oversight

Construction of 125 Temporary Lodging Units at the Newport Naval Base, Rhode Island

Published by the Government Accountability Office on 1971-04-09.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

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Construction Of 125        ’                    ‘r
Temporary Lodging Units
At The Newport Naval Base,
Rhode Island 8-169926
Department   of the Navy   1




BY THE COIMPTRQLLER GENERAL,
OF THE UNITED STATES
                         COMPTROLLER          GENERAL     OF      THE       UNITED   STATES
                                         WASHINGTON.       D.C.         20548




B-169926




Dear   Senator   Pell:

        This is our report    on the construction    of 125 temporary       lodging
units at the Newport     Naval Base, Rhode Island,      as requested      in your
letter   of May 22, 1970. As agreed with your office,          we will issue a
separate     report on the charges   regarding    the construction     of 200
family    housing units at the Newport     Naval Base.

        We have incorporated,       where appropriate,        the Department      of
the Navy’s    comments     on questions     we raised with the Commanding
Officer  of the Newport     Naval Station.       The comments      were furnished
by the Bureau of Naval Personnel,           rather    than by local officials,
because all policy     and basic decisions       relating   to the Newport     project
were made at the highest       levels within      the Department     and thus relate
to the entire Navy temporary         lodging program.

                                                                  Sincerely           yours3




                                                                   Comptroller                General
                                                                   of the United              States

The Honorable      Claiborne           Pell
United States    Senate




                  50TH ANNIVERSARY                      1921- 1971
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I                 COMFTROLLERGENERAL'SREPORTTO                           CONSTRUCTION OF 125 TEMPORARY
I
I                 THE H9NORABLECLAIBORNEPELL                             LODGING UNITS AT THE NEWPORT
I                 UNITED STATESSENATE                                    NAVAL BASE, RHODE ISLAND
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 I
 I                DIGEST
 I                ------
    I
    I
    I
    I             WHYTHE REYIEWWASMADE
    I
    I
    I                    At the request of Senator Pell, the General Accounting             Office      (GAO)
    I                    examined into the proposed construction           of a temporary   lodging fa-                .
    I
    I
                         cility --'-at the-. Ne,wporf7Vaval Base, Rhode Island.      This request was based
    I                    on local residents'        concern over competition    between the Navy lodgings
    I                    and T%%?Wcokmercial          motels and ov~~~~~t3on'         of the 'facility.
    I
    I
                         The Secretary       of the Navy announced in January 1970 that the Navy                   '
    I
    I                    planned to embark on a $10 million          temporary   lodging program.        This
    I                    program is intended to remedy the situation           in which Navy personnel         and
    I
    I
                         their    families     traveling to new duty stations      have had to use their
                         savings,     and often borrow money, to stay in commercial         facilities       while
                         attempting       to find permanent housing.     This  situation   has   occurred     be-
        I                cause of a lack of adequate commercial motels at reasonable                 prices.
        I                 (See p. 3.)
        I
        I
        I
        I
        I
                  FINDINGS AND CONCLUSIONS
        I
        I                The Navy did not document the basis originally              used to justify      the need
        I
         I               for 125 units at Newport prior to award of the              construction     contract.
         I               Also, the Navy did not perform a sufficiently              detailed    study to deter-
         I
         I               mine whether its temporary   lodging needs could            have been met by private
         I               motels in the area.   (See pp. 6 and 11.)
         I
         I
          I              A subsequent Navy revalidation    of the need for 125 units is questionable
          I
          I
                         because (1) many of the calculations    and figures     used in computing the
          I              number of required  units also have not been documented and (2) GAO's
          I
          I
                         verification  of the figures   used in the revalidation     indicate  that they
          I              are not reasonable.    (See p. 7.)
          I
          I
          I              Prior to the award of the construction             contract,      local residents    of
          I              the area were led to believe    that the         Newport temporary        lodging facil-
         I
         I               ity would be for permanent-change-of-station                 personnel   only.    Navy
         I               regulations  showed, however, that the           facility      would be available      to
         I
         I
                         all military  personnel and to certain           civilians.         (See p. 14.)
          I
          I
          I
          I       Tear Sheet
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          I                                                      1
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          I
          I
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                                                                                                 I
                                                                                            ,I       :
                                                                                                 I
                                                                                                 I
     The cost projections    used to establish      the $8 rental   rate   per unit   ap-        ;
     pear questionable.     (See p. 18.)                                                         I
     The location   selected    for the temporary    lodgings will    increase the               I
                                                                                                 I
     likelihood   of additional    jurisdictional    disputes  between the Newport               I
     Naval Base and the town of Middletown,         Rhode Island,   in the event that            I
     a crime is committed in the facility.          (See p. 22.)                                 I


AGENCY ACTIONS AND UNRESOLVEDISSVES
                                                                                                 I
    In commenting on the above matters,           the Navy said that standards      were         I
    being refined      to validate    future  requirements    for temporary  lodging             I
                                                                                                 I
    facilities.       (See p. 9.)     Also, after    the actual construction    and              I
    operating     costs are known, changes could be made in the period of time                   I
    required    to repay the construction        costs in order to maintain     the              I
                                                                                                 I
    $8 daily rental      rate.     (See p. 19.)                                                  I
                                                                                                 I
                                                                                                 I




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                            Contents
                            ------_

DIGEST

CHAPTER

   1       INTRODUCTION                                                 3

   2       VALIDITY OF THE NEED TO CONSTRUCT
           125 TEMPORARY LODGING UNITS                                  6
                The Navy's comptitation   of the number
                  of units   required                                   6
                Availability    of rental units  in the
                  community                                            11

   3       DISCLOSURE BY THE NAVY OF THE CATEGORIES
           OF PERSONNEL TO OCCUPY THE TEMPORARY
           LOXING FACILITY                                             14
                Navy regulations    on types of occupants              14
                Public  announcements    on the types of
                  occupants                                            15
   4       REASONABLENESS OF THE ESTIMATED RATE 'TO BE
           CHARGED OCCUPANTS OF THE NAVY'S TWORARY
           LODGING FACILITY                                            18
               Reasonableness     of operating  and con-
                 struction    cost estimates                           18
               Need for appropriated-fund      support   con-
                 templated    in the rate                              20
   5       PROBLEMS RESULTING FROM THE LOCATION OF THE
           TEW?ORARY LODGING FACILITY                                  22
               Possibility    of increased        traffic       con-
                  gestion                                              22
               Decrease    in playground       area for Navy
                  families                                             22
               Likelihood    of jurisdictional            disputes     22
       6   SCOPE OF REVIEW                                             24
                                                     CONSTRUCTION OF 125 TEMPORAR'U'
                                                     LODGING UNITS AT THE NEWPORT
                                                     NAVAL BASE, RHODE ISLAND
                                                     Department of the Navy
                                                     B-169926


DIGEST
---__-


WHY THE REVIEW h'AS MADE

     At the request   of Senator Pell,  the General Accounting     Office     (GAO)
     examined into the proposed construction      of a temporary   lodging     fa-
     cility  at the Newport Naval Base, Rhode Island.       This request was based
     on local residents'   concern over competition    between the Navy lodgings
     and local commercial   motels and over the location     of the facility.

     The Secretary     of the Navy announced in January 1970 that the Navy
     planned to embark on a $10 million          temporary    lodging  program.        This
     program is intended         to remedy the situation    in which Navy personnel          and
     their   families    traveling    to new duty stations      have had to use their
     savings3 and often borrow money, to stay in commercial               facilities       while
     attempting     to find permanent housing.         This situation   has occurred        be-
     cause of a lack of adequate corranercial motels at reasonable                 prices.
     (See p. 3.)


FINDINGS AND COi'lCLlJSIONS

     The Navy did not document the basis originally              used to justify      the need
     for 125 units at Newport prior     to award of the          construction     contract.
     Also, the Navy did not perform a sufficiently              detailed    study to deter-
     mine whether its temporary   lodging   needs could          have been met by private
     motels in the area.   (See pp. 6 and 11.)

     A subsequent  Navy revalidation     of the need for 125 units      is questionable
     because (1) many of the calculations      and figures    used in computing     the
     number of required  units also have not been documented and (2) GAO's
     verification  of the figures    used in the revalidation     indicate   that they
     are not reasonable.    (See p. 7.)

     Prior    to the award of the construction          contract,     local residents     of
     the area were led to believe     that the        Newport temporary       lodging   facil-
     ity would be for permanent-change-of-station                personnel   only.    Navy
     regulations    showed, however, that the         facility     would be available       to
     all military    personnel  and to certain        civilians.        (See p. 14.)
     The cost projections     used to establish      the $8 rental,   rate   per unit   ap- -
     pear questionable.      (See p. 18.)

     The location   selected    for the temporary     lodgings will     increase the
     likelihood   of additional     jurisdictional    disputes   between the Newport
     Naval Base and the town of Middletown,          Rhode Island,    in the event that
     a crime is committed in the facility.           (See p. 22.)


AGENCY ACTIONS AliD UNRESOLi%'P ISSUES

     In commenting on the above matters,           the Navy said that standards      were
     being refined      to validate    future requirements     for temporary  lodging
     facilities.       (See p. 9.)     Also, after    the actual construction    and
     operating     costs are known, changes could be made in the period of time
     required    to repay the construction        costs in order to maintain     the
     $8 daily rental      rate.     (See p. 19.)




                                       2
                              CHAPTER1

                            INTRODUCTION

      The Secretary of the Navy announced in January 1970
that the Navy planned to embark on a $10 million           temporary
lodging program.      According to the Secretary,      this program
is intended to remedy the situation         in which Navy personnel
and their families     traveling   to new duty stations     have had
to use up their savings, and often borrow money, to stay in
commercial facilities      while attempting    to find permanent
housing.   This situation      has occurred because of a lack of
adequate commercial motels at reasonable prices.

       Military permanent-change-of-station       personnel receive
allowances to cover such things as the average costs of
transportation,    subsistence,   lodging,   and other incidental
expenses related to the travel between duty points.             Under
certain conditions    permanent-change-of-station       personnel in
pay grades E-4 and above also receive dislocation           allowances
which are generally     equal to the applicable     monthly rates of
the basic allowances for quarters.

       The legislative     history   of Public Law 84-20, The Career
Incentive   Act of 1955, as amended (37 U.S.C. 4071, which led
to the establishment       of the dislocation     allowances,   indi-
cates that the allowances are intended to cover a variety              of
nonreimbursable      costs, including     the excess costs of food
and lodging incurred immediately prior to leaving the old
station   and after arriving       at the new assignment.      A 1966
study conducted by the Department of Defense (DOD) indi-
cated, however, that the actual expenses incurred by
permanent-change-of--station        personnel with families     exceeded
the dislocation      allowances by about 250 percent.         This was
exclusive    of the costs of temporary lodging.

       About 900 temporary lodging units will be constructed
in areas of fleet concentration       within the United States.
Installations    receiving the largest number of temporary
lodging units in the first     consttiction     phase are San Diego,
California    (250 units); Norfolk,    Virginia   (200 units); and
Newport, Rhode Island (125 units).


                                    3
      The temporary lodging program will utilize           the "turn
kt+ concept for construction        of the facilities,      under
which a contractor      will provide a completely useable facil-
ity similar to those routinely        being built    for the private
market,     The award, administration,     and supervision     of the
construction    contracts    will be handled by the Naval Facil-
ities Engineering      Commandwho will receive a fee paid from
nonappropriated     funds.    The Navy Resale System Office will
be responsible    for managing the financial       and operating as-
pects of the temporary lodging program in the same manner
as other Navy exchange functions.

       The initial   construction  funds of $10 million     will be
loaned to the Navy Resale System Office by the Chief of
Naval Personnel from nonappropriated       monies which have ac-
cumulated in the centralized      Navy Recreation F'und adminis-
tered by the Bureau of Naval IPersonnel.           is loan is
interest-free,     and the current financial    plan indicates   that
the monies are to be repaid in 13.5 years from the income
generated by the temporary lodging units.

       The construction    of additional     temporary lodging units
will be financed from an annual $2 million           construction
fund.    The monies will be provided from the profits            of the
temporary lodging facilities        augmented, as required,       by
monies from the Navy Recreation         F'und. This procedure will
continue until    the profits   from the temporary lodging facil-
ities can sustain the construction          program or until the tem-
porary lodging construction       requirements     have been met.

      On June 17, 1970, the Naval Facilities         Engineering      Com-
mand awarded a $2.1 million     fixed-price     contract    to the low-
est bidder for the construction       of motel-type     temporary
lodging units at the Newport Naval Base and at the Submarine
Base, New London, Connecticut.       The temporary lodging facil-
 ity at the Newport Naval Base will have 112 living            units
plus support units,     such as rooms for vending machines,
laundry services,    storage, and maid services.         The CQllStTL-UC-
tion contract   also provides for the following         furnishings
in each unit:

      --Kitchenette   with two-burner   range, sink, refrigerator,
         storage cabinet,  wall cabinets,    and garbage disposal.


                                    4
--Two      double         beds      and one single              bed with    back   cush-
   ions     for      use     as     a sofa,

--Dining          table      that     is      convertible         to a coffee      table.

--Wall-to-wall               carpeting.

--Black-and-white                   18-inch       television         set.

--Night       table.

--Six-drawer              chest.

--Combination               desk and vanity              with     chair.

--Two      lounge         chairs,

--Air      conditioner.

--Bathroom           with     shower          and tub.
                                     CHAPTER 2

                   VALIDITY     OF THE NEED TO CONSTRUCT

                       l-25 TEMPORARY LODGING UNITS

        Our review     showed that the Navy did not document the
basis originally        used to justify           the need for 125 temporary
lodging     units   at the Newport Naval Base prior                 to the award
of the construction         contract.          A subsequent      revalidation       of
the need by the Newport base is questionable                       because      (1)
many of the specific         calculations           and figures     used in com-
puting    the number of units           required       have not been documented
and (2) our independent            verification         of selected      figures
considered       in the revalidation           indicate    that these figures
are of questionable         validity.

       Our review also disclosed    that the Navy did not perform
a sufficiently    detailed  study to determine  whether  its tem-
porary    lodging needs could have been met by private     motels
in the area.

THE NAVY'S COMPUTATION OF
THE NUMBER OF UNITS REQUIRED

        In September 1969 the naval district               commandants were
requested      by higher    headquarters    to provide        a listing       of the
number of temporary         lodging   units   required      in their      juris-
dictions.        The request,     however,  did not provide           guidance
regarding      the method of estimating         the number of units             re-
quired.       The Newport Naval Base reported            a need for 230 units
but did not document the specific             calculations        and assump-
tions     which formed the basis for the estimated                need.       There-
fore,     we were unable,      in our examination,        to evaluate         the
reasonableness       of the need for 230 units           as requested         by the
base.

        The Bureau of Naval Personnel,              Special    Services  Divi-
sion,    considered    the need for motel           units   as reported    by
various    naval installations.         In the       case of the Newport
Naval Base,      only  100   of the   230 were       approved    in order to
provide,     we understand,     lodging   units        to a number of other
naval installations.          The Bureau did         not verify     the data


                                           6
provided by the Newport Naval Base, however, nor did they
document the rationale used in making the reduction to 100
units.

       The number of units authorized       for the Newport area was
 increased to 125 units (112 living units plus support units,
 such as maids" rooms), after meetings among representatives
of the Bureau of Naval Personnel, the Navy Resale System Of-
fice, and Naval Facilities      Engineering    Command. We were ad-
vised by a Navy official     that the increase had been made
after giving consideration      to (1) the cost of constructing
various numbers of units and (2) the number of units required
for a profitable   operation     (in some cases as few as 25 units
are being built).    We were also advised that no documenta-
tion was available   to support this increase.

        In view of this lack of documentation,      we advised base
officials      on July 15, 1970, of our reservation     as to the
need for 125 temporary lodging units (the construction           con-
tract had been awarded on June 17, 1970).          Subsequently,   of-
ficials     of both the Newport Naval Base and the Bureau of Na-
val Personnel advised us that a July 23, 1970, study pre-
pared by the naval base had shown that the motel would be
fully     occupied by permanent-change-of-station     families.
This study showed a need for 228 units during the 3 summer
months and a need for 149 units during the remaining
9 months.

       The basePs July 1970 study considered the following        in-
formation    in its determination     of the number of units re-
quired: (1) the estimated number of incoming and outgoing
permanent-change-of-station       personnel who would use the tem-
porary lodging facility,       (2) the average length of stay in
the temporary lodgings for incoming and outgoing permanent-
change-of-station     personnel,   and (3) the number of families
requiring    more than one motel unit.       The determination also
included separate calculations        for student personnel on
permanent-change-of-station       orders, the number of units re-
quired in the summer, and the number of units required during
the remaining 9 months.

        Cur review of the data used in the base study showed
that,    in many cases, the data supporting the figures used in



                                  7
the requirements    computations was not available.   FQBgex-
ample, the study showed that every Navy family making a
permanent-change-of-station     move to or from the Newport base
would use the motel for about 20 days in the winter months
and about 15 days in the summer months.

      Newport officials   told us that these figures were not
based upon a detailed    survey of the conditions;       instead,
they were based on the statement in an ffice of the Chief
of Naval Operations instruction     on the         tion of tempor-
ary lodging accommodations th              B. period of occupancy
will be 10 to 15 days and may be ext          d to 29 days in
order to maintain full occupancy~"             iscussion     with a
Navy official  disclosed   that there was no written        support
for the lo- to 15-day figure used in th

        In addition,     the study use              e base tQur of 24
months to determine the number of                   t-change-of-
station    personnel coming into the area eat year; but New-
port officials       could not provide documenta         support for the
24-month figure.         Because this data affect      the estimated
number of permanent-change-of-station         families     usi
motel, we believe that base officials         should have
such things as the number of families         expected to use the
motel, the length of occupancy, and the average duv tour,
to ensure a realistic        estimate of the number of temporary
lodging units re

       To verify  the expected usage of the Navy motel, we con-
tacted recent Newport permanent-change-of-station        personnel
to determine if they would have used the proposed Navy motel,
had it been available,      and for how lon o As suggested by a
Public Works official,      we obtained a 1
permanent-change-of-station      personnel who had requested as-
sistance from the base to find permanent housing during June
and July of 1970. Our interviews        with 46 such individuals
indicated   that 41 of them would have used the Navy motel for
an average of 11 days, if it had been available.         In addi-
tion, we used the procedure which base officials        advised us
that they had used to compute the average base tour of 24
months.    We estimated that the average Newport Naval Base
tour was about 33 months.



                                   8
        In view of the questionable              validity  of the figures
used by the base in its July 1970 determinat                 ion of the units
required,       we again advised         the base and Eavy Department       of-
ficials      of our reservations           on September   9 and October   12,
1970.      The objective        of the September 9 notification         was to
have them carefully           reconsider      the need to build   all   125
units     before   construction       was well underway.

         In its December 1970 written                   comments,       the Navy stated
that,      although      the primary          consideration        in the provision
of temporary          lodging      facilities        was to serve personnel             on
permanent-change-of-station                    orders,      it recognized        that there
was also a need to provide                    this type of facility            for other
categories         of naval personnel             and their      families.         On the
basis of its surveys,                the Navy also stated             that the deter-
mination        that 125 units          were needed for permanent-change-of-
station       personnel      arriving         at the Newport base was conserva-
tive,     because such units               would also be used by (1) personnel
arriving        at Quonset Point and Davisville,                    Rhode Island,        and
(2) the fa ml'1' ies of patients                 and outpatients          of the Newport
Naval Hospital.

         As shown above, the justification                  for the 125 units                up
to the time of the Navy comments seemed to indicate                                 to us
that it was based on needs to temporarily                        house permanent-
change-of-station          personnel      and their      families          arriving        at
the Newport Naval Base.              Obviously,      the      inclusion          of   other
categories      of personnel        as additional        justification              for hav-
ing 125 units        broadens     significantly        the number of author-
ized potential        users of the temporary              lodging        facility.           On
this basis,       the demand for such accommodations                       could well
exceed the capacity           of the 125-unit        temporary           lodging        faci-
lity     because Navy policy         permits      a wide range of both
civilian      and military      personnel       to use temporary               lodging
facilities.         (See p* 14.)         As discussed         in chapter           3 (see
p* 17), it may be desirable                to generally         restrict         such
facilities      to permanent-change-of-station                    personnel.

       Apparently       the Navy has recognized        the need to improve
the methods being used to determine              requirements        for tempor-
ary lodging      units.       In the December 1970 reply,          the Navy
stated    that standards        were being refined       to assist      in vali-
dating    future    requirements     for temporary       lodgings.        In addi-
tion,   procedures        were being established       to obtain      up-to-date

                                                9
figures   on personnel  receiving  permanent-change-of-station
orders   and on the average length    of wait in each area       for
permanent   housing.




                                 10
AVAILaBILITY OF RENTAL UNITS
IN THE COMMUNITY

        We found that,      prior    to the award of the construction
contract,     base officials       did not coordinate       with local     busi-
ness interests     for the purpose         of having    them meet the
Navy's need for a sufficient            number of suitable       temporary
lodging    accommodations        at reasonable    prices.

         The Navy commented that the costs and availability                               of
existing      community        facilities          had been considered            and re-
viewed.       Rates were obtained                from various         motel/hotel     di-
rectories        and average         in-season        costs were found to be pro-
hibitive       for Naval personnel.                  In addition,       kitchenettes
were generally          not provided.              The Navy explained           that this
feature     was vital        to Navy families              trying     to live within
their     means while        in transit          status      and, for that reason,
was an absolute          requirement           for Navy temporary            lodging    units.
It further        stated     that,      where there was a concentration                   of
naval personnel,           it was fully            realized       that commercial       facil-
ities     might be unable to meet the needs of the Navy during
periods      of peak civilian             use.

       We believe    that motel/hotel rates                   obtained     from direc-
tories    by the Navy are not necessarily                     indicative       of the
rates   that could have been obtained      if                 negotiations       had been
conducted    with the owners for short-or                     long-term      leasing   of
the units    needed.
        For example,      we contacted       the majority       of the motel op-
erators     on Aquidneck     Island,     site of the Newport Naval Base,
and were advised        that there were at least             38 efficiency-type
units    with weekly or monthly          rates    lower,     during    the summer
season,     than the Navy planned          to charge1 and 70 units             avail-
able during       the winter     season,       An additional        39 efficiency-
type units      in the area are rented,           during     the summer months,
at weekly rates       from $90 to $120 and, during                the winter
months,     at weekly rates       from $50 to $90.

        Although      there  is no assurance that these units     wouldbe
available       during    the summer when the demand is greatest,      we
believe      that the existence     of such units shows that the


1
    $8 per   day per unit.
                                              11
    Navy should have explored        the possibility     of leasing      commer-
    cial motel units.      We also noted that this very method was
    considered    in 1966 when base officials        had surveyed      local
    motel owners in Newport regarding          accommodations     for bache-
    lor officers.      The supporting     documents   show that nine motel
    owners expressed     an interest    in leasing    arrangements       which
    would accommodate     about 340 men in the nine motels           at a
    relatively    modest daily    rate of about $5.
           We believe       that coordination      with the local      business
    community    in the Newport area would be in keeping with the
    Navy policy     concerning       temporary   lodging    accommodations.
    Secretary    of the Navy Instruction           11107.1,    dated October      24,
    1963,l provided       that such accommodations         be established      only
    at those activities          where convenient,      adequate,     and reason-
    ably priced     facilities       are not available      in nearby civilian
i   communities.
             With respect      to the need for kitchenettes,          we agree
    that the number of efficiency               units  available   at a rate com-
    parable      to the $8 daily       rate per room proposed        for the base
    motel is limited.            We believe,     however,    that some users of
    the base motel may not desire               a unit with a kitchenette,     be-
    cause such units         are being provided        not only for permanent-
    change-of-station         personnel      but also for other categories       of
    military      personnel,
           Also,    there   is convenient     access to public     dining    facil-
    ities   in the Newport area.          Furthermore,   according      to an ar-
    ticle   in the March 3, 1971, Navy Times, station              commanders
    have been directed        to allow and encourage      enlisted      personnel
    to bring     dependents     and guests    to general  messes for occa-
    sional    meals.
             We noted that the Department                 of the Army is sponsoring
    a similar      construction           program in which approximately                   800
    guest units       are currently           under construction           at bases
    throughout      the United          States;    however,       kitchenette        facili-
    ties will      be included          only when access to public               dining        fa-
    cilities     is not convenient              to a guest house.            We  believe
    that the desire         at Newport to build             temporary        lodging      units
    with kitchenette          facilities,         without     first     determining          a
    need for such facilities,                 may have automatically             precluded
    from consideration           those available           commercial       motel units
    without     such facilities            but which were otherwise              adequate.
    1
        Rescinded     December      18,    1970.
      Prior to the completion of the Newport temporary lodg-
ing facility,  about 380 new commercial motel or hotel units
will have been added to the total of about 825 existing
units on Aquidneck Island.      The newly built commercial motel
or hotel units represent    an increase of about 45 percent of
the total units currently    located on Aquidneck Island,      None
of these new units were considered as possible     substitutes
for any of the units now being built on the base.




                                 13
                                           NAVY OF THE CATEGORIESOF

                                   PEWS0   L TO QCCWY Trn

                                TE       Y LODGING FAGILIT'Y

       Officials                of the town of Middle-town and other local
residents,     further   identified    below, stated that, prior to
the award of the construction          contract  for the temporary
lodging facility       at Neqort,     they had been led to believe
that the facility       would be used for permanent-change-of-
station    personnel only.        They stated also that they were
not in favor of its usage by any other categories           of Navy
personnel e

          We found that Navy regulations       existing   prior to the
award      of the construction     contract   showed that the temporary
lodging facilities       would be available       to aILl categories    of
military      personnel and to certain      categories    of civilians.
Our review showed, however, that public announcements stat-
ing that individuals         other than permanent-change-of-station
servicemen would be permitted           to use the temporary lodging
facility      had not been issued until after the Newport eon-
struction      contract  was    awarded on June 17, 1970.




      Na’c~)’    regulations,   some   dating as far back as 1963, pro-
vide that guest houses (which include hotels and motels)
would be available         to persons authorized       unlimited  Navy ex-
change privileges,         to official      guests and visitors   of the
command, and to visiting           relatives     and guests of military
personnel D The assignment policy for the temporary lodging
   ogram was restated        in the ffice of the Chief of Naval
   erations   Instrucftion     PPPO7 1, dated May 13, 1970, as fol-
lows :

      Bs5s a.          To serve the primary purpose of temporary
      lodging          accommodations,  the occupancy of these fa-
      cilities          will be in the following   order of priority:

                                             14
               (1) Navy personnel        with dependents,        and
      Marine Corps personnel        with dependents        assigned
      to the regular     personnel      allowance   of Navy ships,
      stations    and staffs   arriving       or departing     area
      under PCS [permanent-change-of-station]               orders.

                   (2)     Other      personnel

                           (a> Other active               duty     military        person-
      nel      and their      dependents.

                       (b) Retired             military           personnel        and
       their     dependents.

                        cc> DoD civilian     employees                        assigned         to
       overseas      areas and their     dependents.

                           (d)     Official       guests         and visitors            of    the
       command.

                       (e) Visiting      relatives      and guests of
       assigned    military      personnel      in isolated   areas
       where civilian       community      accommodations     are not
       available.

                   (3)
                     The above order of priorities              is not
       applicable    to temporary      lodging     accommodations
       at naval hospitals.        Instructions        concerning    the
       occupancy    of these facilities        will    be issued    sep-
       arately    by the Chief of Naval Personnel."

PUBLIC ANNOUNCEMENTS ON
THE TYPES OF OCCTJPANTS
       The Navy announced      in January    1970 that the lodging
program:
       VI*** is intended    to remedy the situation            in which
       Navy men and their      families   traveling       to new duty
       stations     have had to dip into     savings      and often
      borrow money to stay in commercial            facilities
      while     attempting  to find permanent       lodging."
But,even    more specifically,                 an announcement       in            the        Newport
Daily    News, dated April               27,   1970, stated    that:
       ‘“9&s;  the Navy motel building   will be for the ben-
      efit of enlisted      men and their families   who are
      newly arrived      in the area **Jr and it will provide
      strictly     temporary housing units until more per-
      manent housing can be found."

       The Newport Naval Base itself     did not issue news an-
nouncements regarding     the temporary lodging facility       prior
to the award of the construction      contract.    Information      sup-
plied to the news media was in response to queries made by
them. Cur review showed that this was in accordance with
guidelines   from higher authorities.      We also found that the
guidelines   did not provide for release of information         re-
garding usage of the temporary lodging facility         by other
than permanent-change-of-station      personnel.
       In letters   dated January 19, 1970, the Navy advised
the Chairmen of the Armed Services and Appropriations           Com-
mittees of the Congress of its plan to construct           temporary
lodgings.      The Navy indicated     that the program was designed
to provide relief     for personnel who were changing stations,
with emphasis on enlisted       families.      The letters did not,
however, contain any indication          that the temporary lodgings
would be used by other categories           of personnel.

         Qn July 21, 1970, officials       of the town of Middletown
stated that they were not aware that the temporary lodging
facility     at the Newport base would be used by other than
permanent-change-of-station        personnel.     They also advised
us that the Navy had told them that the only people to use
the motel would be Naval personnel making a permanent
change of station.       Similiar    statements were also made by a
few commercial motel operators          that we contacted,

         On July 24, 1970, an article      in the Newport Daily News
 stated that the Chairman of the Middletown Democratic Town
Committee felt that the Committee had been misled on the
types of personnel who would be using the temporary lodging
facility.       The article  went on to explain that the Commit-
tee thought the facility        would be used for enlisted      person-
nel only, but that recent disclosures            by the Navy revealed
that retired      Navy personnel,    DOD civilian    employees, and
official     guests and visitors     could also make use of the
temporary lodgings.

                                  16
      In its December 1970 written       comments to us, the Navy
stated that, until       final approval of the temporary lodging
program within the Navy Department had been received,          the
program had been given minimum publicity        so as not to need-
lessly raise the hopes of servicemen.         Public release of
information   concerning the program was withheld until        the
appropriate   committees      of the Congress had been advised.

      We believe that there was ample time between the Janu-
ary 19, 1970, notification        to the committees and the award
of the construction      contract   on June 17, 1970, to advise
Newport business interests        of the Navy"s assignment policy.
Yet, full disclosure      does not appear to have been made until
local interests     learned,   sometime in July 1970 after the
construction    contract was awarded, that persons other than
permanent-change-of-station        personnel would be eligible   to
use the temporary lodgings.
       The Navy policy guidance for public affairs           provides
that the prompt release       of unclassified    information     concern-
ing any activity       or member of the Naval establishment        which
is of interest      to the public is mandatory.       Other instruc-
tions indicate      that the Navy public information       policy re-
quires maximum disclosure        to the public to foster good com-
munity   relations,      It seems to us that it would have been
within the intent of this stated policy for the Navy to
have been more candid concerning who would be eligible               to
use the temporary lodging facility          at Newport.
      In addition,    we believe that eligibility     by other than
permanent-change-of-station       personnel increases the likeli-
hood of unfair competition       between the Navy facility     and
local commercial motels, because it increases the possibil-
ity of occupancy by higher grade military         and civilian    per-
sonnel visiting    the area on Government business,        as well as
by others who might visit       the area on personal business,




                                   17
           WE inq14~red inrte, the reasonableness of the estimated
rate       tcl bc charged occupants because of statements by focal
mlotal.     t3m:xs     that they could  not compete with any motel-type
fs=il.iq         $&j c h wcmld be subsidized  by the Government,

       We fmbnd that the cost projections         used to establish
the $8 d.ail.y rental. rate for the temporary lodging units
w"61Se~cqtxL2ticc,r?,able
                      L This is because (1) the estimated operat-
ing costs used in developing         the rental rate are based on
existing   transient     Navy guest facilities     which are diss9miPar
in size and features       to the proposed transient       lodging facil-
ities and (2) the cost projections           are based on the assump-
tion thae all. temporary Badgingswillreceive             partial   support
frcm appro@,ated       funds2 despite indications       to the Congress
that cc~rsst-a-d_actionand operation     of these Isdgingstil%     be
financed from nonappropriated         funds derived from Navy ex-
changes and ather welfare activities.

       we EcEieve that the questionable      adequacy of the cost
prsjectlons    used to establish   the rental. rate increases the
possibility    2E unfair competition   between the local motel
owners and the Navy" s temporary lodging facility.        In addi-
tics-l) as discussed in chapter 3 on page 17 the possibility
of unfair   competition  is increased by the type of occupants
who use the temporary lodging facility.
                                TING AND
             CTION- COST EST1

           The November   10,      1969, financial     arrangements for the
le;an      of $10 mil%ion in construction           funds to the Navy We-
sale       System Office      by the Bureau of Naval Personnel were
based        0x1 a ,uEi.Earrn daily unit rate of $8 for aPI new tempo-
rary       lodging facilities        with kitchenettes,      such as those
being        built   at NewportS The arrangements           also indicated
that       th,is rate would be sufficient        to cover operating
expenses and repayment             of the     construction        cost   withir;
13.5 years.
         The Navy records         showed that,        in developing      operating-
expense data for the establishment                    of the unit     rate for all
new temporary       lodging       units,     salaries    and other direct          ex-
penses were estimated             by using historical          cost experience
obtained     from 18 transient           Navy guest facilities           operated
in the United       States,       the Philippines,         and Japan.      The 18
facilities      were dissimilar          in that they ranged in size from
two units,      at one location,           to 80 units      at another.       They
also varied       in features        in that some units         offered    shared
baths and kitchen         facilities         and others     were complete       living
units,
        The uniform       rate was established         on the basis         that all
temporary       lodging     units    could be built     at an average          con-
struction       cost of $10,000 per unit.            The actual       construction
contract      costs for Newport temporary            lodging    facility,        how-
ever, will        be about $1.3 million,         or an average of about
$10,560 per unit,            The Naval Facilities         Engineering         Command
will    receive      a 6-percent       fee from nonappropriated           funds for
the administration           and supervision      of the construction            con-
tract.      This fee will         increase    the per unit     construction
cost at Newport to about $11,190.

          In its December 1970 written              comments,        the Navy stated
that,       on the basis of the actual             construction         and operating
costs,       the period      of amortization        could be adjusted,            as
necessary,          to maintain      the $8 rate.        This procedure          suggested
by the Navy would be in accordance                    with the financial            arrange-
ments       pertaining     to the operation         of temporary         lodging
facilities.            The financial      arrangements        also provide        for an
annual review           of the.rate     for such revision            as may be nec-
essary to maintain             the desired      earnings      level.

       We believe,     however,     that realistic        estimates      regard-
ing operating      expenses     should have been developed             for the
Newport temporary       lodging     facility.       The absence of such in-
formation    precluded     a realistic        comparison       between the cost
of building     and operating       a Navy-owned       facility      and alter-
natives,    such as leasing       commercial      motel      space for Navy
personnel.



                                             19
NEED F'ORAPPROPRIATED-FUNDSUPPORT
CONTEMPLATED IN THE RATE

        A Navy Resale System Office           representative         who partic-
ipated    in the rate establishment           stated      that the cost pro-
jectionswere      based onthe        assumption     that appropriated          funds
would bear the cost of snow and trash removal,                      groundskeep-
ing, and other       common service       expenses.         This is in accor-
dance with a Navy Resale System Office                  instruction      which
established     the policy        and procedures      for the operation          of
temporary    lodging    facilities.

          The instruction         states      that such facilities          within    the
continental        United      States    will      reimburse    the Government        for
utility      costs,     such as heat,           steam, water,      ice, electricity,
refrigeration,          gas, compressed            air,   air conditioning,         and
telephone       service,      but appropriated            funds are to bear the
costs of common services,                 such as fire        and security       pro-
        .
tectlon,       pes, f control,       trash      and garbage removal,         sewage dis-
posal,      and medical        inspection.

        In July 1970 the Newport Naval Station,           as well as other
Navy stations,      were requested  to provide       an estimate        of
costs to support      the Navy"s temporary      lodging    facilities       for
inclusion     in the fiscal   year 1972 budget.         Newport furnished
an estimate     of $43,150 of appropriated-fund          support      for fis-
cal year 1972, as follows:

                                                                       Amount

     Item:
             Police    protection                                     $ 7,300
             Pest control                                               1,500
             Fire protection                                            5,000
             Trash removal                                              5,000
             Street    cleaning     and snow removal                    1,500
             Grounds maintenance                                        1,000
             Maintenance       of structure       and
                appurtenances,       emergency calls,
                maintenance       of furnishings,
                equipment      and appliances                          21,850

                    Total                                            $43,150
       We calculated    that, if the above estimated costs were
borne by appropriated       funds, they would subsidize  the New-
port's    temporary lodging operation     by about $1.20 daily
for each unit on the basis of an approximate 90 percent
occupancy.      The nature of the costs suggests to us that ap-
propriated    fund support for temporary lodging facilities
could be substantial       over the years, particularly  if other
Navy stations     and other military    services provide similar
support for such facilities.

      Public Navy releases regarding      the temporary lodging
program did not mention that appropriated         funds would be
used in connection with the operation        of these facilities.
In fact, these announcements and other documents implied
that the lodging program   would   be self    supporting.      For ex-
=pk     in January 1970 the Secretary of the Navy wrote to
the Chairmen of the Appropriations     Committees and the Armed
Services Committees of the Congress and stated in part that:

      "the cost of planning,  construction    and operation
      of these lodgings will befinanced    from nonappro-
      priated  funds derived by the operation    of Navy
      Exchanges and other welfare activities.@'
      In its   December 1970 reply on the indicated         use of
appropriated    funds, the Navy stated that

      There is no plan for amortizing      the cost of
      temporary lodges by use of appropriated      funds.
      Amortization  will be accomplished exclusively
      through use of nonappropriated    funds."
      (Underscoring  supplied.)

The Navy reply, however, did not         refer to operation     costs
which, as indicated     above, would     be financed partially
from appropriated    funds.    This is     not consistent,   therefore,
with the statement the Navy made         in its January 1970 letter
to the congressional     committees.




                                  21
                                      CHAPTER 5

                PROBLEMS RESULTING FROM THE LOCATION

                   OF THE TEMPORARY LODGING FACILITY

          Elected       representatives           of Middletown      made several   crit-
icisms       of the location           selected        for the temporary    lodging
facility.           The principal         criticisms        were that (1) traffic
congestion          would be increased,              (2) the open area used as a
playground          by families        in the area would be substantially               re-
duced, and (3) jurisdictional                      disputes     might occur in the
event a crime was committed                     in the Newport base temporary
lodging       facility.

       Our observations          on these        matters   follow.

POSSIBILITY OF INCREASED
TRAFFIC CONGESTION

       Navy base officials      advised     us that traffic      increases
from the temporary      lodging    facility     would be negligible        be-
cause access roads to the facility             were relocated      to provide
entrance    and exits   via a lightly       traveled    street.     They ad-
vised us also that future        highway construction,          which in-
cluded widening      of the roads and installation            of traffic
lights   around the facility,       would ease the traffic           conges-
tion.

DECREASE IN PLAYGROUND AREA
FOR NAVY FAMILIES

       The temporary    lodging     facility,      including     parking           facil-
ities,   will   occupy about 3 acres at the south end of                        a -/-acre
plot.    The plot    is presently      an open area except for                  a ten-
nis court     and a handball     court      at the north     end.    We         were
advised   by base officials       that the remaining          4 acres           of play-
ground area should be adequate              for Navy family      usage.

LIKELIHOOD      OF JURISDICTIONAL          DISPUTES

       The land on which the motel is being constructed     is
part   of a 128-acre parcel taken by the Government     in 1940.


                                            22
The Government possesses a proprietorial               jurisdiction      over
the property which presently          contains a number of Navy fam-
ily housing units.        Proprietorial     jurisdiction         exists where
the Federal Government has acquired some right or title                    to
an area in a State but has not obtained any measure of the
Statess authority       over the area.      The Federal statute which
authorized     the acquisition     of the land prohibited            such acqui-
sition     from depriving    the State of any civil          or criminal    ju-
risdiction     over the property.
       A base official   informed us that the town of Middletown
had provided police protection      for this property but that
this protection     was withdrawn a number of years ago when the
Federal Government suspended payments for such services.
Since that time the naval base has been furnishing             the police
 rotection    for the family housing units on the property             but
lacks the proper authority      to bring offenders      to trial.        We
were advised by a base official       that, as a result,       in most
cases offenders were not prosecuted.         He also said that he
did not believe that the temporary lodging facility             would pre-
sent any new types of jurisdictional        problems but that its
location   would increase the likelihood       of additional      juris-
dictional   disputes of the type encountered in the past.




                                       23
                                CHAPTER6

                            SCOPEOF REVIEW

        We reviewed pertinent       records and held discussions     with
responsible     officials     of the Department of the Navy, the Na-
val Facilities       Engineering    Command, and the Newport Naval
Base relating      to the following      aspects of the construction
of 125 temporary lodging units at the Newport Naval Base:
the determination         of the number of units required,    the avail-
ability    of motel units in the community, the types of person-
nel to occupy the units,         the determination   of the rental
rate, and the location         of the facility.

      We also held interviews     with personnel who recently
made a permanent change of station       to determine if they
would use the proposed temporary lodging units,       and we con-
tacted local motel operators      to determine the availability
of commercial motel units.      We also held discussions     with the
complainants  regarding   their objections    to the proposed tem-
porary lodging facility     at the Newport Naval Base.

        We obtained   information   at the following    Navy activi-
ties:

        --Bureau of Naval Personnel, Washington, D.C.
        --Naval Facilities Engineering   Command, Washington,                 D.C.
        --Navy Resale System Office,   Brooklyn, New York
        --U.S. Naval Base, Newport, Rhode Island




                                                       U.S. GAO Wash., D.C.


                                    24