Defense Infrastructure:

In-Kind Construction and Renovation Projects Initiated by DOD during Fiscal Year 2013

GAO-15-649: Published: Sep 9, 2015. Publicly Released: Sep 9, 2015.

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Brian J. Lepore
(202) 512-4523
leporeb@gao.gov

 

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What GAO Found

The Department of Defense (DOD) reported to GAO that 137 in-kind projects involving construction or renovation, valued at about $1.8 billion, were initiated in Korea, Japan, Germany and the United States during fiscal year 2013. In-kind payments involve non-cash options, such as renovating or constructing a facility. The table below summarizes the number and value (estimated costs to be incurred) of the projects by country and highlights the most frequently reported purpose for which the projects were used.

Number, Value, and Purpose of In-Kind Construction and Renovation Projects Initiated by DOD during Fiscal Year 2013

Location

Number of projects

Reported estimated value (then-year U.S. dollars)

Most frequently reported purpose for the project

Korea

31

$1,574,237,730a

Operations and training (14 projects)a

Japan

74

264,050,000a

Utility and ground improvements (23 projects)a

Germany

3

20,722,423

Housing and community (2 projects)a

United States

29

18,628,469

Utility and ground improvements (10 projects)a

DOD total

137

$1,877,638,622a

Operations and training (33 projects) and utility and ground  improvements (33 projects)a

Source: GAO summary of Department of Defense (DOD) data. | GAO-15-649

aSubtotals for Korea and Japan and totals for DOD are of undetermined reliability because supporting documentation was not readily available in English, or, according to DOD officials, the costs incurred by the Governments of Korea and Japan were not required to be disclosed to the United States.

The military services' real-estate and real-property management officials discussed four potential advantages to accepting in-kind payments rather than cash payments in domestic real-estate transactions, and identified one potential disadvantage. The reported advantages included generally obtaining facilities more quickly than through the appropriations process and installations receiving 100 percent of the value of negotiated payments received from a real-property interest as opposed to cash payments where only 50 percent of the value is guaranteed to be provided back to the installation. However, some services have implemented policy changes such as returning 100 percent of the value of the real-property interest back to the installation—up to $1 million when accepting cash payments. One reported disadvantage was in-kind payments may require additional administrative work and oversight compared to cash payments.

GAO's review of service policies governing real-estate transactions identified that all services have issued guidance requiring that the cumulative value of in-kind projects reflect the fair-market value of the real-property interest in real-estate transactions. Each of the Services reported similar broad procedures for valuing in-kind payment projects and GAO's review of the documentation for the projects initiated in fiscal year 2013 confirmed that the installations were following the described procedures.

Why GAO Did This Study

DOD uses in-kind payments domestically and overseas in its real-estate transactions as an alternative to appropriated funds to help manage a global real-property portfolio that includes more than 555,000 facilities worldwide. In-kind payments refer to DOD receiving construction and renovation services rather than cash as payment for DOD providing goods, services, real property, or an interest in real property.

The National Defense Authorization Act for Fiscal Year 2013 includes a provision for GAO to review the use of in-kind projects. This report identifies (1) the in-kind payment projects that DOD reported it initiated during fiscal year 2013, and discusses the potential advantages and disadvantages of accepting in-kind payments instead of cash for domestic real-estate transactions; and (2) the extent to which the military services have developed and implemented guidance and procedures to value domestic in-kind payments to ensure the receipt of fair-market value. The Act also provided for a listing of facilities constructed or renovated with the use of in-kind payments, and additional information, which GAO provides in appendixes to this report. To conduct this work, GAO collected in-kind project data from the military services, reviewed DOD and military service policy and project documentation, and interviewed military officials.

GAO is not making recommendations in this report. DOD provided technical comments on the findings, which GAO has incorporated where appropriate.

For more information, contact Brian J. Lepore at (202) 512-4523 or leporeb@gao.gov.

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