The Defense Department understimates the costs of base closures, because outsourced work isn’t accounted for in the department’s reporting process, an April 18 Government Accountability Officereport says.
DoD guidelines for determining costs of base closures require that DOD consider all costs, but without a process for considering costs related to outsourcing, reports won’t be accurate, the report says.
With the military likely to shrink in size in the coming post-drawdown years, Pentagon officials have said they want a new round of Base Realignment and Closure, although Congress so far hasn’t granted authorization since the last round of BRAC, in 2005.
But since 2005, the military has outsourced an increasing large amount of base activity such as utilities, family housing and lodging, as well as outsourcing renewable energy projects and leasing underutilized land. Closing bases could require the termination or modification of contracts underpinning those efforts.
The Cost of Base Realignment Actions model, which the DoD uses to assess how much it costs to close a base, does not provide users with an option to indicate that a cost may exist in cases where officials cannot estimate the costs associated with the project, the report says.
Because of that, DoD identified more than $24 million in unexpected costs paid out in the closure of three bases shut down under the 2005 BRAC round, the report says. As of January 2013, additional settlement costs were still being negotiated for the three bases, two of which were Army bases and one of which was a Navy base.
One of the Army locations is Fort Monmouth, N.J. where DoD terminated for convenience a renewable energy contract involving ground source heat pumps. The Army’s reported costs included payments to the contractor for the contract termination and installation of several boilers to heat installation buildings that were to be heated by the heat pumps. However, those costs were not included in the COBRA because the reporting rules don’t account for costs that can’t be estimated when the base is being evaluated for closure.
At a second Army base, Fort Monroe, Va., DoD terminated a privatized electrical utility contract in September 2011, when the installation was closed. In June 2012, the electrical contractor submitted to DoD a termination for convenience settlement proposal with options for payment of either $9.9 million or $30.0 million, depending on the remaining work to be done by the contractor, the report says. Those costs were not included in the COBRA estimates developed for this closure recommendation.
When the third installation, Brunswick Naval Air Station, Maine, closed in May 2011, a privatized housing project at the installation remained open. To ensure that utility companies correctly charge the Navy for utilities used on the installation, the Navy paid for installing electric and water meters for the housing units. The cost of this work was about $148,800, but was not included in the 2005 COBRA estimates for this closure recommendation, the report finds.