Base Closures:

Long and Costly Process of Reducing the Local National Work Force in Germany

NSIAD-92-62: Published: Apr 17, 1992. Publicly Released: Apr 17, 1992.

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Pursuant to a congressional request, GAO reviewed U.S. obligations to its local national work force in Germany resulting from the drawdown of U.S. forces, focusing on: (1) the U.S. military's basic severance pay liability according to international agreements; (2) the potential for other costs increasing that liability; and (3) whether the Army and Air Force have sufficient funds to cover those liabilities.

GAO found that: (1) in June 1991, the U.S. military's average severance pay liability under existing Tariff Agreement provisions was about $3,000 per person, or about $144 million, assuming that all 47,280 German employees of the U.S. military were eligible for full severance pay; (2) U.S. liability is not limited by Tariff Agreements and can be increased by German court decisions favoring terminated local nationals; (3) many local nationals won settlements averaging over $5,200 during recent base closures; (4) the United States has negotiated an agreement with the German labor unions on an indemnity plan that provides greater benefits, up to $4,400 per person, and reduces the probability that future terminations would be legally contested; (5) if employees still choose to litigate for higher settlements, the United States could request that the German government bear the additional costs, in conjunction with burden-sharing initiatives; (6) the German labor termination process is lengthy, and could cost the Army and Air Force up to $4.1 million in unearned salaries if the United States fails to consider this timing in making base closure announcements; and (7) neither the Army nor the Air Force budgeted or accounted for the cost of severing local national employees in Germany as it was being incurred.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: State agrees that such an initiative should be part of bilateral burden-sharing discussions but that because of other ongoing discussions, the time is not right to introduce this topic.

    Recommendation: If local nationals continue to litigate and severance costs exceed employee entitlements under the Tariff Agreement and indemnity plan, the Secretary of State should request the German government to assist in financing the U.S. military drawdown by bearing the additional severance costs. During the planned bilateral burden-sharing initiative being undertaken by the United States, it would be appropriate to introduce local national termination costs.

    Agency Affected: Department of State

  2. Status: Closed - Implemented

    Comments: The Department of Defense (DOD) is now announcing base closures 6 to 12 months in advance. This should allow ample time to terminate local nationals without incurring unearned salary costs.

    Recommendation: The Secretaries of Defense, the Army, and the Air Force should endeavor to announce base closure dates in adequate time to terminate employees to avoid paying millions of dollars in unearned salaries.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: DOD is now announcing base closures 6 to 12 months in advance. This should allow ample time to terminate local nationals without incurring unearned salary costs.

    Recommendation: The Secretaries of Defense, the Army, and the Air Force should endeavor to announce base closure dates in adequate time to terminate employees to avoid paying millions of dollars in unearned salaries.

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

  4. Status: Closed - Implemented

    Comments: DOD is now announcing base closures 6 to 12 months in advance. This should allow ample time to terminate local nationals without incurring unearned salary costs.

    Recommendation: The Secretaries of Defense, the Army, and the Air Force should endeavor to announce base closure dates in adequate time to terminate employees to avoid paying millions of dollars in unearned salaries.

    Agency Affected: Department of Defense: Department of the Army

  5. Status: Closed - Not Implemented

    Comments: State agrees that such an initiative should be part of bilateral burden-sharing discussions but that because of other ongoing discussions, the time is not right to introduce this topic.

    Recommendation: When delays are caused by the German government, the Secretary of State should negotiate an agreement with Germany to ensure that associated costs are paid by Germany.

    Agency Affected: Department of State

  6. Status: Closed - Implemented

    Comments: DOD issued implementation guidance on the new Foreign National Separation pay account, which reemphasized the policy for accruing severance pay obligations and the requirement to perform annual reconciliations of the account.

    Recommendation: To ensure funds for severance pay are available for anticipated base and facility closures, the Secretary of Defense should direct the Secretaries of the Army and the Air Force to establish a consistent policy and procedures for severance pay accounting in Germany. Those procedures would provide for the accounting of severance on an accrual basis using employee records to estimate the liability and provide for the annual reconciliation of the severance account.

    Agency Affected: Department of Defense

 

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