Military Housing: DOD Needs to Strengthen Oversight and Clarify Its Role in the Management of Privatized Housing

Congress enacted the Military Housing Privatization Initiative in 1996 to improve the quality of housing for servicemembers. DOD is responsible for general oversight of privatized housing projects. However, private-sector developers are responsible for the construction, renovation, maintenance, and repair of about 99 percent of military housing in the United States. Recent reports of hazards, such as mold and pest infestation, have raised questions about DOD's oversight of privatized military housing.

Conference Report 115-952 included a provision for GAO to review ongoing issues within privatized housing. This report assesses, among other things, the extent to which OSD and the military departments (1) conduct oversight of privatized housing and (2) have developed and implemented initiatives to improve privatized housing. GAO reviewed policies and guidance; visited a non-generalizable sample of 10 installations; analyzed work order data; and interviewed DOD officials and private partner representatives.

The Office of the Secretary of Defense (OSD) and the military departments conduct a range of oversight activities, but some of these activities have been more extensive than others. Specifically, GAO found that:

DOD provides reports to Congress on the status of privatized housing, but some data in these reports are unreliable, leading to misleading results. DOD provides periodic reports to Congress on the status of privatized housing, but reported results on resident satisfaction are unreliable due to variances in the data provided to OSD by the military departments and in how OSD has calculated and reported these data.

OSD has made progress in developing and implementing a series of initiatives aimed at improving privatized housing. In addition, Congress established several requirements addressing privatization housing reform. However, DOD officials and private partner representatives have identified challenges that could affect implementation of these various initiatives. These include concerns that implementation could have unintended negative impacts on the financial viability of the privatized housing projects. However, DOD has not assessed the risk of the initiatives on project finances.

GAO is making 12 recommendations, including that DOD take steps to improve housing condition oversight, performance indicators, maintenance data, and resident satisfaction reporting as well as to assess the risk of the initiatives on project finances. DOD generally concurred with the recommendations and identified actions it plans to take to implement them.

In 1996, Congress enacted the Military Housing Privatization Initiative  (MHPI) in response to Department of Defense (DOD) concerns about the  effect of inadequate and poor quality housing on servicemembers and  their families. Since then, private-sector developers and property  management companies, hereafter referred to as private partners, have  assumed primary responsibility for military family housing in the United  States. They are currently responsible for the construction, renovation,  maintenance, and repair of about 99 percent of domestic military  housing—more than 200,000 homes on and around military bases—in  the continental United States, Alaska, and Hawaii. Over the last few  years, reports of the presence of lead-based paint and other hazards,  such as mold and pest and rodent infestation, have raised questions  about DOD’s management and oversight of privatized military housing.

We have previously reported on DOD’s privatized housing program. In  2018, we reviewed the financial condition of DOD’s privatized housing  projects and found that DOD should take steps to improve monitoring,  reporting, and risk assessment. We recommended that DOD revise  guidance to improve the consistency and comparability in terms of the  time periods of the information reported on the financial condition of its  privatized housing projects, fully assess the effects of reductions in basic  allowance for housing on the projects, clarify when project changes  require notice, and define tolerances for project risks. DOD concurred  with our recommendations and, as of 2019, was taking steps to address  them. Specifically, DOD revised its reporting guidance to the military  departments to ensure that financial data were consistent and  comparable. In addition, DOD planned to update guidance to include a  requirement to report on the risk of changes in the basic allowance for  housing and to provide notification of project changes. A list of related  products is included at the end of this report.

The Conference report accompanying a bill for the Fiscal Year 2019  Department of Defense Appropriations Act included a provision for us to  review ongoing issues within privatized military housing. We assessed  the extent to which the Office of the Secretary of Defense (OSD) and the  military departments (1) conduct oversight of privatized military housing  for servicemembers and their families, (2) have communicated their roles  and responsibilities to servicemembers and their families, and (3) have  developed and implemented initiatives to improve privatized housing.

For each of our objectives, we included all privatized housing projects in  each military department. We reviewed OSD and military department  policies and guidance related to the implementation of the MHPI program  and interviewed OSD and military department officials and  representatives from each of the 14 private partners that are currently  responsible for privatized housing projects. We visited a non- generalizable sample of 10 installations selected to represent each of the  military departments and six private partners—including the five largest  who own the majority of privatized military housing—as well as  geographic and climate diversity. We reviewed the ground leases and  other MHPI project documents for housing projects at each of these  locations, and at each installation we interviewed local military  department and housing office officials, as well as local private partner  representatives. In order to obtain resident perspectives on the condition  of privatized housing at the 10 installations we visited, we facilitated 15  focus groups with over 70 residents. In addition, we developed and  administered a publicly available online tool that provided a voluntary  opportunity for any resident of privatized military housing to submit  information on his or her experiences. We received and reviewed over  650 responses and eliminated those that did not meet our criteria.  Information obtained from our focus groups and online tool are not  generalizable to all privatized military housing residents.

For objective one, we also collected information from the private partners  on the structure of the performance incentive fees that they can receive  under the terms of their ground leases. We reviewed the performance  incentive fee structures to determine the extent to which the indicators  underlying them would allow the military departments to assess the  private partners’ performance as it relates to the condition of the  privatized housing units they maintain. To assess the extent to which  private partner work order data could be used to monitor and track the  condition of privatized homes, we identified and analyzed available  private partner data from each of the 79 MHPI family housing projects on  work orders from October 2016 through April 2019. We requested data  from the private partners in April and May 2019, selecting a time frame  that would include complete data for fiscal years 2017 and 2018 and the  most comprehensive data available at the time for fiscal year 2019. To  assess the reliability of the data, we contacted representatives from each  of the 14 private partners to discuss each company’s data system and  potential limitations for using the data. We then performed manual testing  on initial data files received from each partner to identify issues that would  impact the validity and reliability of using these data for ongoing  monitoring and tracking of the condition of privatized housing units. For  example, we identified instances of duplicate records. While we found  these types of data anomalies, as discussed later in the report, we  determined that the data were sufficiently reliable for addressing our  reporting objectives. To evaluate resident satisfaction data reported in  OSD’s reports to Congress on privatized housing, we reviewed the  processes for collecting, calculating, and reporting these data for the  three most recently issued reports for fiscal years 2015, 2016, and 2017,  focusing our detailed analysis on DOD’s fiscal year 2017 report.

For objective two, we reviewed military department policies and guidance  related to their roles and responsibilities for working with residents of  privatized housing. We also reviewed ground leases and other MHPI  project documents for the 10 installations we visited to identify guidance  that articulated private partners’ and military departments’ roles and  responsibilities. During our site visits to 10 installations, we interviewed  military department housing office officials and private partner  representatives to discuss their specific roles and responsibilities. We  also asked questions soliciting information about residents’ understanding  of the roles and responsibilities of the military housing office and the  dispute resolution process during our 15 focus groups, information that  we also sought through our publicly available online tool.

For objective three, we interviewed OSD and military department officials  to discuss ongoing initiatives developed over the course of our audit work  that were aimed at improving MHPI. Following the passage of the  National Defense Authorization Act for Fiscal Year 2020 (Fiscal Year  2020 NDAA), we reviewed provisions of the statute designed to improve  the condition of privatized housing and evaluated the extent to which  these provisions would impact ongoing or planned DOD initiatives or  provide new oversight roles and responsibilities for OSD and the military  departments.

We evaluated the extent to which the evidence we collected aligned with  OSD policy and guidance for the oversight and management of privatized  housing. We also compared OSD and the military departments’ policies  and practices for management and oversight of MHPI with principles in  Standards for Internal Control in the Federal Government focused on data  collection and management accountability. Further details on our  objectives, scope, and methodology can be found in appendix I.

We conducted this performance audit from November 2018 to March  2020 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.

Background Military Housing Privatization Authorities and Project Structures

DOD’s policy is to ensure that eligible personnel and their families have  access to affordable, quality housing facilities and services consistent  with grade and dependent status, and that the housing generally reflects  contemporary community living standards. From the inception of MHPI,  the military departments were provided with various authorities to obtain  private-sector financing and management to repair, renovate, construct,  and operate military housing in the United States and its territories. These  authorities included the ability to make direct loans to and invest limited  amounts of funds in projects for the construction and renovation of  housing units for servicemembers and their families. The projects were  generally financed through both private-sector financing, such as bank  loans and bonds, and funds provided by the military departments. The  Army and the Navy generally structured their privatized housing projects  as limited liability companies in which the military departments formed  partnerships with the developers and invested funds in the partnership.

The Air Force generally provided direct loans to the developers. Because  privatized housing projects involve budgetary commitments of the federal  government, each project was scored at inception by the Office of  Management and Budget to determine the amount of funds that needed  to be budgeted for that particular project.

The military departments have flexibility in how they structure their  privatized housing projects, but typically the military departments lease  land to developers for a 50-year term and convey existing housing  located on the leased land to the developer for the duration of the lease.  The developer then becomes responsible for renovating and constructing  new housing and for the daily management of the housing units. At the  end of fiscal year 2017, 14 private partners were responsible for 79  privatized military family housing projects—34 for the Army, 32 for the Air  Force, and 13 for the Navy and the Marine Corps. See appendix II for a  list of all of these housing projects.

Each privatized housing project is a separate and distinct entity governed  by a series of legal agreements that are specific to that project, hereafter  referred to as business agreements. These agreements include, among  other things, an operating agreement, a property management  agreement, and an agreement that describes the management of funds in  the projects, including the order in which funds are allocated within the  project. However, while each project is distinct, there are some common  elements in how projects invest and use funds. Every project takes in  revenue, which consists mostly of rent payments. Projects then pay for  operating expenses, including administrative costs, day-to-day  maintenance, and utilities, among other things. After that, projects  generally allocate funds for taxes and insurance, followed by debt  payments. Figure 1 shows a typical funding structure for a privatized  housing project.

In the typical privatized housing project depicted in figure 1, once debt  payments are made, funds are allocated to accounts that fund scheduled  maintenance, such as repair and replacement of items like roofs, heating  and cooling systems, and infrastructure. After that, funds are allocated to  a series of management incentive fees, such as the property  management fee. Finally, the project divides these remaining funds  according to a fixed percentage between accounts that (1) fund major  renovations and rebuilds and (2) are provided to the developer. The  percentages may vary across agreements, but according to military  department documentation, typically, the majority of funds go toward the  accounts funding major renovations and rebuilds.

Most of the projects’ business agreements also include the option for the  private partners to receive performance incentive fees based on  achieving the performance metrics established in each individual project’s  business agreement. These fees are intended to incentivize private  partner performance. The incentive fees can be paid to private partners  on an annual or quarterly basis and can be withheld in part or in total if  the private partner fails to meet the established metrics. The weight each  performance metric and underlying indicator carries toward the incentive  fee varies by project, so incentive fees for some projects may be heavily  dependent on financial performance, while others may be more heavily  weighted toward resident satisfaction.

DOD Goals, Roles, and Responsibilities in the Privatized Housing Program

The Deputy Assistant Secretary of Defense for Facilities Management,  under the authority, direction, and control of the Assistant Secretary of  Defense for Sustainment, is responsible for all matters related to MHPI  and is the program manager for all DOD housing, whether DOD-owned,  DOD-leased, or privatized. In this capacity, the Deputy Assistant  Secretary is to provide both guidance and general procedures related to  military housing privatization, as well as required annual reports to  Congress on privatized military housing projects. However, it is the  responsibility of the military departments to execute and manage the  privatized housing projects, including conducting financial management  and monitoring their portfolio of projects. Each military department has  issued guidance that outlines its responsibilities for privatized housing,  such as which offices are responsible for overseeing privatized housing  projects. See figure 2 for details on each military department’s roles and  responsibilities in the MHPI program.

We have previously reported on DOD’s privatized housing program. In  2002, we reported that although military installation officials were  participating with developers in making improvement decisions for  selected projects, DOD and military department headquarters oversight of  those decisions appeared limited. We recommended, among other  things, that DOD implement several changes to enhance government  protections in the privatization program, such as requiring service  headquarters and the OSD to review and approve privatization project  reinvestment account expenditures over an established threshold. DOD  generally agreed with our recommendations and took steps to implement  them. Specifically, DOD revised guidance to establish new rules and  thresholds for review and approval of project reinvestment expenditures,  among other things.

In addition, in 2006, we reported that although DOD and the individual  military departments implemented program oversight policies and  procedures to monitor the execution and performance of privatized  housing projects, opportunities existed for improvement. Specifically, we  reported that the value of DOD’s semiannual report to Congress was  limited because it lacked a focus on key project performance metrics to  help highlight any operational concerns. We also reported that data  collected on servicemember satisfaction with housing, important for  tracking satisfaction over time, were inconsistent and incomplete because  DOD had not issued guidance for the standardized collection and  reporting of such information. We recommended, among other things,  that DOD streamline its report to Congress to focus on key project  performance metrics and to provide guidance to the military departments  to ensure the consistent collection and reporting of housing satisfaction  information from all servicemembers. DOD generally agreed with our  recommendations and took steps to implement them. For example, DOD  took steps to streamline its report to Congress and update its guidance  directing the services to ensure consistent reporting using a numerical  rating system to rank housing satisfaction information.

DOD Conducts Some Oversight of the Condition of Privatized Housing, but Efforts Are Limited in Key Areas

OSD and each of the military departments conduct a range of activities to  oversee both the condition of privatized housing and performance of the  private partners and have recently implemented initiatives to improve this  oversight—such as increasing the frequency of the physical inspection of  homes and issuing guidance to ensure consistency in the framework  used to measure project performance. However, we found that these  oversight efforts remain limited. Specifically, our review showed (1) the  scope of oversight of the physical condition of privatized housing has  been limited; (2) performance metrics focused on quality of maintenance  and resident satisfaction may not accurately reflect private partner  performance related to the condition of privatized housing; (3) there is a  lack of reliable or consistent data on the condition of privatized housing;  and (4) past DOD reports to Congress on resident satisfaction are  unreliable due to the inconsistent handling and calculation of the data and  therefore may be misleading.

Military Departments Conduct Some Oversight of the Physical Condition of Privatized Housing, but the Scope of These Efforts Is Limited

The military departments have taken steps to oversee the condition of  their privatized military housing inventory and each has issued guidance  that outlines their respective oversight roles and responsibilities, but the  scope of these oversight efforts has been limited. Military department  oversight activities generally fall into two categories—(1) daily oversight of  management and operations and (2) periodic reviews of compliance with  each project’s business agreements.

Daily oversight of management and operations. Each installation has  a military housing office that is responsible for conducting daily oversight  of a project’s management and operations. Military housing officials told  us that activities to monitor the physical condition of housing units  generally include reviewing sample work order requests, following up with  a sample of residents to check on their experience with recently  completed work, and inspecting homes during the change-of-occupancy  process. However, the implementation and scope of these activities  varies and can be limited. For example, during our site visits conducted  from June through August 2019, we identified the following installation- specific practices:

The rate of inspections of homes following change-of-occupancy  maintenance at the installations we visited varied. For example, at the  time of our site visits, military housing office officials at Tinker Air  Force Base, Oklahoma, told us that they inspect 100 percent of  homes that have completed change-of-occupancy maintenance, while  officials from Langley Air Force Base, Virginia, stated that they inspect  10 to 20 percent of these homes. In November 2019, Air Force  officials told us that they are moving to a 100-percent inspection  policy. Similarly, the Army issued an order in March 2019 directing  military housing office officials to inspect 100 percent of homes where  change-of-occupancy maintenance has been completed. Officials  from Army installations we visited noted that this was an increase  from previous practices, and for one installation was a change in  practice from conducting inspections only during the move-out  process, which occurs prior to change-of-occupancy maintenance.

According to Department of Navy officials, the Navy’s business  agreements stipulate that Navy and Marine Corps installations have  access to all work order information. However, practices for following  up on work order records varied among some of the Navy and Marine  Corps installations we visited. For example, military housing office  officials at Camp Pendleton, California, told us that for one of the two  partners that own housing on the base, they had access to only 3  percent of completed work orders from the previous month. For the  other partner that owns housing on the base, military housing office  officials noted that the partner provided them with nine work orders of  varying priority each month to review. One military housing office  official added that these were the minimum requirements needed for  monthly reporting and that they were working with the private partner  to increase their access to work order records. Following a different  practice, military housing office officials at Naval Station Norfolk,  Virginia, told us that they had access to the private partner’s  maintenance record system and would pull reports on homes that had  made six or more maintenance calls in a 30-day period.

Periodic reviews of compliance with each project’s business  agreements. Periodic reviews of compliance with a project’s business  agreements are a joint effort between the local military housing office, the  private partners, military department installation commands, and other  echelons of command. These reviews can include neighborhood tours  to view project amenities such as community centers, playgrounds, and  pools, all of which are owned, maintained, and operated by the private  partner companies, as well as exteriors of housing units. However, similar  to the daily oversight activities, these annual reviews have been narrow in the scope of their assessment of the physical condition of the housing  units, as interior walk-throughs were, at times, focused on just a few  homes at each installation. For example:

The Air Force Civil Engineer Center is the primary oversight and  governance body for the Air Force’s privatized housing projects. The  Air Force oversight process includes periodic compliance reviews of  all privatized housing projects. To accomplish this task, the Air Force  is to use a compliance checklist to review the private partner’s  compliance with a project’s business agreements. In addition to the  compliance reviews, guidance states that Air Force Civil Engineer  Center officials visit projects annually, and officials told us that they  tour a sample of homes and interview private partner representatives,  military housing office staff, and residents during these visits.  However, according to selected annual site visit reports we reviewed  and a discussion with an Air Force official, annual site visit reports  typically include only an evaluation of three to four housing units on an  installation and can be restricted to empty units or units that have  completed change-of-occupancy maintenance, limiting the robustness  of the assessment of the installation’s housing units’ physical  condition.

According to Department of the Navy officials, the Navy and the  Marine Corps provide oversight of privatized housing projects through  a tool called the monitoring matrix. Officials from the various  organizational entities involved with privatized housing—to include the  Commander, Naval Installation Command; the Naval Facilities and  Engineering Command; and the military housing office—are to use  this monitoring matrix to periodically review private partner  compliance with a project’s business agreements. The matrix contains  a condition assessment component, which includes a tour of  privatized housing neighborhoods and a visual inspection of individual  privatized housing units. However, similar to the Air Force, according  to select assessments we reviewed and a discussion with a military  housing office official, the visual inspections are typically focused on  two to three homes in each neighborhood on an installation and to  homes that have recently undergone change-of-occupancy  maintenance.

Army guidance calls for the U.S. Army Corps of Engineers to conduct  an annual ground lease inspection to review private partner  compliance with a project’s business agreements. The guidance also  calls for the Army’s program manager to conduct an annual  installation visit to each project to evaluate performance and ensure a  project’s compliance with the business agreements. The visit is to  include a recommended site tour, described in guidance as a brief  visual inspection tour of community elements, and a walk-through  visual inspection of at least four housing units—two renovated and  two recently built—including one unit designated as an accessible  home under federal guidelines. However, according to a May 2019  report by the Army Inspector General, these requirements were  inconsistently met, and the results did not include a follow-up process  and were not communicated to senior commanders.

Through the recent housing reviews that they have conducted, each  military department’s internal oversight body has recognized that the  departments’ oversight guidance has been limited in addressing the  condition of privatized homes and provides little clarity to housing officials  about their roles and responsibilities in assessing the physical condition of  homes. For example, in May 2019, the Department of the Army Inspector  General reported that senior commanders and garrison staffs expressed  confusion concerning the roles, responsibilities, and authorities regarding  privatized housing and that oversight, governance, and synchronization  were insufficient to identify current housing challenges. Similarly, an April  2019 report from the Air Force Inspector General noted that ambiguous  guidance had resulted in inconsistent action and uneven performance  across Air Force housing projects. In addition, a November 2019 report  by the Naval Audit Service identified nine separate guidance documents  for the oversight of privatized housing and found that personnel at  installation and regional levels were unclear on the guidance and  requirements for performing oversight of privatized housing.

According to military department officials, each department has  completed initiatives and is undertaking initiatives to revise guidance and  standardize daily oversight activities in an effort to provide consistent  oversight across projects and installations and to increase the focus on  the physical condition of housing. In addition, the military departments  have initiatives to increase staffing levels, improve training for military  housing office officials, and ensure that military department housing  officials have independent access to work order data to strengthen their  oversight activities. Figure 3 outlines examples of completed and ongoing  initiatives by military department to improve the oversight of privatized  housing.

However, each military department is working to implement service- specific initiatives with minimal guidance from OSD on the level of  oversight expected as it relates to the condition of privatized housing.  OSD guidance as it pertains to the condition of privatized housing is  limited compared with the guidance OSD provides for monitoring the  condition of military-owned housing.

Specifically, OSD guidance is focused on the oversight of the  implementation of projects, the construction of new housing units, and  project financial monitoring. The guidance stipulates that after privatized  housing projects are awarded, monitoring should include descriptions of  deal structure and strategies for project monitoring. In contrast, OSD  guidance for military-owned housing provides clearly defined objectives to  the military departments for oversight, including the physical condition of  the homes. For example, the DOD manual for housing management  directs the military departments to provide managerial oversight of DOD’s  government-owned family housing to ensure that (1) the required  inventory is being provided and maintained in good condition, (2) the  program is being operated in an effective and cost-efficient manner, and  (3) servicemembers and their families have adequate housing choices.  Further, the manual provides specific objectives for the condition of  DOD’s government-owned family housing, stating that for DOD family  housing to be considered adequate overall, it must meet minimum  standards for configuration, privacy, condition, health, and safety. It also  states that military service condition assessments shall use private-sector  housing industry and DOD standards or codes as a basis for assessing  inventory adequacy. The manual adds that for DOD government-owned  family housing to be considered in adequate condition, the construction  cost for all needed repairs and improvements cannot exceed 20 percent  of the replacement cost.

According to DOD’s housing manual, program assumptions for privatized  housing are that privatization allows the military departments to work with  the private sector to generate housing built to market standards. While  the military departments’ policies provide for some measureable oversight  activities, such as requiring a certain number or type of home to be  inspected, OSD has not provided guidance to the military departments  clearly defining oversight objectives for monitoring the physical condition  of privatized housing units.

DOD’s housing manual further states that because privatization creates a  long-term governmental interest in privatized housing, it is essential that  projects be attentively monitored. The 50-year term for the ground leases  creates a long-term interest in monitoring the privatized housing assets,  to include the physical condition of the housing units. However, unless  DOD updates its guidance on the oversight of privatized housing with  objectives for overseeing the physical condition of housing units, it cannot  be assured that the military departments’ oversight activities will be  sustained over time or be sufficiently consistent across projects, raising  the risk that private partners may not provide adequate quality housing.  Notably, the military departments have entered into privatized housing  agreements with some of the same companies, and members of different  military services may live at installations managed by military services  different than their own. As such, it is important that oversight  expectations generally be consistent across the military departments and  the projects they manage.

Moreover, all military departments have an interest in ensuring that  residents feel confident that the private partners will be held to a  consistent standard for maintaining the condition of their homes.  Participants in 8 of our 15 focus groups stated that they will no longer live  in privatized housing following their current experience, and participants  in 6 of our 15 focus groups stated that their current experience with  privatized housing will affect the future career decisions for their family.  One participant stated that he plans to exit the service after 8 years,  noting that his decision is largely based on his experience with privatized  housing. In addition, in our online tool we asked residents if their  experience with privatized housing would impact their future career and  housing decisions. For those residents that responded to these questions,  the majority said their experience will make them less likely to continue to  live in privatized housing in the future. For example, one respondent  stated that while living in privatized housing is a benefit to being in the  military, living in housing that is subpar and where nothing seems to be  getting fixed or at least acknowledged makes the family hesitant to live in  privatized housing again. Some residents also indicated that their  experience would impact their future career decisions.

DOD Uses Several Metrics to Monitor Private Partner Performance, but the Indicators Underlying Those Metrics May Not Provide Meaningful Information on the Condition of Privatized Housing

The military departments each use a range of project-specific  performance metrics to monitor private partner performance. However,  the indicators underlying the metrics designed to focus on resident  satisfaction and on the quality of the maintenance conducted on housing  units may not provide meaningful information or reflect the actual  condition of the housing units. For example, in April 2019 the Air Force  Inspector General reported that the current incentive structure measures  many things with precision, but does not measure the right things.  Private partner performance is commonly measured through four key  metrics—resident satisfaction, maintenance management, project safety,  and financial management. To determine how well the private partners  are performing under these metrics, military housing office officials told us  that they rely on a range of indicators established in the project business  agreements. Table 1 provides examples of various indicators that the  performance metrics comprise.

According to officials from each military department, the performance  metrics and their underlying indicators are a key tool that each military  department uses to hold private partners accountable for providing quality  management of the privatized housing projects. However, we found that  the indicators themselves may not reflect how the private partner is  performing in terms of providing servicemembers and their families with  quality services and housing. For example:

Maintenance management: One commonly used indicator of  performance in maintenance management measures how often the  property manager’s response time to work orders meets required time  frames established in the project’s business agreements. While this  indicator measures the timeliness of the private partner’s response, it  does not measure or take into account the quality of the work that was  conducted or whether the resident’s issue was fully addressed. As  such, a property manager may fully meet the metric for maintenance  management, even if a given repair has not been adequately  completed. Residents in 13 of our 15 focus groups noted that they  typically have had to submit multiple work order requests before an  individual maintenance issue has been fully addressed. For example,  a resident who participated in one of our focus groups provided us  with a copy of work orders she had submitted related to a single  maintenance issue in her home. The first work order was marked  completed on time, yet the resident had to submit a work order for the  same issue a week later. Further, an official at one Army installation  told us that since the incentive fee for the project is awarded on a  quarterly basis, judging property managers only on the basis of work  orders completed on time for that quarter could mask persistent  ongoing housing problems. This is because many smaller work orders  get closed out each quarter, while work orders for more complicated  issues might stay open over multiple quarters. Some projects include  indicators that aim to more directly measure quality, such as the  number of work orders placed during the first 5 business days of  residency. This type of indicator may more clearly indicate the extent  to which change-of-occupancy maintenance was complete on a given  home.

Resident satisfaction: One example of an indicator of resident  satisfaction is whether a project has met target occupancy rates  established in the project’s business agreements. An OSD official and  private partner representatives told us they use occupancy as an  indicator of satisfaction, based on the assumption that residents would  move if they are dissatisfied with their home’s condition. However,  according to the Army’s Portfolio and Asset Management Handbook,  occupancy rates are not a recommended metric to monitor private  partner performance because occupancy rates already impact project  finances. Our focus groups and the responses we received to our  online tool also indicate that this may not be a reliable assumption.  Although most residents are not required to live in military housing,  residents in each of our 15 focus groups and responses to our online  tool indicated a variety of reasons for choosing to live in privatized  housing, many of which do not have to do with their satisfaction with  the quality or condition of their homes. For example, residents in our  focus groups cited other factors influencing their decision to live in  privatized housing, such as living in close proximity to military medical  or educational services for children or other family members that are  part of the military’s Exceptional Family Member Program, a lack of  safe and affordable housing in the surrounding community, and  access to quality schools. Volunteers that responded to our online  tool also cited accessibility to base services, commute time, and  safety as reasons for choosing to live in privatized housing.

Another commonly used indicator of resident satisfaction is the results  of various resident satisfaction surveys, such as maintenance surveys  and leasing surveys, as well as the annual satisfaction survey. The  military departments and the private partners use these survey tools  to gauge resident satisfaction with the maintenance conducted on  their homes, service provided by property managers, and amenities  provided in their community, among other things. However, residents  in 4 out of our 15 focus groups indicated that the surveys they receive  related to maintenance performed on their homes do not ask  questions about the quality of maintenance work. For example,  residents told us that maintenance surveys, which they generally  receive after maintenance work is completed on their homes, ask if  the maintenance worker was courteous, but not about the quality of  the work performed on the home.

We reviewed maintenance surveys from 3 of the 10 installations we  visited and found that the surveys asked residents to provide  feedback on the quality of the work, with questions asking them to  rate their satisfaction with the quality of the maintenance work  completed. In addition, we reviewed a quarterly Army survey from one  of the installations we visited and found that this survey asked  residents about their satisfaction with the courteousness and  professionalism of the maintenance team and the responsiveness and  timeliness of maintenance work, but did not specifically ask about  their satisfaction with the quality of the maintenance work completed.

We also found that the information used to support the indicators can  vary. For example, officials at one Army installation—Fort Huachuca,  Arizona—use quarterly resident surveys, the Army’s annual survey, and  action plans on Army annual survey results as indicators of resident  satisfaction. However, officials at another Army installation—Fort Knox,  Kentucky—use residential community office relationship management  and point of service surveys. Similarly, we found differences in the  information used as indicators of the maintenance management metric.  For example, officials at both Hickam Air Force Base, Hawaii, and Davis- Monthan Air Force Base, Arizona, rely on the timeliness and quality of  change-of-occupancy maintenance as an indicator of maintenance  management. However, officials at Hickam Air Force Base also use work  order response and completion times as indicators of the maintenance  management metric, whereas officials at Davis-Monthan Air Force Base,  Arizona, only use work order response times.

Standards for Internal Control in the Federal Government state that  management should evaluate performance and hold individuals  accountable for their internal control responsibilities. If management  establishes incentives, management should recognize that such actions  can yield unintended consequences and evaluate incentives so that they  align with the entity’s standards of conduct. The standards further state  that management should use quality information to achieve the entity’s  objectives, including relevant data from reliable sources.

In October 2019, OSD, in collaboration with the military departments and  private partners, issued new guidance standardizing the performance  incentive fee framework across the military departments. The new  guidance provides a framework for standardizing the minimum and  maximum percentages of the fee that each metric can account for,  allowing for some flexibility in the weight each metric will carry for an  individual project. Specifically, maintenance management and resident  satisfaction can account for between 60 and 90 percent of the fee, project  safety can account for between 5 and 15 percent of the fee, and financial  performance can account for between 5 and 15 percent of the fee.

However, despite DOD’s efforts to ensure more focus on the condition  and quality of, and resident satisfaction with, privatized housing through  the standardization of metrics across the military departments, the metrics  may be misleading if the specific underlying indicators used to determine  whether a metric has been reached are not reevaluated on an ongoing  basis to ensure they are accurate measures of the private partners’  performance and an accurate reflection of the condition and quality of  privatized homes. OSD and military department officials have recognized  that the current indicators for measuring performance do not consistently  focus on or prioritize the private partners’ performance with maintaining  housing units and ensuring resident satisfaction. For example, Army  officials told us they are no longer using occupancy rate as an indicator of  resident satisfaction and have taken steps to standardize performance  indicators across all Army projects, while still allowing for flexibility at the  installation level to modify the weight of indicators to provide incentives  reflective of the specific needs of the installation. Limitations to the current  indicators may hinder the military departments’ ability to accurately  determine private partner performance. OSD and the military department  officials told us they have not yet reevaluated the specific indicators used  to determine whether a private partner has met a specific metric because  doing so will require negotiation with each of the private partners for each  project. However, without reviewing the specific indicators used to award  performance incentives, OSD and the military departments do not have  assurance that the information the military departments are using to  award these incentives reflects the actual condition of the housing.

DOD and Private Partners Collect Maintenance Data on Privatized Housing, but These Data Are Not Captured Reliably or Consistently for Use in Ongoing Monitoring of Housing Units

Maintenance data collected by the private partners are not captured  consistently or reliably across projects for use in ongoing monitoring of  the condition of privatized housing units over time. The privatized housing  projects’ business agreements typically include a requirement for the  private partner to maintain a records management system to record,  among other things, maintenance work requested and conducted on each  housing unit. According to private partner representatives from all 14  companies, each company uses commercial property management  software platforms for activities such as initiating maintenance work  orders and dispatching maintenance technicians. Some private partner  representatives stated that while data from the work order tracking  systems are primarily used to prioritize and triage maintenance work, the  data were never intended to monitor the overall condition of privatized  housing units.

Military department officials told us that efforts are underway to monitor  work order data from the private partners’ work order tracking systems in  an effort to increase the military departments’ oversight and accountability  of the private partners for providing quality housing to servicemembers.  For example, the Army and the Navy are taking steps to create data  dashboards to track installations’ work orders by priority, status, and  category. However, while data from these work order tracking systems  may be useful for point-in-time assessments of work order volume at a  given installation, we found that these data are not captured reliably or  consistently for use in ongoing monitoring of the condition of privatized  housing units across projects and over time.

We received and reviewed data from each of the 14 private partners’  work order tracking systems covering each of the 79 privatized housing  projects. Based on our review of these data and discussions with private  partner representatives, we found two primary factors that would limit the  reliability or consistency of using these data for ongoing monitoring of the  condition of privatized housing units over time—(1) inconsistent use of  terminology in work order records and (2) differing practices for opening  and closing work orders.

Inconsistent Use of Terminology in Work Order Records

Data in these work order tracking systems include information such as  records of resident requests for service, history of work conducted on  specific housing units, change-of-occupancy maintenance performed, and  work completed on common areas. Residents may request service for a  broad range of issues, such as lost keys, broken appliances, ceiling or  wall damage, lack of hot water, or water leaks or floods. According to  private partner representatives, work orders can be entered into the  system by property management office staff, maintenance technicians, or  call center representatives for those companies that use offsite call  centers to process resident service request calls. At some installations,  residents can also enter work orders into the work order tracking system  through online portals or mobile applications.

However, we noted cases where work orders were inconsistently entered  into the work order tracking systems with respect to two primary factors— (1) how the request is described by the resident or interpreted by the  individual entering the data, which can differ for each work order; and (2)  the existing range of pre-established service category options in the  private partner’s work order tracking system, which differ among the  partners. According to private partner representatives, the individual  responsible for entering the work order into the system—property  management office staff, maintenance technicians, call center  representatives, or residents—makes a judgment on how to categorize  the work order.

These factors create challenges for looking at the data across projects.  Private partner representatives from one installation we met with stated  that the quality of the work order data is dependent on the data input into  the system. In some cases, the data input can be inaccurate or imprecise,  depending on the specificity with which a resident describes his or her  maintenance issue or how a staff person enters the data into the system.  A private partner representative from another installation we visited stated  that reporting on data from the work order tracking system can be  challenging because individuals across installations inputting data may  have a different interpretation of a resident’s reported issue. Private  partner representatives from another installation noted that the work order  tracking system they used could not be easily updated with a new  category if needed, making it more difficult to identify systemic issues. For  example, there is one category for all exterior repairs, but no way to break  that category down into what the specific repairs are, such as roofs. In the  event that there is an issue with several roofs in the same area, the  private partner representative said it would be hard to identify the issue  because the only option available is to look through the notes section.  According to this individual, the regional maintenance technicians, not the  work order tracking system, are the best resource for identifying trends or  recurring issues.

This inconsistent entering of information into the work order tracking  systems, which occurs both within and across installations, means that  the military departments cannot readily use the data to capture the  prevalence of a particular issue, such as mold, among the homes in a  reliable manner. For example, if someone wanted to use work order data  to track instances of mold, he or she would find that these may be  represented in the work order systems under a variety of service  categories, such as mold or mildew, plumbing and bath, heating and  cooling, or general. To isolate service requests related to mold, one may  have to rely on using the service comments for each request, which can  vary in their level of detail. In addition, service requests for mold issues  may be entered into the work order systems under different priority levels,  such as routine, urgent, or emergency. As a result of the variation in the  type and amount of information collected in the work order tracking  systems, work order data alone cannot be used to determine the validity  of a service request, the severity of the problem, or whether the work was  completed to a quality standard. Figure 4 shows examples of differences  in how a perceived mold issue can be captured in these systems based  on our review of the data provided by the private partners.

Military department officials found similar limitations when analyzing the  work order data. According to some officials, one challenge in using the  work order data for oversight is that, while there are good data in the  individual records, people report and record things differently. Specifically,  a Navy official working with these data told us they have to consider these  differences and create unique algorithms to query data for each partner.

Differing Practices for Opening and Closing Work Orders

At some installations we visited, private partners noted changes in  practices for opening or closing work orders, limiting the usefulness of  data in monitoring the status of work orders over time and thus the  condition of privatized housing. For example, according to private partner  representatives at one installation we visited, a practice for tracking  emergency work orders in the work order tracking system had changed in  2013. Work that comes in under an emergency priority may take several  steps to complete: A maintenance technician may first have to stop the  emergency, then clean up any resulting damage, before repairing the root  cause and completing any finishing work. Prior to 2013, maintenance  technicians would open and close new work orders for each step in the  process. Under the new practice, the original work order is kept open until  completion. Representatives from a different private partner described a  similar change in practices, noting that if a work order was closed or  recategorized before the work was finished there could be issues for how  it is tracked, such as getting dropped out of the system and the work not  getting done. A third partner noted the same practice, but added that an  emergency work order can be downgraded to urgent or routine status  during the time that the work is taking place. As a result, work order data  alone may not accurately identify the number of open work orders at any  given time, the time it took to address a maintenance issue, or if a  maintenance request has been fully completed.

Additionally, we identified anomalies in the work order data provided to us  from each of the 14 partners. For example, we identified instances of,  among other things, duplicate work orders, work orders with completion  dates prior to the dates that the resident had submitted the work order,  and work orders still listed as in-progress for more than 18 months.  According to military department officials, they have increased their  efforts to review data from the private partners’ work order tracking  systems and have found similar anomalies. For example, a Navy official  working with work order data found that a couple of homes had six or  seven unique work order records in the system, but each contained  identical information in the various data fields. Officials from both the  Navy and Air Force have come across work order records that were  marked as complete within minutes of being entered into the system or  marked as complete with a date prior to the work order being open, which  signaled the need for further scrutiny.

Each military department has efforts underway to monitor private partner  work order data in an effort to increase oversight of the quality of  privatized housing. However, because neither OSD nor the military  departments have identified minimum data requirements, established  consistent terminology or practices for data collection, or developed  processes for the military departments to validate the work order data  collected by the private partners, data from these work order tracking  systems are not reliable for use in the ongoing monitoring of the condition  of privatized homes. Further, military department data monitoring efforts  are department-specific, even though the departments have entered into  privatized housing agreements with some of the same companies.

Standards for Internal Control in the Federal Government state that  management should use quality information to achieve the entity’s  objectives and design information systems and related control activities to  achieve objectives and respond to risks. Information, among other  things, should be complete and accurate. The standards also state that  management should define the identified information requirements at the  relevant level and requisite level of specificity for appropriate personnel.  Without direction from OSD to establish minimum data requirements and  consistent terminology or practices for data collection, as well as a  requirement for the military departments to validate the data, the military  departments’ ability to use data from the private partners’ work order  tracking systems to monitor the condition of privatized homes over time is  limited and may vary across projects.

DOD Provides Reports to Congress on Resident Satisfaction with Privatized Housing, but Data in These Reports Are Unreliable, Leading to Misleading Results

DOD has provided periodic reports to Congress on the privatized housing  program; however, reported results on resident satisfaction have been  unreliable and are misleading due to (1) variances in the data the military  departments collect and provide to OSD and (2) OSD’s calculation and  presentation of the data. DOD is statutorily required to provide reports to  Congress that include, among other things, information about military  housing privatization projects’ financial health and performance and the  backlog, if any, of maintenance and repairs. These reports have also  included information on resident satisfaction based on the results of the  annual military department satisfaction surveys. In May 2019, DOD  issued its report for fiscal year 2017, which stated that overall resident  satisfaction for calendar year 2017 was 87 percent. However, this  number is misleading due to issues associated with the collection and  calculation of the data DOD used.

The military departments provide data on resident satisfaction to OSD for  inclusion in DOD’s submission to Congress based on information from the  annual resident satisfaction surveys. Specifically, OSD’s instructions to  the military departments for the fiscal year 2017 report required the  military departments to report the following:

The month and year of the most recently completed tenant  satisfaction survey.

The number of residents surveyed and the total number of tenants  who completed the survey during the reporting period.

Resident responses to the question that asks: “Would you  recommend privatized housing?” Results should indicate how many  tenants responded “Yes,” “No,” or “Don’t Know.”

However, instead of asking whether residents would recommend  privatized housing, the military departments’ annual resident satisfaction  survey asked residents the following: “How much do you agree or  disagree with the following statement, ‘I would recommend this  community to others.’”

The difference in the wording between the question asked of residents  and the question reported to Congress is notable, as a resident’s  satisfaction with his or her community and inclination to recommend it to  others may not be reflective of satisfaction with either the privatized  housing unit or privatized housing in general.

We also found differences in how the military departments interpreted  responses to the question they asked. When asked whether they would  recommend their community to others, residents were provided the  following response categories on a scale of five to zero: (5) strongly  agree, (4) agree, (3) neither agree nor disagree, (2) disagree, (1) strongly  disagree, and (0) not applicable, no opinion, don’t know, or no answer.  However, we found that the ways in which the military departments  translated these responses into the “yes,” “no,” or “do not know”  categories differed across the military departments, and in the case of the  Army differed from year to year.

For the fiscal years 2015 through 2017 reports, Navy officials told us  they counted responses reported in categories 5 (strongly agree) and  4 (agree) as “yes,” responses in categories 2 (disagree) and 1  (strongly disagree) as “no,” and responses in categories 0 (not  applicable, no opinion, don’t know, or no answer) and 3 (neither agree  nor disagree) as “don’t know.”

For the same time period, Air Force officials told us they counted  responses in categories 5 (strongly agree), 4 (agree), and 3—neither  agree nor disagree—as “yes,” responses in categories 2 (disagree)  and 1 (strongly disagree) as “no,” and responses in category 0 (not  applicable, no opinion, don’t know, or no answer) as “don’t know.” If 3  had not been counted as “yes,” the reported resident satisfaction rate  would have been lower. For example, for Lackland Air Force Base,  Texas, if officials had not counted responses in category 3 as “yes,”  the resident satisfaction rate for newly constructed units would have  been more than 20 percent lower than what was reported.

The Army calculated responses differently for fiscal years 2015, 2016,  and 2017. Specifically:

For the fiscal year 2017 report, the Army counted responses in  categories 5 (strongly agree) and 4 (agree) as “yes,” responses in  categories 2 (disagree) and 1 (strongly disagree) as “no,” and  responses in categories 0 (not applicable, no opinion, don’t know, or  no answer) and 3 (neither agree nor disagree) as “don’t know.”

For the fiscal year 2016 report, the Army counted responses in  categories 5 (strongly agree) and 4 (agree) as “yes,” responses in  categories 2 (disagree), 1 (strongly disagree), and 0 (not applicable,  no opinion, don’t know, or no answer) as “no,” and responses in  category 3 (neither agree nor disagree) as “don’t know.”

For the fiscal year 2015 report, the Army counted responses in  categories 5 (strongly agree), 4 (agree), and 3 (neither agree nor  disagree) as “yes,” responses in categories 2 (disagree) and 1  (strongly disagree) as “no,” and responses in category 0 (not  applicable, no opinion, don’t know, or no answer) as “don’t know.”

In addition, we identified errors and inaccuracies in how OSD calculates  these data and reports them to Congress. Specifically, we found missing  data points and incorrect formulas, among other errors, in OSD’s  calculation of the data submitted by the military departments. For  example:

The formula used by OSD to calculate overall resident satisfaction for  fiscal year 2017 did not include data for several projects, including  four Army projects—Fort Bragg, North Carolina; Fort Knox, Kentucky;  Joint Base Lewis-McChord, Washington; and Presidio of  Monterey/Naval Postgraduate School, California. As of September 30,  2017, these four projects accounted for over 18 percent of the Army’s  total housing inventory.

The formula used by OSD to calculate resident satisfaction by project  double counted resident satisfaction data for new and unrenovated  homes for Vandenberg Air Force Base, California, by incorrectly using  the Vandenberg Air Force Base data for both the Vandenberg and for  the Fort Huachuca/Yuma Proving Ground project. As a result,  incorrect data were reported for the Fort Huachuca/Yuma Proving  Ground project for some categories of homes.

OSD did not include resident satisfaction data for New Orleans Naval  Complex, Louisiana, in its fiscal year 2017 report to Congress, even  though the Navy had included data for this project when submitting its  data to OSD. OSD also reported identical resident satisfaction data for  Wright-Patterson Air Force Base, Ohio, in fiscal years 2015, 2016,  and 2017, despite the fact that Air Force officials noted in their  submissions to OSD that the annual resident satisfaction data was  from the annual resident satisfaction survey for Wright-Patterson Air  Force Base conducted December 2013.

Further, Army data provided to OSD had calculation errors that OSD  did not reconcile. Specifically, the Army provided OSD the total  number of surveys received for a project, as well as the number of  surveys broken out by different housing categories. However, we  found instances where the sum of the data broken out by different  housing categories was not equal to the reported total number of  surveys received. For example, when we reviewed data for Fort  Rucker, Alabama, the calculated sum of surveys broken out by  different housing categories was 1,372, but the Army reported a total  of 530 surveys received, a difference of 842 surveys.

Further, the presentation of data in OSD’s report to Congress is  misleading because OSD did not explain the methodology it used to  calculate the overall resident satisfaction percentage or include caveats to  explain limitations to the data. Specifically, OSD did not include  information on overall response rates to the annual satisfaction survey for  each military department, nor did it include response rates by project. Low  response rates can create the potential for bias in survey results. For  example, in its fiscal year 2017 report, OSD reported that 25 percent of  residents living in renovated homes at the MHPI project including Fort  Detrick, Maryland/Walter Reed Army Medical Center, Washington, D.C.,  were satisfied with their housing. However, only four residents provided  responses to this question, meaning that just one resident reported being  satisfied. In addition, we found that OSD did not include an explanation in  the report for why five projects were listed as not applicable. According  to OSD officials, this error was a quality control issue that they plan to  address, but the officials told us there are no plans for quality control in  development at this time. The Fiscal Year 2020 NDAA includes a  provision requiring each military installation to use the same satisfaction  survey for tenants of military housing—including privatized military  housing—the results of which are not to be shared with private partners  until reviewed by DOD. The statute also states that DOD’s reports to  Congress shall include additional information, such as the results of  residence surveys, as well as assessments of maintenance response  times, completion of maintenance requests, the dispute resolution  process, overall customer service for tenants, and other factors related to  the condition of privatized housing.

OSD’s report to Congress states that, given DOD’s objective of improving  the quality of life for its servicemembers, the degree of satisfaction  military families experience in privatized housing is a critical indicator of  overall program success and the military departments and private  partners use tenant surveys to help assess the quality of privatized  housing. Additionally, Standards for Internal Control in the Federal  Government state that management should obtain relevant data from  reliable internal and external sources in a timely manner based on  identified information requirements. Relevant data have a logical  connection with, or bearing upon, the identified information requirements.  Reliable internal and external sources provide data that are reasonably  free from error and bias and faithfully represent what they purport to  represent. Management should evaluate both internal and external  sources of data for reliability, and obtain data on a timely basis so they  can be used for effective monitoring.

However, the errors we identified in OSD’s data calculations, as well as  the differences in how the military departments translate data provided to  OSD, indicate the need for better internal controls, including a process for  collecting and calculating resident satisfaction data from the military  departments, and explanation of the data collected and reported on  resident satisfaction to ensure they are reasonably free from error and  bias and represent what they purport to represent. According to an OSD  official responsible for preparing the reports to Congress, her office  inherited the MHPI report process from its predecessors and had to  quickly catch up on reports because DOD was behind on its reporting  requirement. However, she noted her office is working with the military  departments to review the resident satisfaction survey questions and will  be identifying and implementing measures to ensure an accurate and  reliable process to compile, calculate, report, and compare MHPI residents’ satisfaction by military department and across DOD.  Additionally, for future survey data reporting, OSD officials told us they  plan to research the possibility of directly collecting resident survey data  from the survey administrator to minimize data transcription errors. Until  OSD makes these changes to the data collection and calculation efforts  that make up the department’s report to Congress and provides  explanations of the data in the reports, OSD will not be able to provide  Congress with an accurate picture of resident satisfaction with privatized  housing.

Military Housing Offices Have Not Effectively Communicated Their Role as a Resource for Servicemembers Experiencing Challenges with Privatized Housing

Military housing offices located at each installation are available to  provide resources to servicemembers experiencing challenges with their  privatized housing, among other services, but these offices have not  always clearly and systematically communicated this role to residents of  privatized housing. Military housing office officials noted that  servicemembers living in privatized military housing primarily interact with  their installation’s military housing office when they first receive orders to  move to an installation. The military housing office provides new residents  with information on their local housing options, to include referral services  for housing options. However, military department guidance calls for the  military housing office to provide continued assistance to servicemembers  and their families living in privatized housing. For example, each military  department has guidance that establishes the role of its housing offices in  the resident dispute resolution process—specifically, if servicemembers  are experiencing a dispute with the private partner:

Army policy states that each installation should have an official tasked  with providing support to servicemembers regarding resident issues  that cannot be resolved by the private property manager. This  individual is also in charge of resolving every resident complaint, and  the military housing office, if required, can request mediation by the  garrison commander.

Air Force policy directs installation commanders to establish regular  meetings with the private partners to discuss resident disputes and  develop resolutions for residents’ issues. Also, the Air Force  business agreements for each project are to establish Management  Review Committees, in which the private project owner, Air Force  housing office officials, and the Air Force Civil Engineer Center meet  quarterly to review and facilitate the resolution of prevalent issues.

The Navy announced a standardized two-step resolution process in  May 2019 for housing residents who have issues or concerns with  their current homes. The first step is to report any issue to the local  property manager. If the issue is not resolved in either a timely  manner or to quality standards, residents are asked to contact their  local Navy housing service center, which directly reports to the  installation commanding officer, or the servicemember’s chain of  command. Prior to the standardization of this process, Navy guidance  established a general responsibility to assist residents in the dispute  resolution process and each project’s tenant lease includes specific  dispute resolution processes.

The Marine Corps has established a three-step dispute resolution  process for residents to follow when they are experiencing a dispute  with the private partner. Further, Marine Corps policy calls for each of  the private partners to establish standard operating procedures that  should include complaint resolution procedures.

Despite established military department guidance, we found that  residents were sometimes confused and lacked awareness of the  availability of the military housing office to assist them with issues they  were experiencing with privatized housing. For example, residents who  participated in our focus groups and responded to our online tool  expressed the following concerns:

At least one resident in each of our focus groups noted being  sometimes confused about the military housing office’s roles and  responsibilities with regard to the maintenance of their home. These  residents indicated they did not know the military housing office  existed or could serve as a resource. Further, some individuals that  responded to our online tool indicated that they did not know they  could reach out to military housing office officials or their chain of  command with issues related to the condition of their home.

Residents in at least three of our focus groups indicated they  perceived that the military housing office was not working  independently of the partner or in the residents’ best interest. For  example, residents in at least three focus groups noted that they  viewed the military housing office as an extension of the private  partner. Other residents noted that they did not know what the military  housing office was or what role the office plays in managing privatized  housing. In addition, residents we solicited information from through  our online tool indicated that they felt they have not had any recourse  in resolving issues and disagreements with private partners. For  example, one individual who responded to our online tool stated that  she was glad she moved off post because she now has legal recourse  if the landlord does not meet maintenance requirements.

The military department oversight agencies have found that the military  departments have not clearly and systematically communicated their  roles to residents, and resident confusion and a lack of awareness  regarding the role of the military housing offices is an issue. In April 2019,  the Air Force Inspector General reported that less than half of the  residents interviewed used their military housing office to resolve  complaints, and at some installations officials visited many residents did  not know the military housing office had an oversight role. Similarly, in  May 2019, the Army Inspector General reported to the Secretary of the  Army that at 82 percent of Army installations with privatized housing,  residents did not know how to escalate issues with either the private  partner or the Army housing office. Additionally, the Army Inspector  General reported that installation command teams and staff cited multiple  circumstances where military housing offices and tenant advocacy roles  and responsibilities were unclear.

Further, military housing office officials with whom we spoke during our  site visits acknowledged the gap in resident awareness regarding the  existence and purpose of the military housing office. Officials also noted  that at times residents were unaware of the difference between the  military housing office and the private partner office due, in part, to their  physical co-location and unclear building signage. For example, a military  housing office official at Fort Bragg, North Carolina, told us the military  housing office was the best kept secret on the installation. Moreover,  residents that participated in our four focus groups at Fort Bragg  expressed confusion in differentiating the Army military housing office  officials from private partner representatives. Similarly, officials at the  military housing office at Tinker Air Force Base, Oklahoma, told us that  many residents were confused by their office’s role because the private  partner office goes by the name “Tinker Housing Office.” Further, we  observed that both private partner representatives and some military  housing office officials are located in the same building, and signage does  not distinctly indicate that the office houses both military officials and  private partner representatives. In contrast, the military housing office at  Camp Pendleton, California, is intentionally branded as the “Camp  Pendleton Joint Housing Office” and signage indicates the office houses  officials from both the Marine Corps and the installation’s private partners.  See figure 5 for examples of the varying level of detail in military housing  office signage.

Some military housing office officials told us they have taken steps to  improve resident awareness, such as increasing advertising of the military  housing office’s role and contact information, using town hall meetings to  inform residents of their roles and responsibilities, and rebranding their  military housing offices to differentiate them from the private partners. For  example, the Army housing office at Fort Sill, Oklahoma, changed its  name from the “Residential Communities Initiative Housing Office” to the  “Garrison Housing Office” to more clearly denote that the military housing  office is not associated with the private partner. In addition, a Marine  Corps housing office official provided us with a flyer, which is distributed  to residents by the private partner, informing residents of housing office  contact information and the service’s three-step dispute resolution  process. See figure 6 for a copy of the flyer.

According to DOD officials, the military departments generally decreased  their staffing and oversight of daily privatized housing operations after the  MHPI was enacted, which led to less ongoing resident interaction. For  example, Army officials we spoke with in January 2019 told us they  typically filled 80 percent of available military housing office positions  across their installations. Additionally, officials stated that housing offices  were generally staffed with two or three officials responsible for assisting  servicemembers with housing needs both on the installation as well as in  the local community. Further, the officials told us that the team at Fort  Bragg, North Carolina, was decreased from about 15 to 3 positions.  According to OSD officials, while housing offices should generally not  require the number of personnel that were necessary prior to  privatization, reductions following sequestration reduced housing staff  below the level necessary to fully perform required privatized housing  oversight as it was originally envisioned at the outset of the program.

OSD has also recognized that the military departments’ communication  with residents about their role as a resource for residents has not been  clear or systematic. In February 2019, the Assistant Secretary of Defense  for Sustainment testified before Congress that a way forward in  addressing resident concerns would require focus in three key areas:  communication, engagement, and responsiveness. In support of this,  OSD and the military departments are collaborating with each of the  private partners on several initiatives aimed at improving the residents’  experience with privatized housing and ensuring a consistent resident  experience across installations. These initiatives include: establishing a tenant bill of rights that will clearly define tenants’ rights establishing a resident advocate position that is planned to provide  advice, education, and support to the resident and advocate on the  resident’s behalf in disputes with private partners; developing a common lease that provides a common framework and  language in residential leases across all privatization projects; and developing a standardized formal dispute resolution process to ensure  the prompt and fair resolution of disputes that arise between  privatized housing landlords and residents.

Despite the development of initiatives aimed at improving the resident’s  experience with privatized housing and various ad hoc efforts to better  brand and advertise the roles and responsibilities of some military  housing offices, the military departments have not systematically or  clearly communicated these efforts to residents, and military officials we  met with acknowledged that there still appears to be a gap in residents’  awareness of the military housing office and its role in the dispute  resolution process.

Standards for Internal Control in the Federal Government state that  management should externally communicate the necessary quality  information to achieve the entity’s objectives. Management communicates  this externally through reporting lines so that external parties can help the  entity achieve its objectives and address related risks. Moving forward,  having plans in place to clearly and systematically communicate the  difference between the military housing office and the private partners— including the military departments’ roles, responsibilities, and military  housing office locations and contact information—will better position the  military departments to achieve the intended objectives of the initiatives  they are currently developing with OSD.

DOD and Private Partners Are Implementing Initiatives to Improve Privatized Housing, but May Face Challenges DOD and Private Partners Are Implementing Initiatives to Improve MHPI

OSD, the military departments, and the private partners have identified  and begun collaborating on a series of initiatives aimed at improving  residents’ experience with privatized housing. According to an OSD  official, a series of initiatives have been identified and are currently in  various phases of development and implementation. Tri-service working  groups, each chaired by a designated military department and including  officials and legal counsel from each military department as well as  private partner representatives, are leading efforts to develop and  implement the initiatives. In addition, in the Fiscal Year 2020 NDAA,  Congress established several requirements aimed at addressing military  privatization housing reform. Several of the statutory requirements  provide specific provisions that DOD will need to incorporate into its  development and implementation of existing MHPI initiatives, as well as  additional requirements aimed at improving the oversight of privatized  housing. Table 2 outlines key initiatives aimed at improving privatized  housing, as well as additional selected requirements mandated by the  Fiscal Year 2020 NDAA.

In addition to the provisions noted in table 2, the Fiscal Year 2020 NDAA  included requirements for increased oversight of the physical condition of  privatized housing. Specifically, the legislation required the following:

The Secretary of Defense is to designate a Chief Housing Officer to  oversee housing units, including the creation and standardization of  policies and processes regarding housing units.

The Secretary of Defense is required to establish a uniform code of  basic standards for privatized military housing and plans to conduct  inspections and assessment of the condition of privatized homes.

The military departments are required to create a council on privatized  military housing for the purposes of maintaining adequate oversight of  the military housing program and serving as a mechanism to identify  and resolve problems regarding privatized military housing.

The head of the installation military housing office is responsible for  conducting a physical inspection and approving the habitability of a  vacant housing unit for the installation before the landlord managing  the housing unit is authorized to offer the housing unit available for  occupancy; conducting a physical inspection of the housing unit upon  tenant move-out; and initiating contact with a tenant regarding the  tenant’s satisfaction with his or her housing unit not later than 15 days  after move-in, and again 60 days after move-in.

Each installation is required to use the same satisfaction survey for  tenants of military housing, including privatized military housing, and  results are not to be shared with partners until reviewed by DOD.

Initiatives to Improve MHPI May Face Implementation Challenges

DOD and private partner representatives have cited several challenges  that could affect their ability to implement initiatives aimed at improving  MHPI. Specifically, key challenges include the timeliness with which they  are able to implement initiatives, a lack of resources needed for  implementation, and concerns that implementation could have unintended  negative impacts on the financial viability of the privatized housing  projects.

Timeliness of implementation due to the need to collaborate with  and obtain input and agreement from the large number of  stakeholders involved in privatized housing. According to DOD  officials and private partner representatives, many of the initiatives  designed to improve privatized housing require not only agreement  between DOD and the private housing partners, but also discussion  with and, in some cases, approval by the project bond holders.  Because DOD does not have the ability to unilaterally make changes  to existing business agreements, this need for stakeholder agreement  limits DOD’s control over the implementation timeline of any initiative  that requires changes to a project’s business agreement—such as the  implementation of a standardized dispute resolution process.  Additionally, the private partners noted that the bond holders may be  reluctant to agree to changes to the business agreements that could  result in higher project costs.

The need for more military department staff with targeted  expertise. As noted earlier, the military departments had reduced  their involvement in daily privatized military housing operations as part  of the overall privatization effort. This included reducing staffing levels  at the installations, and military housing office officials at over half of  the installations we visited stated that reduced staffing levels had  impacted their ability to carry out oversight duties, such as work order  data analysis and housing inspections. Further, until recent issues  surfaced over concerns of the quality of privatized housing, the  military departments had distanced themselves from involvement in  daily military housing operations. For example, the Army issued a  memorandum in 2013, which has since been rescinded, stating that  garrison commanders were not to authorize, direct, or permit Army  representatives to initiate health and welfare inspections of privatized  housing. Each of the military departments has plans to increase the  military housing office staffing at each installation to allow for  enhanced oversight. In particular, according to military department  officials, these positions will focus on quality control and quality  assurance of the maintenance of privatized homes. However,  improvements to the condition of privatized housing may not be fully  realized until DOD establishes a uniform code of basic standards for  privatized military housing, as required by the Fiscal Year 2020  NDAA, and these new personnel are trained in these standards.

The potential for unintended negative financial impacts on the  projects that could outweigh the intended benefits of the  initiatives. OSD officials and private partner representatives have  expressed concern that some proposed initiatives could result in  unintended financial consequences for the housing projects. In  particular, private partner representatives noted costs from things  such as legal fees associated with the development of a common  lease and the various addendums that would be required and the  unanticipated costs of hiring outside third party inspections. In  particular, some of the private partners noted that the financial impact  of unfunded requirements to projects that are already experiencing  financial distress could result in even fewer funds available to reinvest  in improvements to the current and future physical condition of the  homes.

Moreover, OSD officials told us they have concerns that some  initiatives—such as increased frequency of change-of-occupancy  inspections that may result in homes remaining vacant longer than  planned and therefore not collecting rent—may unintentionally impact  a project’s cash flow. Officials noted that some installations have  large-scale housing turn over at the same time and inspections may  not be able to be completed in the required time frames. For example,  OSD officials said that at Fort Leavenworth, Kansas, the vast majority  of homes generally turn over during a 2-week time period. Officials  said that in a location like this, new oversight requirements may have  a negative impact on residents’ move-in timelines, which could  subsequently impact occupancy rates and project cash flow as a  result of delays in rent payments. OSD officials also stated that  residents’ ability to have their basic allowance housing payments  segregated and held in escrow may present financial challenges to  both the resident and the project. These officials noted that they did  not yet know how the withholding of these payments would be  implemented. According to OSD officials, as of January 2020, there  are many questions surrounding the implementation of the Fiscal Year  2020 NDAA provisions. Officials told us that they have not yet  assessed the impact of increased oversight on the financial viability of  the MHPI projects, but stated that as they develop processes to  implement each new statutory provision, the financial impact is  something that needs to be considered.

DOD’s Military Housing Privatization Initiative Performance Evaluation  Report for fiscal year 2017 stated that the government’s interests are not  always aligned with those of the private sector, and that oversight and  engagement are required and expected in a public-private partnership  over the long term to ensure success. We have previously reported that  the military departments have not defined their risk tolerance levels for  privatized housing relative to the program’s objective of providing quality  housing that reflects community living. Specifically, we recognized that  the Office of Management and Budget guidance on the preparation,  submission, and execution of the federal budget suggests that public- private partnerships, such as privatized military housing projects, contain  some elements of risk to the government. Standards for Internal Control  in the Federal Government state that management should identify,  analyze, and respond to risks related to achieving defined program  objectives. While DOD is in the process of developing and implementing  initiatives to improve privatized military housing, OSD and the military  departments have not assessed the risk of the proposed initiatives on the  financial viability of the privatized housing projects.

According to an OSD official, the intention of privatization was to reduce  the government’s role in the management of military housing and put  more responsibility on the private partners. As described earlier in this  report, the military departments have ramped up their oversight efforts in  response to recent concerns about the condition of privatized housing by,  for example, revising guidance and hiring additional staff. However, OSD  has not assessed the impact of these activities on the financial viability of  the MHPI projects. For example, OSD has not determined how increasing  the frequency of housing office inspections and residents’ withholding of  rent could impact the bottom line of some of its privatized projects.  Without assessing risks to the financial viability of the MHPI projects  associated with the implementation of these initiatives aimed at improving  privatized housing, DOD’s efforts to improve the privatized housing  program could be compromised. Further, DOD has a long-term interest in  ensuring the financial health of the properties privatized under MHPI. As  we have reported, typically the titles to the homes that were conveyed to the private partners and any improvements made to these homes during  the duration of the ground leases will automatically revert to the military  departments upon expiration or termination of the leases.

DOD’s oversight of privatized housing is critical to ensure that residents  are being provided with affordable, quality housing that generally reflects  contemporary community living standards. In light of recent concerns  about the effect of inadequate and poor quality housing on  servicemembers and their families, the military departments have recently  implemented steps to increase the oversight of the condition of privatized  housing. However, OSD has not provided the military departments with  specific objectives for this monitoring. The newly established Chief  Housing Officer position, intended to standardize guidance and processes  for the oversight of privatized housing, provides DOD with an opportunity  to ensure that revised guidance provided to the military departments  includes objectives for increased oversight. In addition to oversight of the  condition of homes, DOD has taken initial steps to standardize  performance incentive metrics across the military departments. However,  unless efforts are made to ensure that the indicators driving these metrics  accurately reflect private partners’ performance in maintaining the  condition and quality of privatized homes, DOD’s ability to hold private  partners accountable will remain limited. Further, while the military  departments continue to increase the access to and use of work order  data to monitor and track the condition of privatized housing, without  consistent terminology and practices for work order data collection and  processes for validating data collected from the private housing partners,  the use of these data may not result in reliable findings. Finally, DOD has  frequently reported high customer resident satisfaction rates as a key  indicator of the success of the privatization initiative. However, the  process used to collect and calculate the data used for determining these  rates and limitations in its presentation to Congress raise questions about  the reliability of DOD’s reports and their usefulness as an indicator of  program success. By improving oversight guidance, mechanisms for  measuring private partner performance, the reliability of housing data,  and reporting on resident satisfaction, DOD can better ensure that MHPI  is providing servicemembers with quality housing.

Despite a decreased role in the daily management of privatized housing,  the military departments still maintain responsibility for providing  servicemembers with resources for seeking resolution to any issues  identified in their privatized homes. However, without plans in place to  communicate military housing office roles, responsibilities, and locations  to residents of privatized housing, these individuals may not receive the  full benefits of the assistance that the military housing offices provide. In  light of the increased focus by DOD and Congress in ensuring that  residents are aware of their rights and responsibilities, improved  communication with residents about the military housing offices’ roles and  responsibilities can help ensure that residents are utilizing the full range  of resources available to them if they have issues with privatized housing.

As OSD, the military departments, and the private partners take steps to  improve the resident experience with privatized military housing and  increase the department’s focus on the condition of privatized homes,  ensuring that their efforts do not inadvertently harm the financial viability  of these projects is key. Without assessing and mitigating the potential  risk program improvements may have on the financial viability of the  MHPI projects, DOD cannot ensure that these initiatives and the  implementation of new statutory requirements will ultimately result in  improvements to the condition of privatized housing.

We are making a total of 12 recommendations—six to the Office of the  Secretary of Defense, two to the Secretary of the Army, two to the  Secretary of the Air Force, and two to the Secretary of the Navy:  The Secretary of Defense should ensure that the Assistant Secretary of  Defense for Sustainment, in collaboration with the military departments,  provide updated guidance for the oversight of privatized military housing,  to include oversight objectives for each service to monitor the physical  condition of privatized homes over the remaining duration of the ground  leases. (Recommendation 1)

The Secretary of the Army should take steps, in collaboration with the  Army’s private housing partners, to review the indicators underlying the  privatized housing project performance metrics to ensure they provide an  accurate reflection of the condition and quality of the homes.  (Recommendation 2)

The Secretary of the Air Force should take steps, in collaboration with the  Air Force’s private housing partners, to review the indicators underlying  the privatized housing project performance metrics to ensure they provide  an accurate reflection of the condition and quality of the homes.  (Recommendation 3)

The Secretary of the Navy should take steps, in collaboration with the  Navy and Marine Corps’ private housing partners, to review the indicators  underlying the privatized housing project performance metrics to ensure  they provide an accurate reflection of the condition and quality of the  homes. (Recommendation 4)

The Secretary of Defense should ensure that the Assistant Secretary of  Defense for Sustainment, in collaboration with the military departments  and private housing partners, establish minimum data requirements and  consistent terminology and practices for work order data collection for  comparability across installations and projects and to track trends over  time. (Recommendation 5)

The Secretary of Defense should ensure that the Assistant Secretary of  Defense for Sustainment require the military departments to establish a  process to validate data collected by the private housing partners to  better ensure the reliability and validity of work order data and to allow for  more effective use of these data for monitoring and tracking purposes.  (Recommendation 6)

The Secretary of Defense should ensure the Assistant Secretary of  Defense for Sustainment, in collaboration with the military departments,  develop a process for collecting and calculating resident satisfaction data  from the military departments to ensure that the data are compiled and  calculated in a standardized and accurate way. (Recommendation 7)

The Secretary of Defense should ensure the Assistant Secretary of  Defense for Sustainment provides additional explanation of the data  collected and reported in future reports to Congress, such as explaining  the limitations of available survey data, how resident satisfaction was  calculated, and reasons for any missing data, among other things.  (Recommendation 8)

The Secretary of the Army should develop and implement a plan to  clearly and systematically communicate to residents the difference  between the military housing office and the private partner. At a minimum,  these plans should include the Army housing office’s roles,  responsibilities, locations, and contact information and should ensure that  all residents are aware that they can directly contact Army housing office  officials. (Recommendation 9)

The Secretary of the Air Force should develop and implement a plan to  clearly and systematically communicate to residents the difference  between the military housing office and the private partner. At a minimum,  these plans should include the Air Force housing office’s roles,  responsibilities, locations, and contact information and should ensure that  all residents are aware that they can directly contact Air Force housing  office officials. (Recommendation 10)

The Secretary of the Navy should develop and implement a plan to  clearly and systematically communicate to residents the difference  between the military housing office and the private partner. At a minimum,  these plans should include the Navy housing office’s roles,  responsibilities, locations, and contact information and should ensure that  all residents are aware that they can directly contact Navy housing office  officials. (Recommendation 11)

The Secretary of Defense should ensure that the Assistant Secretary of  Defense for Sustainment, in collaboration with the military departments,  assess the risks of proposed initiatives aimed at improving the privatized  military housing program on the financial viability of the projects.  (Recommendation 12)

We provided a draft of this report to DOD for review and comment. In  written comments, reprinted in their entirety in appendix III, DOD  concurred with 10 of our recommendations and partially concurred with 2,  identifying actions it plans to take to address each of them.  DOD also  provided technical comments, which we incorporated as appropriate.

DOD partially concurred with our recommendation that the Assistant  Secretary of Defense for Sustainment, in collaboration with the military  departments and private housing partners, establish minimum data  requirements and consistent terminology and practices for work order  collection. The department noted that neither the Assistant Secretary of  Defense for Sustainment nor the military departments could mandate  changes to existing privatized housing project ground leases or legal  agreements. DOD further noted that it cannot unilaterally make changes  to the project ground leases and associated legal documents without  concurrence from the private partners. However, the department noted  that to the maximum extent practical, it would work to establish minimum  data requirements and consistent terminology and practices for work  order collection.

DOD also partially concurred with our recommendation that the Under  Secretary of Defense for Sustainment, in collaboration with the military  departments, develops a process for collecting and calculating resident  satisfaction data because there is no Under Secretary of Defense for  Sustainment. Based on the department’s comments, we revised the  addressee of this recommendation, directing action to the Assistant  Secretary of Defense for Sustainment. However, the department noted  that effective with the survey collection effort for Fiscal Year 2021, it  would refine the process for collecting and calculating resident  satisfaction data from the military departments to ensure that DOD  compiles and calculates data in a standardized and accurate way.

We are sending copies of this report to the appropriate congressional  committees; Senator Catherine Cortez Masto; Senator Mark Warner;  Representative Gus Bilirakis; the Secretary of Defense; and the  Secretaries of the Departments of the Army, the Navy, and the Air Force.  In addition, the report is available at no charge on our website at  https://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-2775 or FieldE1@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. Key contributors to this report are listed in appendix  IV.

Appendix I: Objectives, Scope, and Methodology

The Conference Report accompanying a bill for the Fiscal Year 2019  Department of Defense Appropriations Act included a provision for us to  review ongoing issues within privatized military housing. This report  examines the extent to which the Office of the Secretary of Defense  (OSD) and the military departments (1) conduct oversight of privatized  military housing for servicemembers and their families, (2) have  communicated their roles and responsibilities to servicemembers and  their families, and (3) have developed and implemented initiatives to  improve privatized housing.

We included all privatized housing projects in each military department.  For each of our objectives, we reviewed OSD and military department  policies and guidance for the implementation of the Military Housing  Privatization Initiative (MHPI) program, including guidance on the  authority, roles, and responsibilities for oversight and management of  privatized housing. We evaluated the extent to which the evidence we  collected aligned with OSD policy and stated goals for oversight and  management of privatized housing, and whether the evidence adhered to  the principles in Standards for Internal Control in the Federal  Government. We conducted interviews with officials from the Office of  the Assistant Secretary of Defense for Sustainment, Office of Facilities  Management; the Office of the Deputy Assistant Secretary of the Army  (Installations, Housing and Partnerships); the Army Installation  Management Command; the Army Assistant Chief of Staff for Installation  Management; the Assistant Secretary of the Air Force for Installations,  Environment, and Energy; the Air Force Civil Engineer Center; the  Commander, Navy Installations Command; the Commander, Naval  Facilities Engineering Command; the Marine Corps Installation  Command; and representatives from each of the 14 private partners that  are currently responsible for privatized housing projects.

We visited a non-generalizable sample of 10 installations selected to  represent each of the military departments, six private partners—including  the five largest who own the majority of privatized military housing—and  geographic and climate diversity. The selected sites in our non- generalizable sample were three Army installations—Fort Bragg, North  Carolina; Fort Huachuca, Arizona; and Fort Sill, Oklahoma; two Navy  installations—Naval Station Norfolk, Virginia, and Naval Base San Diego,  California; two Marine Corps installations—Marine Corps Base Camp  Lejeune, North Carolina, and Marine Corps Base Camp Pendleton,  California; and three Air Force installations—Davis-Monthan Air Force  Base, Arizona; Langley Air Force Base, Virginia; and Tinker Air Force  Base, Oklahoma. We reviewed the ground leases and other MHPI project  documents for housing projects at each of these locations, and at each  installation we met with officials from the installation commander’s office  and conducted interviews with officials from both the installation military  housing office and representatives from the private partners.

To collect input from residents of privatized housing, we facilitated 15  focus groups with a self-selected group of current residents of privatized  military housing. During the focus groups, a methodologist led  participants through a structured questionnaire, which we pretested with  11 residents of privatized housing prior to the first focus group. To solicit  participants for our focus groups, we requested that local military housing  office officials email all current residents of privatized housing prior to our  visit to inform them of our focus groups. Individuals interested in  participating in our focus group sessions were instructed to contact us  directly for further information. We had over 70 residents participate in our  focus groups. In addition to the 15 focus groups, we conducted an  additional five sessions in which fewer than three residents attended. We  collected information from these residents, but we did not include their  input in our focus group analysis. Comments from focus group  participants are not generalizable to all residents of privatized military  housing.

We also developed and administered a publically available online tool that  provided an opportunity for any resident of privatized military housing to  voluntarily submit information on their experiences. Participants had the  option to remain anonymous and make multiple submissions in order to  provide us information on their experience at more than one installation.  We developed our tool in conjunction with a survey methodologist to  ensure it met our requirements for publically available anonymous data  collection instruments, and conducted five pretests of the questions with  residents of privatized housing. Our online tool was made available to the  public from June 17, 2019, through August 31, 2019. We received a total  of 658 responses. In analyzing information provided through the online  tool, we took steps to identify responses that did not meet our criteria,  including removing 13 responses for reasons such as responses with  duplicative usernames or Internet Protocol (IP) addresses that described  the same experience or had been started but not fully completed,  responses from DOD officials that informed us they had provided  responses to test our tool, and responses from residents living on  installations outside of the United States. In reporting results from our  online tool, we used the following qualifiers in presenting our results— most (to indicate 80 percent or higher); majority (to indicate 51-79  percent); and some (to indicate less than 50 percent). Findings from our  focus groups and online tool are not generalizable to all privatized military  housing residents.

To determine the extent to which DOD conducts oversight of privatized  military housing for servicemembers and their families, we conducted the  following additional data analysis. Through the steps described in the  following bullets, we determined these data to be reliable for the purposes  of our findings:

To determine the extent to which performance incentive fee metrics  assessed the condition of privatized housing, we collected information  on the structure of the incentive fees from private partners for 74  privatized housing projects and received confirmation that there are 5  projects that do not have incentive fee plans as part of their business  agreements. We reviewed all of the incentive fee plans and identified  commonly used metrics and indicators. We met with officials from the  military housing offices, the military departments, and private partner  representatives to discuss the administration and measurement of the  incentive fee structures. To gain an understanding of how  performance incentive fees are used, we reviewed documents and  guidance from OSD and the military departments that explains the  processes for developing and awarding performance incentive metrics  and fees. In addition, we obtained information from residents through  focus groups and our online tool and spoke with military housing office  officials to obtain anecdotal information regarding the extent to which  the metrics are adequately measuring the condition of the housing.

To assess the extent to which private partner work order data could  be used to monitor and track the condition of privatized homes, we  collected and reviewed private partner work order data from October  2016 through April 2019 from each of the 79 MHPI projects and  discussed these data with the private partners and military department  officials. Given that we requested the work order data from the private  partners in April and May 2019, we selected the October 2016  through April 2019 time frame to include complete data for fiscal years  2017 and 2018 and the most comprehensive data available at the  time for fiscal year 2019. Prior to requesting these data, we contacted  representatives from each of the 14 private partner companies to  discuss our forthcoming data request and to better understand each  company’s data system and potential limitations for using the data.  Subsequently, we requested that each partner provide us with data for  all work orders across all data elements for each installation under  their management. We received data on over 8 million work orders  among the 14 private partners. We performed manual testing on initial  data files received by each partner to identify issues that would impact  the validity and reliability of using these data for ongoing monitoring  and tracking of the condition of privatized housing units. In doing so,  we identified instances of anomalies in work order data from each of  the 14 partners. For 12 of the 14 partners, we found at least one of  the following anomalies in the initial work order data files received for  the time period requested: (1) duplicate work orders; (2) work orders  with completion dates prior to the dates that a resident had submitted  the work order; and (3) work orders still listed as in-progress for more  than 18 months. We reviewed work order data from at least one  installation for each private partner to check for instances of these  anomalies. We also held follow-up discussions with 10 of the 14  private partners to discuss anomalies found in the data and potential  factors contributing to the presence of these anomalies. In addition to  the initial data collected on all of the work orders, we requested a  second data run of work orders over the same time period—October  1, 2016, through April 30, 2019—for service requests related to lead- based paint, mold, and pest/rodent/vermin infestation. As part of this  request, we asked that partners provide the criteria used for querying  the data they provided us. We reviewed these data to determine how  requests for data on specific hazards were getting sorted into the work  order tracking systems by category and priority among the various  partners.

To identify differences in terminology and business practices used by  the private partners in their work order tracking systems, we  requested and reviewed private partner documentation of data  definitions and protocols for managing work order data. In addition,  we conducted interviews with military department officials to discuss  ongoing efforts by the military departments to collect and analyze  work order data.

To evaluate resident satisfaction data reported in OSD’s reports to  Congress on privatized housing, we reviewed the processes for  collecting, calculating, and reporting these data for the three most  recently issued reports for fiscal years 2015, 2016, and 2017. We  reviewed the instructions OSD provided to the military departments  outlining how the military departments are to submit resident  satisfaction data to OSD. We also reviewed the question the military  departments asked on their annual surveys to gauge resident  satisfaction. We then requested the survey data the military  departments submitted to OSD to be included in the annual report to  Congress for fiscal years 2015, 2016, and 2017. We performed data  quality checks and identified inaccuracies on a random sample of data  reported by OSD. We reviewed how military departments calculated  overall resident satisfaction for each privatized housing project.  Further, we discussed these data with OSD and the military  departments to assess the validity and reliability of using these data  for identifying overall tenant satisfaction with the condition of  privatized housing.

To determine the extent to which the military departments have  communicated their respective military housing office roles and  responsibilities to residents, we reviewed military department policies and  guidance related to their roles and responsibilities for working with  residents of privatized housing. During our site visits to 10 installations,  we interviewed military department housing office officials and private  partner representatives to discuss their specific roles and responsibilities.  We asked questions soliciting information about residents understanding  of the roles and responsibilities of the military housing office and the  dispute resolution process during our 15 focus groups. We also solicited  resident feedback in our online tools regarding residents’ experience  reporting maintenance issues and working with military housing offices  and private partners to get maintenance issues resolved.

To determine the extent to which DOD and private partners have  developed and implemented initiatives to improve privatized housing, we  interviewed OSD and military department officials to discuss ongoing  initiatives developed over the course of our audit work aimed at improving  MHPI and reviewed relevant guidance. We met with private partner  representatives to discuss their involvement in developing these  initiatives, as well as to gain an understanding of any challenges or  concerns that may impact the implementation of these initiatives.  Following the passage of the National Defense Authorization Act for  Fiscal Year 2020, we reviewed provisions of the statute designed to  improve the condition of privatized housing and evaluated the extent to  which these provisions would impact ongoing or planned DOD initiatives  or provide new oversight roles and responsibilities for OSD and the  military departments. We discussed these provisions with OSD officials  and private partner representatives to understand how, if at all, their  implementation may impact the privatized housing projects, as well as  any potential barriers to implementation in the current legal construct of  the program.

We conducted this performance audit from November 2018 to March  2020 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.

Appendix II: List of Privatized Military Housing Projects as of September 30, 2017

In table 3, we provide the complete listing of the Department of Defense’s  79 privatized military housing projects, as of September 30, 2017. This  list reflects information that the Office of the Assistant Secretary of  Defense for Sustainment provided in its annual report to Congress for the  time period of October 1, 2016, through September 30, 2017. The report  was provided to Congress in May 2019. The projects can consist of one  or multiple installations.

Appendix III: Comments from the Department of Defense

Appendix IV: GAO Contact and Staff Acknowledgments

Elizabeth A. Field, Director, (202) 512-2775 or FieldE1@gao.gov.

In addition to the contact above, the following are key contributors to this  report: Kristy Williams (Assistant Director), Tida Barakat Reveley (Analyst  in Charge), Austin Barvin, Ronnie Bergman, Vincent Buquicchio, William  Carpluk, Juliee Conde-Medina, Mae Jones, Jordan Tibbetts, Kelly Rubin,  Monica Savoy, and John Van Schaik.

Military Housing: Preliminary Recommendations to Strengthen DOD's  Oversight and Monitoring of Privatized Housing. GAO-20-471T.  Washington, D.C.: March 3, 2020.

Military Housing Privatization: Preliminary Observations on DOD’s  Oversight of the Condition of Privatized Military Housing. GAO-20-280T.  Washington, D.C: December 3, 2019.

Defense Infrastructure: Additional Actions Could Enhance DOD’s Efforts  to Identify, Evaluate, and Preserve Historic Properties. GAO-19-335.  Washington, D.C.: June 19, 2019.

Military Housing Privatization: DOD Should Take Steps to Improve  Monitoring, Reporting, and Risk Assessment. GAO-18-218. Washington,  D.C.: March 13, 2018.

Defense Infrastructure: Army Has a Process to Manage Litigation Costs  for the Military Housing Privatization Initiative. GAO-14-327. Washington,  D.C.: April 3, 2014.

Military Housing: Information on the Privatization of Unaccompanied  Personnel Housing. GAO-14-313. Washington, D.C.: March 18, 2014.

Military Housing: Enhancements Needed to Housing Allowance Process  and Information Sharing among Services. GAO-11-462. Washington,  D.C.: May 16, 2011.

Military Housing Privatization: DOD Faces New Challenges Due to  Significant Growth at Some Installations and Recent Turmoil in the  Financial Markets. GAO-09-352. Washington, D.C.: May 15, 2009.

Military Housing: Management Issues Require Attention as the  Privatization Program Matures. GAO-06-438. Washington, D.C.: April 28,  2006.

Military Housing: Further Improvement Needed in Requirements  Determination and Program Review. GAO-04-556. Washington, D.C.:  May 19, 2004.

Military Housing: Better Reporting Needed on the Status of the  Privatization Program and the Costs of Its Consultants. GAO-04-111.  Washington, D.C.: October 9, 2003.

Military Housing: Opportunities That Should Be Explored to Improve  Housing and Reduce Costs for Unmarried Junior Servicemembers.  GAO-03-602. Washington, D.C.: June 10, 2003.

Military Housing: Management Improvements Needed as the Pace of  Privatization Quickens. GAO-02-624. Washington, D.C.: June 21, 2002.

Military Housing: DOD Needs to Address Long-Standing Requirements  Determination Problems. GAO-01-889. Washington, D.C.: August 3,  2001.

Military Housing: Continued Concerns in Implementing the Privatization  Initiative. GAO/NSIAD-00-71. Washington, D.C.: March 30, 2000.

Military Housing: Privatization Off to a Slow Start and Continued  Management Attention Needed. GAO/NSIAD-98-178. Washington, D.C.:  July 17, 1998.

Private-sector companies build, renovate, and maintain about 99% of family housing at military bases in the United States. However, with reports of hazards like mold and pest infestations, there are concerns about how well DOD monitors the condition of this housing.

Military departments have increased their monitoring of privatized housing conditions, but we found they don’t have reliable data on housing maintenance or resident satisfaction.

We made 12 recommendations, including that DOD ensure it is collecting information that accurately reflects housing conditions and is clearly communicating the role of military housing offices to residents.