|From:||Lenny Siegel <LSiegel@cpeo.org>|
|Date:||Fri, 6 Jul 2012 12:46:14 -0700 (PDT)|
|Subject:||[CPEO-MEF] CLOSURE and REALIGNMENT: BRAC 2005 Costs and Savings Estimates|
Updated Costs and Savings Estimates from BRAC 2005 Government Accountability Office GAO-12-709R June 29, 2012 What GAO FoundOur 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 <firstname.lastname@example.org> http://www.cpeo.org _______________________________________________ Military mailing list Military@lists.cpeo.org http://lists.cpeo.org/listinfo.cgi/military-cpeo.org
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