Summary: The Department of Defense (DOD) estimates that 168,000 military family housing units are inadequate, lack modern amenities, and are in need of major renovation and replacement. According to DOD, completing this work using traditional military construction methods would take more than 20 years and cost $16 billion. To improve housing faster and more economically, Congress authorized the Military Housing Privatization Initiative in 1996. Although DOD has awarded contracts to construct or improve 16,000 units and has plans to privatize an additional 96,000 units by the end of fiscal year 2006, privatization projects are not supported by reliable or consistent needs assessments, and the overall requirement for military housing is not well-defined. The department has achieved two key financial goals for the privatization program--leveraging of government funds and lower project life-cycle costs. Although DOD has included provisions designed to protect the government's interests, GAO found areas where DOD could further enhance protections to the government. First, some contracts did not fully anticipate the increased rent to be paid to project developers as a result of a DOD initiative to increase housing allowances for service members. Second, although military installation officials will participate with developers in making project improvement decisions valued at $3.9 billion over contract terms in nine projects, DOD and service headquarters oversight of these decisions appears limited. Third, GAO found wide variation in contracts regarding assumptions and fees for services paid to developers. Finally, although DOD has developed a semi-annual report to help it monitor and evaluate financial and management data and assess the performance of individual projects, the reports have not been completed in a timely manner, do not include all relevant information, and are not subject to independent verification.
