DOD Plans to Privatize Most Family Housing by 2005, but Its Reported Data Do Not Fully Show Progress in Eliminating Inadequate Housing

Although DOD reported to Congress that the services plan to privatize  most of their family housing units by the end of fiscal year 2005, these  reports do not include the number of privatized units that have been  renovated or newly constructed. As of March 2003, the military services had signed contracts privatizing  about 28,000 family housing units and plan to privatize a total of about  140,000 units by the end of fiscal year 2005. We recognize it can take developers several years to renovate existing  housing units or construct new ones after the military housing is  privatized. Furthermore, as the  privatization program progresses, it will become increasingly important to  have complete data on the status of actual renovation and new  construction of privatized housing units on which to determine how  quickly the program is creating adequate family housing and improving the  living conditions of the servicemembers and their families. Consultant Costs Represent Less than Half of Total Privatization Support Costs

According to the services’ budget data, costs for consultants are less than  half of the services’ total privatization support costs, actual and projected. As figure 2  shows, the services project sharp declines in privatization support and  consultant costs after fiscal year 2004. Military Services Use Inconsistent Definitions of Privatization Support and Consultant Costs

The military services are not consistent in their definitions for  privatization support and consultant costs. The differences in the services’  definitions for privatization support costs result in inconsistent budgeting  for these costs. Furthermore, OSD does not report its own program consultant costs in the  quarterly report. Differences in the Services’ Definitions for Consultant Costs Result in Inconsistent Reporting to Congress

Because OSD had not defined the types of costs to be included in  determining consultant costs, the services define them differently,  resulting in inconsistent reporting of consulting expenditures in the  department’s quarterly housing privatization report to Congress. Several Factors Limit Evaluation and Comparison of Consultant Fees

Although housing privatization fees paid to individual consultants vary  among the services, several factors limit an evaluation and comparison of  these fees. Such factors include the differences in labor categories, hours,  and skills mix that each consulting firm can use to describe the work they  need to do to accomplish the work specified by the services, such as the  following:
Labor categories. As a result, service  officials said that they have contracted with firms that provide the best  value to the government based on their needs. To provide for more consistent and complete data on privatization  consultant costs, we recommend that the Secretary of Defense direct the  Under Secretary of Defense for Acquisition, Technology, and Logistics, in  consultation with the Under Secretary of Defense (Comptroller), to  (1) define consultant costs, including a determination of the inclusion of  portfolio management costs, for the military services; and (2) include  OSD’s own program consultant costs associated with its efforts to  privatize military housing in the department’s quarterly housing  privatization report to Congress.
Why GAO Did This Study

In 2000, Congress required the Department of Defense (DOD) to report quarterly on the services' expenditures for consultants in support of the military family housing privatization programs. GAO was asked to review the costs of the consultants DOD used to support privatizing housing for servicemembers and their families. This report discusses (1) the number of family housing units the services have privatized, particularly newly constructed or renovated units, and project to be privatized by fiscal year 2005; (2) the portion of privatization support costs used for consultants; (3) the services' consistency in the definition for privatization support and consultant costs; and (4) factors that limit an evaluation of how consultant fees for the military housing initiative compare among the services.

What GAO Found

Although DOD reported to Congress that the services plan to privatize most of their family housing by fiscal year 2005, DOD's reports do not provide decision makers with the number of privatized units that have been renovated or newly constructed. As of March 2003, the services had contracts privatizing about 28,000 family housing units and planned to privatize 140,000 units by fiscal year 2005. As a result of this privatization, about 7,600 units had been constructed or renovated. It can take developers several years to renovate existing housing or construct new units after they are privatized. As the program progresses, it will become increasingly important to have complete data on which to determine how quickly the privatization program is creating adequate family housing. Costs for consultants are less than half of the services' privatization support costs. The services anticipate many privatization support and consultant costs to peak in fiscal year 2004 when the need for consultants diminishes once most privatization contracts are signed. Remaining support costs will then focus increasingly on managing the portfolio of the privatized housing. The services are not consistent in their definitions for privatization support and consultant costs. The differences in the services' definitions for privatization support costs result in inconsistent budgeting for these costs. Also, the differences in the services' definitions for consultant costs result in inconsistent reporting of consultant costs in the department's quarterly housing privatization report to Congress. Further, the Office of the Secretary of Defense does not report its own program consultant costs in the quarterly report. Several factors, such as differences in labor categories, hours, and skills mix that each consulting firm can use to accomplish work, limited our evaluation of how consultant fees for the military housing initiative compare among the services. Even though these factors hinder a comparative evaluation of consultant fees, service officials told us they believe that they have contracted with firms that provide the best value to the government based on their needs and that the consultants' fees are fair and reasonable.