MARCH 7, 1996

STATEMENT BY:
MR. JIMMY DISHNER
DEPUTY ASSISTANT SECRETARY OF THE AIR FORCE
(INSTALLATIONS)

DEPARTMENT OF THE AIR FORCE
PRESENTATION TO THE COMMITTEE ON NATIONAL SECURITY
SUBCOMMITTEE ON MILITARY INSTALLATIONS AND FACILITIES
UNITED STATES HOUSE OF REPRESENTATIVES

Mr. Chairman and members of the Committee, Good Afternoon. I appreciate the opportunity to appear before you today to discuss the Department of the Air Force's Housing Privatization Program.

MILITARY HOUSING PRIVATIZATION INITIATIVE
Outsourcing and privatization are getting a lot of attention right now - and rightfully so. At a time when Air Force Manpower is severely reduced from our recent past, accomplishment of our continuing workloads by other means is a logical direction to take.

As you know, outsourcing is not new to the Air Force. We've done it for years by paying private entities to do work for us. The Air Force doesn't actually construct most of our facilities any more than we actually manufacture F-16 aircraft. We've always turned to private market specialists to bring their expertise and efficiency to work for us. Outsourcing, in a broad sense, is therefore a form of privatization.

However, the privatization that currently has our attention in the Air Force installations business goes one step further -- not only letting the private sector do our work in designing, constructing, operating and maintaining our facilities, but getting them to do this with their own finances. This type of privatization addresses both our lack of manpower and expertise in certain areas, as well as our lack of sufficient funding to take care of our facility needs -- in this case our housing.

We applaud this committee for its pivotal role in giving the Department of Defense a very useful tool box of authorities to enable us to take advantage of private-sector expertise and financing to solve our well-known housing problem.

OUR HOUSING PROBLEM
The Air Force has historically had strong Congressional support for our family housing investment programs. Nevertheless, the average age of our family housing inventory is now 33 years, and over 60,000 of our 114,000 housing units require major renovation or replacement. The current funding stream won't get this job done for at least 24 years. So there is no question that we've got to at least sustain the current level of investment in our major improvement and replacement programs. However, we've got to multiply the effect of these funds to do more quicker -- thus enters privatization.

HOUSING PRIVATIZATION INITIATIVE
The new military housing privatization authorities provided in the Fiscal Year 1996 National Defense Authorization Act will allow us to partner with the private sector, providing land, money and guarantees to assure private developers of a durable and profitable investment in units intended primarily for military personnel. And while we have a limited background in privatizing family housing, the new military housing privatization initiative also opens the door to partner with the private sector to build and rehabilitate unaccompanied housing as well. While we look forward to the opportunities this affords in improving our dormitory needs, we are currently concentrating on family housing as the most immediately promising area for privatization.

Embracing privatization requires a paradigm shift -- a new mind set, because the privatization approach means we must be willing to shift:

-From Air Force owned housing to housing that's owned, managed and maintained by private builders, developers and property managers, but made available for air Force use.

-From costly and slow government-regulated design and construction methods to truly commercial residential development.

-From rigid, inflexible, programmatic contracting approaches to making the smart deals tailored to suit the particular needs of the Air Force and the entrepreneur at each location.

We must take a corporate view in implementing these privatization initiatives -- stretching our available resources to address the total Air Force housing problem. We must maximize each single investment and minimize the time to effect solutions. We can't afford to hold on to deteriorating on-base inventories for fear of losing control of housing. We ought to privatize when the result will be quicker, better, cheaper housing for Air Force families. In situations where this won't be the case, we can fall back upon the traditional MILCON Capital investment approach -- particularly in our overseas inventory. But we must aggressively seek out the "win-win" circumstances to leverage the resources we have and solve our housing deficiencies. Our goal is to accelerate the renovation and replacement or our family housing needs from the current 24 year pace to 10 years.

IMPLEMENTATION
In order to implement this privatization initiative, we have established and staffed a facilities privatization office within our headquarters civil engineering organization. This office, which is supplemented with private consultant support, will enable us to focus and prioritize our efforts, provide a center for developing Air Force expertise in facilities privatization, assist our major commands and bases with their individual initiatives and interface with OSD's Housing Revitalization Support Office on the projects we execute.

Just last month, this office hosted a housing privatization conference with industry representatives and major command engineers, lawyers, financial managers and contracting personnel. The dual purpose was to gather perceptions about the new legislation from members of the private industry associated with the residential housing construction market and to build the confidence and knowledge of the leaders who will have to take charge and make this work within the Air Force.

We are now working with the OSD Housing Revitalization Support Office (HRSO) to establish rules of engagement for project submittals, consultations and notifications to the Congress. We are also in the process of conducting joint site visits with the HRSO at sites we've identified to determine whether they are good locations for the new authorities. The first sites are Lackland Air Force Base, Texas, and Tinker Air Force Base, Oklahoma. We will follow up with independent site visits at the other locations to broaden our assessment of housing privatization opportunities and better define feasible options at those locations.

We, in conjunction with OSD, are embarking on a new journey, and are defining the process for getting there as we go along. Within DoD we have the challenge of making sure we know what we're doing before entering into deals with private industry and yet not succumbing to the very centralized, study-the-issue-to-death tendency with which we seem to be so comfortable. We need a balanced approach and rate of implementation that does not jeopardize achieving overall success within the five-year window of these provisional authorities. We would appreciate any oversight flexibility this committee can afford while we experiment with procedures and develop the best approach to housing privatization.

The Air Force is determined to win enough short term victories to enable the Secretary of Defense to submit a good report to the Congress and secure long-term extension and even expansion of this privatization legislation. We also are attempting to get smart quickly in order to effect the timely transition of this effort's administration from OSD to the Services, as was envisioned by the FY 1996 enactment.

In conclusion, Mr. Chairman, I want to thank the Committee for its strong support of this initiative and the benefits it will have in helping us provide access to safe and affordable housing for our members. We are extremely anxious to execute a winning project and build up our collective confidence in the privatization solution.

We request your continued support of our housing capital investment level to ensure that we can leverage those funds to accelerate, where possible, the improvement and replacement of our degraded housing inventory. This initiative is important to the quality of life for our members and our ability to retain our country's best and brightest members in its defense.

Thank you Mr. Chairman, and members of the Committee. I will gladly answer any questions you have.