	Background

DOD’s lodging programs were established to maintain mission readiness  and improve productivity, and were intended to provide good quality  temporary lodging facilities and service for authorized personnel. DOD has approximately 82,000 transient lodging rooms. The Marine  Corps operates its PCS lodging as part of its MWR program, which is  operated as a Category C, revenue generating program. The Army estimates  that, absent privatization, it would cost about $1.1 billion and would take  more than 20 years to renovate or build new lodging facilities. Services Use Decentralized Approach to Manage and Fund Lodging Programs

Each military service takes its own approach to manage and fund its  lodging programs, but current DOD lodging guidance does not establish  performance standards and measures needed to assess program  effectiveness. The Army and the Air Force each manage  their TDY and PCS lodging under one organization, while the Navy and  Marine Corps both opt to have one organization manage TDY lodges and  another one for PCS facilities. The military services’ lodging programs receive varying levels of  appropriated and nonappropriated fund support. While DOD lodging programs are  collecting and reporting some of these measures, lodging officials are  unclear how the data is being used, since performance standards have not  been established. Army’s Privatization Plans Could Upgrade Facilities Faster but Will Increase Government Costs and Create Other Challenges

The Army believes the lodging developer will renovate existing or  construct new lodging facilities sooner—in 7 years by 2014—than  otherwise planned by the Army, and provide for adequate sustainment of  lodging facilities over the 50-year project life. Our analysis indicates that the  Army’s travel costs could increase by about $75 million per year if all  lodging facilities in the United States are privatized. In addition, the Army  could incur approximately $17.3 million in onetime costs associated with  severance pay and discontinued service retirement annuities for  nonappropriated fund lodging employees who would be let go if lodging is  privatized. The Army estimated that appropriated fund support for the  expenses associated with these items, across the United States, totaled  about $27.9 million in fiscal year 2005. Other Potential Operating Challenges of Lodging Privatization

The privatization of Army lodging may potentially affect occupancy levels  and exacerbate rate disparities among bases and between official and  unofficial travelers, as well as promote more notable inconsistencies in  room rates among services at planned joint bases. While the Army does not believe that privatization will  affect plans for joint basing, we believe it could lead to inconsistencies in  room rates among services at joint bases. Revised DOD Lodging Policy Does Not Provide Clear Performance Standards

On October 6, 2006, DOD provided the military services with revised  lodging guidance, which addressed some issues raised in prior GAO  recommendations but does not provide clear program performance  standards and measures. Additionally, as  the Army moves forward with its plans to privatize lodging, it needs to  provide the same level of accountability to the Congress and OSD for  program costs and performance as it does for its housing privatization  projects. Recommendations for Executive Action

We recommend that the Secretary of Defense direct the Under Secretary  of Defense for Personnel and Readiness in consultation with the Under  Secretary of Defense for Acquisition, Technology, and Logistics to (1)  clarify their respective roles for establishing policy and overseeing the  lodging program, and (2) update the DOD lodging program strategic plan,  to include developing performance standards and measures to ensure that  the goals of the lodging program strategic plan and Army plans to privatize  its lodging are being achieved. Appendix I: Scope and Methodology

To determine how the military services’ operate and assess their lodging  programs, we reviewed Department of Defense (DOD) and military service  lodging policy, analyzed data regarding program funding, room rates, and  occupancy rates by type of traveler. We interviewed officials from: the  Office of the Under Secretary of Defense for Acquisition, Technology, and  Logistics; Office of the Under Secretary of Defense for Personnel and  Readiness; and the Army, Air Force, Navy, and Marine Corps offices  responsible for managing the temporary duty (TDY) and permanent-  change-of-station (PCS) lodging programs. To determine the effect on Army travel costs,  we compared the average daily room rate for Army lodging to the  projected room rate under the privatization effort.
Why GAO Did This Study

The Department of Defense (DOD) transient lodging programs were established to provide quality temporary facilities for authorized personnel, and reduce travel costs through lower rates than commercial hotels. DOD has approximately 82,000 temporary duty (TDY) and permanent-change-of-station (PCS) rooms worldwide, and reported that it cost about $860 million in appropriated and nonappropriated funds to operate them in fiscal year 2005. While the Army plans to privatize its lodging in the United States, there are concerns as to whether these plans are cost-effective, and how they relate to DOD-wide lodging efforts. GAO was asked to address (1) how each military service and DOD manages, funds, and assesses the performance of its lodging programs to meet short- and long- term needs, and (2) the effect that lodging privatization would have on the costs to the Army and the ability to maintain and recapitalize facilities. GAO is also providing information on DOD's actions to implement prior recommendations regarding the lodging program. GAO obtained data from the Office of the Secretary of Defense, the military services and visited nine military installations.

What GAO Found

Each military service takes its own approach to manage and fund its lodging programs, but current DOD lodging guidance does not establish performance measures to assess program effectiveness. The Army and Air Force each manage their TDY and PCS lodging under a single organization, while the Navy and Marine Corps have separate organizations managing TDY and PCS facilities. The Marine Corps manages PCS lodging separately because it operates as a profit-generating morale, welfare, and recreation program. The services' lodging programs are provided varying levels of appropriated and nonappropriated fund support, which correlates with the room rates charged. For example, since the Air Force allocates more appropriated funds for program expenses, it charges less than does the Navy PCS program, which is sustained with the revenues generated from room rates. Determining total program costs across the services is difficult because some of the data reported are estimated or hard to collect. Though DOD has a lodging strategic plan, it has not been updated since 1999. DOD has not established lodging performance measures, and the services vary in their efforts to determine program effectiveness. Performance measures could help in assessing future program plans. The Army believes privatization will provide for faster improvement and long-term sustainment of lodging facilities and avoid costs. GAO recognizes these benefits, but its analysis shows privatization could increase costs through increased room rates and create operating challenges that have implications beyond the Army, such as uneven lodging occupancy and room rates where joint basing is planned. Under privatization, the Army projects that a developer will renovate existing or construct new lodging facilities in 7 years, and provide for their adequate sustainment over the 50-year project life. In contrast, the Army projects it would take over 20 years and cost about $1.1 billion to upgrade all lodging facilities under current plans, which do not provide for adequate long-term sustainment. GAO found that lodging privatization could increase costs to the government by about $75 million per year through increased room rates if all lodging facilities in the U.S. are privatized, with those costs borne by the operations and maintenance and military personnel appropriation accounts. The Army currently estimates it will also incur at least $17.3 million in onetime costs related to severance pay and discontinued service retirement annuities for lodging employees let go because of privatization. Privatization also may affect occupancy levels and exacerbate rate disparities among bases and between official and unofficial travelers, as well as lead to inconsistencies in room rates among services at future joint bases. Complying with relevant housing privatization legislation will allow congressional oversight of the Army's privatization of lodging. On October 6, 2006, DOD provided the military services with revised lodging guidance, but this guidance lacks performance standards and measures, and does not address which office within the Office of the Secretary of Defense is responsible for lodging policy and oversight of privatized lodging facilities.