Leased Military Housing Costs in Europe Can Be Reduced by Improving Acquisition Practices and Using Purchase Contracts
NSIAD-85-113
Published: Jul 24, 1985. Publicly Released: Jul 24, 1985.
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Highlights
GAO reviewed the weaknesses and inconsistencies in the Department of Defense's (DOD) lease acquisition practices for family housing in Europe and actions to improve these practices.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Defense | To ensure that the military services follow consistent leasing procedures and practices and comply with congressional committee lease acquisition reporting requirements, the Secretary of Defense should direct the services to jointly develop and issue guidance on uniform policies and procedures for acquiring foreign leased family housing and for complying with the congressional committee reporting requirements for lease awards. This guidance should: (1) be consistent with those acquisition principles for advertising, evaluating, and negotiating contained in DOD regulations for other types of procurement; (2) require the services to provide, in leases having escalation of net rental clauses, that rental payments will not exceed the amount of appropriations available at the time payments are due or the statutory limit established for such year under 10 U.S.C. 2828(e), and that nothing in the lease can be considered as implying Congress would, at a later date, appropriate sufficient funds to meet deficiencies; and (3) include congressional committee reporting requirements for lease awards on groups of leases with the same lessor and renewals of existing leases. |
Closed – Implemented
DOD concurred with this recommendation and stated that the services would be directed to develop a tri-service manual containing the guidance recommended by GAO. The DOD IG audit follow-up system shows that the joint service manual had been completed as of November 10, 1987, and that the uniform policies contained therein will be implemented by the services.
|
| Department of Defense | To resolve the military services' concerns over the legal propriety of buy-out provisions, the Secretary of Defense should evaluate and propose legislation to Congress on the type of buy-out provisions that should be permitted in foreign leases. |
Closed – Not Implemented
DOD concurred with this recommendation and stated that legislation would be prepared. Legislation was not submitted because it was believed to conflict with Office of Management & Budget (OMB) Circular A-11. However, the services now include a buy-out clause in lease contracts requiring contractors to state the buy-out costs for each year of the lease.
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| Department of Defense | The Secretary of Defense should require the services to obtain assurances from host-country governments that the United States would be able to exercise the buy-out provisions. |
Closed – Not Implemented
DOD concurred with this recommendation. The legal requirement that services obtain host-country assurances was to be included in the FY 1988 draft military construction bill. However, legislation was not submitted because it was believed to conflict with OMB Circular A-11. However, the services are including buy-out options in their lease contracts.
|
| Department of Defense | To provide the military services with another alternative method of acquiring needed housing in Europe, the Secretary of Defense should propose to Congress specific legislation granting the military services authority to use purchase contracting, when appropriate. |
Closed – Not Implemented
DOD concurred with this recommendation and stated that legislation would be prepared for consideration for FY 1988. However, legislation was not submitted because it was believed to conflict with OMB Circular A-11.
|
| Department of Defense | If purchase contracting authority is granted by Congress, the Secretary of Defense should require the military services to: (1) prepare economic analyses comparing the costs of purchase contract arrangements with other alternatives; and (2) seek host-country governments' support before entering into purchase contracts. |
Closed – Not Implemented
DOD concurred with this recommendation. Final implementation was contingent upon Congress enacting legislation authorizing the use of purchase contracting. DOD did not submit legislation because it believed that there was a conflict with OMB Circular A-11. However, the services are including buy-out options in their lease contracts.
|
| Department of Defense | The Secretary of Defense should direct the Navy to seek amendment to the Italian leases and any others that have been awarded containing provisions on escalation of rental in indefinite or indeterminate amounts. |
Closed – Implemented
The Navy attempted to amend existing leases, however, lessors would not agree to amendment. The Navy has instructed its field offices that all future leases must contain clauses which implement the intent of the recommendation.
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Topics
Construction contractsContract optionsCost controlLeasesMilitary housingProcurement practicesPurchase ordersRental housingLease agreementsMilitary forces