From the U.S. Government Accountability Office, www.gao.gov Transcript for: DOD Estimates for Facility Sustainment Fall Short of Funding Needs Description: The Department of Defense (DOD) manages more than 550,000 facilities worldwide. These include everything from military housing and childcare centers to runways, roads and pipelines. GAO recently looked at how DOD estimates the costs for maintaining and replacing its facilities and how it could improve this effort. We'll find out more from GAO's Elizabeth Field. Related GAO Work: GAO-22-104481, Defense Infrastructure: DOD Should Better Manage Ricks Posed by Deferred Facility Maintenance Released: January 2022 [Music] [Elizabeth Field:] This is a ticking time bomb, and we have seen the deferred maintenance backlog at the department increased exponentially. [Holly Hobbs:] Hi and welcome to GAO's Watchdog Report--your source for news and information from the U.S. Government Accountability Office. I'm your host, Holly Hobbs. The Department of Defense manages more than 550,000 facilities worldwide. These include everything from military housing and childcare centers to runways, roads, and pipelines. DOD facilities support military communities as well as DOD's mission. And so, we here at GAO recently looked at how DOD estimates the costs for maintaining and repairing its facilities and how it could improve this effort. Today, we'll find out more from Elizabeth Field, a director in our Defense Capabilities and Management Team. Thanks for joining us. [Elizabeth Field:] Thanks for having me. [Holly Hobbs:] So Elizabeth, given the number of facilities that DOD manages and their diversity of purposes, it seems like it would be difficult to estimate maintenance and repair costs. How does it work? [Elizabeth Field:] Basically the department looks at all of the facilities that it has --things like sidewalks or storage sheds or piers. And for each category of facility, it will identify cost factors and come up with an annual cost of sustaining that facility. So, for example, for a storage shed, they'll determine the cost per square foot of that shed and then they will apportion those costs over the expected lifecycle of that facility. So, if a storage shed is expected to last 20 years, it'll divide that cost by 20, and that will be the annual facility sustainment costs for that shed. [Holly Hobbs:] And are these estimates good? [Elizabeth Field:] Well, in some ways, the department does a pretty good job. So for example, it takes inflation into account. It takes extra cost of additional security for certain facilities into account. And that's good. And we found that that is consistent with the way other federal agencies do it. But the one thing that DOD does not currently do, which it should be doing, is taking into account the age of facilities. And this is a problem because many DOD facilities are used well past their expected lifetime. For example, we found that the average age of Navy wharfs is about 73 years, which is 23 years beyond their expected lifespan. And of course, older facilities have more problems and more-costly problems. For example, at one installation that we reviewed, there were many warehouses built of wood back in the 1940s that had exceeded their lifespan by over 30 years. And so they have problems like termite damage, which is, of course, very costly to deal with. And what this all means is that DOD is likely underestimating its total facility sustainment cost. [Holly Hobbs:] So if DOD's estimates are off, how does that impact its funding for repairs and maintenance? [Elizabeth Field:] We compared the funding that the department has identified as its total facility sustainment need, which again is probably underestimated, to the amount that the department has requested for the last four years in its budget submission. And we found that the department has requested about 80% of its projected total need. And this is noteworthy because the department's own internal guidance says that it should be requesting 90% of its total estimated cost of sustaining facilities. [Holly Hobbs:] So when they don't have the funding to meet these needs, do they defer improvements or maintenance? [Elizabeth Field:] They absolutely do. And in fact, in fiscal year 2020, the department reported a deferred maintenance backlog of $137 billion. And again, keep in mind that, that is probably an underestimate. And so if you're wondering what that $137 billion in deferred maintenance looks like, it looks like poor quality and failing facilities--facilities that have been deemed lower priority, like childcare centers or military barracks. But of course, these facilities are important. And department officials explain that, well, of course, they would love to fund these facilities at 100% of their need. They often lose out to higher priority things that are more closely related to the mission and operational needs. But the problem with deferring maintenance on things like childcare centers and military barracks is that they can, of course, have second and third order effects on military readiness and morale. [Music] [Holly Hobbs:] So, Elizabeth just told us that DOD's facility maintenance estimates don't include an important factor--the age of facilities, which could increase the cost of repairs or replacements. And as a result, estimates were off, and DOD has needed to defer billions of dollars' worth of projects. So Elizabeth, what can DOD do to improve its estimates? [Elizabeth Field:] Well, right now the department is developing and rolling out a new model. And this should give DOD a better estimate of the total needs that it has for facilities sustainment. And it could allow the department to better evaluate the risks of deferring maintenance. That said, we found that the system has been delayed in terms of its implementation, and it's also not being rolled out uniformly enough across the military services to allow for comparisons, which could be useful in developing budget requests. And so, we have a number of recommendations in our report to strengthen implementation of this new system. We also recommend that in the next five years, while they are still using their current model, that they take the age of facilities into account so they don't continue to underestimate their total need. [Holly Hobbs:] And last question, what's the bottom line of this report? [Elizabeth Field:] You know, I think a department official whom we interviewed for this review said it best. And he said, "Look, this is a ticking time bomb." And indeed the deferred maintenance backlog at the Defense Department has increased exponentially. We looked at it a few years ago, and since that time, the deferred maintenance backlog has increased 195%. And so DOD really needs to get a better handle on evaluating and mitigating the risk of this problem because ultimately this check is going to come due. [Holly Hobbs:] That was Elizabeth Field talking about our report on defense infrastructure management. Thanks for your time, Elizabeth. [Elizabeth Field:] Thank you. [Holly Hobbs:] And thank you for listening to the Watchdog Report. To hear more podcasts, subscribe to us on Apple Podcasts, Spotify or wherever you listen and make sure to leave a rating and review to let others know about the work we're doing. For more from the Congressional Watchdog, the U.S. Government Accountability Office, visit us at GAO.gov.