	Background

The Military Construction Authorization Act, 1984, established the Military  Family Housing Leasing Program, commonly referred to as the Section 801  housing program. In 1996, Congress created a new military family  housing program, called the Military Housing Privatization Initiative,  which provides DOD with authorities to attract investments from private  developers for the construction and improvement of military housing. The Status of On-Base Section 801 Housing Contracts Varies Widely among Military Installations

		Four Contracts Are Still in Their In-Lease Phase

The status of contracts for on-base Section 801 military housing varies  widely, ranging from continuing the in-lease phase of the contracts to  demolishing unneeded units. There are eight on-base Section 801 housing  contracts: four remain in the in-lease phase during which DOD rents all of  the units from the developer for up to 20 years whether the units are  occupied or not, two are in the out-lease phase during which developers  may be permitted to lease units to the general public and pay DOD rent for  the use of the land for another 20 to 30 years, and two are involved in  contract disputes or litigation. Of the two  contracts in the out-lease phase, one (Fort Wainwright) has completed its  housing transition to the general public’s use, while the other (Fort Hood)  has renegotiated its contract to retain priority use of the housing units for  military personnel or DOD civilians. Finally, the two contracts in dispute or litigation are Eielson Air Force  Base and Naval Weapons Station Earle. Additionally, while some Section 801 contracts provide that DOD may  terminate early in the event of a national emergency or other specific  circumstances, such as when the developer fails to perform or violates  certain contractual requirements, none of the original contracts  specifically address potential liability in instances where DOD might  terminate for reasons such as reduced demand for housing due to base  realignment and closure, or security concerns with permitting the general  public to occupy on-base housing. Some DOD Installations or Communities Would Face Transition Costs If Housing Units Are Converted to the General Public’s Use

We found there would be transition costs for DOD and communities at  three of the four installations remaining in the in-lease phase of their  contracts—the period in which DOD rents all of the units from the  developer for a period of up to 20 years whether the units are occupied or  not—if the on-base Section 801 housing units were to transition to the out- lease (the general public’s use). The three  affected sites are: Naval Base Ventura County Port Hueneme, Ellsworth  Air Force Base, and Hurlburt Field. No cost estimate was available at the time of  our review. We found, for example, that Fort Hood renegotiated its on- base Section 801 contract to contractually agree to the terms of any  potential early termination of its lease and retain priority use of the  housing units for future military or DOD civilians. However, in our  interviews with housing officials at five installations, Air Force and Navy  officials stated they were unfamiliar with Fort Hood’s Section 801 housing  contract modifications or any contract changes at other installation with  Section 801 contracts. According to federal best practices for sharing information to ensure  efficient use of resources, program managers should communicate  information within a time frame to management and others within the  entity to meet goals for effective and efficient use of resources. Without a communications process to share installations’  experiences with any major housing contract changes and community  interaction, DOD and the services cannot ensure that the four installations  facing potential contract changes in their out-lease will have all timely  information to position them to negotiate the most cost-effective contract  terms for the U.S. government. Also, while at least one installation has interacted with the  community—including communicating which entity pays for security,  education, transportation, and environmental considerations when the  general public occupy on-base housing—DOD lacks a communications  process to share any community interaction experiences among all  Section 801 housing installations. Recommendation for Executive Action

To ensure that DOD and the military services have all information and  possible options they need to revise relevant housing contracts in the  future in the best interests of the federal government, we recommend that  the Secretary of Defense direct the Under Secretary of Defense  (Acquisition, Technology and Logistics) to develop a communications  process so that all Section 801 housing installations may share information  and best practices for negotiating any revisions to military housing  contracts and for interacting with communities before allowing the  general public’s use of on-base housing. The Department of Defense (DOD)  and the local community will not incur any transition costs.
Why GAO Did This Study

In the Military Construction Authorization Act, 1984, Congress authorized the Section 801 housing program, which provided a means for improving and expanding military family housing through private developers' investment. Under this authority, the Department of Defense (DOD) awarded eight contracts for the construction of on-base housing that typically consisted of two phases: the in-lease (DOD leases all of the units from developers for up to 20 years whether housing is occupied or not) and the out-lease (under some contracts, developers may rent housing to the general public while leasing the land from DOD for up to 30 more years). Based on a mandate in the National Defense Authorization Act for Fiscal Year 2010 conference report, GAO's objectives were to assess (1) the status of contracts for on-base Section 801 military housing, (2) the estimated costs to DOD and local communities that would result from the general public occupying this housing, and (3) the extent to which DOD and the services share information on modifications to the contracts and community interaction experiences. GAO visited five installations with on-base Section 801 housing, analyzed housing contracts, and interviewed relevant officials.

What GAO Found

The status of contracts for on-base Section 801 military housing varies widely, ranging from continuing the in-lease phase of the contracts to demolishing unneeded units. Of the eight on-base Section 801 housing contracts, four remain in the in-lease phase (when housing is reserved for service members and their families), two are in the out-lease phase (when, depending on the terms of the contract, the installation may allow the developer to rent housing to the general public or reserve housing for service members), and two are in contract dispute or litigation--Eielson Air Force Base and Naval Weapons Station Earle. For the two contracts in the out-lease, Fort Wainwright converted its housing units to the general public's use, while Fort Hood renegotiated its contract to retain housing for military or DOD civilians' use. The housing contracts generally require the developer to pay certain costs (potentially including roads construction, utilities, and demolition costs) to permit the Section 801 housing units' transition to the general public's use; however, no cost estimates existed during GAO's review. Also, GAO found potential transition costs for DOD and the communities linked to three installations: Naval Base Ventura County Port Hueneme, Ellsworth Air Force Base, and Hurlburt Field. The potential costs relate to security, education, transportation, and environmental considerations. GAO did not identify any potential benefits that might accrue from converting the leases to the out-lease phase because it was outside of the scope of our work. GAO found that the services share information regarding their Section 801 housing contracts with other installations within the service; but DOD and the services do not share this information across the services. For example, Fort Hood renegotiated its contract to specify additional reasons for potential early termination of its lease, and retained priority use of the housing units for military personnel or DOD civilians; however, Air Force and Navy officials stated they were unfamiliar with these contract modifications. Additionally, GAO reported that most Section 801 contracts provide that DOD may terminate early in the event of national emergency or other limited circumstances, but none of the contracts specifically address potential liability in instances where DOD might terminate for other reasons such as reduced demand for housing or security concerns. GAO found that the services and DOD lack a communications process to share information from contract negotiations and community interaction--both of which can affect the efficient use of military housing resources. According to best practices for internal control in the federal government, program managers should communicate information within a time frame to management and others within the entity to meet goals for effective and efficient use of resources. Without a communications process to share installations' experiences with any major housing-contract changes and community interaction, DOD and the services cannot ensure that the four installations facing potential contract changes will have the timely information to better position the installations to negotiate the most cost-effective contract terms for the federal government.

What GAO Recommends

GAO recommends that DOD develop a communications process among installations with Section 801 housing to share information regarding any contract changes. DOD concurred with GAO's recommendation.