How Would Privatization Projects Fare Following a Future BRAC?

Despite its apparent lack of interest in discussing the possibility of additional base closure rounds, the House Armed Services’ Readiness Subcommittee is sufficiently curious as to how long-term commitments the services have made in conjunction with defense real estate projects would be affected by future closures that it requests the Government Accountability Office (GAO) to study the issue.

The panel’s request to GAO to look at the impact of base closures on alternatively financed projects is included in the report language accompanying its section of the fiscal 2013 defense authorization bill. The subcommittee passed its portion of the authorization bill Friday; the text does not include the Pentagon’s request for BRAC rounds in 2013 and 2015.

The subcommittee’s primary concern is that the process to evaluate costs and savings in future basing decisions may overlook costs associated with the long-term contractual obligations from projects involving:

  • military housing privatization;
  • renewable energy generation obtained through energy savings performance contracts, utility energy service contracts, Energy Department guaranteed loans and other vehicles;
  • enhanced use leasing; and
  • Privatization of Army Lodging.

“A future basing decision could lead to a closure of an installation before the associated ground leases or other contractual arrangements between the government and the developer have been satisfied,” according to the report language.

The subcommittee directs GAO to submit a report by March 1, 2013, that assesses:

  • what alternatively financed projects exist on DOD installations in the U.S. and what obligations related to contract or ground lease termination, or loan guarantees exist;
  • how DOD ensures the government’s interests are protected in addressing contract or ground lease termination, or loan guarantees; and
  • the extent to which DOD’s process for evaluating costs and savings from prospective basing changes captures any termination liability that the government could incur.

The full committee is scheduled to mark up the measure May 9. The subcommittee’s section is available on the committee website.

Dan Cohen
Dan Cohen

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