[CPEO-MEF] CLOSURE and REALIGNMENT: BRAC 2005 Costs and Savings Estimates

[Lenny Siegel <LSiegel@cpeo.org>]

Updated Costs and Savings Estimates from BRAC 2005

Government Accountability Office
GAO-12-709R
June 29, 2012

What GAO Found

Our analysis of DOD’s fiscal year 2011 update relating to the BRAC  
2005 budget submission to Congress shows that one-time implementation  
costs grew from $21 billion originally estimated by the BRAC  
Commission in 2005 to about $35.1 billion, an increase of about $14.1  
billion, or 67 percent, largely due to increased construction costs.  
We compared the BRAC Commission’s 2005 estimates to DOD’s fiscal year  
2011 budget submission and found that 14 of 182 BRAC recommendations  
accounted for about 72 percent of the cost increase, or about $10.2  
billion. Our analysis of those 14 recommendations shows that  
increased construction costs resulted primarily from additional  
building projects and additions to planned projects, which DOD deemed  
necessary after implementation began. For example, one-time costs for  
realigning the National Geospatial-Intelligence Agency more than  
doubled from $1.1 billion to $2.6 billion, with military construction  
accounting for nearly $726 million of that increase due to additional  
supporting facilities the agency identified as essential to the  
mission. Overall, military construction costs for the BRAC 2005 round  
increased 86 percent, from $13.2 billion estimated by the BRAC  
Commission to $24.5 billion according to DOD’s fiscal year 2011 BRAC  
budget, while over the same time period, general inflation increased  
by 13.7 percent. In contrast, military construction costs for the  
four prior BRAC rounds combined amounted to less than $7 billion.  
Other reasons for implementation cost increases included increased  
operation and maintenance costs, such as for furnishings to outfit  
new and renovated buildings and information technology needed to  
equip additional facilities, and higher environmental restoration costs.

Due primarily to the large increase in one-time implementation costs,  
the 20-year net present value DOD can expect by implementing the 2005  
BRAC recommendations has decreased by 72 percent, and our analysis of  
net annual recurring savings shows a decrease of 9.5 percent compared  
to the BRAC 2005 Commission’s estimates. The 20-year net present value 
—that is, the present value of future savings minus the present value  
of up-front investment costs—of $35.6 billion estimated by the  
Commission in 2005 for this BRAC round has decreased by 72 percent to  
about $9.9 billion.15 We believe that the 20-year net present value  
of BRAC recommendations is a good measure of the net result from up- 
front implementation costs and the resulting savings because it takes  
into account the time value of money; that is, it considers when a  
dollar amount, such as savings, is received during the 20-year  
period. In 2005, the BRAC Commission approved 30 recommendations that  
were expected to produce a negative 20-year net present value (in  
other words, at the end of the 20-year period, those 30  
recommendations would result in net costs). Based on our analysis,  
currently 75 out of the 182 Commission-approved recommendations,  
about 41 percent, are now expected to result in a negative 20-year  
net present value. Nine recommendations have seen their net present  
value decrease by over $1 billion each. Also, our analysis of DOD’s  
fiscal year 2011 update of the BRAC 2005 budget submission to  
Congress shows that DOD’s net annual recurring savings estimates have  
decreased by $400 million to about $3.8 billion, a 9.5 percent  
decrease from the Commission’s estimate of $4.2 billion.

...


For the entire report, go to
http://www.gao.gov/products/GAO-12-709R


--

Lenny Siegel
Executive Director, Center for Public Environmental Oversight
a project of the Pacific Studies Center
278-A Hope St., Mountain View, CA 94041
Voice: 650/961-8918 or 650/969-1545
Fax: 650/961-8918
<lsiegel@cpeo.org>
http://www.cpeo.org

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