oversight

Environmental Compliance: Reporting on DOD Military Construction and Repair Projects Can Be Improved

Published by the Government Accountability Office on 1997-12-08.

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

                  United States General Accounting Office

GAO               Report to Congressional Committees




December 1997
                  ENVIRONMENTAL
                  COMPLIANCE
                  Reporting on DOD
                  Military Construction
                  and Repair Projects
                  Can Be Improved




GAO/NSIAD-98-33
             United States
GAO          General Accounting Office
             Washington, D.C. 20548

             National Security and
             International Affairs Division

             B-277673

             December 8, 1997

             The Honorable Conrad Burns
             Chairman
             The Honorable Patty Murray
             Ranking Minority Member
             Subcommittee on Military Construction
             Committee on Appropriations
             United States Senate

             The Honorable James M. Inhofe
             Chairman
             The Honorable Charles S. Robb
             Ranking Minority Member
             Subcommittee on Readiness
             Committee on Armed Services
             United States Senate

             The Department of Defense (DOD) budgeted over $700 million for
             environmental compliance construction and repair projects to comply
             with environmental laws during fiscal years 1996-97. Of the total,
             $274 million was funded by military construction appropriations and most
             of the remainder by operation and maintenance appropriations. The
             Senate Report on the 1997 Military Construction Appropriation Act
             (Report 104-287, June 20, 1996) required us to review and make
             recommendations on DOD’s processes for programming environmental
             compliance construction projects and estimating future funding
             requirements and costs. As agreed with your offices, this report addresses
             environmental compliance projects funded as construction or repair and
             (1) identifies DOD’s criteria for determining which appropriation account is
             used for programming funds, (2) describes the process for programming
             funds, and (3) discusses reporting on future funding requirements.


             DOD undertakes environmental compliance construction and repair
Background   projects to meet the requirements of environmental laws and regulations
             that protect water, air, and ground quality. Environmental compliance
             projects include constructing and repairing facilities such as wastewater
             treatment plants, underground storage tanks, and sanitary landfills.
             Military installations use defense programming guidance and applicable




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laws and regulations to determine initially whether a project is
construction or repair and to identify the appropriate funding source.1

The activities that make up the programming process include identifying
operations, equipment, and facilities that are or will be out of compliance;
verifying environmental compliance requirements; prioritizing
requirements; and budgeting funds. As part of the programming process,
DOD installations are responsible for identifying, classifying, and
prioritizing projects and submitting budget requests to higher commands
for verification and approval. Environmental compliance construction and
repair projects compete with other projects for funding within the
applicable accounts.

Of the fiscal year 1998 estimate of $266.4 million for environmental
compliance construction and repair projects, DOD estimates that
$162.8 million would be funded from defense components’ operation and
maintenance accounts, and that $103.6 million would be funded from
military construction appropriations.2 DOD’s Environmental Quality Annual
Report to Congress is a principal source of information about the
proposed expenditures for compliance construction and repair projects.3
The report is to include status in carrying out environmental compliance
activities at defense installations and provide information on such things
as current and projected funding levels to comply with applicable
environmental laws.

We have previously reported on environmental compliance. We concluded
that DOD could not adequately determine its environmental compliance
construction needs and project priorities, and that reporting of compliance
activities could be improved.4 We recommended that DOD develop

1
 DOD’s directive on the planning, programming, and budgeting system (DOD Directive 7045.14) states
that, in the programming phase, defense components are to develop proposed programs that reflect
objectives to be achieved, methods for accomplishing them, and effective allocation of resources.
2
 Funds for environmental compliance construction account for $103.6 million of the overall $9.2 billion
fiscal year 1998 military construction estimate. The $103.6 million for environmental construction does
not include funds for base realignment and closure activities.
3
 According to DOD, this annual report to Congress on environmental compliance activities was
developed in response to the provisions of 10 U.S.C. 2706(b) and Executive Order 12856, Federal
Compliance with Right-to-Know Laws and Pollution Prevention Requirements. DOD environmental
budget exhibits provide additional information about proposed expenditures for compliance
construction projects.
4
 Environmental Compliance: Guidance Needed in Programming Defense Construction Projects
(GAO/NSIAD-94-22, Nov. 26, 1993); Environmental Protection: Status of Defense Initiatives for
Cleanup, Technology, and Compliance (GAO/NSIAD-97-126, May 29, 1997); and Environmental
Compliance: Continued Need for Guidance in Programming Defense Construction Projects
(GAO/NSIAD-96-134, June 21, 1996).



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                   guidance to assist the defense components in consistently classifying
                   projects. Although DOD disagreed with our recommendation, it took action
                   to improve compliance reports. It subsequently made some minor
                   modifications to its classification system and issued other guidance. Our
                   current review focuses on DOD actions since those reports.


                   The basis for determining which funding source should be used for
Results in Brief   funding environmental compliance construction and repair projects is set
                   forth in laws and regulations. The law requires military construction
                   appropriations to be used for all construction projects costing over
                   $500,000.5 The law defines construction as the creation of complete and
                   usable new facilities or complete and usable improvements to existing
                   facilities on military installations. In general, operation and maintenance
                   appropriations are available to fund construction projects costing less
                   than $500,000 and repairs of any value. Other appropriations such as
                   research, development, test, and evaluation, may also be used in
                   appropriate circumstances.

                   The programming process for environmental compliance construction or
                   repair activities varies according to the project funding source. Under the
                   process, the level of project justification detail that DOD provides to
                   Congress is greater for military construction projects than for projects
                   funded under other appropriations. In general, any military construction
                   project, including environmental compliance projects, is programmed,
                   reviewed, budgeted, and funded individually. Projects to be funded from
                   operation and maintenance appropriations are rolled up into a single
                   amount for budgeting and funding purposes. The law permits some
                   smaller value military construction projects to be carried out as
                   unspecified minor construction. These are budgeted as a single amount.

                   Since our prior reports, DOD has made some improvements to its annual
                   compliance reporting by identifying specific projects that will cost over
                   $300,000. Also, it has improved the detailed budget information provided
                   to Congress by identifying recurring and nonrecurring compliance costs by
                   appropriation. However, information provided to Congress in this report
                   does not identify proposed construction and repair projects costing over
                   $300,000 and their funding sources.




                   5
                    The requirements for military construction are set out in the Military Construction Codification Act
                   (10 U.S.C. 2801-2813).



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                    The requirements for military construction are set out in the Military
Justification for   Construction Codification Act (10 U.S.C. 2801-2813). The act defines
Funding             military construction as projects that result in the creation of complete
                    and usable new facilities or complete and usable improvements to existing
                    facilities on military installations. Military construction projects must be
                    specifically authorized by law. Specific authorization means that each
                    project is requested and justified individually to the authorization and
                    appropriation committees. When approved, the amounts authorized for
                    various locations are listed in the authorization act, and each project is
                    identified by name, location, and amount in the committee reports on the
                    military construction appropriations act.

                    The statute requires military construction projects costing over $500,000 to
                    be funded by the 5-year military construction appropriation. Projects
                    costing less than $500,000 may be funded from other appropriations, such
                    as operation and maintenance.6 The statute also allows construction
                    costing less than $1.5 million to be carried out as unspecified minor
                    construction, which is funded as a single amount rather than by individual
                    project. Of the total $9.2 billion fiscal year 1998 budget proposal, DOD plans
                    to spend $26.1 million for unspecified minor construction. According to
                    officials in the Office of the Under Secretary of Defense (Comptroller),
                    DOD uses this authority only to execute projects that are not identified
                    early enough to have been specifically authorized. The dollar ceiling for
                    unspecified minor construction can go up to $3 million if the project is
                    needed to correct deficiencies that threaten life, health, or safety.

                    Environmental compliance projects also include facility repairs, which,
                    according to DOD, are to be done to maintain real property facilities,
                    systems, and components, or restore them to a usable condition.7 Repairs
                    of any value may be properly funded from 1-year operation and
                    maintenance appropriations, but in the past some repairs have been
                    specifically authorized by law to be funded from military construction
                    appropriations. The law requires that operation and maintenance funded
                    repairs over $5 million be authorized in advance by the Secretary
                    concerned. The National Defense Authorization Act for Fiscal Year 1998
                    will also require DOD to notify Congress when repair projects costing over
                    $10 million are to be conducted. Table 1 shows appropriations that are

                    6
                     In addition, contractors that operate government-owned facilities use procurement funds for
                    environmental compliance construction and repair projects costing less than $500,000. Research,
                    development, test, and evaluation funds may also be used for construction costing less than $500,000
                    for environmental compliance projects required in connection with research activities.
                    7
                     These criteria are stated in a July 2, 1997, memorandum defining repair and maintenance projects by
                    the DOD Deputy Comptroller for Program and Budget.



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                                     used to fund construction and repairs, including environmental
                                     compliance projects.

Table 1: Appropriations by Project
Type Used to Fund Military                                                                        Project Type
Construction and Repair Projects                                            Construction
                                                                             greater than Construction less                Repairs of any
                                     Appropriation                              $500,000     than $500,000                          value
                                     Military construction                                 xa,b                     x
                                     Operation and
                                                                                            b
                                     maintenance                                                                    x                         xc
                                     Research, development,
                                                                                            d
                                     test, and evaluation                                                           xe
                                                                                            d
                                     Procurement                                                                    xf
                                     Family housing                                        x                        x                         x
                                                                                                                     g
                                     Working capital fund                                                           x                         xg
                                     a
                                      Military construction projects costing more than $500,000 must be funded with military
                                     construction appropriations. Also, any construction costing less than $1.5 million can be carried
                                     out as unspecified minor construction.
                                     b
                                      Projects needed to correct deficiencies that threaten life, health, or safety may be funded in
                                     alternative ways. Projects costing up to $3 million may be funded as unspecified minor
                                     construction in a single amount by service, rather than by individual project. Alternatively, projects
                                     costing up to $1 million may be funded with operation and maintenance appropriations.
                                     c
                                     Repairs over $5 million must be authorized in advance by the service secretary concerned.
                                     d
                                      Efforts to execute construction costing more than $500,000 with research, development, test,
                                     and evaluation or procurement funds normally require congressional notification.
                                     e
                                      Research, development, test, and evaluation appropriations may be used to fund projects
                                     costing less than $500,000 at government-owned installations that support research efforts, and
                                     to fund construction that supports unique research-related items at facilities that are contractor
                                     operated and maintained.
                                     f
                                      Procurement appropriations may be used to fund projects at government-owned,
                                     contractor-operated facilities when located on a military installation, on government land other
                                     than a military installation, or at an ammunition plant.
                                     g
                                      The working capital fund may be used for construction in support of environmental compliance
                                     at arsenals, plants, and depots.




                                     The programming process for any construction or repair project varies
Programming Process                  according to the project funding source. Environmental compliance
Varies Depending on                  projects are funded from the military construction or operation and
Project Funding                      maintenance appropriations, depending on the project’s character
                                     (construction or repair) and cost. Military installations use defense
                                     programming guidance and applicable laws and regulations, to initially



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                            determine whether a project is construction or repair and identify the
                            appropriate funding source.


Projects Funded Under the   The process for identifying construction needs and obtaining military
Military Construction       construction funds through project completion requires about 5 years.
Appropriation Require       Because the law requires military construction projects to be specifically
                            authorized, the services and DOD review each compliance construction
Detailed Justifications     project to be funded with 5-year military construction appropriations and
                            request individual project funding approval from Congress.

                            Using defense programming guidance and applicable laws and regulations,
                            the services’ headquarters offices are to review all proposed military
                            construction projects through a dual-track process to confirm
                            requirements and assess technical feasibility. The offices review the
                            regulatory requirements to confirm their environmental purpose. At the
                            same time, support agencies with engineering expertise, such as the Air
                            Force Civil Engineer Support Agency, the Army Corps of Engineers, and
                            the Naval Facility Engineering Command review the technical aspects of
                            proposed projects to determine their feasibility. After the requirements
                            and technical reviews have been completed, the services prioritize the
                            proposed projects to determine which ones will be contained in the budget
                            request.

                            After the services have completed their review and prioritization
                            processes, they submit their compliance construction budgets to the
                            Office of the Deputy Under Secretary of Defense (Comptroller) for review.
                            This office, in conjunction with other Office of the Secretary of Defense
                            (OSD) offices such as the Office of the Under Secretary of Defense for
                            Environmental Security, reviews proposed construction projects to
                            confirm and adjust requirements as necessary. The Comptroller issues
                            program budget decisions to the services, transmitting the Deputy Defense
                            Secretary’s decision on each project. Once OSD has approved the projects,
                            it submits a listing of approved projects to the Office of Management and
                            Budget (OMB), which approves and submits the final construction project
                            budgets, including compliance projects, to Congress as part of DOD’s
                            overall budget request. Figure 1 illustrates the military construction
                            project approval and funding process, which each military service and
                            defense agency conducts separately.




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Figure 1: DOD Process for Programming and Funding Environmental Compliance Military Construction Projects

   Installations                                    Major commands/claimants                        Service headquarters

   Identify construction requirements,              Review, validate, and prioritize                Review major commands' construction
   prioritize projects, and submit                  projects and submit prioritized                 requirements, set overall
   prioritized projects to major commands.          project lists to service                        priorities, adjust and approve
                                                    headquarters.                                   service resources, and review
                                                                                                    and approve biennial budgets.




                       OSD                                          OMB                                        Congress
                                                                                                               Reviews individual project
                       Compiles, reviews, adjusts, and              Reviews and approves the                   budget submissions, holds
                       approves project lists and                   budget, including individual
                       submits a budget and draft                                                              hearings, and enacts
                                                                    projects, and the draft
                       authorization bill to OMB for                authorization bill.                        authorization and appropriation
                       approval.                                                                               bills for construction projects.




                                                   Note: Major commands include organizations such as the Army Training and Doctrine Command,
                                                   Air Force Air Combat Command, and Naval Air Systems Command. Navy claimants include
                                                   organizations such as the Naval Air Warfare Center. Major commands, claimants, service
                                                   headquarters, and OSD eliminate projects and adjust funding levels at the project level.

                                                   Source: Our analysis of service and DOD data.




                                                   For fiscal year 1998, DOD requested $103.6 million for the construction of
                                                   24 environmental compliance projects to be funded with military
                                                   construction appropriations. The Air Force requested funding for
                                                   18 projects with military construction appropriations, whereas the Army
                                                   and the Navy requested funding for 2 and 3 environmental compliance
                                                   projects, respectively. The Defense Logistics Agency (DLA) requested
                                                   funding for four similar projects to be constructed at four separate
                                                   locations under one common authorization.

                                                   Table 2 shows the environmental compliance construction projects that
                                                   DOD requested for fiscal year 1998. Five of the 24 projects are wastewater
                                                   treatment/disposal facilities and sewer systems, 4 are corrosion control
                                                   projects, and 2 are vehicle wash facility projects. The remaining projects
                                                   include tank trail erosion mitigation, oily waste treatment, and small arms
                                                   range remediation.



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Table 2: DOD’s Fiscal Year 1998 Budget Request for Environmental Compliance Military Construction Projects
Dollars in thousands
Project                                          Component              Base                                                                     Cost
Central vehicle wash facility                    Army                   Fort A.P. Hill, VA                                                   $5,400
Tank trail erosion mitigation                    Army                   Fort Lewis, WA                                                           2,000
Emergency spill control                          Navy                   Camp Pendleton, CA                                                       2,800
Oily waste collection system                     Navy                   Portsmouth Naval Shipyard, VA                                            9,500
Oily waste collection treatment system           Navy                   Pearl Harbor Naval Station, HI                                       25,000
Water treatment plant                            Air Force              Lajes Field, Portugal                                                    4,800
Remediate small arms range                       Air Force              MacDill Air Force Base, FL                                               1,500
Wastewater disposal system                       Air Force              Aviano Air Base, Italy                                                   7,900
Wastewater treatment facilities                  Air Force              Arnold Engineering Development Center, TN                            10,800
Upgrade wastewater treatment plant               Air Force              Edwards Air Force Base, CA                                               1,500
Add/alter sewer liner                            Air Force              Edwards Air Force Base, CA                                               1,400
                                                                                                                            a
Corrosion control facility                       Air Force              Minneapolis/St Paul International Airport, MN                            1,600
Fire training facility                           Air Force              Westover Air Force Base, MA                                              1,800
                                                                                                            a
Alter fuel cell/corrosion control facility       Air Force              Charlotte Municipal Airport, NC                                          2,500
Regional firemen training facility               Air Force              Gulfport International Airport, MSa                                       900
                                                                                                                    a
Vehicle refueling shop and paint bay             Air Force              Klamath Falls International Airport, OR                                   500
Add/alter fuel cell and corrosion                Air Force              McEntire, SC                                                             1,500
Vehicle wash facility                            Air Force              Minneapolis/St. Paul International Airport, MNa                           400
Add/alter corrosion control facility             Air Force              Quonset State Airport, RIa                                                300
                                                                                                                    a
Add/alter vehicle washing and corrosion          Air Force              Salt Lake City International Airport, UT
control facility                                                                                                                                  500
Fuel cell and corrosion control facility         Air Force              Schenectady Air National Guard, NY                                       5,700
Upgrade petroleum oil lubricant system           Air Force              Indian Mountain, AK                                                      2,000
Fire training facility                           Air Force              Kunsan Air Base, Korea                                                   2,000
Conforming storage (for hazardous materials)b DLA                       c
                                                                                                                                             11,300
Total                                                                                                                                     $103,600
                                             Source: Office of the Deputy Under Secretary of Defense for Environmental Security.
                                             a
                                             Air Force Reserve and/or Air National Guard locations.
                                             b
                                              Conforming storage facilities are built to conform to legal standards for the storage of certain
                                             hazardous materials.
                                             c
                                              The conforming storage project at DLA involves construction at the following locations:
                                             Anchorage, Alaska ($5 million); Cherry Point, North Carolina ($2.1 million); Camp LeJeune, North
                                             Carolina ($1.3 million); and Oklahoma City, Oklahoma ($2.9 million).




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                                      The military construction budget requests for environmental compliance
                                      construction projects do not directly compete with operation and
                                      maintenance budget requests. However, service officials told us that the
                                      increased competition for military construction funds in recent years and
                                      reduced military construction budgets, have made it more difficult to fund
                                      all the projects they would wish to. As a result, there is considerable
                                      uncertainty whether a project will be approved. The availability of military
                                      construction funds has decreased over the years, with a slight increase in
                                      the fiscal year 1998 request. Table 3 shows the environmental compliance
                                      portion of the military construction budget for the defense components’
                                      environmental compliance requirements for fiscal years 1996-98.

Table 3: Defense Components’ Fiscal
Year 1996-98 Military Construction    Dollars in thousands
Budgets for Environmental             Defense                    Fiscal year 1996            Fiscal year 1997           Fiscal year 1998
Compliance                            components                          budget                      budget             budget request
                                      Army                                  $21,200                     $2,000                     $7,400
                                      Navy                                  115,320                     33,910                     37,304
                                      Air Force                              92,776                     53,291                     47,566
                                      DLA                                           0                          0                   11,275
                                      Total                               $229,296                     $89,201                   $103,581



Projects Funded Under                 Service installation commanders have discretionary approval authority to
Operation and                         budget and obligate operation and maintenance funds. Thus, the review
Maintenance                           and approval process for construction and repair projects funded with
                                      operation and maintenance appropriations is often much faster than the
Appropriations                        comparable 5-year military construction approval process. Projects funded
                                      with the operation and maintenance appropriation can generally be
                                      approved and funded in 1 to 2 years because many of the projects can be
                                      approved at the installation or command level. Projects are individually
                                      reviewed and approved by major commands without being subject to the
                                      detailed headquarters review required for construction projects funded
                                      with the military construction appropriations. However, projects costing
                                      over $500,000 must be separately identified in budget exhibits and are
                                      subject to OMB review.8




                                      8
                                       In commenting on a draft of this report, DOD stated that volume 2 of the Financial Management
                                      Regulation, chapter 8, requires projects costing over $500,000, funded with operation and maintenance
                                      appropriations, to be identified in Budget Exhibit OP27P. This exhibit, which is included with the
                                      President’s Budget Submission, is required for all real property maintenance projects, including
                                      environmental compliance projects.



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Service headquarters offices review only selected samples of projects to
confirm requirements. OSD reviews total requests to confirm and adjust
overall requirements within a specified funding range.9 Congress reviews
and approves environmental compliance operation and maintenance
funding as part of its overall process for reviewing and approving the
defense components’ operation and maintenance request. Figure 2
illustrates the operation and maintenance review and approval process. In
that context, the only information that is reviewed above the major
command level is the (1) total dollar amount each component is requesting
for environmental compliance projects to be funded from the operation
and maintenance appropriation and (2) Environmental Quality Annual
Report to Congress list of projects over $300,000.

According to OSD and service officials, budgeting to fund projects from
operation and maintenance appropriations does not guarantee that
projects will be accomplished even if the request is approved and funds
are appropriated. This is because installation commanders have the
authority to use operation and maintenance funds to meet their day-to-day
requirements. Consequently, this is one reason that, in the past, military
construction funds were requested for large repair projects.




9
 Although budget requests are not reviewed in detail, OSD and service officials told us that they
monitor obligation of operation and maintenance funds closely to ensure that funds requested for
environmental compliance projects are used for those purposes.



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Figure 2: Operation and Maintenance Programming and Funding Process

  Installations                                Major commands/claimants                     Service headquarters

  Identify and classify environmental          Review and validate projects,                Review samples of projects to set
  requirements and submit projects to                                                       budgets, approve total budget
                                               and submit projects to service
  major commands through a                                                                  requirements and budgets for major
                                               headquarters.
  compliance tracking database.                                                             commands.




                  OSD                                          OMB                                      Congress
                                                                                                        Reviews total operation
                  Compiles, reviews, adjusts, and              Reviews and approves the                 and maintenance request, and
                  approves total operation and                 budget, but not individual
                  maintenance requirements, and                                                         authorizes and appropriates
                                                               projects.
                  submits a budget to OMB for                                                           funds.
                  approval.




                                                    Source: Our analysis of DOD data.




                                                    Requirements data are submitted and tracked through a separate
                                                    compliance tracking system used to prepare information for the
                                                    Environmental Protection Agency (EPA), which is responsible for
                                                    monitoring federal environmental protection programs, including
                                                    compliance. In commenting on a draft of this report, DOD noted that the
                                                    requirements data tracking system is not the DOD budget system through
                                                    which funding decisions are made. Program funding is tracked separately,
                                                    and budgets are submitted through the Office of the Comptroller. Major
                                                    commands, claimants, service headquarters, and OSD adjust requirements
                                                    within available funds.

                                                    Construction projects costing less than $500,000, or repairs of any value,
                                                    may be funded with operation and maintenance appropriations. For
                                                    purposes of developing budget requests, the project estimates are totaled
                                                    and shown as a single amount in the operation and maintenance request.10
                                                    Major commands may delegate approval authority to installation

                                                    10
                                                     Operation and maintenance funding also may be used for construction projects costing up to
                                                    $1 million if the project is to correct a deficiency that threatens life, health, or safety.



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                                         commanders to use operation and maintenance funds for environmental
                                         compliance construction and repair projects. However, requests for repair
                                         projects estimated to cost more than $5 million must be individually
                                         approved in advance by the service secretary or, in the case of defense
                                         agencies, the Secretary of Defense. Section 2802 of the National Defense
                                         Authorization Act for fiscal year 1998 will require DOD to notify Congress
                                         of repair projects costing over $10 million.11

                                         Table 4 shows estimates of the services’ operation and maintenance
                                         budgets for construction and repair projects for fiscal years 1996-98.

Table 4: Services’ Fiscal Year 1996-98
Operation and Maintenance Budgets        Dollars in thousands
for Environmental Compliance                                            Fiscal year 1996       Fiscal year 1997           Fiscal year 1998
Construction and Repair                  Service                                 budget                 budget                     request
                                         Army                                   $81,778                   $71,760                    $45,764
                                         Navy                                   134,101                    94,329                     59,763
                                         Air Force                               26,575                    24,955                     57,290
                                         Total                                 $242,454                 $191,044                   $162,817
                                         Note: Most of DLA’s construction and repair projects are funded with military construction funds
                                         or its working capital fund.

                                         Source: Defense components.



                                         The largest single project category among the services, according to funds
                                         requested and budget justification material, is for sewer and wastewater
                                         treatment projects. For fiscal years 1996 and 1997, on average, the Air
                                         Force and the Navy planned to spend about 40 percent of their operation
                                         and maintenance environmental compliance construction-related funds
                                         for sewer and wastewater projects. The remaining funds were to be spent
                                         on storage tank removal, repair and remediation, and on air quality and
                                         other projects. The Army planned to spend about 18 percent of its
                                         requested funds on sewer and wastewater treatment projects, with most of
                                         its planned expenditures for storage tank removal, repair and remediation.
                                         The remaining funds were to be spent on air quality and other projects.12

                                         Officials from the Office of the Under Deputy Secretary of Defense
                                         (Comptroller) recently advised us that, beginning with the fiscal year 1999
                                         budget, all projects meeting the definition for repair will be funded from
                                         operation and maintenance appropriations. In the past, the defense

                                         11
                                           P.L. 105-85, section 2802.
                                         12
                                           We did not confirm whether the funds were spent for their intended purpose.



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                                       components sometimes requested specific authorization of military
                                       construction appropriation funds for major repair projects such as landfill
                                       closures and wastewater treatment facility upgrades. For example, for
                                       fiscal year 1996, the Air Force requested and received specific
                                       authorization for $7.5 million in military construction funding for landfill
                                       closure projects at Beale Air Force Base, California. The Air Force plans to
                                       spend $5.6 million in fiscal year 1998 operation and maintenance funds for
                                       a landfill closure project at Holloman Air Force Base, New Mexico.

                                       Figure 3 shows the landfill repair at Holloman Air Force Base.


Figure 3: Fiscal Year 1997
Environmental Compliance Landfill
Repair Project at Holloman Air Force
Base, New Mexico




                                       Note: Construction debris is on top of the landfill.



                                       While DOD has made some improvements to its annual compliance
Reporting of Future                    reporting in its annual report and supporting budget documents, the
Requirements                           information provided is still insufficient for oversight purposes. Recent
Estimates                              congressional committee reports have raised specific areas of concern
                                       related to (1) expenditures for environmental compliance activities, the




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                             standardization of such data, and the tracking of funding and (2) DOD’s
                             definitions of compliance classes.


DOD Initiatives to Improve   Our May 1997 report on cleanup, technology, and compliance addressed
Compliance Reporting         DOD initiatives to improve compliance reporting and provide Congress with
                             more informative data. In 1995, DOD began an effort to achieve consistency
                             in compliance definitions, categories, and requirements. It planned to
                             identify goals, strategies, budget items, and measures of performance for
                             compliance and other environmental areas. Accordingly, for the fiscal
                             year 1998 budget planning process, DOD’s Office of the Under Secretary of
                             Defense for Environmental Security established new policies and goals for
                             classifying compliance projects and obtaining needed compliance data.
                             For the fiscal year 1999 budget planning process, DOD officials added
                             explanatory footnotes to programming preparation instructions. DOD also
                             included, as part of its fiscal year 1998 budget submission, additional
                             information by appropriation on recurring and nonrecurring costs for the
                             environmental quality areas of compliance, pollution prevention, and
                             conservation. Actual costs, obligations, and future year estimates are
                             included as part of this backup budget documentation.

                             In its fiscal year 1995 Environmental Quality Annual Report to Congress,
                             DOD  started including estimates of individual future compliance projects.
                             For projects estimated to cost over $300,000, DOD provided cost data on
                             planned compliance projects for defense component installations.
                             However, the report did not identify the funding source of these activities
                             or clearly indicate whether the project was for construction or repair.
                             Although officials indicated their intent to include more detail in future
                             reports, officials from the Office of the Deputy Under Secretary of Defense
                             for Environmental Security believed, as of May 1997, that they could not
                             include project detail on funding and environmental area such as
                             compliance or pollution prevention, because they believed the services’
                             data were not consistent and could not be standardized. Since that time,
                             officials stated that the data has improved and that they are working
                             toward reporting project funding sources and environmental area for all
                             defense components except the Navy, which had not provided DOD with
                             the environmental information it needs.


Additional Compliance        The House National Security Committee report on the Defense
Data Available for           Authorization Act for Fiscal Year 1998 (Report 105-132, June 16,
Reporting                    1997) stated concerns about expenditures for environmental compliance



                             Page 14                          GAO/NSIAD-98-33 Military Construction and Repair
B-277673




activities and directed DOD to develop standardized data on such things as
contracts, projects, and installations to permit the tracking of compliance
funding from budget request to expenditure.

The defense components are already collecting data on some of the
information discussed in the House report. Although these data do not
include expenditures, they include other useful information, such as
funding source, classification priority, and estimated cost.13 Since 1978,
heads of federal agencies have been responsible for reporting on the status
of their efforts to prevent, control, and abate environmental pollution at
their facilities.14 The agencies report on these efforts to OMB through EPA.

DOD has required the services to provide standardized data for reporting to
EPA,and EPA has stated that it has provided formats for consistent
reporting to DOD and the services. In most cases, data already available
from service installations could be extracted from the information
required for EPA reporting and incorporated into DOD’s annual
environmental quality report. Table 5 illustrates that some of the needed
data have already been gathered by DOD and the services for EPA reporting.
However, these projects may not be included in the fiscal year 1997
President’s budget.




13
 Except for military construction-funded projects, DOD does not track individual project
expenditures.
14
  Executive Order 12088, October 1978.



Page 15                                     GAO/NSIAD-98-33 Military Construction and Repair
                                            B-277673




Table 5: Examples of Fiscal Year 1997 Service Data Prepared for EPA
Dollars in thousands
                                                                                          Law or                                Estimated
Service                     Appropriation         Project                                 regulation               Priority          cost
Air Force                   O&M                   Removal/replacement of tanks            RCRA                            2          $2,000
Army                        RDT&E                 Removal/replacement of tanks            RCRA                            2                400
                                                                                          a                                 a
Navy                        DBOF                  Removal/replacement of tanks                                                             750
Air Force                   MILCON                Removal/replacement of tanks            RCRA                            2           3,940
Air Force                   MILCON                Closure construction of landfill        RCRA                            1           6,735
Air Force                   O&M                   Closure/cleanup landfill                RCRA                            1                350
Army                        O&M                   Soil erosion program                    NATR                            3                600
                                            Note: O&M, operation and maintenance; RCRA, Resource Conservation and Recovery Act;
                                            RDT&E, research, development, test, and evaluation; DBOF, Defense Business Operating Fund
                                            (now the Working Capital Fund); MILCON, military construction; NATR, Natural Resources Laws.
                                            a
                                            Data were not provided.

                                            Source: Service data prepared for EPA.



                                            EPA established a system for reporting compliance classes to assist federal
                                            agencies in establishing the relative importance of their projects and
                                            activities. We also reported in May 1997 that DOD had expanded the
                                            number of projects that qualify for funding under compliance class I
                                            without distinguishing among different project types. Although EPA
                                            explicitly limits class I to facilities currently out of compliance, as
                                            documented by notices of violation or consent agreements, DOD’s
                                            definition added projects to address requirements in facilities that will not
                                            yet be out of compliance for 2 or more years. DOD’s descriptions also
                                            indicated that items that EPA includes in class III (such as inventories,
                                            surveys, studies, and assessments) could also be routinely funded as
                                            class I projects.

                                            We recommended that DOD reconsider changes in compliance class
                                            definitions so that the data permit better oversight and are more
                                            consistent with governmentwide reporting to EPA. DOD made minor
                                            adjustments to its classification system by expanding its class I standard
                                            to include components that will be out of compliance if funds are not
                                            provided during the year requested, but the changes are not sufficient to
                                            address our concerns. There is still potential for overlap when defining the
                                            different project types. For example, under EPA’s definition, a class I
                                            project is currently out of compliance. Under DOD’s definition, a project




                                            Page 16                                   GAO/NSIAD-98-33 Military Construction and Repair
                  B-277673




                  could be classified as class I even if it is not out of compliance for 2 or
                  more years.

                  In commenting on a draft of this report, DOD noted that it may need to
                  make future minor adjustments to its class I and II definitions, but that
                  major changes are currently unnecessary. If such adjustments are similar
                  to those made previously, the changes will not be sufficient to address our
                  concerns. DOD stated that it believes the EPA classification system, upon
                  which DOD’s class definitions are based, is not sufficient to support budget
                  development or long-range financial planning. As we have stated in our
                  previously cited June 1996 and May 1997 reports, the focus of our concern
                  is on DOD’s ability to prioritize its requirements in a meaningful way. We
                  reported that classification categories could dilute the highest priority
                  category by increasing the number of highest priority projects, and thus
                  significantly reduce management oversight, and that we have been
                  monitoring DOD’s implementation of revised definitions for multiple
                  requesters.

                  The Senate Armed Services Committee report on the Defense
                  Authorization Act for Fiscal Year 1998 (Report 105-29, June 17,
                  1997) stated concerns regarding DOD’s definitions of environmental
                  compliance classes. The report noted that DOD’s class I and class II
                  definitions overlap and may lead to confusion regarding funding priorities.
                  The Committee directed DOD to clarify the class I and II definitions and to
                  eliminate the overlap. We also reported that data, such as those called for
                  by the Senate report are available because the services still distinguish
                  between compliance classes I, II, and III.


                  DOD’s criteria for determining which appropriation account should be used
Conclusions and   to fund construction and repair projects is set forth in laws and
Recommendation    regulations. The law requires military construction appropriations to be
                  used for all military construction projects costing over $500,000. Operation
                  and maintenance appropriations are available to fund construction
                  projects costing less than $500,000 and repairs of any value. The process
                  for programming funds for environmental compliance construction or
                  repair activities varies according to the project funding source. Under the
                  process, the level of project justification detail that DOD provides to
                  Congress is greater for military construction projects than for projects
                  funded under other appropriations. Military installations use defense
                  programming guidance and applicable laws and regulations, to initially




                  Page 17                            GAO/NSIAD-98-33 Military Construction and Repair
                     B-277673




                     determine whether a project is construction or repair and identify the
                     appropriate funding source.

                     DOD has taken some actions on our previous recommendations to provide
                     better oversight of environmental compliance construction and repair
                     projects by modifying its classification system and providing additional
                     summary data in budget support documents. However, both the House
                     and Senate reports of the fiscal year 1998 authorizing committees
                     expressed concerns about DOD environmental compliance data and
                     directed DOD action. Since the Senate Armed Services Committee has
                     directed DOD to clarify compliance class definitions, we are not making
                     recommendations regarding compliance classes at this time. However, we
                     will continue to monitor DOD’s actions in this area.

                     Although DOD disagreed with our prior recommendation to provide better
                     guidance for reporting costs in its annual report to Congress, it has made
                     minor improvements to guidance and taken initial steps to improve
                     reporting by obtaining data on compliance projects over $300,000.
                     However, we believe reporting could be further improved by identifying
                     projects as construction or repair and indicating the funding sources for
                     them. Thus, to improve the specificity of its reporting, we recommend that
                     the Secretary of Defense direct the Deputy Under Secretary of Defense for
                     Environmental Security to revise the DOD annual report to Congress to
                     (1) identify all proposed construction and repair projects over $300,000 for
                     all services and (2) include the funding sources for them.


                     DOD  provided written comments on a draft of this report. DOD agreed with
Agency Comments      our recommendation. It stated that its fiscal year 1996 annual report to
and Our Evaluation   Congress will identify appropriation, environmental pillar (such as
                     compliance or pollution prevention), legal requirement, and environmental
                     class for each project estimated to cost over $300,000. DOD officials expect
                     this report to be published in December 1997.

                     DOD also provided technical comments, which we have incorporated
                     where appropriate. DOD’s comments are reprinted in their entirety in
                     appendix II, along with our comment on a specific point.


                     To obtain information on DOD’s criteria for determining which
Scope and            appropriation account is used for programming funds, we obtained,
Methodology          reviewed, and analyzed applicable laws and regulations and held



                     Page 18                          GAO/NSIAD-98-33 Military Construction and Repair
B-277673




discussions with officials from the Office of the Comptroller, Office of the
Under Secretary of Defense for Environmental Security, and in
headquarters and field offices of the Army, the Navy, the Air Force, the
Marine Corps, and DLA.

To obtain information on DOD’s and the military services’ processes for
programming funds, we reviewed pertinent laws, regulations, policy
statements, and other documents. However, we did not assess the extent
to which projects complied with applicable laws and regulations. We
obtained additional information on the processes through discussions with
OSD and service officials. We used information that we previously reported
in November 1993 and June 1996. We selectively verified data for specific
projects, but did not verify overall database accuracy. However, we have
issued a series of reports over the past few years documenting deficiencies
in the Department’s ability to reliably account for and report on its
expenditures.15

To address reporting on future funding requirements, we reviewed and
analyzed DOD budget reports, submissions, and expenditure data for fiscal
years 1995 through 1998.

We documented examples of construction and repair projects costing over
$300,000 that were funded with military construction and operation and
maintenance funds to illustrate the difficulty of reporting and projecting
future requirements. We relied on the accuracy of DOD and service data in
conducting our analysis and selectively verified data in certain reports. We
drew upon information we reported in May and June 1997 on DOD’s
reporting of compliance projects. We held discussions with and obtained
information from officials in the Office of the Under Secretary of Defense
for Environmental Security and in headquarters and field offices of the
Army, the Navy, the Air Force, the Marine Corps, and DLA.

We visited and obtained information on DOD’s programming and
requirements reporting processes at the following military installations
and major commands: Commander in Chief, Pacific Forces, Hawaii;
Commander in Chief, Atlantic Fleet, Virginia; Commander in Chief, Pacific
Fleet, Hawaii; Naval Facilities Engineering Command, Atlantic Division,
Virginia; Naval Facilities Engineering Command, Pacific Division, Hawaii;
Marine Forces Pacific, Hawaii; Air Combat Command, Virginia; Pacific Air
Forces, Hawaii; Holloman Air Force Base, New Mexico; Marine Corps

15
   In DOD Problem Disbursements (GAO/AIMD-97-36R, Feb. 20, 1997), we identified significant errors
in DOD expenditure reports.



Page 19                                     GAO/NSIAD-98-33 Military Construction and Repair
B-277673




Base, Camp Pendleton, California; Army National Training Center, Fort
Irwin, California; Army Training and Doctrine Command, Virginia; Army
Forces Command, Georgia; and Army Pacific Command, Hawaii. We
discussed environmental compliance issues with officials in EPA Region IX
and with officials of the State of Hawaii’s Environmental Management
Office.

We conducted our review between September 1996 and July 1997 in
accordance with generally accepted government auditing standards.


Unless you publicly announce its contents earlier, we plan no further
distribution of this report until 30 days from its issue date. At that time, we
will send copies to appropriate congressional committees; the Secretaries
of Defense, the Army, the Navy, and the Air Force; the Commandant,
Marine Corps; the Director, Defense Logistics Agency; the Environmental
Protection Agency; and the Director, Office of Management and Budget.
We will also make copies available to others on request.

If you or your staff have any questions concerning this report, please
contact me on (202) 512-8412. Major contributors to this report are listed
in appendix II.




David R. Warren, Director
Defense Management Issues




Page 20                            GAO/NSIAD-98-33 Military Construction and Repair
Page 21   GAO/NSIAD-98-33 Military Construction and Repair
Appendix I

Comments From the Department of Defense


Note: GAO’s comment
supplementing those in
the report text appear at
the end of this appendix.




Now on p. 18.




See comment 1.




                            Page 22   GAO/NSIAD-98-33 Military Construction and Repair
Appendix I
Comments From the Department of Defense




Page 23                             GAO/NSIAD-98-33 Military Construction and Repair
              Appendix I
              Comments From the Department of Defense




              The following is GAO’s comment on the Department of Defense’s (DOD)
              letter dated October 31, 1997.


              1. As discussed on page 17 of this report, the focus of our concern is on
GAO Comment   DOD’s ability to prioritize its requirements in a meaningful way and to
              improve management oversight. We have been monitoring DOD’s
              implementation of revised definitions for multiple requesters.




              Page 24                             GAO/NSIAD-98-33 Military Construction and Repair
Appendix II

Major Contributors to This Report


                        Charles I. Patton, Jr.
National Security and   Uldis Adamsons
International Affairs   Elizabeth G. Mead
Division, Washington,
D.C.
                        James Moores
Kansas City Field       Ben Douglas
Office                  Bob Hammons
                        Steve Pruitt
                        Virgil Schroeder


                        Lynn Gibson
Office of the General   Margaret Armen
Counsel




(709273)                Page 25                  GAO/NSIAD-98-33 Military Construction and Repair
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