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.

Recommendations for Executive Action

  1. 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 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

  2. 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 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

  3. 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, 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

  4. 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 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

  5. Status: Closed - Implemented

    Comments: DOD's actions have resulted in more accurate and comprehensive posture costs for U.S. Pacific Command, as GAO recommended in May 2011. The Department reports funded posture costs to Congress in the annual U.S. Global Defense Posture Report to Congress. According to DOD officials, prior to GAO's May 2011 report, only military construction costs were included in the report to Congress. In part as a result of GAO's recommendation in May 2011, the cost data that are included in the report to Congress, starting as early as 2012, now reflect all costs for new or ongoing funded posture initiatives in support of enduring operations that, according to DOD officials, have been approved by the Secretary of Defense. In addition, the Overseas Cost Summary exhibit is included annually as part of DOD's budget submission. According to DOD officials, the exhibit identifies the amounts necessary for funding of all personnel, operations, maintenance, facilities, and support costs for all DOD overseas military units in the U.S. Pacific Command and the costs of supporting all dependents who accompany DOD personnel outside of the United States. The total cost for operating and maintaining existing installations, family housing and other cost elements for each location in the U.S. Pacific Command area of responsibility, is captured by total country cost in the Overseas Cost Summary exhibit. According to DOD officials, since GAO's May 2011 report, DOD has placed extra emphasis on cost data collection to support greater transparency of posture costs in the Pacific. As a result of these actions, DOD has made substantial progress in identifying more comprehensive posture costs in the Pacific.

    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

  6. Status: Closed - Implemented

    Comments: Since GAO's recommendation in GAO-11-316, the Department has put added emphasis on posture planning and costs as part of the Combatant Commands Theater Posture Plans. According to DOD officials, as a result of the recommendation, the Department now requires the Combatant Commander to include comprehensive cost estimates for new initiatives as part of the Theater Posture Plan. Those estimates are continually refined up until the point that they are requested in the budget. This is all part of an integrated posture planning prioritization process. According to officials, Posture requirements are identified in the Combatant Command's (COCOM) annual Theater Posture Plan (TPP) and used as the basis for prioritizing initiatives across COCOMs. According to DOD officials, these initiatives are developed from Departmental guidance addressing posture priorities. After the initiatives have been assessed to ensure proper strategic linkage, the Department begins to prioritize the initiatives to ensure that the most critical posture requirements are identified for potential resourcing. According to DOD officials, the TPPs include near-term estimates of posture initiatives, long-term costs of posture initiatives and a description of efforts to leverage existing infrastructure as alternatives to new posture requirements. Costs included in the TPPs are often rough order of magnitude costs. According to DOD officials, the TPP is the key starting point for the DOD posture prioritization process and informs DOD resourcing deliberations, ultimately resulting in decisions that produce the estimated cost of posture, as reflected in the annual U.S. Global Defense Posture Report to Congress. As a result of these actions, DOD has met the intent of the recommendation by better informing the Combatant Commander of necessary posture-related cost data to support the development of the annual theater posture plans.

    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

  7. Status: Closed - Implemented

    Comments: Since GAO's recommendation in GAO-11-316, the Department has put added emphasis on posture planning and costs as part of the Combatant Commands Theater Posture Plans. According to DOD officials, as a result of the recommendations in GAO-11-316, the Department now requires the Combatant Commander to include comprehensive cost estimates for new intiatives as part of the Theater Posture Plan. According to DOD officials, cost estimates are provided by the Combatant Commander's in their theater posture plans which are submitted to the Under Secretary of Defense (Policy) for informal adjudication to the global posture community for prior finalization. Under Secretary of Defense (Comptroller) participates in that information review by evaluating cost data and providing feedback. According to DOD officials, this has become part of an intergated posture planning and prioritization process that supports DOD-wide deliberations, affordability analyses, and reporting to Congress. As a result of these actions, DOD has met the intent of the recommendation by better informing the Under Secretary of Defense (Policy) and Under Secretary of Defense (Comptroller) so they can better support internal decision-making and reporting to Congress.

    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

 

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