2003 CPEO Military List Archive

From: dickboyd@aol.com
Date: 19 May 2003 15:31:37 -0000
Reply: cpeo-military
Subject: [CPEO-MEF] Life Cycle Costs and Military Housing

To see information on the Air Force's efforts to privatize [housing],
check out:

For the Army, check out:

Here are my thoughts regarding privatization of military housing. Or for
that matter, the privatization of any task done by government.

The basic premise is that the work is essential. The work has to get
done. Essential government work is not defined. That is, the work that
must be done by the government, and the government only, is not defined.
Anything can be contracted out. Mercenary, anyone?

If democrats are in power, the government will hire people directly onto
government payrolls to do the work.

If republicans are in power, the work will be contracted out.

In either case, the number of workers will be the same IF, and that is a
big IF, the workers are doing the same thing. That is, if the work is
the same.

In the case of privatized military housing, three criteria stand out.
Severability, scoring and life cycle cost.

Severability means the housing must operate independently of the base.
That is, the houses are outside the fence. If peace were suddenly to
break out and there were less need for military, the housing could be
used by the local economy. This gives the local government more say over
building standards. For instance, local government may require
sprinklers for fire suppression in any new housing. The Federal
Government may not require sprinklers. Or vice versa. Local governments
may require insulation values greater than R-32 in walls and R-50 in
ceilings. Federal may be less stringent. Or vice versa. Local codes may
require fire proof vice fire retardant roofs. The point is that local
governments need to get their oar in the water and pull in the same
direction. Severability also implies that local government will be
called on to provide more services. Roads, sewers, schools, hospitals,
fire and police protection and the like.

Scoring is government speak for a budget. If the military were to build
the houses, it would have to be funded using MILCON. MILCON is budget
speak for military construction. So what? Congress appropriates public
monies. One of the "rules" is not to encumber future congresses with
monetary obligation. Congress is not supposed to pass a bill authorizing
spending money
and then expect future congresses to come up with the appropriations.
This ties in to a fully funded concept. If congress doesn't appropriate
the money (or have the borrowing power to appropriate money), the work
doesn't get done. Most government monies are appropriated on a yearly

Operations and Maintenance, for instance, is one year money.
Construction, on the other hand implies long term commitment. The DoD
construction budgets are multi year. Instead of relying on several
congresses to authorize money, long term money, one congress gets the
ball rolling. Future congresses would have to amend previous legislation
to stop the MILCON projects.

The services have to work out how much housing is going to cost.
Services have to submit this cost as part of their personnel budgets. No
free lunch.

The Office of Management and Budget (OMB) publishes circulars. Circulars
provide administrative guidance about spending government money. In the
case of privatized military housing, the services are allowed to pay a
premium of up to one-third more for privatized housing. If private
industry bids higher than the one-third premium, the military will build
it themselves.
This difference in cost takes us back to the big IF. If the military
builds the housing, the military has to provide roads, schools, sewers,
fire and police, hospitals and all the support services. If private
industry builds the housing then the infrastructure becomes the
responsibility of local government. Hopefully, local government will
assess builders fees to pay for the needed items.

In any case, the services have to work out a budget of what it would
cost to build and operate housing. That budget is the baseline for the
contracting out decision.

That brings us to the biggie in the triumvirate. Life Cycle Cost. The
weak point is that the start of life and the end of life can be defined
differently. Does life run from lust to dust, cradle to grave, or life
as a teenager? One of the items in project decisions is disposal cost.
For buying a car, do you think about trade in value? When buying a
computer or tires, do you think about disposal costs? Or do you just go
dump them on the side of the road when they are worn out? What are the
trade off investments? Are there construction features that raise
construction costs, but lower operating costs? If so, what is the
required pay back period? What is the return on investment?

What about the unforeseen? Take lead as an example. Lead was used in
paint and in gasoline until it was shown to be a health hazard. Modern
paint manufacturers are being asked to put warning labels on lead free
paint to advise painters of the hazards of working with lead based
paints that they might be painting over. Who should pay for that warning
effort? What about
asbestos? Follow the example of the tobacco companies and blame lung
cancer on asbestos. How many nonsmokers get asbestos disease?

The big IF is that if the work is privatized, life ends when the
contract ends. Then who picks up responsibility? Perchlorate died as a
teenager, but the corpse is still a problem. Housing has a long track
record. Not too many surprises. Almost everything that could have
happened has happened. Terminating one contract and writing a new one is
almost painless. (Except to
the losing bidder.)

If the government made perchlorate, there would be no question that the
taxpayers would be stuck with a clean up bill. If private industry makes
perchlorate and they didn't collect enough money to self insure or to
buy insurance, then you can't get blood from a turnip. (Or is that
saying, you can't get water from a rock?) If the government insists that
industry stand
behind every contingency, there won't be many ethical people bidding on
government contracts. Either that or the cost of doing government
business will be astronomical.

That said, we are at the heart of the restoration advisory board's
problem. Who pays for the clean up? Or do we stand around and argue
about what has to be cleaned up? Right, we haven't really proved that it
does need to be cleaned up. ( ;- P

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