Actual Renovation Costs Generally Were Consistent with or Less Than Budget Estimates

With a few exceptions, the services’ reported actual costs for renovation  projects for general and flag officer quarters were generally consistent  with or less than the budget estimates provided to Congress. Cost Increases Due to Customer-Requested Changes and Unforeseen Repairs

Customer requests for changes and unforeseen repairs were the primary  reasons for cost increases to renovation projects. Customer driven requests, such as upgraded kitchen and bathroom  renovations, or work that was not included in the original scope of work  were responsible for about 45 percent of the total cost increase for the 5  Marine Corps projects that exceeded their budgets by more than 10  percent. For the 5 projects that exceeded their budgets by more than 10 percent,  cost increases due to such unforeseen repairs as for termite damage or  such undetected structural deficiencies as sagging floor supports occurred  because these deficiencies or requirements were not identified during  initial inspections. The Marine Corps budget estimate did not  include this requirement. Marine Corps and Navy Did Not Properly Account for Gifts Used to Help Renovate the Home of the Commandants

The Army, Navy and Marine Corps each received private donations of  cash, property, or services to furnish and renovate general and flag officer  quarters. According to Marine Corps officials, they did not follow the prescribed  procedures for accepting and accounting for the estimated $765,500 in  nonmonetary gifts (materials such as kitchen cabinets, furniture, wall  coverings, draperies, and furniture upholstery) from the Friends of the  Home of the Commandants. However, the Marine Corps  property records do not include the items purchased with the gift funds. The Navy and Army also accepted nonmonetary or monetary gifts for  furnishings for flag and general officer quarters. However, similar to the Marine Corps, the Navy did not properly accept  and account for about $3,970 of the gifts in the property records. By the end of fiscal year 2003, the services had privatized 65 of  their 784 general and flag officer quarters and planned to privatize 426, or  54 percent, by the end of fiscal year 2008. For example, the Air Force draft guidance applies the  same project approvals for renovations to privatized general officer homes  as currently exist for government-owned homes, which is all renovation  projects over $35,000. Finally, DOD and the military services  could lose visibility over renovations to general and flag office quarters  that are privatized. With regard  to the first two recommendations, DOD indicated that the Navy has agreed  to reemphasize the importance of limiting customer-driven changes to  renovation projects for general and flag officer housing, properly  accounting for all gifts accepted and used to help renovate the Home of  Commandants of the Marine Corps, and incorporating accountability  measures into revisions of Secretary of the Navy guidance governing the  general and flag officer quarters program. To determine how the actual costs of renovation projects for general and  flag officer quarters compared to the service budget estimates provided to  Congress, we reviewed all renovation projects of more than $100,000 for  fiscal years 1999 through 2003. To assess the extent to which DOD and the services have issued guidance  to provide visibility and control over costs associated with renovation  projects for privatized general and flag officer quarters, we interviewed  Office of the Secretary of Defense and service officials responsible for  family housing and privatization.
Why GAO Did This Study

Recent cost increases in renovation projects to general and flag officer quarters raised questions about the services' management of the programs. GAO was asked to determine (1) how actual costs of renovation projects for general and flag officer housing compare to service budget estimates provided to Congress and (2) the primary reasons for any increases and the services' procedures to control cost increases. Additionally, GAO is presenting observations about the services' accountability over gifts provided to help renovate some general and flag officer quarters and the extent to which Department of Defense (DOD) guidance provides visibility and control over costs associated with renovation projects for privatized general and flag officer quarters.

What GAO Found

With few exceptions, the services' reported costs for renovation projects for general and flag officer quarters were generally consistent with budget estimates provided to Congress. For fiscal years 1999 to 2003, GAO found that 184, or 93 percent, of the 197 renovation projects over $100,000 cost less than or the same as budget estimates. While the remaining 13 projects--6 Navy and 7 Marine Corps--exceeded cost estimates, 5 Marine Corps projects exceeded their budgets by more than 10 percent. Customer-requested changes and unforeseen repairs were the main reasons for cost increases to renovation projects. For 5 of the 7 projects that exceeded their budgets by over 10 percent, about 45 percent of the increased costs was for customer-driven changes, 53 percent for unforeseen repairs, and 2 percent could not be determined. Though the services have guidance to limit customer-requested changes, the Marine Corps approved many such changes that contributed to project costs exceeding budgets. Customer requests included upgraded kitchen and bathroom renovations or initially unplanned work. Unforeseen repairs, such as for termite damage or unexpected historic preservation requirements, occurred because problems were not identified in the inspections on which the estimates were based. Military services did not properly account for gifts used for general officer quarters in two instances, one involving renovation costs. In that instance, the Marine Corps did not comply with existing regulations to properly accept and account for all gifts used to renovate the Home of the Commandants. The Friends of the Home of the Commandants told GAO it provided about $765,500 in nonmonetary materials and services (e.g., furnishings and construction labor). However, the Marine Corps could list nonmonetary gifts totaling only $492,413 because it did not follow specified gift acceptance and accounting procedures. Navy General Gift Fund records show receipt of an additional $88,300 in monetary gifts from the Friends of the Home of the Commandants. The Marine Corps has receipts for monetary expenditures, but not property records for items purchased with the gift funds. The Navy and Army also accepted gifts to furnish general and flag officer homes. Of those, the Navy did not properly accept and account for about $3,970 in nonmonetary gifts. DOD and the military services could lose visibility over housing renovation costs for privatized general and flag officer homes. DOD does not require review of renovation costs for these quarters, such as costs over $35,000, as required for government-owned quarters. The Navy, Marine Corps, and Air Force are developing guidance to increase visibility and accountability over the spending for these quarters, but the draft guidance is not consistent. Although the services have privatized only 65 of their 784 general and flag officer quarters, they plan to privatize 426 or 54 percent by fiscal year 2008.