Pentagon has another money pot

Walter Pincus
Reporter April 21, 2013

“Non-cash payments in kind” — compensation that host nations give the Defense Department, from construction and repairs to base support projects — have over the years provided another multimillion-dollar pot of money for the Pentagon.

A major source of such funding comes from the residual value of U.S. facilities on bases returned to host countries, according to a study on costs of U.S. bases overseas released Tuesday by the Senate Armed Services Committee.

Walter Pincus reports on intelligence, defense and foreign policy for The Washingon Post. He first came to the paper in 1966 and has covered numerous subjects, including nuclear weapons and arms control, politics and congressional investigations. He was among Post reporters awarded the 2002 Pulitzer Prize for national reporting. View Archive

The committee investigators found “residual value payments-in-kind being used on military construction projects of questionable value.”

Since 2005 the United States has returned to the German government more than 100 facilities whose invested value has been put at nearly $1.1 billion, but there has yet to be a residual-value settlement. An additional 19 facilities with investment values of nearly $600 million are set to be returned to Germany by 2015.

Residual-value negotiations normally take years, often after Germany sells the property or establishes a market value if it uses the facility itself.

Committee investigators found that none of the 12 military construction projects that were funded with payments-in-kind were originally in the Pentagon’s five-year budget plan, despite Congress requiring such funds be used for “priority” projects.

In addition, they found that two, a $21 million central distribution facility and a $16.5 million infrastructure project, had been rejected by Congress. Still, the projects were reconfigured and went ahead, using $6.7 million in payment-in-kind funds.

In 2008 the U.S Installation Management Command- Europe (Imcom-Europe) arranged for a $60 million in-kind advance from the German government to be repaid when the Americans returned facilities of that value. According to the Senate report, an Imcom-Europe official wrote that the “need for advance [payment-in-kind] is becoming acute based on evolving infrastructure requirements.”

In working out the advance, the U.S. official told the Germans that the “advance funds will prove helpful in construction projects to be performed in Wiesbaden and other locations in Germany.”

Defense has told the Senate panel that the advance payment did not have to be disclosed to Congress, and the panel just became aware of it last year, when it was mentioned in a Defense Department inspector general report.

While the need for the advance was described as “acute,” some $6 million was planned to be used to build a furniture storage warehouse in Grafenwoehr. The Army leases an 80-year-old building to store furniture and appliances for soldiers stationed at the base in Grafenwoehr and is unhappy with the building’s maintenance.

Funds for the warehouse were never submitted for consideration in the Army’s five-year appropriations budget planning because, as an Imcom-Europe official told the committee investigators, it “would not have competed well for military construction funding.”

In justifying the construction to Congress, the Pentagon said the new facility was “the best” of three options. But the committee report noted it only appeared that way because the Pentagon said it would recover more than $3.2 million in residual value for it in 2038, an assumption described by the panel as “inconsistent” with past experience.

The Defense Department has since asked the Army to put the furniture warehouse project on hold.

An additional $200,000 of the advance residual in-kind payment was earmarked for 200-square-foot sunrooms to be added to senior officer homes in Stuttgart, Germany.

The home extensions were justified because they were below the “benchmark” overall square footage set for an Army colonel. Committee investigators noted that European Command staff “could not recall another occasion in which home additions were built for the sole purpose of meeting benchmark size requirements.”

Compared with Defense Department overspending on procurement and in other areas, these outlays are small potatoes. But they illustrate the same state of mind in the military toward money — that anything and everything can be justified as “needed” or “acute” for national security.

It’s an attitude that must change.

For previous Fine Print columns, go to washingtonpost.com/fedpage.

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