Defense Infrastructure: Improved Guidance Needed for Estimating Alternatively Financed Project Liabilities

Abstract : To effectively manage facilities, DoD has pursued a strategy that includes base realignment and closure, privatizing certain base assets, and leasing underused property. To do so, DoD leverages private capital using alternative financing agreements that rely at least in part on means other than full up-front appropriations. The House Armed Services Committee directed GAO to assess the impact of base closures on such agreements and how DoD captures costs associated with projects in the BRAC process. This report does the following: (1) describes existing projects on DoD's U.S. bases, as of September 30, 2011; how project legal agreements protect the government's financial interests; and circumstances where DoD could face financial liabilities in the event of base closure; and (2) determines the extent to which DoD's process for estimating costs and savings of base closure candidates captures these liabilities and other costs. GAO reviewed documents; collected information from DoD on projects active as of September 30, 2011; and interviewed officials. GAO recommends that DoD modify BRAC data collection and cost modeling to better indicate possible liabilities arising from such projects. DoD did not concur, noting that military value is the primary criterion for BRAC decisions and liabilities will not be known until project negotiations. GAO's recommendations do not preclude optimizing military value, and certain liabilities may be determinable before negotiations. Thus, GAO continues to believe that acting on these recommendations would help improve the BRAC process.