Military Sealift Command: Relocation of Atlantic Area Command to Norfolk, Virginia, Area

Published by the Government Accountability Office on 1997-10-09.

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

      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      National Security and
      International Affairs Division


      October 9, 1997

      The Honorable Robert Menendez
      House of Representatives

      Subject:     Militarv Seahft Command: Relocation of Atlantic Area Command to
                   Norfolk. Virginia, Area

      Dear Mr. Menendez:

      In response to your request and a similar request from former Congresswoman
      Susan Molinari, we reviewed the Navy’s estimated costs of relocating the
      Military Sealift Command’s (MSC) Atlantic area command from the Army’s
      Military Ocean Terminal at Bayonne, New Jersey, to Camp Pendleton, an Army
      National Guard base in the Norfolk, Virginia area. We also reviewed the extent
      to which MSC analyzed alternate relocation sites in the Bayonne area and
      estimated the cost differences between relocating in the Bayonne and Norfolk


      As a major component of the U.S. Transportation Command, MSC,
      headquartered in Washington D.C., is responsible for strategic shipping and
      support of Navy combatant ships and various special mission ships. At the
      beginning of 1995, MS& East Coast organizations included the Atlantic area
      command, a tenant at the Military Ocean Terminal in Bayonne, and the Middle
      Atlantic subarea command at the Norfolk Navy Base in Virginia. In March 1995,
      the Secretary of Defense recommended to the 1995 Base Closure and
      Realignment Commission that the ocean terminal be closed, except for the
      facility housing the Atlantic area command.

      The Base Closure and Realignment Commission agreed with the Secretary of
      Defense and recommended that the ocean terminal be closed. However, as
      requested by the Secretary, the Commission stipulated in its recommendation
      that the Atlantic area command be allowed to move to a location of the Navy’s
      choice. As part of a reengineering effort involving multiple locations, MSC
      decided to relocate the Atlantic area command to the Norfolk area because the

                                         GAOLNSIAD-9840R Military Sealift Command

Command’s largest customer on the East Coast, the Navy’s Atlantic Fleet, is
based in Norfolk. As part of the relocation, MSC planned to disestablish the
Middle Atlantic subarea command and have its functions assumed by the
Atlantic area command, thereby reducing civilian personnel authorizations.
MSC officials stated they elected to lease facilities at the Camp Pendleton Army
National Guard Base because that option had the least cost and would allow the
Atlantic area command to relocate to the Norfolk area by December 1997.


Militaxy Sedift Command officials estimate that the overall one-time cost to
relocate the Atlantic area command from Bayonne to the Norfolk area would be
about $9.2 million. This estimate includes various personnel, military
construction, and transportation costs. Our analysis, as well as independent
reviews conducted by the Army’s Base Realignment and Closure Office and the
Naval Audit Service, show that the estimate is a reasonable approximation of
the costs that are likely to be incurred for the move.

Officials at the Military Sealift Cornrnand told us they considered, but rejected,
Bayonne area sites for a variety of reasons and chose to move to the Norfolk
area primarily for operational reasons. Because the Command did not
document its consideration of the alternate sites, we could not specifically
identify the precise cost differentials between the Norfolk and Bayonne area
sites. Nonetheless, our analysis indicated that the higher moving costs
associated with relocating to the Norfolk area are likely to be offset over time
by lower annual operating costs at Camp Pendleton. These lower costs are
largely due to the consolidation of two Command activities and the associated
reduction in personnel in the Norfolk area.


As of August 1997, the Navy’s cost estimate to move its Atlantic area command
from Bayonne to the Norfolk area was about $9.2 million. This estimate
included about $5 million for various civilian personnel costs, including
relocation allowances and severance pay for separated employees; about
$1.5 million to renovate eight buildings at Camp Pendleton; and $2.7 million for
other costs, including transportation and reinstallation of equipment.

 2                                   GAO/NSJAD-9840R Military Sealift Command
Civilian Personnel

Civilian personnel costs account for more that one-half of MSC’s $9.2 million
cost estimate for relocating to the Norfolk area. These personnel costs,
estimated at about $5 million, basically fall into three categories: moving costs
for employees relocating with the Command, moving costs for employees who
find other government employment through the federal government’s priority
placement program, and severance costs for employees not electing to relocate.
In computing the relocation estimate, MSC officials assumed that 25 percent of
the employees that were offered jobs at Camp Pendleton would accept the
offers and relocate at an average cost of about $35,000. For those employees
not relocating, MSC officials assumed that one-third would find jobs at other
federal agencies and would relocate at a cost of about $28,800 per move.
Remaining employees would receive severance pay estimated at $25,000 per

The personnel cost estimates are consistent with Navy historical experience and
are viewed as valid expenditure estimates by the Army’s Base Realignment and
Closure Office. An official in the Navy’s Base Closure Implementation Office
stated that the cost factors used to develop the estimates are periodically
revised to reflect actual cost experience from recent closures.

Militarv Construction

The military construction cost estimate of almost $1.5 million is to renovate
eight two-story wooden administration buildings located at Camp Pendleton.
Figure 1 shows one of the buildings at the relocation site. A Naval Audit
Service report on the Camp Pendleton project concluded that the military
construction estimate was realistic and that the facilities would meet the
Atlantic area command’s space requirements. We reviewed this analysis and
had no basis to question the report’s tidings.

                                    GAO/NSIAD9840R Military Sealift Command
Figure 1: One of the Eight Buildings to Be Renovated at Camp Pendleton

Source: MSC.

Trarmortation   and Installation
of Eauinment

The $2.7 million estimate for the cost of packing, transporting, and reinstalling
equipment was developed by Atlantic area command officials. According to
MSC officials, the estimate is based on an inventory of property, conducted as
part of the 1995 Department of Defense DOD) base structure review, and
estimates obtained from local moving companies. Officials from the Army Base
Realignment and Closure Office believe these relocation expenditures are


MSC officials told us that they considered several Bayonne area sites for
relocating the Atlantic area command. These sites included the Stapleton
Homeport and Fort Wadsworth sites on Staten Island, New York, and Fort
Monmouth and Earle Naval Weapons Station sites in northern New Jersey.
However, MSC officials could not provide any documentation, other than a
briefing chart, of their consideration of these alternative sites. The officials

 4                                   GAO/NSLADQ84ORMilitary Sealift Command
advised us that their site analyses consisted primarily of informal visits to the
sites under consideration and telephone discussions with appropriate officials.
However, their review was cursory and did not include detailed site evaluations.

MSC officials told us they rejected the New York sites because both were
closed under previous base closure rounds. The Fort Monmouth site was
rejected because the officials estimated it would cost about $3.5 million more to
move there than to move to Camp Pendleton. The officials rejected Earle Naval
Weapons Station because they believed the site would need new military
construction and would not be ready to meet MSC time frames. We requested
additional details on cost estimates for the alternate sites, but the officials said
that they had no other data to support these general cost approximations. MSC
officials told us that they selected the Norfolk area site because (1) the Atlantic
area command could operate more efficiently if it were located closer to MSC’s
principal East Coast customer-the Atlantic Fleet-and (2) MSC could
consolidate operations in Norfolk and thus reduce personnel costs.


Even though the Navy could not provide any documentation of its consideration
of alternative locations in the Bayonne area, we attempted to compare known
cost estimates of the move to the Norfolk area with some general assumptions
about the costs of relocating in the Bayonne area. All available information
suggests that the Navy’s relocation estimates and associated assumptions
appear to be reasonable.

The relocation of personnel from Bayonne makes up the largest portion of the
costs associated with the move to Norfolk. MSC officials agree that moving to
any site in the Bayonne area would virtually eliminate these costs. Some of the
Navy’s options for facilities in the Bayonne area apparently had limited
investment costs. For example, in October 1996, commercial space on Staten
Island was offered to MSC for lease, and no military construction expense
would be required. Although equipment transportation costs would still be
incurred for a move to a Bayonne area site, they would be only slightly less
than those associated with a move to Camp Pendleton. According to MSC
officials, most of the moving cost is incurred in packing, unpacking, and
reinstalling equipment, including automated data processing systems. This cost
would be incurred with a move to any site. Thus, the one-time cost associated
with transporting equipment and supplies to another location in the Bayonne
area could have been $2.7 million or less. Under this scenario, the Norfolk
relocation could be expected to incur $6.5 million more in up-front costs than
relocation in the Bayonne area.

For purposes of our analysis, we assumed that the Norfolk and Bayonne
locations would have involved an ongoing facility lease cost and that lease costs

5                                   GAO/NSIAD-98-40R Military Sealift Command
         would not be any greater in Bayonne than in Norfo1k.l we made the latter
         assumption because, if lease costs were greater in the Bayonne area, they
         would actually enhance the comparative savings potential of the Norfolk area

         MSC officials told us that moving the Bayonne operation to Norfolk is part of a
         broader MSC reengineering effort that began in 1995 to consolidate operations
         and reduce personnel. MSC officials stated that this consolidation will allow
         them to eliminate 235 military and civilian positions, 50 of which were due to
         the disestablishment of the Middle Atlantic subarea command. The elimination
         of the subarea command and the associated personnel savings were possible
         because of the relocation of the Bayonne operation to the Norfolk area.
         Further, the move will allow MSC to retain its physical presence in the
         immediate vicinity of the Navy’s Atlantic Fleet. MSC officials estimate that the
         elimination of these 50 positions will produce an annual recurring savings of
         about $2 million. The relocation to Norfolk will also result in an additional
         savings because of a federal civilian locality pay differential that is 4 percent
         lower in Norfolk than in Bayonne. Officials from the Army Base Rea.lignment
         and Closure Office advised us that MSC’s estimated savings are reasonable to
         assume as valid annual recurring savings.

         Our review of MSC budget submissions supports the claimed reduction in
         personnel authorizations of 41 civilian positions in the Atlantic area command.
         Although MSC military authorizations have been reduced, MSC officials could
         not specifically identify the reductions as part of the Atlantic area command.
         However, savings based on the reduction of 41 civilian positions total
         $1.6 million annually, which could offset the initial cost of the move to Norfolk
         in about 6 years.


         In commenting on a draft of this report, DOD agreed with our conclusion that
         MSC’s estimate to relocate the Atlantic area command was a reasonable
         approximation of the likely costs. Also, DOD agreed that the higher costs to
         move to the Norfolk area versus the Bayonne area would likely be offset by
         lower annual operating costs. DOD’s comments are in enclosure 1.

‘The annual lease cost for Camp Pendleton had not been negotiated at the time we
completed our field work, but similar administrative space at Camp Pendleton is being
leased to the Navy for an initial cost of $4.28 per square foot. On the basis of this figure,
the annual lease cost for the Atlantic area command at Camp Pendleton would be about
$0.2 million.

          6                                   GAOINSIAD-9840R Military Seahft Command

We reviewed documents and met with officials from the Department of the
Army and MSC Headquarters in Washington, D.C. We also visited MSC’s
Atlantic area command in Bayonne, New Jersey; the Middle Atlantic subarea
command in Norfolk, Virginia; and Camp Pendleton in Virginia Beach, Virginia.

In reviewing cost estimates, we examined the appropriateness of key
assumptions used by MSC to develop the estimates by comparing MSC’s
estimation techniques and standard cost factors with those used in other base
closure relocations. We questioned Army officials regarding the reasonableness
of MSC estimates because the Army is ultimately responsible for funding the
relocation. We also reviewed documents on Army and Base Closure and
Realignment Commission work relating to the 1995 decision to close the
Bayonne Military Ocean Terminal, fiscal year 1998 Army base closure budget
submissions, and a Naval Audit Service report regarding the relocation. We
relied on the audit report’s analyses and conclusions but did not independently
verify its supporting data.

 In reviewing alternate site relocations, we discussed with MSC officials the
 extent of their consideration of potential sites in the Bayonne area. Because of
 the lack of supporting MSC documentation, we contacted selected site officials
 to obtain then- views on the availability of space and facilities to accommodate
 MSC requirements and the associated costs. We considered these costs, along
 with estimated personnel costs, in estimating the one-time MSC cost to relocate
jn the Bayonne area.

We conducted our review between May and August 1997 in accordance with
generally accepted government audit standards.

We are providing copies of this letter to the Chairmen and Ranking Minority
Members of the Senate Committee on Armed Services and the House
Committee on National Security; the Director, Office of Management and
Budget; the Secretaries of Defense, the Army, and the Navy; and the Office of
the 13th District of New York, represented formerly by Congresswoman
Molinari. We will also make copies available to others on request.

7                                   GAO/NSLAD-9840R Military Sealift Command

Please contact me at (202) 512-8412 if you or your staff have any questions
concerning this letter. Major contributors to this letter are Barry Holman,
James Reifsnyder, Raymond Cooksey, and Joseph Faley.

Sincerely yours,

David R. Warren
Director, Defense Management Issues


                                    GAOLNSJAD-98-40RMilitary Sealift Command
                         ENCLOSURE 1                                                                ENCLOSURE        1

                             OFFICE    OF THE    UNDER      SECRETARY           OF   DEFENSE
                                              3000  DEFENSE   PENTAGON
                                             WASHINGTON     DC 2030 l-3000

                                                                 October   2,   1997

       Mr. David R. Warren
       Director, Defense Management Issues
       National Security and International Affairs Division
       United States General Accounting Offiti
       Washington, DC 20548

       Dear Mr. Warren:
               This is the Department of Defense (DOD) response to the General Accounting Office
       (GAO) draft report: “‘MILITARY BASES: Mili$y Sealift Command Bayonne Relocation to
       Norfolk, Virginia Area,” dated August 27,1997, (GAO Code 709263/0SD case 1450).

               We agree with the draft report’s conclusion that the Military Sealift Command’s estimate _
       to relocate the Atlantic area command to the Norfolk area is a reasonable approximation of the
       cqsts that are likely to be incved. We also agree that the higher moving costs associated with
       relocating to the Norfolk area are likely to be offset by lower annual operating costs.

                    The Department appreciates the o

                                                         Deputy Under Secretary
                                                         (Industrial Affairs & Installations)


                        9                                       GAO/NSI.AD-9840R        Military   Sealift Command
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