construction, Veterans' Affairs, and Related Agencies Subcommittee our report on Comprehensive Cost Information and Analysis of Alternatives Needed to Assess Military Posture in Asia. We reported that the decision to move forward with the tour normalization initiative, which would increase the tour lengths of personnel stationed in South Korea and move thousands of military dependents to South Korea, was not supported by a business case analysis, a thorough examination of the potential benefits, advantages, disadvantages, and affordability of viable alternatives. We recommended that the Commander, United States Forces Korea, identify funding and construction projects that will be affected - directly or indirectly - by a decision to fully implement tour normalization, and provide that information to the Office of the Secretary of Defense with sufficient time to limit investments associated with tour normalization until a business case analysis for tour normalization in South Korea is reviewed and the most cost-effective approach is approved by the Secretary of Defense. In response, United States Forces Korea conducted a series of consultations with the services and Congress to evaluate the costs and benefits - a business case analysis - associated with the tour normalization initiative. On March 29, 2012, General Thurman, Commander United States Forces Korea, testified that the United States would not be moving forward with the tour normalization initiative, because it was unaffordable. As a result, during the completion of the business case analysis, United States Forces Korea identified funds and construction projects associated with tour normalization in South Korea, which helped DOD make an informed decision about investing resources in tour normalization.

    Recommendation: To provide DOD and Congress with comprehensive posture cost information that can be used to fully evaluate investment requirements and the affordability of posture initiatives, the Secretary of Defense should set specific time frames for the completion of the business case analysis, the Secretary of Defense's review, and the approval of the selected alternative.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: In May 2011, we provided the Senate's Appropriations Military Construction, Veterans' Affairs, and Related Agencies Subcommittee our report on Comprehensive Cost Information and Analysis of Alternatives Needed to Assess Military Posture in Asia. We reported that the decision to move forward with the tour normalization initiative, which would increase the tour lengths of personnel stationed in South Korea and move thousands of military dependents to South Korea, was not supported by a business case analysis, a thorough examination of the potential benefits, advantages, disadvantages, and affordability of viable alternatives. We recommended that the Secretary of Defense set specific timeframes for the completion of the business case analysis, review, and approval of the selected alternative. According to DOD, the business case analysis was scheduled to be completed by May 2012 with a review by the appropriate DOD entities prior to forwarding it to the Secretary of Defense. In response, United States Forces Korea conducted a series of consultations with the services and Congress to evaluate the costs and benefits'a business case analysis associated with the tour normalization initiative. On March 29, 2012, General Thurman, Commander United States Forces Korea, testified that the United States would not be moving forward with the tour normalization initiative, because it was unaffordable (the result of doing the business case analysis). DOD's analysis, review, and approval were completed ahead of the estimated scheduled completion date of May 2012. As a result, DOD was able to make a timely well informed decision regarding its posture in South Korea.

    Recommendation: To provide DOD and Congress with comprehensive posture cost information that can be used to fully evaluate investment requirements and the affordability of posture initiatives, the Secretary of Defense should identify and direct appropriate organizations within the Department of Defense to complete a business case analysis for the strategic objectives that have to this point driven the decision to implement tour normalization in South Korea. This business case analysis should clearly articulate the strategic objectives, identify and evaluate alternative courses of action to achieve those objectives, and recommend the best alternative. For each alternative course of action considered, the business case analysis should address, at a minimum: (1) relative life-cycle costs and benefits; (2) methods and rationale for quantifying the life-cycle costs and benefits; (3) effect and value of cost and schedule trade-offs; (4) sensitivity to changes in assumptions; (5) potential advantages and disadvantages associated with the alternative; and (6) risk factors.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: In May 2011, we provided the Senate's Appropriations Military Construction, Veterans' Affairs, and Related Agencies Subcommittee our report on Comprehensive Cost Information and Analysis of Alternatives Needed to Assess Military Posture in Asia. We reported that DOD's decision to move forward with the tour normalization initiative, which would increase the tour lengths of personnel stationed in South Korea and move thousands of military dependents to South Korea, was not supported by a business case analysis, a thorough examination of the potential benefits, advantages, disadvantages, and affordability of viable alternatives. We recommended that the Secretary of Defense identify and direct the appropriate organization within DOD to complete a business case regarding the decision to move forward with the tour normalization initiative. The Military Construction, Veteran's Affairs, and Related Agencies Appropriation Bill (112-29) also cited our report and mandated that DOD provide a business case analysis for tour normalization before any future funding requests for the initiative were approved. In response, United States Forces Korea conducted a series of consultations with the services and Congress to evaluate the costs and benefits a business case analysis associated with the tour normalization initiative. On March 29, 2012, General Thurman, Commander United States Forces Korea, testified that the United States would not be moving forward with the tour normalization initiative, because it was unaffordable. According to an OSD Policy official, the determination that tour normalization was too expensive and to not move forward with the initiative was the result of the recommendation to conduct the business case evaluation of the initiative as recommended in GAO's May 2011 report. As a result of conducting this analysis, DOD reevaluated one of its major posture initiatives and took action based on weighing the specific costs and benefits of the initiative.

    Recommendation: To provide DOD and Congress with comprehensive posture cost information that can be used to fully evaluate investment requirements and the affordability of posture initiatives, the Secretary of Defense should direct the Secretaries of the military departments to provide these cost estimates to the Offices of the Under Secretary of Defense (Comptroller) and the Under Secretary of Defense (Policy) to support DOD-wide posture deliberations, affordability analyses, and reporting to Congress.

    Agency Affected: Department of Defense

    Status: Open

    Comments: The Department of Defense is taking steps to address our recommendations associated with global defense posture costs in the Pacific; however, DOD has not yet finalized its actions. For example, changes to reporting guidance and procedures for global posture costs will be outlined in the forthcoming Global Defense Posture DOD-Instruction; however, as of August 2013, that instruction remained in draft. Furthermore, according to DOD officials, the Department, specifically the Office of the Under Secretary of Defense (Comptroller), continues to identify the total cost of posture and gain fidelity on cost estimates though the use of data calls as part of the program/budget cycle. However, as of August 2013, this cost collecting process remains in development. As a result, both current and future posture costs to use in posture deliberations are not yet availble.

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