MILCON appropriations are generally available for obligation for 5 fiscal  years, at which time the appropriation expires. According to  DOD officials, available but unobligated amounts no longer needed may  be either rescinded by Congress or reprogrammed to other MILCON  projects that the active component identifies as needing additional  funding. The Active Component Obligated and Expended Most of Its Military Construction Appropriations Received during Fiscal Years 2005 through 2016

During fiscal years 2005 through 2016, Congress appropriated about $66  billion in MILCON funds to the active component and, as of September  30, 2016, the active component had obligated all but about $5.1 billion  and expended all but about $11 billion of those funds. Of the $5.1 billion  that remains unobligated, about $4.6 billion was unexpired and available  for new obligations (i.e., from fiscal year 2013 through 2016  appropriations). The Active Component Reprogrammed Hundreds of Millions of Dollars in Military Construction Appropriations in Fiscal Years 2010- 2016

The active component reprogrammed about $1.6 billion in MILCON  appropriations to fund shortfalls caused by emergency projects, projects  that were authorized but did not receive specific appropriations, and  projects needing additional funding in fiscal years 2010 through 2016. Of  this amount, the Army reprogrammed about $789 million of about $14  billion in appropriated MILCON funds; the Navy, about $535 million of  about $14 billion in appropriated MILCON funds; and the Air Force, about  $295 million of about $7 billion in appropriated MILCON funds. DOD’s Cost Estimates for Selected Construction Projects Were Not Reliable and DOD’s Guidance Does Not Fully Incorporate the Steps Needed for Developing Reliable Estimates

Our analyses of the cost estimates for three selected projects shows that  the cost estimates were not reliable, and DOD’s cost estimating guidance  does not fully incorporate all the steps needed for producing reliable  estimates. As previously  discussed, the Cost Guide defines the four characteristics— comprehensive, well documented, accurate, and credible—of a reliable  cost estimate and the associated best practices related to each  characteristic. The Cost Guide also identifies 12 steps that, when incorporated into an  agency’s cost estimating procedures and guidance, are more likely to  result in reliable and valid cost estimates. However, our analysis of DOD’s  department-wide cost estimating guidance—the Unified Facilities  Criteria—found that the criteria did not include all of these 12 steps. The quality of project  cost estimates are of great importance since those estimates are the  basis for DOD’s requests for appropriations. Until DOD incorporates the 12 steps of  high-quality, reliable cost estimating into this department-wide  construction criteria, DOD and congressional decision-makers may not  have reliable estimates to inform their decisions regarding appropriations  and the oversight of projects. DOD acknowledged that expanding its cost guidance to more fully  incorporate these steps would benefit the military construction program,  and that it is planning to address this by revising its cost guidance during  Fiscal Year 2019. To examine the amount of MILCON reprogramming during fiscal years  2010 and 2016 by the active component, we reviewed DOD’s requests to  Congress to reprogram MILCON funds from one project to another. To determine the extent to which DOD’s MILCON cost estimates are  reliable and DOD’s guidance for producing estimates fully incorporates all  of the steps needed for developing reliable estimates, we compared the  process for developing three selected projects with the characteristics  and best practices for developing a reliable estimate identified in GAO’s  Cost Estimating and Assessment Guide: Best Practices for Developing  and Managing Capital Program Costs (the Cost Guide).
Why GAO Did This Study

Between fiscal years 2005 and 2016, Congress annually appropriated between $2.5 to $9.6 billion in MILCON funding for the active component of the U.S. military to use for projects worldwide. Reliable project construction cost estimates are of great importance, since those estimates drive these appropriations.
House Report 114-537 accompanying a proposed bill authorizing national defense activities for fiscal year 2017 included a provision for GAO to report on DOD's MILCON cost estimating. This report examines the extent to which (1) the active component obligated and expended the MILCON appropriations received during fiscal years 2005-2016, (2) the active component reprogrammed MILCON appropriations during fiscal years 2010 through 2016, and (3) DOD's MILCON cost estimates are reliable for selected projects and DOD's guidance for developing estimates fully incorporates the steps needed for developing reliable estimates. GAO analyzed the active components' MILCON execution data and reviewed DOD's guidance for cost estimating and compared it with the best practices identified in GAO's Cost Estimating and Assessment Guide .

What GAO Found

During fiscal years 2005 through 2016, Congress appropriated about $66 billion in military construction funds (MILCON) to the active duty Army, Navy, and Air Force (referred to as the active component) for projects. As of September 30, 2016, the active component had obligated all but about $5.1 billion and expended all but about $11 billion of those funds. Of the $5.1 billion remaining unobligated, about $4.6 billion was still available to be obligated because MILCON appropriations are generally available for new obligations for 5 years. According to Department of Defense (DOD) officials, available but unobligated amounts no longer needed may be either taken back by Congress or reprogrammed to other MILCON projects that the active component identifies as needing additional funding.
During fiscal years 2010 through 2016, the active component reprogrammed about $1.6 billion in MILCON appropriations to fund emergency projects, projects that were authorized but did not receive specific appropriations, and projects needing additional funding. Of this amount, the Army reprogrammed about $789 million; the Navy, about $535 million; and the Air Force, about $295 million.
DOD's guidance does not fully incorporate the steps needed for developing reliable estimates and the estimates for three projects that GAO reviewed were not reliable. Specifically, two of the three high-value projects GAO examined experienced a more than 30-percent increase from the initial cost estimates submitted to Congress. GAO determined that DOD cost estimators did not follow all the best practices associated with the four characteristics—comprehensive, well-documented, accurate, and credible—of a reliable estimate for these projects. GAO's Cost Estimating and Assessment Guide identifies 12 steps that, if used, are more likely to result in reliable and valid cost estimates. However, as shown below, DOD's construction guidance—the Unified Facilities Criteria—does not include all of these steps. Until DOD incorporates these steps, DOD and congressional decision-makers may not have reliable estimates to inform their decisions regarding appropriations and the oversight of projects.

What GAO Recommends

GAO recommends that DOD ensure that its cost estimating guidance fully incorporate the steps needed for developing reliable cost estimates. DOD partially concurred with GAO's recommendation and stated that it will issue revised cost guidance in fiscal year 2019 that more fully incorporates those steps that would benefit the military construction program.