The Challenge of Excess Defense Facilities: Practical Solutions June 5, 2014 Andrew V Napoli Assistant for BRAC Office of the Deputy Assistant Secretary of the Army (Installations, Housing & Partnerships)

Force Structure and Infrastructure Army world-wide facility capacity analysis, preliminary results: Based on 490K Active Component end-strength Between 12-28 percent excess capacity (average: 18 percent) Over 160 Million square feet of excess capacity QDR directed Army AC End-Strength: 450K by 2017; 420K if Sequestration Resumes in Fiscal Year 2016 Additional excess capacity will be created if the AC shrinks below 490K, necessitating incremental facility capacity analyses Army estimate: $3/square foot to maintain underutilized facilities Declining force structure drives lower infrastructure requirements. This is a relationship that is nearly as certain as the laws of gravity. The Army has done some database reviews to see how much excess capacity will be created at the 490K active component level. There is much more work to be done here, but the preliminary findings are quite instructive: 160+ MSF, @ $3 per square foot, produces a carrying cost of about $500M a year. That’s real money. “Empty Space Tax” could cost the Army ~$500M/year

Army Capacity Analysis Army Capacity Analysis: Preliminary Results @ 490K end-strength Army has a misalignment of facilities. Key facility types with greatest excess capacity: Gen Purpose Admin, large unit HQ, barracks Current database systems’ reporting issues: Facilities Planning database updates lag behind force structure changes, producing obsolete requirements RPLANS rolls up excess and deficits at the ‘base’ or ‘campus’ level; most installations show excesses and deficits for the same exact facility categories Excess facility assets should enable reduction in relocatables and leases Substitution of facilities (i.e., using barracks as storage or admin space) provides potential efficiencies and consolidation options Data shows opportunities to partner with Local Communities A couple of key caveats to the Army Capacity Analysis we conducted. * The analysis is preliminary – we are still finalizing. For example, we need to include training ranges and maneuver areas. * It was a data-base only review. We did nodata calls to garrisons, nor have we done any site visits to validate database issues. * The excess capacity estimates are based on the 490K active component end-strength. Today’s excess capacity is lower, obviously. * The RPLANS system uses a series of algorithms to calculate projected facility requirements based on a given force structure and installation population. Installations have the ability to review the RPLANS model-outputs and suggest edits to the database to account for local conditions. HQDA oversight of that editing process is getting better but still needs more work. * Installations will be reviewing their excess and deficit results to see if there are options to substitute a known shortfall for a facility type (i.e., storage or small unit HQ space) by utilizing excess facility types (i.e., barracks). * Until installations have gone through this process of leveling out excess capacity to meet shortfall requirements, it will be difficult for installations to know what kinds of partnership opportunties upon which they should focus.

Installation Infrastructure Expenses Base Operations and FSRM, FY11 vs FY13 Execution Installation/Garrison Base Ops ($K) FY11 Base Ops ($K) FY13 Percent Change SRM ($K) FY11 SRM ($K) FY13 Fort Benning, GA $199,275 $157,577 -21% $66,692 $159,121 139% Fort Bliss, TX $124,606 $129,065 4% $82,145 $66,678 -19% Fort Bragg, NC $250,856 $207,526 -17% $91,119 $79,393 -13% Fort Campbell, KY $111,994 $109,189 -3% $59,509 $40,916 -31% Fort Carson, CO $90,564 $94,921 5% $26,334 $36,701 39% Fort Drum, NY $98,299 $82,167 -16% $42,276 $41,895 -1% Fort Gordon, GA $95,759 $76,162 -20% $22,663 $45,937 103% Fort Hood, TX $152,851 $154,333 1% $65,151 $99,057 52% Fort Huachuca, AZ $61,603 $56,021 -9% $16,935 $18,637 10% Fort Irwin/NTC, CA $72,733 $99,278 36% $11,153 $62,533 461% JBLM $207,155 $198,760 -4% $99,943 $80,536 Fort Knox, KY $109,386 $125,502 15% $35,543 $32,850 -8% Fort Lee, VA $89,826 $78,785 -12% $18,502 $38,629 109% Ft Leonard Wood, MO $97,961 $74,092 -24% $56,836 $46,399 -18% Fort Meade, MD $100,253 $103,933 $15,147 $12,056 Fort Polk, LA $82,869 $181,953 120% $23,344 $43,051 84% Fort Riley, KS $80,434 $66,547 $40,485 $34,055 Fort Sill, OK $116,455 $73,139 -37% $41,193 $25,892 Fort Stewart/HAAF, GA $123,588 $125,356 $44,980 $32,186 -28% Fort Wainwright, AK $103,612 $37,886 -10%   Total Army BOS $10,029,000 $9,791,000 -2% Total Army SRM $3,275,000 $3,108,000 -5% This chart may be hard to read for many in the audience, but I show it to give you a sense of magnitude in terms of what our installation infrastructure costs the Army globally, as well as what it costs at a collection of our 20 larger installations. A couple of key points to bear in mind: Funding can fluctuate at installations over time, but the trend line is clear across the Army – it is declining and will continue to do so. For defense communities looking to make a difference, keep in mind it costs about $100M a year to pay salaries and keep the lights on at most of our largest installations. Keeping the buildings fixed generally runs $30M and above a year. Partnerships to share costs on maintaining ballfields, or sharing the library, have merit. Fort Huachuca is saving about $300K a year with its library municipal partnership. That’s good. But the delta between FY11 and FY13 execution for BOS and SRM across the Army is over $400M. To close that size gap, we would need to execute 1,333 additional library partnerships, each saving $300K a year. That’s a lot of libraries! I encourage defense communities to ask their garrisons and senior installation commanders, what kinds of services are they finding themselves forced to cut or scale back due to budget pressures? Is the installation seemingly running a permanent deficit over time? Whenever another round of BRAC is authorized, most payback calculations will revolve around adding up the cost of implementing a proposed recommendation, and comparing that to the number of months of annual BOS & SRM expenses avoided through closures or realignments. For a community looking to make a difference to their local installation, my recommendation is to focus on what would be needed to consolidate functions into more efficient facility layout, so that vacated buildings could either be demolished or offered up to the community. If the proposed partnership isn’t permanently and significantly driving down the installation BOS & SRM requirement, then it is probably not worth the managerial calories.

Army Facility Footprint Facility Sustainment Model (FSM) Millions of Square Feet of Army Facilities, FY13 vs FY14 FY 2013 FY 2014 Active Component 490 MSF 480 MSF Total Army FSM 654 MSF 651 MSF Takeaways: “One for One” MILCON/Demolition Policy Appears to be Working …But not fast enough to avoid the need for BRAC Without closing installations, most Base Operations Support (BOS) requirements continue regardless of smaller forces or fewer buildings Starting the Fiscal Year 2013, the Army began enforcing a policy under which each new square foot of military construction, had to be offset by an equivalent square foot of demolition. The preliminary evidence thus far, finds that it seems to be working. The Facility Sustainment Model (FSM) is the system used by the Army to generate a “should cost” estimate of how much our facilities require to sustain each year. Real property databases feed the FSM model. Different types of facilities generate different amounts of sustainment requirements, relative to different units of measure. One point of interest -- relocatable buildings do not generate a sustainment model requirement – their upkeep generally comes at the expense of other Base Operations Support and other sources of funding. Another note FSM only captures the square footage of facilities that produce a Facility Sustainment requirement. The Army does have more than 654 million square feet of facilities. For the Active Component, the one-for-one policy seems to be having some effect. By demolition or by other means of disposal, the AC is estimated to have 10 million fewer square feet of facilities that will generate some kind of sustainment requirement, from last year. The interesting thing about the Army, is that the vast majority of the Army’s excess square footage, will be found at installations that are high military value and relatively unlikely to close under BRAC. That means that demolition and other non-BRAC forms of property disposal are absolutely paramount. Our Facility Reduction Plan does not get many headlines, but it is quietly having an effect. A future round of BRAC would purge the Army of excess square footage – no doubt. But taking down square footage here and there, does not get after the funding gap we are wrestling with in our Base Operations Support (BOS) account, which is the larger of the two installation overhead accounts. That is because you still need security guards, a housing office, a garrison staff, trash collection and IT support, etc., regardless of whether your installation population goes down by 5% or 50%. If you shrink the size of the facility footprint, you still need most or all of the full gamut of installation services. So the nuance here, is that while most excess facility capacity will need to be addressed through non-BRAC disposal authorities, the big chunks of money needed to plug our budget holes, must necessarily come from BRAC savings.

Food for Thought: Potential Solutions Demolish of excess facilities; remove relocatable buildings (RLBs); Leverage Section 331 Public-Public Partnerships Offer excess facilities for lease to the community Review leases in community; relocate to installation excess capacity BRAC Relocate other federal agency tenants to installation excess capacity Declare selected property as excess; dispose through GSA Systematically re-think the need for cantonment areas Convert AC installation into a Reserve Component Training Center Defense communities partner with installations to help fund facility consolidation plans. These ideas are food for thought for discussion purposes – they do not necessarily represent Army policy. I want to make one critical additional caveat. Solutions to excess capacity must not only have the correct direction from a policy and implementation standpoint. They also need a sufficient magnitude to make a dent in declining BOS and SRM resources. Not all of these are mutually exclusive. In fact, many can build on one another. The first few options have been discussed at other ADC conferences. I want to spend a moment to talk about a few that haven’t received as much discussion, starting from the bottom up. Most installations have tenants spread out, with many organizations having their own dedicated buildings. As installation populations decline, the tendency at Army installations is for tenants to spread out further, so every building ends up partially full but consuming $3 or more of sustainment per square foot to maintain. MILCON funding has declined drastically, so consolidating scattered tenants into a smaller and more efficient facility footprint is really not an option at most installations. I would submit that this is where defense communities may be able to offer assistance. If they were willing to defray consolidation costs on the installation, it could allow the garrison to either demolish failing buildings, or offer up property back to the community for re-use. The challenge for all of these options is that most excess capacity is not located right on the perimeter of the installation. The excess dining facilities, barracks, fitness centers, etc., are usually located deeper on post, and surrounded by ongoing military activities. Offering up an isolated barracks building in the middle of a training campus is unlikely to get private sector interest. But if other activities on the perimeter could be relocated into adapted barracks, it could free up that more valuable space and increase Army efficiency.

Community Benefits from BRAC Creates greater transparency and opportunity to appeal decisions Gives access to DoD Office of Economic Adjustment (OEA) grants, planning, and technical expertise Provides more community control over property re-use Provides opportunity to thoughtfully develop, master plan, and balance community interests I realize that many people regard “BRAC” as a four letter word, and that the vast majority of defense communities do not want to see their installation close or be realigned. But I want to make sure that defense communities understand that the status quo is going to be much worse for the majority. Higher military value installations will bear a larger share of the cutbacks in order to prop up the lowest military value installations. Status Quo = adverse impact from smaller forces without hope of mission back- fill; property remains off the tax-rolls BRAC = chance to recuperate lost DoD workload; get property back into tax base and create new jobs

BACK-UP SLIDES

History of Army End-Strength The Army has followed a predictable pattern over time. As a society, we do not like to pay for large standing armies in peacetime. When at war, we rapidly increase our end-strength to meet the wartime challenge. When the war is over, we quickly draw down. The movements are more gradual post-Vietnam due to the shift from a conscript military to a professional, all-volunteer force. But you can see the ramp-up from about 480,000 Soldiers in our Active Component after the 9/11 attacks. The Army has begun the process of reducing end-strength and force structure. Fiscal reductions required by the current law, along with the end of ground combat operations in Iraq and Afghanistan, have put the Army on a path to shrink its active duty end strength from its peak of 570,000 to at about 450,000. This is a reduction of 120,000 to 130,000 Soldiers, or approximately 22 percent from the active component. These reductions will affect every installation in the Army. Additional cuts, of the magnitude associated with sequestration, will drive our end strength below 450,000. Further reductions due to the outyear discretionary budget caps, will cut more Soldiers out of the Active Component, National Guard, and U.S. Army Reserve. Lower Army end-strength requires a smaller force structure. The supporting infrastructure and civilian staffing must also be reduced, or else excess capacity is created that is unaffordable and puts the Army out of balance. 490K by 2015 QDR 450K by 2017 420K by ????

The Money Is Gone, Part II If Congress prevents the Army from realizing savings from infrastructure efficiencies through BRAC, where else in the budget can we go? Military Personnel: Already planned Modernization: Already planned Research and Development: Already planned Compensation and Benefits: Congress rejects Medical Costs: Congress rejects Civilian Personnel: Need BRAC to optimize Installation Infrastructure: Need BRAC to optimize Training and Readiness: Easiest to harvest Bottom Line: the money has to come from somewhere. “The money is gone.” – Secretary John McHugh

Supplemental PEA The Programmatic environmental assessment or PEA for Army 2020 Force Structure Realignment, released for public comment on 18 January 2013 and completed in April, 2013, assessed the environmental and socioeconomic impacts associated with Army force structure realignments necessary to reduce AC end strength from 562,000 Soldiers to 490,000.   Current budgetary projections require the Army to analyze the reduction of AC end strength below 490,000 Soldiers. Significant end strength reductions below 490,000 Soldiers exceed the scope of analysis in the original PEA, requiring an updated assessment. The BCT inactivations announced in June 2013 distributed the reductions in a relatively even manner to get down to 490K. Reductions below 490K could potentially be distributed in a different manner, necessitating a larger range of population losses to be analyzed. The Army will collect data at 30 installations, which includes the 21 installations assessed in the 2013 PEA and an additional 9 that may see reductions in excess of 1,000 Soldiers.   The overall numbers assessed in this “Supplemental PEA” do not reflect actual or projected population losses; rather, they are designed to provide an assessment of the possible environmental and socioeconomic impacts of the greatest cumulative reductions being considered at each installation.   The PEA will be made available for comment, probably sometime this summer by the Army Senior Leaders, to the public. The Army will also conduct listening sessions at each installation to receive input from local communities, Soldiers, Civilians, and business leaders on the PEA and other military value issues. The Army intends to conduct the Supplemental PEA process in fundamentally the same way it conducted the original PEA in 2013.