[Senate Hearing 116-641]
[From the U.S. Government Publishing Office]
S. Hrg. 116-641
THE CURRENT CONDITION OF THE MILITARY HOUSING PRIVATIZATION INITIATIVE
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON PERSONNEL
AND
SUBCOMMITTEE ON READINESS AND
MANAGEMENT SUPPORT
OF THE
COMMITTEE ON ARMED SERVICES
UNITED STATES SENATE
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
FEBRUARY 13, 2019
__________
Printed for the use of the Committee on Armed Services
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via: http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
54-809 PDF WASHINGTON : 2024
COMMITTEE ON ARMED SERVICES
JAMES M. INHOFE, Oklahoma, Chairman
ROGER F. WICKER, Mississippi JACK REED, Rhode Island
DEB FISCHER, Nebraska JEANNE SHAHEEN, New Hampshire
TOM COTTON, Arkansas KIRSTEN E. GILLIBRAND, New York
MIKE ROUNDS, South Dakota RICHARD BLUMENTHAL, Connecticut
JONI ERNST, Iowa MAZIE K. HIRONO, Hawaii
THOM TILLIS, North Carolina TIM KAINE, Virginia
DAN SULLIVAN, Alaska ANGUS S. KING, Jr., Maine
DAVID PERDUE, Georgia MARTIN HEINRICH, New Mexico
KEVIN CRAMER, North Dakota ELIZABETH WARREN, Massachusetts
MARTHA McSALLY, Arizona GARY C. PETERS, Michigan
RICK SCOTT, Florida JOE MANCHIN, West Virginia
MARSHA BLACKBURN, Tennessee TAMMY DUCKWORTH, Illinois
JOSH HAWLEY, Missouri DOUG JONES, Alabama
John Bonsell, Staff Director
Elizabeth L. King, Minority Staff Director
__________
Subcommittee on Personnel
THOM TILLIS, North Carolina,Chairman
MIKE ROUNDS, South Dakota KIRSTEN E. GILLIBRAND, New York
MARTHA McSALLY, Arizona ELIZABETH WARREN, Massachusetts
RICK SCOTT, Florida TAMMY DUCKWORTH, Illinois
Subcommittee on Readiness and Management Support
DAN SULLIVAN, Alaska, Chairman
DEB FISCHER, Nebraska TIM KAINE, Virginia
JONI ERNST, Iowa JEANNE SHAHEEN, New Hampshire
DAVID PERDUE, Georgia MAZIE K. HIRONO, Hawaii
MARTHA McSALLY, Arizona TAMMY DUCKWORTH, Illinois
MARSHA BLACKBURN, Tennessee DOUG JONES, Alabama
(ii)
C O N T E N T S
__________
February 13, 2019
Page
The Current Condition of the Military Housing Privatization 1
Initiative.
Members Statements
Statement of Senator James M. Inhofe............................. 1
Statement of Senator Jack Reed................................... 2
Statement of Senator Thom Tillis................................. 3
Statement of Senator Kirsten Gillibrand.......................... 4
Statement of Senator Dan Sullivan................................ 5
Statement of Senator Tim Kaine................................... 6
Witness Statements
Cornwall, Crystal............................................... 7
Wanner, Jana..................................................... 9
Driver, Janna.................................................... 12
Williams, Christopher, President, Balfour Beatty Communities..... 26
Picerne, John G., Founder and Chief Executive Officer, Corvias 31
Group.
Ehle, John, President, Hunt Military Communities................. 35
Hickey, Denis, Chief Executive Officer, Americas Lendlease 41
Corporation.
Bliss, Jarl, President, Lincoln Military Housing................. 47
McMahon, Hon. Robert H., Assistant Secretary of Defense for 71
Sustainment.
Beehler, Hon. Alex A., Assistant Secretary of the Army for 76
Installations, Energy, and Environment.
Bayer, Hon. Phyllis L., Assistant Secretary of the Navy for 80
Energy, Installations, and Environment.
Henderson, Hon. John W., Assistant Secretary of the Air Force for 83
Installations, Environment, and Energy.
Questions for the Record......................................... 100
(iii)
THE CURRENT CONDITION OF THE MILITARY HOUSING PRIVATIZATION INITIATIVE
----------
WEDNESDAY, FEBRUARY 13, 2019
United States Senate,
Subcommittee on Personnel and
Subcommittee on Readiness and
Management Support,
Committee on Armed Services,
Washington, DC.
The Subcommittees met, pursuant to notice, at 2:04 p.m. in
room SD-G50, Dirksen Senate Office Building, Senator James M.
Inhofe (Chairman of the Committee) presiding.
Subcommittee Members present: Senators Inhofe, Wicker,
Fischer, Rounds, Ernst, Tillis, Sullivan, McSally, Scott,
Blackburn, Reed, Shaheen, Gillibrand, Blumenthal, Hirono,
Kaine, Warren, Duckworth, and Jones.
OPENING STATEMENT OF SENATOR JAMES M. INHOFE
Senator Inhofe. Good afternoon.
The Subcommittees on Personnel and Readiness meet jointly
today. This is kind of an unusual thing. This does not happen
very often, but there is a very good reason that should be
evident to everyone right now that this is the right way to
handle this.
Today we are going to have three panels of witnesses. We
will hear from the families, those who are seated at the table
right now, of Active Duty servicemembers, representatives of
privatized housing, and the military leaders responsible for
overseeing military housing. I welcome all of our witnesses and
thank them for being here today.
In the future, this will be conducted at the full committee
level, but due to the scheduling conflicts that we have, we
were unable to do that today. I believe that we needed to have
this hearing as soon as possible.
It is important for everyone to understand why on-base
housing is privatized. In the late 1990s, on-base housing,
which was managed by the Department of Defense (DOD), was in
disrepair. We privatized the system, putting our faith and
trust in the private sector to give our families a better
quality of life while the contractors received fair
compensation. That was the goal.
Here is the fact. Our servicemembers and their families
deserve high-quality, affordable housing. Period. One mistake
is too many. We hear the argument that this is a rare thing,
but even if it were, one is too many.
After hearing from the servicemembers and their families in
Oklahoma and across the country, it is clear that is not
happening everywhere. The Military Family Advisory Network
(MFAN) received nearly 17,000 responses in just 7 days to a
survey about privatized housing experiences. Of the close to
15,000 families who currently or recently lived in privatized
family housing, almost 45 percent responded that they have a
neutral or a favorable privatized housing experience. That
leaves 55, however, or at least 8,000 residences, who are
currently dissatisfied with where they are living.
There are some out there who try to minimize this problem
by saying this only happens in 1 percent of privatized housing.
Even if that is true, that would still be 2,000 military
families having problems, and this survey shows otherwise.
Now, we are not going to be able to resolve this issue in
one sitting. Today's hearing is just the beginning. We need
necessary reforms to ensure accountability and excellence in
privatized on-base housing so that we are going to keep on this
issue. This is not going to be over with today.
We need to look at three things: the care for the
servicemembers and their families, accountability in the
contracting process, and examine what, if anything, the chain
of command is doing to address the families' concerns.
You know, we were talking this morning, several of us who
had been in the United States Army in this case. The chain of
command was the final decision, and things actually were
working pretty well at that time.
Ranking Member Reed and I will work with our Government
Accountability Office (GAO), as well as the DOD Inspector
General (IG), to thoroughly investigate and report back to the
committee on steps, whether administrative or legislative, that
can be taken to ensure our military families have housing they
deserve. I remind both the industry and the Department to fully
cooperate in these investigations.
I would also like to put on record today that our witness
testimonies and other conversations that they have had with
Members of this Committee are protected communications. That is
very important. As such, any form of reprisal or threat thereof
should be immediately reported to this Committee and will be
immediately referred to the DOD Inspector General for swift
action. Make no mistake about it. I will take any report of
reprisals on our military families directly to the Secretary
and Chief of that specific service.
We are going to get to the bottom of this, and today's
hearing is the right first step to take.
Before I turn to Senator Reed, I would like to remind our
Members that we have three panels today. So we will have 3-
minute rounds for the first panel and 4-minute rounds for the
others to ensure that we try to get everyone satisfied and who
wants to participate.
Senator Reed?
STATEMENT OF SENATOR JACK REED
Senator Reed. Thank you very much, Mr. Chairman.
First and foremost, I want to sincerely thank the panel of
military families who are here today to speak up and speak out
for their families and for the families of all military
personnel. I extend that thanks to a dozen more families who
are not here, but they have submitted written testimony that
brings to life the painfully inadequate living conditions that
some of our servicemembers and families are enduring as we
speak.
I also want to thank the panels of housing companies and
DOD witnesses for agreeing to appear today. We have a real
problem here. Everyone needs to acknowledge that reality, and
everyone here needs to work constructively and quickly to
ensure our military families have the housing they deserve in
the minds of the American people.
The Committee has received scores of heartbreaking
testimonials with equally disturbing photos of rampant mold,
poor water quality, contamination from lead-based paint, carbon
monoxide, radon, faulty construction, infestations of kitchens
and other living areas. The impact of these conditions leave
residents fearful for their families' health and well-being.
Equally alarming is a recent survey from the Military
Family Advisory Network, which found that more than half, 55.5
percent, of families had a negative or very negative experience
with privatized military housing across 35 different companies.
I think it is fair to say that generally military housing has
improved upon where it was in the 1990s when this program
began. However, here we are 20 years later. There is a clear
disconnect between what has been promised by the companies as
permitted by the DOD and the reality of what has been provided
to military families.
I understand several families have traveled here today at
their own expense. Would all the military families in the
audience please stand up so we can recognize you and thank you?
[Applause.]
Senator Reed. Thank you very much.
A servicemember's commitment extends beyond the missions
they complete. They dedicated their entire families' lives to
serving this country, serving this Nation. This Committee is
similarly obligated to ensure it meets the needs of
servicemembers and their families once they return home. It is
our commitment today that this hearing will be the first step
towards doing just that.
With that, Mr. Chairman, I thank you.
Chairman Inhofe. All right. We will now hear from the
Chairs and ranking Members of the Personnel and Readiness
Subcommittees. We will start with Senator Tillis.
STATEMENT OF SENATOR THOM TILLIS
Senator Tillis. Thank you, Mr. Chair. I will be brief.
By the way, I noticed you all were talking when he said 3-
minute rounds, and what he meant by that is multiply the number
of Q&A [questions and answers] by the number of members up
here. We will each have 3 minutes to ask you questions. It does
not seem like a lot of time, but you need to understand that
these committee hearings are kind of like the tip of the
iceberg. This is where you get information to the members. I am
from North Carolina. I have a vested interest in making sure
that we get this right. But the real work happens after the
hearing when the staff and members get together.
What I am interested in--I am going to be brief so that we
can get to your testimony--is just back to what Senator Reed
said. When we did this in the mid-1990s, it was because the
Department was doing a very poor job. We tended to improve, but
we seemed to have back-slipped.
As we go through your personal testimonies--and I have
spent a fair amount of time this week and I have seen the
pictures that have come to me in different forms--I will be
asking other members of the panel how did we get here. How did
we not have the governance in place to identify this? How did
we not have a safety valve for the military families to
actually solve a problem?
I will leave you with this. There is a variety of reasons
why we should all be concerned with this. Some of it is just at
the human level. You see the pictures of children with
respiratory problems. You see mushrooms growing out of upstairs
bathrooms, all of these kinds of things. But think about it
also as something that affects readiness because if you have a
man or woman deployed and all of a sudden they are calling home
and they have their spouse talking about these problems and
worried about the health and well-being of their children, they
are not as ready, they are not as focused, and they are not as
capable as we want them to be to protect their lives and the
lives of their colleagues.
I look forward to your testimony. Thank you.
Senator Inhofe. Thank you, Senator Tillis.
Senator Gillibrand?
STATEMENT OF SENATOR KIRSTEN GILLIBRAND
Senator Gillibrand. Thank you, Senator Inofe and Senator
Reed, for calling this very important hearing as quickly as
possible so that we can start to address these issues and find
solutions for our servicemembers and their families.
This hearing will rightly begin with the testimony from
military families. We will hear the stories of toxic mold, lead
paint, pest infestation, and other health risks present in
their homes. We will hear how these terrible conditions are
harming the health of our military families, and we will hear
about the long-term consequences they are actually having on
their children.
We will also hear about contractors and their military
partners completely failing our military families and not
responding to the crisis in an adequate or timely way. It is
yet another example of corporate profits coming before the
health of our military families.
The committee has received dozens of testimonies from
families beyond what we will hear today on our first panel. The
nonprofit Military Family Advisory Network has compiled the
stories of many of these families and concluded that, ``the
concerns of families are ignored and families are expected to
tolerate these conditions.'' This is completely unacceptable.
In most cases, it is not just a single exposure to mold
spores or lead-based paint that causes health issues or birth
defects, but rather the sustained exposure over many weeks and
months. There should have been a prompt and professional
response to the initial call for help. We should have been able
to avoid the situation.
For example, the Committee received testimony from a family
in Oklahoma with five children that not only suffered long-term
health problems because of black mold, but put themselves in
tens of thousands of dollars of personal debt trying to
remediate their situation. Yet, the company apparently tried to
hide the problems from the family.
A family in Texas called their management company when they
found mold following the mother's hospitalization. The company
sent an unqualified technician who failed to diagnose the
problem. The company refused to send an expert to test for
mold. When the family paid out of pocket for their own
inspection, which confirmed the presence of mold at dangerous
levels, the company denied their request for reimbursement.
That family continues to experience health issues today.
When a family in my home State of New York noticed the
uninhabited house connected to theirs flooding from a water
leak, their management company shut off the water and told them
not to worry. When their walls started to buckle from water
damage, the company told them, quote, the house was settling.
When bubbles formed on their ceilings, they were told it was
just humidity. In order to move from the residence, the
management company required a letter from a doctor attesting to
the family's health issues. Adding insult to injury, the
company ultimately denied their claim for all the personal
items and furniture that had to be destroyed due to mold.
When a family from New Orleans detected mold in their house
after experiencing health issues, the management company did
not believe them and did not test or remediate. When the
pregnant mother's Ob-Gyn [obstetrician-gynecologist] requested
mold testing and duct cleaning after becoming concerned that
the mother could lose her child, the management company
scheduled the work and then canceled it. They said they were
not responsible for resident health. The family paid for their
own test, which revealed six types of mold in the house. That
family and that baby continue to experience health issues
today.
Thank you, Mr. Chairman, for the time.
Senator Inhofe. Thank you.
Senator Sullivan?
STATEMENT OF SENATOR DAN SULLIVAN
Senator Sullivan. Thank you, Mr. Chairman, for calling this
important hearing today.
I want to make sure that as we listen to the families and
recognize their service and courage, that we have our other
witnesses, the DOD witnesses, the contractors, who are intently
taking notes and thinking about how they will fix this problem.
As I have dug into this issue, I am hopeful that we can all
agree, everybody here, all the Senators, all the witnesses, on
three things. We should have the best possible housing for our
military families. Period. There is a lot of talk about the 1
percent in America. Well, guess what. We are looking at a lot
of the 1 percent in America. It is the less than 1 percent that
actually raise their right hand to support and defend the
Constitution of the United States and die for this country and
their families. They should have the best housing. Period. That
should not be in dispute.
Second, we need to fix the lack of accountability and
oversight that has come from this, whether it is DOD or chain
of command or contractors. What to me is so appalling as I have
dug through a lot of these issues is how people, families,
military families, were not being listened to either within the
chain of command, the Department of Defense, or the
contractors. We have to understand why and fix it.
Finally, we need to fix the program for today and for the
future. There are things in this hearing that I think are going
to likely shock many Americans, that we are going to hear about
military families who are living with things like black mold
and rodent infestations and raw sewage. We need to look at this
program, not scrap this program. There are a lot of good homes,
including in my State in Alaska, that provide quality and
affordable housing for our servicemembers. But something has
gone terribly wrong with the system and how to fix it.
I think if we can agree on these three things, Mr.
Chairman, it will be an important start.
I do want to thank the servicemembers and their families.
It takes a lot of courage for you to be here, those who have
traveled to be here, and we are looking forward to hearing your
testimony.
Thank you.
Senator Inhofe. Thank you, Senator Sullivan.
Senator Kaine?
STATEMENT OF SENATOR TIM KAINE
Senator Kaine. Thank you, Mr. Chair, and thanks to all the
witnesses who will appear and everybody who is with us today.
I am proud to be on this Committee. I am proud to represent
a State that has such a proud military history and has so many
current Active, Guard, Reserve, DOD civilian, military
families, military contractors. I am proud to have a child in
the United States Marine Corps.
I am not proud to be here today. This is the kind of
hearing we should never have to have. One of the occupational
hazards of being in the line of work that many of us are in is
it gets harder and harder to shock me. We all see a lot of
stuff, and our standards of what will shock or outrage us kind
of change over time. This is shocking. I look forward to the
questions.
I want to offer two sets of thanks to people who are not
going to be at the witness table today. First, to the Military
Family Advisory Network for doing this survey. Everyone in this
room should read the survey. You should read the summary of
what has happened, but you should especially read the
narratives of the families and the photos that they submitted
that are at the end of the survey. It is very, very important
work that you have done, and you have been very, very helpful
in encouraging action by the Committee.
Second, I want to thank Reuters. This first came to our
attention in our office by Reuters reports. There is a school
of thought sadly expressed from people even in high offices
these days that the press is the enemy of the people. The press
does what they need to do in this country. We put it in the
First Amendment for a reason. The reason that freedom of the
press is in the First Amendment is because of hearings like
this one. It has been accelerated and brought to more attention
more quickly than it would have because of the diligent efforts
of journalists to interact with families and tell their
stories. I want to thank the press for doing a good job on
this.
Thank you, Mr. Chair.
Senator Inhofe. Thank you, Senator Kaine.
What we are going to do now is hear from the three young
ladies who are representing many, many families. We are going
to ask you to try to keep your opening comments down to 5
minutes. However, your entire statement that you have submitted
will be made part of the record. Then our questions from the
panel here.
We will start with you, Ms. Cornwall. You are recognized.
STATEMENT OF CRYSTAL CORNWALL
Ms. Cornwall. Mr. Chairman and members of the committee,
thank you for the invitation to participate in today's hearing.
I am Crystal Cornwall, the proud spouse of a marine of 11
years, a passionate military family advocate, and founder of
the nonprofit Safe Military Housing Initiative. I am currently
a finance professional, a former police officer, and have a
bachelor's in public administration and am working towards a
master's degree.
In many ways, I am like every other military spouse. We are
at our fourth duty station and are anticipating a geo-batch
tour in the fall. For the next 3 years, my husband will serve
away from our family. Our three children have only known their
father preparing for or deploying to war, a war that has
endured 18 long years.
I am here today on behalf of military families of every
branch and rank. We ask that you act on our testimony and
ensure military families receive safe, habitable, and
functional housing and a better, more accountable way to
resolve problems that arise.
I first became aware of the crisis-level military housing
issues at Keesler Air Force Base where termites fell out of
light fixtures into our beds. Later, at Camp Pendleton, we
lived with pervasive mold issues and unjustifiable move-out
charges. At Keesler, the housing office staff told me,
``Termites in your home are to be expected because of the
region.'' At Camp Pendleton, we were inexplicably charged
almost $700 for carpet replacement. The housing rep used a
black light and moisture stick to find stains unseen by the
naked eye. When I disputed the validity of these charges, I
found no path to resolution with the housing company, Camp
Pendleton, or my husband's former command. In the end, various
agencies and local attorneys advised us that military families
living on the bases are essentially powerless in these
disputes.
During my 2 years of research and advocacy, I received
hundreds of reports from military families of mold growth,
rodent and pest infestations, moisture intrusion, lead and
asbestos exposures, radon concerns, base contamination, and
cancer clusters in their housing. All of this was too often
compounded by defensive, sometimes abusive housing staff.
With other military families, I have witnessed the peeling
paint inside and outside of the homes at Fort Belvoir. I have
felt the helplessness of a fellow Marine Corps spouse as she
held her new baby and sobbed while we stood under a collapsing,
moldy ceiling in her home at Camp Lejeune. I listened in horror
as families at Camp Pendleton told of mice eating through
pacifiers in their babies' cribs and electrical outlets
catching fire due to wiring issues. I have crawled into an
attic at Keesler Air Force Base and measured the moisture
intrusion from a roof leak. And I have been to the town halls
where families were dismissed and they also feared retaliation
for reporting their concerns.
Today you will hear from the corporate housing company
executives testifying that they were unaware of these problems
and that their own surveys show they are fulfilling the terms
of their government contracts. They, and some of those in
command, will also say military families are not reporting
housing issues through official channels. That is just not
accurate in my experience and in those of other military
families. In fact, that is what military families do: we follow
the rules.
Until recent media reports and today's hearing, our efforts
to fight for safe housing were too often met with intimidation,
personal attacks, and strategic attempts to discredit us and
silence our voices. We are appalled by this response.
Looking ahead, we offer three recommendations to address
the military housing crisis: amend or cancel the 50-year
privatized contracts to allow for competition, proper
oversight, and accountability; provide a clear and accessible
path to administrative or legal recourse when necessary; as
with civilian counterparts, military families should be able to
withhold their basic housing allowances until their homes are
safe and habitable.
Military families understand that quality housing does not
mean entitlement to elegant mansions. We simply ask for homes
free of mold, pests, lead, and other hazards. We expect homes
free from the stressors of deployments, work-ups, training, and
the day-to-day Military Service. As parents, we want safe
places for our children to sleep at night.
Thank you for your time today and commitment to resolving
the military housing crisis. We look forward to working with
you to create solutions. As military families, we do our part.
We ask that those who are paid to support us do theirs.
[The prepared statement of Ms. Cornwall follows:]
Prepared Statement by Crystal Cornwall
Mr. Chairman, and Members of the Committee, thank you for the
invitation to participate in today's hearing.
I am Crystal Cornwall, the proud spouse of a marine of 11 years, a
passionate military family advocate, and founder of the nonprofit Safe
Military Housing Initiative. I'm currently a finance professional and
former police officer, and have a bachelor's in Public Administration
and am working toward a master's degree.
In many ways, I am like every other military spouse. We are at our
fourth duty station and are anticipating a geo-bach tour in the fall.
For the next 3 years, my husband will serve away from our family. Our
three children have only known their father preparing for or deploying
to war--a war that has endured 18 long years.
I am here today on behalf of military families of every branch and
rank. We ask that you act on our testimony and ensure military families
receive safe, habitable, and functional housing and a better, more
accountable way to resolve problems that arise.
I first became aware of the crisis-level military housing issues at
Keesler Air Force Base where termites fell out of light fixtures into
our beds. Later, at Camp Pendleton, we lived with pervasive mold issues
and unjustifiable move-out charges. At Keesler, the housing office
staff told me, ``Termites in your home are to be expected because of
the region.'' At Camp Pendleton, we were inexplicably charged almost
$700 for carpet replacement. The housing rep used a black light and
moisture stick to find stains unseen by the naked eye. When I disputed
the validity of these charges, I found no path to resolution with the
housing company, Camp Pendleton, or with my husband's former command.
In the end, various agencies and local attorneys advised us that
military families living on the bases are essentially powerless in
these disputes.
During my 2 years of research and advocacy, I received hundreds of
reports from military families of mold growth, rodent and pest
infestations, moisture intrusion, lead and asbestos exposures, radon
concerns, base contamination, and cancer clusters in their housing. All
of this was too often compounded by defensive, sometimes abusive
housing staff.
With other military families, I have witnessed peeling lead paint
inside and outside of the homes at Fort Belvoir. I have felt the
helplessness of a fellow marine spouse as she held her new baby and
sobbed while we stood under a collapsing, moldy ceiling in her home at
Camp Lejeune. I listened in horror as families at Camp Pendleton tell
of mice eating through pacifiers in their babies' cribs and electrical
outlets catching fire due to wiring issues. I've crawled into an attic
at Keesler Air Force base and measured the moisture intrusion from a
roof leak. I've been to the town halls where families were dismissed
and feared retaliation for reporting their concerns.
Today you will hear from the corporate housing company executives
testifying that they were unaware of these problems and that their own
surveys show they are fulfilling the terms of their government
contracts. They, and some of those in command, also will say many
families are not reporting housing issues through ``official
channels.'' That's just not accurate, in my experience and in those of
many other families. In fact, that's what military families do: we
follow the rules.
Until recent media reports and today's hearing, our efforts to
fight for safe housing were too often met with intimidation, personal
attacks, and strategic attempts to discredit us and silence our voices.
We are appalled by this response.
But, looking ahead, we offer three recommendations to address the
military housing crisis:
Amend or cancel the 50-year privatized contracts to allow
for competition, proper oversight, and accountability.
Provide a clear and accessible path to administrative or
legal recourse, when necessary.
As with civilian counterparts, military families should
be able to withhold their basic housing allowances until their homes
are safe and habitable.
Military families understand that quality housing does not mean
entitlement to elegant mansions. We simply ask for homes free of mold,
pests, lead, and other hazards. We expect safe homes free from the
stressors of deployments, work-ups, training, and the day-to-day
Military Service. As parents, we want safe places for our children to
sleep at night.
Thank you for your time today and commitment to resolving the
military housing crisis. We look forward to working with you to create
solutions. As military families we do our part, we ask that those who
are paid to support us do theirs.
Senator Inhofe. Thank you very much for the excellent
statement, Ms. Cornwall.
Ms. Cornwall. Yes, sir.
Senator Inhofe. Mrs. Wanner?
STATEMENT OF JANA WANNER
Ms. Wanner. My name is Jana Wanner. I am an Army spouse of
9 years, and we are currently stationed at Fort Meade in
Maryland. My husband is a sergeant first class, and we have two
children.
We are enrolled in the Department of Defense's Exceptional
Family Member Program (EMFP), which means the Department helps
us with adaptive housing, proper medical care, and educational
needs for our daughter who has a rare genetic condition that
causes both physical and educational issues. While it is not a
perfect system, we are extremely grateful for the EFM program,
as it allows my spouse to train and deploy without worrying
about our safety and welfare at home.
Five months before we moved to Fort Meade, we contacted the
Corvias housing staff to select a home. Due to our daughter's
medical condition, we needed and requested a single-story home
without stairs. We verbally made the housing staff aware over
the phone that our daughter has knee problems associated with
her medical condition. Corvias assured us that since we were
placed on the waitlist 5 months prior to our report date, that
they would have plenty of time to accommodate our request.
After selecting from the choices that were provided by the
housing staff, Corvias committed to providing us the single-
story home that we selected. We packed for our move, had our
household goods delivery set up, confident that the house we
selected would accommodate us and our special needs and be
ready upon our arrival.
Five days before our move from Fort Gordon, 600 miles away,
we received a phone call from Corvias that the home we had
secured with a lease was no longer available. The explanation
that we were given from Corvias was that the current family in
the home was no longer moving out, and now we only had one
option to choose for housing.
It was the height of moving season, known as PCS [Permanent
Change of Station]. With no time left, we decided to take the
only house that Corvias offered that would be available upon
arrival. We accepted a multi-story townhome on the base rather
than risk not having any home at all. This meant that when our
daughter dislocated her knee or when she required surgery on
her knee again, she has to go up and down the stairs to get to
her room.
Before we moved into housing, we were quoted a fixed-rate
rent for the house. Upon arrival, we were given a slightly
higher rate, but we felt powerless in arguing the difference in
rent prices. A few months later, Corvias claimed that they had
miscalculated their own move-in costs and demanded that we pay
them an additional $14, even though this was their own mistake.
In January, when the housing allowance pay was adjusted,
Corvias also took it upon themselves to disregard our fixed
market rate lease and increased our pay deduction by $177
without our consent or informing us. Once we provided them
proof of our market rate addendum, which was attached to our
lease, we were given the burden of proof. Shortly after
correcting the housing allotment, Corvias staff informed us
that they would increase our rent again in July, despite their
initial promise to continue to renew our lease at a market
rate.
Shortly after moving in, we began to notice issues with our
home. The linoleum floor around our first-level toilet started
to get large black matter visible underneath and it continued
to grow. After our first work order, Corvias did not send any
workers or inspectors, so we submitted a second work order.
Housing finally came to our home after an unexplained 2-week
delay. They took out our toilet and placed it in our laundry
room, and it sat there for 2 days. They also pulled up the
bathroom floor and exposed the house to extensive black mold
for the next 2 days. Maintenance did not properly clean the
concrete below and placed new linoleum over the mold-covered
concrete. The contractors Corvias sent to our home to repair
the bathroom even stated that the work that they had completed
was a band-aid.
Shortly after the first-floor bathroom issue was addressed,
we began noticing issues with our second-floor bathroom. Mold
was growing out of the wall of our shower. When Corvias
maintenance came to address our work order for this, they told
us--and this is a direct quote--``let the mold just fall out.
If we seal the area, the moisture will just be trapped
inside.'' Meanwhile, the area that we can see behind the shower
wall is black and actively growing mold because it continues to
get wet.
We also requested an air quality check from housing due to
our daughter's frequent nosebleeds and the bathroom mold issues
that we have encountered. Corvias, however, has not committed
to checking our air quality, and it has been more than 2 weeks
since we have heard from the housing office. Meanwhile, we
still live in these conditions.
Our story is not unique, nor is it the worst. Almost 17,000
military families responded to a survey by the Military Family
Advisory Network with testimonials of unhealthy living
conditions in privatized housing on military bases. And many
more were given to other military family nonprofits.
Thank you, Senators, for the opportunity to testify and for
addressing the serious issues of the health, safety, and
welfare of our military families.
[The prepared statement of Ms. Wanner follows:]
Prepared Statement by Jana Wanner
My name is Jana Wanner, an Army spouse of 9 years, and we are
currently stationed at Ft. Meade in Maryland. My husband is a Sergeant
First Class and we have 2 children.
We are enrolled in the Department of Defense's Exceptional Family
Member Program, which means the Department helps us with adaptive
housing, proper medical care, and educational needs for our daughter
who has a genetic condition that causes both physical and educational
issues. While not a perfect system, we are grateful for the E-F-M
program as it allows my spouse to train and deploy without worrying
about our safety and welfare at home.
Five months before we moved to Fort Meade, we contacted the Corvias
housing staff to select a house. Due to our daughter's medical
condition, we needed and requested a single-story home without stairs.
We verbally made the housing staff aware over the phone, that our
daughter has knee problems associated with her medical condition.
Corvias assured us that since we were placed on the waitlist five
months prior to our report date, they would have plenty of time to
accommodate our request. After selecting from the choices that were
provided by the housing staff, Corvias committed to providing us a
single-story home that we selected. We packed for our move, had our
household goods delivery set up, confident that the house we selected
would accommodate us and our special needs and be ready upon our
arrival.
Five days before our move from Fort Gordon, 600-hundred miles away,
we were told that the home we had secured with a lease was no longer
available. The explanation we were given from Corvias was that the
current family in the home was no longer moving out in time, and we now
only had one option to choose for housing.
It was the height of moving season, known as P-C-S. With no time
left, we decided to take the only house Corvias offered that would be
available upon arrival. We accepted the multi-story townhome on the
base, rather than risk not having any housing at all. This meant that
when our daughter dislocated her knee or when she requires surgery on
her knee again, she has to go up and down the stairs to get to her
room.
Before we moved into housing we were quoted a fixed rate rent for
the house. Upon arrival we were given a slightly higher rate, but we
felt powerless in arguing the difference in rent prices. A few months
later Corvias claimed they had miscalculated their own move in costs
and were demanding we pay them an additional $14, even though this was
their own mistake.
In January when the housing allowance pay was adjusted, Corvias
also took it upon themselves to disregard our fixed ``market rate''
lease and increased our pay deduction by $177 without our consent or
informing us. Once we provided them proof of our market rate addendum
attached to the lease, we were given the burden of proof in this
matter. Shortly after correcting the housing allotment, Corvias staff
did inform us they will increase our rent again in July, despite their
initial promise to continue to renew the lease at a market rate.
Shortly after moving in, we began to notice issues with the home:
the linoleum floor around the first-level toilet started to get large
black matter visible underneath and it was growing. After the first
work order, Corvias did not send any workers or inspectors so we
submitted a second work order, Housing finally came to the house after
an unexplained two week delay. They took out the toilet and placed it
in our laundry room, where it sat for two days. They also pulled up the
bathroom floor and exposed the house to extensive black mold for the
next two days. Maintenance did not properly clean the concrete below,
and just placed new linoleum over the mold covered concrete. The
contractors Corvias sent to our home to repair the bathroom even stated
that this work they had completed was just a band-aid.
Shortly after the first floor bathroom issue was addressed, we
began noticing issues with the second floor bathroom. Mold was growing
out of the wall of the shower. When Corvias maintenance came to address
our work order for this, they told us, and this is a direct quote,
``let the mold just fall out. If we seal the area, the moisture would
be trapped inside'' Meanwhile, the area we can see behind the shower
wall is black and ly growing mold because it continues to get wet with
every shower.
We requested an air quality check from housing due to our
daughter's frequent nosebleeds, and the bathroom mold issues we have
encountered. Corvias, however, would not commit to checking our air
quality, and it has been more than two weeks since we have heard from
the housing office. Meanwhile, we are still living in these conditions.
Our story is not unique, nor is it the worst. Almost 17,000
military families responded to a survey by the Military Family Advisory
Network, with testimonials of unhealthy living conditions in privatized
housing on military bases, and many more were given to other military
family nonprofits.
Thank you, Senators for the opportunity to testify, and for
addressing the serious issues of the health, safety and welfare of
military families.
Senator Inhofe. Thank you, Ms. Wanner.
Ms. Driver?
STATEMENT OF JANNA DRIVER
Ms. Driver. My name is Janna Driver, and my husband is
currently Active Duty Air Force stationed at Tinker Air Force
Base in Oklahoma.
We lived on base in privatized housing managed by Balfour
Beatty. We had numerous ongoing issues in our home, including
maintenance issues that were neglected over the less than 2
years we lived there, which ultimately resulted in making my
family very sick. Our housing company has known about these
issues for years and is taking advantage of young military
families who are not educated on how to properly treat mold and
the health effects it causes. They are covering up, painting
over mold, threatening military members with their command,
using scare tactics and intimidation, lying to us, and making
the problems worse, and now it is out of control. They have
been banking on the fact that we would likely PCS to another
base before what they covered up would reappear. On the
surface, these homes appear to be flawless. But inside, the
walls tell a different story.
On August 19, 2018, after lengthy and constant illnesses,
my husband and I began to discover the real cause of all of our
symptoms. I spent the weekend deep cleaning because we had all
been so sick for so long. The utility room in our house was
also my children's playroom where they played daily. In the
utility room, I moved their small card table that was leaning
up against the wall. The wall was solid black. I never thought
mold. I thought it was residue from the padded side of their
table. I wiped it off and continued cleaning.
The symptoms we had included constant sore throats,
nosebleeds, brain fog, blurred vision, numbness, fatigue,
debilitating headaches. Even the 4-year-olds complained daily
of these headaches, along with dizziness. Knowing headaches are
not normal for a child of that age, I was concerned they may
have cancer. One of my twins suffered numerous times from
respiratory distress that required emergency room visits.
On Monday, August 20, we called maintenance to repair a
leak in the utility room. This was the ninth leak we had had in
less than a year and a half. Maintenance came, cut a large hole
in the sheetrock and repaired the leak. Upon completion, he
asked if we wanted the hole repaired or if we were okay to
leave this large hole in our wall. There were numerous large
discolored spots on the same wall. We asked if those were from
that same leak. He said no. He then told us he wanted to go out
and look at our mechanical room, which is directly behind this
utility room. This is a locked room attached to our homes that
house hot water heaters and our HVACs [heating, ventilation,
and air conditioning]. We are not allowed access to these rooms
by housing. I told my husband to follow him. He walked up
behind him and overheard a frantic phone conversation between
him and the housing office about how our mechanical room needed
to be repaired immediately.
When he noticed my husband standing behind him, he
frantically began saying, ``You cannot be in here. I am not
allowed to let you see in this room.'' My husband said, we pay
for this house. I am coming in. Upon entering, he saw black
mold covering the walls, floor to ceiling. He immediately
called housing maintenance. The housing office told him they
had known about the mold since March and had been treating it
by scrubbing it with bleach and water. When he asked why we
were not notified, she stated she assumed the technicians had
already told us.
We have verified with numerous experts that this process is
only acceptable when the area of focus is very small and never
use bleach on a porous surface. Doing this only feeds the mold,
causing it to grow faster, spread, and multiply. We have shared
this information with the housing company numerous times. To
this day, they continue to use this process.
The next morning, my husband and his command met with our
military housing liaison and our local housing community
manager at our home. We were told by this manager that they had
actually been documenting the mold since February, not March,
and had she known how bad the room was, we would not have been
allowed to continue living there. We told her we wanted mold
testing done by a company of our choosing before any
remediation began. That was refused. One week later, this
manager no longer worked for that company.
Balfour Beatty then moved our family into a Patriot Home.
These are homes used to temporarily house families while work
is being done to their own homes. We were told it had no mold,
that it was clean and safe. The first day we were there, we
found mold. The home was filthy, dirt on the floors, stains on
the couch and carpets, bugs in the drawers in the kitchen.
There were leaks in the Patriot Home, water pouring into a
light fixture in the ceiling from an upstairs bathroom. We
called housing. They came and cut a 2-by-2 inch square in the
ceiling and left it, causing water then to pour into the floor
of the utility room instead of into the light fixture.
We began to feel worse in this home and requested to be
moved to a hotel. Initially housing would only commit to one
night at a time, leaving us each night to wonder where we would
go the next day and the next night after that with five
children. We had to borrow a credit card from my parents so
that we at least had the security of a roof over our heads for
more than one night at a time. Eventually, the company agreed
to go back and pay for those, and finally, upon hiring an
attorney, we were extended in the hotel for over 2 months. All
total, we were out of our home for approximately 3 months with
five small children, spending approximately 80 days in a hotel,
which cost $17,000.
We had to hire our own mold company to come test the mold
at our home. The test results showed all five of the toxic
molds present inside our home. We believe the mold was
contained to our utility room and maintenance closet initially.
Air samples of our living room were clean. We had to pay out of
pocket to see a doctor in Midwest City who specializes in toxic
mold exposure. We have tested positive for the presence of
mycotoxins in our bodies.
Housing subcontracted a company to remediate the mold. We
know for a fact that the remediation was done improperly. Vents
were not covered and contaminated items that were in the
utility room were put inside my garage, as well as my kitchen--
--
Senator Inhofe. Ms. Driver, try to bring your comments to a
close, if you would.
Ms. Driver. We will likely suffer from the effects of this
for the rest of our lives, physically, financially,
emotionally, and mentally. My family has gone from zero to
$40,000 in debt in a 3-month period. I suffer daily from
chronic breathing issues and blurred vision due to the mold in
my brain. We take an enormous amount of binders and
prescriptions daily with no end in sight. It did not have to be
this way. Our military families do not deserve this after all
the sacrifices they make. It is criminal. It is unbelievable
the extent of this coverup.
Thank you again.
[The prepared statement of Ms. Driver follows:]
Prepared Statement by Janna Driver
My husband is currently Active Duty Air Force stationed at Tinker
AFB in Oklahoma. We lived on base in privatized housing managed by
Balfour Beatty. We had numerous ongoing issues in our home including
maintenance issues that were neglected over the less than 2 years we
lived there which ultimately resulted in making my family very sick.
Our housing company has known about these issues for years and are
taking advantage of these young military families who are not educated
on how to properly treat mold and the health effects it causes. They
are covering up, painting over mold, threatening military members with
their command, using scare tactics and intimidation, lying to us and
making the problems worse. Now, it is out of control. They have been
banking on the fact that we would likely PCS to another base before
what they covered up would reappear. On the surface, these homes appear
to be flawless. But inside the walls tell a different story.
On August 19, 2018 after lengthy and constant illnesses, my husband
and I began to uncover the real cause of all of our symptoms. I spent
the weekend deep cleaning because we had all been so sick, for so long.
The utility room in our home was also my children's play room where
they played daily. In the utility room, I moved their small card table
that was leaning up against the wall. The wall was solid black. I never
thought mold. I thought it was residue from the padded side of their
table. I wiped it off and continued cleaning. The symptoms we had,
included: constant sore throats, nose bleeds, brain fog, blurred
vision, numbness, fatigue, debilitating headaches, even the 4 year olds
complained daily of these headaches along with dizziness. Knowing
headaches are not normal for a child of that age, it even caused me to
worry that my they might have cancer. One of my twins suffered numerous
times from respiratory distress that required emergency room attention.
On Monday, August the 20th, we called maintenance to repair a leak
in our utility room. This was the ninth leak we had had in less than a
year and a half. Maintenance came, cut a large hole in the sheetrock
and repaired the leak. Upon completion, he asked if we wanted the hole
repaired or if we were ok to leave this large hole in our wall. There
were numerous large discolored spots on the same wall. We asked if
those were from that same leak, he said no. He then told us he wanted
to go out and look at our mechanical room which is directly behind the
utility room. This is a locked room attached to our homes that we were
not allowed access to by housing. I told my husband to follow him. He
walked up behind him and overheard a frantic phone conversation between
he and the housing office about how our mechanical room needed to be
replaced immediately!
When he noticed my husband standing behind him, he frantically
began saying, ``You cannot be in here! I am not allowed to let you in
this room!'' My husband insisted that because we pay for this house
that he was coming in! Upon entering, he saw black mold covering the
walls, floor to ceiling. He immediately called housing maintenance. The
housing office told him they had known about the mold since March and
had been ``treating it'' by scrubbing it with bleach and water. When he
asked why we were not notified, she stated that she assumed the
technicians had told us. We have verified with numerous experts that
this process is only acceptable when the area of focus is very small
and NEVER use bleach on a porous surface. Doing this only feeds the
mold, causing it to grow faster, spread and multiply. We have shared
this information with the housing company numerous times, to this day,
they continue to use this process. The next morning, my husband and his
command met with our military housing liaison and our local housing
community manager at our home. We were told by the manager that they
had actually been documenting the mold since February and had she known
how bad the room was, we would not have been allowed to continue living
there. We told her we wanted mold testing done by a company of our
choosing before any remediation began. That was refused. One week
later, this manager no longer worked for the company.
Balfour Beatty then moved our family into a Patriot Home. These are
homes used to temporarily house families while work is being done to
their own homes. We were told it had no mold, that it was clean and
safe. The first day we were there, we found mold. The home was filthy,
dirt on the floors, stains on the couch and carpets and bugs in the
drawers in the kitchen. There were leaks in the patriot home. Water
pouring into a light fixture in the ceiling from an upstairs bathroom.
We called housing, they came and cut a 2 x 2 inch square in the ceiling
and left it causing water to then pour into the floor of the utility
room instead of into the light fixture. We began to feel worse in this
home and we requested to be moved to a hotel. Initially, housing would
only commit to one night at a time. Leaving us each night to wonder
where we would go the next day and the next night after that, with 5
children. We had to borrow a credit card from my parents so that we at
least had the security of a roof over our heads for more than one night
at a time. Eventually, the company agreed to go back and pay for those
and finally upon hiring an attorney, we were extended in the hotel for
over two months. All total, we were out of our home for approximately 3
months with 5 children spending approximately 80 days in a hotel
costing Balfour Beatty $17,000.
We had to hire our own mold company to come test the mold at our
home. The test results showed all 5 of the toxic molds present inside
our home. We believe the mold was contained to our utility room and
maintenance closet initially. Air samples of our living room were
clean. We had to pay out of pocket to see a doctor in Midwest City who
specializes in toxic mold exposure. We tested positive for the presence
of mycotoxins in our bodies.
Housing subcontracted a company to ``remediate'' the mold. We know
for a fact that the remediation was done improperly. Vents were not
covered and contaminated items that were in the utility room were put
inside my garage as well as my kitchen and living room. They did not
take walls out that should have been taken out and they did not remove
boards that had mold growing on them between the walls. When this
nightmare started for us, my husband revoked the authorization we had
given them to enter our home without permission and signed that they
were no longer allowed to enter without notifying us. We caught them in
our home on numerous occasions, they left our home unlocked for lengthy
periods of time and gave the keys to our home to outside contractors
without them being present or us being notified. They performed several
air sample tests without telling us but we found them in our home doing
this twice.
We have requested in writing the results for those tests and they
refused to give them to us. We waited for 2 weeks, with nothing being
done to our home. We paid to have testing done again after they
completed their work. Our testing shows the situation was far worse now
than it was to begin with. We had Stachybotrys in our air samples in
our living room that were only present in tape samples in our utility
room and mechanical room previously. The last air sample was done on
10-16-18 by a company hired by the company housing had subcontracted to
do the remediation. This is a huge conflict of interest. Housing sent
us their final report which showed Stachybotrys present in a bedroom.
Despite this, they scheduled a final walk through of the house stating
it was safe for us to move back in to. We went through the house with
the project manager for Balfour Beatty and pointed out all of the mold
they left during remediation and informed him that we had pictures and
videos proving it had not been remediated properly and we would not be
taking possession of the home back.
I found out just two days ago, Balfour Beatty has moved another
family into this contaminated home. Over the next week, we began to
move out. We were only able to save metal and glass items from our
home. I was forced to part with antiques given to me by my
grandparents, as well as keepsake items from my children because they
had all been contaminated with mold spores due to improper remediation.
We turned in a 7 day written notice to terminate our lease based on it
being uninhabitable on November 15th but Balfour Beatty continued to
withhold our BAH for another month. They sent us a letter through our
attorney charging us $1,100.00 in fees (we never received an itemized
statement of those charges) and that they would trade us a month of BAH
for all our inconveniences and we could then call it even. We did not
accept this offer.
We will likely suffer from the effects of this for the rest of our
lives. Physically, financially, emotionally and mentally. My family
went from zero to $40,000.00 in debt in a 3 month period. I suffer
daily from chronic breathing issues and blurred vision due to the mold
in my brain. We take an enormous amount of binders, supplements, and
prescriptions daily, with no end in sight. It didn't have to be this
way. Our military families do not deserve this after all the sacrifices
they make. It is criminal. It is unbelievable the extent of this cover
up.
Thank you again for allowing me the opportunity to testify.
Senator Inhofe. Thank you, Ms. Driver.
For the benefit of my fellow Senators, she has put together
some pictures to fortify her statement, one of her 4-year-old
twin daughter.
Before we start our 3-minute rounds, the Committee has
received dozens of testimonies from families, as well as
statements for the record from a number of military family
organizations. I move that these be submitted into the public
record and that the record stay open for 48 hours for any other
families who wish to submit a statement, and without objection,
that is so order.
[Family testimonies are on file at the Senate Armed
Services Committee for viewing upon request.]
Senator Inhofe. Nothing is more important than taking care
of our families so the Americans who volunteer to fight on
behalf of us know that the ones that they love are cared for.
That is very basic.
Ms. Driver, do you believe that you have an advocate
fighting for safe housing for our military families?
Ms. Driver. I know our military housing liaison has fought
tirelessly to help families at Tinker, but that is about as far
as it goes.
Senator Inhofe. Yes.
I would say this to all of the military families that are
represented here, do you believe the military families'
experiences in the base housing will impact their decision to
remain in the service? Each one of you?
Yes. See that is one of the problems we are having right
now. We are trying to rebuild a force that needs to be rebuilt
for all of our safeties. This does have a negative effect on
that, I am fearful.
Thank you very much for your testimony.
Senator Reed.
Senator Reed. Thank you very much, Mr. Chairman and,
ladies, thank you for very compelling testimony and being here
today.
Just very quickly starting with Mrs. Cornwall, what is the
one immediate change you would like to see, something on the
order of giving the housing facilitator more power or something
that we can do or the military actually, the Department of
Defense, can do right away?
Ms. Cornwall. Thank you for your question, sir.
One of the things that I think is important to do right
away is give the military families an ability to stop their BAH
[Basic Allowance for Housing] until the problems are fixed.
That might mean putting their BAH in escrow and/or giving the
government housing offices a little bit more power to address
those issues and being able to look at the PPV [Public Private
Venture] and say you will do this or X, Y, and Z is going to
happen.
Senator Reed. Very good.
Ms. Wanner?
Ms. Wanner. There is more to do than what I have time to
say, but I will echo what she says. They need to withhold the
BAH payments to housing. Clearly, the money that they are
receiving is not going to provide us with stellar housing and
the conditions that we deserve. All they are doing is profiting
off of families moving in and out constantly. I feel like if
their payments are withheld, then maybe it will entice them to
do more to protect our families and keep us safe.
Senator Reed. Thank you.
Ms. Driver, please, your comments.
Ms. Driver. I believe this has been going on and that
people have been aware of these problems for a very long time.
I believe as well that they should not be being funded their
management fees if they are not in compliance.
Senator Reed. Thank you all again. Thank you, ladies, for
your very compelling testimony.
Senator Inhofe. Thank you, Senator Reed.
Senator Tillis?
Senator Tillis. Thank you, Mr. Chairman.
Ms. Driver, you were talking about having a housing
advocate for you that is working, but not getting a result. Let
me just say for the benefit of anybody in this room and anybody
watching that every single Member on this Committee is behind
you, and every single one of us loves doing casework. As we are
trying to solve this problem, as you know of families that are
going through what you are going through right now, find out
who your Senator is, and if you are at Fort Bragg or Camp
Lejeune or Cherry Point or New River, you call my office, and I
will guarantee you we will help your housing liaison and we
will at least deal with that while we are trying to solve the
systemic problem.
I am not going to ask you all a lot of questions because we
have a lot of testimony, and I have got a whole lot of
questions for the next two panels.
Thank you all for being here, but please communicate
through your organizations and others. We do casework. We will
help you. Just let us know you need the help. Thank you for
being here.
Senator Inhofe. Thank you, Senator Tillis.
Senator Gillibrand?
Senator Gillibrand. Based on your experience with the
privatized housing program, are you more or less likely to
recommend Military Service to a friend or a relative and their
family?
Ms. Cornwall. Based on what I have gone through as a
military spouse, I have become very disenfranchised by what has
happened and my research over the last 2 years. I would not
recommend my own children to join the service, and my husband
has been a marine for almost 12 years.
Senator Gillibrand. Jana?
Ms. Wanner. I would not recommend it after everything that
we have been through, especially health-wise. When our
accommodations were not met for our EFMP child, I think that
pretty much solidified the decision that we will never live in
base housing again, and we will never recommend it to anyone
ever again. I think it would be difficult to recommend joining
the service to anyone if they wanted to live in base housing.
Ms. Driver. I agree. I would never recommend anyone to live
in base housing. I enjoyed my time living on base until I
discovered that our home was making us very sick. The amenities
of living on base are wonderful, but the homes are definitely
making people sick.
Senator Gillibrand. What was your experience in trying to
raise this with the chain of command? Do you believe that they
responded appropriately? Do you believe they have enough
authority to intervene on your behalf to hold the contractors
accountable? Are you aware of any actions that the military or
the Department of Defense took to hold the companies
financially accountable when these problems were exposed?
Ms. Cornwall. Thank you for your question.
In my personal experience going through the chain of
command, we had no help even though I had volunteered over
1,300 hours with that chain of command.
Further, my family readiness officer had actually been
retaliated against for standing up for our family against
Lincoln Military Housing (LMH).
Ms. Wanner. We did not have the opportunity to reach out to
my husband's chain of command because everything happened so
quickly. Honestly we did not know that it was an option. We
thought that maybe since it was a private company, that maybe
the military's hands were tied and the chain of command would
not be able to be as effective as our own voices, so we just
dealt with it on our own.
Ms. Driver. My husband's command, his direct command, was
very helpful to us, provided things we were not able to afford
after this happened to us. But that is about as high up as it
went. We did not get help from the base commander. It seemed
like lip service. We received letters and we had a town hall
meeting that he was actively a part of. I have put links to
that town hall in my binder. I hope you have a chance to look
at that.
The military housing liaison that we have at Tinker is
exceptional in my opinion. That is not the case at most bases.
They do not have help from their military housing liaisons
there. I wanted to clarify that.
Senator Gillibrand. Thank you.
Thank you, Mr. Chairman.
Senator Inhofe. Thank you, Senator Gillibrand.
Senator Sullivan?
Senator Sullivan. Thank you, Mr. Chairman.
I want to thank again the witnesses for having the courage
to testify and for your service to our country. Whether you are
serving in the military or not, you are serving--right--because
your family is so you are.
I am a colonel in the Marines. I have three daughters. I
have told my girls and my wife they all serve their country.
Right? You are all serving our country. Thank you.
First, I want to reiterate Senator Tillis' point. I think
that is really important. These are the kind of things that you
can come to your Senator or Congressman about and we will get
involved and we will ask questions. So continue to pass the
word on that, whether it is in Alaska for me or North Carolina
or Oklahoma.
I want to unpack a little bit more of this chain of command
issue that Senator Gillibrand just asked about in terms of the
details. For example, Ms. Cornwall, you said they were not
helpful. Were they just saying, hey, you know, suck it up? You
are a marine. Get over it. Or were they maybe trying to and
then there was a disconnect between what the military chain of
command can do and then over to the housing authority or the
private company? I mean, what was the experience really for all
of you. Some said you had a better experience with the chain of
command. But to me, this is a huge issue, and can you give me a
little more detail on your experience?
Ms. Cornwall. Yes, sir.
The issue with the chain of command with the Marine Corps
at Camp Pendleton was I think they just simply took the word of
the PPV over their family. Then when we had a family readiness
officer step in and advocate on our behalf, we had already left
the unit as it was. He still took the time to advocate on our
behalf, and even he was retaliated against by the base command
and had no support from the colonel at our MEU [Marine
Expeditionary Unit]. Unfortunately, he has actually left the
family readiness program because of this issue.
Senator Sullivan. Ms. Driver, you had mentioned something
that to me was very disturbing if it is true and systematic. I
have no reason to doubt that it is true because you stated it.
But did you or did others see examples of--you mentioned young
military families. You got a young guy, a young spouse coming
in. He is a lance corporal or a PFC [private first class]. Do
you think they were taking advantage of young military families
because they are young and inexperienced and maybe do not want
to question authority?
Ms. Driver. Absolutely, 100 percent I believe that is what
is happening. My neighbors who we share a wall with were moved
into a home that we visually saw they were pressure washing
mold off of the wall in their house before they moved in. This
young family moved in. They just got married, first home they
have ever lived in. They do not know the toxic effects of this
type of mold. We are not talking about just a little bathroom
mold in your shower. We are talking mold growing through the
walls. I just think young people are not aware of how toxic it
is and the health effects that come from it.
Senator Sullivan. Thank you. Thank you again for your
testimony.
Thank you, Mr. Chairman. On that, I think that certainly
merits follow-up questions for our next panel. If that is
happening, that is outrageous. Outrageous.
Senator Inhofe. Thank you, Senator Sullivan.
Senator Kaine?
Senator Kaine. Thank you, Mr. Chair.
You know, over the course of our history, it has been sad
that often military members and their families have kind of
been viewed as profit centers to soak. President Truman came to
attention first as a Senator when the Curtiss Aeronautical
Company got caught sending defective engines into theater war
during World War II, and it was an unholy alliance between
people at the plant and military officials exposing people's
lives to make money. We have had payday lenders and other kinds
of aggressive and predatory lenders kind of cluster around
military members and their families. We have had low quality,
for-profit educational institutions view GI Bill benefits as a
place where they can go to try to make a lot of money without
offering a quality product.
I think one of the things that we are going to try to do in
this work and in the NDAA [National Defense Authorization Act]
is to make sure that this is not what is happening here, that
the quest for a profit is not blinding people to the reality of
the service that you provide.
Ms. Cornwall, I want to this retaliation incident because
if you have got a problem--to me, the most shocking part of the
survey that Military Family Advisory Network did is actually
not the physical conditions. It is the way you get a run-around
when you try to get help. So you have got a housing liaison
officer in the Marines. You have a family readiness advocate.
You have a chain of command through your spouse's unit. You
have the private housing provider. There should be multiple
places where you can go for help. But as I read the stories, it
sounds like there is a lot of finger pointing. We cannot do it.
It is somebody else's. I am particularly interested in this
retaliation incident because since I am a little bit familiar
with the Marine program having these family readiness
specialists.
What did your family readiness specialist do? Describe the
retaliation.
Ms. Cornwall. Upon leaving the unit, I let him know that
this was happening to us, and I was concerned about what was
happening to other military families within the unit. Again, I
volunteered very heavily there. So we had a very good
relationship.
Essentially I went to him and told him what happened. He
knew that there was another spouse on the general officer side
of the house who was also investigating issues in that housing
area, including mold. He put me in touch with her, and then her
and I kind of teamed up to sort of address it on a whole scale
in Camp Pendleton.
When the base command found out about that--and base
command, like the base general officer. When he found out about
that, the family readiness officer was told to stand down, that
we had left the unit, that there was nothing else that they
could do.
Senator Kaine. Why would the base command be more loyal to
the housing provider than to you?
Ms. Cornwall. That is a really great question. We have not
been able to figure that out.
I believe that the marriage between the PPVs and the base
commands is the biggest detrimental part to this issue. For
example, the government housing offices are inside the PPV.
Like for Lincoln Military Housing, our government housing
office is inside that building. There is a marriage there, and
there is a certain loyalty there that supersedes loyalty to
military families.
Senator Kaine. My time is up, but thank you for that
answer.
Senator Inhofe. Thank you, Senator.
Senator Ernst?
Senator Ernst. Thank you. I am just sitting down in the hot
seat.
But I want to thank all of the families for being here
today. I am a former military spouse as well, having lived on
Fort Benning and Eglin Air Force Base and Fort Jackson. So I
can commiserate with some of the instances, but certainly not
all of the things that you and your families have had to
endure. Thank you very much for being here and for shedding
light on something that so many families have had to suffer
through. Thank you very much.
Again, I am really sorry about all of the issues that you
have experienced in military housing. We know that you deserve
and have earned much, much better than what you have received.
Based on your personal experience, can you discuss some of
the challenges like with getting the termite and mold issues
fixed, what steps you have taken? I know you have probably
answered some of those already, but if you would, just go ahead
and please express those again and then where you think we need
to be going in the future. What would be your perfect solution
to making sure that our military families have safe housing
that is conducive of raising healthy families and kids that are
able to learn and grow? What is your perfect environment?
Ms. Cornwall. Well, to answer your first question, I think
that--so there is a marriage between the PPVs that is hard to
get past and the military. In my personal experience, I went to
Philip Rizzo, who is the VP [vice president] of operations
nationally for Lincoln Military Housing. We had many
conversations. Each one of those conversations was met with a
very dismissive tone. We would go to him and tell him about
these families on Camp Pendleton. He would dismiss it and blame
the families.
I sent a package to Secretary of Defense James N. Mattis
when he was there, and their office had to send it down to The
Honorable Robert H. McMahon, Assistant Secretary of Defense for
Sustainment. They told me they had to stay in their lane. They
have one lane. That is military readiness.
Senator Ernst. Right. Thank you.
Any other thoughts, ladies? What would your perfect
environment be? What is the solution?
Ms. Driver. One problem I see is that they have been
allowed 50-year contracts. I do not know of any contract that
you could make with somebody for that long of a period of time.
I believe they have been given chance after chance after
chance, and they have known about these issues. I struggle to
understand why they are allowed to be able to hold onto these
contracts.
Senator Ernst. An exceptional point.
Jana, do you have any other thoughts?
Ms. Wanner. I feel like one of the most important things
they need to do, instead of putting band-aids on issues, they
need to actually correct the issues. I think they need to pay
more attention to what the families are saying instead of just
dismissing us every time we come up with a concern and telling
us that they cannot fix it or they have already fixed it. I
think that they need to listen to the families more and not
their pockets.
Senator Ernst. Very good. I wish we had a lot more time,
ladies. We might have to get together offline and commiserate
together. Thank you all very much. I appreciate you.
Senator Inhofe. Thank you, Senator Ernst.
Senator Jones?
Senator Jones. Thank you, Mr. Chairman.
I again want to echo what I heard Senator Tillis and
Senator Sullivan say about contacting Senators. Every base has
two United States Senators and one Member of Congress. If you
cannot get through to the local person, call the office. If you
cannot get through calling, come. Get families to come. Trust
me. We pay attention when people show up at our doorstep.
I would go one step further. If anybody has a family member
and you feel like is being retaliated by the military, call
somebody on this Committee and call the House Committee as
well. Go straight to the source.
So with that, I am almost at a loss for questions. You
know, Ms. Driver, in the interest of time, we had to kind of
cut you off a little bit. Are there any things that you would
like to add that you did not get to in your statement? We are
happy to hear that now in the remaining 2 minutes.
Ms. Driver. We caught them numerous times inside of our
home after we had signed a statement that they were not allowed
to enter our home without letting us know.
We requested in writing results of two tests that we caught
them doing, and we still have not received those tests. We paid
to have our own testing done after they completed the work, and
our tests show that the situation was far worse after they did
their own remediation. We had stachybotrys in our air samples
in our living room that were only present in tape samples in
the utility room before. The last air sample was done by a
company hired by the company housing had subcontracted to do
the remediation. This is a huge conflict of interest. Housing
sent us their final report showing stachybotrys present in a
bedroom. Despite this, they scheduled a final walk-through of
the house, stating it was safe for us to move back into. We
went through the house with the project manager for Balfour
Beatty and pointed out all of the mold they left during
remediation and informed him that we would not be taking
possession back of the home.
Senator Jones. I think that may be about out of my time. Is
that correct, Mr. Chairman?
Senator Inhofe. That is correct.
Senator Jones. Okay. I am sorry. But rest assured, all of
your statements are going to be entered in full into the
record, and we are all looking at them and reading them. Thank
you very much.
Senator Inhofe. Thank you, Senator Jones.
Senator Rounds?
Senator Rounds. Thank you, Mr. Chairman.
I have only one question and will try to be very brief with
it.
There has been a discussion about the possibility of a
tenants bill of rights. Have you considered that, and would you
give me about the possibility and whether or not that would
have helped any of you in your situations?
Ms. Cornwall. Thank you.
Just like a tenants bill of rights or any kind of
legislation that you put forth, if there is not an enforcement
mechanism to that, it is not going to work. There has to be an
enforcement mechanism to any kind of legislation or bill of
rights. I support a bill of rights. There needs to be something
like that in place. But there has to be an enforcement and
accountability mechanism, which is what we are lacking.
Senator Rounds. Thank you.
Any other thoughts on it?
Ms. Driver. I agree. I feel there is no accountability and
they are running all the way to the bank however often they are
getting paid, knowing nobody is watching and nobody is speaking
up and nobody cares enough to stop paying them, and that is the
only way this is going to stop in my opinion.
Senator Rounds. Thank you.
Mr. Chairman, I will stop right there. I think other
members have questions as well. Thank you, sir.
Senator Inhofe. Thank you, Senator Rounds.
Senator Duckworth?
Senator Duckworth. Thank you, Mr. Chairman.
Ms. Cornwall, can you speak a little bit to whether--or any
of the ladies--if any of your spouses were retaliated against
from the military side or were spoken to by their chain of
command? Or you said the GOs [general officers] said that they
were going to stay in their lane. Can you talk a little bit to
that?
Ms. Cornwall. Upon leaving my husband's MEU, he did receive
a phone call from his major that he was very upset that my
husband had not kept him in the loop, which was actually not
true because we had a conversation with him about what was
happening on the base. So while my husband did not have
anything in writing, my husband did receive a phone call.
Senator Duckworth. Either one?
Ms. Wanner. My husband was never retaliated against, but I
do want to say that his chain of command has been extremely
helpful for the families coming forward now that everything has
come out in the media and they are aware of the issues. They
have encouraged families to come forward and have said that
they would help if there were families that needed the help.
Ms. Driver. My husband was never personally retaliated
against. However, during the midst of our situation--and this
happens numerous times. I have heard several people attest to
the same situation. The housing communities will call our
husband's command and tell lies, things that are completely
untrue trying to get our spouses in trouble. That happened to
us personally. My husband's command did take our side in that
situation, but that happens a lot where these housing companies
reach out to command in order to try to get command in
trouble--or to get the military person in trouble.
Senator Duckworth. So they are outright either lying--not
just intimidating but outright lying to the chains of command?
Ms. Driver. Yes.
Senator Duckworth. That is absolutely unacceptable.
Can any of you speak a little bit--in the amount of time I
have left, a little over a minute--to any type of disability
accommodations or issues that you might have with disability
issues? One of you has a daughter with a hurt knee I believe.
Ms. Wanner. My daughter has a rare genetic condition, and
it affects her ability to walk sometimes. She has issues with
her knees. Before we moved to Fort Meade, the Corvias staff
assured us that since we were placed on the waitlist in time,
that we would be able to be accommodated with a one-level home.
Just a few days before we arrived to Fort Meade, they told us
that the house was no longer available. When we explained to
them the issue, we told this when we signed for the house, when
we signed the lease the first time and also when they called us
5 days before arrival that we did need a one-story home, but
they said they did not have anything left, and if we wanted a
home, we had to take what was being offered, which was the
townhome.
Senator Duckworth. Did the chain of command or the military
families with special needs office do anything to help you in
this case?
Ms. Wanner. We did not reach out to anyone because
everything was happening so quickly, and we were already in the
height of PCS season. It was the middle of the summer, and we
did not think that we would be able to have our needs
accommodated. We did not even sign into my husband's unit yet,
so we did not know who really to reach out at the time.
Senator Duckworth. Thank you for your very brave testimony,
ladies.
Thank you, Mr. Chairman.
Senator Inhofe. Thank you, Senator Duckworth.
Senator McSally?
Senator McSally. Thank you, Mr. Chairman.
Ladies, I also like many on this panel served. I served 26
years. I never did live on base. But as a former commander, as
a former fellow patriot as you are, I am infuriated by what I
am hearing today. This is disgusting. When your spouse has
raised their right hand to make the sacrifices and serve for
our freedoms and our way of life, you also stood up to
sacrifice. You knew there were going to be some sacrifices to
your careers and to moving around and all that comes with it.
But not this. They were maybe going to go live in austere
circumstances when they deployed, but this is in America and
American families that are putting up with health risks and
sickness and harassment.
We went to the private sector because the private sector,
unlike the bureaucracy of the government, is supposed to be
better. It is supposed to be more innovative, more responsive,
more able to do customer service for our troops and their
families. Instead there are people that I hope look at
themselves in the mirror tonight and say--instead of being
partners with our troops to make sure that our way of life is
kept safe and free, they left you hanging. They put you in
harm's way. This is so wrong and so angering to so many of us,
and we have a lot of questions for the next panels in follow-
up.
If anyone in Arizona who is listening is having issues like
this, I want you to please immediately call my office, 602-952-
2410. But for those of you, even though your Senator may not be
up here, we have your backs. This is just the beginning. We are
infuriated. I am speaking on behalf of everybody here. This is
wrong.
On top of everything else you have been through, the
emotional sacrifice, the inability--I cannot even imagine your
husband coming to work in my squadron every day wondering if
his family was going to be homeless the next day and the impact
that has on readiness and safety and everything.
How much money are you all each out for the costs that you
had to pay financially for tests and medical and everything
else, on top of everything else?
Ms. Driver. I have not totaled medical because it is not
covered. We have had numerous families that have tried to go to
the MFTs [military treatment facilities] to get referrals out
to mold specialists. They are being refused referrals to get to
a mold specialist.
With little, tiny children--you asked if we have sick
family members. We have a 5-year-old on base with lung cancer
right now who will probably never be able to have children of
his own some day. His house tested positive for aspergillus.
The counts inside their home were six times higher than they
were outside.
Just our bedding and mattresses and replace essential--my
home is basically empty. We have beds and we have pots and
pans, but that alone has cost my family $40,000.
Senator McSally. Oh, my gosh.
I just want to know how much are you out.
Ms. Wanner. Personally we are not out costs yet.
Senator McSally. Ms. Cornwall?
Ms. Cornwall. I ended up settling with Lincoln Military
Housing for a mere $300. But I can say as an advocate for other
military families, the cost to them has not been just in money
but to their health, which is long-term effects.
Senator McSally. Right, exactly. I realize that is not the
only cost.
I am out of time, but I just want to say the chain of
command has got to be involved in this. Somehow we need the
chain of command who is responsible for our troops, responsible
for the readiness, responsible for our families to be able to
poke their finger in the chest of these companies and say fix
it now or you are done.
I yield back.
Senator Inhofe. All right. Thank you, Senator McSally.
We will now dismiss our first panel. Thank you very much
for the testimony that you have shared with us. We apologize on
behalf of those who are the responsible parties, and we will
correct it. Thank you very much.
[Applause.]
Senator Inhofe. We will now ask the next panel to come
forward. I will probably pronounce some of these wrong here,
but it would be Mr. Christopher Williams, President of the
Balfour Beatty Communities; Mr. John Picerne, founder and Chief
Executive Officer of the Corvias Group; Mr. John Ehle,
President of the Hunt Military Communities; Mr. Denis Hickey,
Chief Executive Officer of Americas Lendlease Corporation; and
Mr. Jarl Bliss, President, Lincoln Military Housing.
We are going to start over here on your right and our left,
and we are going to ask you to confine your comments to 3
minutes so we will have a chance to get to all of those who
want to ask questions. Mr. Williams?
STATEMENT OF CHRISTOPHER WILLIAMS, PRESIDENT, BALFOUR BEATTY
COMMUNITIES
Mr. Williams. Good afternoon, Chairman Inhofe, Ranking
Member Reed, Chairman Sullivan----
Senator Inhofe. You need to put your mic on there. There we
go.
Mr. Williams. Sorry.
Good afternoon, Chairman Inhofe, Ranking Member Reed,
Chairman Sullivan, Ranking Member Kaine, Chairman Tillis, and
Ranking Member Gillibrand, and distinguished Members of this
Subcommittee. Thank you for your invitation to testify today.
Today's first panel touched me deeply. I know at Balfour
Beatty we want every servicemember and their family to have
only positive experiences in housing. We are constantly working
to meet that duty, and when we fall short, we try to make
things right.
Balfour Beatty Communities consider it is an honor to serve
those who serve our country. We strive to deliver quality, safe
housing to provide responsible maintenance and create
communities that support the unique housing needs of our
families. Our employees pride themselves in promoting a true
sense of community throughout programming thousands of resident
events, as well as modern amenities that did not exist before
privatized housing.
Balfour Beatty is responsible at 55 installations with the
Army, Navy, and Air Force across the United States. Through
these projects, we have delivered over 20,000 new homes and
renovated over 20,000 existing homes. To ensure the replacement
needs are met, approximately 93 percent of all net cash flows
from our projects are deposited into a Government-controlled
project reinvestment account. To date, that amounts to more
than $700 million.
I will not forget my first experience in privatized
housing. It was 16 years ago when my team met with General
Blunt, at the time the commanding general of the Army's 3rd
Infantry Division. He had just returned from Kuwait earlier in
the day and was meeting to provide us input on how he wanted
his soldiers and their families to be treated at Fort Stewart.
It hit home to me and our team to know that in a few weeks'
time, he would be sending our troops into harm's way with the
Thunder Run up into Baghdad.
From that day forward, I have maintained a deep respect and
appreciation for the challenges faced by military families. We
are constantly learning from our experiences, both good and
bad, and we are always looking for ways to improve our service.
To that end, we recently had our mold and moisture inspection
policies reviewed by a nationally renowned environmental firm,
and we are implementing those recommendations with our routine
maintenance practices.
We are also adding resources. We have created a new
position of resident engagement specialists. This is dedicated
to on-site staff who engage directly with the customer to
ensure those residents are being heard and getting prompt and
complete answers to their questions and concerns.
We have also engaged a third party firm to provide
preventative maintenance of our HVAC systems and central air
systems. This will allow our maintenance technicians to focus
on delivering greater levels of responsiveness in other
maintenance areas.
On behalf of the Balfour Beatty Communities, including the
hundreds of proud veterans and military family members who we
employ, we are committed to listening to our residents and
working with our DOD partners and committee to make privatized
housing better. Thank you.
[The prepared statement of Mr. Williams follows:]
Prepared Statement by Chris Williams
introduction
Balfour Beatty Communities is a diversified real estate services
company focused on the acquisition, management and renovation of
residential assets in the multifamily, student and military housing
sectors. As one of the earliest partners participating in the Military
Housing Privatization Initiative (MHPI), we consider it an honor and
privilege to serve those who serve our country. From the delivery of
new and renovated housing, to the provision of responsive property
management and maintenance support, we strive to create thriving
communities that fully support the unique and evolving housing needs of
our U.S. servicemembers and their families. We also pride ourselves in
delivering dynamic resident event programming, community gathering
spaces, playgrounds, parks and other amenities.
The Balfour Beatty Communities team has been a leader in the U.S.
residential real estate market for more than 20 years. Currently, our
residential portfolio consists of more than 50,000 units and $6 billion
in real estate assets under management. We were awarded our first MHPI
project in 2002 for the privatization of military family housing at
Fort Stewart in Hinesville, GA. Today, we are responsible for military
housing operations at 55 Army, Navy and Air Force installations in over
30 states across the U.S., encompassing more than 43,000 military homes
and 150,000 residents. Through these projects, we have partnered with
the Department of Defense to oversee the construction of more than
20,000 new military homes and renovation of 20,000 military homes. In
addition, approximately 93 percent of all net cash flows from our
projects have been reinvested back into project reinvestment accounts
(amounting to more than $700 million to date) that are controlled by
the Services in regards to timing and scope of use.
Servicemembers and their families may choose to live either on or
off an installation, and it is only by offering quality homes on the
military installations we serve that we effectively compete for their
business. In coordination with the Services, our MHPI projects are
required to undergo significant monitoring procedures, which includes
compliance checklists, management review committees, site visits and
resident satisfaction surveys. Through these processes, we are
constantly evaluating our performance to better understand and address
resident challenges and concerns. Balfour Beatty Communities also
maintains a Resident Bill of Rights that is provided to our residents
and outlines the level of quality and customer service they should
expect, as well as avenues of recourse residents have if they feel we
are not meeting their needs. We also have looked for ways to make our
maintenance process better, such as creating the position of Resident
Engagement Specialist to our military on-site teams, to provide
dedicated customer engagement and ensure our residents are being heard
and getting prompt and complete answers to their questions and
concerns. This position also is intended to focus on resident education
efforts, ensuring that our residents know how to effectively manage
their home, identify any safety or maintenance issues, and notify our
facilities team so we can deliver a prompt response. In addition, we
have contracted with a third-party firm to perform regular preventative
maintenance evaluations on our military homes, allowing our day-to-day
maintenance teams to focus solely on ad hoc service requests and
provide even greater responsiveness.
benefits of privatized military housing
Prior to MHPI, typical service request response times were weeks
and even months. Residents were required to handle much of their own
home maintenance, such as snow removal and lawn care. There were
limitations on the number of bedrooms a family could qualify for,
forcing them to `double up' dependents in a single bedroom if they were
within certain age ranges. Expectant families also could not qualify
for a home until a more advanced point in the pregnancy. This is why
the transformational change that has occurred in military housing
communities as a result of MHPI has been called the single largest
Quality of Life effort ever in the Department of Defense and we are
very proud to be a leading partner in that effort.
Today, the new and refurbished inventory of military homes allows
military families to receive homes that provide one bedroom per
dependent as the standard. And families who are expecting qualify for
their new home early in the pregnancy, allowing time to get comfortably
settled. Military housing under MHPI also offers significantly elevated
features, including upgraded flooring, appliances and HVAC systems, as
well as the addition of extensive community amenities, from
playgrounds, pools and dog parks to community centers, athletic courts
and fitness centers.
Another key facet of MHPI has been our focus on creating community
through resident events. Our award-winning
LifeWorks@BalfourBeattyCommunities program provides a busy calendar of
engaging events and activities for residents of all ages, from fitness
clubs and seasonal crafts, to community gardens and cooking classes. A
core offering at all of our military communities, this program allows
residents to meet their neighbors, socialize and make memories to last
a lifetime. In 2018, Balfour Beatty Communities hosted more than 4,700
community events across our military housing portfolio, entertaining,
engaging and educating more than 160,000 resident attendees.
Servicemembers have many choices and options regarding where they
want to live, and are not required to live in our on-base housing. In
fact, approximately 70 percent of military families reside off-base.
Just like landlords in the conventional housing sector, we must compete
for renters by offering quality homes, modern amenities and providing
robust support services designed specifically for the needs of military
families. While we always strive to improve our performance, the
average resident satisfaction score across our MHPI portfolio is
approximately 84 percent, which is classified as ``Very Good'' by an
independent third party survey company that is directly engaged by the
Department of Defense to monitor property management services of the
MHPI projects. In addition, 119 out of approximately 310 neighborhoods
within our portfolio achieved awards for ``Outstanding'' service (based
on 85 percent or above scores).
Notwithstanding our successes in building our housing communities,
we believe there is always room for improvement--and to that end, we
have implemented procedures to ensure that we both hear and address
resident feedback and concerns. Processes are in place for
servicemembers living in privatized military housing to escalate issues
to our local and regional managers teams, and ultimately the local
Army, Navy or Air Force housing officers and base leadership. Balfour
Beatty Communities works closely with the housing offices for our Army,
Navy and Air Force housing partners and local commanders to proactively
provide them with regular reports on maintenance activities, keeping
them involved in our day-to-day project operations and working through
resident issues at each installation. We meet and collaborate on a
regular basis to discuss resident well-being and concerns to ensure we
are consistently delivering to expected standards and meeting our
contractual obligations.
maintenance, health and safety processes
During 2018, Balfour Beatty Communities performed more than 490,000
maintenance work orders throughout our military homes. Of those, 5
percent involved water leaks or moisture-related issues, and less than
0.5 percent of resident maintenance requests involved reports of mold.
When a resident does report a mold or moisture-related concern, it is
considered a Priority Urgent Work Order, which means our Community
Manager and/or Facility Manager will visit the home within four hours
to perform an initial assessment. Additionally, we invite our local
Army, Navy, and Air Force housing partners to accompany our staff when
inspecting the home to ensure any problems are being adequately
addressed with input from the Services partners. Our teams are trained
on how to inspect for and assess mold in homes, as well as determining
when appropriate remediation, repair and restoration procedures must be
followed. When needed, we enlist the services of certified
environmental, engineering and scientific consulting firms to perform
and assess air quality and other environmental-related testing; and we
engage licensed mold remediation contractors in compliance with all
applicable laws and regulations. Where extensive or disruptive repairs
are required in a home, residents are provided temporary housing in one
of our Patriot Homes (furnished homes in the community used for
temporary lodging needs) or an area hotel suite.
With regard to health and safety issues, under the MHPI project
agreements, there are requirements to comply with all applicable state,
local and federal health and safety laws and regulations. In order to
meet these requirements, we have extensive policies and procedures in
place (which are reviewed and approved by the Services) that identify
the handling of all hazardous materials and environmental-related
matters. For example, we have many historical homes in our inventory
that contain lead-based paint. As required by law, we advise residents
moving into a home constructed prior to 1978 during the lease signing
process about the potential presence of lead-based paint in the home.
Residents also are given detailed information about how to identify
compromised (chipped/peeling) painted surfaces in the home and
instructions regarding immediate notification to our team. All pre-1978
construction homes are subject to visual inspections of both the
exteriors and interiors on an annual basis (as well as upon change of
occupancy), to ensure the integrity of the painted areas of the home
and any required repairs are made in accordance with applicable federal
EPA, state and local regulations.
Balfour Beatty Communities also maintains a preventative
maintenance program that is designed to proactively identify
maintenance issues, and ensure homes are monitored on a continuous
basis. As part of this program, our team conducts the following
procedures:
Comprehensive check of all life safety systems (smoke
detectors, fire extinguishers, range hood fire suppression canisters)
as part of every work order/service visit to the home;
Annual inspection of painted surfaces in pre-1978 homes
to identify compromised areas in need of repair/remediation;
Annual checks of all housing components and systems,
interior/exterior; and
Review of repeat work orders to identify any systemic
issues.
incentive fee structures
In commercial real estate, property management firms typically
fixed management fees that range anywhere from 3.5 percent to 5 percent
of gross revenues of the property. Under the MHPI program, management
fees were negotiated with two components:
the first component is a fixed fee (base management fee)
based on gross revenues (which average 1.79 percent throughout our
portfolio); and
the second component is an incentive-based management
fee, or performance bonus, or approximately 2.02 percent of gross
revenues.
These incentive fees are based on agreed upon metrics, or
performance hurdles, that must be met in order to obtain the fee, which
is a unique fee structure not common within the real estate industry.
The incentive metrics (which are approved by the Services) are based on
objective and measurable data points, including response time on
service requests and resident satisfaction scores, as well as command
satisfaction on select projects. The determination of the base line for
these metrics was motivated by the desire to improve pre-MHPI average
resident satisfaction scores of 60 percent and extended wait times for
completion of maintenance repairs. The incentive management portion of
our fees is an effective tool for our military partners to use when we
are not meeting resident expectations.
broader challenges of mhpi
How the Private Sector Partners Can Help
Balfour Beatty Communities believes there are many ways that we can
work together with the Services to enhance the MHPI program. This
includes the potential to meet more frequently with members of the
Senate Armed Services Committee, the House Armed Services Committee,
and other members of Congress, to ensure an open and transparent
dialogue can occur regarding areas of interest and concern raised by
their constituents. We believe we also can focus on developing
additional best practices to improve the quality of life of our
servicemembers and enhance their living experiences in our housing. As
part of this process, the following areas can be developed to further
educate residents:
how the MHPI program works in general (i.e., under a
public-private partnership with the Services sharing in the economic
returns on the projects);
Basic Allowance for Housing (BAH) collection processes
(i.e., for servicemembers, monthly rent is collected in arrears);
the presence and management of environmental hazards in
``legacy'' homes (i.e., older homes conveyed by the government into the
MHPI projects), such as lead-based paint and asbestos; and how
residents can continue to feel safe in these homes; and
how residents can communicate housing concerns and
identify the proper housing advocates available to them.
How Congress Can Help
When MHPI was initially conceived, over 20 years ago, the program
was structured to successfully leverage private sector investment and
deliver military family housing more efficiently and effectively than
previous government-run housing models. The servicemember's BAH was
identified as a core component and primary source of revenue for the
program. Over the years, changes to scoring requirements and BAH
calculation have significantly hampered MHPI projects.
OMB Scoring of New Projects and Project Refinancing: The underlying
legislation permitted the Services to enter into these transactions
without severely and negatively impacting their annual operating
budgets by leveraging private sector debt. However, changes to OMB
scoring rules in 2012 but officially implemented in fiscal year 2015
hamper the ability of the housing partners to leverage private sector
debt. Financial tools available in the commercial real estate space
(refinancing, restructuring, adding equity, extending terms, etc.) are
not available or are extremely difficult and time consuming to enact
under the post-2015 OMB scoring rules. Reinstating the original scoring
methodology for MHPI would provide the housing partners and the
Department of Defense with greater flexibility to optimize and expand
privatized partnerships. In particular, it would allow the housing
partners to potentially accelerate renovations and improvements to
existing housing.
Basic Allowance for Housing (BAH): BAH is the financial engine and
major revenue source for the MHPI program. Congress and Department of
Defense have from time to time revised how the BAH rates are
calculated. There have been significant swings in the BAH rates in some
areas as established by the Defense Travel Management Office. GAO has
conducted several reviews on BAH as it relates to its accuracy in
determining accurate rates for these data collection areas and has
called for more transparency in the BAH data collection and rate
calculation process (GAO-11-462: Published: May 16, 2011). BAH rate
stabilization would allow MHPI projects to better budget, plan, program
and execute both short- and long-term capital improvement expenditures.
Military Services End-Strength: Following the 2005 BRAC round,
there was significant realignment of forces between installations and
two closure actions that impacted bases with MHPI projects.
Additionally, there was a decrease in Service end-strength that
also affected the financial condition of the projects. Lower than
expected occupancy results in decreased funds flowing into the
reinvestment accounts, limiting available funds for recapitalization
and restoration projects (GAO-18-218).
conclusion
Delivering an exceptional living experience for servicemembers and
their families who call our military communities their home is Balfour
Beatty Communities' top priority. The partnerships we have formed
through the MHPI program have created jobs, more resilient and
sustainable communities, and a means to increase resources for housing
and infrastructure programs within budget constraints. Most
importantly, our partnerships have nurtured a true sense of community
and improved living experiences for military members and their
families.
As a vested stakeholder in our communities, we look forward to the
continued feedback from military families, our Department of Defense
partners and the findings of the Senate Armed Services Committee as we
follow our core mission of delivering an exceptional living experience
to every resident we serve. We are providing our full support to the
Government Accounting Office (GAO) and Department of Defense Office of
Inspector General investigations into environmental issues and
oversight of the privatized military housing program. We look forward
to their observations and recommendations and understanding ways we can
improve our operations. On behalf of Balfour Beatty Communities,
including our 312 employees who are proud veterans or spouses of Active
Duty servicemembers, we remain committed to working with Congress to
ensure a more proactive and informed approach to the MHPI program going
forward.
Senator Inhofe. Thank you.
Mr. Picerne?
STATEMENT OF JOHN G. PICERNE, FOUNDER AND CHIEF EXECUTIVE
OFFICER, CORVIAS GROUP
Mr. Picerne. Thank you, Mr. Chairman. Thank you, Senators.
I will be brief.
My name is John Picerne, and I am the founder and CEO
[chief executive officer] of Corvias. We are a mid-sized
company made up of approximately 850 dedicated, hardworking
people who, alongside of our hundreds of small, minority-owned,
disadvantaged subcontractors, take very personally our
commitment to servicemembers who defend our Nation.
It is in that spirit that I am here to say on behalf of
everyone at Corvias that we let down some of our residents. I
am sorry and we are going to fix it. We will get to the bottom
of this problem, and once again, we will return to the gold
standard of customer service that we once had.
First, we are making life better for our residents today
with a focus on customer service.
Secondly, we are making organizational changes to ensure
that our gold standard resident service is built in our
operation by adding staff to be in the neighborhoods, by
reopening several neighborhood centers and amenities, by
retooling our entire mold and mildew standards and policies,
and by starting a major construction push. While working with
the Army and the Air Force leadership, we are tapping into more
than $140 million worth of formerly trapped by reserve accounts
by our investment groups. We are also investing $323 million in
new dollars. This will provide for improving more than 2,600
homes in our communities.
I know that we will get back to that gold standard place.
We are proud to serve our military members as we believe there
is no higher calling in our business.
I thank you for this time and look forward to your
questions and thoughtful dialogue.
[The prepared statement of Mr. Picerne follows:]
Prepared Statement by John G. Picerne
Thank you for the opportunity to appear before you today.
My Name is John Picerne and I am the Founder and CEO of Corvias.
We are a mid-sized company made up of approximately 850 dedicated,
caring, hardworking people, who, alongside our hundreds of small,
minority-owned, disadvantaged subcontractors, take very personally our
commitment to the woman and men who fight for and serve our Nation.
Our company has three core principles: best place to work; best
provider of service; best community partner. That is the standard the
American people should expect from those whose job it is to serve those
who serve in the military.
It is in that spirit that I come here to say, on behalf of everyone
at Corvias: we want to do right by servicemembers who choose to live in
our homes. Any let down of any of our residents is unacceptable. And we
are making every effort to fix it.
We're returning to the ``gold standard'' level of resident care
that defined our company, from the start.
Let me share with you what we're doing.
First, we're taking steps to do a better job at resident service.
We are living the ``Corvias Commitment''--a series of
specific commitments, to our residents, that we will respond promptly
to a request, actively seek their feedback, and make changes when we
need to do better.
We launched a ``service surge,'' to reduce the backlog of
work orders, improve our response time to service requests. We shifted
resources, authorized overtime, worked on weekends. More people,
handling more calls, more quickly.
We eliminated annual rent increases on our lower demand
homes and eliminated fees that may be common in the multifamily real
estate market, but aren't right appropriate for the special audience we
serve here.
We're re-opening playgrounds, paving roads and making
other investments in community amenities.
Second, we're making a number of structural changes, to ensure that
``gold standard'' resident service is built into our operation:
We're hiring 25+ resident service specialists for support
across Fort Polk, Fort Bragg and Fort Meade. These people will focus
100 percent on local resident needs.
We're moving our resident call centers back to the local
installations--and out of a remote third-party call center. During
regular business hours, residents will once again speak to a local
Corvias team member, down the street, when they have a problem.
We hired a world-renowned specialist--at no cost to the
government--to review our mold and mildew procedures, so that here,
too, we are living up to the gold standard.
We're looking at every part of our resident care
operations to see where we can do better. Everything is on the table.
Finally, we're getting much closer to the community. . .and to
local installation command.
We took the proactive step to provide our military
partners with a detailed Weekly Work Order Situation Report (SITREP)--a
summary of our overall performance, work order details and specific
resident cases. If we fall behind, we'll all know it. Full
transparency.
We're spending more time with garrison commanders at Army
installations and senior level command at our six Air Force bases. We
want them to know everything we're doing. We want to hear what's on
their minds.
We're getting out there, in the communities, listening to
residents--town halls, Community Information Exchanges, Executive
Councils, focus groups. There's no better way to put our residents
first.
One of the biggest challenges: residents can feel that it's hard to
be heard, that there is no way for them to raise an issue outside of
the chain of command. In the era of social media, where everyone has a
voice, our residents expect and deserve better.
We're forming resident advocacy groups--at each installation--to
speak for the community's interests and give us ongoing, direct
feedback. If a resident has a problem, they'll have a fellow resident
voice to contact, someone who can act on their behalf.
It is vital that residents can easily contact us--currently we have
five different ways, within the housing community and up to Corvias
headquarters. Residents have asked for ways to get help, and we hear
them. So we are exploring how to bring in 21st century technology to
make it even easier, to give our residents more ways of being heard.
We have a lot underway, and a lot to do. But we are seeing results.
Our renewed commitment to resident service is starting to pay off.
In January, our work order completion rate reached 95
percent across our Army installations.
Ninety-seven percent of 3,645 total emergency work orders
at our Army communities were responded to within eight hours . . . and
completed within 24 hours.
The average work order survey score was 4.24 on a 1-5
scale.
Looking ahead, we're starting a major construction push--new homes,
renovations, energy efficiency upgrades. Working with Army and Air
Force leadership, we're tapping more than $140 million in a formerly
trapped reserve account and a new investment of $323 million. Work
begins this year.
As part of this initiative, Corvias will eliminate any lead-based
paint hazards in every home undergoing renovation.
We are also working with our Air Force partners on a long-term
housing solution for single unaccompanied airmen at Edwards Air Force
Base, beginning in early 2019. Corvias will invest approximately $100
million: the cost impact to the Air Force is zero.
To get ahead of rising utility costs, we're working with our Air
Force and Army partners to install roughly 50 megawatts of solar arrays
across Fort Polk, Fort Bragg and Eglin AFB. This will complement the
existing 30 megawatts already installed across our military portfolio.
Lowering utility costs keeps more money in the program to fund new
homes, renovations.
So how did we get here?
Supporting a resident community--within the confines of an Army or
Air Force installation--is at once unique and, at the same time, no
different than a ``civilian'' neighborhood.
We have weather issues--like the record rains that soaked the mid-
Atlantic last summer, sending water into some of our homes. Our
servicemembers move more frequently, meaning we must expend project
funds to address the normal wear and tear on a home so they are ready
for the next family to occupy. We have competing demands for repairs,
investments.
In the past few years, several developments put downward pressure
on the partnership--the funds available for resident service,
improvements, new construction:
Sequestration and force structure downsizing reduced
demand for on-base housing. Fewer residents.
Utility costs increased by 11 percent from 2015 to 2018--
more than anticipated.
A litigation matter across all the partnerships, now
resolved, froze the reserve fund--the money used for construction and
major improvements--for several years.
If we did nothing to address the financial stress on our projects,
the model would eventually collapse. Operational costs would be
increasingly difficult to cover. There would not be nearly enough funds
to pay for future construction and renovations.
To get us back on the right path, we looked for ways to make the
numbers work. We tackled utility costs and how we could limit future
increases--by replacing failing ground source heat pumps at Fort Polk,
installing solar panels. We pursued new funding avenues--bringing more
money into the program, sooner rather than later, to move ahead on
improvements.
And, we looked at the service operation. We centralized our call
center and maintenance operations. We reduced our local resident
support presence, shortened the operating hours for our community
centers and even closed a few centers. We adopted a number of customer
service practices that are common in the civilian real estate world.
To be clear: we have nothing, financially, to gain from changes to
resident service. In fact, investing less in resident service makes it
more difficult to attract new tenants.
Changes in resident service operations were one way to ensure
adequate support for the reserve fund--money used to support new home
construction and renovations. We, Corvias, do not make any more money
when less is spent on customer service. This is all about one thing:
how does the program have enough funds for the future?
These moves made financial sense . . . but they took us away from
the ``gold standard'' of resident service that Corvias was known for.
This is not the civilian real estate world: we serve a special
audience.
In our joint governance, Partnership structure, we--Corvias--and
the military leadership are always trying to strike the delicate
balance of how to satisfy today's residents and their families . . .
and still preserve adequate dollars to serve and satisfy 100 percent of
future residents.
That is why the MHPI model was designed to be a flexible program vs
a rigid contract--so that the government and private partners can make
adjustments over time, in the best interests of the program and the
residents we serve.
The MHPI partnership model keeps the vast majority of funds where
they belong: in the community. For a typical military housing project,
a dollar in basic allowance for housing (or BAH) is spent along the
following lines:
Approximately 30 cents of the BAH dollar are for the
direct costs supporting the communities--including payroll, supplies,
marketing to attract tenants, repairs and home maintenance.
Utilities, taxes and insurance account for about 17
cents.
Debt service accounts for about 34 cents.
About 15 cents is deposited in reserve--to be invested
back in the community in the form of new construction, renovations,
major improvements. This reserve fund is among the most important parts
of the model: it represents the future.
Corvias is paid a property management fee and--if we achieve
certain performance goals--an incentive fee. Together, these fees
account for approximately four cents of every BAH dollar.
With our partners in the Army and Air Force, we've been on a nearly
20-year journey to improve the quality of life in military residential
communities.
In 2001, the U.S. Army selected Corvias to partner with it for a
pilot program at Fort Meade. We wanted to see if the partnership could
make a meaningful difference in the availability and quality of housing
on post.
When Corvias first assumed responsibility for Fort Meade housing,
occupancy was in the low 70 percent range and there was a maintenance
backlog of nearly 37,000 work orders. Corvias cleared the backlog
within 60 days. Occupancy rates soared above 93 percent.
That pilot project helped confirm the partnership model works . . .
and that high-touch resident service must be our top priority, our most
important measure of success.
We also learned a few things--both in the Fort Meade pilot and in
subsequent projects. We learned that many factors influence the
direction and long-term viability of these partnerships.
Occupancy rates falling below what was originally forecast; higher
construction costs after 9/11; soaring utility costs: these and other
issues would pose an ongoing challenge in the years ahead. They affect
the economics of the partnership, requiring us, in collaboration with
our military partners, to make adjustments and, at times, tough
choices.
The partnerships have come a long way from that first pilot at Fort
Meade. MHPI is delivering on its promise to provide higher quality
housing to servicemembers and their families.
In the nearly 20 years since Corvias first partnered with
the military, we've built or renovated more than 25,000 homes. More
than 9,600 new homes built; 16,000+ homes completely renovated.
All homes in our portfolio--more than 27,000 in total--
will undergo significant renovations and/or replacement during the
lifecycle of each partnership.
When it comes to building or renovating homes, we're not talking
about a new version of the same old thing. We install amenities
available in the conventional rental market outside the installation--
pools and splash parks; computer labs; dog parks, fitness centers;
walking trails, picnic areas, fire pits and pavilions--to attract
residents. We build community centers--35+ to date.
Our homes are built 100 percent in compliance with Federal
regulations, with third-party inspectors. No exceptions, no cutting
corners.
Together with our partners in the Army and Air Force, we're proud
of what we've accomplished--though we know we need to do better. The
thousands of new or renovated homes available to servicemembers. The
care, commitment and hustle of our employees who are out there, every
day, in communities on 13 Army and Air Force installations nationwide.
Our work with the military is the largest, continuously operating
public-private partnership in U.S. history. This partnership has helped
to improve--substantially--the standard of living at those
installations where we manage homes
In addition to our work with the U.S. military, Corvias applies the
same public-private partnership model to other areas.
We work with local governments and government stakeholders to help
them tackle tough environmental, energy and infrastructure challenges
like storm water management.
We partner with universities to help them meet on-campus housing
needs for the students of today and tomorrow.
Our name today, Corvias, is rooted in the Latin phrase, ``by way of
the heart.'' It represents the commitment we bring to our partners. The
passion we bring to making a real difference. Our name serves as a
daily reminder to lead with our hearts and do right by our communities.
Earlier, I mentioned our three core principles--best place to work;
best provider of service; best community partner. With the opportunity
to serve the military comes the importance of supporting the
community--beyond providing a home.
Corvias employees live by this principle, giving time and money to
help the communities we support. Our national giving back program has
enabled more than 33,000 hours of community service, and our foundation
has awarded $13 million in scholarships to servicemembers' sons and
daughters, and grants to military spouses.
Throughout our history, we've kept Corvias a small, privately-owned
and founder-led company--for good reasons.
First: it enables us to make decisions for the long-term, not just
the next quarter. Second: when we see a problem, we can move quickly,
go the extra mile. That's what we're trying to do here.
We have always taken pride in being the best at what we do.
Although we have slipped, we will get back to that ``gold standard''
place.
There remain a number of longer-term issues we must address--issues
that stress the service model, upset that delicate balance, and will
only get tougher over time. We need to keep working with our partners
to understand and meet these challenges.
Let me close with where I began--what we, at Corvias, believe.
We believe that our fellow countrymen who serve the Nation deserve
our best--nothing less.
We believe in the partnership model--to tackle major infrastructure
projects, help governments meet citizen needs, make a better quality of
life.
And we believe in doing the right thing--in living and working ``by
the way of the heart.'' That's where we came from, and where we're
going.
Thank you.
Senator Inhofe. Thank you.
Mr. Ehle?
STATEMENT OF JOHN EHLE, PRESIDENT, HUNT MILITARY COMMUNITIES
Mr. Ehle. Chairman Inhofe and distinguished Members of the
Subcommittees, good afternoon. My name is John Ehle, President
of Hunt Military Communities. Thank you for the opportunity to
be here.
At Hunt we provide more than just housing. We are entrusted
to build and sustain quality communities that meet the needs of
those in uniform and their loved ones. We take that
responsibility seriously.
We are also committed to being a responsible partner to the
Department of Defense.
At Hunt, we have built approximately 15,000 new homes,
renovated another 8,300 homes, and built 83 community centers.
We have invested more than $5 billion in our communities and an
additional $181 million in capital improvements in recent
years.
Today we own interests in approximately 52,000 homes on or
near 49 military installations in 21 States and the District of
Columbia. Of that number, we manage about 32,000 units and
serve more than 165,000 residents.
We recognize that there is no such thing as maintenance-
free housing and that issues will arise that must be remedied
with both our historic and newer homes. When that happens, we
strive to address the situation in a timely and transparent
manner, and we hold ourselves accountable. We are not perfect,
and we aim to learn from our mistakes.
I want to be clear. There is no acceptable percentage of
unhealthy homes. Every resident deserves our best. Keesler
family housing in Biloxi, Mississippi has been one area of
special focus for us, so I would like to speak directly to
that.
The military homes at Keesler were largely destroyed by
Hurricane Katrina in 2005. After the homes were rebuilt, we
found that residents were consistently identifying moisture-
related issues. Addressing these issues proved difficult. We
took ownership of the situation and have executed a multi-phase
moisture remediation project. We have visited every one of the
approximately 1,100 homes, assessed each home for moisture-
related issues, developed a plan for each home as needed, and
performed remediation work for each of those homes. I am proud
of the work we have done at Keesler, and we will continue to
monitor and address any new issues with the utmost diligence.
To the families that live at Keesler, we appreciate your
service and we are here to serve you.
At Hunt, we do not succeed unless we provide our residents
with safe and healthy homes. We agree with you that more can be
done to accelerate the improvement of housing stock. We would
start with promoting common standards and sharing best
practices. We also support the continued availability of
housing allowances that facilitate options for our
servicemembers.
Finally, let me say a word about the future. Over the next
5 years, we plan to invest over half a billion dollars in
additional capital improvements across our portfolio. This
includes constructing 230 new homes to replace houses for
residents in Hawaii. This project is expected to create
hundreds of good paying jobs.
Again, thank you for the opportunity to testify today. I
look forward to hearing your views and answering your
questions.
[The prepared statement of Mr. Ehle follows:]
Prepared Statement by John Ehle
i. introduction
Chairmen Tillis and Sullivan, Ranking Members Gillibrand and Kaine,
and distinguished Members of the Subcommittees: Good afternoon, and
thank you for the opportunity to be here today to discuss the current
condition of the Military Housing Privatization Initiative (``MHPI'').
My name is John Ehle, and I am the President of Hunt Military
Communities (``Hunt''), a subsidiary of Hunt Companies, Inc. Among
other things, I am responsible for overseeing the ongoing management,
operations, and partner relationships associated with Hunt's military
family housing portfolio.
Hunt welcomes the subcommittees' interest in military housing, and
we share your commitment to promoting the safety, health, and well-
being of America's servicemembers and their families. We also
appreciate the efforts of the committee staff in facilitating our
participation in this hearing.
At Hunt, we aim to provide more than just housing. We have been
entrusted to build quality communities that meet the needs of those in
uniform and their loved ones, and we take that responsibility very
seriously. We are also committed to being a responsible partner of the
Department of Defense, playing an important part in the military
mission.
I look forward to providing you with an update on Hunt's work and
hearing your views as we continuously seek to improve the housing
experience of our military families.
ii. hunt is proud to provide quality communities to america's military
families.
Hunt is honored to serve those who serve us. As a company, we have
strong and longstanding ties to the military community. Indeed, as a
naval officer who served from 1942-1947, Jack Hunt, one of the founders
of Hunt Companies, experienced life in military family housing while
stationed in North Africa, Italy, and Guam, and that experience
provided a major impetus for the company's first military housing
construction project starting in 1969, long before the MHPI program.
Today, at Hunt military communities across the country, our employees
include members of military families living in the housing we manage.
In a recent survey of 798 Hunt Military Communities employees, more
than half indicated that either they or their spouse served in the
military or they grew up in a military household.
We take great pride in providing quality homes to those who
sacrifice so much for our country. Prior to the creation of the MHPI,
military housing was subject to a cycle of investment and subsequent
neglect that led to the necessary rebuilding of homes well before what
should have been the end of their useful life. The MHPI paved the way
for partners like Hunt to provide the expertise, efficiency, and hands-
on oversight needed to break that cycle.
Hunt has proudly partnered with the Department of Defense since the
inception of the MHPI. We greatly value the relationship we share with
our military partners, and we appreciate the oversight they provide.
In service of our partnerships under the MHPI, we have built
approximately 15,000 new homes, executed major renovations of another
8,300 homes, and built 83 community centers, in addition to the
construction of other community amenities. A total of more than $5
billion has been invested into the transformation of the communities
that comprise Hunt's MHPI portfolio. Since the conclusion of the
Initial Development Periods at our projects, we have invested an
additional $180 million in capital improvements across the Hunt
portfolio.
We have also performed full LED conversions in three of our
communities, which involved converting the lighting in 2,466 of our
homes, 718 street lights, and six of our own facilities to LED light
bulbs, resulting in an estimated annual electric savings of $873,000.
We have similar plans in place for LED lighting conversions at three
additional communities in 2019. As part of that work, we expect to
retrofit another 1,444 of our homes, 839 street lights, and five of our
own facilities with LED lighting, which will result in an additional
$953,000 in estimated annual electric savings. Also, we have installed
solar panels on 1,510 rooftops in four of our communities and a 1.2-
megawatt ground-based solar array resulting in estimated solar savings
of $3.4 million annually. Finally, we have installed 3,962 low-water
fixtures in homes at six of our communities, thereby saving 33,329,920
gallons of water to date and resulting in $540,000 in estimated annual
water savings. All cost savings associated with these energy
sustainability initiatives inures to the benefit of the projects and
their reinvestment accounts, thereby building additional capital
reserves for future property improvements.
Today, we own interests in approximately 52,000 homes on or within
close proximity to 49 Air Force, Navy, Marine Corps, and Army
installations located in 21 states and the District of Columbia. Of
that number, we manage about 32,000 units across 44 installations and
serve more than 165,000 residents.
Our housing stock is made up of a variety of properties. We have a
large number of historic houses mixed with many newer homes. Our
properties have dedicated community centers for resident activities,
and many have additional features such as sporting fields, playgrounds,
fitness centers, club houses, pools, and splash pads.
Hunt is committed to supporting our residents, employees, and our
neighboring communities through efforts that are focused on military
issues. We recognize that servicemembers and their loved ones face a
wide range of challenges, from frequent moves and deployments to
financial difficulties. Hunt's deployed spouse program centers on
improving the quality of life for all residents, even in the most
difficult times. For example, in contrast to pre-privatization,
residents in our communities receive landscaping services outside of
any fenced area around their homes, and for those families with a
deployed spouse, we will service the entire area, including any fenced-
in areas around their home.
Unlike most conventional housing properties, we do not require
security deposits or application fees from our servicemembers. And
where pet deposits or other fees are required by location, they are
typically much less than one would find at comparable conventional
housing. In addition, we offer other services and benefits for our
residents that may not always be offered in a conventional setting,
including:
Relocation Benefits: If a resident is required to be out
of their home during a repair, we will secure temporary alternative
accommodations and may provide financial support to ensure that the
resident is not out-of-pocket during this time.
Service Order Response Times: All of our service requests
are documented and categorized as ``emergency,'' ``urgent,'' or
``routine,'' and each have required response and completion times
associated with them. We monitor these requests on a regular basis and
include them in a monthly report to our government partner. Residents
also have the opportunity to address a concern with the government
partner directly, if needed. When such concerns are raised, we will
work with the government partner to ensure it is resolved.
Self-Help Supplies: We provide supplies and equipment for
our residents such as light bulbs and air filters, as well as tools and
gardening equipment, which they may use at no cost.
Resident Events: We host regular social events for our
communities, such as fall festivals, spring carnivals, and movie nights
under the stars as well as more regularly scheduled events throughout
the year. These events, which include ice cream socials, holiday hot
cocoa events, pizza pick-ups, games, and contests, encourage our
military families to bond and form a community.
Smile Bucks: Hunt developed the ``Smile Bucks'' program
to empower its employees to make decisions that serve to brighten a
resident's day. Hunt property management employees can each use up to
$100 in any one month (up to $500 per year) to do something for a
resident that goes above and beyond what is required, such as sending a
greeting card and a plant to celebrate a birthday or delivering
balloons and coloring books to cheer up a sick child.
Community Advisory Boards: Our Community Directors
organize and lead a Community Advisory Board consisting of military
residents who meet on a monthly basis to discuss and plan social events
for the community. This group will also organize support for families
with deployed spouses such as meal assistance, dog walking, or other
light maintenance or chores to pitch in during a time of need.
Further, we seek to establish a bridge between our military housing
properties and the civilian communities that surround them. In this
regard, we welcome community groups and services, such as local
scouting troops or public libraries, to visit our properties and engage
with our residents, all with an eye toward raising the quality of life
for those we serve.
We formed a nonprofit organization, Hunt Heroes Foundation, to fund
projects that address challenges related to servicemembers and those
who support them, particularly in the areas of health, education, and
housing. Hunt Heroes has supported military families and their
communities through strategic partnerships with organizations like wear
blue: run to remember, a national nonprofit running community dedicated
to honoring fallen military members and their families, and Stop
Soldier Suicide, the first veteran-founded-and-led nonprofit focused on
military suicide prevention.
It is a privilege to be part of the public-private program that
provides homes to our military families, and our commitment to ensuring
safe and healthy living conditions is fundamental to our business. We
recognize that there is no such thing as maintenance-free housing and
that issues will inevitably arise that must be remedied with both
historic and newer housing stock. When that happens, we consistently
strive to address the situation in a timely and transparent manner. We
are not perfect, of course, so we also aim to learn from our mistakes
in order to provide a better experience for our residents going
forward.
iii. the health and safety of military families is hunt's top priority.
There is no higher priority for us than the safety and health of
our resident servicemembers and their families. When we receive reports
of an issue that could put that at risk, or that otherwise impairs the
quality of the housing provided, we take prompt action.
Hunt has an extensive inspection and preventative maintenance
program at all of its properties. We also have systems in place to
respond to reported concerns, issue work orders, and follow up in a
timely manner. Hunt tracks work orders for maintenance requests and
issues work order satisfaction surveys for every visit. Moreover, our
maintenance response times are dictated by our MHPI engagements with
our military partners, and we provide monthly reports to the government
detailing our response and completion times.
Hunt is committed to providing a safe environment for its
residents. Its management and maintenance teams are focused on
assisting residents and addressing their concerns every day. Hunt
strives to keep its residents informed of important environmental and
safety matters that may affect them.
This is why we created the Hunt Safety Zone, an online library of
information relevant to residents' safety, which is regularly updated
with new information. In the library, one can find information
concerning home safety, seasonal safety, children's safety and other
useful tools. The topics are all presented in a user-friendly format
and include fire and mold prevention, window safety, and others. In
addition, seasonal safety topics are available by month such that a
resident can visit the Safety Zone at a particular time of year and
learn about a seasonally relevant safety topic. These topics range from
water, grilling, and bicycle safety to crime and poison prevention and
even Halloween safety.
In addition to the Safety Zone, we affirmatively provide our
residents standard safety information upon move-in. This includes the
EPA pamphlet, ``A Brief Guide to Mold, Moisture In Your Home,'' and
information on lead-based paint, asbestos, radon, and/or pesticides. We
have a vested interest in maintaining a safe environment for our
residents.
We value transparency and are committed to maintaining regular
communication and an open dialogue with all resident families and base
leadership. We proactively interact with our residents and military
partners via routine electronic and written messages, monthly Mission
Support Group Commander or Asset Management meetings, regular
conversations with military housing offices, and updates on the company
website and Facebook page. We hold town hall meetings and conduct
``open office hours'' or smaller meetings within a community where
residents are able to ask questions on a more personalized one-on-one
basis.
Also, as mentioned, each of our communities has a Community
Advisory Board, which serves as a liaison between community members and
the Hunt property management team. Residents are able to voice concerns
directly to the command of their respective military units.
Hunt's ultimate goal is to provide our servicemembers and their
families with quality homes that foster their safety, health, and well-
being. When we fall short on this, we need to know about it, and we
work to fix it.
iv. where challenges have arisen, hunt has undertaken substantial
remediation efforts.
Hunt acknowledges that exceptional challenges occasionally occur at
its properties, and we embrace our responsibility to address such
issues when they arise. We are committed to being responsive to the
needs and concerns of our residents. The situation at Keesler Family
Housing (``Keesler'') in Biloxi, Mississippi has been one area of
special focus for us, so I would like to speak to that and, in
particular, the remediation effort that Hunt has undertaken there.
The military homes at Keesler were largely destroyed by Hurricane
Katrina in 2005. In the years following, the homes were rebuilt, owned
by the Air Force, and then placed under the management of Forest City
Military Communities via the MHPI program. After the reconstruction,
residents at Keesler began identifying issues, including, in some
instances, moisture build-up.
Addressing these issues proved difficult. However, we took
ownership of the situation and have, in consultation with independent
consultants, executed a multi-phase Moisture Remediation Project
(``MRP''). As part of this MRP, we have:
Visited every Hunt-owned residence located at Keesler
(approximately 1,100 units);
Assessed each home for condensation-related issues;
Developed a tailor-made plan to address the specific
issues identified in each home where such issues were found; and
Performed all necessary remediation work required for
each impacted home.
The remediation work varied from home to home. This was not a one-
size-fits-all solution. It was a complex plan that varied given the
circumstances. In some cases, issues were able to be addressed in a
matter of hours. In others, the work was more extensive. In the latter
situations, Hunt worked to relocate residents into alternative housing
and minimize the impact on affected families by providing various means
of financial support. Nevertheless, some residents opted to remain in
their homes during remediation. We recognize that this process has been
intrusive and inconvenient at times, and we are grateful for the
collaborative spirit in which residents have worked with us.
As of May 2018, we have completed all required work for the MRP,
including accessing and analyzing more than 1,100 homes at Keesler, and
repairing issues when we found them. In addition, we recognize that
sustainment of remediation is an ongoing process, and that we need to
maintain our investment in order to sustain long-term solutions to meet
the needs of our residents. We launched the Sustainment Phase of our
program to address any potential moisture issues that may arise in the
future.
The Sustainment Phase of our program was designed to be robust and
custom-tailored to each home. In the Sustainment Phase, we have used an
industrial hygienist to analyze certain units, and we have conducted
inspections along duct lines as needed. We have also begun two
different pilot programs to study ventilation in the homes, and we have
increased the number of hospitality suites to allow for shorter waiting
times for those families that may need temporary accommodations while
work is being completed in their homes.
To date, a total of $12.2 million has been spent on our remediation
and sustainment efforts at Keesler, and I am proud of the work we have
done to address the root cause of the condensation issues reported
there. Nevertheless, we understand that Mississippi's Gulf Coast
climate lends itself to high levels of moisture and humidity,
particularly in the summer months. Indeed, every warm season brings a
new set of challenges. Accordingly, we will continue to vigilantly
monitor conditions in our Keesler homes, and we fully intend to
approach any future moisture issues, should they arise, with the utmost
diligence.
v. hunt's compensation incentives are aligned with the interests of its
residents.
At Hunt, we do not succeed unless we provide our residents with
safe and healthy homes that meet their needs. This goal is not only
part of our corporate philosophy but also built into our engagements
with our military partners.
Each year, Hunt residents receive a satisfaction survey, which
gives them the chance to express their views on the job we are doing.
The survey is administered by a third-party company and disseminated to
residents electronically in order to increase response rates.
The results from these surveys guide us in our work. Hunt
representatives meet with our military partners to discuss the survey
results, and Hunt provides an action plan to address any areas in need
of improvement.
Further, in our industry, resident satisfaction scores are a key
metric that can directly impact a company's bottom line. Under the
terms of our engagements with our military partners, Hunt stands to
collect an additional fee for the properties it manages based on the
achievement of performance benchmarks. Resident satisfaction is a
substantial component of these incentive fees, which can be reduced or
even forfeited completely if certain goals are not met. Other metrics
that can impact incentive fees, depending on the particular agreement,
include service order response times, preventive maintenance
achievements, commander's evaluations, and occupancy rates. Thus,
Hunt's incentives are aligned with the interests of its residents, and
resident satisfaction is our overarching goal.
vi. hunt continues to reinvest in and improve its properties.
Finally, I would like to share with you some information about how
Hunt reinvests in its properties and works to improve them.
Hunt's management revenue is generated primarily through the
receipt of rent payments from residents who opt to live in a Hunt
property. These rent payments are in large measure covered by a
servicemember's Basic Allowance for Housing (``BAH''). Hunt receives
the BAH as gross revenue. It then uses portions of the BAH to cover
operating expenses, service debt payments, pay asset management and
property management costs, and contribute prescribed amounts to
reinvestment accounts, which fund long-term sustainment.
Only then is any remaining cash divided between Hunt and its
government partner. On average, this permits Hunt to retain between one
and two percent of the total monthly BAH dollars it receives, assuming
the property is performing financially. In short, this means that the
vast majority of each BAH dollar Hunt receives goes to supporting our
military housing communities and, by extension, the servicemembers that
reside there.
Likewise, Hunt periodically dedicates significant reserve funds to
replenishing parts of its housing stock. When it entered into its
partnership with the Department of Defense, Hunt was aware that many
housing units would need to be replaced during the span of the
relationship, and it takes this responsibility seriously. Over the next
5 years, Hunt plans to invest nearly $530 million in capital
improvements across its portfolio, including the construction of 230
new homes in replacement of existing housing stock.
One exciting development is currently underway in Hawaii, where
later this year we will begin the process of replacing existing homes
in our Nani Ulupau neighborhood with 40 new houses at a total cost of
$32 million. That project will be followed about 2 years later by
replacement of the homes at the Hokulani neighborhood with 190 new
houses at an estimated cost of $100 million.
At their peak of activity, the combined projects are expected to
create 200 jobs and ultimately improve the quality of housing offered
to our Marine Corps and Navy residents. Both projects demonstrate our
steadfast commitment to addressing challenges posed by aging housing
structures and providing homes that serve the safety and health of our
residents.
vii. conclusion
Thank you for inviting me to testify today. I appreciate the
opportunity to discuss Hunt's work with you. I have done my best to
share what we know about the important issues you have raised.
Above all, what I hope I have conveyed is that Hunt remains
committed to providing quality communities that meet the needs of
America's heroes and their families. We recognize the responsibility
placed upon us, and we do not take it lightly. We are dedicated to our
relationship with our military partners, and we look forward to
continuing to work with them in this critical endeavor.
Likewise, we welcome the opportunity to hear your views and hope to
address any concerns you may have. In that spirit, I would be glad to
answer any questions you may have to the best of my knowledge. Thank
you.
Senator Inhofe. Thank you.
Mr. Hickey?
STATEMENT OF DENIS HICKEY, CHIEF EXECUTIVE OFFICER, AMERICAS
LENDLEASE CORPORATION
Mr. Hickey. Thank you, Chairman Inhofe, Ranking Member
Reed, distinguished members of the joint subcommittee. My name
is Denis Hickey and I am Chief Executive of Lendlease Americas.
Thank you for inviting me here today to testify on our
contribution to the military housing program.
Lendlease is a global property company founded in Sydney in
1959, but we have been operating in America since 1970. As an
Australian, I can attest that Australia, as the only country to
have stood side by side with America in fighting every major
conflict since World War I, is very proud to be a part of this
program since its inception.
Mr. Chairman, I would like to touch on the issues that are
brought here today. This afternoon, we have heard from several
families who have outlined the examples in a very material way
of the serious problems that have arisen across some of the
portfolios. The situation is clearly not acceptable, should
have been avoidable, and I personally have great empathy for
their cause. No family, much less a military family, should be
subject to these conditions.
We have 130,000 people living in our communities, and I can
assure the Members that we try extremely hard not to let these
type of issues arise. However, unfortunately, we are human and
mistakes do happen. I can assure the Members that we are very
focused on trying to learn from the stories that we hear today
and learn from the Committee's input to fix these situations
moving forward.
Despite many successes and the strength of the military
housing program, the program itself does bring some challenges.
For example, the continued funding to continue with the
remediation and continued betterment of the housing stock
across the portfolios. Currently Lendlease's communities have
invested $7 billion into new construction and development
across the portfolios, and we think that there is another $16
billion to invest over the life of the program. However, those
funds are not evenly distributed across the projects. So the
challenge for us is to actually find a way to get those funds
to the areas it needs to be invested.
Secondly, the safe and timely management, rectification,
and repair work of some of the environmental issues that
existed on the base from pre-existing conditions is a real
challenge, and we try very hard to address this every day.
There is also the challenge of meeting occupancy levels.
When military decisions are made around troop deployments that
affect demand on the base, it is a challenge for the project
companies to manage through those.
Finally, there are challenges of managing various natural
disasters that occur. Mr. Chairman, a case in point is our
Hurricane Florence at Camp Lejeune project in September of
2018. This was an unprecedented natural disaster and of the
6,200 homes on Camp Lejeune, 3,800 were affected. The repair
bill alone for that project is over $150 million. Whilst we
were slow to start, we have made good progress, and we have
repaired over 40 percent of the homes. Earlier this week, I met
with Secretary Spencer of the Navy and other leaders of the
Navy and Marines, and we talked about this specific issue. We
are working together collectively, and our goal is to have all
of the homes repaired by the end of November.
Mr. Chairman, finally, we are proud of the many
accomplishments that we have achieved across our portfolio to
date, but we are also very aware of the issues that have been
brought here today. The issues have my personal and full
attention, and I can assure you we are very focused on
improving every aspect. We want the people who live in our
communities to be proud, as our people are proud to serve them.
Thank you.
[The prepared statement of Mr. Hickey follows:]
Prepared Statement by Denis Hickey
Chairmen Tillis and Sullivan, Ranking Members Gillibrand and Kaine,
and distinguished Members of the Armed Services Committee, my name is
Denis Hickey, Chief Executive Officer of Lendlease Americas. Thank you
for inviting me to testify today.
I represent Lendlease, and I am here to provide the Subcommittees
with information regarding Lendlease's contributions to the Military
Housing Privatization Initiative (MHPI) program.
Lendlease is a leading global property company founded in Sydney,
Australia in 1959, and we have been operating in the United States
since 1970. Lendlease Americas is a full tax paying U.S. corporation
directly employing more than 1,700 people across the United States, 895
percent of which are American citizens. We are proud of our long
history in America, and our goal is to increase our presence here in
future years.
In 1972, our founder Dick Dusseldorp, famously remarked that ``the
time is near that companies must start justifying their worth to
society, with greater emphasis placed on environmental and social
impact, rather than straight economics.'' This belief is at the core of
who Lendlease is today. It guides our efforts and ensures we remain
committed to delivering long-term sustainable value to the communities
we create and serve.
As an Australian, I can attest to the fact that Australia -the only
country to have stood and fought beside America in every major conflict
since World War I -is very proud of the strong military ties between
our two countries. As a partner to the Department of Defense (DOD)
since the early days of the MHPI program, we at Lendlease are also
humbled by the opportunity to serve military personnel and their
families by providing quality, healthy, safe, and sustainable
communities.
We take this responsibility seriously.
Our military housing business is headquartered in Nashville, TN. We
oversee and manage more than 40,000 single-family rental homes across
28 installations in 12 states, from Upstate New York to Alaska and
Hawaii. Many of our managers and employees live in the local
communities we serve, managing day-to-day operations for our residents.
They are part of these communities. Many are also veterans or military
spouses who have lived on military installations and experienced first-
hand the sacrifices our military and their families make every day.
Before I address the MHPI initiative and Lendlease's role in this
program, I would like to touch on the recent news reports and the
issues raised that have brought us here today. The media reports
outline examples of some serious shortcomings that have arisen across
the program, and they are clearly not acceptable.
I empathize with the families that have been affected by these
issues, as they should not be subjected to these conditions.
I can assure the members of the Subcommittees that Lendlease is
dedicated to creating and maintaining safe, healthy and sustainable
communities for our servicemembers and their families. As such, we are
committed to doing everything we can to resolve these types of issues
should they occur on our projects.
the mhpi program
The MHPI program was enacted out of a critical need to modernize
old and dilapidated housing on military bases that, after decades of
deferred maintenance, had fallen into disrepair. The DOD did not have
enough appropriated funding to undertake this renewal program.
Partnering with the private sector to unlock much needed capital and
capabilities was seen as an innovative and effective way to remedy this
problem.
Exercising its authority under the MHPI legislation, after a full
and open public procurement process, each Military Service selected a
private sector developer to access the expertise and private sector
funding that was deemed critical for the construction, refurbishment,
operations and ongoing sustainment of their housing facilities.
Lendlease implemented the privatization initiative under a basic
structure in which a Project Company is formed to own, develop, finance
and operate family housing on military installations. Often, the
respective Military Service elects to become a member of the Project
Company. Regardless of structure, the Military Service retains
governance oversight and control over major decisions of the Project
Company through the project agreements. This Project Company then
contracts with various parties to deliver the asset management,
property management and development management services. In our case,
Lendlease is engaged as the asset manager and the development manager,
and partners with Winn Corporation to perform the property management.
Lendlease works closely with the DOD and the leadership of the
individual Military Services, both at the Pentagon and local
installation level, to determine appropriate development and
operational plans to meet the objectives of the program. Generally,
Lendlease, the DOD and Military Services share approval authority over
annual operating budgets and capital expenditures, and the DOD
maintains regular oversight of the overall performance of the Project
Company and its service providers through the contractual and funding
structure.
One of the great successes of the MHPI program has been the
creation of new housing on military bases throughout the U.S. On these
bases, older homes were torn down and replaced with new, modern ones
that conform to the latest building codes. In addition, many of these
older homes have undergone significant renovation and have been brought
up to current standards.
Despite this investment in new homes, a significant number of older
legacy homes remain including some that may have potential
environmental issues that need to be carefully managed. Maintenance
plans are developed and administered for these homes until
modernization and/or replacement can occur.
project funding sources
Initial funding for the development scopes was generated from
leveraging the forecast income from the Project Company to secure
financing from the capital markets. Together with investments made by
the Military Services and the private sector developer, this financing
was used to fund the initial period of development, construction and
renovation of a select tranche of homes at each installation (known as
the Initial Development Period or IDP).
Ongoing funding for the Project Companies comes in the form of the
rent they collect from the residents, which is capped at the Basic
Allowance for Housing (BAH). The revenue is deposited into secured
accounts and is used to pay operating expenses, service debt, fund
approved management fees and agreed investment returns, with the
balance of the net operating income (NOI) deposited into the project's
``reinvestment account.'' These funds are not distributed to the
developers, but remain within the project to fund future development
and maintenance work.
As the reinvestment account balance grows, the Project Company, in
consultation with the Military Service and the local installation,
assesses how those funds can be utilized to best improve the quality of
housing on the installation. Generally, the Military Service, as a
member of the Project Company, shares authority for approving plans
and/or funds to be expended from the reinvestment accounts.
To date, Lendlease's MHPI projects have invested more than $7.2
billion to fund new construction and major renovation activities to
improve the quality of life for our residents. Our current forecast is
that a further $16.4 billion of surplus NOI will be generated for
deposit into the reinvestment accounts across our MHPI portfolio over
the remaining balance of the ground leases, subject of course to
continued project occupancy. Funds in the respective projects'
reinvestment accounts are intended to be used for further upgrades and
new facilities over the remaining term of the projects, conditional on
direction and mutual approval by the Project Manager and the Military
Services.
customer service is critical for success
Except for a small fraction of command-designated personnel who are
required to live on base, every other eligible servicemember has the
choice to live either on or off base. They receive their BAH and are
free to use that BAH to pay for housing wherever they choose to live.
As such, the MHPI program is an entirely free market program with
consumer choice, and has absolutely no occupancy or rental guarantees
from the Government.
As a result, we need to compete very hard with the homes off base
to be seen as the housing provider of choice. For an MHPI housing
project to thrive, it must consistently provide the best value and
customer service to its residents, or it will lose occupancy and
receive lower rental income. If lower rental income is received, then
there is likely to be less NOI to be invested in the project's
reinvestment account, thereby impacting what can be done to improve the
housing and the facilities within that project.
We are very focused on customer satisfaction and train our
employees on how to deliver high standards of customer service. We
measure the quality of our customer's experience using independent
resident surveys conducted by CEL & Associates and SatisFacts. These
objective reviews are designed so that our local property management
teams can promptly address residents' feedback, questions, issues or
concerns.
In 2018, we received more than 36,000 completed resident feedback
surveys and averaged a score of 4.45 out of 5. Whilst these were good
scores, there is obviously room for improvement and we use these survey
results as learning opportunities for our and our property managers'
operations teams to focus on areas where we can improve our level of
service and performance. These results are also reviewed in detail with
Military Service leadership, both at the Pentagon and local
installation level. They closely monitor our performance and they form
part of the basis for the asset and property management fees.
To provide a measure of scale of the annual activity that happens
on the installations that we manage, our front-line property management
personnel perform more than 18,000 changes of occupancy annually. Each
resident change brings with it a requirement to conduct environmental
assessments, refresh the home and repair any cosmetic issues which can
include flooring replacements, painting, fixture and finish upgrades,
appliance upgrades and minor structural renovations. In addition, our
maintenance teams performed over 400,000 service requests in 2018,
ranging from fixing mold issues, flaked paint, blown light bulbs,
clogged toilets to broken screen doors. These are cataloged and
recorded in our project databases.
All in all, our success depends on providing exceptional customer
service and, as such, we invest significant time and resources trying
to continuously improve and raise our performance in all areas.
environmental stewardship
Lendlease understood that many of the houses acquired through the
MHPI projects would not be demolished as part of the IDP, and came with
both known and unknown conditions including lead-based paint, asbestos
and contaminated soils. The set up of the projects was not and could
not be designed to address all the legacy homes in the initial
development. Rather, it was envisioned that these legacy homes would be
addressed over time and funded out of the project reinvestment
accounts.
For example, our portfolio of over 40,000 homes includes more than
14,200 legacy homes built prior to 1978, when the use of lead-based
paint was banned. Until these conditions can be successfully eradicated
through major renovations or housing replacements, they require active
management. Accordingly, at the time of a project's inception, each
home in the project is inspected for these conditions, and in cases
where the conditions are not addressed and require continued active
management, it is noted on our housing registers.
In these instances, any known presence of lead-based paint,
asbestos, or contaminated soils in/or around a house are all clearly
documented and disclosed to all residents prior to occupying their
home. Every resident at move in receives a home walk through, covering
all aspects of the home, including discussions around the existence of
these environmental conditions, and receives material regarding how to
live safely in the home. All residents are encouraged to report any
suspected lead-based paint flaking, mold or other environmental
concerns that may arise during their tenancy directly to the Property
Manager. All reports are treated very seriously, and we strive to
rectify these issues as soon as possible.
driving innovative, sustainable and community solutions
Consistent with Lendlease's commitment to improving the
environmental and social impact to the communities we create, we have
been focused on implementing strategies across our portfolio that
support the DOD's objectives of reducing energy, water and waste
consumption. These include:
The development of 34.77 megawatts of ground and rooftop
solar arrays across our portfolio. In the past 12 months, our projects
have generated over 43 gigawatt hours of solar electricity, enough to
power 5,303 homes for 1 year.
The delivery of industry leading green building practices
with 15,000 homes built to Energy Star or LEED Silver standards.
The design, construction and monitoring of the first two
Zero Energy Homes (ZEH) on any DOD military installation at Fort
Campbell, and the first Net Zero Energy Home on a Navy/ Marines
installation at Camp Lejeune.
Implementing resident education and engagement programs
around consumption and conservation best practices. This includes home
energy audits and educational walk throughs to help residents operate
their homes more efficiently.
Incorporating the use of Building Energy Management
Systems (BEMS) resulting in approximately 7,206,697 kilowatt hours or
$684,636 million saved over the last year.
In addition to these environmental initiatives, Lendlease is also
focused on giving back to the people and communities we serve. For
example, in 2007, Lendlease established the Lendlease (U.S.) Community
Fund, a 501(c)(3) fund designed to give back to military communities.
Through a combination of Lendlease contributions as well as other
fundraising initiatives, the Lendlease Community Fund has raised over
$4.2 million. This money has been distributed to various organizations
such as Wounded Warriors, Operation Shower, Boot Campaign, K9s for
Warriors, Veterans PATH, Fisher House Foundation and many more
grassroots organizations working tirelessly to serve Active Duty
servicemembers, veterans and their families. The Lendlease Community
Fund's BlueStar Scholarship program has also awarded $704,000 in
scholarships to high-school age military dependents.
We will continue to focus on these areas and are committed to
piloting new initiatives. Our efforts have reshaped industry practices
and have helped design and achieve better outcomes for our communities.
meeting the challenges
Despite delivering tangible benefits to the respective communities,
the MHPI program brings a unique set of challenges, including, but not
limited to:
The timely rectification and replacement of historic
environmental conditions, including lead-based paint, asbestos and
pesticide impacted soils.
Ensuring the Project Companies can individually generate
sufficient NOI to fund the continued modernization of the on-base
legacy homes.
Maintaining occupancy levels through troop deployment and
other military decisions that can dramatically affect the housing
demand.
Managing various natural disasters and unforeseen events
that periodically occur.
We will continue to do our best to manage and mitigate these issues
so they do not adversely impact our military families. Our leadership
and operational teams will continue to work with local installation
command, Military Service leadership and community representatives to
review these issues as they arise and develop and implement appropriate
solutions to mitigate their impact.
The most recent example of managing one of these issues was the
natural disaster of Hurricane Florence that hit our Atlantic Marine
Corps Communities (AMCC) project in North Carolina in September 2018.
This hurricane was unprecedented in size and impact with significant
effect on both the AMCC base facilities and the broader community.
Damages from the hurricane have resulted in major logistical and
construction challenges. On the AMCC project alone, 3,818 of the 6,182
homes were damaged, and the estimated repair bill for housing on the
base is over $150 million. Although progress on the recovery was
initially slower than envisaged, after recent meetings with the local
Commander and his team, as well as meetings with other high-ranking
officials in both the Navy and Marines, we have collectively
implemented several improvements that have helped AMCC to accelerate
recovery in a collaborative manner. We are making solid progress and
have currently rectified 1,478 homes (40 percent of the total damaged).
Our aim is to have all of the recovery work substantially completed by
November of this year.
concluding remarks
Lendlease's MHPI portfolio is a cornerstone of our business in the
United States. The company is committed to the MHPI program and to
continuing to work with the DOD and Military Services to make it
successful.
While we are proud of many of our accomplishments across our MHPI
portfolio to date, we are also keenly aware of the issues that have
been brought before the Subcommittees today and see these as critical
areas that have our full attention. We will continue to focus on
improving our services for the benefit of the military families who
reside in our communities. We want them to be as proud to live in our
communities, as we are to have them.
Mr. Chairman, this is of the highest priority to Lendlease. We want
to make sure that every military family on all our bases receives the
highest level of service every day. They deserve nothing less.
To that end, we look forward to the dialogue the Subcommittees have
initiated and remain receptive to any and all constructive advice for
improvements to our projects and the MHPI program. We also welcome any
Senators or their staff who wish to visit our facilities and see first-
hand the status of our operations.
I thank you for the opportunity to represent Lendlease and to tell
the story of MHPI from our perspective.
Senator Inhofe. Thank you, Mr. Hickey.
Mr. Bliss?
STATEMENT OF JARL BLISS, PRESIDENT, LINCOLN MILITARY HOUSING
Mr. Bliss. Chairmen Inhofe, Tillis, and Sullivan, Ranking
Members Reed, Gillibrand, and Kaine, and members of the
subcommittees, on behalf of Lincoln Military Housing, thank you
for the opportunity to testify before your subcommittees today
on the Military Housing Privatization Initiative (MHPI).
My name is Jarl Bliss and I am the President of LMH.
I realize time is short, but I would like to recognize the
servicemember families who just testified for sharing their
experiences with you.
The men and women of LMH work every day to serve all of our
families with honor and integrity. I regret when even one
servicemember family feels like we have come up short.
I am sincerely and personally committed to working with our
military families, our DOD partners, and your subcommittees to
address any concerns with our operations and to foster better
communication and understanding with those we serve.
Obviously, one of the reasons we are here today is because
there are families who feel like we did not perform up to
expectations. Whatever the source of that frustration, whether
it was a service problem or whether we did not communicate well
with the family, I deeply regret that any of our residents feel
this way.
While I believe the MHPI program is a true success for many
thousands of military families, it is clear in the testimony of
the families here today that not every family feels the same
way. I want to change that. I want to regain the trust of these
military families.
As your subcommittees look at how LMH and other PPVs are
performing, I look forward to working with you and our DOD
partners to explore new and creative ways to improve our
military families' experience in our housing. I look forward to
your questions and, more importantly, to working with you to
address the concerns of the military families.
[The prepared statement of Mr. Bliss follows:]
Prepared Statement by Jarl Bliss
Chairman Tillis, Chairman Sullivan, Ranking Member Gillibrand,
Ranking Member Kaine, and Members of the Subcommittees:
Thank you for the opportunity to testify before you and your
subcommittees this afternoon concerning the Military Housing
Privatization Initiative (MHPI), and, specifically, Lincoln Military
Housing's (LMH) provision of residential property management services
to our women and men in uniform through that program. LMH welcomes your
subcommittees' oversight of the MHPI to ensure that all of the public-
private ventures (PPVs) are delivering the highest level of service to
military families with a level of integrity that reflects our Nation's
gratefulness for their sacrifice.
introduction
LMH is an affiliate of Lincoln Property Company (LPC), a Dallas-
based residential and commercial property management company with a 54-
year history of outstanding customer service. LMH, formed in 2001 to
participate in the MHPI, is extremely proud of our nearly two decades
of partnership with the Department of Defense (DOD) and our service to
the military community through the program.
As your subcommittees are aware, in the mid-1990s, military family
housing was in serious disrepair; residents at that time rated their
satisfaction at around 60 out of 100 and DOD estimated that
rehabilitating the housing stock would cost taxpayers at least $16
billion over 30 years. Through the MHPI, private sector investment in
military housing has exceeded $20 billion over the past 16 years, and
military families have experienced a marked improvement in the quality
of housing, as evidenced by a 20-25 point increase in their self-
reported satisfaction scores across the portfolio of homes.
Today, LMH manages around 37,000 residential units through the
MHPI, of which approximately 7,000 are at Camp Pendleton and 4,300 are
in the Hampton Roads area of Virginia. Over the last 16 years, the PPVs
in which LMH participates have invested about $4 billion, of which
amount almost $1.125 billion in private capital has been invested in
the Camp Pendleton/Quantico Housing project alone. Over the next
decade, LMH, with the approval of and in consultation with our DOD
partners, plans to spend at least $450 million more in this project and
over $2 billion more across our entire portfolio.
While LMH is proud of our record, we acknowledge that one of the
reasons for this hearing is a series of published media reports
implying that LMH has cut corners and failed to provide quality housing
to servicemembers. LMH welcomes and encourages military families to
raise complaints about their housing and we regret when even one
servicemember family is dissatisfied with our performance. We recognize
that some issues have become compounded due to some servicemembers'
feeling like there is a breakdown of trust and communication with LMH.
We are committed to fixing those issues in a manner that puts the
readiness of military families first. As your subcommittees conduct
oversight of this issue, however, we wish to highlight the following
points:
LMH has strong ethical and economic incentives to deliver
the highest level of customer services to servicemember families
because the success of the PPVs established under the MHPI depends
wholly on LMH's ability to maintain satisfied residents and high
occupancy rates in its housing. If LMH were to cut corners and provide
lower quality housing, many servicemembers may choose to use their
Basic Allowance for Housing (BAH) to live in non-military housing.
Both in policy and practice, whenever LMH's online or 24/
7 telephone customer service center receives a service request relating
to moisture or mold in a home, a trained LMH technician responds to the
family within 30 minutes--an ``emergency'' level of response because
mold usually indicates water intrusion. Once at the residence, the
technician assesses the type of repair or remediation needed and works
with the family to schedule the service. Every mold or water intrusion
service request generates three follow-up visits in the days and weeks
after service is performed to confirm the repair or remediation worked
and the family is satisfied. On an annual basis, mold work orders
constitute less than one percent (0.6 percent) of service requests,
even at coastal installations where relative humidity levels are
naturally high.
LMH is proud of our service to our special class of
residents. Servicemember families sacrifice greatly in service of our
national defense; they deserve to have complete confidence in the
condition of their housing, which contributes to readiness. While we
disagree with the characterization of our property management services
in recent media stories, the important issue is how the MHPI
community--Congress, the DOD partners, and the PPVs--moves forward to
improve upon past success and to ensure the level of program integrity
our servicemember families expect and deserve.
LMH recognizes that there is always room for improvement. To that
end, LMH has commissioned an independent review of our mold policies
and procedures, training and communication to determine how we can
improve the experience of our military families in the housing units we
manage. We look forward to partnering with Congress, DOD, and
especially our residents to restore residents' trust and improve upon
our ability to deliver the highest quality property management services
to the families that wear the Nation's uniform.
background on lincoln military housing and the ppvs
As your subcommittees review LMH's performance as a MHPI private
partner, it is important to understand the details of how our PPVs work
so that you can assess the parties' relative incentives and
performance, along with the existing DOD oversight mechanism for the
PPVs. A PPV is essentially a base-specific public-private partnership
under which DOD enters into a joint venture with a private sector
company. At all times, the PPV holds title to the housing stock on the
base. DOD retains the underlying land and provides a ground lease to
the PPV for a 50-year term. At the expiration of the lease, the PPV
must return the land and housing stock to DOD in the same or better
condition than at the beginning of the lease. Additionally, all
monetary assets are distributed to DOD at the end of the partnership.
The PPV contracts with a property management company for management
services.
The PPV is financed primarily by securitizing the BAH of the
military families that live in military housing. As you know, each
servicemember's BAH is set by DOD according to rank and cost of living
in a given geographic location. LMH plays no role in setting a
servicemember's BAH. Each servicemember receives a BAH and at all times
has the choice whether to live in military housing (which is typically
but not always on-base), in which case the servicemember family's BAH
is paid to the PPV as rental payment, or whether to take the BAH as a
check-in-hand and seek housing in an off-base community. Currently,
over 70 percent of military families do not live in military housing
for a variety of reasons. Sometimes it is for a particular school
district; other times it is because they find housing off-base for rent
lower than their BAH so they are able to save part of their BAH for
other expenses.
By the MHPI's design, the PPV's responsibilities fall into three
main categories: managing the military housing, servicing the PPV's
debt, and saving for (and actually making) capital improvements
necessary to preserve or improve the condition of the housing stock as
required by the 50-year ground lease. As shown in the diagram below,
each BAH dollar that flows into LMH's PPV portfolio is allocated across
these three accounts in the average percentages shown below.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
As you can see, nearly half of every BAH dollar is invested in
operating expenses, which includes property management services, all
related maintenance, community services, resident events and tax
obligations. Unlike a traditional P3 where the private investor's
primary pecuniary interest is in residual equity, LMH's revenue is
derived primarily from providing property management services to
military families. Some of our fees are earned only when we meet
certain performance standards, of which customer satisfaction is one.
The next quarter of every BAH dollar goes to debt service--paying
interest on the private capital borrowed against future BAH revenue
streams. The next quarter goes to a capital ``reserve account,'' which
are funds that may only be used for larger and strategic improvements
(large-scale renovations and, when appropriate, replacement of existing
military housing) pursuant to the operating agreement. This long-term
sustainment fund is security for DOD, i.e. to ensure that the housing
stock is maintained in a high-quality fashion and will be returned at
the end of the 50-year lease in good repair. It is important to
understand that any and all decisions regarding the use of these funds
must be made jointly by DOD and LMH. The segregation of these funds is
a key feature of the MHPI and is meant to ensure that necessary
improvements to military housing are not sacrificed for other DOD
priorities, as was sometimes the case prior to MHPI.
Finally, on a portfolio-wide average basis, there is a 1.1 percent
LMH Managing Member distribution. LMH's primary interest in a MHPI
transaction is fee-for-services, which are based upon LMH's performance
and accountability as measured through benchmarking and resident
satisfaction scores. LMH can also be dismissed if we fail to maintain
performance above certain standards.
Given this structure, it is clear that LMH has zero economic
incentive to cut corners on quality property management. Beyond
economics, LMH has a strong ethical commitment to servicemembers and
their families. LMH's employee workforce, over 60 percent of whom are
veterans or have Active Duty military in their families, would find it
offensive to treat fellow servicemembers with anything but respect and
dignity. The vast majority of LMH's military housing is offered in very
competitive housing markets. The success of the PPV depends entirely on
LMH's ability to offer and continuously provide quality housing to
military families because high occupancy levels are needed to sustain
the PPVs from BAH revenue. If LMH were to provide substandard property
management services, military families would consider moving out of
military housing and into residences in communities surrounding the
base.
To the contrary, the military installations LMH services have some
of the highest occupancy rates in the country. As mentioned, our
overall resident satisfaction scores, as measured by an independent
surveyor, are more than 20 points (on a scale of 100) higher than the
resident satisfaction scores before the MHPI was enacted. At Camp
Pendleton alone, LMH has invested $1.125 billion in private capital in
building new homes, renovating existing homes, and constructing club
facilities, pools, playgrounds and dog parks. As an example, prior to
MHPI, the families at Camp Pendleton had just one community swimming
pool for over 7,000 families. Today there are 17 for the same number of
families.
Finally, in LMH's experience, the PPV model works only when all of
the parties--LMH, the DOD partner, and the residents--work together and
keep an open line of communication to address issues that arise from
time to time in the community. LMH offers regular town halls and ``meet
the manager'' days where residents can learn more about how LMH is
investing in the community or can tell us if they believe their voices
are not being heard through normal channels. Every resident has many
tools to redress concerns. In the first instance, residents can contact
LMH to resolve an issue. Most do just that, primarily by calling our
24/7 customer call center to report maintenance and other issues. If,
however, a resident believes that he or she is not receiving an
adequate response from LMH, the PPV model allows the resident to raise
the concern with the military housing office on base, which then
intercedes on the resident's behalf as the local representation for the
installation Commander. This process is communicated when residents
move-in, and it is shared again (known as the 3-Step Process) quarterly
when residents are invited to our ``Meet the Manager'' events. Finally,
every resident also has the right to complain to state and local
housing authorities, which, under our resident lease agreements, have
jurisdiction to enforce state and municipal laws housing codes.
lmh's mold and moisture remediation procedures
This section describes how LMH handles mold and moisture issues
when they arise. In general, the subcommittees should know that LMH
regularly reviews and updates all of our management policies and
procedures on a regular basis. This testimony, however, will focus on
mold remediation.
Mold and mold spores are naturally occurring in virtually every
environment. It is in every hearing room in the Senate complex and in
all of our homes. The common mildew that forms on the caulk or grout in
a shower is mold. While mold spores are invisible to the naked eye,
what most people refer to when they say they see ``mold'' is actually
mold growth. Mold growth occurs when spores combine with sufficient
moisture and a nutrient source, like dust, soil, paper, or other
organic materials.
Mold growth in buildings is not readily preventable except by
controlling the source of moisture needed for mold spores to grow.
According to the State of California, ``[o]rganic matter is almost
always available, so whether mold grows depends mostly on whether there
is moisture.'' \1\ Excessive moisture can be caused by a number of
factors, including plumbing or roof leaks or through inadequate
ventilation in shower and bath areas, crowded storage areas, and other
causes. Humid areas of the country--including the coastal areas where
Hampton Roads and Camp Pendleton are located--are more prone to mold
issues than drier areas.
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\1\ CAL. DEPT. OF PUB. HEALTH, INDOOR AIR QUALITY SECTION,
FREQUENTLY ASKED QUESTIONS ABOUT MOLD, https://www.cdph.ca.gov/
Programs/CCDPHP/DEODC/EHLB/IAQ/Pages/Mold-FAQs.aspx
---------------------------------------------------------------------------
Mold growth can occur quickly when conditions are right. Mold is a
symptom of excessive moisture--a common problem in the property
management world that must be remedied promptly because unaddressed
water intrusion can result in extensive damage. An area with no
observable mold growth can develop into a problem in less than 48
hours. While LMH does annual preventive maintenance visits on every
home to check for signs of mold, water intrusion or other issues,
unless we are inside a home every 48 hours (which would be unduly
disruptive to residents), mold spores may turn into mold growth without
us being aware. As such, LMH and other property managers rely to a
significant degree on residents to report mold and water intrusion in a
timely way so the issue can be addressed.
LMH's procedures for mold assessment and remediation exceed what is
recommended by the State of California and the U.S. EPA. Under LMH's
management plan, mold and water intrusion are considered the most
urgent type of maintenance issue and LMH responds to every call about
mold or water intrusion within 30 minutes. \2\ A trained technician
contacts the resident to get more information on the type of issue (for
example, a roof leak or HVAC concern) and schedules a repair visit with
the resident. The technician visually inspects the area and if needed
uses a moisture meter to determine if any materials have been water
damaged. If there is mold growth on a nonporous surface like an HVAC
register or a metal window frame, the technician will follow the EPA
guidelines and clean the surface using an appropriate cleaner. If there
are signs of water damage or mold growth on porous materials like
drywall paper or wood flooring, the technician will schedule
replacement of the damaged material as soon as possible in consultation
with the family's schedule. If there is a larger area of mold, LMH will
contract with a qualified third-party mold remediation company to
perform the work. In such cases, LMH offers the family temporary living
accommodations at a guest suite or local hotel at no cost to the
residents until the work is complete.
---------------------------------------------------------------------------
\2\ Other ``emergency'' issues include fire, gas leaks, carbon
monoxide hazards, broken windows, and sewage backups.
---------------------------------------------------------------------------
After the remediation is complete, a LMH technician comes back to
the resident's home three times over the next few weeks to confirm that
the source of the moisture has been fixed and that mold growth has not
returned. LMH tracks these visits in property management software
called Yardi, to which the DOD housing office has access and can
monitor LMH's follow through on a house-specific basis. Additionally,
in many instances the local military housing office is notified of the
mold issue and participates in communications and planning with the
residents.
Even in higher humidity areas like Camp Pendleton and Hampton
Roads, mold work orders account for less than one percent (0.6 percent)
of LMH's call center work orders. In preparation for this hearing, LMH
asked LPC, our conventional property management company which manages
140,000 plus homes throughout the country, to provide the percentage of
mold and water intrusion tickets for non-military housing residential
properties, and the percentage was generally the same as it was for
military housing.
the path ahead: how can lmh better serve military families?
LMH takes very seriously whenever any resident family feels like
their concerns have not been remedied in a professional and
satisfactory way. Every day, we work with servicemember families and
try to go above and beyond to serve their needs because we understand
the unique nature of their residency and their contribution to the
readiness of our Armed Forces. We regret that some residents feel that
their concerns have not been adequately addressed.
At Camp Pendleton alone, we accommodate about 7,000 families each
year. While we are proud of our track record and resident satisfaction
scores, it is impossible for any enterprise to deliver 100 percent
satisfaction all the time. One unsatisfied customer is one too many and
we do everything we can to prevent it. But when issues inevitably
arise, we work hard to engage all the stakeholders, including our
military partners, to address the issues and try to mitigate them in
the future. Working with the on-base Government Housing Office, we try
to do whatever it takes to earn the resident's trust and satisfaction.
LMH believes that no matter how well we serve military families
today, we can always do better tomorrow. No property management
company--especially one that serves our Nation's military--should ever
feel so satisfied in its performance that it ceases to strive to
provide better service. Each year LMH reviews the results of the annual
Resident Satisfaction Survey, together with over 20,000 individual
surveys completed on work orders and has actively sought to partner
with DOD to continue to improve how the PPVs can further increase
customer satisfaction and the quality of the housing stock we manage.
In addition, LMH has hired an independent third-party expert to review
our entire moisture and mold management program, including our
prevention and remediation procedures. We are eager to see whether
there are new methods or best practices that we can employ to make our
program more effective and efficient.
LMH is exploring new ways to communicate with residents about mold
prevention and remediation and any other issues that are of concern to
our residents. Even when there is a mold or water issue in someone's
home, we never want a family to feel that they have to go somewhere
else to have their concerns heard. LMH commits to doing more to foster
better lines of communication with residents. Most important, we
welcome residents' input into how we can improve our responsiveness to
their concerns in a productive way. We understand the urgency with we
need to act to regain the trust of the servicemember families we serve,
and we look forward to partnering with your subcommittees to ensure
more positive outcomes for our men and women in uniform.
Senator Inhofe. Thank you, Mr. Bliss.
We will now have rounds of questions not to exceed 4
minutes.
The witnesses in the first panel singled out three
organizations. They happened to be your organization, Mr.
Williams; yours, Mr. Picerne; and yours, Mr. Ehle. I would like
to have you make any comments or responses to those statements
that were made concerning your organizations, if you would take
those 4 minutes to do it, the three of you, starting with you,
Mr. Williams.
Mr. Williams. Thank you, Chairman.
I heard loud and clear the Drivers, Mrs. Driver in her
comments, and I take them extremely serious.
At Tinker Air Force Base, we experienced a product failure
with a plumbing system in 398 homes that were built several
years ago. It was a manufacturer's product defect, and at one
point, we had over 500 water leak calls in to our offices. I
will never make an excuse. We need to do better. We were
managing in a crisis situation. We worked with the local
command, as well as AFCEC [Air Force Civil Engineer Center], to
develop a plan to go in and replace all of the plumbing
systems. I realize it was a major inconvenience, as well as a
true hardship to the residents that had to experience that,
especially the Drivers and the other families that were named
in the article.
Senator Inhofe. We are running out of time here. So I will
leave it with that. Mr. Picerne?
Mr. Picerne. Thank you very much for the question.
Again, to all three of the families that presented earlier,
we are at what I would call a critical inflection point in
where our program is, and we know we need to get to the bottom
of the challenges that we are facing. We have some new homes.
We have some older homes that need major renovations. We have
had some challenges in dealing with that.
But specifically to the family that moved to Fort Meade
expecting to have their child brought into a single-family or
single-story home, it is unacceptable. My company will stand up
and will help and support that family and every family going
forward in trying to make these things better. There was a time
and place when that would never have happened, and again, we
have made some shifts and changes with our governance partners,
the United States Army, and those changes were not good. We owe
a debt of gratitude to their families and we need to help them.
Senator Inhofe. Thank you.
Mr. Ehle?
Mr. Ehle. Senator, we heard the families loud and clear. It
is a heartbreaking story, and no one should ever have to go
through that. Like I said, no percentage of unhealthy homes is
acceptable to Hunt.
We have got processes and procedures and protocols that we
follow to work closely with our residents. Our goal every
moment and every day to work in partnership with our residents
to resolve their issues to completion and satisfaction--we do
sometimes fall short. Whenever we do, we look back at those
situations, try to learn from them. We are an accountable
organization. If we find weaknesses in our organization, we
tend to those. We will continue to do so, but we have got room
to improve. We do not shy away from that. We own that. We want
to work with the stakeholders here to achieve a better MHPI
program for all.
Senator Inhofe. Thank you.
Senator Reed?
Senator Reed. Well, thank you very much, Mr. Chairman.
I have three questions which I will direct individually
beginning with Mr. Williams, and I believe they require yes or
no answers.
First, do you affirm today that you will do everything in
your power to immediately address the issues raised today by
our military families, not just those who testified but also by
each of those who submitted testimony and information to the
Committee, Mr. Williams?
Mr. Williams. Absolutely, 100 percent.
Senator Reed. Mr. Picerne?
Mr. Picerne. Yes.
Senator Reed. Mr. Ehle?
Mr. Ehle. Yes, sir.
Senator Reed. Mr. Hickey?
Mr. Hickey. Yes, sir.
Senator Reed. Mr. Bliss?
Mr. Bliss. Yes, Senator.
Senator Reed. Second question is following up the
chairman's remarks. Communication with Congress in any form is
a protected communication under whistleblower statutes. Do you
affirm today that you will do everything in your power to
protect the military families who appeared here today, as well
as those who have submitted testimony and information to the
Committee, Inspectors General, or their chain of command from
reprisal, including threats or reprisal from your employees?
Mr. Williams?
Mr. Williams. Yes, Senator.
Senator Reed. Mr. Picerne?
Mr. Picerne. Absolutely, Senator.
Mr. Ehle. Yes, Senator.
Mr. Hickey. Absolutely, Senator.
Mr. Bliss. Yes, Senator.
Senator Reed. Finally, as you know, the GAO is conducting
an ongoing review of the MHPI program. Do each of you guarantee
complete cooperation with the GAO in their effort to obtain
information and issue findings? Mr. Williams?
Mr. Williams. Senator, we have and will continue to.
Mr. Picerne. Absolutely, Senator, we will.
Mr. Ehle. Senator, we are happy to work with GAO.
Mr. Hickey. Absolutely, Senator.
Mr. Bliss. Yes, Senator, we will continue working with the
GAO as we have in the past.
Senator Reed. Thank you.
I think the testimony today, including the first panel and
your comments, suggests the system is broken. These problems
were obvious to the military families, but they were not
obvious enough to you to take effective corrective action. So
we have to think collectively, working with the Department of
Defense and the service departments, to come up with
appropriate incentives and disincentives so, once again, you do
not take your eye off the target. The target is very clear. As
we have all stated--and we have to not just talk about it, but
do it with deeds--we owe an obligation to these families
because of their service so that they live in the best possible
housing, not the type of housing that was described today. I
know working with the Chairman, we will do all we can and do
whatever we must to ensure that every military family in
military housing does not have to worry about the health of
their child, the safety, or their warmth in the winter or their
comfort in the summer.
Thank you.
Senator Inhofe. Thank you, Senator Reed.
Senator Tillis?
Senator Tillis. Thank you all for being here.
I have got a couple of questions. Number one, sometimes
when you see bad behavior--you guys I know are in the C-Suite,
the executive levels of your very large organizations that
constitute about 80 percent of all the housing that is
provided. I guess probably another couple of dozen other firms.
But one time in my past experience, when I have seen bad
behavior on the part of people further down the chain of
command, it had to do with incentives and how they were
compensated. Is any of your review of how this broke down going
to go back to how the people in the chain of command that
actually touched these homeowners actually behaved because
maybe they had some of their own personal livelihood at stake?
Is that possibly a factor? Is that something you are going to
look at? Just go down the line.
Mr. Williams. Yes, Senator, we are looking at that right
now. First, we do not compensate on how we earn our incentives
to our employees. But, yes, we are looking at better ways to
make sure that that----
Senator Tillis. Yes. Because I am just trying to figure out
why on earth anybody who is working in this organization would
have heard these stories and not move heaven and earth to try
and get the right resource on site.
Mr. Williams. I agree, Senator.
Senator Tillis. Mr. Picerne?
Mr. Picerne. Yes, Senator, I totally agree, and we are
going to dig into it. We want to work closely with you and with
the service branches to dig in deep and get to the bottom of
this.
Senator Tillis. Thank you.
Mr. Ehle?
Mr. Ehle. Senator, we do have an incentive structure in our
organization from top to bottom that already ties into things
like resident satisfaction and maintenance service. We are
already there, but we are willing to take a continued look.
Senator Tillis. Yes, because I am looking at unit managers
or other managers that may be compensated by bottom line
impacts and how that could force a bad behavior. I am not only
talking about the customer-facing role. I am talking about the
people who are trying to balance the books and dealing with
various issues.
I am going to assume you are going to give me a similar
answer. So I want you to look at it.
Mr. Hickey, you said something that I am curious--you
seemed to refer to funds being locked which would be used to
reinvest and hopefully up-fit or address some of these
problems. Can you explain that to me briefly?
Mr. Hickey. Thanks, Senator.
In short, each project company is set up that the revenue
that comes in from the BAH pays all the operating----
Senator Tillis. And there are some 82 of these agreements
over various stages, and I think you all constitute about 80
percent of them.
Mr. Hickey. Something like that.
The revenue comes in from the BAH collection. It pays all
of the operating costs for running the base and fixing any
capital improvements, et cetera. It then pays the debt service
that is actually being used to do the first IMP [impression]
round, and then the surplus account sits at the bottom, stays--
--
Senator Tillis. And it is the surplus that you could not
get back into----
Mr. Hickey. The surplus NOI [net operating income] stays at
the base level. And therefore, if the base gets into a
situation, it really only has the capacity to access its own
surplus NOI. There are some agreements where they can share,
but it is not uniform across the services.
Senator Tillis. Okay.
Have things changed? When you first started this process--
many of you have a couple of decades under your belt. Others
are newer to the process. Have the rules or the agreements
changed between you and the DOD? I mean, what else could have
possibly changed that is creating stress on what would seem to
me to be no-brainer business behaviors that for some reason
fell down on some of these installations.
Mr. Picerne. Senator, I would describe it as this is the
largest and longest standing PPP, or public-private
partnership, in America to this point. The challenge that we
faced 20 years ago was daunting and systemic, truly systemic.
The solution that we came up with with the Department of
Defense and with you folks was something that would be able to
solve--not just fix for building new houses, but solve--for the
50-year period.
The challenge has been over the last several years, we have
been moving in a direction of making sure that budgets are run
at a very tight level, not as much focused on customer service
and more about the NOI, net operating income, or the revenue
account so that we have the dollars for the future. I think we
just tipped the balance too far, I know we tipped the balance
too far, so we need to move it back to the middle, and we are
all pretty much----
Senator Tillis. Right.
We will look deeply into these contracts in my role of the
Personnel Subcommittee. But I am just trying to figure out some
of the basic safety valves that did not appear to be in place
in terms of service-level agreements, general satisfaction,
escalation paths. The sorts of things that I did in a very
different context in business seem to be missing here. I am
looking forward to really drilling down on this.
I am also serious when I tell you we are going to reach
out.
Let me just say one other thing in advance of the next
panel. First off, do not be surprised if you get a call from my
office if I get a lot of constituent requests, and I think I
speak for most of my members. Expect to be on auto-dial.
But I will tell you there is a problem in DOD that we have
got to address as well because at Camp Lejeune you could
actually have a family having a mold problem in their home.
Then you can turn right back around and that marine goes on
base and they are working in offices that have mold, that have
plastic on top of the roofs, and we have got our own facilities
to deal with. I mean, we have got marines coming in on weekends
fixing the roofs and trying to fix their offices. We have got
serious problems here, and that is why I do not want anybody to
leave this meeting thinking it is any one entity that is at
fault.
Every single one of you have work that you have got to do,
and we have got to do a top to bottom review to get it done. I
hope I have your commitment and the commitment of the other few
dozen firms that are not here before the Committee but do the
same thing for the whole DOD.
Thank you.
Senator Inhofe. Thank you. Senator Tillis, presiding, and
Senator Gillibrand.
Senator Gillibrand. Let me begin by reiterating how
frustrated I am by the experience of the families we have heard
from today who live in houses under the management of your
companies.
In choosing to participate in the Military Housing
Privatization Initiative, your companies did not just land
another real estate deal. You assumed responsibility for the
safety, health, and wellbeing of military families who make
incredible sacrifices each and every day in support of our
national defense.
In response to the recent reporting on problems in your
housing units, many of you have pointed to satisfaction numbers
showing resident approvals as high as 70 or low 80 percentage
ranges. However, those satisfaction surveys are clearly at odds
with the heartbreaking testimony that we have heard today and
even then would still put somewhere between 20 and 30 percent
families in average or below average conditions.
In written testimony submitted for this hearing, the
Military Family Advisory Network states that they have
conducted a survey with nearly 17,000 respondents and found,
``more than half, 55.53 percent, of respondents had a negative
or very negative experience with privatized military housing.''
I would like each of you to answer the following questions.
What percentage of military families do you believe deserve to
live in excellent on-base housing?
Mr. Williams. Senator, 100 percent.
Mr. Picerne. We agree, Senator. One hundred percent.
Mr. Ehle. One hundred percent, Senator.
Mr. Hickey. Everybody, 100 percent, Senator.
Mr. Bliss. One hundred percent, Senator.
Senator Gillibrand. How many military children deserve to
be exposed to mold, lead, or other health hazards as a
consequence of living in privatized housing units?
Mr. Williams. Senator, none of them.
Mr. Picerne. I agree, Senator. Zero.
Mr. Ehle. Zero, Senator.
Mr. Hickey. I agree, Senator. Zero.
Mr. Bliss. I also agree, Senator. Zero.
Senator Gillibrand. Do you think it is easier or harder for
a servicemember to focus on their military duties while also
worrying about the health and safety of their families?
Mr. Williams. Harder, Senator.
Mr. Picerne. It is always harder, Senator.
Mr. Ehle. It is much harder, Senator.
Mr. Hickey. No doubt, much harder, Senator.
Mr. Bliss. It is harder, Senator.
Senator Gillibrand. In so many of the stories that we have
heard today from these families, the maintenance procedures
that you have put in place have failed to ensure quality in
housing units. In your written testimony, many of you pointed
to quick response statistics for work orders in military homes.
But if those issues are not addressed properly, if mold is
painted over or water damage misdiagnosed, families remain in
danger.
Further, many of the families have experienced cold and
insensitive treatment from the local representatives of your
companies, subsidiaries, and partners responsible for
addressing the problem.
Do you expect your staff working on installations as
technicians to be capable of both remediating work orders and
showing genuine concern for the families impacted?
Mr. Williams. Absolutely, Senator.
Mr. Picerne. We would expect nothing less, Senator.
Mr. Ehle. We absolutely agree, Senator.
Mr. Hickey. Absolutely agree, Senator.
Mr. Bliss. Yes. They should be able to do both, Senator.
Senator Gillibrand. How many contractors or service
technicians have each of your companies fired for
unsatisfactory performance in completing work orders in
military housing?
Mr. Williams. I do not have that exact number, but it is
multiple.
Mr. Picerne. I also do not have the exact number, but it is
significant.
Mr. Ehle. Senator, we are a company of accountability, and
if someone is falling short of expectations, we take action.
Mr. Hickey. Senator, I do not have the exact number on
hand, but similar to the other organizations, we take it very
seriously and we will move people on if they are not doing
their work.
Mr. Bliss. Senator, I do not have the exact number either,
but we have made that decision to separate from personnel when
they do not do the right thing and follow our policies and
procedures.
Senator Gillibrand. Thank you for your testimony. From your
answers, I can conclude that you agree this is something we
must fix. It is an urgent issue. It does not represent our
values to the country, and it does not sound like it represents
your values as companies. So I expect your 100 percent
commitment to solving this problem. Thank you.
Senator Tillis [presiding]. Senator Sullivan?
Senator Sullivan. Thank you, Mr. Chairman.
I just want to get from the panel a couple things. I am
assuming, as you all indicated in your testimony, you believe
this is not just an opportunity to make money, and there is
nothing wrong with making money in this capitalist society of
ours, but it is also an opportunity to serve the men and women
in the military--correct--and their families. Is that correct?
Mr. Williams. Yes, sir.
Mr. Picerne. Yes, Senator.
Mr. Ehle. Correct.
Mr. Hickey. Correct.
Mr. Bliss. Yes, sir.
Senator Sullivan. There is one kind of overriding in some
of the DOD responses, in their testimony--it is a bit of a
subtlety. Actually when I was reading it, it really kind of
ticked me off. But this notion that, well, the servicemembers
have a choice where they are living. They can always go off
base. I think one of our witnesses essentially says that in his
written testimony, which I find ridiculous. I just want to make
sure that each of you are not saying in your testimony or your
belief is that, well, they have another option. If they do not
want to live in a rat-infested home, they can just go off base.
That is not the attitude here. Is it?
Mr. Williams. No, Senator.
Mr. Picerne. Absolutely not, Senator.
Mr. Ehle. No, Senator.
Mr. Hickey. No, absolutely not, Senator. I mean, the
livelihood of all of our businesses rely on great customer
service. We want people living in our bases. So customer
service is at the heart.
Mr. Bliss. That is not our attitude.
Senator Sullivan. Okay, good. Because again, one of the
things I mentioned in my opening statement is I think we can
all agree that our military members, whether they have a choice
to live off base or not, should have the highest quality of
military housing when they are on base. So I think let us just
all agree to that.
But let me ask--and this is more kind of a how this works.
You build the housing, and then your contracts--you are also in
charge of all the maintenance and the upkeep and keeping the
housing in a good living condition. Is that not your
responsibility as well?
Mr. Williams. Yes, Senator.
Senator Sullivan. So that is part of the contracts. You do
not have to all say yes, but that is part of the contracts.
Correct? It is not a base housing official at Camp Pendleton or
something. It is you. Right? You are responsible for that. So
when you read about the mice and the mold, it is your
responsibility to keep that up. Correct? To get rid of it.
Mr. Williams. That is correct.
Senator Sullivan. Let me ask this. I mean, we live in this
uber society. What would be wrong with having the military
members be able to grade you on how well you do? Do you think
that would be a good idea to maybe kind of somehow relate your
contract performance to--it would empower the members a bit,
right, to be able to say, hey, here is what I think is going on
with my home. I got a bunch of mice in it. Nobody is coming. I
think your service stinks. Do you think that would be a good
reform maybe that we could actually empower these courageous
families who testified earlier to let them know that we can see
that? Would that be a good idea, more direct kind of responses?
Mr. Picerne. Senator, we do survey. Our surveys----
Senator Sullivan. But I am not talking about the surveys.
Mr. Picerne. I think we need to find a better way to get
real touchpoints from the residents on a more real-time basis.
That is one of the things we need to----
Senator Sullivan. But maybe tie it to your compensation.
Mr. Picerne. Absolutely. Yes, correct.
Senator Sullivan. Would everybody agree that has potential?
Mr. Hickey. Yes, Senator. I think there is an opportunity
to kind of get the residents on the base having a collective
voice that can sit at the table with us and the services----
Senator Sullivan. They do not have to go through their
chain of command to be heard by----
Mr. Hickey. They can sit collectively and we can do that
as----
Senator Sullivan. Let me ask one final question. One thing
that came up in the testimony before was this idea that somehow
you or people who work for you might be taking advantage of a
young lance corporal and his wife who just came on base and do
not really know what is going on. I want each of you to
definitively say that that is not the policy, you do not have
people doing that, and if you do, you fire them.
But maybe here is another suggestion. Maybe you look and do
it the opposite way. Maybe have a program to help the young
lance corporal and his wife who are coming on base and maybe do
a proactive program to help these young guys. I mean, heck,
they are barely teenagers, some of them, and their spouses. So
can I get from each of you that you are definitively not doing
that, and if you found people in your company who were doing
that, you would fire them?
Mr. Williams. If we found somebody doing that, we would
fire him. We are committed to making sure that that is not
happening.
Mr. Picerne. Senator, I agree wholeheartedly. We would
never do that, and we would fire people if they did do that.
To answer your second question, we absolutely believe that
in a proactive plan, helping our young soldiers as they first
come on base is the right thing to do. We used to do it, and we
are committing to going back to it.
Senator Sullivan. Great.
Mr. Ehle. Senator, at Hunt, if anyone were to do that, it
would be against, first of all, our employee code of conduct,
and yes, they would have to be dealt with up to termination.
Mr. Hickey. Yes, likewise, Senator. It goes against every
value that our company stands for. So it is totally
unacceptable.
I think your suggestion of finding a way to help the
younger people more proactively is a good one.
Mr. Bliss. I agree, Senator. That is totally against our
character. If anybody at Lincoln is acting that way, they will
be terminated.
Senator Sullivan. Thank you.
Thank you, Mr. Chairman.
Senator Tillis. Senator Kaine?
Senator Kaine. Which of you served in the military? Did any
of you serve? I did not either. So there is no shame in that.
But how about this. Have any of you ever lived on a
military base as a military dependent like when your mom or dad
were in the military?
Mr. Williams. I have never had an experience living in
family housing.
Senator Kaine. Is that the same for all of you? I think
that is pretty important. I mean, I think that is an obvious
really important sensitivity issue. This is a really important
hearing. So each of these companies--you are sending a really
important person here who is a person with some authority and
responsibility to answer our questions. If at the top of these
institutions, we do not have people who understand the lives
that folks are leading in the military, I think that is maybe
the beginning of an issue.
In your government contracts, are you required to do
surveys of your military tenants?
Mr. Williams. It is part of our incentive program.
Mr. Picerne. Yes, we do, along with our government
partners, multiple surveys.
Mr. Ehle. Yes. Our compensation program is tied to resident
satisfaction surveys.
Senator Kaine. Do you do those on your own? Do you write
the survey yourself?
Mr. Ehle. There is a third party, independent company that
provides those surveys, and we have no access to it other than
we get the final report.
Mr. Hickey. Likewise, Senator. We do in-depth customer
surveys with a third party. We review the output of that with
our respective service partners.
Senator Kaine. Is that third party--it is not the military.
It is some third party.
Mr. Hickey. No, no, no. It is a third party organization.
We produce that and review that with our military partners.
Senator Kaine. Mr. Bliss?
Mr. Bliss. Yes. We also have an independent third party
survey company. Additionally, we have another independent
survey company that surveys after each work order service
request.
Senator Kaine. I think there should be kind of a SOP
[standard operating procedure], of a template that would be a
survey that military families and dependents who live on bases
would be given the opportunity annually to do a survey and that
would go to the requisite office with the military so that
groups like MFAN would not have to do their own survey to
figure out what is going on. I think a customer satisfaction
survey that would be an annual for everybody living in military
housing, that would be a template, apples-to-apples questions
would be really important. You could see who were the better
landlords and who were the worst ones. You could see are their
particular bases that are unusually bad, and that might suggest
there are some infrastructure needs on the base that we could
address that are not purely yours. I think an apples-to-apples
template, regular survey with the information going directly to
the military so we would not have to rely on outside groups to
tell us what is going on with families would be a good idea.
Let me ask you this. You would agree with me, would you
not, that somebody living on a military base should not have
worse housing or have housing that is substandard compared to
housing in the community where they live with respect to
building codes, environmental standards, et cetera. Right? The
military families' should not be worse than the surrounding
communities'. Is that a fair statement?
Mr. Williams. I think it should be better.
Senator Kaine. Should military housing not have to comply
with building and environmental codes? Say, Fort Belvoir is in
Fairfax County. Why should military housing on that base not
have to comply with local building and environmental codes,
including inspections by Fairfax County building and
environmental inspectors? If these folks want to call and
complain, should there not be--I am thinking like a mayor. I
used to be a mayor. We had a code compliance section. I think
they ought to be able to go into housing in Fairfax County
whether it is on a military base or not and determine whether
something complies with codes or is in violation of codes.
Would that cause any challenges for you all?
Mr. Picerne. I think there is a wide variety of challenges,
and I think that is an issue that we need to look at. We do it
here to all of the national standards, and we do have, again,
the best we could find, third party inspectors who do all of
that inspection work. However, the challenge I think that may
be presented is at a place like Fort Bragg where Fayetteville
is not a large place, if we were to do a large--we are about to
do a couple hundred million dollars worth of work, we may
overwhelm the Fayetteville office for inspection and code
compliance.
I think there is something there. As we start to dig into
the bottom and get to kind of where the real challenges are, I
think there is a way to do that in a very meaningful and
significant way that adheres to or gets to the heart of what
you are trying to get to, which is----
Senator Kaine. I am over my time, but I am just thinking if
these folks cannot get an answer out of a private housing
provider, if they feel like their family readiness specialist
is being intimidated against, if they cannot get the chain of
command to help them, where can they go? Most people in a city
would call a local building officer and they would come out and
somebody would do an inspection that would validate or verify
whether in fact the property was sub-code. It would seem to
me--since you have agreed with me that somebody should not be
subjected to housing worse than the sets of rules in the
community where the housing is, it would seem to me to be an
obvious potential solution.
Thanks, Mr. Chair.
Senator Tillis. Senator Rounds?
Senator Rounds. Thank you, Mr. Chairman.
Gentlemen, first of all, I am just curious. It seems to me
that should never have gotten to the point where it required a
congressional hearing to get to the bottom of it. I think you
all have been notified in advance of the need to come and speak
to us. How much time did you have to prepare for this meeting
today? If you could just go down the line, how much time did
each of you have?
Mr. Williams. Less than a week.
Mr. Picerne. Several days, Senator.
Mr. Ehle. Just about that.
Mr. Hickey. The same.
Mr. Bliss. About the same time, Senator.
Senator Rounds. A few days anyway.
Was there a sense of panic when you were asked to come and
testify?
Mr. Williams. Senator, no. I welcome the challenge. We need
to do better as a provider, and we want to work with the
Committee.
Senator Rounds. Mr. Williams, here is the reason why I ask.
It would appear to me that either you knew that you had a
problem to begin with and it had not been resolved or this came
as a complete surprise to you. It would appear to me--that is
part of the question here is were you had a problem and you
just could not figure out a way to fix it. Or did this come as
a surprise to any of you?
Mr. Picerne. Senator, it came up as partly a surprise about
8 months ago, 9 months ago, and as we peeled it back and peeled
it back and peeled it back, it became a bigger and bigger
challenge. I am not panicked to be here today, although I will
not say this is the happiest experience of my life. This is not
where I ever wanted to be getting into this business. I felt
like we were here committed to taking care of the
servicemembers who defended our Nation. Again, the idea that we
have let them down is deeply disturbing to me, and I am here to
try to make sure----
Senator Rounds. Okay. Look, let me just ask this of all of
you then. After you found out a couple of days ago that you
were going to be in front of us, if there was one critical
issue that you said I know we got to fix it, I know they are
going to hit us on it. What is the issue that has got to be
fixed that is in front of us today? Just very quickly, what was
top of mind on got to be fixed now?
Mr. Williams. The interface with the resident.
Mr. Picerne. I would agree. Interface with the command and
the resident.
Mr. Ehle. Yes. Communications with our residents and our
partners.
Mr. Hickey. Yes. The sharing of communications so that
everybody is informed and everyone is operating on the same
information set.
Mr. Bliss. I think for me it was allowing a voice for the
residents, a place to go. I think Senator Kaine hit on it. They
do not feel like they have a place to go. We need to figure out
a process that allows them where they feel they are aptly
represented when issues come up.
Senator Rounds. The damage that has been done out there--
how much of it has been because of construction that was of
poor quality to begin with and you are managing products that
have a poor quality in the construction itself from day one?
Mr. Williams?
Mr. Williams. I think it is twofold. We have had an issue
with some product that we bought to build some of the houses
that have failed. It is a manufacturer's defect. But we also
have an inventory. Our inventory ranges from the early 1800s to
2016. When we took on a lot of that legacy, those historical
homes were quite the challenge. As we look at those historical
homes, they become harder and harder and harder to pay for that
type of work while continuing to balance to provide the
services for the other residents.
Senator Rounds. Thank you. That should be noted.
Mr. Picerne?
Mr. Picerne. I think the same holds true for our portfolio
as well. Once we realized that you could not replace and build
brand new all of the homes, then trying to find a way to
balance maintenance and care on the existing program, as well
as saving up the dollars to rebuild--we do not have a systemic
construction problem. We have a systemic maintenance problem.
Senator Rounds. Mr. Ehle? I am running out of time, but if
you could quickly.
Mr. Ehle. Senator, except for Keesler where I cannot speak
to the MILCON [military construction] of those houses, we did
find that we had to do some repair to the HVAC ductwork in
those for the condensation. But elsewhere, if we are having
problems, it is generally not in the newer homes. It is in the
legacy homes that have yet to be replaced.
Senator Rounds. Thank you.
Mr. Hickey?
Mr. Hickey. Yes, Senator, likewise. We have demolished
15,000 homes and we have built new 16,000 homes. We still have
25,000 that are legacy homes. They are the majority of the
issues, almost all of the issues are contained within those set
of homes.
Senator Rounds. Mr. Bliss?
Mr. Bliss. Similar, Senator. It is legacy homes, the age.
Our homes also range from the 1800s to the 2010s.
Senator Rounds. Thank you.
Thank you, Mr. Chairman.
Senator Tillis. Thank you, Senator Rounds.
For the record, the Committee reached out to the government
relations counterparts and each of your organizations on
January 28. The official notice of this hearing was on January
31.
Senator Warren?
Senator Warren. Thank you, Mr. Chairman.
Since we do not have much time, I will just go straight to
it. I sent letters to each of you last week to learn more about
how you make your money and what recourse tenants and taxpayers
have if you failed to uphold your side of the bargain. Your
agreements were not transparent. They are not publicly
available. But basically you make your money in two ways:
management fees and distributions based on performance.
You all stressed in your written testimony that your
management fee is partially based on resident satisfaction and
quality of service. I want to unpack this.
Mr. Williams, I will use you for the example. Say there is
mice and mold in all of your units and the tenants are unhappy.
Do you still get paid a base fee?
Mr. Williams. Yes, Senator.
Senator Warren. You are going to get paid that, and then
how much more you get paid is going to be your performance fee.
Right? The idea is the performance fee will be withheld if the
place is filthy, if it is overrun with rats, and so on.
Mr. Williams, Balfour Beatty manages 43,000 homes across 55
military installations. Across that portfolio, how many times
has this performance-based fee been completely withheld in the
last 5 years?
Mr. Williams. Senator, I do not have that specific data,
but I can tell you that we have had our incentive fees or a
portion of our incentive fees withheld.
Senator Warren. I know, but what I want to know is how
often. This is why I sent the letters to ask about this. Have
you ever had them withhold and just say you do not get your
performance fee because the place is full of rats?
Mr. Williams. We have had our incentive fees withheld.
Senator Warren. Completely withheld?
Mr. Williams. I do not have that----
Senator Warren. You are not sure if they have ever been
completely withheld.
Mr. Williams. At this point, no, but when we answer your
letter, I will give you that.
Senator Warren. Mr. Picerne?
Mr. Picerne. Senator, our incentive fees have never been
100 percent withheld.
Senator Warren. Okay, so never.
Mr. Ehle?
Mr. Ehle. Senator, there are multiple components to our
incentive fees.
Senator Warren. I am asking if they have ever been
completely withheld.
Mr. Ehle. Not 100 percent.
Senator Warren. Never. So you guys have still been getting
incentive fees and all these stories going on.
Mr. Hickey, have yours ever been completely withheld?
Mr. Hickey. Senator, they are calculated on a base-by-base
basis, and we have been withheld on some of the bases, but
never across----
Senator Warren. Never. So that is just no. You have never
had them completely withheld.
Mr. Bliss?
Mr. Bliss. Yes, Senator. They have been reduced, but they
have never been completely----
Senator Warren. That is not a yes. That is a no. Okay, you
have never actually had any of them completely withheld.
The way these deals are structured, you are also guaranteed
a return on your investment in the project every year. If
operating expenses are high 1 year because a house needs a new
roof or the place is full of mold, DOD authorizes you to raid
the reserve fund for the project instead of cutting into your
profits. Is that correct, Mr. Williams?
Mr. Williams. Senator, I do not believe that is how it
works. We do not raid the operating expenses to pay for other
things. After all the bills are paid, it goes into----
Senator Warren. No. I said the reserve fund. That is the
whole point. If 1 year you have to put up a bunch of roofs, you
have a reserve fund and you use that, which is how it is that
year after year after year after year, you manage to make a
profit in this.
I look at your annual reports and what I see is that all in
about 3 percent of the taxpayer-funded rent that you collect
from servicemembers goes straight into your pocket even if the
homes are disgusting and that usually that number is closer to
5 percent.
I just want to understand--I will try to do this as quickly
as I can--what that adds up to in dollars, and I sent you a
letter to ask you this. I am sure everyone has the number
ready, and that is, what is your company's annual profits,
including the base fee and the performance fees and any other
fees you collect for your agreements with DOD on privatized
housing? Mr. Williams?
Mr. Williams. Our net profits for our military housing
business are around $33 million.
Senator Warren. A year.
Mr. Williams. A year pretax.
Senator Warren. Mr. Picerne?
Mr. Picerne. Our net profits are closer to $12 million to
$14 million.
Senator Warren. Twelve million dollars to fourteen million
dollars.
Mr. Ehle?
Mr. Ehle. Senator, as a privately held company, Hunt does
not disclose those, but I can take that back to my team and we
can get you something afterwards.
Senator Warren. Mr. Hickey?
Mr. Hickey. Senator, the same. We will give you that
information in response to your letter.
Senator Warren. All right.
Mr. Bliss?
Mr. Bliss. Yes, Senator. As a privately held company----
Senator Warren. All right. So thank you.
I apologize for running over, Mr. Chairman, but I think
this is important. This is not right.
Senator Tillis. Senator Rounds, briefly before we go to
Senator McSally.
Senator Rounds. Mr. Chairman, I just make the point. Think
about this if we actually issued notices out between the 28th
of January and the 1st of February and you only had a couple of
days, that means someplace within your organization somebody
had that information. If it takes that long for that
information to get to you from a congressional request, think
about what that says about how tough it is for a young enlisted
man or their family to get to you with a problem. I think that
is part of the problem.
[Applause.]
Senator Rounds. Thank you, Mr. Chairman.
Senator Tillis. Senator McSally?
Senator McSally. Thank you, Mr. Chairman.
The stories we heard today and those that represent many
other families that were not heard today and their similar
horror stories of living on base in privatized housing by
several of your companies are disgusting, as I have said
earlier.
From my view, having been in the military, they do not just
represent a one-off situation or a rare situation that just was
not handled well by one employee, by one situation, whatever,
one family, one house, one contractor, but systemic issues. I
think back to when I was a commander. You have a culture in
your team of how you are going to deliver and partner with our
military. You are all talking about being partners. But you are
in charge of the culture of that team, how they respond to our
military families, how they respond to customer service, how
they make sure the contractors that go out there are
identifying whether something is a health hazard, how they
notify the individuals, how they get them out of the house fast
to make sure their kids are not sick. Like that is all like a
whole chain of events that needs to happen in how you are
executing these contracts and partnering with the DOD to serve
our military men and women and their families. This is multiple
layers of failure for these incidents that we heard today,
multiple layers that to me comes down to like cultural issues,
and there have been many failures here.
I hope all of you can look these servicemembers and their
families in the eye and tell them that you are sorry, but then
do the right thing, starting now. I hope you feel embarrassed.
Starting now, do the right thing, the next right thing in order
to take care of this.
Mr. Williams, when did you find out about the Drivers'
situation?
Mr. Williams. Right after the Drivers moved out, I found
out about the Drivers' situation, and then once the Reuters
article came out, I really dug into what was going on there.
Senator McSally. Now I understand. I do not expect you to
know about every single situation of every single house. I get
that. But the fact that the story was told like we heard today
somehow did not rise up to the level of like we got a problem,
and this is a situation of a family, but man, what else is
going on in this organization?
Since this has been brought to your attention, what else
have you done immediately in order to address the culture to
hold people accountable? Who has been fired? Who has been held
accountable? What else are you changing in your team in order
to fix this?
Mr. Williams. Senator, we have gone back and looked at
everything where it broke down, and as I stated earlier today,
one of the challenges that we had was the failure of the
plumbing system. As we do that audit, when I find out where the
breakdown happened, there will be ramifications to everybody
who failed to inform us about this situation.
Senator McSally. Mr. Williams, I get that there was a
failure of the plumbing system, but do you hear the story? They
find mold. It is time to alert them there is mold. This is
dangerous to your family. Let us get the family out. Let us get
them into a safe circumstance. That is more than just a faulty
pipe. It is what happens next.
So, can I ask, are you committed now that if any of you
hear of anything that comes in any of your units or anyone on
your team that is a hazard or is dangerous to any of these
families, that they are going to immediately be notified and
they are going to be put into safe housing, sustained, safe
housing, until it is resolved? Can I get that commitment?
Mr. Williams. One hundred percent.
Mr. Picerne. Absolutely, Senator.
Mr. Ehle. Life safety issues are our number one priority.
Mr. Hickey. Absolutely.
Mr. Bliss. Absolutely, Senator.
Senator McSally. All right. Thank you.
I yield back.
Senator Tillis. Senator Hirono?
Senator Hirono. Thank you, Mr. Chairman.
I think that a lot of the questions that I asked have
probably already been asked. I apologize that I had to go to
another hearing.
I would like to ask from you folks, because basically you
are on the hot seat and you manage, among you, hundreds of
thousands of units of military housing. Correct?
Do you all acknowledge that you can do more to make sure
that the military housing you provide is safe, clean, and
habitable?
Mr. Williams. Yes, Senator.
Mr. Picerne. Yes, Senator.
Senator Hirono. Let us go down the line.
Mr. Ehle. Yes.
Mr. Hickey. Yes.
Mr. Bliss. Yes.
Senator Hirono. That you want to be part of the solution.
So that is good.
You have to have a reserve fund, right, to take care of
things like fixing roofs and getting rid of persistent mold and
all of that. Who determines how much is in that fund?
Mr. Williams. That fund is determined by the cash flow that
flows through the project and down into the waterfall that then
is deposited into a government-controlled fund. Then we and the
services determine what the long-term plan is to spending that.
Senator Hirono. Is it basically that you all decide how
much should be in the reserve fund?
Mr. Hickey. No, Senator. The reserve fund is the result of
the net cash flow that comes out over a period. The revenue
comes in, operating expense, then the debt service. Everything
goes into the reserve fund and that accumulates. And then we
put recommendations to the Military Service, and together we
will work out where those funds get spent.
Senator Hirono. How much of those reserve funds go for
things like repair and maintenance?
Mr. Ehle. One hundred percent.
Senator Hirono. Debt service is for repair and maintenance?
Mr. Hickey. Debt service comes out before the reserve fund,
Senator.
Senator Hirono. Okay.
Mr. Hickey. Debt service comes out, balance into the
reserve fund. The reserve fund is used for repairs and
maintenance and new construction and----
Senator Hirono. What percentage of your reserve fund, once
you do the debt service and all the other things that you have
to do--how much is left for the reserve fund for the repair and
maintenance of your units?
Mr. Picerne. On most of our projects, it is somewhere
between 16 and 18 percent.
Senator Hirono. Do you think that is adequate?
Mr. Picerne. I do not actually think it is adequate, and I
think that is what has driven us partly to the place that we
are in today. So as we try to create smaller expense accounts
to try to be more efficient in how we serve the families and
maintain the families, which is directly related to how much
money would go into the reserve accounts----
Senator Hirono. I think I am running out of time.
Mr. Picerne. So let me just quickly.
Senator Hirono. Yes.
Mr. Picerne. On a daily basis, the families that we are
dealing with who have issues in their homes--that would come
out our operating expenses. The reserve accounts are to deal
with the rebuilding, modernization, or revitalization of the
homes.
Senator Hirono. But including things like eliminating
persistent rodent infestation, all of those things, that comes
out of the reserve fund. There is no law that requires all of
you to have a certain percentage in the reserve fund. Is that
correct?
Mr. Picerne. Correct.
Senator Hirono. What do you think if we impose such a
requirement? You would not like it.
Mr. Ehle. Senator, there is a minimum amount of deposit
that needs to go into the reserve accounts before anything else
can happen. So it is in our documents. It was agreed upon with
our military partners at the outset.
Senator Hirono. We may need to revisit the adequacy of the
reserve fund in light of all of this testimony.
I do thank all of the people who have shone the light on
this.
I was looking at--you know, part of the concern is, of
course, the disclosure that goes to the homeowners. I am
looking at one. This is two pages, single-spaced, and it talks
about pesticide impacted soil, and the residents have to sign
this form. There is such a thing as forms that are easy to
read, and I do not think this is an easy-to-read form. So I
would ask that if all of you have--I assume you all have to
have these disclosure forms that cover the various kinds of
dangers and hazards that may be in the home. I would ask you to
review these forms because if I were wanting to get into
housing, I would probably just sign this form and not
necessarily read it as carefully as one should. Simplifying
your form is something that I think would make a big difference
in terms of meeting any notice requirements.
I see I am out of time, so I do have a few other questions
that I can submit for the record. Thank you.
Senator Tillis. Thank you.
Senator Jones?
Senator Jones. Thank you, Mr. Chairman.
First of all, Mr. Ehle, you have got a couple of properties
in Alabama at Redstone and Montgomery. Following up what
Senator Rounds said, I am assuming for a moment that you cannot
express surprise about any of this coming out today since 2
years ago, Lieutenant Governor of Alabama, now Governor of
Alabama, Kay Ivey, sent a letter to the Secretary of the Air
Force complaining about the complaints in the standard housing
at Maxwell.
This past year, 2 years later, the same newspaper ran an
article that was titled ``Substandard Maxwell Gunner Base
Housing has Military Families up in Arms.'' Now, I recognize
from that article that there have been some improvements there,
but obviously, there is still a long way to go. I am not going
to ask you to take the time today to go into those.
What I would like for you to do is to commit to, within a
couple weeks, getting me a full report on what you have done
and where you are planning to go because 2 years is a long
time. Some of those houses are older. I get that. But those
families are suffering. So will you commit to do that for me?
Mr. Ehle. Yes, Senator.
Senator Jones. All right. Thank you.
I want to follow up just--you may want to explain this, you
may not--for each of you, Ms. Cornwall--and I think it was
backed up by our other two witnesses--said one of the things
that could be done quickly to try to help alleviate this
problem--and you have all identified and talked about
communication, and I agree with that. But one of the things
that she said that was backed up by everybody is withholding
the housing allowance until things are corrected. Now, I
recognize--I am a lawyer and so I understand that you cannot
just do that on a complaint. But would you oppose the
withholding of that allowance if a system is in place that
would give you, one, adequate time to correct the problem, but
also correct a problem that has been documented? Would you
oppose that for each of these families that are having so much
problems? If so, I would like to know why.
Mr. Williams. No, Senator.
Mr. Picerne. No, Senator. I think there is a reasonable
mechanism that will withhold dollars until things are fixed. I
think that makes sense.
Mr. Ehle. No, Senator.
Mr. Hickey. No, Senator, we would not. But I think it is
also a part of trying to actually install an arbitration or a
type of a regime that gives people a voice that can actually
sit and adjudicate over these issues that most of the families
have raised that they have not been able to do today.
Senator Jones. Good. We will come right back to that.
Mr. Bliss. No, Senator.
Senator Jones. All right. That is great.
Again, I am going to make another request. I would like
each of the five of you to give us something of what you think
that that would look like so that this Committee can consider
it and talk to your military partners about implementing that.
Going back, Mr. Hickey, to what you just said, what would
you see would be a good mechanism? I agree with you completely
because if there is no ability to redress and you complain and
complain and complain, there is just not much going to happen
when money is involved. So let us find a way. What would you
suggest would be a good way for these families to be able to
seek some redress, whether it is arbitration, mediation, or
whatever?
Mr. Hickey. Thanks, Senator.
I think on a base-by-base, you need to establish a forum
for the local people to be able to come and express their
concerns and to work with us, plus the service partner, plus
the community and the residents. I think what that structure
looks like--we can work on that. I think we can use best case
examples from other industries in other areas. But I think if
we can create that environment, I think that goes a long way to
actually giving people a----
Senator Jones. I do not disagree with you. Your concept
would be to establish an overall framework, but let the
individual base and their commanders work with the communities
and others that are interested to come to some resolution
agreement that can come forward. Something along those lines?
Mr. Hickey. Yes. I think it is important to bring it back
to a base level because I think if you introduce something too
high up, it becomes cumbersome, et cetera. So I think there may
be scales of----
Senator Jones. I do not disagree with that because,
obviously, it has not gone too far up with each of your
companies right now. So we got to figure that out.
Thank you all for the commitments, and I look forward to
getting your responses in the very near future, in the next 2
or 3 weeks. Thank you very much.
Senator Tillis. Gentlemen, thank you for coming and
testifying today. For certain people that come before us, they
have an obligation to respond to questions for the record. You
do not have an obligation, but we would ask that if you receive
questions from the Senate Members, that you try to respond to
them promptly over the next 2 weeks. We thank you for being
here.
I particularly look forward to solving these problems and
seeking your feedback on the interface to government and other
things that need to be made better so you can do your job
better. But we have got to do a better job.
In the meantime, as I said before, I speak for every Senate
Member when I say if you are living in military housing
anywhere in this country and you are not getting satisfaction
from any of these vendors, call your Senate offices and we will
be in touch.
You may now step down. Thank you very much again.
We are going to seat the next panel.
[Pause.]
Senator Tillis. Thank you all for being here.
In the interest of making sure we can get to questions, I
would ask you to try and keep your opening comments to about 4
minutes, submit written statements to the record. We will start
with Secretary McMahon.
STATEMENT OF HON. ROBERT H. McMAHON, ASSISTANT SECRETARY OF
DEFENSE FOR SUSTAINMENT
Secretary McMahon. Good afternoon, Mr. Chairman, Ranking
Members, thank you for the opportunity to testify on this very
important topic.
I would like to begin by thanking the family members that
were here for bringing and having the courage to come forward
and talk about what they did in a very difficult environment.
We appreciate not only what do they do, but more importantly,
what they do in support of their spouses.
What we heard from them reinforces what we already knew and
that we collectively have to do significantly better.
For those of us that have lived in military housing before
privatization--and I lived in nine different base homes during
my 34-year military career--we know that privatization was the
right decision and that the quality of privatized housing is
significantly better than when DOD managed it.
However, for more than 80 percent of our current military
population who did not experience the poor housing conditions
of the past, this is all they know, and they expect us to get
it right 100 percent of the time.
As you all know, 70 percent of our military members live
off base. For the 30 percent that live on base, our goal is to
offer them a safe, high quality, and affordable home where they
want and choose to live. Although our current independently
generated satisfaction rate with privatized housing runs
approximately 85 percent--and those are 2017 numbers--we, as I
said before, must and will do better.
I had the opportunity to meet with our partners, as well as
my service counterparts, on the 1st of February and talk about
the issues that we face. It became clear to me from that
meeting that we need to focus in three areas, and it is much of
what our family members said. We need to improve upon
communication, we need to improve upon engagement, and we need
to improve upon responsiveness. Both groups are fully in sync,
and that is where we intend to go.
At the same time, we have to work to ensure the long-term
viability of our privatized housing projects. Integral to that
responsibility is ensuring the fiscal structure of our current
projects assures us that these projects will be just as healthy
in 15 to 25 years.
In closing, the Department of Defense and our industry
partners are fully committed to the complementary goals of,
first, ensuring that today's residents of privatized housing
have a safe, high quality, and affordable home where they want
to live and choose to live, and second, ensuring the long-term
viability of our privatized housing projects so that our future
residents 20 years from now have exactly the same thing.
I look forward to your questions
[The prepared statement of Mr. McMahon follows:]
Prepared Statement by Hon. Robert H. McMahon
introduction
I want to thank you, Chairmen Sullivan and Tillis, Ranking Members
Kaine and Gillibrand, and distinguished members of the Subcommittees.
I'm honored to appear before you this afternoon in my new capacity as
Assistant Secretary of Defense for Sustainment to discuss the Military
Housing Privatization Initiative and the Department's commitment to
supporting the housing needs of servicemembers. Having lived in on-base
family housing nine times during my Active Duty career, I understand
the importance of safe, quality housing to our military families.
In return for the sacrifices they make in service to our nation,
servicemembers and their families expect a safe and secure place to
live, good schools for their children, access to good medical care, and
a viable relocation process that respects their household goods. You
have my pledge that the Department of Defense is committed to
fulfilling this sacred contract with servicemembers and their families,
to include ensuring they have access to safe, high quality, and
affordable housing where they will want and choose to live. I look
forward to working with the Committee to support the priorities of the
Department and the quality of life for our military members and family
members who are called to sacrifice so much for public service.
military housing privatization initiative overview
Under the Military Housing Privatization Initiative (MHPI)
legislation established in 1996, the Military Departments have
privatized 99 percent (more than 200,000 units) of installation family
housing in the U.S., with more than 80 MHPI projects currently in place
across approximately 150 installations.
The Department is confident that housing privatization was the
right thing to do. Privatization has dramatically improved the quality
of on-base housing and has facilitated long-term investment necessary
to maintain high quality housing. The MHPI allowed the Military
Departments to leverage private sector expertise and funding to improve
the quality of installation housing in the United States much faster
than DOD could have done through traditional military construction and
ongoing operation and maintenance funding. Before privatization, the
housing on our U.S. installations had a $20 billion maintenance
backlog, which the Department of Defense (DOD) estimated would take
more than 30 years to address using traditional military construction.
The lack of sufficient Military Department funding to adequately
maintain quality housing severely impacted servicemember quality of
life, creating recruitment and retention challenges, thereby impacting
readiness. These realizations contributed to DOD's conclusion that
housing management, not a core DOD mission, needed to be addressed
through privatization.
Under the MHPI, Military Departments conveyed their existing
government housing units to competitively selected privatization
entities (i.e., the MHPI projects). MHPI projects operate under long-
term (850-year) ground leases and associated legal agreements with a
Military Department, with one 25-year option period. In return, the
MHPI projects assumed responsibility for operation, maintenance,
construction, and replacement of the housing during the lease term, in
accordance with the MHPI authorities as defined in Title 10, United
States Code.
At present, 99 percent of the construction and renovation planned
for the 5 to 10-year initial development phase (IDP) of the individual
MHPI projects has been completed, to include construction of more than
75,000 new units and major renovations of more than 50,000 units. This
represents more than $32 billion in total development achieved with
less than $4 billion in government funding as authorized under the MHPI
authorities.
A crucial part of the housing privatization model is that
servicemembers, except for a small number of key and essential
personnel, are not required to live in privatized housing.
Servicemembers who choose to live in MHPI housing receive BAH, sign a
lease, and use their BAH to pay rent just like servicemembers who
choose to rent housing in the local community. The fact that
servicemember chose where to live (on or off-base), incentivizes MHPI
projects to maintain quality housing to attract and retain tenants.
Although the Military Departments retain certain rights under the
project's legal documents MHPI partners are not DOD or Military
Department contractors. The main role of the Military Department is to
monitor the MHPI projects to ensure adherence to the terms of the
project documents, as well as applicable legal and regulatory
requirements. Additionally, the Military Departments monitor MHPI
projects to ensure project financial performance can sustain quality
housing over the life of the ground lease. To this end, the Military
Departments monitor housing occupancy and resident satisfaction, as
well as revenue, operating expenses, operating budgets, and the overall
financial health of each MHPI project, to include the project's
sustainment and recapitalization funding as compared to pro forma
expectations and project needs. Depending on the particular structure
of a given project, the Military Departments may also have approval
authority for project budgets, certain major project expenditures,
changes in property management companies, or other key project
oversight decisions.
the office of the secretary of defense oversight role
The Office of the Secretary of Defense (OSD) provides portfolio
management of the MHPI program, meaning policy oversight, long-term
program monitoring, and ensuring that the projects comply with the
requirements of Office of Management Budget (OMB) Circulars A-11, A-
129, and budget guidance. My office issues MHPI policy and program
guidance, including guidance on MHPI project requirements for OSD and
OMB review and approval, policy on financial restructuring involving
federal credit or otherwise impacting budgetary scoring, and
implementation guidance for legislative requirements such as section
606 of the John S. McCain National Defense Authority Act of Fiscal Year
2019 (Public Law 115-232) which requires payment to MHPI projects to
make up for reductions in housing allowances as part of incorporation
of an out-of-pocket component. My staff reviews and provides scoring
documents and consultation necessary to obtain OMB approval of new MHPI
projects or changes to project deal structures that could potentially
impact project budget scoring or federal credit subsidies. These
changes, that could revise government financial contributions or
property conveyance or impact federal credit instruments, include
restructures of government direct loans; changes to private loans
covered by government loan guarantees; and sales of projects or project
assets and use of sale proceeds.
A key aspect of OSD's oversight is long-term monitoring of the
financial health of the individual projects and MHPI portfolio as a
whole. This includes implementing new or improved procedures to provide
enhanced housing privatization reports on an annual basis to the
congressional defense committees, to include an assessment of project
sustainment; establishing and monitoring performance metrics and key
project data elements; and conducting periodic program reviews to
identify project or program issues that necessitate increased
monitoring, additional guidance or assistance from OSD or by the
Military Departments, or potential resolution through some other change
to the project such as a financial restructure.
Under my leadership, OSD is increasing its oversight to ensure the
Military Departments fully and effectively exercise their
responsibilities to ensure that privatized housing is managed in a
manner protective of human health and the environment. This includes
OSD establishing new reporting requirements and programmatic reviews
regarding Military Department monitoring of potential hazards in
privatized housing, such as reporting on the number of child falls from
windows in MHPI (or military-operated) housing.
Additionally, OSD is increasing its participation in meetings with
MHPI partners to focus on privatized housing management, housing
conditions, and project financial health from a portfolio perspective.
On February 1, 2019, I hosted a meeting with MHPI partner and Military
Department executives to review their oversight of housing conditions
and discuss how we can work together to better ensure local
privatization project housing managers are responsive to tenant
concerns, remedy identified health or safety hazards, inspect housing
for hidden hazards in need of resolution, and keep residents informed
regarding any safety risks and associated mitigation or abatement
measures. As a result of this summit, the DOD participants and MHPI
partners collectively agreed that a way forward in addressing resident
concerns will focus in three key areas . . . communication, engagement,
and responsiveness.
The Department and our housing privatization partners are committed
to working together to increase our collective communication with
military families to better ensure they have a positive experience
living in privatized housing. This includes increasing our engagement
with military families throughout their entire residency in privatized
housing. For example, meeting with residents within 90-days after their
lease signing to ensure they are satisfied with their home and overall
housing experience, hosting more frequent townhall meetings, and
providing other opportunities to solicit feedback besides annual
resident satisfaction surveys.
Through increased engagement, we will better educate military
families about their roles and responsibilities to help identify any
issues with housing conditions, and the roles and responsibilities of
the privatized partner and the installation housing teams. Our
commitment to increase engagement also extends to Military and Veteran
Support Organizations and advocacy groups such as the Military Family
Advisory Network.
In all cases, we commit to work with our housing privatization
partners to ensure any and all resident concerns are addressed in a
highly responsive, timely and professional manner, with emphasis on
expediting resolution of any concerns involving potential health or
safety issues. We want our military families to know that we truly care
about their experience living in privatized housing and that we want to
collectively do better in delivering safe, high quality, affordable
housing where our military members and their families will want and
choose to live.
overall health of the mhpi program
The overall health of the MHPI program is measured in three
distinct phases: Initial Development, Sustainment, and
Recapitalization.
Initial Development Phase (IDP): This phase is typically planned
for the initial 5 to 10-year period after project financial closing.
With 99 percent of the initial development complete, more than 62
percent of the MHPI portfolio is either newly constructed or has
received a major renovation with the remaining housing receiving some
investment (e.g., new cabinets, paint, new flooring) to ensure the
housing is in good condition. The MHPI program has leveraged private
sector capital by a ratio of eight to one, achieving more than $32
billion in development scope with just $4 billion in government
funding. While the majority of IDPs are complete, the resulting
leveraging of private sector investment is far in excess of the
original internal DOD requirement to achieve projects with a three to
one leverage, and represents a highly successful and a very healthy
foundational start to the program.
Sustainment Phase: This phase begins after the IDP, concentrating
on operation of the asset and planned capital repair and replacement is
the norm as the project pays down the initial financing and begins to
save for the next major recapitalization development period which will
likely occur around year 25 to year 30 of the project. While the MHPI
program is in the early stages of this phase, the program remains very
healthy with strong occupancy across the portfolio, positive resident
satisfaction and, for the most part, strong cash flows to support the
initial debt taken down by the projects.
The projects of the most concern at this point are those that were
highly leveraged at the outset, most notably the projects with
government direct loans (GDL) in addition to their private debt. This
government financing is generally subordinate to the third-party
financing and results in the greater risk that the project might lack
sufficient cash flow to cover project debt in the event that project
revenue is lower than expected. This can occur if housing occupancy or
BAH rental income is lower than expected, for example, due to
deployments, and/or if operating costs are higher than projected, for
example, due to significantly increased utility rates. The focus of
oversight in situations where the GDL is at risk is on restructuring or
modifying the GDL to ensure, first and foremost, repayment of the
principal and secondly to preserve as much of the original interest
return anticipated at the outset of the loan.
Recapitalization Phase: Recapitalization of the assets at the
appropriate time in the life cycle is a bellwether measure of the
overall success of the MHPI program. At this time, it is too early to
determine if a project is able to meet recapitalization objectives as
there is significant time remaining in the Sustainment Phase. Further,
there are other changes occurring or affecting each project that impact
the funds available at the time Recapitalization Phase begins. That
said, prudent management of the projects includes frequent forecasting
of funds available in relation to anticipated costs of the
recapitalization. In addition, the MHPI authorities and the existing
project structures provide tools to address potential funding
shortfalls. As such, we cautiously, but reasonably, assert that the
program will remain healthy as we approach and proceed through this
phase.
To ensure continued health and success, long-term government
oversight of the program and individual MHPI projects is critical. The
private sector brings exceptional experience and expertise to perform a
non-core function for the Department of Defense. However, we must
recognize that the Government's interests are not always aligned with
the private sector; oversight and engagement is required and expected
in a public-private partnership over the long term to ensure success.
health and safety conditions in privatized housing
Although privatization has dramatically improved the quality of on-
base housing, there is room for improvement, including in those areas
raised in recent media coverage. DOD, the Military Departments, and our
privatization partners take seriously any concerns about unsafe or
unhealthy conditions in privatized housing and are committed to
addressing such concerns. The health and safety of our servicemembers
and their families is a top priority of the DOD. With that said, in
some cases, we lost focus on delivering a positive experience to our
residents.
While MHPI resident satisfaction surveys by an independent third
party (with occupancy rates that exceed 93 percent for all MHPI
projects) suggest the recently raised issues are not indicative of a
systemic problem across the MHPI portfolio, the Military Departments
and MHPI project partners continue to work together to review housing
conditions. They are working together to address health and safety
hazards, and to evaluate policies and procedures to ensure that any
health and safety issues are addressed in a manner protective of human
health and the environment, in compliance with all applicable federal,
state, and local laws and regulations, and applicable DOD and Military
Department policies. In all cases, it is my expectation that the
Military Departments and housing privatization partners keep residents
informed about lead-based paint, mold, or other hazards, and associated
mitigation or abatement measures. The Military Departments will
continue to assess privatized housing tenant satisfaction through
resident surveys obtained using an independent third party contractor
and will incorporate the survey results into their reviews of partner
performance.
MHPI project ground leases and associated legal documents address
the requirement for projects to provide safe, quality housing and
define required project compliance with Federal, state and local
environmental and health standards. MHPI projects must comply with the
same regulatory standards and inspection requirements as off-base
rental housing and tenants of privatized housing have the same rights
and protections as residents living off-base. While there are Federal
regulations and standards related lead based paint, there are no
Federal standards for mold. The Military Departments and their housing
privatization partners consider all housing maintenance requests
including those involving lead-based paint or mold as ``urgent'' and
therefore requiring rapid response.
Each Military Department has procedures in place, supported by
their respective housing offices, through which military tenants may
seek assistance to resolve issues with their landlords, whether they
live in private housing off-base or privatized housing on-base.
Residents of privatized housing are encouraged to report any concerns
to the housing property management office or the on-base, government
housing office so that their concerns can be addressed in a timely
manner. All resident complaints will be taken seriously and acted upon
in a timely manner. Residents of privatized housing also have the
option of filing an anonymous complaint with the Inspector General. In
all cases, the installation commander is the resident advocate for any
issue involving privatized or government-owned or leased housing and is
always to act on behalf of the resident, without resident fear of
reprisal.
Prospective tenants of any privatized (or government-owned or
leased housing unit) built before 1978 are notified in writing of the
health risks associated with damaged or deteriorating lead-based paint
and what to do if any damage to paint occurs, consistent with EPA
requirements. Before signing a lease and accepting residency,
prospective tenants are: 1) provided with EPA-required information
about the presence of lead-based paint, health risks associated with
lead exposure, the steps they must follow to minimize those risks, the
requirement to notify maintenance if any damage or deterioration to
paint occurs while they are living in the home; and 2) required to
review and sign a lead paint addendum that is consistent with EPA
requirements. Because servicemembers are not required to live in MHPI
housing, they can opt not to rent privatized housing, or a specific
unit of privatized housing, for any reason. For example, a
servicemember might decline to rent a privatized housing unit that was
built prior to 1978 due to concerns regarding potential lead-based
paint.
Unfortunately, we are seeing anecdotal information indicating that
not all residents fully understand or appreciate the need for their
vigilance that these standard documents seek to convey; but rather view
them as one of a litany of forms they must sign in the chaos of a
Permanent Change of Station (PCS) relocation. Accordingly, the Military
Departments are exploring a variety of educational programs, including
90-day post move-in visits and interviews to impress upon residents, in
a time of more calm, the need to be watchful for and promptly notify
management of any damaged or deteriorating lead-based paint.
The Government Accountability Office (GAO) has initiated a review
of hazards in privatized housing. We welcome this review and stand
ready to work with the MHPI partner companies to provide GAO with the
data needed to make informed judgments on the management and benefits
of this critical program.
conclusion
The Department of Defense understands that family is important and
honors the sacrifice that servicemembers and their families make to
serve our nation. The Department recognizes we have a moral obligation
to military families to provide safe and quality housing, and we take
that obligation seriously. We are committed to the long-term success of
the MHPI projects and MHPI program, and will continue our oversight of
the MHPI portfolio to ensure delivery of quality housing for
servicemembers and their families over the life of the projects. Bottom
line, this includes a twin focus . . . ensuring our residents have a
positive experience living in privatized housing, and ensuring the
long-term viability of the MHPI projects.
Thank you for the opportunity to testify on the Military Housing
Privatization Initiative and for your continued support of Department
of Defense's efforts to make sure that military families have safe,
quality housing. Again, I look forward to working with you to support
the priorities of the Department and the quality of life for our
military members and family members who are called to sacrifice so much
for public service.
Senator Tillis. Thank you.
Secretary Beehler?
STATEMENT OF HON. ALEX A. BEEHLER, ASSISTANT SECRETARY OF THE
ARMY FOR INSTALLATIONS, ENERGY, AND ENVIRONMENT
Secretary Beehler. Mr. Chairman, Ranking Members, and
distinguished members of the joint Subcommittee on Personnel
and Readiness and Management Support, thank you for this
opportunity both to testify on the current state of the Army's
Military Housing Privatization Initiative and to answer any
questions you may have. I look forward to working with each of
you to achieve our mutual goal of providing safe and secure
housing on all of our Army installations, which directly
impacts the readiness, welfare, and quality of life for our
soldiers and families.
First, I want to address the concerns of our Army family
members heard during the first panel. The Army and its leaders
at every level down to each Army installation are taking your
concerns seriously. All levels of command are actively working
to address the problems you have highlighted. Their focus and
mine is to ensure the safety and wellbeing of the soldiers and
their families who choose to reside in privatized housing. We
are all committed to providing a safe, secure living
environment. The Army's number one priority continues to be
readiness, and that very much begins with our families,
including exceptional family members.
I would like to introduce for the record at this point a
statement on behalf of the Secretary of the Army and the Chief
of Staff of the Army. We are deeply troubled by the recent
reports highlighting the difficult conditions in some of our
family housing. It is unacceptable for our families who
sacrifice so much to endure these hardships in their own homes.
Our most sacred obligation as Army leaders is to take care of
our people, our soldiers and family members. We are fully
committed to provide a safe and secure environment on all of
our installations. We have directed an Inspector General
investigation and have taken other actions. We will hold our
chain of command and private contractors accountable to ensure
they are meeting their obligations to provide safe, high-
quality family housing. We are going to Fort Meade tomorrow
with Army senior leaders to get to the bottom of the situation
at Fort Meade.
With that, I welcome any and all of you to visit an
installation with me to engage directly with the garrison team
and visit family homes and servicemembers.
Thank you for the opportunity to come before you today and
for your continued support of our soldiers, civilians, and
families. Your oversight is always welcome in order to provide
the best service to our soldiers and families. I look forward
to your questions.
[The prepared statement of Mr. Beehler follows:]
Prepared Statement by Honorable Alex Beehler
introduction
Chairmen, Ranking Members, and distinguished members of the joint
subcommittee on Personnel and Readiness and Management Support, thank
you for this opportunity to testify on the current state of the Army's
Military Housing Privatization Initiative, and to answer any questions
you may have. I want to begin by thanking the committees for their
continued support and commitment to our soldiers, families, and
civilians. I would also like to take this opportunity to welcome the
new Members on these two subcommittees. Your continued leadership and
guidance were instrumental in the successes we achieved last year. I
look forward to working with you to achieve our mutual goal of
improving the condition of the housing on all of our Army
installations, which directly impacts the welfare and quality of life
for our soldiers and families.
providing safe, quality army family housing
First, I'd like to emphasize that the safety and well-being of our
soldiers and their families is paramount. On all of our installations,
the Army is committed to providing safe and secure family housing that
meets or exceeds health and safety standards, which includes preventing
exposure to environmental hazards.
With more than 102,200 homes (11,000 Army-owned, 87,000 privatized
and 4,200 leased), the Army is the seventh largest provider of housing
in the United States. The vast majority of our homes in the United
States are owned and managed by private companies. Housing is an
extension of how our installations contribute to soldier and family
readiness, and regardless of who owns the homes, we are committed to
providing safe, quality, affordable housing to our soldiers and their
families on all of our installations, both CONUS and OCONUS.
We recognize that no matter how well we and our privatized partners
are managing our housing assets, we can always improve. I appreciate
hearing from the witnesses called in the previous two panels. Oversight
and scrutiny of inventory management, along with customer satisfaction
surveys, provide continuous feedback, which is essential to identifying
issues or areas we can improve. Whether in Army-owned or privatized
housing, preventative maintenance programs proactively identify areas
of concern. The Army and our private partners endeavor to promptly
respond and resolve all problems whenever they occur.
Although Army-owned and privatized homes are built and maintained
to high standards, they are affected by weather, just like all other
homes in the world. In areas of high humidity, after heavy rains, or
when a hurricane or tornado strikes, additional maintenance and
unanticipated repairs will inevitably be needed. The maintenance
departments for our Army-owned and privatized homes strive to quickly
address residents' problems through well-established policies and
procedures, and to follow up to ensure that our residents are
satisfied. Nonetheless, in some cases we and our partners have let
residents down by failing to completely resolve problems in a timely
fashion. We want to know when this happens and encourage residents to
escalate concerns. By looking into each occurrence, we and our partners
are able to learn from our mistakes and engage in process improvement.
environmental hazards
I would like to take this opportunity to address some recent news
reports on a small fraction of our Army-owned and privatized homes. We
take these reports very seriously, and acknowledge that there is room
for improvement. The Army's greatest asset is our people, and we are
committed to ensuring that our soldiers and their families experience a
high quality of life while they serve our nation.
After investigating these reports, we have determined three key
facts regarding the number of children in Army housing had elevated
blood lead levels: 1) children on Army installations were five times
less likely to have elevated levels than the national average, 2) out
of 83,517 Army children tested between 2010 to 2018, less than 1
percent (690) showed elevated levels, 3) more than 70 percent of
soldiers and their families live off post in non-Army housing.
Furthermore, additional analysis that the Army conducted into
specific cases noted in news reports regarding Fort Benning show that
historic homes are not a likely source of elevated blood lead levels.
Fort Benning determined that 19 of the 31 children who tested positive
there lived off post and just four lived in historic homes on the base.
Similarly, of the 3,400 children tested at Fort Riley since 2012, 11
had elevated levels, and seven of them lived off post. Fort Hood's
medical center tested 11,181 children since 2011, and 12 of the 15
children with elevated results lived off post.
Nonetheless, out of an abundance of caution, the Army recently took
immediate action to address soldier and family concerns pertaining to
environmental hazards in homes. We began by identifying approximately
13,000 pre-1978 government-owned/leased/privatized homes with aged six
or under because they are most at risk to environmental hazards. We
tasked the U.S. Army Corps of Engineers (USACE) to conduct an
Environmental Hazard Screening in Army-owned, leased, and privatized
housing; consolidate and analyze findings; and prepare a report of
results addressing concerns related to potential hazards. We conducted
1,360 visual inspections between September 2018 and December 2018, and
identified over 833 (60.5 percent) homes with one or more positive
visual indicators of lead-based paint, both inside and outside the
home, requiring further investigation. We also reviewed the records of
these same homes for evidence of Asbestos Containing Material (ACM).
The records review and limited visual checks indicated that all
existing asbestos was correctly encapsulated and in locations where
daily activities would not disturb it.
In addition, the Installation Management Command (IMCOM) and the
Army Public Health Center (APHC) implemented a plan to sample water at
the tap in 20 percent of the Army-owned and leased homes annually.
Since 2016, this potable water testing has been completed in 60 percent
of these homes, with most issues corrected through routine maintenance
measures such as the replacement of faucets, filters, or aerators. The
Army will test the drinking water on the privatized homes following the
IMCOM and APHC established regimen beginning the second quarter of
fiscal year 2019, and, based on the test results, the private partners
will replace fixtures as required per EPA lead-free standards.
We are also working with both Army garrison staff and private
partners to ensure a more rigorous check is being implemented during
preventive maintenance inspections of homes to verify proper
ventilation is occurring, especially in bathrooms. If there are mold
issues, the Army housing staff or the private partner will promptly
respond. In response to resident concerns regarding communication
between them, the housing manager, and the installation, the Army is
also developing a standardized template for communications that can be
shared among all installations.
Our approach to the Environmental Hazard Screening results has been
comprehensive. We reinforced resident and leadership education to
ensure communication is ongoing at every echelon, from HQDA and Senior
Leader engagements, to garrison-level resident education. We believe
these efforts will lead to proactive reporting of potential hazards
that will greatly reduce risk from environmental hazards including
lead-based paint.
Additionally, the USACE report provided several key
recommendations: 1) increased staff for Director of Public Works (DPW)
and the housing offices and seek resources to support as needed;
establish programs for monitoring environmental hazards in housing to
include continual inspections, 2) reporting and oversight, and
replacement of all non-lead free plumbing fixtures; 3) increase
training and develop communication plans for garrison commanders, DPWs,
Army asset management staff and residents; 4) follow up with all
residents to reinforce the importance of previously provided
educational materials, with an emphasis on possible environmental
hazards; 5) codify and emphasize change of occupancy protocols to
include using certified risk assessors to inspect the homes.
We believe these recommendations are valuable and are creating an
implementation plan that, pending Army Senior Leader approval, will
address them.
mhpi oversight
Where the Army has privatized the management of our housing
inventory by transferring ownership of the assets to a partner, we
continue to retain an essential oversight role to ensure that the
partner meets its obligations.
Day-to-day oversight of both Army-owned and privatized housing is
performed by the installation garrison commander and his or her housing
support team. Our garrison commanders play an important role in the
day-to-day execution of housing operations at their installations. By
working daily with the installation housing offices, their own
maintenance staffs, and on-base private housing management
representatives, they ensure residents' housing concerns are addressed
in the most expeditious and appropriate manner. Residents play an
equally important role by bringing issues to the attention of the Army
or privatized-property managers. Additionally, garrison commanders
regularly hold town hall meetings or forums at every Army installation
to engage with local residents. When we have identified instances where
customer service expectations were not met, we have worked with our
partners to correct the situation and continue to do so as issues
arise.
An additional aspect of the Army MHPI program is its development
and construction oversight. Typically, a private partner develops a
development and construction plan in conjunction with the garrison
commander and installation support team (DPW, Safety, and Army housing
staff), and then the Army approves proposed plans, including the
budget. The installation support team overseas the development and
construction activities, along with a third-party Independent
Construction Consultation (ICC) contractor. The ICC contractor inspects
any development and construction work to ensure compliance with
building codes, and before a home is occupied, it is certified for
occupancy.
We have found that as the MHPI program matured, we identified the
need to improve our training program for garrison commanders, Army
leaders, and soldiers.
In addition, we and our partners will improve communications with
residents. For instance, when news outlets reported that some work
orders were not being processed in a timely manner, we examined the
records related to each. While we found a number of these claims to be
inaccurate, there were instances where our partners could have done
better. We will direct our garrisons to make a regular review of local
work order records to identify opportunities for continuous
improvement.
It is also essential to note that our military and civilian tenants
have the exact same protection available to anyone living on the local
rental market under the Fair Housing Act, without having to face any
fear of reprisal. Dissatisfied residents have several avenues for
recourse, including a process for escalating their concerns to the
private project company, the Government Housing Office, or both in some
cases. In fact, we strongly encourage residents to take advantage of
this process, as their satisfaction is the goal of the Army and our
private partners. Residents always have the option to ``vote with their
feet'' and live off post, as two-thirds of Army families currently do.
Our goal for housing occupancy rates is 95 percent. Our overall
occupancy rate from fiscal year 2016 to fiscal year 2018 increased from
91.3 percent to 93.3 percent, and as of 30 November 2018 was at 94.9
percent. While we find this encouraging and tangentially indicative of
satisfaction, satisfaction surveys themselves range from only 77
percent-86 percent of residents satisfied. Our stretch goal is 90
percent. Clearly, there is room for improvement.
Our partners have sufficient incentive to make these improvements.
Military Housing Privatization Initiative (MHPI) ground leases are
typically for 50-year periods and their main streams of revenue (from
Soldiers' Basic Allowance for Housing and rent from civilians living on
post) are not guaranteed. A rigorous funds-allocation waterfall process
dictates how the net operating income is allocated. This includes
annual operation expenses (maintenance, capital repair and replacement
expenses), as well as long-term reinvestment in properties. Our
partners' main objective, which coincides with the Army's expectations,
is to ensure that MHPI projects continue to be sustainable, that
housing remains attractive to our soldiers and their families, and that
housing remains competitive with the local, off-post housing market,
where soldiers always have the option of renting. It is also important
to note that when there are inadequate funds in the reinvestment
account to execute long-term projects--such as renovations, demolition
or replacements--the private partners do not retain the revenue as
profit. Instead, the long-term project sustainment is postponed until
the necessary projects can be executed. Furthermore, the performance of
the private partners dictates their incentive fees. These incentive
fees are based on metrics developed jointly between the Army and the
individual partners, and are in no way guaranteed.
conclusion
Our mission is to provide high quality homes and living experiences
for those who choose to live on our installations, whether the housing
is Army-owned or privatized. We remain committed to providing safe and
secure housing for our soldiers and their families.
The Army and its private partners have well-established procedures
in place to monitor and manage environmental hazards in all homes and
are continuing to develop and implement enhanced move-in protocols,
maintenance procedures, and oversight responsibilities.
The Army and its private partners will continue to inform and
educate soldiers and families about concerns and health impacts of
environmental hazards, resources available to tenants, and all
available methods to report potential risks.
We believe these efforts will lead to proactive reporting of
potential environmental hazards and greatly reduce the risk to our
soldiers, families, and civilians.
We have not achieved the level of resident satisfaction that we
strive for. There is clearly room for improvement. We believe that
increased education for garrison and senior commanders along with
initiatives to improve communications with residents will close gaps
that exist.
Thank you for the opportunity to present this testimony and for
your continued support of our soldiers, families, and civilians.
Senator Tillis. Secretary Bayer?
STATEMENT OF HON. PHYLLIS L. BAYER, ASSISTANT SECRETARY OF THE
NAVY FOR ENERGY, INSTALLATIONS, AND ENVIRONMENT
Secretary Bayer. Good afternoon. Senator Reed, Senators,
thank you for the opportunity to have this dialogue. It is a
very important topic.
I want to start out first by--I want to--on behalf of
Secretary Spencer for the Navy and Marine Corps families and
particularly for the ladies here today, I want to apologize for
the horrible experiences that you have experienced in your
families and in your homes. We are responsible, and we are
going to fix it.
With that, Secretary Spencer and I are fully dedicated and
committed to ensuring that all marines, sailors, and their
families live in safe, secure housing that meet or exceed
health and safety standards. We are committed to families
first.
Seventy-five percent of our servicemembers live in off-base
housing, and 25 percent of our servicemembers are in on-base
privatized housing. Across the department, we have 62,700
privatized homes.
Since Congress passed the Military Housing Privatization
Initiative, the Navy and Marine Corps have leveraged this
private sector investment to obtain the equivalent of $9.8
billion of improved housing, with only $1.5 billion of Navy or
taxpayer investment.
Prior to privatization, government-owned family housing
resident satisfaction scores ranged from average to good. I
know you have heard a lot about this, and I am not throwing
this up for an excuse. By no means. But today our resident
satisfaction scores range from very good to outstanding
overall, and it is better than what it was when the government
had our housing where we just did not have the discipline to
compete with other funding priorities to have quality housing.
As we all know from our own housing, maintenance issues are
a constant effort, and we must strive to do better.
In 2001 and 2011, the Department of Navy learned many
lessons from a mold incident with our privatized homes in
Norfolk, Virginia. Based on that experience, the Navy
incorporated better management practices to address the
environmental hazards in our privatized housing. From that
experience with our Navy CNIC [Commander, Navy Installations
Command], we developed a standard operating manual. A copy was
sent to each of you. I will only point this out because this
SOP was developed for environmental hazards in privatized
housing. It is particularly focused on environmental hazards
such as asbestos, carbon monoxide, lead-based paint, radon,
security, mold, water infiltration, and pest infestation. The
SOP provides enhanced oversight of privatized houses through
prescribed actions and notifications through the chain of
command to ensure our servicemembers' needs are addressed.
The SOP also increases the visibility of property
management response times pertaining to health and safety
issues, and it helps the Navy hold our partners accountable in
their delivery of services to sailors, marines, and their
families.
At each installation, the Navy and the Marine Corps
maintain an installation housing office that monitors our
partners' performance. Any significant or systemic concerns are
elevated in accordance with our SOP.
It is evident that there are cases where we and our housing
partners did not meet our expectations. We will hold our
partners and ourselves accountable. It is clear that our SOP
has not always been followed because the procedures here are
written with the intent to address these needs. You have my
commitment and that of Secretary Spencer that we are looking
into this problem.
Thank you.
[The prepared statement of Ms. Bayer follows:]
Prepared Statement by The Honorable Phyllis L. Bayer
Chairman Tillis, Chairman Sullivan, Ranking Member Gillibrand,
Ranking Member Kaine, and distinguished members of the Committees, it
is an honor to sit before you today with my fellow Service leaders to
testify on the Department of the Navy's (DON)'s oversight of its
privatized housing portfolio.
The DON is committed to ensuring that all marines, sailors, and
their families live in safe and secure housing that meet or exceed
health and safety standards. This commitment stands firm whether our
families live in community rentals, government-owned, or privatized
houses, or government furnished or leased housing overseas.
Thank you for the opportunity this forum provides for me to voice
my commitment to learning where and how we can do better. The DON works
very hard to address any complaints of environmental hazard through
multiple actions and oversight, however, house maintenance is a
constant effort and we continually strive to improve our response. The
Navy learned many lessons in 2011-2012 from a mold issue in Norfolk,
Virginia, which we incorporated into better management practices for
all environmental hazard responses. That experience shaped how we
manage and respond to health and safety concerns in DON privatized
housing today. It is evident there are cases where our housing Partners
failed to meet the standards and we must hold them and ourselves
accountable. I am committed to continuing to strengthen our oversight
of our Partners to ensure rapid remediation of any reported or
discovered environmental hazards. Our privatized housing is ongoing and
effective----evidenced by our 82 percent resident satisfaction and 94.3
percent occupancy rate, however there is always room for improvement.
The Military Housing Privatization Initiative (MHPI) legislation
passed by Congress in 1996 empowered the Military Departments to
leverage private sector expertise and investment to more quickly
improve our military family housing inventory. The DON successfully
leveraged private sector investment to obtain the military equivalent
of $9.8 billion of improved housing with a DON investment of
approximately $1.5 billion. This infusion of private sector resources
improved the quality of our privatized housing and increased resident
satisfaction across the portfolio. The DON has 62,713 privatized houses
across the United States, and all are currently financially stable.
privatized housing oversight
Our Partners are required to immediately notify the DON
Installation Housing Office of any resident concern involving asbestos,
carbon monoxide, lead based paint, radon, security, mold/water
infiltration and pest infestation. These issues are documented by our
Partners and addressed in accordance with hazardous material management
plans, emergency/urgent/or routine maintenance service calls, depending
on the severity and situation, and established action plans, including
applicable laws and regulations. When issues arise, our Partners
perform preliminary investigations to collect relevant and detailed
information about the concerns or incidents, and record all health and
safety issues in a commercial real estate property management database.
Our Partners and government housing staff track all maintenance actions
and perform follow-up inspections to ensure resident satisfaction. For
mold, water intrusion, pest, drinking water and hazardous material
responses, Partners mitigate issues and monitor for recurrence. The DON
has full access to the database and, if there is a health and safety
concern identified, DON personnel engage in accordance with our Health
& Safety Standard Operating Procedures (SOP). The SOP, developed from
lessons learned from the Norfolk incident is intended to ensure Navy is
aware of potential health and safety risks to residents in privatized
housing and they advocate for our servicemembers and families. The SOP
also increases visibility of property management responses pertaining
to the health and safety of residents living in privatized housing.
Our Partners routinely monitor houses for Lead Based Paint (LBP),
in accordance with all laws, including state laws which vary and may be
most strict in locations with old or historic homes. Prior to signing a
lease agreement, our Partners provide tenants with a LBP Disclosure
Form, and educational materials. At change of occupancy, and/or in
response to resident requests, as well as any other requirements for
more frequent inspections, our Partners have trained personnel who
examine lead-positive components to confirm that all lead-containing
components are intact and managed.
The DON implements robust tools and processes to perform oversight
of our privatized housing. We have Business Agreements with each of our
Partners across 14 projects that allow us direct access to data to
analyze trends, identify systemic issues, and resolve conflicts. At
each installation, the DON maintains an Installation Housing Office
that performs oversight of the partner's property management
performance. Our DON Housing directors and staff monitor monthly the
partner's property management performance. Any significant or systemic
concerns are elevated to the Navy/Marine Corps Region Housing Staff
and/or the NAVFAC Business Agreement Managers (BAMs) to engage with the
Partners and resolve issues.
installation housing offices
Every Navy and Marine Corps installation has a Housing Office that
is responsible for providing advice and advocacy for servicemembers and
families. If a resident believes our Partner is not responsive to their
needs or concerns, they can report the issue to the Installation
Housing Office. If a resident is dissatisfied with our Partner's
response, the resident may contact a Navy or Marine Corps
representative at the Installation Housing Office and speak with a
military liaison trained in Landlord-Tenant relations. DON government
housing counselors receive issue resolution training from the Navy
Housing Learning Center to facilitate resolution of landlord--tenant
disputes in community rentals as well as privatized housing. Military
members may also report issues to their chain of command or
installation Commanding Officer. DON Installation Commanding Officers
and Senior Enlisted Advisors receive training on privatized housing
during their pre-command course In the Navy, a Partner representative
usually assists in the training and provides the property manager's
perspective to installation leadership. In the Marine Corps, the
Installation Leadership Management Program provides training in
privatized housing to new Installation Commanders and Sergeants Major.
In accordance with the established Business Agreements, all
Partners conduct Resident Satisfaction Surveys (RSS) using a private
sector third party company to measure performance against private
sector best practice benchmarks. The satisfaction survey is also
structured to seek best practices to continually improve customer
satisfaction. As previously mentioned, over the past 5 years, the DON's
resident satisfaction scores for privatized housing have averaged 82.2
percent and the occupancy rate is 94.3 percent. Prior to privatization,
government-owned family housing RSS scores ranged from Average to Good.
Today, our resident satisfaction scores range from Very Good to
Outstanding across the program.
condition of mhpi housing
The DON team (NAVFAC BAM and Navy/Marine Corps Region and
Installation housing staff) performs annual condition assessments of
privatized housing. These assessments review curb appeal, resident
compliance, ancillary amenities, common areas, and private partner
compliance with environmental regulations. The assessment also
identifies noticeable and identified health and safety issues. Pre-work
for condition assessments includes review of maintenance logs for
residences with multiple service calls for health- and safety-related
issues. These are targeted for resident interviews, which allow the
Navy team access to the homes as part of the assessment. Our Partners
are required to supply documentation that they are in full compliance
with all environmental regulations/requirements.
The condition of the DON portfolio is at levels comparable to or
better than surrounding community housing properties near our
installations. The DON selected privatized housing Partners based on
qualifications and likelihood for success due in no small part to their
experience managing, maintaining and recapitalizing their commercial
residential portfolios. Overall, the privatized housing initiative is
financially healthy, having recovered from the housing market crash of
2007-2009.
incentive structures
The DON uses an incentive structure within the Business Agreements
to motivate the Partners to deliver quality performance in their
property management and service. Should a project not perform to the
agreed upon levels of performance (i.e., service call response time,
work order completion rates, and resident satisfaction scores), it can
negatively impact the incentive fees. Moreover, should private sector
management companies fail to perform, the DON has the authority to
issue Cure Notices to elevate concerns to bond holders financing the
projects; potentially affecting a Partner's credit rating. Our goal is
to resolve issues before a project goes into extremis, however, our
agreements allow us to take this level of action.
conclusion
In closing, I want to reemphasize that we take the health and
safety of our servicemembers and their families very seriously and
believe the incidents highlighted in the recent media represent
opportunities for us to improve. Thank you for your unwavering support
of our sailors, marines and their families, and I look forward to your
questions.
Senator Tillis. Secretary Henderson?
STATEMENT OF HON. JOHN W. HENDERSON, ASSISTANT SECRETARY OF THE
AIR FORCE FOR INSTALLATIONS, ENVIRONMENT, AND ENERGY
Secretary Henderson. Mr. Chairman, Ranking Members, Ranking
Member Reed, Ranking Member Kaine, and distinguished Members of
the Committee, it is an honor to represent our airmen and our
Air Force civilian and our senior Air Force leaders at this
hearing today.
My full written statement is submitted for the record where
we articulate some of the background about the Air Force
privatized housing initiatives, some of the challenges we are
currently having, and what specifically we are doing about it.
The safety and health of our airmen is our highest
priority, and we share their frustration with the housing
challenges that they are experiencing at some of our bases.
These challenges distract our airmen from their mission. This
is unacceptable and we all must do better.
Now, my assessment--and that is an assessment based on
spending 18 years during my Active Duty career in some of the
very housing run by the folks behind me and my assessment based
on my time in this position. What ultimately determines whether
a military family has a positive or negative experience in
military housing has everything to do with the on-site
leadership managing the housing at each location.
Generally speaking, where the Air Force has had problems
with poor construction quality, which has led to a lot of the
mold problems, mismanagement of maintenance requirements, or
unresponsive customer service, ultimately the root cause can be
linked to a breakdown in communications and a breakdown in
oversight and leadership at the site where it matters the most.
Now, challenges with facility degradation can be expected
and are unavoidable in property management, but there is no
excusing any instance where these issues go unaddressed or are
allowed to persist to a point where they are impacting the
quality of life of airmen and their families. Whether it is the
construction companies who build our homes, the project owners
who operate and maintain them, or the on-site management teams
who serve our airmen. If their highest priority is not aligned
with our highest priority, there is no room on the Air Force
team for them.
To this end, the Air Force will continue to exercise
proactive leadership and own these challenges by holding our
private sector partners and our on-site leadership accountable
for meeting our quality of life, health, and safety
requirements for our airmen and their families.
Please accept our sincere gratitude for your demonstrated
support for the Air Force and the opportunity to testify today.
I look forward to your questions.
[The prepared statement of Mr. Henderson follows:]
Prepared Statement by Honorable John Henderson
introduction
The United States Air Force endeavors to build, operate, and
maintain installations which serve as power projection platforms in
support of multi-domain joint warfighting operations, the foundation
for generating combat power, and safe and healthy communities for our
airmen and their families. The health and safety of our airmen, their
families, and the communities in which we serve is our priority, and
the quality of life of our airmen is key to meeting our recruiting and
retention goals. A significant component to the quality of life of our
airmen is access to adequate housing. We share the concerns of our
airmen as well as the concerns of this Committee when we are confronted
with instances where our housing objectives have not been met. When
there are challenges, Air Force leadership owns it. We intervene with
the project owners, advocate for our residents, and support
installation commanders in our mission to take care of our airmen and
their families.
Currently, the Air Force provides 74,500 family housing units
worldwide for use by our airmen and their families. In 1997, the Air
Force began a journey to privatize its stateside housing inventory in
an effort to improve the quality of housing for the servicemembers and
families living on our Air Force bases. We sought to leverage private
sector funding and expertise to provide quality housing for our members
while shedding a non-core warfighting function. In the first 16 years,
the Air Force completed 32 projects that privatized housing at 63
installations with a total end state of 53,237 homes. Of these, 18,028
existing adequate homes were conveyed at closing, and $619 million in
Air Force scored costs were used to obtain $8.3 billion in total
development though private partnerships to renovate 12,595 homes and
construct an additional 22,219 homes. Of the 32 projects, 28 are now
complete (42,786 homes) and four are still in development (10,451
homes). Twenty-two years into this journey, we're focused on overseeing
the long-term project health and sustainment of these projects with a
focus on providing a quality housing experience for our servicemembers.
Today, the privatization of our military housing has been generally
successful in providing quality communities that our airmen choose to
live in. As evidence of this, our 2017 customer satisfaction survey,
conducted by a third-party agency, returned a rating of ``Very Good''
(81.8 percent) with military occupancy rates of 90 percent across the
Air Force. As can be expected with any housing portfolio of this size
and scope, we certainly have some challenges at a few of our
installations as well as opportunities to improve. Recently-published
articles critical of military privatized housing have highlighted these
known challenges that we were already actively working to resolve with
the project owners, residents, and installation commanders.
To this end, the Air Force has a comprehensive portfolio management
process. Specifically, the Air Force has housing offices at each of our
installations that serve as advocates for our families. They engage
daily with the project owners' staffs and residents, visit housing
units, and assess compliance with transactional documents for
privatized housing. Additionally, the Air Force established a
centralized organization within the Air Force Civil Engineering Center
(AFCEC/CI) to work directly with our installations and privatized
project owners to address both individual project and broader portfolio
concerns. When local housing offices are unable to resolve residents'
housing issues, they can elevate those issues through their chain of
command or directly to AFCEC/CI. Finally, AFCEC/CI works directly with
project owners and with the Deputy Assistant Secretary for the Air
Force for Installations (SAF/IEI) as necessary to resolve resident's
concerns with privatized housing.
Through these Air Force resources, we conduct oversight of the 32
projects across our 63 installations. We focus on proactive
interventions in an effort to identify and prevent problems before they
happen. For instance, AFCEC/CI conducts quarterly project reviews that
include meetings with installation leadership, project owners, and the
housing offices to address project performance. Where warranted, AFCEC/
CI will establish corrective action plans to bring performance back
into alignment with transactional documents. AFCEC/CI also conducts
annual site visits to each installation, visiting a sample of the
housing units and assessing compliance with project requriements.
AFCEC/CI and SAF/IEI conduct regular Program Management Reviews to
address a wide range of issues across the entire portfolio of
privatized projects and work closely together on an almost daily basis
with installations to resolve resident concerns. Finally, AFCEC/CI,
SAF/IEI, and the project owners meet twice a year to share best
practices, discuss lessons learned, and conduct one-to-one feedback
sessions with the partners. Through this process, the Air Force works
diligently with installations, residents, the chain of command, and
project owners to resolve all concerns to ensure that our
servicemembers have a positive family housing experience and that any
challenges they have are resolved quickly and fairly.
current focus areas for addressing privatized housing challenges in the
air force
Tyndall Air Force Base Rebuild
On October 10, 2018, Category 4 Hurricane Michael made landfall
near Tyndall Air Force Base, Florida. With sustained winds of 155 miles
per hour, Hurricane Michael remains the strongest hurricane on record
to hit the Florida Panhandle. Tyndall Air Force Base sustained
catastrophic damage from the eyewall of the hurricane. The storm
resulted in the largest loss in the Air Force Privatized Housing
Program history: all 867 Tyndall Air Force Base homes were damaged,
from roof and siding damage to complete losses. Immediately following
the hurricane, the project owner initiated response efforts to preserve
salvageable structures, clear debris from the neighborhoods, and create
safe access for residents to recover their belongings. Additionally,
they immediately stopped collecting Basic Allowance Housing payments
(Oct 11, 2018), began the process of cancelling tenant leases, and
engaged with their insurer to begin casualty insurance damage
assessments and invoke business interruption insurance to ensure the
solvency of the larger project. The Air Force is currently working to
provide housing to support Tyndall Air Force Base's enduring missions
and to assure financial stability to the Air Education Training Command
Group 1 Housing Privatization Project that includes Tyndall, Sheppard,
Altus, and Luke Air Force Bases. The Air Force is working with the
project owner and its private lender to develop a viable course of
action to meet these objectives and is fully engaged with the Project
Owner, the Office of the Secretary of Defense, and the Office of
Management and Budget to map the execution of this project to meet
recovery goals. The severity of the damage is still so great that the
Air Force, and project owner and its lender need to pursue a formal
restructuring of the project, which requires Office of the Secretary of
Defense and Office of Management and Budget approval, in order to
continue meeting the Air Force's long-term housing requirements for our
airmen at all four installations and assure financial stability within
this project.
Lead-Based Paint
The Air Force conveyed 13,426 homes built before 1978 to the
privatization projects. Those homes may still contain some form of lead
paint or leaded materials. The status of the lead-based paint program
at each installation and each project is evaluated annually.
Additionally, the Air Force visits a random selection of these homes
during the annual visit. While we have identified some documentation
issues, the project owners are complying with statutory requirements in
the management of lead-based paint in these homes. In areas where we
have found elevated levels of lead in homes, like at F.E. Warren Air
Force Base where we had a family that resided in privatized housing and
whose child had elevated blood levels, the project owners have
proactively stepped up to assess the full scope of the problem and are
working with residents to ensure their homes are safe.
Mold
Mold is always a challenge in perennial high-humidity climates.
Environmental mold spores grow readily when the right moisture
conditions are present. Even the best facility designs cannot eliminate
the risk. Residents living in areas susceptible to mold growth are
provided a mold addendum to their tenant leases, which recommends
specific measures they can take to prevent mold growth. Facility
design, construction and maintenance are also key to controlling mold.
We have identified three installations where facility design,
construction, or materials are a key contributor to mold growth in
1,667 homes: Tinker Air Force Base, OK, Keesler Air Force Base, MS, and
MacDill Air Force Base, FL. Seventy-six percent of these 1,667 homes
were conveyed to these housing privatization projects from the
government's inventory.
At Tinker Air Force Base, 398 homes constructed from 2009 to 2012
by the project owner, Balfour Beatty Communities, experienced mold
issues. These homes were built using cross-linked polyethylene water
lines which were later found to have systemic manufacturing defects.
The water lines developed pinhole leaks in the wall system, providing
the moisture for mold growth. In May 2018, the Air Force approved $6.1
million in project funds to replace the water lines and relocate
families to fully furnished homes (at no cost) while whole-house water
line replacements are being conducted; the estimated completion date is
May 2019. In June 2018, Balfour Beatty Communities also discovered that
roughly 200 newly constructed homes were experiencing moisture problems
in mechanical rooms resulting in mold growth. In consultation and with
direction from the Air Force, Balfour Beatty Communities remediated the
mold. Furthermore, they hired to a third-party engineering firm to
assess the mechanical room heating, ventilation, and air conditioning
systems to determine the causes of moisture issues and recommend
further corrective actions. The estimated completion date is May 2019.
At Keesler Air Force Base, the Air Force conveyed 1,028 homes built
by Hunt Companies in 2010 to Forest City Military Communities in 2011.
Poor workmanship in both the air conditioning systems and the building
envelope resulted in condensation. Forest City treated mold as it
occurred while seeking remedies from Hunt Construction.
In 2015, Hunt Military Communities purchased the project from
Forest City. The Air Force insisted on a Mold Remediation Settlement as
a condition of sale. The settlement required Hunt Companies to correct
the construction defects within the scope of the original construction
contract, representing a $6.4 million exposure to Hunt Companies. The
Air Force worked with Hunt Companies on a multi-phased Moisture
Remediation Plan with an estimated completion date of June 2020. Hunt
Communities has completed the Test Pilot Phase, Immediate Response
Phase, and the first of three stages of the Sustainment Phase. All
1,028 units have received some work. Stage Two of the Sustainment Phase
is 33 percent complete and involves 255 units. Once complete, the
project owner will conduct an assessment, and will correct any residual
facility moisture issues in the final stage. AFCEC/CI continues to
monitor the project owner's compliance with the action plan, including
eradication of the mold and correction of the root cause.
At MacDill Air Force Base, 241 units previously built for the Air
Force were conveyed to Clark/Harbor Bay. Due to breaches or lack of a
vapor barrier, systemic moisture issues were present in these units.
The project owner treated the mold while designing projects and plans
to correct the underlying cause. In 2017, 94 units were reclad at a
cost of $3.7 million. In 2018, interstitial spaces and stucco repairs
were executed, dehumidifiers were added to homes where the air
conditioning units were not controlling moisture adequately on their
own, and 19 homes were treated for mold growth. This year, an
additional 68 units will be reclad.
At all three installations, the Project Owners have taken steps to
correct the underlying causes. The corrections have not been as quick
as we would like, and there have been instances where the project
owner's response has lacked the urgency we would expect. Air Force
leadership has engaged with the project owners, retained Performance
Incentive Fees, and implemented corrective action plans to address
project owner underperformance and inadequate oversight.
conclusion
The Air Force privatization effort enabled the Air Force to
modernize its housing, shed a non-core warfighting management function,
and support our members with a significantly higher quality of housing
by leveraging private sector funding and expertise. The Air Force takes
our responsibility to provide safe and healthy living conditions to our
airmen and their families very seriously. When we identify challenges,
we have a consistent history of proactively resolving these issues with
the project owners. While we remain focused on addressing sites with
facility issues and projects that are struggling financially, these
represent a small percentage of the housing inventory. The underlying
causes have been identified and corrective actions are underway. As we
move forward, our focus is on oversight, sustainment, and the long-term
success of the privatized housing portfolio in order to provide safe
and healthy housing for our airmen. We view this as an essential
activity to support ready and resilient Air Force installations, which
serve as power projection platforms for our nation.
Senator Tillis. I am going to defer to Senator Reed. He has
another commitment. He will go ahead of me.
Senator Reed. Thank you very much, Mr. Chairman.
Thank you, Secretaries, ladies and gentlemen.
Since you are literally the partners of the private housing
companies, I want to ask you the same questions I asked them,
and I think a yes or no answer is appropriate, beginning with
Secretary McMahon.
Do you affirm today that you will do everything in your
power to immediately address the issues raised today by
military families here and also by those who have testified and
submitted material to the Committee? Mr. Secretary?
Secretary McMahon. Yes, Senator, I will.
Secretary Beehler?
Secretary Beehler. Yes, Senator.
Senator Reed. Secretary Bayer?
Secretary Bayer. Absolutely, Senator.
Secretary Henderson. Absolutely, Senator.
Senator Reed. As the Chairman stresses, communication with
Congress in any form is a protected communication of the
whistleblower statutes. Do you affirm today that you will do
everything in your power to protect the military families who
have appeared here today, as well as those who submitted
testimony and information to the Committee, the Inspector
General, and the chain of command from reprisal? Just as a
caveat, I was a little distressed when the implication is that
the chain of command was not as responsive, in fact, indeed,
retaliated against some of these complaints. Secretary McMahon?
Secretary McMahon. Yes, Senator, I will.
Senator Reed. Secretary Beehler?
Secretary Beehler. Yes, Senator. I find retaliation totally
unacceptable and will do everything in my power to make sure it
never happens.
Senator Tillis. Secretary Bayer?
Secretary Bayer. Absolutely, Senator.
Senator Tillis. Secretary Henderson?
Secretary Henderson. Absolutely, Senator. I would follow on
that the Secretary of the Air Force and Chief of Staff have
initiated an IG investigation to look exactly into those
mechanisms that allow our families to raise these concerns in
an environment that is free for communication and allows the
chain of command to act.
Senator Reed. Well, thank you very much.
I think one of the things that we have to do is provide
incentives and appropriate disincentives. It strikes me,
listening to the testimony and the questions of my colleagues,
particularly the very, very thoughtful testimony of the family
members, that what we need is, in some respects, a military
housing ombudsman on every post that is empowered. We have them
but they are not empowered. That they would be the ones as a
representative of the families, not the company or the chain of
command, that would certify that the housing is quality
housing, not just adequate, but quality housing, and from that
certification might flow the retention of the housing
allowance, some financial indication that would be appropriate.
Secretary McMahon, let me just ask you. Is that something
that you could work on or will work on?
Secretary McMahon. Senator, we have to find a different way
to both incentivize and disincentivize. I would have to have a
lawyer in the room to figure out what we can do with the legal
documents and what is within the art of the possible. But we
have to find solutions to get to a better position than where
we are today.
Senator Reed. I understand, but part of this I think is
sitting down with the companies and, if necessary,
renegotiating aspects of the contract so that we can protect
the families. That is something I think should be done.
Secretary McMahon. Yes, sir. I agree with that, and we have
already begun that process. I meet again with them next month
to continue this journey to figure out how we can collectively
provide a better level of service to our residents.
Senator Reed. Just a final comment. It is surprising to me
and I think my colleagues on the Committee that--particularly
let me commend Senator Tillis and his colleagues on the
Personnel Subcommittee. They spend a lot of time with DOD
personnel, service personnel asking questions about what is
going on, how can we help the service men and women and their
families. This issue seems to have caught us by surprise, which
suggests that we have to go back and look at--you know, you are
doing surveys. I reviewed the surveys showing 85 percent
approval. The companies are doing surveys showing 85 percent.
But then an independent party does a survey and it is 55. I
think we have to go and step back, among our many missions we
have, and not be caught by surprise again.
I am pleased by the testimony in some respects of the
companies admitting that they were themselves somewhat taken
aback when they discovered that these issues were so flagrant
and so serious. Again, all of you, I would hope you would take
that back and do it.
Secretary McMahon. Yes, sir.
Senator Reed. Thank you.
Thank you, Mr. Chairman, for your kindness.
Senator Tillis. Certainly, Senator Reed.
I am going to defer my questions till the end and give
Senator Rounds an opportunity to go.
Senator Rounds. Thank you, Mr. Chairman.
Let me just begin by just saying, I appreciate the service
that you have all provided to our country. But I also want to
point out something here. I think we have an obligation to call
you on the carpet when it does not appear that you are getting
your job done.
Secretary McMahon, I just want to understand. You pointed
out that you have an 85 percent positive rating, and I want to
allow you a few minutes of my time to clarify. That means 15
percent of all the folks who are out there are telling you that
they were not satisfied. What is an acceptable number? What did
you do when you found out that you had 15 percent of these
young men and women that were in these housing locations, that
they had a problem, enough to where they would report up the
line? Can you clarify for us that that was not necessarily
something that you were bragging about?
Secretary McMahon. Yes, sir, I would. Senator, to your
question, the acceptable number is 100 percent. Although we may
fail at times of being able to support the resident, the
question then becomes how responsive and how do we respond to
the failures that we have. The clear answer today, as you have
heard and as we have seen, is that we have not responded
collectively well enough as we have.
Senator Rounds. So we got a lot of work to do. You would
say that in terms of your role and responsibility on this, we
have got a commitment that this is one that you are going to be
working your way from the top down to find a better way to do
it.
Secretary McMahon. Sir, let me be clear. I am the
accountable person in the Department of Defense for ensuring
that we provide quality homes to our residents that elect to
live on base, and ultimately it is my responsibility working
with my partners here and our privatization partners. So, yes,
I am committed to that.
Senator Rounds. Thank you, sir. I suspect that this
Subcommittee may very well be visiting with you again in the
future on it.
Colonel Henderson, as I know you, but Secretary Henderson,
you have over a period of years proven to me that you are a
person that is very capable of coming up with solutions and
working with people. I have a two-part question for you, and I
have got about a minute and 53 seconds left.
First, could you please discuss with the Members of this
Committee what recourse the Air Force currently has at its
disposal to hold accountable under-performing privatized
housing owners that are on your bases?
Secondly, what tools or mechanisms could this Committee
help provide you with to better hold them accountable in the
future?
Secretary Henderson. Thank you, Senator.
First, we have a myriad of tools that I will not talk about
now where we measure performance, and there is a number of
those. But when we see those performance indicators start to
lag, which we have with a few of our companies, we have these
options inside the transactional documents to retain incentive
pays. How much incentive pay we have the discretion kind of
varies from partnership to partnership. But we have that option
and our Air Force team would tell you in a lot of cases we have
never paid the full incentive pay, but we always end up having
to pay partial.
When things get really bad, as they have at Tinker Air
Force Base, we have had to stop. We have had to get with the
project owner and put them on a very deliberate corrective
action plan, which is part of the transactional documents. That
is what we can do inside of the programs.
We do have the ability to go out with State and local
authorities for violations for the EPA [Environmental
Protection Agency], for building codes, and for landlord-tenant
laws. For some reason or another, it sounds like at some of our
bases that is mixed up, but we do have those authorities.
Additionally, in places where we have found suspected fraud
or malfeasance, we have initiated Office of Special
Investigation (OSI) investigations, and we are working with the
FBI [Federal Bureau of Investigation] on some of those
currently.
Senator Rounds. I am going to ask if you could respond for
the record with the remaining portions of answers to my
question.
But I want to know one more thing. If we could put together
a bill of rights, a tenants bill of rights, do you believe that
the Air Force--I know you cannot speak for all of the others,
but do you believe the Air Force could participate and work
through the issue of creating a bill of rights that the private
contractors will use if we do a good job of putting something
like that together?
Secretary Henderson. Absolutely, sir. Inside the bill of
rights--we talked about this thing of accountability earlier--
there are some important things in there. For instance, the
resident should have the choice of whether they pay their rent
or not if they feel like their landlord has not given them a
healthy and safe place to live. That makes the landlord
responsive financially to the resident.
Additionally, I think there should be rebates for untimely
repairs, for power outages, and those things that they have to
do for self-help. Some of our project owners already do things
like that. I would like to see that franchised a bit because
that is where we are seeing our positive satisfaction ratings.
Finally, it would be nice if we could look at something
where we had a little bit more discretion over the entire
incentive fee so when we were not getting the response out of
our project owners that we expected, we had a little bit bigger
hammer inside the partnerships to influence that behavior.
Senator Rounds. Thank you. Thank you all once again for
your service. I appreciate that.
Mr. Chairman, thank you for allowing me to move forward.
Senator Tillis. Senator Kaine?
Senator Kaine. Thanks to all of you. You have heard the
same testimony that I have heard. Secretary McMahon, you used
three very good words in your opening comment:
``communication,'' ``engagement,'' ``responsiveness.'' Those
are things that are needed. Clearly the frustration of family
members not feeling like they have a place to go, they are
getting turned away here, turned away there. They do not have
an avenue where they can approach to get an answer is really,
really important. So those are good words.
I want to say, Secretary Beehler, you used great words. You
used ``accountability'' and ``apology.''
Accountability, Secretary McMahon, you said you are the
accountable person, but I think what we are going to want to
see as we work on the NDAA over the course of the next couple
months, where is the accountability for poor performers, where
is the mechanism that is a fair mechanism in connection with
contracts that exist already and cannot just be torn up. What
can we put in that creates accountability for poor performers?
Is it a withholding? Is it access to bases by local building
officials with the ability sanction poor performers? There has
got to be accountability. The communication mechanism is
really, really important because it is so frustrating to not
get an answer, but there have to be accountability mechanisms.
Secretary Bayer, you used the ``apology'' word, and I
highly, highly commend you for that because these folks are
owed an apology. Frankly, they are owed an apology more by
panel 3 than by panel 2. We ought to hold panel 2 accountable
for living up to their contract, but these folks did not
volunteer to be a Lendlease tenant or a Lincoln tenant. They
volunteered to be a member of the military. They volunteered
with their spouses to be soldiers and military families, troops
and military families. To the extent that there is an apology
owed, it is more from you all. It is more from the command
structure that has let them down by not having the
accountability mechanisms so they can live.
I asked the panel of the business folks just that simple
question. Have any of you ever served? Have any of you ever
lived in military housing for the obvious reason? There is no
shame in not serving. I did not serve in the military. But if
you have not lived the life that these people live, you guys
understand the life, but they do not necessarily understand the
life. These military spouses--first, they are in a joint
project to patriotically serve this country. Second, they
deploy and move around and change locations repeatedly in ways
that are extremely stressful. Third, they are dealing with the
military deployments of their spouses and family members in the
longest war in the history of this country, multiple
deployments again and again and again, and worried about the
physical safety of their loved ones.
Then on top, military spouses have an unemployment rate
that is three to five times the national average because it is
very difficult to find jobs as a military spouse either because
of the absence of high-quality child care or an employer that
looks at you and thinks, well, boy, you are really qualified
but you are going to move in the next year and a half, so I am
not going to hire you.
There is a particular set of challenges that these families
deal with that you understand. I am not sure that the private
housing providers even after all these years fully understand
that. For most of them, it is a division of a big housing
enterprise where they are dealing with all kinds of tenants who
are not military spouses, not military families to deal with
these issues.
So this is incumbent upon you to get right in the
accountability mechanisms that you set up, and to the extent
that we have fallen short, hey, there may be things that we
need to apologize for. To the extent that problems are the most
persistent in legacy housing, you know, if we did not build it
right or maintain it along the way and then it is causing
problems, then that is something that we need to fix from a
budgetary standpoint.
But they are owed an apology and I am glad that you made
one, Secretary Bayer.
The last thing I would love to ask Secretary Beehler. I
know about the GAO investigation. Tell me about the IG
investigation you mentioned.
Secretary Beehler. Yes, Senator, a couple things.
First, when we were made aware of the situation at Fort
Benning last--my office--I was not in the office, but last
August, my office immediately launched an investigation by the
Army Corps of Engineers. That report took 10 percent of all----
Senator Kaine. Because I am way over time. Just the IG
investigation you mentioned. Tell us about that.
Secretary Beehler. Yes. The IG investigation is being
called by the Chief of Staff of the Army to do spot, swoop-
down, splash type of inspections on designated installations
that obviously we are not going to reveal in advance in order
not to compromise. When we have those results, I would be happy
to share them with the Committee and engage in further
discussion.
Senator Kaine. That would be enormously helpful.
Thank you, Mr. Chair.
Senator Tillis. Senator Sullivan?
Senator Sullivan. Thank you, Mr. Chairman.
I appreciate some of the initial testimony, Secretary
Beehler, with your statement from the Secretary of the Army and
the Chief of Staff.
Secretary Bayer, I think it takes--it is not always easy to
apologize, but I think that is warranted here.
Secretary McMahon, I appreciate your written testimony on
the moral obligation that we have, that you, the Pentagon has,
as you mentioned as a military member. I did not like the
statement in your testimony about, well, they are not required
to live on base. That is kind of a non sequitur in my view. I
mean the whole point of this hearing is that if they are going
to live on base, it should be appropriate, outstanding housing.
I think you might want to relook at that one because that is
not the point in my view at least.
Secretary McMahon. Senator, may I respond?
Senator Sullivan. Yes, you may.
Secretary McMahon. Senator, the intent of that is to say
what we want to do is create on-base housing where our
residents, our military members and families, want and desire
to live. That is a matter of motivating our private sector
partners to build something so that it becomes the first
choice. If I implied something other than that, I apologize.
Our goal is to make it so good that they want and desire to
live there and that is where they choose to live.
Senator Sullivan. No. I think that is a good goal. Maybe I
read it differently, but I just kind of read it differently.
Anyway, the point is if we are providing housing on base, it
should be outstanding and it should not be, well, you can
always go off base. I do not think anyone believes that. That
is how I read yours and maybe I will take a look at it and
reassess it.
I want to go to this issue that the first panelist, Ms.
Cornwall, raised. I think she called it an unholy alliance or a
marriage that exists between the housing kind of entities and
maybe even the senior chain of command and the private
companies. I think she was making a good point where it seemed
like they seem to be very closely aligned, almost opposed to
the interests of the servicemembers, which is the whole damn
point of good housing. It is for the men and women in the
military and their families.
Can any of you address that? I think she is raising a good
point. How do we address that?
Let me just throw out another question because, again, I do
not have a lot of time here. But the chain of command failures.
It does seem like something happened or something has happened,
not in every case, but where the chain of command, the unholy
marriage, as she mentioned, seems to create a situation where
the people we are all dedicated and supposed to serve,
including this housing situation, gets forgotten or thought
about last. I would like you to comment on that. I know you
were all here for her testimony, but it seems to me it was
powerful.
Secretary McMahon. Senator, if I could comment on your
second question first, and that is this concept of leadership.
Whether it is on the private partner side or whether it is on
the military side, it is clear to, I think, all of us that
there has been breakdown in leadership. We have senior NCOs
[non-commissioned officers] who ought to represent the needs of
their soldiers, sailors, airmen, and marines. We have first
sergeants. We have commanders at all levels whose job it is to
take care of the individual and take care of the family. We
recruit the individual. We retain the family. If we are not
doing that on the military side, we are failing.
If, on the other side, that first line of defense is the
manager on the local base, if they are not sensitive to those
requirements, we failed there.
This is a failure of leadership on both sides that we need
to address and figure out how we change the way we attack this.
Senator Sullivan. How about this unholy marriage or
alliance that she was referencing?
Secretary McMahon. Sir, as you know from your private
sector time, it is about partnerships. I will tell you that it
is absolutely essential that we are partners, that we
understand what each brings to the table. These homes, as you
know, are not government homes. They are private homes. We have
to acknowledge that and the legal elements associated with
that. At the same time, we have to partner with them in a way
that provides, at the end of the day, the best quality home
that we can to our residents.
Senator Sullivan. Thank you, Mr. Chairman.
Senator Tillis. Senator Warren?
Senator Warren. Thank you, Mr. Chairman.
Ultimately, each of you are here representing the services,
and you are responsible for making sure that these private
partners are providing safe housing, responding to maintenance
on time, generally satisfying the terms of their agreements. In
practice, these private housing providers are virtually
guaranteed to make a profit. They get a base fee plus costs.
Your big tool is the incentive fee.
Now, DOD told the Committee that the incentive fees were
paid out about 95 percent of the time, and you heard the
testimony from the companies themselves. Not a single one said
they were ever denied all of their incentive fees, at the same
time that we are receiving testimony about appalling
conditions.
I just want to understand what has gone wrong here, how it
is that these guys can get 95 percent of their incentive fees,
plus their base fee, plus their expenses at the same time that
we are hearing this kind of testimony.
Let me ask my first one. Secretary McMahon, tenant surveys
are your main tool to determine whether private partners are
meeting their obligations, but those surveys evidently did not
alert you to the mice, the mold, and the lead poisoning. Do you
agree that surveys are not giving you a complete picture of
what is going on?
Secretary McMahon. Yes, Senator, I agree with that, and
just so you know, what we see in returns on an annual basis is
somewhere between 35 and 50 percent from our residents. So we
are only getting a partial picture.
Senator Warren. All right. Do you independently verify what
you are getting on surveys through inspections?
Secretary McMahon. Senator, the data that I just gave you
is from a third party independent. So it is not----
Senator Warren. No, no. I am asking whether or not you do
any inspections or contract with someone to do independent
inspections. Do you only do the surveys?
Secretary McMahon. That is correct, ma'am, at the
Department of Defense level. We defer the rest of that to the
services who actually own the----
Senator Warren. Is anybody doing anything beyond the
surveys? Secretary Beehler?
Secretary Beehler. Senator, we have conducted annual ground
lease surveys of the condition of the outside of the houses. As
I started to refer, we launched an Army Corps of Engineers
investigation where we surveyed 10 percent of all properties.
Senator Warren. Let me just stop then. You have a housing
portfolio that is more than 200,000 units. Are you telling me
you surveyed 20,000 units last year?
Secretary Beehler. Senator, we focused on--no. We did
investigations inspections of the houses that had--they were
pre-1978 that had lead----
Senator Warren. I appreciate it. Listen, I am sorry, but I
am short on time here, and I know we are trying to stay within
a time limit.
I am just trying to ask, out of 200,000 housing units, how
many inspections did the services do last year?
Secretary Beehler. For the Army we have roughly 100,000. We
have done inspections both inside and outside all of the
houses, to the best of my understanding.
Senator Warren. So you are telling me you did 100 percent
inspections last year?
Secretary Beehler. During the course of a year, yes.
Senator Warren. In the course of a year, you inspect 100
percent of the housing, and you did not find any of this?
Secretary Beehler. What we found we took and made repairs
and instigated work orders.
Senator Warren. Okay. So you inspected but you did not see
the rats? I just do not understand what that means.
Secretary Beehler. I will take for the record and go back
and provide what our inspections found that were not acceptable
and what actions were taken to address it.
[The information follows:]
Secretary Beehler. During the USCAE 10 percent
Environmental Hazards inspections, there were 60 percent
positive visual findings. These findings included nicked/
scratched wood on doors, door frames, and banisters, cracks/
scratches in window frames, peeling paint on porches/carports/
exterior doors. The RCI Project Companies took immediate action
to test to verify if the paint was lead-based, followed
standard maintenance procedures nor non-lead-based paint, or
remediated. HQ IMCOM is tracking all findings and remediation
efforts to ensure all findings are repaired/remediated. Over
the last two months, the Army has inspected all homes and
barracks. All findings are placed in the RCI Project Company
work order system or in the DPW work order system and monitored
until completion by Army leadership.
OACSIM conducted project compliance and partnering visit,
development and special purpose reviews on approximately 71
homes. These visits verified work that was completed,
identified discrepancies in bid processes, and way-ahead
discussion on the next phase of development.
USACE conducted 15 annual lease compliance reviews. During
the compliance reviews, environmental management plans, lessee
response plans, and natural resource management plans were
outdated or not signed by the garrison commander; support
leases needed renewal; pesticide usage reports not being
provided to the Army monthly; and maintenance concerns of storm
water retention structures.
Senator Warren. How many State and local housing inspectors
were invited onto base last year?
Secretary Beehler. Senator, I will have to take that for
the record and provide.
[The information follows:]
Secretary Beehler. The Army is not aware of any State or
local housing inspectors being invited onto base last year.
Senator Warren. You know, I will quit because I understand
where we are on this.
But this just is not right. These contracts are bad enough
as they are. A guaranteed profit--virtually guaranteed in
return for which they are supposed to provide decent housing,
and the one tool you have got is to say there has got to be
some performance evaluation here. And to give away 95 percent
of the performance-based money at the same time that we are
hearing from the people who live in this housing that it is
rat-infested, that it is dirty, that things leak, that is just
not right. You are not using the tools that Congress gave to
you on behalf of our servicemembers. Until this gets fixed, we
got a real problem.
[Applause.]
Senator Tillis. Senator Blumenthal?
Senator Warren. Thank you. Sorry, Mr. Chairman.
Senator Blumenthal. Thank you, Mr. Chairman.
I am going to begin where Senator Warren ended because when
I first learned about this absolutely outrageous scandal, in
effect, hiding in plain sight, my first question was when did
you know about it. Maybe you can tell me, Secretary McMahon,
when you first knew about this problem.
Secretary McMahon. Senator, as you know, I was reconfirmed
for the position that I am in and took over this responsibility
effective 1 November. Part of the conversation as I prepared
for this was to find out that there were issues. As such, as
early as middle January, I scheduled to meet with my partners
here, as well as the privatization partners, to look into the
details.
Senator Blumenthal. Did your predecessor know about it?
Secretary McMahon. Sir, I do not know the answer to that
question.
Senator Blumenthal. When you were briefed about it, I
assume the folks who briefed you had known about it for some
time.
Secretary McMahon. Sir, I cannot put words in their mouth.
I do not know the answer to that question.
Senator Blumenthal. Well, I would like to ask you for the
record to provide us with information about what was known, who
knew it and when.
Secretary McMahon. Yes, Senator. I will take that for the
record.
[The information follows:]
Secretary McMahon. My predecessor first learned of the
issues regarding lead and mold in December 2017 when Ms.
Crystal Cornwall from the Safe Military Housing Initiative
provided information to OSD. This information was forward to
the Military Departments for resolution. The Reuters articles,
the first of which was published in November 2018, identified
resident issues warranting immediate attention, with more
extensive and wide-ranging resident concerns subsequently
surfacing.
Senator Blumenthal. I would like to know also what accounts
for the disparity between the Department of Defense 85 percent
satisfaction survey versus the Military Family Advisory Network
survey which shows 50 percent satisfaction.
Secretary McMahon. Senator, I will take that for the record
as well and provide----
[The information follows:]
Secretary McMahon. The survey performed by the Military
Departments and the survey conducted by the Military Family
Advisory Network (MFAN) utilize vastly different methodologies
and their results cannot be meaningfully compared. The Military
Departments' surveys have been conducted since the early years
of the MHPI program by a nationally-recognized independent firm
using industry best practices to ensure the statistical
validity of the responses. The surveys included strict controls
to ensure that responses were only sent to MHPI households and
to avoid duplicate responses. While the 85 percent average
satisfaction rate statistic is based on resident responses to
whether or not they would recommend privatized housing, the
survey also contains multiple questions about many other
aspects of the privatized housing to help the Military
Departments gain a better understanding of resident
experiences. In comparison, the MFAN survey was an online
questionnaire administered via a freely-available web link. At
this time, it is unclear what survey controls were put into
place to ensure that each response was unique and to verify
that the respondents are currently residing in privatized
military housing or lived in private military housing within
the last 3 years. While the two survey results cannot be
compared with the appropriate statistical rigor, the MFAN
survey raised important issues that the Department must
address. We appreciate the MFAN's efforts to bring these issues
to our attention and are committed to working with all
stakeholders to ensure that military families have safe,
quality housing.
Senator Blumenthal. Well, what would be your response right
now?
Secretary McMahon. Senator, I cannot comment on the study
or the survey that was done by the family group. I do not know
how widespread it was or whether or not everyone was offered
the opportunity. I do know that on the annual survey, it sounds
like there is a much larger population that is surveyed.
Senator Blumenthal. Would you support the proposal that has
been advanced by the military families--I certainly support
it--that the basic allowance for housing payments should be cut
until housing conditions, acceptable standards are met?
Secretary McMahon. Sir, working with the lawyers, something
along those lines I think would be prudent to ensure that we
incentivize our partners to respond rapidly.
Senator Blumenthal. I am going to take that as a yes
because I think that more than an apology needs to be provided.
I accept that you are new and all of you may have come into
these positions after the problems arose, but now more than
apologies, I would like to see accountability imposed on those
providers of housing, the landlords, the renters because if we
were in the private sector and I were still attorney general of
the State of Connecticut, I would be saying let us sue the--and
there would probably an expletive. Let us sue them. Right?
[Applause.]
Senator Blumenthal. That option for the families is costly,
burdensome, and frankly risky. But for the Department of
Defense to take their side and be their advocate and champion
it seems to me is basic accountability. Would you agree?
Secretary McMahon. Senator, I would agree that there is
additional accountability on both our private partner side as
well as on the military side.
Senator Blumenthal. Let me just ask you one more question.
If those families were to withhold housing payments from their
private landlords, I assume there would be no retaliation by
the Department of Defense.
Secretary McMahon. What I would tell you, Senator, is there
should be absolutely no reason for retaliation whatsoever on
any of these issues as our job is to take care of our military
members and their families.
Senator Blumenthal. It is a matter of military readiness.
Would you agree?
Secretary McMahon. Yes, sir.
Senator Blumenthal. Because no one is going to want to put
their families through this kind of hardship.
Secretary McMahon. Senator, as I mentioned earlier, we
recruit the individual. We retain the family. It is absolutely
essential that we take care of both.
Senator Blumenthal. Thank you.
Thanks, Mr. Chairman.
Senator Tillis. Thank you.
I actually deferred to the end. My colleague, Senator
Rounds, probably thought I was doing it because I was nice, but
this way I can talk longer and I am not holding anybody else
up.
[Laughter.]
Senator Tillis. Except for the ranking member.
Now, I want to be very brief because, as I said to the
first panel, this is the beginning. This is more or less the
tip of the iceberg. There is a lot of work that has to be done
here. I think it was Senator Reed who said that he remembers
the military housing back when leisure suits were popular.
About that time.
Senator Reed. Yes.
Senator Tillis. It was a horrible situation. That is when
DOD was doing it.
Quite honestly, I do believe that the public-private
partnership is a way to be able to have a better chance and a
more consistent, reasonably priced property. I think most of us
agree with that. If not, those who testified or otherwise,
please provide the feedback. But there are a lot of structural
things that we need to do differently.
Secretary McMahon, as the convener in all of DOD with the
lines of service, I have heard Secretary Bayer talk about the
standard operating procedure for the Navy.
Now, I know the lines of service come in here and they will
oftentimes say that they have to do things differently because
of their mission set. I cannot imagine that there is a
different best practice for Air Force housing than there is for
Marine housing or Army housing.
One thing I would like for you all to start doing very
quickly is figure out who is doing things right or better and
start building best practices and not have variations, which I
think exist.
I think we also need to go back to the 82 or so contracts
that are out there and determine to what extent they need to be
modernized that is a fair and equitable treatment for the DOD,
for the private sector, but mainly for the tenants, the people
who are renting these houses.
Finally, I was trying to figure out--I think, Secretary
Bayer, when you were talking about the standard operating
procedure and you were listing off some of the hazards, is
there like a trip mechanism now to where if somebody called up
and called whoever their private housing provider is and said I
see black mold, I see mushrooms growing in my second story
bathroom, I see these things that I have a reason to believe
that I have lead paint exposure--is there any tripping
mechanism right now that just absolutely escalates that to make
sure that they are being handled within the Navy?
Secretary Bayer. Yes, Senator. The processes and the
procedures are in the SOP.
Senator Tillis. Are they being followed?
Secretary Bayer. Exactly.
Senator Tillis. If they are not being followed, what is the
recourse for the people not following them?
Secretary Bayer. It is a leadership issue. When I look at
the SOP and--we have these maintenance calls. There are
emergency maintenance calls, urgent maintenance calls, or
routine maintenance calls.
Senator Tillis. Well, I would argue that that is one thing,
without getting into the SOPs of the other lines of service.
Secretary McMahon, I believe there is a right and wrong way to
do that. The escalation procedures and the repercussions for
when the escalation does not occur need to be very clearly
spelled out.
Secretary Bayer. The point is there, Senator, is we just
need to hold leaders accountable that we are following our
procedures.
Senator Tillis. Well, that is right.
That actually gets to the last thing that I wanted to talk
about, and it has to do with retaliation. Nothing irks me more
than abuse of authority. I consider retaliation from somebody
in a position of authority is the worst kind of leadership you
can possibly exhibit. As the chair of the Personnel
Subcommittee and someone who gets consulted with on future
promotions, I can assure you if there is even a whiff of
retaliation among leaders that come before my committee, they
better find a different line of work.
This is a very important issue that needs to be solved
quickly. I hope that you all will convene and come back and
give us suggestions particularly with respect to any additional
authorities or revisions that we need to make in advance of the
National Defense Authorization Act. If there are things that
you need, we need to know that fairly quickly.
I also want to see evidence pretty quickly that you are
engaging the two dozen or so private housing providers in each
of your lanes and solving this problem and coming back with
very different results in the near future.
I also want to--on behalf of the chair, he appreciates all
of you coming in today and he wants to assure you that he is
clearly--on the one hand, this is a joint committee between my
Personnel Subcommittee and Senator Sullivan's Readiness
Subcommittee. The chair and the ranking member thought enough
of this that they want to elevate this to the full committee
level. At the same time, both the chair and the ranking member
have encouraged both me and Senator Sullivan and our respective
ranking members to go through our own process, probably hold
other hearings so that we are moving this along.
So you can expect in my capacity as the Personnel
Subcommittee chair that you will be getting an invitation to
come back, and we will be wanting some specific answers to
questions. You can also expect questions for the record from
many of us, particularly those of us on the subcommittees,
other members. We would expect or would appreciate a prompt
response because we want to produce a result.
Again, in the meantime, anybody out there, all the
networks, all the interest groups that are watching this,
please make sure they know that the Senators are here to do the
casework.
Actually there is one other thing and then I will stop.
By the way, I yielded back 1 and half minutes from my first
line of questions.
[Laughter.]
Senator Tillis. So I am only 30 seconds over so far.
Is there anything that would prohibit any of you all from
sending a letter to current military housing tenants saying we
are concerned about this? You may have a work in progress. We
want to know about it. Is there anything within the contracts
that would prevent you from doing that?
Secretary Beehler. Sir, on behalf of the Army, I will
double check. I do not know of anything, but I will definitely
check and hopefully we can do as you suggest but I need to
check.
Senator Tillis. Whatever is most expedient, whether it is
snail mail, email communication. But I think that we owe to
these tenants, particularly these young people, to know that we
have their back and that you are willing to help them. And
while the private providers are helping, I think you owe it to
the current base and maybe over some recurring period until the
foreseeable future when we are convinced we have got a handle
on this problem. I think you should do that to your base.
Thank you all for being here today, And again, stay tuned.
We will be reaching back out to you and look for questions for
the record.
The meeting is adjourned.
[Whereupon, at 5:07 p.m., the Committee adjourned.]
[Questions for the record with answers supplied follow:]
Questions Submitted by Senator Jack Reed
military family housing
1. Senator Reed. Secretary McMahon, Secretary Beehler, Secretary
Bayer, Secretary Henderson, Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
Hickey, and Mr. Bliss, are each of you 100 percent confident that every
military family is living a safe and healthy home today and what steps
have you taken to alleviate family perceptions of potential retribution
for reporting issues of maintenance and hazards?
Secretary McMahon. The health and safety of our servicemembers and
their families is a top priority for the DOD. Although privatization
has dramatically improved the quality of on-base housing, there is room
for improvement, including in those areas raised in recent media
coverage. Under my leadership, working together with the Military
Departments and the MHPI partners, inspections of individual homes are
underway, resident communication has increased, and development of an
MHPI Resident Bill of Rights, with input from families and family
advocates, is underway. We are committed to improve communication with
residents, without fear of retribution, and to quickly identify and
address health and safety issues going forward.
Secretary Beehler. The health and safety of the Army's soldiers,
civilians and their families is an enduring priority. With over 100,000
Army-owned, leased and privately-managed homes, the Army can never be
100 percent certain that every military family home is free of
deficiencies.
All residents have an Army advocate at each installation housing
office. The Army and RCI Project Company's collaborate to ensure all
reported problems and issues are heard and resolved. We are
communicating to residents to ensure they understand that they have the
exact same protection available to anyone living on the local rental
market under the Fair Housing Act without having to face any fear of
reprisals.
The Army will not tolerate reprisals and will hold accountable any
person who engages in such acts. Army senior leaders and Garrison
Commanders have disseminated this zero tolerance policy to families at
every Army installation through housing town halls February 2019. While
100 percent certainty that every family is living in a safe and healthy
home is difficult to achieve, the Army is striving to improve
visibility of conditions in family housing and to inform residents of
the proper mechanisms to effectively communicate and obtain remedies
for any identified deficiencies.
Secretary Bayer. General Neller and Admiral Richardson have each
issued orders requiring commanding officers to afford the opportunity
for every family in military housing to receive a voluntary visit by
April 15, 2019. The purposes of these visits are:
1. to raise command awareness of family living conditions to
ensure that they are safe, secure and environmentally healthy;
2. to personally observe any issues affecting the home and to
understand any actions being taken to address them; and
3. if a problem is found, to help servicemembers and their
families get the problem resolved, and ensure that all families
understand the help and resources available to them.
Marine Corps Commanders will use the Marine Housing Outreach
program to improve their awareness of concerns and better advocate for
military families. Commanders will leverage appointed servicemember
advocates and the base housing office to streamline communication with
providers. Both commanders and appointed advocates will ensure
effective oversight and remediation are in place, operating with the
full authority and support of the chain of command. The DON will
streamline its reporting process so that no sailor (or soldier or
airman living in DON privatized housing) has to exceed two calls before
achieving resolution--the first to the housing company, and the next to
their chain of command, which can then properly advocate on their
behalf with the government base housing office, base leadership, and
Commander Navy Installation Command (CNIC) to ensure resolution.
Simultaneously, families will continue to have an open channel to the
base housing office. Our guidance regarding the home visits and
resolution of issues states: ``there cannot be even the hint of
retaliation or retribution. It should be the goal of every command that
their sailors bring these and other issues to their command leadership
for resolution. Leadership, especially small unit leadership like
division officers and division chiefs, should be eager to resolve these
problems on behalf of their sailors.''
Secretary Henderson. The health and safety of our airmen and their
families is a leadership imperative. This is about taking care of
people. There is nothing better than engaged leaders with eyes on the
problem. Therefore, the Secretary and Chief of Staff of the Air Force
directed each of our wings to conduct a health and safety check for our
airmen living in privatized and government owned homes and government
leased housing worldwide. We found that of the almost 51,000 airmen
contacted, almost 9,900 expressed concerns about their home. We were
only able to reach 89 percent in the short time before this hearing,
and we will continue our efforts until we reach 100 percent.
Of those contacted, over 14 percent were concerned with the health
and safety of their homes. Wing leadership offered members a home visit
to view the problems firsthand. Installation commanders are taking
immediate action to address health and safety concerns of these members
as well as the concerns from those who directly contacted the Senate
Armed Services Committee. I sent an update letter to the Committee on
March 26, 2019 regarding those families who directly contacted the
Committee.
The Secretary and Chief have conducted visits to the most troubled
bases and met with residents, installation leadership and, in some
cases, the project owner. The Air Force Inspector General is performing
an inspection of housing privatization policies, procedures, and best
practices for handling resident complaints and protecting residents.
While we have not found any cases of retribution, we take this issue
seriously and this is an aspect of the Inspector General's
investigation. The Air Force Judge Advocate General has provided
guidance to legal offices to educate tenants about the services
available through military legal assistance, tenants' rights under
leases and state law, and the process for filing claims. Finally, the
Air Force established a toll-free housing call center for residents to
report concerns with privatized housing to the Air Force Civil Engineer
Center Housing Division.
Mr. Williams. To the best of my knowledge, I am not currently aware
of any occupied homes across our military housing portfolio that
exhibit habitability concerns or are non-compliant with applicable
health and safety laws and regulations. BBC maintains extensive lead-
based paint, moisture/mold remediation and other health and safety
policies and procedures designed to ensure that resident concerns are
addressed promptly and consistently. Once a work order request made by
a resident is received, BBC staff respond to it based on the
appropriate service level priority (emergency, urgent, routine). With
regard to work order requests placed by residents after regular
business hours, we assign ``on-call'' duty to BBC maintenance staff to
ensure an appropriate response regardless of the time of day. It is
BBC's policy that all emergency and urgent work order requests made by
residents also receive a follow-up satisfaction call. BBC also
maintains a preventative maintenance program that is designed to
proactively identify maintenance issues, and ensure homes are monitored
on a continuous basis for needed repairs. As part of this program, BBC
maintenance staff conduct the following procedures, among others:
Comprehensive check of all life safety systems (smoke/
carbon monoxide detectors, fire extinguishers, range hood fire
suppression canisters) as part of every work order/service visit to the
home;
Annual and visual inspection of lead-based painted
surfaces in pre-1978 homes to identify compromised areas in need of
repair/remediation;
Annual checks of all housing components and systems,
interior/exterior; and
Review of repeat work orders to identify any systemic
issues.
See our response to question 28 below regarding steps taken to
alleviate family perceptions of retribution for reporting maintenance
or health and safety issues. We stand alongside our service branch
partners in condemning any actions that involve retaliation against
servicemembers for reporting housing concerns. To the extent BBC were
to become aware of any employees or contractors engaging in such
activity, we would take immediate disciplinary action.
Mr. Picerne. Based on our own records as well as the results of
recent inspections performed by the Army and Air Force, we are
confident that more than 99 percent of the homes we manage are safe.
The remaining less than 1 percent have varying issues that may impact
the habitability of the home to the point where residents must be
offered temporary alternative housing (i.e. hospitality suite home or
hotel) while necessary repairs are made. In any situation where there
is any concern about issues that could potentially adversely impact the
residents' health or safety, appropriate steps are taken to ensure the
home is fit for re-occupancy following completion of repair work.
Corvias is partnered with the Army and Air Force on projects that
in total include approximately 27,000 homes. One of the key drivers
behind the Program was the private partners' ability to bring
significant private financing (via long-term debt) to an on-post
housing program that was traditionally woefully underfunded via annual
federal budget appropriations. The deferred maintenance issue is simply
too great to overcome without the addition of significant additional
capital. The initial capital infusion was never intended to be enough
to completely transform what was a very old and neglected housing stock
during the initial development period (the first 7 to 10 years of each
50-year partnership). As such, the private partners' ability to
continue to improve the military housing is heavily influenced by the
revenues and capital available to the partnerships. The reality is that
while great strides have been made over the past 15+ years including
thousands of newly constructed homes and renovations of thousands of
others, these partnerships between the government and private sector
still own thousands of very old homes that needs to be replaced.
With respect to concerns about potential retribution for resident's
reporting maintenance issues or hazards, we have stated publicly that
we agree with our military partners' policy against retaliation. If we
are made aware of any resident's concerns about retaliation, we will
cooperate in a thorough review of the situation, and if necessary will
take appropriate disciplinary action.
Mr. Ehle. At Hunt Military Communities (``Hunt''), we have no
higher priority than ensuring the health and safety of our resident
servicemembers and their families. Every resident deserves our best. We
recognize, however, that there is no such thing as maintenance-free
housing and that issues will inevitably arise that must be remedied
with both our historic and newer homes. When that happens, we strive to
address the situation in a timely and transparent manner.
We value and are committed to maintaining regular communication and
an open dialogue with all resident families. In support of this, we
strive to continually improve our customer service and communication
skills among our personnel, particularly those management and
maintenance teams that are focused on assisting residents and
addressing their concerns every day. In recent weeks, we have
undertaken refresher training among our community directors,
maintenance directors, and other leadership to ensure that
communications with our resident families are effective and reflect the
high-quality customer service our families deserve.
Mr. Hickey. We believe that all residents have the right to reside
in homes and communities that are safe and meet health and
environmental standards. Our portfolio consists of over 40,000 homes,
including 24,142 legacy homes built prior to privatization. We actively
manage many issues in our portfolio as they arise, and work with
residents and installation leadership to resolve them. Lendlease
encourages residents to report housing issues, and any confirmed
incidents of retribution will be dealt with swiftly and appropriately.
Based on our own inspections, command inspections and feedback
available to us, to the best of our knowledge, we are confident that
every military family in one of our properties is in a safe and healthy
home and that any maintenance incident that arises to change that
status will receive a very prompt and satisfactory response. There are
no circumstances under which any retribution is condoned, to the best
of our knowledge this has not occurred.
Mr. Bliss. I am 100 percent confident that Lincoln Military Housing
(LMH) has a process in place to make homes ready for occupancy that are
safe and of high quality. We are in the process of an in-depth review
with our Department of Defense (DOD) partners to confirm the condition
of our homes and the processes in place for maintaining them. LMH
completes annual preventive maintenance checks on every home in the LMH
MHPI portfolio. Thorough checks are made by LMH personnel for signs of
water intrusion, mold growth, peeling/flaking paint in pre-1978 homes
and other potential life/safety concerns (i) during the make ready
process, (ii) at change of occupancy, and (iii) during the annual
preventive maintenance process. While LMH makes every effort to
identify issues and remedy them in advance, LMH also relies on its
residents to abide by established residence guidelines, which require
the residents to immediately report any issues so that LMH personnel
can promptly address them. LMH's call center is staffed 24 hours/7 days
a week to address service calls.
LMH was disappointed to hear stories of retribution. Accordingly
LMH has again communicated with its on-site teams that, as service
providers, we want and need our residents to report maintenance needs
and potential hazards. In addition, in 2017 LMH expanded its
communication of the escalation process for unresolved resident
concerns. The escalation process in place entails the following:
(a) contacting LMH's maintenance hotline with a concern or
maintenance request,
(b) if the resident's concern is not resolved, LMH asks the
resident to call LMH's Regional General Management Office, and
(c) LMH encourages the resident to contact the Government/Base
housing office at any time during the process to further advocate on
their behalf to resolve any concerns.
In addition, LMH follows strict protocols for homes that (i)
exhibit mold (in accordance with EPA guidelines and industry best
practices), (ii) are of pre-1978 construction where lead-based paint
(LPB) may be present (specific lease disclosures and EPA information
pamphlets notify residents of this in accordance with applicable laws),
or (iii) are known or suspected to contain asbestos-containing
materials (ACM). As part of the military housing privatization program,
DOD was required to report any existing hazards, including but not
limited to LBP and ACM. The public-private ventures (PPVs) took the
information presented by DOD and completed Phase I environmental site
assessments.
No landlord can guarantee that all health and safety concerns are
reported. At the same time, LMH's residents are routinely informed of
how to report any instances that might affect their safety and health,
whether it be through LMH's 24-hour call center, its online service
request system, the resident's district office or the resident's
Command.
2. Senator Reed. Secretary McMahon, Secretary Beehler, Secretary
Bayer, Secretary Henderson, Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
Hickey, and Mr. Bliss, how do each of you define family satisfaction,
what kind of questions do you ask in your resident satisfaction
surveys, what is your survey response rate and have you ever taken any
steps to incentivize families to respond to surveys (if so, please
detail)?
Secretary McMahon. Annual resident satisfaction surveys are
performed by a nationally recognized independent third party. The
surveys include a set of core questions asked of all residents,
supplemented by questions that are Military Department specific. One of
the key questions asked is whether the resident would recommend
privatized housing. In 2018, the resident satisfaction survey was
distributed to 184,345 military households and had a response rate of
43.6 percent. The Department is unaware of any instances where steps
were taken to incentivize families to respond to the third party
surveys, but private partners may have incentivized other surveys they
use to monitor staff performance. Resident responses on the third party
survey of MHPI housing exceed national averages based on data reported
by Multifamily Executive Magazine in 2018, and consistently produced
ratings considered by the independent firm to be outstanding.
Secretary Beehler. The Army Annual Housing Survey is focused on
three key satisfaction: Service, Property, and Overall Resident
Experience. These metrics provide a good indicator of how well or
poorly the RCI Portfolio partners are performing. Nine (9) Business
Success Factors in the survey, which may vary slightly from year-to-
year, also provide specific insight into which functions have a high
level of satisfaction and which may require improvement. The most
recent completed survey for 2018 reported a response rate of 38.5
percent (30,241 respondents out of 78,515 surveys sent). Response rates
for the previous 3 years were between 38.2 percent and 39.8 percent.
The Army does not incentivize respondents to respond to the Army Family
Housing Survey.
Secretary Bayer. The surveys DON's MHPI partners use are directed
by the DON and developed by CEL & Associates, LLC. The surveys provide
a benchmark and allow DON to compare pre- and post-privatization
satisfaction ratings as well as compare privatization project
satisfaction ratings to community rentals/industry standards. A copy of
DON's Resident Satsifaction Survey (RSS) have been retained in
Committee files. The full survey includes 55 questions, some of which
are highlighted below:
With regard to the appearance and condition of the
community, how satisfied are you with . . . How would you evaluate the
property management of Privatized Housing with regard to the following
. . . . How would you rate your satisfaction with maintenance services
. . . ? How satisfied are you with each of the following features of
the community . . . How would you rate your satisfaction with the
following characteristics of your home . . . How would you evaluate the
leasing process: . . . Please indicate how much you agree or disagree
with each of the following statements . . .
The survey includes satisfaction questions related to
responsiveness and follow through, property appearance and condition,
quality of management, leasing, maintenance, customer service, property
rating, relationship rating, and intention to renew housing. The RSS
survey also gives respondents the opportunity to provide to open-ended
comments and request to be contacted.
The average response rate for 2017 to 2018 was 45 percent.
Secretary Henderson. The Air Force measures resident satisfaction
for all but one of our 63 installations using an industry standard
third party Resident Satisfaction Survey. The third party company
reviews responses for signs of tampering. The survey questions are
standardized across the military and the private sector and the survey
process allows residents to respond anonymously. The 2018 response rate
was greater than 46 percent. Each question is rated on a scale of 1 to
5 and the survey includes 53 questions on appearance and condition of
the community, management of the property, maintenance services,
community amenities, characteristics of the home, leasing process and
overall morale. In addition to the annual survey, customers are
provided feedback cards for every work request, which seeks ratings and
comments regarding ease of reporting, timeliness of response, whether
the work was performed correctly the first time, professionalism of the
technician, and whether they want a follow up. The Air Force is
exploring potential improvements to both the Resident Satisfaction
Survey and the Work Order Survey to improve response rates, detect
trends, and provide a picture of the overall satisfaction, while not
diluting the minority with serious problems.
Mr. Williams. BBC utilizes a third party independent electronic
driven touch point survey (SatisFacts) to track customer satisfaction
response and customer service for each service request and each
resident move-in. While we work with this third party service to
develop proper survey questions to ensure reliable data, generally our
questions are selected to obtain satisfaction with work order response
time, quality of work order responses, professionalism exhibited by
staff and satisfaction with housing conditions.
Generally, BBC's response work order response rate is 13 percent
(industry standard 10 percent to 20 percent) and its move-in response
rate is 29 percent (industry standard 10 percent to 15 percent). From
time to time, BBC has used contests (through random drawings) to
encourage resident completion of surveys, such as winning a rent
credit. These surveys and the drawings are promoted on housing
Facebook pages, by site personnel and in marketing collateral in order
to promote increased response rates.
Mr. Picerne. Our goals are aligned with our military partners. We
agree that we should work together to ensure that we can provide on-
post military housing that is safe, comfortable, and affordable, such
that it is considered the housing of choice by servicemembers and their
families. Along with the housing, we must also provide excellent
customer service to all of our residents. We have acknowledged that in
some instances, the quality of our service had slipped. We have
undertaken a concerted effort to quickly improve our performance, with
the goal of returning to the gold standard of resident satisfaction.
Our residents are all offered the opportunity to respond to
independent surveys, approved by our military partners and administered
by unbiased third-party survey firms, including annual resident
satisfaction surveys and satisfaction surveys after the completion of
work orders.
As is the case with all surveys, one goal is to find ways to
encourage as many people as possible to take the survey, so the surveys
represent a wider cross-section and representation of the population
being surveyed. To that end, we have worked with the independent survey
companies to get the word out about surveys and encourage residents to
respond to the surveys, including e-mail blasts to all residents. In
the past, we have held resident events during which we encouraged
participation by allowing servicemembers to be eligible for a raffle
for gift cards, etc., once they submitted their survey. Our military
partners encouraged efforts to increase resident participation in the
surveys, however, based upon recent feedback we acknowledge how such
events could be perceived differently, as such, we've suspended those
events moving forward.
Mr. Ehle. Hunt does not have control over the annual resident
satisfaction survey. It is administered by an independent third party,
CEL & Associates, Inc., and delivered electronically directly to
residents to maximize response rates. The survey invites residents to
answer questions about Hunt's readiness and willingness to solve
problems, its responsiveness to resident concerns, the physical
appearance and condition of Hunt properties, overall resident
satisfaction, including resident intention to renew their lease, and
other topics.
While response rates vary from property to property, Hunt is proud
of the overall response rates across its communities. In recent years,
response rates have exceeded 50 percent at some properties, and we
strive to obtain increased response rates year after year.
Hunt values resident feedback and takes steps to increase response
rates. Internally, Hunt publishes response results to further motivate
staff teams to improve resident service. Externally, Hunt holds
community events to encourage residents to complete the survey through
the independent, third-party administrator.
Mr. Hickey. Family satisfaction is primarily measured using two
methods:
1. Military service-sanctioned, independent CEL & Associates
(CEL) resident satisfaction and performance improvement surveys. They
have performed this for our MHPI portfolio for over a decade. CEL
annually surveys every MHPI project within each branch of the Military
Services using a core set of questions for all surveys to generate a
like for like comparison. Surveys are conducted online using strict
quality control measures.
2. A separate SatisFacts survey is conducted following each time
a work service order or key event occurs. These surveys are sent out by
Lendlease service teams immediately after a service order event (see
results below).
Projects from time to time offer incentives (such as raffle prizes)
to drive survey participation as survey results are more valid the
higher the participation as a percentage of total population surveyed.
The 2018 CEL portfolio response rate across the full Lendlease
portfolio was 44.2 percent reflecting approximately 17,680 responses.
The CEL survey questions identify nine (9) Success Factors (SF--2018
score and CEL overall rating are reflected):
SF1: Readiness to Solve Problems--84 ``Very Good''
SF2: Responsiveness & Follow Through--80.6 ``Very
Good''
SF3: Property Appearance & Condition--80.9 ``Very
Good''
SF4: Quality of Management Services--83 ``Very Good''
SF5: Quality of Leasing--87.9 ``Outstanding''
SF6: Quality of Maintenance--86.1 ``Outstanding''
SF7: Property Rating--79.8 ``Good''
SF8: Relationship Rating--83.1 ``Very Good''
SF9: Renewal Intention--77.5 ``Good''
The 2018 SatisFacts response rate across the full Lendlease
portfolio was 13.0 percent reflecting approximately 37,150 responses
across all survey types (conducted post Leasing, Move-in, Service
Order, Resident Experience and Point of Service). The 2018 scores and
SatisFacts ratings were:
Leasing: 4.52--Exceptional
Move-In: 4.56--Exceptional
Service Order: 4.39--Superior
Resident Experience: 4.25--Superior
Point of Service: 4.24--Superior
Whilst these scores for both surveys are strong, we do pay specific
attention to the negative feedback we receive and address it directly,
both at an individual level as well as through our business planning
cycle. In addition, we are focused on lifting our response rates.
Mr. Bliss. LMH defines family satisfaction as being a time when all
residents enjoy their living experience and when issues arise, as they
will, LMH personnel quickly resolve such issues with excellent customer
service and quality workmanship.
The third-party resident satisfaction survey mandated under the
project documents is anonymous and extensive. This independent survey
also affords residents the opportunity to provide comments either
anonymously or with an option to be contacted to follow-up on their
comments. These comments are reviewed by both LMH and its DOD partners.
LMH understands that all branches of the military utilize substantially
the same third-party survey form (a sample of which is attached
hereto).
LMH's resident survey response rate is typically in the 35 percent
to 50 percent range, which we understand is typical. To increase the
response rate, LMH has utilized tools to encourage increased
participation by residents. Such incentives are never offered in an
effort to influence how LMH is rated. LMH welcomes any and all
feedback, positive or negative, as it continues to seek ways to improve
resident satisfaction.
3. Senator Reed. Secretary McMahon, Secretary Beehler, Secretary
Bayer, Secretary Henderson, Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
Hickey, and Mr. Bliss, have any of you ever had fees withheld for
failure to perform, and if so please describe?
Secretary McMahon. The Military Departments, as part of their
respective oversight programs, are in a better position to respond to
this question.
Secretary Beehler. Garrison Commanders in the past have withheld a
portion of incentive fees when the MHPI partner failed to meet the
criteria of an objective metric. We are assessing this area and believe
we need to make improvements and will be working with the MHPI partners
to ensure that metrics are quantifiable and reflective of desired
performance objectives.
Each Military Housing Privatization Initiative (MHPI) project,
other than Fort Carson, has an individual incentive fee management plan
based on objective and subjective metrics.
Secretary Bayer. Yes, on a few occasions the DON has withheld fees
for failure to perform or for other reasons. Please refer to our
response to question 72 below. DON's privatized housing is owned,
operated and maintained by privatization (i.e., Military Housing
Privatization Initiative or ``MHPI'') project entities which are
Limited Liability Companies (LLCs). It is often referred to as public-
private venture, or ``PPV'' housing. The Managing Members (Private
Partners) of the LLCs hire and pay fees to service providers, such as a
property managers, to carry out the purposes of the LLCs. These fees
are paid out of funding available to the LLCs, primarily revenue.
Although in many instances the service provider is a related entity of
the Managing Member, each of the fees are customary for the particular
service provided, would have to be paid regardless of who provides the
service, and are in line with market rates for the fees. Wherein the
service fee includes a base and incentive, the total of the two is in
line with market rates for that particular fee. Both base & incentive
fees, including incentive fee performance requirements, are documented
in the operating agreement of the LLC or attachments to that operating
agreement, and cannot be revised without DON Member approval.
Secretary Henderson. Over the last 12-month period, the Air Force
has withheld $1.2 million in Performance Incentive Fees out of a
potential $19.7 million. We withheld these fees based on project
owners' failures to meet standards established in the Performance
Incentive Fee Plans. In the case of Keesler, MacDill, and Tinker Air
Force Bases, inadequate mold remediation efforts were specifically
cited in the decision to reduce the performance incentive fee.
Mr. Williams. We have been debited portions of our fees in
instances where we have not achieved our defined metrics. Examples of
these would be exceeding budgeted controllable expenses, occupancy
targets going below 95 percent, not completing turnover work within the
defined timeline (specific to each project but range is generally 4 to
7 days), not meeting response and or completion times of a portion of
work orders or not meeting customer satisfaction ratings for a defined
period (varies based on project; either annual or quarterly and
benchmarks range from 85 percent to 95 percent).
Mr. Picerne. On occasion, we have received less than 100 percent of
our incentive fees for failing to meet the metric necessary to earn 100
percent. Some examples include failure to comply with adherence to
budget metrics (mostly related to timing of expenses), failure to
manage occupancy expectations, etc. Admittedly, these examples/
instances are not the norm, but we have on multiple occasions, earned
less than 100 percent of incentive fees.
Mr. Ehle. Under our agreements, Hunt is compensated for services
associated with the management of rental real estate housing complexes,
such as property management and, as applicable, asset management. The
fee arrangement typically includes two components:
1. a base fee, which includes (a) property management fee and/or
(b) asset management fee, if applicable; and
2. a performance incentive fee. The rates for these fees, and the
ways in which they are earned, are established during the competitive
bidding process for the award of the MHPI project, and are then
negotiated and agreed upon in definitive documents. The amount of fees
received is not guaranteed.
Incentive fees are discretionary and are based upon performance.
The criteria that factor into incentive fee calculations vary from
project to project, but, generally, they include at least:
1. resident satisfaction (via annual surveys);
2. maintenance response times; and
3. other performance metrics as decided by the particular military
department for a given project. Installation base commanders can also
weigh-in on the performance of the property manager and adjust the
incentive fee accordingly.
If we fail to meet performance expectations outlined in the
agreement, as assessed by our military partners, some or all of the
incentive fee may be withheld. There have been times when Hunt has not
received the all available incentive fee. This has occurred, for
example, when Hunt received low resident satisfaction survey scores,
when percentage of response times for work orders has exceeded the
allowable threshold, and when we have exceeded acceptable variances for
expenses within our operating budget.
Mr. Hickey. All Lendlease project's asset and property management
agreements include an element of incentive fee to promote performance.
The Military Services can withhold and/ or not award full incentive
fees if agreed performance metrics are not achieved. Project
performance is measured against incentive criteria established in
project business agreements and each military service determines the
resulting award percentage in accordance with those agreements
Lendlease has had incentive fees withheld.
By way of example, as a part of our SASC response, we reviewed our
incentive awards over the past 3 years (fiscal year 2016 through fiscal
year 2018). Eighty-eight incentive awards were analyzed and of these,
53 had their incentives reduced from the full 100 percent possible.
Fees were reduced for;
Not achieving service completion times
Not achieving change of occupancy completion times
Not achieving customer satisfaction rations from CEL or
SatisFact scores
Lendlease provided 3 specific examples of instances in which
incentive fees were withheld from its projects to Senator Warren's team
on March 9, 2019. The Lendlease team would be pleased to provide a
similar briefing to SASC, if additional information is desired in
response to this question.
Mr. Bliss. LMH has had a portion of our fees withheld. The
incentive fees that are included in LMH's project documents are
determined by a variety of metrics, including but not limited to: (a)
resident satisfaction survey results, (b) completion of change of
occupancy maintenance and service requests within specific thresholds,
(c) LMH's participation with small businesses as part of its vendor
pool and (d) evaluation by LMH's DOD partner. While incentive fee
calculations differ by project, LMH generally receives 80 percent to 90
percent of the fees. LMH is committed to achieving the highest level of
service for our residents.
4. Senator Reed. Secretary McMahon, Secretary Beehler, Secretary
Bayer, Secretary Henderson, Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
Hickey, and Mr. Bliss, what are the most common housing hazard issues
you're tracking today, how widespread are they, and how do you know?
Secretary McMahon. The Military Departments, as part of their
respective oversight programs, are in a better position to respond to
this question.
Secretary Beehler. Based on work orders submitted to MHPI partners
from February 15 to March 20, 2019, the most common housing
deficiencies are plumbing, electrical, and elevated moisture levels
leading to mold. Based on review of these work orders and installation-
led visits to 100 percent of the inventory, The Army has determined
that life/health/safety work orders account for less than .2 percent of
current work orders in the queue (47 out of 29,217).
The Army is inspecting 100 percent of all work /service orders
relating to life/health/safety; contacting 5 percent of all residents
with a completed maintenance call within the last 72 hours to assess
the results of the maintenance performed; and visiting 100 percent of
those called who indicate dissatisfaction with the maintenance
performed.
Secretary Bayer. The issues raised in recent housing
dissatisfaction reports are: poor workmanship/construction, mold,
pests, water intrusion and lack of air conditioning. The DON and PPV
partners are currently evaluating all relevant data to determine the
magnitude of the problems raised. The results of this analysis will
help us develop the best way ahead.
Secretary Henderson. The most common housing hazard issues we are
tracking today are mold/moisture intrusion, pests, and chipped or
flaking paint that may be lead-based. Based on the health and safety
review we conducted, the Air Force is tracking that 14 percent of our
military residents have health or safety concerns. Of the 9,980 members
that accepted a visit from the installation leadership team, they
confirmed that 2,421 had evidence of mold or moisture, 1,234 had
evidence of pests, and 482 had peeling or flaking paint. These same
concerns were also the most common raised during recent Air Force
leadership visits to our most troubled installations.
Mr. Williams. We track our service requests by category (asbestos,
lead based paint, fire/safety, water intrusion, mold, pest, electric,
HVAC, plumbing) and also by priority of emergency, urgent and routine.
We respond to all emergency work orders within one hour and all urgent
within four hours. If there are any situations that cannot be corrected
immediately and rise to the level of a hazard (environmental) and/or
compromises quality of life (lack of heat, lack of air conditioning),
the resident is offered alternative accommodations for the duration of
the repair.
General plumbing maintenance requests make up the majority of our
service requests. Mold/mildew maintenance related requests represent
less than 1 percent of service calls and are classified as urgent.
Additionally, a community management and facility management
representative responds to all moisture related calls and we invite our
government partner to join us on these visits to the resident's home.
Mr. Picerne. More than 99 percent of the homes we manage are safe,
meaning no hazards. The remaining less than 1 percent have issues that
may impact the habitability of the home to the point where residents
must be offered temporary alternative housing (i.e. hospitality suite
home or hotel) while necessary repairs are made. In any situation where
there is any concern about issues that could potentially adversely
impact the residents' health or safety, appropriate steps are taken to
ensure the home is fit for re-occupancy following completion of repair
work.
The more common housing hazard issues that we're currently tracking
are related to water intrusion that may create an environment for mold
growth. These problems are most persistent in the older homes in our
portfolio. Of the approximately 27,000 military homes we manage on
behalf of our partnerships with the Army and Air Force, approximately
10,000 were built prior to 1978. While several of these instances are
tied to roof and/or plumbing leaks, there are also instances where our
failure to continually educate our residents has led to some of these
issues. For example, we have several cases of aluminum windows sweating
(condensation), especially in the winter months. If left unaddressed,
the window sweat can lead to mold spores collecting on the sides of the
window as well as the window sill. However with proper routine care
given by the resident in the form of simply wiping up the condensation
on a regular basis, the likelihood of any mold related challenges
related to window sweating is reduced to virtually zero.
Mr. Ehle. Hunt currently owns and operates 21 separate projects in
partnership with DOD. All of Hunt's projects, some of which include
multiple property sites, are located on or near Air Force, Navy, Marine
Corps, and Army bases throughout the country. Specifically, Hunt own
interests in approximately 52,000 homes on or within close proximity to
49 military installations located in 21 states and the District of
Columbia. Of that number, we manage about 32,000 units across 44
installations and serve more than 165,000 residents.
Across this diverse portfolio, we would not characterize one type
or group of complaints as most common. Rather, resident issues
typically vary according to geographic location, age of housing stock,
and other factors.
One challenge that we have experienced at more than one of our
properties involves moisture issues. For example, our communities at
Keesler Family Housing in Biloxi, Mississippi. The previous homes there
were largely destroyed by Hurricane Katrina in 2005 and rebuilt via
MilCon before privatization. After privatization, we found that
residents were consistently identifying moisture-related issues.
Addressing these issues proved difficult, but we took ownership of the
situation and executed a multi-phase moisture remediation project,
which included assessments of each of the approximately 1,100 homes at
Keesler, and completed all necessary remediation work. We have received
some reports of moisture issues at other Hunt properties, and we
address them promptly and diligently.
Mr. Hickey. The most common maintenance and hazard issues the
Lendlease team is currently tracking include mold and lead-based paint
concerns. For calendar year 2018, a total of 2,001 mold service orders
and 582 lead-based paint service orders were received across 400,000
service orders. These reflect 0.50 percent and 0.145 percent
respectively of total service orders during the calendar year.
All work orders with homes that have potential environmental
conditions are pre-stamped and identified directly on the service order
to notify the technician that they need to take appropriate precautions
and employ EPA guidelines to appropriately remediate issues. Preventive
maintenance occurs on all homes each year with special attention given
to those with known environmental conditions.
Issues are tracked and logged via Yardi property management
software, an industry-leading product as well as the primary standard
for property management software across the privatized military housing
program.
Mr. Bliss. We take any health and safety hazards very seriously and
treat such work orders as emergencies, which require a 30-minute
maximum response time. In addition, we review our work orders to
identify trends. Emergency work orders represent approximately 10
percent of our total service requests.
Based on a review of service request histories, mold is the most
common environmental service request LMH receives, although it is not
widespread. We follow EPA guidelines and industry best practices for
addressing mold. LMH follows a multi-step process to address and follow
up with mold, both from when a resident calls in for potential mold or
when one of our Preventative Maintenance Teams discovers mold during
their annual walks. Resident education is also a crucial aspect
regarding mold. In 2018, we began an outreach program to ensure
residents understand what they can do to prevent/mitigate mold and what
to expect from LMH when it is reported. Whether the result of a leaking
pipe, leaking roof or a housekeeping issue, we treat any occurrence of
mold with the same level of urgency and care.
5. Senator Reed. Secretary McMahon, Secretary Beehler, Secretary
Bayer, Secretary Henderson, Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
Hickey, and Mr. Bliss, how do you use maintenance and work order
histories to inform your housing maintenance plans?
Secretary McMahon. The housing privatization projects own, operate,
and maintain the privatized housing under the Military Housing
Privatization Initiative and, therefore, are the entities who develop
and maintain all associated housing maintenance plans.
Secretary Beehler. Maintenance and work order histories are a
critical resource in all housing (Army-owned, leased, and privatized)
to identify maintenance trends and validate long-range plans for repair
and replacement. These histories allow the Army to gauge the timeliness
and thoroughness of responses and may identify the need for more, or
better trained maintenance personnel. Feedback from work orders allows
us to identify recurring issues and details of any equipment failure,
to analyze the quality of preventive maintenance for improvement, and
to assess the project Capital Repair and Replacement Plans and
operating budgets for adequacy.
Secretary Bayer. Maintenance plan development is the responsibility
of the partners, based on recurring maintenance, the age of the home,
and resident feedback. Maintenance plans are included in the Partner's
annual budget and 5-year plan, both of which are reviewed by the DON.
Secretary Henderson. Project owners are required to maintain,
sustain, and operate housing in a safe and healthy condition.
Installation commanders and the Air Force Civil Engineer Center review
both the Operating Budget and Sustainment Plans and the Air Force Civil
Engineer Center approves the Operating Budget. Where we know of
specific issues, such as moisture issues or other major complaints,
these budgets and plans are questioned to ensure they are addressing
those concerns.
Within our government owned housing, we conduct a Housing Community
Profile every 5 years, which includes condition assessments to inform
our Housing Master Plan and program for larger projects. In addition to
these assessments, we use trends in maintenance data to develop smaller
repair and upgrade projects by facility maintenance teams at each
installation.
Mr. Williams. Maintenance and work order histories are used to
identify systemic issues and to develop short term and long term action
plans to correct. These histories are also the benchmark for the
development of our annual operating budgets, our annual and 5 year
capital replacement plans and the more far reaching sustainment plans
for our projects, which are reviewed and approved by the military
services.
Mr. Picerne. Maintenance and work order histories are used to
inform both our housing maintenance plans and our short and long-term
capital repair and replacement plans. For example, if we observe a high
number or work orders relating to a certain condition in homes, we take
steps to immediately address those issues, if possible, and if not then
take steps to ensure the condition is addressed via either specifically
addressing that issue across similar housing stock or, if necessary
incorporating means to address the issue as part of our annual
budgeting for capital repairs and replacements.
Mr. Ehle. Resident complaints and reports of issues are logged into
Hunt's housing maintenance software, Yardi. Hunt monitors this
information closely and works proactively with residents to address
issues as they arise. In situations where we have found that residents
are consistently identifying specific issues, we use that information
to help us understand and identify potential underlying causes and
develop a comprehensive solution.
For example, when we found that Keesler residents were consistently
identifying moisture-related issues, we took a broader look at the
challenges they were experiencing, and we were ultimately able to
identify repairs that needed to be made to the ventilation system in
many homes in the community. With this information, we were able to
address an underlying cause of the moisture-related issues throughout
the community.
Mr. Hickey. At each project, Lendlease and its partners use
historical trend analysis to inform assumptions about future
maintenance needs. Along with other analyses, these form the basis of
the Project's annual budget and business plan (PBBP). The PBBPs rely on
trend analysis to forecast changes of occupancy, maintenance service
orders, and replacement of minor capital items such as home appliances,
HVACs and roofs. PBBPs for each Project are presented to the military
services for input and then approval each year.
Mr. Bliss. We use work order histories extensively. All of our
maintenance systems are online (Yardi system) and we can pull emerging
trends at all properties in order to formulate effective maintenance
plans, both for our operating and capital budgets. Annual preventative
maintenance inspections for each housing unit are custom tailored as
they are based on maintenance and work order histories at specific
locations. This allows LMH staff to inspect and address typical problem
areas in each specific type of housing unit.
6. Senator Reed. Secretary McMahon, Secretary Beehler, Secretary
Bayer, Secretary Henderson, Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
Hickey, and Mr. Bliss, if any of you fail to timely and properly
remediate an issue in a home, or fail to meet your agreement
obligations, what corrective actions can DOD take?
Secretary McMahon. The housing privatization projects own, operate,
and maintain the privatized housing under the Military Housing
Privatization Initiative and, therefore, are the entities responsible
for timely and properly remediating any issue in a privatized home, not
the Military Departments. If a project fails to timely and property
remediate an issue, the existing deal structures provide the mechanisms
for the Military Departments to hold the MHPI private partners
accountable for substandard housing. In addition to withholding of
incentive fees, the Military Departments have certain rights regarding
major decisions made by the privatization project, to include the right
to require replacement of the housing management and maintenance
service providers if warranted based on overall poor performance as
defined in the deal structure documents. In a small number of cases, a
Military Department has required the housing privatization project to
replace the property management service provider. While the ground
lease and associated legal agreements that comprise the project deal
structures include termination clauses that can be exercised in extreme
cases, DOD is focused on ensuring the long-term success of the existing
partnerships and projects rather than considering their termination,
whether for either re-competition/selection of new private partners or
for resumption of government owned and operated housing. Termination is
an extreme step that would impose significant financial cost upon the
Department and adversely impact our ability to provide quality homes
for military members and their families.
Secretary Beehler. The Army's privatized housing project companies
are required to comply with all applicable federal and state laws and
regulations, including those that regulate housing and response to
environmental hazards. The Ground Lease is the controlling document
that sets the framework on which our partnerships are based; there is a
mechanism in place to remove a property management, construction
company or RCI Privatized Partner. If a RCI Private Company continually
fails to adhere to the terms of the ground lease, the Army may be able
to either withhold incentive fees or terminate the lease.
Secretary Bayer. DON leaders have various tools available to ensure
our PPV partners meet their obligations. Oversight and monitoring
authority is set forth in 10 U.S.C. 2884 & 2885 and in associated legal
agreements. The operating agreement of each PPV company defines the
rights and responsibilities of the DON in the company. DON leadership
exercises oversight of privatized housing projects with the aid of a
``monitoring matrix'' based on the PPV's obligations in each business
deal. The managing member (or in one instance, the general partner) of
each PPV company is tasked with management of the company. While DON
does not participate in the day-to-day management of these private
companies, DON's daily interaction with these companies is the DON's
first level of oversight and issue resolution. DON is specifically
prohibited from managing the company except with regards to certain
consent rights, and other specifically defined rights, such as the
ability to initiate the process for replacement of the property
manager. DON reviews and approves the annual budget and incentive fees,
and can request reporting to provide oversight and make well-informed
consents. In addition, DON can enforce performance from the privatized
housing projects by engaging bondholders to work with the projects to
meet the commitments under the project legal agreements. DON can also
issue cure notices or use the court system, if needed, to seek
resolution for poor performance. Each PPV partner has the opportunity
to earn performance incentive fees based on several criteria, such as
resident satisfaction, maintenance responsiveness, and property
condition. Poor performance in any of these areas will reduce the
amount of the fee earned.
Secretary Henderson. If the project owner fails to properly
remediate or meet other obligations under our agreements, the Air Force
can leverage all tools available to ensure the project owner takes
corrective action. These tools include:
Performance Incentive Fees: Withholding performance
incentive fees when remediation efforts are inadequate or unsuccessful,
or other obligations are not met. However, under the current Incentive
Fee Plans, project owners generally earn at least a partial incentive
fee.
Formal Dispute Process: Initiating a Formal Dispute
process in accordance with closing documents ranging from cure notices
to termination of the leases.
Enforcement Agencies: Air Force can initiate a complaint
with the Environmental Protection Agency or state and local agencies,
which can levy fines and punitive actions against the project owner for
violations of environmental, health, or safety laws
Mr. Williams. The applicable Ground Lease for each of our MHPI
projects contains provisions regarding ``Events of Default'', which
identify the events upon which the government may terminate the
agreement. Generally, these events of default include any failure to
materially comply with the representations, obligations and covenants
contained in the Ground Leases. These include, but are not limited to,
compliance with: applicable environmental and health and safety laws
and regulations; leasing requirements outlined in the Ground Lease; use
of the improvements and premises only for the purposes set forth in the
Ground Lease; obligations to repair and restore the improvements after
casualty events; and requirements to maintain minimum levels of
insurance. It should be noted that with regard to environmental
hazards, generally the project owner/lessee is not liable for any pre-
existing environmental conditions prior to effectiveness of the Ground
Lease or for any hazards that are created by the government/lessor or
its agents.
Mr. Picerne. As a technical matter, our military partnerships are
with the Army and the Air Force, not the Department of Defense. Our
military partners have various rights and remedies pursuant to the
legal agreements that govern our partnerships, including entity (i)
Operating Agreements (for the Army partnerships in which Corvias and
the Army are members in the project-specific entity/LLC), (ii) Ground
Leases (Army)/Lease of Property (Air Force), (iii) Master Development
and Management Agreement (Air Force), Project Operating Agreements (Air
Force).
Mr. Ehle. Hunt is subject to financial or other penalties if it
fails to perform its contracts. Under the terms of our project
agreements, a military partner may terminate our agreement if we are in
material default of our obligations. Alternatively, if we are not in
material default of our agreements, but we have, nevertheless, failed
to meet performance expectations, a military partner may withhold all,
or a portion of, our incentive fees.
Mr. Hickey. Each of the Military Services has rights to exercise
remedies as stipulated in the various project business agreements. This
can include withholding incentive fees in accordance with management
agreements and at its highest, a declaration of potential default for
failure to meet contractual obligations.
Mr. Bliss. DOD has extensive oversight and review capabilities
under our project documents. If DOD finds that a PPV is not performing
its contractual obligations, then DOD can take specific actions under
the Ground Lease and other project documents to which they are a party.
DOD can also actively support the PPV's enforcement of its service
contracts. LMH supports the development of a more clear and well-
defined protocol among the PPV, property manager, DOD and our residents
regarding follow up on maintenance issues.
7. Senator Reed. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr. Hickey,
and Mr. Bliss, what do you charge families if they have to break their
lease due to health or maintenance hazards?
Mr. Williams. BBC (through its affiliates) does not charge families
to break their lease where a health or safety/hazardous condition
exists.
Mr. Picerne. Nothing. If a military family elects to terminate
their lease due to health and safety concerns with the housing, we do
not charge an early termination fee.
Mr. Ehle. When health and maintenance hazards are reported, Hunt's
first priority is ensuring resident safety. As issues arise, we want to
know about them, and we aim to fix them promptly. In most instances,
when a resident voices a concern, we work with them to address the
issue, and, if necessary, we relocate the resident into alternative
housing. On rare occasions, residents are not amenable to repairs or
relocation and wish to leave a Hunt property altogether. We assess such
situations on a case-by-case basis and may release residents from their
leases without penalty. In either scenario (i.e., whether a resident
remains a Hunt resident or not), health and maintenance hazards are
corrected.
Mr. Hickey. Protecting the health and safety of all who have a
relationship with Lendlease is a core value of our organization. As
such, we take resident concerns about health and safety extremely
seriously. When a resident identifies a health or safety issue, there
is an interactive process to address those issues. If a home has a
health or safety hazard that would put the family at risk, temporary
lodging or other accommodations are made immediately. Generally, this
would occur if residents will be without heat, water or electricity for
more than a day or where there is an environmental hazard that is
deemed to be unsafe. If it's determined that the issues in the home
cannot be remedied in 30 days or less, (for example fire or significant
structural issues), the family would be offered a permanent move-over
to a safe, comparable home. If residents decline the move, or in the
rare situation where a comparable home is not available, a lease break
is offered. In these situations, Lendlease charges no break fees. There
are circumstances in which repairs become more complicated or require
more time than estimated as they unfold. In those cases, the same
remedy approach set forth above is applied. Ultimately, if we are not
able to satisfy the resident through any other means, we relieve the
resident of their lease obligations, and do not charge any fees. Given
the quality of our inventory, this does not happen frequently. In most
cases, we can provide a suitable replacement home and/or address the
issue in an expeditious enough time frame to not unreasonably
inconvenience the resident.
Mr. Bliss. We typically do not charge residents who break their
leases due to health or maintenance hazards. If this were to occur, we
would coordinate the effort with the local government housing office or
Commands.
8. Senator Reed. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr. Hickey,
and Mr. Bliss, what access do families have to work order history and
home test results of hazards in their home, and if none, do you have
any issues with sharing those with families going forward?
Mr. Williams. Residents have access to their work history through
our software resident portal and/or app. In select circumstances where
BBC contracts with an independent firm to perform testing, a member of
our management team, and often a member of our health/safety/
environmental staff, meet with the resident to review and provide an
explanation of the data and results.
Mr. Picerne. Currently, upon request we provide copies of work
order histories to residents. In addition, if any tests are performed
in a home, we provide copies of the tests along with a summary
explanation of the test results, which is provided by the independent
third party testing firm.
Mr. Ehle. Hunt residents currently have access to the work order
history pertinent to their home from the time of their initial move-in
through the time they move out. We are also putting in place additional
measures to facilitate residents' access to their work orders.
Mr. Hickey. Lendlease believe that residents should be informed
about the homes they will be living in and are committed to providing
information in a transparent and timely manner. At move in, all
residents are provided the requisite disclosures regarding pre-existing
environmental conditions and are educated about their associated
management regimes in accordance with applicable laws and regulations.
Residents have full access to work order histories of their homes
during the length of their residency. This information is available on
the MilitaryCafe resident portal (both desktop and via an app) or upon
request to the community and maintenance management teams.
Mr. Bliss. Families are able to track their work order histories
online. If LMH identifies a current health or safety issue with a home,
we share that information with the current resident.
9. Senator Reed. Secretary McMahon, Secretary Beehler, Secretary
Bayer, and Secretary Henderson, what steps have each of you taken over
the past several years to ensure private housing companies are being
held accountable where remediation efforts have failed and what forcing
mechanisms do you have to ensure that MHPI partners are living up to
their commitments?
Secretary McMahon. As ASD(Sustainment), I have met three times with
the housing privatization partner CEOs to ensure their commitment to
the shared goal of providing safe, quality and affordable housing where
servicemembers and their families will want and choose to live.
Additionally, I have been working closely with the Military Department
Assistant Secretaries to ensure that they are taking steps to
reinvigorate their oversight of privatized housing projects, to include
quality assurance, monitoring, and enforcement of performance
requirements by privatization projects, and withholding of incentive
fees and other forcing mechanisms provided for in the existing legal
deal structures. I am also working with my staff to implement new
performance metrics to better monitor Military Department oversight and
privatization partner performance to help ensure that the Department
addresses housing concerns raised by residents and keeps this
commitment over the long-term.
Secretary Beehler. The Army is not aware of instances where
remediation of unsatisfactory conditions deemed necessary by the Army
has ``failed.'' If such failure were to occur, however, the Army could
decrement incentive fees or require the replacement of the responsible
unresponsive Project Company contractors. For unresolved conditions
creating a significant health or safety concern, the Army could also
declare the Project Company in default of the Company's ground lease
with the Army.
In order to improve MHPI performance and to ensure that MHPI
partners continue to live up to their commitments The Army leadership
has directed several initiatives:
1. Drafted a tri-service Tenant Bill of Rights in coordination
with the Navy and Air Force.
2. Worked with the RCI Project Companies to eliminate non-
refundable pet fees.
3. Suspended the RCI Energy Conservation Program.
4. Moved incentive fee approval to HQDA.
Secretary Bayer. Oversight and monitoring authority is set forth in
10 U.S.C. 2884 & 2885 and in associated legal agreements. The operating
agreement of each PPV company defines the rights and responsibilities
of the DON in the company. DON leadership exercises oversight of
privatized housing projects with the aid of a ``monitoring matrix''
based on the PPV's obligations in each business deal. The managing
member (or in one instance, the general partner) of each PPV company is
tasked with management of the company. While the DON does not
participate in the day-to-day management of these private companies,
DON's daily interaction with these companies is the DON's first level
of oversight and issue resolution. DON is specifically prohibited from
managing the company except with regards to certain consent rights, and
other specifically defined rights, such as the ability to initiate the
process for replacement of the property manager. DON reviews and
approves the annual budget and incentive fees, and can request
reporting to provide oversight and make well-informed consents. In
addition, DON can enforce performance from the privatized housing
projects by engaging bondholders to work with the projects to meet the
commitments under the project legal agreements. DON can also issue cure
notices or use the court system, if needed, to seek resolution for poor
performance.
Secretary Henderson. The Air Force has withheld performance
incentive fees at Keesler, Tinker, and MacDill Air Force Bases for
failures in their remediation efforts for mold. While not a formal
mechanism, we have also placed both Hunt and Balfour Beatty Communities
on corrective action plans due to performance failures by their
maintenance teams that exacerbated the moisture and mold issues. The
forcing functions at our disposal today include withholding of
performance incentive fees, invoking the formal dispute process, and
raising complaints with an enforcement agency such as the Environmental
Protection Agency.
10. Senator Reed. Secretary McMahon, Secretary Beehler, Secretary
Bayer, and Secretary Henderson, how often are each of you paying out
fees to housing companies and how often have each of you withheld from
paying fees?
Secretary McMahon. The Military Departments, as part of their
respective oversight programs, are in a better position to respond to
this question.
Secretary Beehler. Incentive Fees are typically paid quarterly in
accordance with the project legal documents.
Prior to February 2019, the RCI Project Company would submit a
request for the amount to be awarded. The installation housing office
would validate the request and make a recommendation to the Garrison
Commander. The Garrison Commander determines the appropriate incentive
fee payment to the MHPI partner based on the agreed upon metrics, to
include incentives paid and incentives withheld. The Office of the
Assistant Secretary of the Army for Installations, Environment and
Energy (ASA IE&E) transferred approval authority of the performance
incentive fees to their office in February 2019 effective 2d quarter
fiscal year 2019. As a result, incentive fees awarded and withheld with
the reason why, will be tracked and monitored by ASA IE&E.
Secretary Bayer. Base fees to housing companies are paid monthly
with the operating draw. Incentive fees are paid to housing companies
on at least a semi-annual basis. Incentive fees are tied to performance
measures and unearned fees go back into the project.
Secretary Henderson. Performance incentive fees are paid out
quarterly by the project (not with appropriated funds) except for four
projects (Robins I and II, Offutt and Dyess (off base site only)) which
do not have performance incentive fees. In the past year, seven of ten
project owners have seen reductions in their performance incentive
fees.
11. Senator Reed. Secretary McMahon, Secretary Beehler, Secretary
Bayer, and Secretary Henderson, have any of you ever issued cure
notices to elevate concerns to bond holders financing these MHPI
projects (and if so, please detail)?
Secretary McMahon. The MHPI project legal agreements between the
private-sector project entity, private-sector partners, and the
Military Departments are not contracts. As such there is no protocol
for the Department to issue a cure notice to the partner or the
respective bondholder representative.
Secretary Beehler. The Army has not issued a cure notice designed
to elevate concerns to bond holders. At least one lower level cure
notice has been issued to improve performance.
Secretary Bayer. Issuing cure notices is one of the tools available
to DON. Cure notices are sent to the project owner, not the bond
holders. DON would engage the bond holders when the project owner fails
to remedy issues in a cure notice. Examples of cure notices sent
include:
2007 June--NAVFAC HQ SVA letter to American Eagle
Communities LLC (PACIFICNORTHWEST) to cure Operating Agreement Defaults
2010 July--NAVFAC PACIFIC letter to Hawaii Military
Communities LLC on Asset Management Agreement deliverables
2011 December--NAVFAC HQ SVA letter to Lincoln Military
Housing LLC on Norfolk Mold plan of action
2012 January--NAVFAC HQ SVA letter to South Texas
Military Housing on Development Agreement and Ground Lease potential
defaults
Secretary Henderson. Cure notices were issued to four military
housing privatization initiative projects held by American Eagle early
in the program for performance failures. American Eagle was not meeting
its construction obligations during the initial development phase of
the project. Ultimately, the projects were taken over by a new project
owner, Hunt.
12. Senator Reed. Secretary McMahon, Secretary Beehler, Secretary
Bayer, and Secretary Henderson, what steps are each of you taking and
what information are you providing to installation commanders to ensure
they are holding housing companies responsible for timely and high-
quality service to families?
Secretary McMahon. As ASD(Sustainment), I am working closely with
the Military Department Assistant Secretaries who directly oversee
their respective privatized housing projects to establish near-term,
mid-term, and long-term actions that the Department needs to take to
address conditions in privatized housing, to include the need for
Military Departments to reinstate quality MHPI training for
installation commanders and housing staff regarding their
responsibilities so that they are able to provide quality assurance,
monitor and hold privatized housing projects accountable for providing
timely, responsive, high-quality service and housing for servicemembers
and their families. This includes understanding their authority to
withhold incentive fees and other forcing mechanisms provided for in
the existing legal deal structures, or to raise significant concerns to
high leadership, as appropriate.
Secretary Beehler. In order to re-establish its oversight of
housing services and maintenance, the Army is re-establishing the
number of personnel (an increase of 114) across its installations over
the next two months to ensure that Quality Assurance and Quality
Control is at or above levels utilized in the early years of the MHPI
program. We will emphasize and educate our soldiers and families about
the concerns and health impacts of indoor contaminates, resources
available, and methods to report potential risks.
The Army has introduced enhanced quality assurance procedures to be
conducted by Army Housing careerists that includes:
a. Inspection of 100 percent of all homes having completed between
occupancy maintenance to ensure families are moving into homes that
have no outstanding maintenance issues
b. Physical inspection of 100 percent of all maintenance work
orders relating to life, health or safety issues.
c. Contacting 5 percent of all residents who have had recently-
completed work orders to determine if they are satisfied with the work
performed. Army Housing Management staff will visit all of those
expressing dissatisfaction with the maintenance conducted.
d. Hosting quarterly town hall meetings for residents hosted by
the Garrison Commander and including the MHPI partner attendance and
participation.
e. Establishing a Hot Line phone number which can be accessed by
any housing resident should they prefer privacy to report any housing
issue.
f. Improving the training plan for Garrison Commanders, DPW staff,
and Army Housing staff to ensure the appropriate training and
certifications are obtained.
Secretary Bayer. On February 22, 2019, the commander, Navy
Installations Command, directed all installation commanding officers to
contact 100 percent of PPV residents informing them how to raise issues
with their homes. Installation Commanding Officers also held town hall
meetings to hear privatized housing residents' concerns first-hand.
Within the DON, prospective installation leaders attend senior shore
leadership training (Navy) and the Installation Leadership Management
Program training (USMC) that includes a segment on privatized housing.
Installation housing managers support Installation commanding
officers and executive officers in overseeing privatized housing. The
housing installation program manager has the responsibility for
resolving issues and/or escalating issues and concerns to installation
leaders. Both Navy and USMC are reviewing their leadership and staff
training on privatized housing oversight responsibilities and will
modify this training as appropriate to address recent oversight
concerns.
Secretary Henderson. The Air Force is collaborating with our Army
and Navy counterparts on a Resident's Bill of Rights, to educate
military residents on their rights when a project owner fails to
correct health or safety problems. Senior Air Force leadership recently
issued a letter reiterating and clarifying chain of command
responsibilities to ensure the safety and welfare of our airmen. We are
also increasing our current oversight policies and revitalizing local
commander engagement in the oversight processes. We are reviewing
manpower in the local Air Force housing management offices to ensure
commanders have sufficient oversight resources. We will update our
training on these new processes and oversight tools to the one-on-one
training we provide commanders on privatized housing when they assume
command.
13. Senator Reed. Secretary McMahon, Secretary Beehler, Secretary
Bayer, and Secretary Henderson, what authorities to installation
commanders have to exercise oversight and how, if ever, have they been
used?
Secretary McMahon. In general, installation commanders have
authority and responsibility for day-to-day oversight and quality
assurance regarding housing privatization project compliance with the
ground lease and associated legal agreements. This includes
responsibility for assessing project performance against metrics
defined in the legal agreements, such as responsiveness to resident
maintenance, and recommendations or approval regarding the withholding
of any performance fees. The Military Departments, as part of their
respective oversight programs, are in a better position to provide
details regarding installation commander oversight authorities and how
they have been used.
Secretary Beehler. Each MHPI project has a Ground Lease, which
denotes specific authorities, including reinforcing the garrison
commander's inherent responsibility for command and control. The Ground
Lease also identifies the MHPI partner as responsible for providing
safe and habitable homes to residents, establishes the provisions for
default, and the Contract Disputes Act as the method for settling
disputes. Garrison commanders, as the local military representatives
for the project, have the responsibility for ensuring compliance with
the various legal documents covering requirements such as the Davis-
Bacon Act, Municipal Services, National Historic Preservation Act
(NHPA), and those authorities included in title 10 of the United States
Code Sections 2884/2885. Compliance checklists are provided to the
garrison commander to document and report on their oversight functions
throughout the year and these are reviewed as part of the annual
project Compliance Site Visit conducted by higher headquarters.
Secretary Bayer. Installation commanders have overall oversight of
the program, and they are the primary advocate for servicemembers and
their families living in privatized housing on DON installations. They
are responsible for ensuring privatized housing at their installation
meets DON and DOD policies and procedures. Installation Commanders
report to Region Commanders, who are also held responsible for ensuring
installations in their Region comply with DON and DOD policies and
procedures.
Secretary Henderson. All of the Air Force's project documents
expressly state that commanders retain all of their inherent authority
to protect the life, health and safety of persons on their
installations. Additionally, most commanders (32 of 63) have direct
input and discretion into the performance incentive fees earned as part
of their oversight and performance feedback. As we work to improve our
oversight of the program, we will work to reach mutual agreement with
our project owners to amend those agreements where commander input for
performance incentive fees is not currently required. Our goal is for
all 63 of our commanders to provide direct input and feedback into the
performance incentive fees to be awarded to project owners.
14. Senator Reed. Secretary McMahon, Secretary Beehler, Secretary
Bayer, and Secretary Henderson, how many people in each of your
departments are dedicated to the oversight of MHPI?
Secretary McMahon. Within my organization, the Office of the Deputy
Assistant Secretary of Defense for Facilities Management [ODASD(FM)]
provides oversight for the Military Housing Privatization Initiative.
One civilian employee with contract support conducts this oversight as
part of a broader range of duties.
Secretary Beehler. At the various headquarters levels the Army has
17 manpower authorizations dedicated to oversight of MHPI. The Deputy
Assistant Secretary of the Army for Installations, Housing, and
Partnerships (DASA IH&P) is resourced for 4 manpower authorizations and
will be hiring one additional full-time employee. OACSIM Privatized
Housing and Lodging Branch has 9 manpower authorizations. HQ IMCOM has
4 manpower authorizations. The Army Installation Family Housing offices
currently have 104 manpower authorizations providing oversight for 49
MHPI projects. The installations are in the process of hiring
additional manpower. By the end of May, IMCOM will have an additional
114 permanent positions filled to perform quality assurance and quality
control of the 49 MHPI projects.
Secretary Bayer. The DON has a total of 191 positions dedicated to
MHPI oversight. For the Marine Corps, there are approximately 46 people
dedicated to the oversight of MHPI, most of whom are at the region and
installation levels. The Marine Corps also funds approximately 17
additional positions at NAVFAC for their support and oversight of the
business agreements. The Navy has 128 positions that support the MHPI
program overall; 88 of these positions are at CNIC and are mostly at
the installation-level; and, 40 positions are funded through NAVFAC for
additional support and oversight of the business agreements.
Secretary Henderson. The Air Force has roughly 100 full time
equivalents dedicated to the oversight of the Military Family Housing
Privatization Initiative.
15. Senator Reed. Secretary McMahon, Secretary Beehler, Secretary
Bayer, and Secretary Henderson, how do each of you ensure that
privatized housing companies are complying with all environmental,
health and safety laws and regulations?
Secretary McMahon. As part of my oversight of the Military Housing
Privatization Initiative, I've directed my staff to expand their
monitoring of each Military Department's oversight of its respective
housing privatization projects. This includes establishing metrics and
collecting and reviewing data to ensure each Military Department is
monitoring and ensuring project compliance with environmental, health,
and safety laws and regulations, consistent with the project legal
agreements. I defer to the Military Department Assistant Secretaries to
explain their respective oversight measures.
Secretary Beehler. The Garrison Commander (GC) is responsible for
ensuring privatized housing management companies are maintaining on-
post housing at an acceptable standard of comfort and safety for
servicemembers and their families through his/her installation support
staff. The Director of Public Works (DPW) provides the bulk of
installation support to the GC for environmental, cultural resources,
safety, and housing.
The housing manager is responsible to the GC and DPW for all
housing related issues on-post or as may be brought to them from off-
post. The housing manager will coordinate with other DPW support staff
on housing matters such as ensuring the partner environmental
management plans are reviewed and approved or coordinating with the
cultural resources offices for historical homes during renovations.
Secretary Bayer. Private housing partners are required to comply
with all applicable federal, state, and local laws and regulations,
including those related to environmental, health, and safety hazards.
These requirements are generally included in the project ground leases
and augmented by Environmental Management Plans or other legal
agreements that are part of the MHPI project deal structure.
Partners are required to immediately notify the DON Installation
Housing Office of any resident concern involving asbestos, carbon
monoxide, lead based paint, radon, security, mold/water infiltration
and pest infestation. Such environment, health and safety issues are
documented by our Partners and addressed in accordance with hazardous
material management plans, emergency/urgent/or routine maintenance
service calls, depending on the severity and situation, and established
action plans, including applicable laws and regulations.
In addition, DON requires the Managing Member to certify on an
annual basis that:
The Managing Member is in compliance with the environmental
requirements contained in the business agreements that are applicable
to the Managing Member's activities on the leased premises, and that
the Managing Member has all environmental permits (including air
permits) or authorizations required for its operations under the ground
lease or environmental laws.
2. The Managing Member has developed, implemented and is in
compliance with all Environmental Management Plans (including, as
applicable and without limitation, hazardous materials, pesticide
management, storm water pollution prevention, lead based paint, and
mold management) required pursuant to the ground lease, and has updated
such plans from time to time as required by changes to environmental
laws or at the reasonable request of the government.
Secretary Henderson. Our housing privatization projects include the
broad requirement that project owners must comply with all applicable
laws, which would include all environmental, health, and safety laws
and regulations. If the Air Force becomes aware of non-compliance with
a specific environmental, health, or safety law, we immediately engage
with the project owner and, if necessary, the applicable regulatory
authority to ensure that the issue is resolved.
In addition, the local housing management office provides day to
day oversight to ensure compliance with specific performance
requirements under the transaction documents, including those relating
to maintenance and repair of housing units. Monthly reviews are
conducted at the installation level between project owner and housing
management office representatives using a compliance checklist.
Quarterly Management Reviews take place between installation commanders
and project owners. Annual site visits are conducted by the Air Force
Civil Engineer Center to include review of all compliance checklists.
When necessary, senior Air Force leadership may engage project
owners at corporate levels, withhold performance incentive fees, engage
enforcement agencies, issue cure notices for performance failures, and
initiate other formal dispute actions.
16. Senator Reed. Secretary McMahon, Secretary Beehler, Secretary
Bayer, Secretary Henderson, Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
Hickey, and Mr. Bliss, what legal recourse options do families have
when they cannot resolve an issue with their housing and how often have
you seen families exercise these options?
Secretary McMahon. Military families living in privatized housing
are encouraged to report housing concerns to the privatized housing
property manager, and then the government housing office on the
installation, but they always have the option to elevate concerns to
their installation commander or the Inspector General. The military
legal office at their installation can help provide guidance regarding
their legal options depending on the issue of concern. The Military
Departments, as part of their respective oversight programs, can
provide specifics in response to this question.
Secretary Beehler. Army leadership and chain of command are
responsible for ensuring residents are satisfied with their housing.
Dissatisfied residents have several avenues for recourse, including
submitting complaints through Army leadership, their chain of command,
the installation housing hot line, the Army housing office, or the MHPI
partner.
We will continue to strongly encourage residents to take advantage
of this process, as their satisfaction is the goal of the Army and our
partners. Our military or civilian tenants have the same protection
available to anyone living on the local rental market under the Fair
Housing Act without having to face any fear of reprisals. Finally, if a
family is unable to resolve an issue with a privatized housing company,
they can bring legal action in a state or federal court that has
jurisdiction over the parties. The Army has not tracked such litigation
but is aware that such litigation has occurred several times in the
past.
Secretary Bayer. Complaints arising out of PPV partner concerns are
adjudicated in accordance with processes defined in the PPV/tenant
agreement. A dispute is between the tenant and the landlord, the PPV
partner. Legal Assistance attorneys assigned to DON Legal Service
Offices are authorized to provide eligible PPV tenants with the same
scope of services currently offered to eligible legal assistance
beneficiaries engaged in housing disputes with non-PPV entities. These
services include advising, consulting with, and negotiating on behalf
of eligible tenants in PPV housing.
Secretary Henderson.
The housing management office is the primary interface to
assist residents in disputes with the project owner. This occurs on a
daily basis.
Residents may also seek their commander's support, who
can independently exercise command authorities to ensure the health,
welfare, safety, or security of Air Force families. This occurs when
the housing management office has not been able to resolve the dispute
with the project owner.
The local housing management office or commander may
elevate the dispute to the Air Force Director for Installations at the
Air Force Civil Engineer Center, which may lead to direct engagement
with the project owner at the corporate level and the use of informal
and/or formal dispute process. This may include issuing cure notices,
withholding performance incentive fees, and developing corrective
action plans. It is rare for a resident to directly raise a concern to
this level, but our addition of a toll free number to reach the Air
Force Civil Engineer Center will likely change this paradigm.
Residents can raise a complaint with federal, state, and
local enforcement agencies. Projects have had ``no-notice'' inspections
of lead-based-paint'' programs brought on indirectly by resident
complaints raised through the media.
Tenants can independently take legal action in accordance
with the tenant lease agreement and seek advice from the local base
legal assistance office. We are aware of residents at four
installations that have exercised their legal options and secured
counsel at Tinker, Keesler, Los Angeles and MacDill Air Force Bases.
The Air Force Judge Advocate General has provided guidance to legal
offices to educate tenants about the services available through
military legal assistance, tenants' rights under leases and state law,
and the process for filing claims.
Mr. Williams. Residents are able to address housing issues with the
local housing management office/housing office administered by the
service branches which oversee and monitor MHPI housing and/or with
their local command. In addition, residents are able to raise legal
concerns with their local legal assistance/JAG office or through the
engagement of a private attorney. In addition, residents may file
lawsuits against the landlord/project owner and property manager under
relevant state and local law.
Mr. Picerne. If a resident is dissatisfied with how a housing issue
is being addressed by Corvias staff at the project, they are encouraged
to contact our corporate leadership at our corporate office. Our
military partners are also encouraged to bring housing related issues
to their respective housing office, or installation/base leadership. If
neither of those avenues result in resolution satisfactory to the
resident, the resident may seek recourse through the appropriate legal
avenues by (i) working with the military's lawyers, (ii) retaining a
private lawyer, and/or (iii) filing a lawsuit.
Mr. Ehle. In the event that a resident has a complaint or dispute
with the landlord, the resident can follow the dispute resolution
procedures outlined in their lease, handbook, and resident guidelines.
Hunt interacts with its residents via these procedures on a regular
basis. Under the current procedures:
The resident should raise the complaint or dispute with
the neighborhood property management office.
If the resident feels that the issue has not been
adequately resolved by the neighborhood property management office, the
matter will be immediately raised to the Landlord's Community Director.
The resident may request a meeting with the Community
Director and Housing Military Office (``HMO'') to present their concern
or dispute.
If the resident feels that the issue has not been
adequately resolved, HMO will elevate the request to the Installation
Commander (``IC''). The HMO, IC, and the Landlord's Director of
Operations will evaluate the issue and seek to resolve it within 30
days. The Landlord will notify the resident in writing of the final
decision.
If a resident is not satisfied, he or she may, at any
time, seek to enforce his or her legal rights under the lease agreement
as well as applicable law and standards. The resident may also retain
independent legal counsel.
We are also working with our military partners to develop a
consistent approach to the MHPI experience, including uniform lease
agreements, resident guidelines, a Resident Bill of Rights and
Responsibilities, and a uniform dispute resolution process that could
be invoked by the landlord or the resident and would be incorporated as
an addendum to the Resident Lease Agreement. We expect to seek the
input of our residents before any proposal is adopted.
Mr. Hickey. Residents can elevate their concerns in the first
instance through several channels including;
the Projects local Community Managers (responsible for
the management of their neighborhood) as the first point of contact,
then in escalation, Property Management Directors (who
oversee the whole project).
Additionally, Lendlease Project Directors at each site
(overall responsibility for the entire Privatization on an
installation) are directly and immediately accessible to residents.
Further, the Government partner's local installation
housing office, and military chain of command are other avenues for
residents to raise their concerns,
Resident lease agreements also have a mediation clause, a
mechanism that residents can employ to formally seek and enter
mediation via an independent arbiter. In Lendlease's experience, it is
a very rare occurrence where residents use this facility
Generally, local State courts resolve landlord tenant
issues, but there are some State courts who shy away from issues
related to federal jurisdiction matters.
Lendlease is currently revisiting this structure, to implement a
more effective complaints/arbitration process for residents and this is
currently being finalized with the respective military partners.
Mr. Bliss. Families are able to legally enforce the terms of their
resident lease through the local court systems. Although some residents
have sought this recourse, LMH strives to resolve all issues with our
residents before they feel that court proceedings are necessary. A
critical component to effective resolution is communication. While we
believe we provide quality housing to military families, LMH is
exploring new ways to communicate with residents about service issues,
especially mold prevention and remediation. While we encourage families
to utilize the escalation process to ensure issues are resolved to
their satisfaction, we never want a family to feel that they have to go
somewhere else to have their concern heard. LMH commits to doing more
to foster better lines of communication with residents. We welcome each
residents' input into how we can improve our responsiveness to their
concerns in a productive way. LMH has been working collaboratively with
one of the military families that testified at the February 13 SASC
hearing to develop reforms which will improve the experience of
military families. We understand the urgency with which we must act to
regain the trust of our servicemember families, and we look forward to
working with SASC and our DOD partner to ensure a great living
experience for our men and women in uniform and their families.
17. Senator Reed. Secretary Beehler, what have been residents'
response to the Army's efforts over the past six months to address
concerns about lead-based paint in family housing?
Secretary Beehler. Resident responses have generally been positive
over the last six months. Some feedback has been that residents are
appreciative about the response to their concerns, are pleased with how
the remediation is being managed, and the education provided by Army
and Partner sources has been an eye-opener. Most families welcomed the
Army's additional inspection of their homes by EPA-certified staff as
well as the sharing of the inspection results.
We received a few negative responses where a couple of partners did
not confirm the visual findings with testing before they remediated the
areas identified and some residents noted the appearance of a lack of
urgency in mitigating the areas of visual findings identified during
the inspections.
18. Senator Reed. Secretary Beehler, how does the Army justify a 10
percent sampling of homes as an ``enhanced'' review and what is the
Army doing to ensure all problems are being addressed, given the 60
percent hit rate at just those 10 percent of homes?
Secretary Beehler. The Army inspected Army-owned, privatized, and
leased homes in response to concerns of environmental hazards in Army
housing. USACE recommended the Army identify a random sample of pre-
1978 homes with children 6 years of age or younger as this group is
considered at higher risk by EPA. This 10 percent sample was the focus
of the USACE effort.
The visual assessments were simply a snapshot in time of
conditions. USACE did not see a value in more visual inspections beyond
the first phase. USACE concluded the Army and the RCI Project Companies
have procedures in place to manage hazards in the interior of the homes
between occupants. Due to these procedures, USACE's review of the
inspection results found little to suggest a risk to current occupants
on the interior of the homes as long as encapsulated lead-based paint
was not compromised.
USACE recommended the Army implement a robust monitoring program to
manage potential hazards, address concerns identified during the visual
inspections, regular interior and exterior inspections, establish and
track inspections in Defense Occupational & Environmental Health
Readiness System--Industrial Hygiene (DOEHRS-IH), and foster an
understanding of potential environmental hazards in housing through
resident education as well as housing and garrison staff.
19. Senator Reed. Secretary Beehler, many families at Fort Bragg
have reportedly signed a petition demanding improvements to their
housing. Have those issues been addressed, and if so, how have they
been addressed?
Secretary Beehler. Army staff and Fort Bragg are aware of the
petition and are working to address issues reported by residents. The
Army is fully committed to taking care of soldiers and families and
will thoroughly investigate all reported concerns.
20. Senator Reed. Secretary McMahon, the Department's program
evaluation report to Congress on MHPI is consistently late. For
example, the report covering 2014 to 2016 was not delivered to Congress
until the end of September 2018. Why are these MHPI evaluation reports
so late and going forward do you commit to having them delivered on
time?
Secretary McMahon. We acknowledge the delays in providing the
Department's program evaluation report to Congress, primarily due to
resource constraints. However, we are implementing streamlined data
collection and verification processes to expedite submission of this
report in the future.
__________
Questions Submitted by Senator Richard Blumenthal
private housing companies
21. Senator Blumenthal. Mr. Williams, Mr. Picerne, Mr. Ehle, Mr.
Hickey and Mr. Bliss, the Military Family Advisory Network reported a
disconnect between the experiences of military families in privatized
housing, and company reports of resident satisfaction. Why is this
disconnect so stark, and how do your companies plan to address it?
Mr. Williams. BBC agrees that the data resulting from these two
sources raises questions. The MHPI projects, together with the military
services, engage a third party survey organization, CEL, which is
professionally accredited to conduct surveys and to provide analysis of
the data.
There are stringent controls used by the third party to ensure that
there are not duplicate responses by any one party; and are based on a
strong forensic program to review response anomalies. Conversely, the
Military Family Advisory Network performed a survey without any of
these controls and without a formal analysis program.
Mr. Picerne. The military service branches and the private partner
firms engage independent, unbiased third party professional survey
firms to conduct resident satisfaction surveys. By contrast, the
Military Family Advisory Network (MFAN) is not an unbiased third party,
nor is it a professional survey firm that can/should be counted on to
create or administer resident satisfaction surveys. MFAN is a non-
profit that was founded by a for-profit marketing and communications
firm (Reingold) that pushes social media campaigns. The MFAN survey was
flawed because (i) it was a completely ``open'' survey, meaning anyone
could go on line and complete the survey, whether they lived in on-base
military housing or not, ad (ii) there was no limit to the number of
times someone could complete the survey.
Mr. Ehle. Communication is an area that Hunt can improve with its
residents. We understand that when residents report maintenance issues,
keeping them informed of the maintenance response plan and process is
empowering and makes them an integral part of the process. As with
other areas, when we fall short in our communication goals, we take
steps to fix it. As noted in response to question 1 above, we have
recently undertaken to provide refresher or enhanced communication
training for key personnel within the Hunt organization to improve our
future communication efforts.
Hunt cannot speak to the methodology used by the Military Family
Advisory Network in conducting its survey or the validity of its
reported results. Nevertheless, any time Hunt's performance falls
short, Hunt takes action. We are committed to being responsive to the
needs and concerns of our residents suggested by the survey report and,
in particular, have continued to work directly with the affected
families to address the issues they raised.
Mr. Hickey. The MFAN survey lacks transparency to determine the
valid authenticity of survey results. When the survey results were
released there was, and still is, no transparency around the basic
survey controls.
Anyone could complete the survey multiple times (allowing
distortion/manipulation)
Anyone with the survey link could complete a survey,
regardless of their connection to MHPI housing.
Based on the information Lendlease has received, MFAN received
16,779 completed surveys (8.8 percent response rate assuming one survey
per MHPI household-assuming one survey per person, which cannot be
confirmed). This is compared to 82,170 received by CEL (43.2 percent
response rate). CEL provides one survey link to and accepts one survey
response from each MHPI household (190,006 surveys distributed in
2018). That is why Lendlease credits the results of the CEL survey over
those from the MFAN survey.
For additional information on the background of each survey and
disparities between the two, please see the attached CEL & Associates,
Inc.'s Military Housing Partner Briefing to Hon. Robert McMahon from
March 8, 2019.
Mr. Bliss. LMH is not familiar with the survey process utilized by
the Military Family Advisory Network and so is unable to speculate on
whether those survey results are accurate or on the specific reasons
for the difference in results from surveys conducted of LMH's
residents. LMH believes that the best way to resolve any confusion
regarding the level of satisfaction with military family housing would
be to initiate a carefully monitored survey conducted by a third-party
service provider across all military branches.
22. Senator Blumenthal. Mr. Williams, Mr. Picerne, Mr. Ehle, Mr.
Hickey and Mr. Bliss, who provides oversight of housing management and
maintenance? Is oversight primarily conducted by your companies, or by
various military services?
Mr. Williams. The Department of Defense and relevant branch of
armed service for our MHPI projects regularly monitor and assess our
performance and adherence to MHPI project agreements, including housing
management and maintenance. While the types of processes vary by armed
service branch, each have implemented a variety of weekly, monthly,
quarterly, semi-annual, annual and ad hoc forms of review and
reporting. With respect to BBC, organizationally we maintain: (i) local
on-site community and facility managers who oversee leasing
administration and facilities maintenance staff; (ii) regional
community managers and regional facility managers who oversee local
project staff within their assigned region; (iii) Vice Presidents who
monitor the regional and local staff and report directly into senior
management executives at BBC's corporate office; and (iv) senior and
executive level management which monitors the entire MHPI portfolio,
and includes subject matter experts dealing with operations, training,
legal/compliance, and health, safety and environmental training and
administration.
While day-to-day oversight of the housing operations is
administered and managed by BBC (by design and purpose of the MHPI
program), BBC views each of its housing projects as true partnerships
with the service branches. The service branches (i) receive monthly,
quarterly and annual reports from BBC regarding project operations,
(ii) review and approve annual project budgets, including capital
repair/replacement plans with respect to the housing operations, (iii)
frequently hold ``partner'' meetings with BBC and other developers to
discuss and address relevant topic affecting the MHPI program; and (iv)
perform their own review, assessment and inspections of housing
operations, housing conditions, resident survey results, and compliance
with law and MHPI project agreements.
Mr. Picerne. On our military housing partnership projects,
oversight is provided by representatives of both parties to the
partnership--Corvias and either the Departments of the Army and the Air
Force.
For the military service branch partner, oversight is provided at,
both at the local installation/base level and at the Pentagon level,
through a combination of uniformed and civilian staff as well as third
party consultants who are engaged in a variety of expert capacities.
For Corvias, oversight is provided at both the local installation and
corporate level. In addition, the partnerships engage independent third
parties for a variety of oversight and inspections, including
construction code compliance, financial compliance, and health and
safety compliance.
Mr. Ehle. Our military partners have multiple controls in place to
oversee and monitor Hunt's performance, and we encourage such
engagement. Hunt is subject to reporting and inspection requirements
that occur on weekly, monthly, quarterly and annual bases. Our military
partners have access to our maintenance software, Yardi, and can review
work orders and survey responses. They are also able to inspect homes
and follow up directly with residents. Each of our military partners
has its own unique requirements for reporting and inspection. Please
see the response to question 107 below for additional detail.
Mr. Hickey. At the program level, the first line of military
oversight is the Local Installation Housing Office. These military
housing professionals are coordinating daily with the installation and
the Project Company and report performance up through their chains of
command. Housing offices for all service branches, report to both the
installation command and the Service's installations management
authority, each of which oversee Project Company performance.
The respective Military Services retain governance oversight and
control over all major decisions impacting each Project Company. This
is formalized in the contractual rights outlined in the various project
documents. Lenders, bondholders and others with financial interests
also exercise a high degree of control over the Project Companies'
operations (including scope changes and financial investments of
Project Company funds, for example) and have significant rights under
the financing documents.
In addition to monitoring and oversight conducted by the Military
Services through contractual agreements and processes, independent
construction consultants provide oversight on major property
development and construction activities, including independent review
and approval of construction progress and pay applications. The Project
Companies' assets and operations are also subject to inspection by
Federal, Military Services and certain State regulatory authorities.
Mr. Bliss. There are many monitoring and oversight mechanisms built
into each of our PPV business agreements. Our DOD partners regularly
monitor and assess our performance and adherence to the various PPV
business agreements. The PPV documents outline a number of financial,
legal, environmental and governmental reporting controls that govern
the operation of the PPVs. These controls include, but are not limited
to: (a) government approval of major decisions; (b) government approval
of annual operating and renovation budgets; (c) government review of
financial information, occupancy reports, service request summaries,
and reserve account funding activity; and (d) government assessment of
community appearance and property manager's performance. A portion of
our compensation for services depends upon our satisfactory completion
of our work. Below we list some of the ways in which the provisions for
oversight included in the PPV business agreements are put into action
on a day-to-day basis:
Government partner access to resident service records:
The Departments of the Navy and Army have each been afforded 24-hour/7-
days a week online access to the Yardi System (i.e., LMH's property
management tracking software). This access allows the DOD partner to
view resident data, including but not limited to resident service
request status/completion, make-ready status/completion, and comments
regarding resident satisfaction. The Yardi System also allows the DOD
partner to filter for service related to various specific areas of
concern including mold-related service requests. In addition to being
tracked in and available to the DOD partner through the Yardi System,
separate notification is provided to the applicable military branch
partner for any resident displacements.
Government inspection of PPV property: The DOD partner
conducts announced and unannounced inspections of the PPV's housing
communities. The applicable military branch partners also have the
right to inspect any housing unit with minimal advance notice (for
occupied units, the resident must be present in the unit for said
inspection to occur).
Financial information shared with government: Each PPV
provides the applicable military partner monthly ``Flash Reports''
(Navy/Marine Corps) or ``Dashboards'' (Army) that summarize occupancy
levels, expenses (detailed variance analysis), performance with regard
to completion of resident service requests and completion of turn-over/
make ready units, reserve account funding, etc. In addition, each PPV
provides quarterly reporting to the applicable service branch, which
includes construction activity updates, reporting on Flag/Executive
housing units, operational highlights and other items as may be
requested by the applicable military partner. Detailed budget
submissions (both operating and capital) are presented to the
applicable military partner annually for their approval. Annually, each
of the PPVs' updated 5-year plans are reviewed by the applicable
military partner. The applicable military partners also receive copies
of the annual financial audits, monthly account reporting to the
Trustees (inflows and outflows of various accounts related to the PPVs)
and monthly financials which are also sent to Bondholders, Trustees and
Credit Providers for the applicable PPVs.
Meetings between the Government and Private Partner:
There are scheduled as well as informal meetings (in person or via
conference call) that occur on a weekly to monthly basis with
Headquarters, Regions (Federal personnel, Flags), Bases, NAVFAC (Navy
Partner), and the Army.
Specific Navy reporting includes, but is not limited to:
Based upon findings and inspections, the Navy submits monthly,
quarterly and annual reports to the applicable oversight divisions
within the Navy (LANT and SVA) which oversee the entire privatized
housing program. In addition, a Monitoring Matrix (oversight of all
aspects of the applicable PPV, including property inspections) is
continually updated and presented/completed annually to/by LANT and
SVA. A breakdown of these reports is as follows:
Monthly Operating Reports
Quarterly Operating Reports
Annual Program Evaluation Reports (Congressional
report)
Condition Assessments--environmental and property
management review via regular neighborhood visits
Monitoring Matrix--ongoing annual report on property
management, development, financial, and environmental oversight
YARDI access by Navy Partner
Service branch notifications on all resident
displacements
Local Navy housing representatives on site at all
installations for day-to-day oversight
Navy ad-hoc site visits to check on the specific issues
for the properties
Annual Resident Satisfaction Surveys
Ongoing case-by-case interpretation and compliance with
all PPV obligations
Specific Army reporting includes, but is not limited to:
Daily--Army verifies a sampling of work (inspecting)
for move-in and move-out inspections, make ready, and renovations.
Weekly--Army verifies a sampling, via phone calls,
residents' maintenance satisfaction, move-in satisfaction, move-out
satisfaction, and office service satisfaction. Army also verifies
renovations, a sampling of lead based paint repairs, and capital work.
LMH meets at least weekly, and often daily, with Army (RCI) regarding
any issues that arise.
Monthly--Army performs neighborhood drive through and
walks, Davis-Bacon wage inspections, and renovation inspections. Army
consultant, Jones Lange LaSalle (JLL), and analysts for the Army's
Office of the Assistant Chief of Staff for Installation Management
(ACSIM), review applicable PPV reports and financials. Army/
Installation Management Command (IMCOM) and ACSIM review all monthly
``Dashboard Reports'' delivered to Army (RCI).
Quarterly--Army performs maintenance shop inspections
and reviews results from the J. Turner Resident Satisfaction Survey.
Army, IMCOM, and ACSIM review the Portfolio Asset Management report.
Incentive fee submissions are reviewed by RCI, ASA and the Garrison
Commander before approval. Additionally, a quarterly Portfolio
Evaluation Report/Plan monitoring matrix (highlights project progress
and status during the relevant period) is prepared for the Army.
Annual--Army conducts separate project site visits by
Army representatives, and the IMCOM/ASA and United States Army Corps of
Engineers (USACE) conduct ground lease inspections. Annual CEL Army
survey is conducted. Annual Army survey by IMCOM/ACSIM is performed.
Annual budgets are reviewed and approved by Army, IMCOM, ACSIM, and
JLL.
Every 2 years--Army performs a wounded warrior home
inspection.
Environmental Oversight:
Navy: Annually, each PPV submits an Environmental
Disclosure Report (called the ``LLC Environmental Submittal'') to
NAVFAC, which summarizes environmental permits, any notices of
violations received from regulatory agencies, any spill incidents,
abatement projects, copies of any updated environmental plans, and
other information concerning radon, pesticides, and cultural resources
for the year. In addition, annually, the Navy performs a condition
assessment, which includes and environmental oversight inspection of
representative properties in each PPV. The Navy checks for complete/
accurate tenant lease addenda relating to environmental conditions,
water intrusion ticket spot checks, environmental plans/updates, and
completes a visual inspection of the hazardous materials storage areas.
The Navy includes this information in their overall condition
assessment reporting.
Army: The JBLM and Fort Sam PPVs fall under the base's
environmental program relating to hazardous materials management and
are inspected regularly. The JBLM and Fort Sam PPV management plans
require particular oversight for property management and development,
which include various inspections by the Army. The Army follows an
inspection checklist to monitor make ready, work orders, development/
capital activities and property inspections based on our management
plans. Our PPVs are also subject to the oversight of and regulation by
other Federal, state, and local authorities. For example, if there is
an environmental permit in place, the applicable local/state/Federal
agency may inspect according to the requirements of the permit. In
addition, if an ACM or LBP abatement project is underway, the
regulating agency may come to inspect at their discretion.
Beyond government oversight, LMH proactively takes steps to
ensure it is using best practices with regards to environmental
compliance. These steps include, without limitation: (a) annual
environmental training for all maintenance and management staff; (b)
maintenance center inspections by construction/LMH environmental
services department at least twice annually; (c) annual visual
inspection of at least 10 percent of housing units with LBP/ACM; and
(d) third-party consultant oversight of projects involving LBP/ACM.
Oversight of the project is primarily conducted by the PPV and its
contractors, but our military partner plays an active role in oversight
as well.
23. Senator Blumenthal. Mr. Williams, Mr. Picerne, Mr. Ehle, Mr.
Hickey and Mr. Bliss, when military families lodge complaints or
request maintenance assistance, how long does it take for complaints to
be addressed?
Mr. Williams. Once a work order request made by a resident is
received, BBC staff respond to it based on the appropriate service
level priority (emergency, urgent, routine). Based on the service level
priority assigned, generally a response must be addressed within one
hour for emergency matters, within four hours for urgent matters and
within 8 business hours for routine matters.
With regard to work order requests placed by residents after
regular business hours, we assign ``on-call'' duty to BBC maintenance
staff to ensure an appropriate response regardless of the time of day.
It is BBC's policy that all emergency and urgent work order requests
made by residents also receive a follow-up satisfaction call.
Mr. Picerne.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Emergency 1 Emergency 2 Emergency 3 Urgent Routine
-------------------------------------------------------------------------------------------------------------------------
Expected Response Expected Response Expected Response Expected Response Expected
Response Completion Time Completion Time Completion Time Completion Time Completion
Time (Hrs) Time (Hrs) (Hrs) Time (Hrs) (Hrs) Time (Hrs) (Hrs) Time (Hrs) (Days) Time (Days)
--------------------------------------------------------------------------------------------------------------------------------------------------------
APG........................... 1 24 4 24 8 24 72 72 3 10
Ft. Bragg..................... 1 24 4 24 8 24 48 48 3 6
Ft. Meade..................... 1 24 4 24 8 24 48 48 3 10
Ft. Polk...................... 1 24 4 24 ......... ........... 48 48 3 6
Ft. Riley..................... 1 24 4 24 8 24 72 72 3 10
Ft. Rucker.................... 1 24 4 24 8 24 72 72 3 10
Ft. Sill...................... 1 24 4 24 8 24 72 72 3 10
--------------------------------------------------------------------------------------------------------------------------------------------------------
Mr. Ehle. Resident reports and requests are assigned into one of
three categories: emergency, urgent, or routine. On average, Hunt
responds to emergency reports or requests within one hour, urgent
reports or requests within four hours, and routine reports or requests
within three days. Hunt emphasizes, however, that these numbers are
rough averages and that response times vary on a case-by-case basis.
Resident reports and requests are assigned into one of three
categories: emergency, urgent, or routine. Hazards to health and safety
are treated as emergencies.
Mr. Hickey. As stipulated in project business agreements, property
management is required to respond to service order requests within a
specific amount of time by service order category: Emergency, Urgent,
or Routine. Service orders are opened upon receipt and remain open
until all work has been completed (which spans response to and
``arresting'' the initial issue as well as all subsequent and follow-on
requirements). These response and completion times are typically:
Emergency: Response within 1 hour, Completion--Service orders
remain open until full completion of the original issue prompting the
emergency as well as all follow-on and subsequent requirements.
Urgent: Response within four (4) to twenty-four (24) hours
(depending on operating documents of the project), Completion--Service
orders remain open until full completion of the original issue
prompting the urgent call as well as all follow-on and subsequent
requirements.
Routine: Response is typically three (3) to five (5) days
(depending on the operating documents of the project), Completion--
Typically within three (3) to ten (10) days (depending on the operating
documents of the project).
In 2018, the on-time response rate was 95 percent and the on-time
completion rate was 97 percent.
Mr. Bliss. As soon as a call comes in, the work order is classified
as either Emergency, Urgent, or Routine. Any call relating to health
and safety is classified as an Emergency and is responded to within 30-
minutes. Any call that is classified as Urgent is responded to within
4-hours, and any call that is classified as Routine is responded to
within 24-hours. The average completion time for a maintenance issue is
one (1) day.
24. Senator Blumenthal. Mr. Williams, Mr. Picerne, Mr. Ehle, Mr.
Hickey and Mr. Bliss, do customers have a means to track their requests
and work orders?
Mr. Williams. Residents are able to submit, manage and track
service requests and work orders online or through a mobile app.
Mr. Picerne. Corvias is in the process of introducing a new
property management software that includes ways for residents to track
their work order requests, including an app that will greatly improve
the residents' ability to submit and track work order requests remotely
using an app on their electronic devices such as mobile phones.
Mr. Ehle. When a resident calls in or submits a maintenance request
online, the resident is provided with a work order number. Residents
can call or email their property management office to obtain a status
update on the work order. Residents are also able to access the work
order history pertinent to their home from the time of their initial
move-in through the time they move out.
Hunt is in the process of testing solutions that would allow
additional means by which residents can check the status of a work
order. For example, we are testing a mobile application that would
enable residents and maintenance personnel to track a work order or
other maintenance request in real-time on their mobile devices.
Mr. Hickey. As mentioned in response to question 8, Residents can
utilize the Military Cafe app and online portal on the property website
to submit work order requests and track their progress. Residents have
access to work order status, completion information, and details about
the work order.
Mr. Bliss. Yes. Families are able to track their work order
histories online.
25. Senator Blumenthal. Mr. Williams, Mr. Picerne, Mr. Ehle, Mr.
Hickey and Mr. Bliss, what is the average timeline to address housing
concerns?
Mr. Williams. Once a work order request made by a resident is
received, BBC staff respond to it based on the appropriate service
level priority (emergency, urgent, routine). Based on the service level
priority assigned, generally a response must be addressed within one
hour for emergency matters, within four hours for urgent matters and
within 8 business hours for routine matters.
With regard to work order requests placed by residents after
regular business hours, we assign ``on-call'' duty to BBC maintenance
staff to ensure an appropriate response regardless of the time of day.
It is BBC's policy that all emergency and urgent work order requests
made by residents also receive a follow-up satisfaction call.
Mr. Picerne.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Emergency 1 Emergency 2 Emergency 3 Urgent Routine
-------------------------------------------------------------------------------------------------------------------------
Expected Response Expected Response Expected Response Expected Response Expected
Response Completion Time Completion Time Completion Time Completion Time Completion
Time (Hrs) Time (Hrs) (Hrs) Time (Hrs) (Hrs) Time (Hrs) (Hrs) Time (Hrs) (Days) Time (Days)
--------------------------------------------------------------------------------------------------------------------------------------------------------
APG........................... 1 24 4 24 8 24 72 72 3 10
Ft. Bragg..................... 1 24 4 24 8 24 48 48 3 6
Ft. Meade..................... 1 24 4 24 8 24 48 48 3 10
Ft. Polk...................... 1 24 4 24 ......... ........... 48 48 3 6
Ft. Riley..................... 1 24 4 24 8 24 72 72 3 10
Ft. Rucker.................... 1 24 4 24 8 24 72 72 3 10
Ft. Sill...................... 1 24 4 24 8 24 72 72 3 10
--------------------------------------------------------------------------------------------------------------------------------------------------------
Mr. Ehle. Resident reports and requests are assigned into one of
three categories: emergency, urgent, or routine. On average, Hunt
responds to emergency reports or requests within one hour, urgent
reports or requests within four hours, and routine reports or requests
within three days. Hunt emphasizes, however, that these numbers are
rough averages and that response times vary on a case-by-case basis.
Mr. Hickey. As stipulated in project business agreements, property
management is required to respond to service order requests within a
specific amount of time by service order category: Emergency, Urgent,
or Routine. Service orders are opened upon receipt and remain open
until all work has been completed (which spans response to and
``arresting'' the initial issue as well as all subsequent and follow-on
requirements). These response and completion times are typically:
Emergency: Response within 1 hour, Completion--Service orders
remain open until full completion of the original issue prompting the
emergency as well as all follow-on and subsequent requirements.
Urgent: Response within four (4) to twenty-four (24) hours
(depending on operating documents of the project), Completion--Service
orders remain open until full completion
of the original issue prompting the urgent call as well as all
follow-on and subsequent requirements.
Routine: Response is typically three (3) to five (5) days
(depending on the operating documents of the project), Completion--
Typically within three (3) to ten (10) days (depending on the operating
documents of the project).
In 2018, the on-time response rate was 95 percent and the on-time
completion rate was 97 percent.
Mr. Bliss. As soon as a call comes in, the work order is classified
as either Emergency, Urgent, or Routine. Any call relating to health
and safety is classified as an Emergency and is responded to within 30-
minutes. Any call that is classified as Urgent is responded to within
4-hours, and any call that is classified as Routine is responded to
within 24-hours. The average completion time for a maintenance issue is
one (1) day.
26. Senator Blumenthal. Mr. Williams, Mr. Picerne, Mr. Ehle, Mr.
Hickey and Mr. Bliss, is there a system to triage these complaints
based on urgency and severity?
Mr. Williams. Once a work order request made by a resident is
received, BBC staff respond to it based on the appropriate service
level priority (emergency, urgent, routine). Based on the service level
priority assigned, generally a response must be addressed within one
hour for emergency matters, within four hours for urgent matters and
within 8 business hours for routine matters.
With regard to work order requests placed by residents after
regular business hours, we assign ``on-call'' duty to BBC maintenance
staff to ensure an appropriate response regardless of the time of day.
It is BBC's policy that all emergency and urgent work order requests
made by residents also receive a follow-up satisfaction call.
Mr. Picerne. On a quarterly basis our teams summarize all work
orders submitted, broken down by category, and analyze a) if there are
recurring issues that need to be addressed, b) if there are any
challenges with response times related to particular issues and/or work
order categories, and c) determine how we introduce process
improvements in our work order response.
Mr. Ehle. Resident reports and requests are assigned into one of
three categories: emergency, urgent, or routine. Hazards to health and
safety are treated as emergencies.
Mr. Hickey. As discussed in response to question 23, all service
orders are assigned a response category of Emergency, Urgent or Routine
based on the severity and nature of the issue. There are guidelines
that identify the appropriate classification of each service order.
Mr. Bliss. Yes. We prioritize the work orders in order of urgency,
based on the substance of each request. As soon as a call comes in, the
work order is classified as either emergency, urgent, or routine. Any
call relating to health and safety is classified as an emergency and is
responded to within 30-minutes.
27. Senator Blumenthal. Mr. Williams, in your testimony, you state
that Balfour Beatty invites ``local Army, Navy, and Air Force housing
partners to accompany our staff when inspecting the home to ensure any
problems are being adequately addressed with input from the Service
partners.'' How often do service partners conduct this oversight?
Should the military services be required to accompany your staff when
surveying housing conditions?
Mr. Williams. A chart identifying monitoring and assessment
processes, shown by armed service branch, is provided along with this
letter.
BBC welcomes active participation by the military services in the
surveying of housing conditions at its MHPI project locations. See
Exhibit A which identifies active monitoring and assessment procedures
currently employed by the military services. Retained in Committee
files.
28. Senator Blumenthal. Mr. Williams, in your testimony, you also
mention that Balfour Beatty has created the position of Resident
Engagement Specialist to provide customer engagement and ensure
residents are receiving responses to questions and concerns. When was
this position created, and what kind of outreach was conducted to make
sure that military families are aware of the support available to them
by the Resident Engagement Specialist?
Mr. Williams. The Resident Engagement Specialist position was
created by BBC in January 2019. The first formal hiring and staffing of
this position occurred in February at West Point. BBC is currently
recruiting and hiring Resident Engagement Specialists at its properties
around the country with a goal to drive greater resident communications
and satisfaction. When this position is staffed an email announcement/
introduction is sent to each resident and also posted to our Facebook,
which indicates how residents may contact the Resident Engagement
Specialist directly (such as via email and telephone). This position is
also in attendance at Townhalls, Neighborhood Huddles and all other
resident events. When they are not meeting with residents, they will be
spotted going through neighborhoods at popular meeting places like the
school bus stop and playgrounds to engage and elicit informal feedback
from residents.
29. Senator Blumenthal. Mr. Williams, what role does the Resident
Engagement Specialist play in ensuring timely responses to concerning
maintenance and housing condition concerns?
Mr. Williams. The Resident Engagement Specialist is charged with
aiding customers with service-related questions; and they will
continuously identify opportunities to improve the resident experience.
The Resident Engagement Specialist also will be tasked with monitoring
resident needs and obtaining their feedback.
department of defense officials
30. Senator Blumenthal. Secretary McMahon, when did you first learn
of these problems with private company abusing military families? Did
any of your predecessors know of this problem? If yes, when did you or
any of your predecessors learn of the cases we heard from in testimony
before the committee?
Secretary McMahon. My predecessor first learned of the issues
regarding lead and mold in December 2017 when Ms. Crystal Cornwall from
the Safe Military Housing Initiative provided information to OSD. This
information was forward to the Military Departments for resolution. The
Reuters articles, the first of which was published in November 2018,
identified resident issues warranting immediate attention, with more
extensive and wide-ranging resident concerns subsequently surfacing.
31. Senator Blumenthal. Secretary McMahon, Secretary Beehler,
Secretary Bayer, and Secretary Henderson, who provides oversight of
housing management and maintenance? How do the relationships between
DOD, military services, and various private housing companies differ
across the country? Should we be working toward more standardized
contracts and oversight processes?
Secretary McMahon. The MHPI partners provide direct daily oversight
of each project's property management service provider that is
responsible for all aspects of housing management and maintenance;
Military Department government housing staff provide daily oversight of
the MHPI project from a programmatic standpoint including resolution of
housing issues and resident concerns. The Government housing office is
the first line of Military Department oversight of a privatization
project's housing management and maintenance, with direct daily
interaction with the privatization partner's team at the installation.
The Military Departments, under the project legal documents
administered by their respective oversight programs, have certain
rights with regard to decisions made by the project related to the
housing manager. These controls can include such items as operating
budget reviews, incentive fee awards, capital expenditures, and
reinvestment account expenditures. These rights include replacement of
the housing management and maintenance firm by the project for poor
overall performance, a right that the Military Departments have
exercised in the past.
Secretary Beehler. Oversight of housing management and maintenance
is provided at various levels. HQDA performs RCI project and program
portfolio performance oversight management and monitors each privatized
project through reviews of monthly, quarterly, and annual reports as
well as compliance visits and special purpose reviews. USACE Norfolk
visually inspects a sampling of homes and the area specific to the
ground lease during annual compliance reviews. Army Material Command
(AMC) provides oversight of the work order process and all execution
actions to improve the quality of the homes. IMCOM HQs provides
installation level operational asset management oversight support and
conducts review of reports and annual site visits of each project to
ensure compliance with all Army requirements. The Garrison Commander
has the responsibility for ensuring compliance with the various legal
documents covering requirements and those authorities included in title
10 of the United States Code Sections 2884/2885 as well as the day-to-
day interests of the Army.
The Services implemented the MHPI program differently through
partnership agreements or through contractual methods. There are
different requirements by state that cause the resident leases to
differ. Other differences include wait list management, referral
processes, and oversight.
The Army agrees that more standardization in our partnerships and
in our oversight processes to improve housing for our servicemembers
and their families is needed. A few things we are standardizing is the
Tri-Service Bill of Rights (currently in draft), developing a common
MHPI tenant lease that is augmented by addendums, identifying and
sharing best practices, making work orders status and progress visible
and transparent, developing a process to potentially withhold rent
until life, health, and safety issues are resolved, and evaluating the
annual resident survey for additional areas for improvement. Supporting
documents have been retained in Committee files.
Secretary Bayer. Oversight and monitoring authority is set forth in
10 U.S.C. 2884 & 2885 and in associated legal agreements. The operating
agreement of each PPV company defines the rights and responsibilities
of the DON in the company. DON leadership exercises oversight of
privatized housing projects with the aid of a ``monitoring matrix''
based on the PPV's obligations in each business deal via personnel in
CNIC and MCICOM housing offices and NAVFAC Business Agreements
Managers. DON is actively working with OSD, Army and Air Force on
initiatives that include common lease language and a resident bill of
rights to create a more consistent privatized housing experience across
the DOD.
Secretary Henderson. Project owners are responsible for providing
quality control over their management and maintenance activities. The
Air Force provides quality assurance over these functions using a
variety of tools.
The local housing management office provides day to day
oversight and evaluates random samples of the project owner's work to
ensure the project owner's quality control function is effective and
maintaining compliance with all requirements of the transaction
documents;
Monthly reviews of metric data and compliance checklists
are conducted at the installation level between project owner and
housing management office representatives;
Quarterly Management Reviews of metric data are conducted
between installation commanders and project owners; and
Annual site visits are conducted by the Air Force Civil
Engineer Center Installations Directorate to evaluate project owner
compliance with transaction documents.
For Air Force projects, the oversight process is
centralized and standardized across the portfolio.
32. Senator Blumenthal. Secretary McMahon, Secretary Beehler,
Secretary Bayer, and Secretary Henderson, for each service branch, what
is the role of the installation commander in overseeing private sector
housing projects? Is there a conflict of interest in the installation
commander having direct influence over privatized housing companies?
Secretary McMahon. The Military Departments are in a better
position to respond to this question.
Secretary Beehler. Garrison Commanders and the Senior Military
Member assigned to Army Garrison Commander equivalent positions on
Joint Bases are appointed by the Deputy Assistant Secretary of the Army
for Installations, Housing and Partnerships (DASA (IH&P)) as the Army's
senior representative (Designated Member) for the RCI project entity
Limited Liability Company/Limited Partnership (LLC). The Garrison
Commander/Designated Member is responsible for installation level day-
to-day asset management oversight for RCI project execution. The
Garrison Commander acts as the Secretary of the Army's local
representative for coordination of Major Decisions submitted for the
Army's consideration.
There is not a conflict of interest. The Garrison Commander/
Designated Member's authority is limited to specific actions as
delegated by the DASA IH&P, and defined within the legal framework of
the RCI Limited Liability Company (LLC) (or Limited Partnerships)
structure for each RCI project. The Garrison Commander/Designated
Members shall not authorize health and welfare inspections, participate
in RCI project eviction decisions, or influence housing assignment
process.
Secretary Bayer. There is no conflict of interest. The DON
Installation Commander is the primary person responsible for overseeing
the housing program on their base, and for ensuring that the housing
concerns of its servicemembers are addressed. The DON Installation
Commander works through their housing office and DON's Business
Agreement Manager to address issues with the PPV's Property Manager or
Managing Member.
Secretary Henderson. The installation commander is responsible for
the health, safety, and morale and mission effectiveness of the
personnel under his or her command. The installation commander partners
with the project owner's site lead. The housing management office
reports to the installation commander, provides the day-to-day
oversight, and advises the commander on housing issues. The commander
provides a quarterly evaluation to provide feedback to the project
owner on the program--on several projects this evaluation is also part
of the incentive fee structure. The commander coordinates on the annual
budget, sustainment, and reinvestment plans. Finally, commanders may
independently exercise their command authorities to ensure the health,
welfare, safety, or security of Air Force families living in privatized
housing, although this authority is limited to directing Air Force
action and does not include the right to direct project owners to take
action.
We do not believe these activities are a conflict of interest, but
are essential for the commander to execute his or her responsibilities
to protect the health, safety, morale, and mission effectiveness of the
personnel under his or her command.
33. Senator Blumenthal. Secretary McMahon, Secretary Beehler,
Secretary Bayer, and Secretary Henderson, how are the various service
branches ensuring that military installations have a strong military
community when the military no longer owns houses in these communities?
What improvements should be made to enhance the experiences of military
families living in privately-owned housing?
Secretary McMahon. The DOD overall has many programs and services
in place for the military families on a military installation, anchored
by the community of military families living on the installation in
MHPI housing. The Military Departments are in a better position to
provide further responses on potential improvements.
Secretary Beehler. For the Army, a community is more than just the
homes. It is about the streets, the parks, the landscape, and the
activities. It is having a place for residents to feel like they
belong. Our RCI Project Companies provide community centers for
residents use to have neighborhood meetings, to have kids' playtime, or
mommy and me meetings. The RCI Project Companies typically go above and
beyond the requirements of the project legal documents to host monthly
and quarterly events to create a sense of welcome and belonging such as
Mother's Day Spa day, Father's Day Bowling, Back-to-School Bash, and
Christmas parties where kids can make things to give as gifts. The RCI
Project Companies also work with the installations for National Night
Out events, Easter Egg Hunts, or developing neighborhood watches. The
RCI Project Companies also give back through Thanksgiving Dinner
giveaways and Scholarships to residents. It is also about giving the
residents the ability to collaborate on what is happening within the
housing community from activities such as hosting a block party through
the Housing Mayor Program to community design such as a dog park. The
RCI Project Companies provide outreach services to servicemembers and
their families during times of crisis and natural disasters.
The Army will continue to support the existing activities and
events sponsored by the RCI project companies and ensure that residents
and Army leadership are more involved. We can assist in publicizing
these activities and events by increasing awareness through social
media.
Secretary Bayer. The DON is executing short- and long-term actions
to increase oversight of PPV housing through routine boots on the
ground and resident follow-up, spot checks, continued town halls,
education, increased leadership engagement, and continued
communications with all stakeholders. We look forward to working with
Congress to identify additional authorities that may aid in improving
the experiences of our military families living in privatized housing.
Secretary Henderson. The success of privatized housing was built on
the premise that project owners must provide housing desirable to the
military members. The requirement in our agreements to first offer a
preference in renting of homes to Active Duty families assigned to the
installation and resident satisfaction surveys are essential in
monitoring the health of the community. Where these tools indicated a
project was failing to meet the needs of military families, the Air
Force Civil Engineer Center and the installation leadership team
engaged with the project owners in those areas that were deficient.
However, we have learned these tools alone are not effective. One of
the improvements we will be implementing is the use of Resident
Councils to provide direct feedback to installation commanders and
project owners on the military community needs. We are also adding
resident interviews and sensing to our oversight tools. These
additional tools will help focus Air Force engagement with project
owners and inform Air Force decisions with regard to the project
operating budget, sustainment, and reinvestment activities.
34. Senator Blumenthal. Secretary McMahon, Secretary Beehler,
Secretary Bayer, and Secretary Henderson, what changes are necessary
for existing MHPI authorities to ensure that contractors are held
accountable for substandard housing?
Secretary McMahon. MHPI partners are not DOD or Military Department
contractors. Under the MHPI, Military Departments conveyed their
existing government housing units to competitively selected
privatization entities (i.e., the MHPI projects). MHPI projects operate
under long-term (850-year) ground leases and associated legal
agreements with a Military Department, with one 25-year option period.
In return, the MHPI projects assumed responsibility for operation,
maintenance, construction, and replacement of the housing during the
lease term, in accordance with the MHPI authorities as defined in title
10, United States Code. The main role of the Military Department is to
monitor the MHPI projects to ensure adherence to the terms of the
project documents, as well as applicable legal and regulatory
requirements. Additionally, the Military Departments monitor MHPI
projects to ensure project financial performance can sustain quality
housing over the life of the ground lease. To this end, the Military
Departments monitor housing occupancy and resident satisfaction, as
well as revenue, operating expenses, operating budgets, and the overall
financial health of each MHPI project, to include the project's
sustainment and recapitalization funding as compared to pro forma
expectations and project needs. Depending on the particular structure
of a given project, the Military Departments may also have approval
authority for project budgets, certain major project expenditures,
changes in property management companies, or other key project
oversight decisions. DOD and the Military Departments are reassessing
and enhancing our oversight roles and processes to confirm we are
appropriately monitoring the projects and partner performance in
providing a safe, healthy, and enjoyable living experience for military
members and their families. The existing MHPI legislation and the
agreement documents undertaken pursuant to that legislation give the
government the authorities it needs to adequately run a good MHPI
program. This is not an issue of lack of authority, rather one of
needing to do a better job of exercising the authorities we already
have.
Secretary Beehler. The existing MHPI authorities are adequate to
ensure the RCI Project Companies are held accountable. Even with
adequate authorities, we realize that like any other business
enterprise, collaboration and oversight with our RCI Project Companies
needs to be evaluated on a continual basis. We will work with OSD and
the other Services to review current legislation; if we find
opportunities to improve, we are committed to do so.
Secretary Bayer. Existing MHPI authorities are sufficient and
provide ample opportunities to hold PPV partners accountable for
substandard housing. For example, in most projects, the PPV Partner
hosts a Resident Advisory Board which consists of military housing
personnel, PPV property management personnel and select residents. The
goal of the board is to solicit ideas and suggestions for making PPV
communities the best option for military members and their families.
Additionally, the PPV partner obtains input from residents at move out
and when developing the budget. They also receive input from the DON
during condition assessments.
Secretary Henderson. The Air Force has sufficient authority and
will work to negotiate with the project owners and private lenders on
changes to existing agreements that are necessary to ensure that
privatized housing meets or exceeds applicable standards for the health
and safety. The Air Force always strives to ensure that privatized
housing is an attractive and safe option for military members that
meets or exceeds the standards for safe housing that are available off
the installation.
The negotiations with project owners and private lenders will be
informed by the Resident Bill of Rights that is developed to inform
residents of their rights within privatized housing. To the extent the
Resident Bill of Rights provides for additional rights beyond those
currently found under tenant leases and state laws, we will need to
work closely with project owners and private lenders to amend the
existing agreements. We are also evaluating other changes that will be
discussed with project owners, to include alternative performance
incentive fee metrics to increase commander input and increase overall
Air Force leverage when a project owner fails to perform in accordance
with the requirements of existing agreements.
35. Senator Blumenthal. Secretary McMahon, Secretary Beehler,
Secretary Bayer, and Secretary Henderson, how are you sharing
information with VA about these conditions that are a direct result of
exposure to environmental hazards and toxic substances encountered
during military service?
Secretary McMahon. My office is working with the Office of the
Assistant Secretary of Defense for Health Affairs [OASD(HA)] to ensure
processes are in place for DOD medical or public health officials to
share information about potential housing-related health conditions
with other health officials, as appropriate. According to OASD(HA),
medical conditions for servicemembers are documented in the service
treatment record which is shared with the VA during transition for
continued treatment and/or disability where applicable. There is
currently no information sharing with VA regarding environmental
hazards and toxic substances encountered in privatized housing during
military service. However, any hazard and/or toxic substances annotated
in the service treatment record, regardless of the source, would be
shared with the VA during transition. DOD, in coordination with the
military Services, is working solutions to make privatized housing
environmental health assessment data available to government housing,
public health specialists and healthcare providers. DOD will also
assess the feasibility of providing the privatized housing
environmental health assessment data to VA. Further questions on
interagency information sharing between DOD and VA should be addressed
by OSD.
Secretary Beehler. The DOD/VA Deployment Health Working Group meets
monthly to discuss issues that relate to servicemembers and Veterans.
Frequent topics are environmental exposures. As appropriate, we will
ensure care is provided to those eligible at Military Treatment
Facilities (MTFs), and we will work with those who are not eligible for
care at MTFs in order to identify the best resources available to them.
Secretary Bayer. Medical conditions for servicemembers are
documented in the service treatment record which is shared with the VA
during transition for continued treatment and/or disability where
applicable. There is currently no information sharing with VA regarding
environmental hazards and toxic substances encountered in privatized
housing during military service. However, any hazard and/or toxic
substances annotated in the service treatment record, regardless of the
source, would be shared with the VA during transition. DOD, in
coordination with the military Services, is working solutions to make
privatized housing environmental health assessment data available to
government housing, public health specialists and healthcare providers.
DOD will also assess the feasibility of providing the privatized
housing environmental health assessment data to VA. Further questions
on interagency information sharing between DOD and VA should be
addressed by OSD.
Secretary Henderson. The answers were provided by AFMSA.
Upon completion of service, military members can share their
medical records with the VA and these records contain occupational and
environmental exposure information from in-garrison as well as deployed
operations. Furthermore, clinical evaluations, to include annual
preventive health assessments are included which can assist with
determining disability and healthcare needs for our servicemen and
women.
36. Senator Blumenthal. Secretary McMahon, Secretary Beehler,
Secretary Bayer, and Secretary Henderson, can you confirm that these
families are receiving adequate health care services through TRICARE to
address these conditions?
Secretary McMahon. My office is working with OSD Health Affairs to
ensure military families who have health concerns that may be related
to housing receive appropriate health care services, and that there are
clear processes in place for medical and public health officials to
raise concerns about housing conditions to installation housing offices
for investigation and remediation, as appropriate.
Secretary Beehler. The Military Health System (MHS) is equipped
with medical specialties and can provide the highest standard of care
for any medical condition. The availability of specific sub-specialists
may be limited to larger MTFs, but in areas where in-house specialty
care is not readily available, the MHS provides access to specialists
through civilian partners using the purchased care system.
In rare cases where a patient requires sub-specialty care that is
not available in the military or local civilian healthcare systems, DOD
will pay travel costs to where care is available.
Secretary Bayer. Eligible beneficiaries can access care at their
local medical treatment facilities (MTFs). Navy Medicine is ensuring
that our MTFs have an internal process that facilitates communication
and coordination between providers and public health personnel. We are
also working to ensure providers, servicemembers, and families
understand the proper procedures for reporting health concerns related
to housing discrepancies. If required health care services cannot be
provided at the MTF, the TRICARE network is used to ensure all required
care is received. Network providers are required to provide reports to
the Primary Care Manager or MTF, thus ensuring the MTF tracks all
health care provided by the network. The Department of Navy is
committed to ensuring the readiness, health and safety of our sailors,
marines and their families.
Secretary Henderson. The answers were provided by AFMSA.
Family members who seek care through military treatment facilities
or via off-base using the TRICARE benefit will receive quality
healthcare to address their symptoms and conditions. Public health
professionals are developing additional guidance for clinical
professionals to ensure these patients are adequately tracked and cared
for using the best in evidenced-based practices to resolve their
healthcare concerns.
37. Senator Blumenthal. Secretary Bayer, in your testimony, you
mention that privatized housing partners are required to immediately
notify the Navy Installation Housing Office of any resident concern
involved asbestos, carbon monoxide, lead based paint, radon, mold, and
pest infestation. In your experience with Navy installations, are
privatized housing partners consistently and appropriately notifying
the Navy of these alarming conditions?
Secretary Bayer. The Business Agreements specify notification time,
and the partners are, in general, meeting these requirements. However,
we are seeing that concerns are not suitably resolved in a timely
manner.
38. Senator Blumenthal. Secretary Bayer, does the Navy often
accompany the privatized housing partner to conduct oversight of
housing conditions? If not, why?
Secretary Bayer. Navy and Marine Corps military housing personnel
accompany the partners on about 3 percent of the visits.
39. Senator Blumenthal. Secretary Bayer, in your testimony you
state ``partners and government housing staff track all maintenance
actions and perform follow-up inspections to ensure resident
satisfaction.'' What is the average timeline from the initial complaint
to resolving the maintenance issue?
Secretary Bayer. In general practice, there are three categories of
service. While response times may vary by project, typical response
times are:
Emergency calls should be responded to within thirty
minutes (either by phone or in person) and completed as soon as
possible
Urgent calls should be responded to within four (4) hours
and completed within one (1) working day.
Routine calls should be responded to within one (1) day
and completed within 24 hours (pending parts).
A ``Carve Out'' occurs when (a) the resident wishes to schedule an
appointment for the time they wish the request to be responded to, (b)
after responding to the call, the Manager determines that replacement
parts are needed to complete the request or (c) the service request
requires completion by a licensed contractor (such as Exterminator,
Plumber, Electrician, etc.) after an initial response by maintenance
personnel. Most ``Carve Outs'' are completed within two weeks; however,
any ``Carve Outs'' outstanding (i) for more than two weeks are reviewed
by the Regional Property Managers for action, (ii) for more than three
weeks are reviewed by the Vice President of Property Management, and
(iii) for more than forty-five (45) days are explained in the Manager's
quarterly management report delivered to the housing office. Some
``Carve Outs'' that require ``continual'' work, such as water intrusion
or roof leaks that damage sheetrock or flooring and require time to dry
or cure before repairs can be completed by multiple trades may extend
past the typical two week period, but will be monitored accordingly by
Property Management.
__________
Questions Submitted by Senator Hirono
ways to improve issue response--ppv representatives
40. Senator Hirono. Mr. Williams, Mr. Picerne, Mr. Ehle, Mr. Hickey
and Mr. Bliss, when determining if an issue is satisfactorily resolved,
does the resident have input?
Mr. Williams. BBC has implemented a policy that gives residents
final approval on closing work orders to ensure tasks are completed to
their satisfaction. In addition, BBC utilizes a third party to survey
residents regarding their experiences with respect to work order
submission.
Mr. Picerne. Yes. We utilize a third party survey company to
administer surveys to the residents after work orders are complete in
order to help us learn and improve upon our processes and procedures.
Mr. Ehle. Yes. After a work order or maintenance request is
completed, Hunt solicits informal feedback from the resident regarding
the work that was performed. Hunt also issues work order satisfaction
surveys for every visit. Our military partners have access both to our
work order survey results and may also follow-up with the resident.
If the resident is not satisfied with a repair, the resident can
follow the dispute resolution procedures outlined above in the response
to question 9.
Mr. Hickey. Yes, via the SatisFacts service order survey. These are
distributed weekly to all residents who have had a service order
performed in their home during that week. For calendar year 2018,
approximately 19,900 completed SatisFacts service order surveys were
received. These surveys ask if any maintenance problems still exist and
if the resident would like to be contacted. Additionally, any survey
with an overall score of less than 3.0 is investigated by the
maintenance team as to what led to resident dissatisfaction.
Mr. Bliss. Yes. We notify residents when a service request has been
closed out. If the resident does not believe the issue has been
resolved to their satisfaction, then there is a process to address the
issue. In 2017, LMH expanded its communication of the escalation
process for unresolved resident concerns. That process involves the
following steps:
(a) Step 1--contacting LMH's maintenance hotline with a concern or
maintenance request,
(b) Step 2--if the resident's concern is not resolved, LMH asks
the resident to call LMH's Regional General Management Office, and
(c) Step 3--LMH encourages the resident to contact the Government/
Base housing office at any time during the process to further advocate
on their behalf to resolve any concerns.
41. Senator Hirono. Mr. Williams, Mr. Picerne, Mr. Ehle, Mr. Hickey
and Mr. Bliss, what protocol do you have in place to notify the
Department of Defense of pervasive maintenance issues, perhaps across
communities, bases or states?
Mr. Williams. The service branches actively monitor and review work
order performance by BBC and have 24/7 access to the Yardi software
platform through which work orders are logged and tracked through
completion. In addition, BBC regularly submits reports to the service
branches on the state of housing and recommendations for any
unprogrammed and necessary capital repairs/replacements, the presence
and remediation of any environmental hazards and work order processing.
Mr. Picerne. As active partners with the Army and Air Force, we
have direct avenues to communicate all manner of issues with the
appropriate military officials, both and the installation/base ad
Pentagon levels.
Mr. Ehle. Hunt values transparency and we are committed to
maintaining regular communication and an open dialogue with our
military partners. As we discuss in greater detail below (see response
to question 31), Hunt is subject to reporting and inspection
requirements that occur on weekly, monthly, quarterly and annual bases.
Our military partners have access to the Yardi maintenance software and
can review work orders and survey responses. They are also able to
inspect homes (with notice and consent unless its an emergency) and
follow up directly with residents.
When extraordinary issues arise, Hunt reports developments through
the chain of command, including the Air Force Civil Engineering Center,
the Office of the Assistant Chief of Staff for Installation Management,
and the Naval Facilities Engineering Command.
Mr. Hickey. The entire Lendlease team, from on-site Project
Managers to Executives, maintain very regular communication with their
counterparts, from local military housing staff and installation
command to Pentagon personnel. This is both formal and informal. If a
pervasive maintenance issue were to occur, we would work
collaboratively with our military partners to comprehensively address
the situation. We have regular, formal meetings with the Service
Secretary's staff to work through operational concerns.
Mr. Bliss. Primarily, we use informal calls and official meetings
with DOD when maintenance trends emerge. We also use the monthly Flash
report/Dashboard designed by the Navy/Army and the annual budget
process to identify recommended repairs. In addition, DOD has access to
our online maintenance system and they perform condition assessments
annually.
42. Senator Hirono. Mr. Williams, Mr. Picerne, Mr. Ehle, Mr. Hickey
and Mr. Bliss, how can your organization incentivize greater survey
participation and honest responses by residents in order to get
meaningful data about issues experienced by families living in your
communities?
Mr. Williams. BBC incentivizes residents with the opportunity to be
entered to win a small rent credit by submitting responses to our third
party survey firm that contacts residents regarding work order request
and move-in satisfaction.
Mr. Picerne. We have begun participating in discussions with the
Offices of the Secretaries of Defense, Army, Air Force, along with the
independent survey firms to review the survey questions and the
methodologies, all with the goal of ensuring the partnerships all
receive meaningful data and increase survey participation.
Mr. Ehle. As stated in response to question 2 above, Hunt values
resident feedback, and we take proactive steps to encourage residents
to provide feedback and participate in satisfaction surveys. With
respect to the annual satisfaction survey conducted by an independent
third party, Hunt publishes response results to motivate staff teams to
constantly improve resident service. Externally, Hunt holds community
events to encourage residents to complete the survey through the
independent, third-party administrator. On a day-to-day basis, we reach
out to residents to solicit real-time feedback on maintenance requests
and work orders that have been completed at their residence.
Mr. Hickey. Survey participation is encouraged in numerous ways,
including community events, social media engagement and personal
interaction with residents. In 2018, 44.2 percent/ (17,680) of our
residents submitted CEL surveys. Providing residents with general
community communications that reflect the feedback provided by the
community along with what actions are being taken in this regard builds
trust with residents and improves feedback.
We are investigating other ways to collect feedback and increase
participation, including proactive outbound calls and/or live feedback
on iPads at times of service.
Mr. Bliss. SatisFacts surveys (independent third party), are
continuous and ongoing with each service request and move-in
assessment. On average, we receive a 13 percent response rate to our
survey requests. The Annual Resident Satisfaction Surveys are
anonymous. We offer residents the ability to enter a drawing for prizes
in order to increase participation, but the drawing is not dependent on
whether the resident provides praise or criticism in their survey
response. LMH will work with the third-party survey company to better /
inform residents that honest and open responses are crucial to the
ongoing success of privatized military housing.
43. Senator Hirono. Mr. Williams, Mr. Picerne, Mr. Ehle, Mr. Hickey
and Mr. Bliss, how can your organization better communicate its
standard processes and procedures to address concerns with residents?
Mr. Williams. BBC is in the process of creating resident access to
an electronic library of resident informational documents, not only for
the resolution process and contact information but also seasonal and
educational ``how to'' guides, tips and tricks, for living in our homes
and communities. BBC also is developing a move-in orientation session
that will be scheduled and hosted in person, as well as be accessible
via Facebook live.
Mr. Picerne. Over the past 3 months, we have dramatically increased
our efforts to ensure that all of our residents are aware of our
standard processes and procedures for contacting us with any concerns
they may have with their homes or the services Corvias is providing,
including five different ways to communicate with us, 24 hrs/day, 7
days/week.
Mr. Ehle. Hunt strives to keep our residents informed of important
environmental and safety matters that may affect them. We have in place
the Hunt Safety Zone, an online library of information relevant to
residents' safety, which is regularly updated with new information and
seasonally relevant topics. We also provide our residents standard
health and safety information upon move-in, as required by applicable
law and standards, regarding moisture and mold, lead-based paint,
asbestos, radon, and/or pesticides.
As stated in response to question 1 above, we proactively interact
with our residents and military partners in a variety of ways,
including, among others, routine electronic and written messages,
regular town hall-style meetings, and via social media. Nevertheless,
we recognize that improving communication starts with us. As such, we
have undertaken to provide customer service and communication training
for relevant personnel within the Hunt organization to improve our
future communication and resident relation efforts. We are also
reviewing our operational processes for work order resolution and
evaluating whether staffing levels are sufficient to address service
requests in a high-quality and timely manner.
Hunt has also implemented an improved helpline, the ``Hunt Promise
Helpline,'' which will be a more efficient way for residents to voice
complaints directly to a Hunt senior management team member if a
concern has not been resolved by the local housing management or
military housing office.
Mr. Hickey. The Lendlease team are committed to continual
improvement in everything that we do, especially in providing clear,
consistent and straightforward communications with our residents that
is delivered in a variety of formats. Currently, at move in residents
are provided information including:
Reviewing of the lease and its key provisions;
Explaining how to submit work orders, through what
mechanisms, together with an outline of work order classifications,
response and completion time expectations;
Sharing our feedback channels and encouraging residents
to complete move-in surveys;
Reviewing the key points from the resident guide and
where to find the guide; and
Inviting residents to register for the Resident Portal
and MilitaryCafe App to allow them to submit work orders and track
requests.
An orientation is completed in the home, showing residents how to
operate the life/safety components, appliances, etc. Residents have a
magnet with contact information on their refrigerator.
The Resident Guide is available on the website and outlines
procedures, policies and processes for all areas of their residency.
Each project has a local Facebook page which provides periodic posts
about procedures and reminders that help residents in their tenancy.
Also, residents receive periodic reminder emails. Many properties host
or participate in regularly held Town hall meetings which give us an
opportunity to provide information and answer resident questions.
Recently, Escalation Posters were posted in all community offices
giving residents more awareness of what their escalation channels are
and how to utilize them. Our goal is to adapt and change as new
communication tools and methods are adopted widely by our residents.
Additionally, we are investigating other ways to collect resident
feedback proactively and have commenced a program of `outbound calls'
to this end as well as securing live feedback using app and iPad at the
time of service orders.
Lendlease understand and acknowledge that a need exists to provide
more modern, user friendly communications. To this end, we have
examined where the most impactful improvements can be made (starting
with technology and access upgrades) and are preparing for a refreshed
communications plan which is currently in pilot stage at one of our
largest installations.
Mr. Bliss. LMH is exploring new ways to communicate with residents
about our processes and procedures. This may include revised and
simplified lease forms and community handbooks, revisions to our
website and online access to address questions and concerns. LMH
commits to doing more to foster better lines of communication with
residents.
fiscal year 2018 ndaa requirement for assessment of child safety
44. Senator Hirono. Secretary McMahon, the Fiscal Year 2018 NDAA
called for the Secretary of Defense to enter into an agreement with an
independent entity with experience in performing technical evaluations
of the compliance of housing units with the codes and standards of the
International Code Council and other relevant codes and standards to
conduct and submit to the Secretary and the congressional defense
committees an assessment of child safety issues in military family
housing units, with an emphasis on assessing hazards that may result in
falls. This was to be completed no later than a year after the
enactment of the NDAA. I have sent a letter to the acting Secretary of
Defense requesting the status of this assessment. To your knowledge,
was this assessment done and, if so, what were the results?
Secretary McMahon. The safety of children residing in military
family housing is of the utmost importance to the Department. The
Department agrees with Congress that an analysis is necessary to ensure
family housing standards are in place to provide for the safety and
well-being of servicemembers and their families in accordance with the
codes and standards of the International Code Council and other
relevant local, state, and federal building codes. In order to utilize
the ``independent entity with experience'' required by the legislation,
the Department secured fiscal year 2019 funding to contract for this
assessment. We have begun the process to contract with an independent
entity that possesses the required authoritative knowledge and
experience in performing such technical evaluations, including an
emphasis on assessing hazards that may result in window falls. Due to
the size and global distribution of the Department's military housing
inventory, we estimate any independent entity would require several
months to conduct an extensive assessment. Therefore, we anticipate
delivery of the assessment by the end of December 2019.
45. Senator Hirono. Secretary McMahon, I have seen the report for
calendar year (CY) 2017 to the Committee on Armed Services indicating
there were no window falls from Government-owned family housing and two
non-fatal falls from privatized housing units. Do you have the final
numbers for calendar year 2018 and, if so, what is your assessment of
the results?
Secretary McMahon. The report on window falls is expected to be
provided to the Defense committees in early April. During calendar year
2018 there were no window falls from Government-owned family housing
but one non-fatal fall occurred from a privatized family housing unit
at Buckley Air Force Base, Colorado, on October 29, 2018. DOD's housing
privatization partners provide window safety education as part of their
leasing process, supplemented with ongoing education at townhall
meetings and other forums.
health concerns in privatized housing
46. Senator Hirono. Secretary McMahon, Secretary Beehler, Secretary
Bayer, and Secretary Henderson, what mechanisms does your service make
available for military families to report health and safety concerns
with military housing?
Secretary McMahon. Military families are encouraged to report any
health and safety concerns regarding their housing to their landlord
and the government housing office at their installation, regardless of
whether the housing is on the installation or not. They can also report
any health and safety concerns to Installation Commander or the
Inspector General. In all cases, OSD expects the Military Departments
to ensure resident reports of health and safety concerns are taken
seriously and handled in an expedited manner, without fear of
retribution, and will ensure this is included in the Residents' Bill of
Rights.
Secretary Beehler. In addition to the ability to report health and
safety concerns directly using the soldier's chain of command, the
Commanders of installations with Army housing were recently tasked to
establish and maintain a command hotline to respond to Army housing
concerns of soldiers and families. In addition, Army Medicine is
revising policy and implementing oversight procedures to ensure that
any health condition potentially associated with an environmental
hazard inside the home is documented in the patient's electronic health
record, and, where a home assessment is recommended, assisting
residents of on-post housing with the coordination of a home inspection
and remediation of the potential hazard.
Secretary Bayer. Partners have agreed to immediate notification to
the Navy/Marine Corps on issues related to: asbestos, carbon monoxide,
LBP, Radon, Security, Mold/water infiltration and pest infestation.
Upon discovery or notification, Partner documents incident,
provides service call; follows established action plans:
Partner performs preliminary investigations to collect
relevant and detailed information about the concern or incident
Partner records all Health and Safety issues in the
commercial real estate property management databases
If hazard suspected, alternate housing provided
Partners conduct follow up inspections
Partner maintenance actions are tracked
For Mold/Pests/Drinking water/hazardous material responses:
No Federal or state EPA/OSHA regulations exist for mold
Partner cleans hazard and monitors home
Residents sign mold addendum in lease
Secretary Henderson.
Members can and should immediately notify the maintenance
staff, whether privatized or government owned, by submitting a work
order.
Members can and should report failures to perform to the
housing management office for resolution and if unable to resolve,
elevate their concern through their chain of command.
The Air Force established a call center for residents to
express their concerns and receive direct engagement by the Director of
Installations at the Air Force Civil Engineer Center.
Members can report concerns to the Inspector General
Members can report the concern to an enforcement agency
such as the Environmental Protection Agency or state or local
enforcement agencies.
47. Senator Hirono. Secretary McMahon, are mechanisms for military
families to report health and safety concerns with military housing
standardized across services and housing properties?
Secretary McMahon. Each Military installation includes a government
housing office to provide housing referral and assistance to
servicemembers and their families, to include receiving resident
reports of health and safety concerns including issues that residents
feel have not been adequately addressed by the privatized housing
project. In all cases, residents are encouraged to submit work order
requests and report any health and safety concerns to the privatized
housing property management office first, followed by raising concerns
to the government housing office. Privatized housing residents may
always raise any concerns to their leadership chain, the installation
commander, the Inspector General, or local or state housing
authorities.
48. Senator Hirono. Secretary McMahon, Secretary Beehler, Secretary
Bayer, and Secretary Henderson, do the services have sufficient
oversight capability and authority to manage the MHPI program?
Secretary McMahon. The DOD has the authorities necessary to provide
sufficient MHPI program and project oversight. Where DOD needs to
improve is in exercising those authorities and funding the level of
staff support necessary to fully perform required privatized housing
oversight as it was originally envisioned/intended at the outset of the
MHPI program. In addition, DOD leadership must re-engage in the
oversight process to demonstrate their continued commitment to military
families and ensure the continued success of the program.
Secretary Beehler. Yes, the Army believes that sufficient
authorities exist to oversee and manage the MHPI program. The recent
lapse in MHPI oversight was the direct result of budget and personnel
cuts that are now being rectified. The Deputy Assistant Secretary of
Defense (DASD) for Health Services Policy and Oversight (Health
Affairs), in collaboration with DASD Environment, and DASD Facilities
Management is evaluating current Service policies and procedures to
ensure standardization across the Services and housing properties
regarding health and safety concerns with military housing.
Secretary Bayer. Based on the original objectives defined by
Congress when the program was initially created in the mid-1990s, the
DON has sufficient oversight capability and authority to manage the
MHPI program.
Secretary Henderson. The Air Force has the necessary capabilities,
resources, and authorities to provide sufficient oversight and manage
the MHPI program. However, we will need to reevaluate past reductions
in our housing management office and program oversight staff required
to provide the necessary oversight and support to our housing
residents.
49. Senator Hirono. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, what percentage of homes in your service's
portfolio did your service independently inspect in 2018?
Secretary Beehler. Installation housing offices routinely conduct
random sample inspections of homes at every installation but actual
numbers of inspections were not tracked. HQ IMCOM, HQ Department of the
Army and US Army Corps of Engineers personnel conducted inspections on
approximately 2 percent of the homes in the inventory in 2018 during
annual site visits. The Army recognizes that it should increase the
number of inspections performed. Following the recent surge in
complaints, the Army in 2019 conducted visits to 100 percent of the
homes in the inventory.
Secretary Bayer. Navy and Marine Corps military housing personnel
typically inspect about 3 percent to 5 percent of the homes during
changes of occupancy, condition assessments and/or upon following up on
action items from residents or maintenance logs.
Secretary Henderson. The Air Force independently inspected
approximately 3.3 percent of the housing portfolio in 2018.
50. Senator Hirono. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, in Hawaii, we have housing built as far back as
the early 1900s. What is being done at your level to address issues
regarding lead-based paint and other environmental concerns in these
communities?
Secretary Beehler. RCI Project Companies are required to adhere to
all Federal, States, and local laws and regulations to address
environmental hazards. The Army will be randomly inspecting to ensure
laws and regulations are followed. The Army is assessing the staffing
and hiring needed at each installation. We are increasing ground lease
compliance inspections. We are refining existing protocols while
simultaneously implementing enhanced move-in protocols, maintenance
procedures, and oversight responsibilities.
The Army is ensuring garrisons inspect 100 percent of all homes
where between occupancy maintenance / change of occupancy maintenance
have been completed and inspect 100 percent of all work / service
orders relating to life/health/safety issues. The Army and the RCI
Project Companies will continue to inform and educate soldiers and
families about the concerns and health impacts of environmental
hazards, the resources available to tenants, and all of the available
methods to report potential risks.
Secretary Bayer.
Prior to transferring the property to the PPV Partner,
the Navy conducts an Environmental Baseline Survey and provides the PPV
partner with a Finding of Suitability to Lease/Finding of Suitability
to Transfer, which later transitions to an Environmental Condition of
Property. Additionally, LBP Inspections and Risk Assessments are
conducted in accordance with applicable regulations such as24 CFR Part
35. After transfer through Ground Lease, the PPV project becomes
responsible at its cost and expense for:
Necessary abatement, removal, disposal maintenance and
management of LBP located in and on the Improvements
Maintenance and management in place of LBP hazards in
the soils immediately adjacent to the improvements on the Leased
Premises
Claims or liability resulting from Lessee's failure to
properly manage, remove, abate, or dispose of all LBP in the
improvements.
Lessee must comply with and incorporate a LBP hazards
removal, disposal, management and abatement plan into Lessee's plans.
Annually on a routine basis; at Change of Occupancy; and/or in
response to Resident Request; partners will: have trained personnel
conduct a physical ``walk through'' to examine lead-positive
components; document findings to confirm that all lead-containing
components are intact and manageable; reference the original lead
survey and any subsequent inspection reports and; identify and track
all properties containing LBP and update the inventory records.
Also, regarding disclosure/notification to residents in PPV units:
in accordance with Federal regulations, and as specified in the ground
lease, prior to signing the lease agreement, partners provide each
tenant under a Housing Agreement: a copy of the LBP Disclosure Form, a
copy of the Pamphlet ``Protect Your Family from Lead in Your Home,''
and upon resident request, all known records, reports and documents
regarding LBP.
Secretary Henderson. Within the Secretariat, I am responsible for
the lead based paint management policy for Air Force owned facilities.
The Air Force maintains records of the program for the housing it
manages. For privatized housing, the project owner maintains those
records. The Air Force checks the lead based paint program for each
privatized project during compliance audits conducted annually.
Residents of pre-1978 homes are provided an addendum to their lease
that informs them of the potential existence of lead based paint in
their home, housekeeping instructions when residing in a home with
potential lead based paint, and instructions to contact maintenance if
they see degradation to painted surfaces.
51. Senator Hirono. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, besides withholding incentive payments, what
additional authority or authorities does your service have to address
PPVs that are not sufficiently addressing concerns of servicemembers
and their families with regard to their housing?
Secretary Beehler. Additional authorities the Army has to address
RCI Project Companies that are not sufficiently addressing concerns of
servicemembers and their families include:
1. Issue a cure notice when responsibilities in agreements are not
met.
2. Notify lenders that issues are not being corrected.
3. Approval authority over operating budgets (operating budget
that determines what flows into the Reinvestment Account).
4. Terminate the ground lease.
Secretary Bayer. Oversight and monitoring authority is set forth in
10 U.S.C. 2884 & 2885. The operating agreement of each PPV company
defines the rights and responsibilities of the DON in the company. DON
leadership exercises oversight of privatized housing projects with the
aid of a ``monitoring matrix'' based on the PPV's obligations in each
business deal. The managing member (or in one instance, the general
partner) of each PPV company is tasked with management of the company.
DON does not participate in the day-to-day activities of these private
companies. DON is specifically prohibited from managing the company
except with regards to certain consent rights, and other specifically
defined rights, such as the ability to initiate the process for
replacement of the property manager. DON reviews and approves the
annual budget and incentive fees, and can request reporting to provide
oversight and make well-informed consents. In addition, DON can enforce
performance from the privatized housing projects by engaging
bondholders to work with the projects to meet the commitments under the
agreement. DON can also issue cure notices or use the court system, if
needed, to seek resolution for poor performance.
Secretary Henderson. The Air Force can initiate the formal legal
action in accordance with the existing agreements. The remedies for the
Air Force range from the issuance of a default and cure notice to the
extreme remedy of termination of the lease agreement. The remedies are
subject to the rights of the private lender to step in and cure any
default that has been declared by the Air Force.
The Air Force can also initiate a complaint with the Environmental
Protection Agency or state and local agencies, which can levy fines or
other enforcement actions against the project owner for violations of
environmental, health, or safety laws.
__________
Questions Submitted by Senator Elizabeth Warren
financial performance of mhpi agreements
52. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, do any of your agreements with any of your
privatized military housing partners dictate either an expected target
profit or a minimum or maximum profit that a partner is allowed or
expected to receive through fees and member distributions? If so,
please describe each such agreement?
Secretary Beehler. Yes. In regards to member distributions, or
partner equity return, the majority of the operating agreements include
a minimum preferred return and also a maximum total equity return to
the partner. The preferred return percentage, if applicable, is
included as a portion of the total equity return. In regard to property
management fees, the majority of the projects include a cap on total
fees which is adjusted by CPI or other similar benchmark. The idea
behind the CPI cap is to ensure property managers do not receive large
increases in fees due to a large BAH increase and therefore fees are
capped at CPI or other benchmark index increases. The spreadsheet has
been retained in Committee files.
Secretary Bayer. The 98.3 percent pays for Operations and
Sustainment. The partners' return is 1.7 percent.
Secretary Henderson. The Air Force projects are not uniform in the
payment of fees or other distributions. The project owners may be
entitled to the payment of certain fees (e.g., property management,
asset management, or development fees) depending on the revenues of the
project and priority payment of other expenses within the project. The
project owners may also be entitled, as the last priority for payment,
to a percentage of any remaining revenue after the payment of all other
expenses of the project. There is typically a Lockbox Agreement for
each project that outlines how the rent revenue for the project will be
used to pay expenses and other obligations of the project. The
financial structure of each project was established in the proposal
submitted by the successful developer in a competitive source
selection.
53. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, for each of your respective Military Department's
active Military Housing Privatization Initiative agreements, please
provide the following information: (1) The date it was signed; (2)
installation(s) that it serves; (3) number of housing units provided;
(4) year or years that those housing units were first occupied; (5)
year or years of any substantial renovations; (5) value of the
replacement reserve fund or other funds available for capital expenses.
Secretary Beehler. Every project has had some percentage of their
respective housing stocks undergo substantial renovation or
replacement. The actual percentage varies with each project and is
dependent upon the amount and quality of the housing inventory that was
transferred, direct government investment (cash) at closing, and most
importantly the financial cash flows and loan proceeds used for
investment in the initial development period. The portfolio has
replaced 26,804 and constructed 8,655 new homes with another 27,026
substantial renovations completed to date. The spreadsheet with
response have been retained in Committee files.
Secretary Bayer. Attachments 1 and 2 have been retained in
Committee files.
Attachment 1 includes: (1) The date it was signed; (2)
installation(s) that it serves; (3) number of housing units provided;
and (6) value of the replacement reserve fund or other funds available
for capital expenses.
Attachment 2 includes: (4) year or years that those housing units
were first occupied; (5) year or years of any substantial renovations.
Secretary Henderson. [Deleted.]
54. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, for each of the last 10 years, please provide the
following information for each year for each agreement: (1) How much in
total revenues from rental payments did each of your private partners
generate from each agreement? (2) How much (in dollars) did each of
your private partners receive or retain through member distributions
for each agreement? (3) How much (in dollars) did each of your private
partners receive or retain through incentive-based fees for each
agreement? (4) How much did each of your private partners receive or
retain through management, operations, or other non-incentive-based
fees or payments for each agreement? (5) How much was the total profit
(in dollars) for each of your private partners for each agreement?
Secretary Beehler. As for the total profit for each of the Private
Partners, the Army doesn't have visibility on the profitability of the
individual Private Partners for each Partnership Agreement. See
spreadsheet in response to #53 for details by project of the amounts of
fees and equity distributions made to the Private Partners from the
Project Companies.
Secretary Bayer. Please refer to Attachments 3 and 4 retained in
Committee files.
Attachment 3 contains the information requested, broken out by
year, from 2009 to 2018. Attachment 4 contains a roll-up of the
information requested for the period 2009 to 2018.
Secretary Henderson. Attached document [deleted] labeled revenue
and fees have separate charts for items (1) through (4). We cannot
determine the profit level of the private partners without full
visibility of their internal costs, which is not available to the Air
Force.
55. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, do DOD officials or does any third party conduct
financial audits of any of your agreements or partners? If so, please
provide copies of any audits conducted in each of the last 5 years.
Secretary Beehler. RCI Partnerships are required to have a
financial audit completed by a third-party annually. A sample copy has
been retained in Committee files.
Secretary Bayer. The DON does not conduct financial audits of our
agreements or partners. Nevertheless, DON executes oversight via (1)
inspections of, and reports and certifications by the company (all set
forth in a ``monitoring matrix''), (2) the ability to make the
bondholder replace key managers for grave performance issues, and (3)
veto power over major decisions including the annual budget.
Secretary Henderson. Each project is required to have an annual
independent audit of the project's financial statements by a qualified
public accounting firm. Copies of the Audited Financial Statements will
be provided to the Committee separately.
56. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, are you aware of what, if any, capital need plans
your private partners have in place for each development, for the next
5 years?
Secretary Beehler. Yes, every Partner, as a part of their annual
operating budget submission to the Army, provides an updated 5-year
Capital Repair & Replacement plan. In addition, all of the Projects
submit an Out-Year Development plan in 5-year increments that
establishes the development activity for the Project over that time
period. These plans are approved by the Army. The amount and type of
development activity largely depends upon the needs of the Project and
the availability of investment proceeds for utilization from the
Project Reinvestment Account. At this time, there are Out-Year
Development plans that contain no major development and construction as
the project builds up funds in the Reinvestment Account for future
construction.
Secretary Bayer. Yes. As part of the budget, the PPV Partner
submits their Capital Repair and Replacement (CRR) plans to the DON,
and they are reviewed and approval annually.
Secretary Henderson. Project owners submit a capital needs plan
each year for Air Force review that outlines their plans for capital
expenditures. This review includes comparisons to industry standard
needs assessments and models.
57. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, is the balance in the reserve account sufficient
to meet the needs of the developments?
Secretary Beehler. All projects have funding available to meet the
minimum needs of the projects.
Secretary Bayer. All of our PPV Partners' accounts have sufficient
balances to meet required obligations under our agreements.
Secretary Henderson. The Air Force has identified six projects for
financial restructuring (Robins I, Robins II, Scott, Barksdale/Langley/
Bolling, Offutt, and Air Education and Training Command Group I) with
insufficient sustainment and reinvestment reserves to fully to sustain
and recapitalize for the duration of the lease term. The Air Force has
another seven projects (Falcon Group, Buckley, ACC Group II, U.S. Air
Force Academy, Dover, and Kirtland) that are on a watch list. These
seven projects can meet minimum sustainment needs for the life of the
lease term but have insufficient recapitalization reserves.
inspections
58. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, do all applicable state and local housing codes
apply to the houses within your privatized housing portfolio? Please
provide a list of all bases or installations that are excepted from
applicable state and local housing codes.
Secretary Beehler. The Army requires all privatized projects to
comply with a list of overarching codes including the International
Building Code, the International Residential Code, National Electric
Code and National Fire Protection Agency (NFPA), as examples.
Historically for privatized housing falling under Exclusive Federal
Jurisdiction, state and local codes were not applicable by law. The
Army recognized this as an area which required clarification and
updated the RCI Construction Standards policy which was issued in
October 2018. The policy clarifies the intent of applicable codes: all
state and local housing building codes apply to all houses and work
completed within the RCI privatized housing portfolio. Even for areas
of Exclusive Federal Jurisdiction, the policy states RCI shall comply
with state and local codes with the caveat that in the event of
conflict with Federal Regulations, Federal Regulations take precedence.
Prior to the issuance of the policy, ``applicable'' may have resulted
in elements of construction non-compliant with state and local
standards for RCI projects falling under Exclusive Federal
Jurisdiction.
Secretary Bayer. None of DON's business agreements except the
privatized housing companies from applicable state and local housing
codes.
Secretary Henderson. No project is excepted from applicable state
and local housing codes. Project owners are required under the ground
leases to comply with all applicable laws, which is typically defined
very broadly. For example, the AETC II project defines ``Applicable
Laws'' to include ``all federal, state and local laws, rules,
regulations, orders, ordinances, and other governmental standards and
requirements which are applicable to the Project Owner or the
Project.''
59. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, how many homes within your entire privatized
housing portfolio were inspected by Federal authorities in fiscal year
2018?
Secretary Beehler. The General Accounting Office (GAO) conducted an
audit of the financial health of the privatized housing projects at
Fort Knox and Fort Meade. During the visit at these installations, the
GAO team visited approximately 10 homes. OMB, OSD, and EPA visited Fort
Meade and walked-through approximately 10 homes. OACSIM conducted
project compliance and partnering visit, development and special
purpose reviews at Fort Wainwright, Fort Greeley, Carlisle Barracks,
Picatinny Arsenal, Joint Base Lewis McChord, Fort Hood, Fort Bragg,
Fort Hamilton, Fort Meade, Hawaii, Presidio of Monterrey, Fort Rucker,
and Fort Benning walking 71 homes.
USACE conducted 15 annual lease compliance reviews for Carlisle
Barracks/Picatinny Arsenal, Fort Belvoir, Fort Benning, Fort Bragg,
Fort Gordon, Fort Hamilton, Fort Hood, Fort Leavenworth, Fort Leonard
Wood, Joint Base San Antonio--Fort Sam Houston, Fort Stewart/Hunter
Army Air Field, Hawaii, Joint Base Lewis McChord, Presidio of Monterey,
and Redstone Arsenal.
The total percentage of homes independently inspected in 2018 is
unknown, however the Army conducted Environmental Hazards screenings in
10 percent (1,360) of all pre-1978 built homes during 2018. During site
visits, HQ IMCOM focused on the Army's oversight roles and did not
inspect homes.
Secretary Bayer. We do not track this in a centralized master
database. Officials from the Environmental Protection Agency perform
inspections as warranted.
Secretary Henderson. The Air Force inspected approximately 3
percent of privatized homes at change of occupancy. We have no record
of inspection of any homes by other federal authorities. However, the
Environmental Protection Agency has conducted ``no notice'' reviews of
the lead based paint program of project owners at several
installations. The EPA reviewed records and inspected several homes.
60. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, which specific Federal authority performed these
inspections?
Secretary Beehler. The General Accounting Office (GAO) conducted an
audit of the financial health of the privatized housing projects at
Fort Knox and Fort Meade. During the visit at these installations, the
GAO team walked approximately 10 homes. OMB, OSD, and EPA visited Fort
Meade and walked-through approximately 10 homes. OACSIM conducted
project compliance and partnering visit, development and special
purpose reviews at Fort Wainwright, Fort Greeley, Carlisle Barracks,
Picatinny Arsenal, Joint Base Lewis McChord, Fort Hood, Fort Bragg,
Fort Hamilton, Fort Meade, Hawaii, Presidio of Monterrey, Fort Rucker,
and Fort Benning walking 71 homes. USACE conducted 15 annual lease
compliance reviews for Carlisle Barracks/Picatinny Arsenal, Fort
Belvoir, Fort Benning, Fort Bragg, Fort Gordon, Fort Hamilton, Fort
Hood, Fort Leavenworth, Fort Leonard Wood, Joint Base San Antonio--Fort
Sam Houston, Fort Stewart/Hunter Army Air Field, Hawaii, Joint Base
Lewis McChord, Presidio of Monterey, and Redstone Arsenal.
Secretary Bayer. Officials from the Environmental Protection Agency
have inspected DON privatized housing.
Secretary Henderson. Home inspections were conducted by the local
Air Force housing management office. The Environmental Protection
Agency reviewed lead based paint programs and documentation at multiple
sites but did not perform any widespread home inspections.
61. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, how many homes within your entire privatized
housing portfolio were inspected by state and/or local authorities in
fiscal year 2018? Please provide a breakdown of which state/local
authority conducted these investigations, and under what authority they
did so.
Secretary Beehler. HQ IMCOM does not have specific data relating to
inspections conducted by state or local officials for privatized
housing.
Secretary Bayer. The DON is not aware of any investigation by
state/local authorities of homes within the DON's privatized housing
portfolio.
Secretary Henderson. We are not aware of any inspections by state
or local authorities in 2018.
62. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, please provide the inspection results for those
inspections undertaken by Federal, state and/or local authorities in
fiscal year 2018.
Secretary Beehler. While comprehensive data is not tracked by The
Army, a sample of inspection results from state and local authorities
have been retained in Committee files.
Secretary Bayer. Outside inspection results are not centrally
collected.
Secretary Henderson. The Environmental Protection Agency has not
provided any final reports to the Air Force for the no-notice reviews
they conducted.
reprisal and retaliation
63. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, did anyone in your Military Department receive any
reports of retaliation or reprisal from any servicemember or their
family after they reported unsafe, unhealthy, or unacceptable
conditions in privatized housing? Please provide a list of all reports
of retaliation or reprisal, if any, that your Military Department
received.
Secretary Beehler. Army Materiel Command is aware of 4 total
reports of retaliation/reprisal by private housing partners. There are
3 reports of retaliation/reprisal by Balfour Beatty Communities (1 each
at Carlisle Barracks, West Point, and Fort Detrick), and 1 by Corvias
(Fort Riley). The Army Inspector General's office will provide chain of
command retaliation/reprisal data when it completes its final report in
mid-May.
Secretary Bayer. The DON is not aware of any reports of retaliation
or reprisal in connection with a report of unsafe, unhealthy, or
unacceptable living conditions in privatized housing.
Secretary Henderson. The Air Force Inspector General reviewed 70
substantiated reprisal findings covering the past 5 years (2014 to
2019) and found no record of reprisal based on military housing
complaints or concerns raised through official communications to
Congress, Inspector General or command. However, the Air Force is
currently addressing one allegation of reprisal against command based
on a member's protected communications regarding housing issues.
64. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, what, if any, training or education does your
Military Department provide to prospective base or installation
commanders regarding their legal authorities and responsibilities with
regard to ensuring that privatized military housing under their command
is safe, clean, and meets all Federal, state, and local regulations?
Secretary Beehler. The Army incorporated into the Garrison Pre-
Command Course specific training in housing program oversight, quality
assurance, legal documents, financial accounts, and development
planning, and developed a chain-teaching program of the same study
areas for existing commanders and command sergeants major currently in
command.
Secretary Bayer. Prospective Navy installation leaders attend
senior shore leadership (SSL) training and prospective Marine Corps
installation leaders attend Installation Leadership Management Program
(ILMP) training. Both of these training courses include a segment on
privatized housing. The installation housing managers also provide MHPI
education to Commanding Officers and Executive Officers. PPV executive
briefs are provided both at the SSL and ILMP courses and at regions and
installations. The housing installation program manager has
responsibility for resolving issues and/or escalating issues and
concerns to installation leaders.
Secretary Henderson. The Director for Installations for the Air
Force Civil Engineer Center provides a 2-hour one-on-one leadership
orientation discussion tailored to each new installation commander and
their leadership team covering roles, oversight tools, communication,
project health, resident satisfaction, lessons learned, and command
authority. The Director for Installations for the Air Force Civil
Engineer Center also offers an open dialogue with the installation
commanders throughout the duration of their commands if they have any
issues or concerns regarding privatized housing.
65. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, what, if any, training or education does your
military department provide to employees, civilian and military, in
base or installation housing offices, regarding their legal authorities
and responsibilities with regard to ensuring that privatized military
housing under their command is safe, clean, and meets all Federal,
State, and local regulations?
Secretary Beehler. Technical training of the Army's Housing
Management careerists is a priority. Since 2016, approximately 350 Army
Housing careerists have attended the IMCOM-led technical training in
Army Housing Management Levels I & II and the Residential Communities
Initiative technical training Levels I & II courses. Additionally,
almost a thousand careerists have attended `Housing the Force' training
since 2014. `Housing the Force' is a workshop of seminars and training.
These courses provide a wealth of knowledge and best practices for Army
Housing careerists in budgeting, management and oversight. The test
scores and surveys for these events clearly indicate we are on the
right path for providing quality training that is valuable and relevant
to our Army Housing careerists.
Housing Career Program 27 provides industry standard training on
privatization, finance, real estate management, fair housing, housing
inspections, customer service and Basic Allowance for Housing through
such as the Institute of Real Estate Management and Military Housing
and Lodging Institute.
Secretary Bayer. Local training is provided to Military Housing
personnel outlining the provisions of the lease which specifically
address the condition of the home at move in, informs the resident of
their right to a joint walkthrough inspection, and their right to list
any noted defects within a specified period. Additionally each lease
specifies the Choice of Law that governs the contractual agreement
between the landlord and tenant.
Secretary Henderson. The Air Force provides a variety of training
to housing management offices on their authorities and
responsibilities. These include:
Bimonthly Housing Management Office Staff Training: The
Director for Installations for the Air Force Civil Engineer Center
provides a telecom training opportunity to housing management office
staff every two months to provide training on privatized housing
oversight topics, discuss lessons learned, cross-feed ideas, and
receive feedback from the field.
Biennial Housing Symposium: The Director for
Installations for the Air Force Civil Engineer Center conducts a
Biennial Housing Symposium to discuss the health of the housing fleet,
provide training on housing topics, .discuss lessons learned, cross-
feed ideas, and receive feedback from the field from the much wider
community of housing professionals.
Air Force Institute of Technology (AFIT) Formal Courses:
AFIT provides formal training courses for housing professionals to
provide initial skills and enhance skills.
Civil Engineer Squadron Commanders, who oversee the
housing management office, receive training on housing privatization
roles and responsibilities prior to assuming command as part of the
Civil Engineer Squadron Commander's Course.
oversight
66. Senator Warren. Secretary McMahon, please provide a copy of all
regulations, policy, and/or written best practices that governed the
formation or set out required elements of new partnership agreements as
part of the Military Housing Privatization Initiative.
Secretary McMahon. These documents will be provided under separate
cover in the near future.
67. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, what mechanisms are in place for your respective
Military Departments to amend or alter the agreements following
findings of malfeasance on the part of privatized military housing
providers?
Secretary Beehler. Failure of any privatized housing service
provider to comply with laws or contract requirements can trigger
termination of the provider's contract or a diminishment of incentive
fees that the provider could otherwise be awarded.
Secretary Bayer. The DON has entered into business agreements with
private partners which are the Managing Members of each LLC. The
Managing Members are responsible for the management of each company,
including developing, constructing, renovating, maintaining, leasing,
operating and managing the housing, as specified in the PPV LLC
operating agreements. Should the Managing Member violate provisions
within these agreements, the DON has the ability to initiate a process
for replacing the Managing Member.
All changes to the business agreements must be negotiated and
mutually agreed-upon by the DON and the Managing Member.
Secretary Henderson. While the Air Force does not have the
authority to unilaterally alter agreements, the Air Force can engage
project owners at corporate levels to withhold performance incentive
fees, engage enforcement agencies, issue cure notices, and take other
formal dispute actions. The Air Force can also work directly with a
project owner to mutually agree on amendments to the existing
agreements, which also occurs as part of the normal oversight performed
on these projects.
The Air Force will work to propose changes to existing agreements
that are necessary to ensure that privatized housing meets or exceeds
applicable standards for the health and safety. The negotiations with
project owners and private lenders will be informed by the Resident
Bill of Rights that is developed to inform residents of their rights
within privatized housing. To the extent the Resident Bill of Rights
provides for additional rights beyond those currently found under
tenant leases and state laws, we will need to work closely with project
owners and private lenders to amend the existing agreements. We are
also evaluating other changes that will be discussed with project
owners, to include alternative performance incentive fee metrics to
increase commander input and increase overall Air Force leverage when a
project owner fails to perform in accordance with the requirements of
existing agreements.
68. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, has your respective Military Department ever taken
any action to alter or amend an agreement with a privatized military
housing provider after findings of malfeasance?
Secretary Beehler. Yes. Between 2010 and 2015, Pinnacle, the
property manager for four privatized housing projects (operating on
Forts Belvoir, Benning, and Irwin, along with the Presidio of Monterey,
Moffett Field, Ord Military Community, and the Naval Post Graduate
School), was terminated for multiple acts of civil fraud.
Secretary Bayer. No, we have not taken such action, nor have we
encountered instances that would warrant such action.
Secretary Henderson. The Air Force has not had any formal findings
of malfeasance and has therefore not taken any actions to alter or
amend any agreement based on such a finding. The Air Force and project
owners routinely alter or amend the agreements for the purpose of
incorporating changes that are based on lessons learned and to improve
the manner in which these projects are operated.
69. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, has your respective Military Department ever
completely and entirely withheld a performance fee from one of your
privatized military housing provider partners, and if so, for what
reasons?
Secretary Beehler. To the best of our knowledge and specifically
within the previous 3 years, the Army has never completely and entirely
withheld an incentive performance fee from any Project Partner.
Secretary Bayer. No, the DON has never completely and entirely
withheld a performance fee from our PPV partners.
Secretary Henderson. The Air Force has not completely withheld a
performance fee from any privatized military housing provider. The Air
Force administers the performance fee according to the performance fee
plan for each project.
70. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, please provide a list of all agreements under
which your respective Military Department has ever wholly or partially
withheld performance fees from a privatized military housing partner in
the last 10 years.
Secretary Beehler. Please refer to the table retained in Committee
files.
Secretary Bayer. Please refer to Attachment 3 in response #54 for
the 10-year history of incentive-based fees. Retained in Committee
files.
Secretary Henderson. The Air Force does not generally retain
records of working files, which includes the documents that contain the
total available performance incentive fee award for a respective time-
period. The Air Force evaluates each incentive fee request to verify
the proper performance thresholds were achieved. If performance fell
short, the project transaction documents specify how much payment to
withhold. The Air Force approves the performance incentive fees in
accordance with the project transaction documents. Once the appropriate
incentive fee award is determined, an approval letter is created and
retained. The approval letter only specifies the award amount, not the
total possible award.
71. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, for each year from 2008 to the present, what was
the total value of all available incentive fees for each of your
partners?
Secretary Beehler. Please refer to the response for question #70,
for a list, by project, of the awarded incentive fees since 2016.
Retained in Committee files.
Secretary Bayer. Please refer to Attachment 4 (column 3) in
response #54, for the Incentive-Based Fees earned by the Partners over
the last 10 years. Retained in Committee files.
Secretary Henderson. The Air Force does not generally retain
records of the working files that contain the total available award
amounts. The Air Force evaluates each incentive request against the
established metrics and thresholds. If performance fell short of
target, the project transaction documents specify how much of the
available fee should be withheld. The Air Force then approves the
amount to be awarded, but does not retain the working document that
indicates how much incentive fee was available during that period.
72. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, during that same period, if all available
incentive fees were not awarded, please provide a brief explanation
why.
Secretary Beehler. Please refer to the response for question #70,
for a list, by project, of the awarded incentive fees since 2016.
Retained in Committee files.
Secretary Bayer. Examples of Incentive Fee reductions include:
April 2014--Letter denying Forest City Hawaii appeal for
scoring below 70 in Resident Satisfaction due to high utility costs
January to June 2018--AMCC (Camp Lejeune, Cherry Point,
Stewart)
2nd half of 2017--PNC Property Management Incentive Fee
(Northwest)
1st Half 2017--Ohana Military Communities--Property
Management Incentive Fee (Hawaii)
Marine Corps Hawaii Phases 1 to 3
Navy Hawaii Phases 1 and 2
Secretary Henderson. A project owner must meet multiple performance
targets in order to achieve the full incentive fee. Some of the more
common reasons for not earning the full incentive award are: occupancy
below budgeted expectations, operating expenses or net operating income
below budgeted expectations, resident survey results that are below the
required threshold, the project not meeting work order response and
completion time requirements, and Installation Commanders not awarding
their full discretionary award. Each project has different incentive
metrics, but most have some combination of those listed.
resident satisfaction surveys
73. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, the private housing companies all described
resident satisfaction surveys as a key metric for them to receive
performance incentive fees. Please describe in detail the survey
process your respective Military Department uses to determine if
military personnel are satisfied with the quality of on-base housing.
Secretary Beehler. There are three different survey mechanisms in
existence at Army MHPI projects.
1) The most comprehensive and scientifically accurate survey is
the Army Annual Housing Survey which is contracted by the Army with an
independent, third-party contractor (CEL Associates, Inc) through its
MHPI financial consulting contract with RER Solutions, Inc. CEL uses a
core set of questions for all multifamily surveys. This core set of
questions is used by all military and private sector clients year after
year to ensure a basis of comparison and reliable trending information.
During project setup, the survey instrument for the project is reviewed
and approved. The survey sponsor may add questions unique to their
population, but the core questions are left intact.
Email addresses are validated in advance to provide opportunity
for correction in order to get the survey to each resident. Only one
survey response per household is accepted. All occupied homes are
included in survey distribution. Those residents without email
addresses, or who do not receive the email, may receive instructions to
access the survey via a ``code letter,'' or by contacting CEL directly
via email. CEL will email the resident the URL and Survey ID for their
survey. Online surveys are controlled by address. Surveys completed
online are accessible only by CEL staff members. Individual survey
responses are never available to the Partners or Branches.
CEL scores are a proprietary metric used to measure one
population against others, or the same population over time, in
multiple categories. They are calculated from the core set of
standardized scored questions across CEL's military and private
clients. CEL calculates scores for the following categories:
a. Three satisfaction indexes--overall satisfaction, property
satisfaction, and service satisfaction.
b. Nine Business Success Factors--readiness to solve problems,
quality of management services, property eating, responsiveness &
follow-through, quality of leasing services, relationship rating,
property appearance & condition, quality of maintenance services, and
renewal intention.
c. Question scores for each survey question.
d. Scores are computed based on all answers for a population
(such as a property, installation, or region) using CEL's scoring
formula. These calculations result in a CEL score per respective
category. Reports contain both results from the current survey and
historical data so longer-term trends and patterns can be reviewed.
Individual survey responses are never provided to the Partners,
Branches, or any other entity outside CEL. All comments are provided
verbatim. Action Plan templates containing the current scores are
provided as part of the report package. Completed reports are provided
to the survey sponsor (Department of the Army). Creating specific,
actionable goals--and working towards those goals each year results in
satisfaction improvement.
2) The RCI Project Company assesses tenant satisfaction at each
point of service--move-in, move-out, maintenance, and resident
satisfaction. The RCI Project Companies in coordination with the
installation housing team will develop questions for the distributed
surveys. The surveys are distributed by the RCI Project Company or its
independent firm with results being provided to the RCI Project Company
who provides to the Army Family Housing Office. The Army Family Housing
Office will review survey results and identify any concerns or
anomalies for discussion with the RCI Project Company.
3) The Army Family Housing Office conducts independent surveys to
verify incentive fee awards for move-in, move-out, or maintenance
satisfaction. The surveys are developed to assess resident satisfaction
and verify metrics were met. Returned responses are reviewed and any
concerns or anomalies are discussed with the RCI Project Companies.
Secretary Bayer. CEL & Associates, LLC administers a Resident
Satisfaction Survey (RSS) for all Navy-owned housing residents. The
Marine Corps is in the process of administering a RSS for all USMC-
owned housing residents. PPV partners contract directly with CEL to
conduct the same survey with all PPV residents. CEL is an industry
leader in tenant resident Surveys and has provided surveys to DON since
2000. The RSS is conducted using a controlled method of one survey per
household. Each family is given a unique, anonymous password.
Navy's RSS survey includes 55 questions. Questions include
satisfaction questions related to readiness to solve problems,
responsiveness and follow through, property appearance and condition,
quality of management/leasing/maintenance, customer service, property
rating, relationship rating, and intention to renew housing. The RSS
survey also gives respondents the opportunity to provide to open-ended
comments and request to be contacted.
The RSS is a point based survey on a range of 1 to 100, not a
percentage score. All residents receive the opportunity to complete a
survey and the average response rate for the DON was over 45 percent in
2018.
Secretary Henderson. The Air Force has measured resident
satisfaction for all but one of our 63 installations using the industry
standard third party survey created and conducted by CEL and
Associates. The questions are standardized across the military and the
private sector, the resident response is anonymous, and responses are
reviewed by the company for signs of tampering. The 2018 response rate
was greater than 46 percent. Each question is rated on a scale of 1 to
5 and the survey includes 53 questions on appearance and condition of
the community, management of the property, maintenance services,
community amenities, characteristics of the home, leasing process, and
overall morale. We are currently exploring revisions of the CEL survey
to better capture the resident experience.
All but one of the property owners using this survey distribute it
electronically. For properties owned by Balfour Beatty Corporation,
blank surveys are provided to the residents by Balfour Beatty
Corporation and once completed, the resident drops it in a locked box
that is only accessible by the third party survey company (i.e.,
Balfour Beatty Corporation never touches a completed survey).
In addition to the annual survey, customers are provided feedback
cards for every work order request and can provide feedback on ease of
reporting, timeliness of response, whether the work was performed
correctly the first time, professionalism of the technician, and
whether they want a follow up. These forms are provided to the resident
by the project owner, collected by the project owner, and provided to
the Air Force housing management office.
74. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, which entities are responsible for disseminating
the survey to privatized housing residents?
Secretary Beehler. The Army housing survey is administered by an
independent third-party survey firm, CEL Associates, through its MHPI
financial consulting contract with RER Solutions, Inc. to conduct the
Army Annual Housing Survey. As such, they are responsible for all
administrative functions of the survey including the creation,
dissemination, collection and reporting of results. The maintenance and
point-of-service surveys are administered by the RCI Project Companies
via survey cards, independent third-party survey firms hired by the RCI
Project Companies, or electronic survey's through the property
management operations system. The Army Family Housing Office surveys
are administered electronically by the Army Family Housing Office
staff.
Secretary Bayer. CEL & Associates, LLC administers the survey with
a controlled method of one survey per household with a unique anonymous
password. With the exception of Balfour Beatty, surveys are distributed
electronically from CEL. Balfour Beatty distributes them manually, but
in 2018, Navy requested they change to electronic.
Secretary Henderson. The annual resident satisfaction surveys are
disseminated and collected electronically by the third party survey
firm with the exception of projects held by Balfour Beatty Communities,
which distributes the paper surveys to residents, who then submit them
in a locked collection box controlled by the third party firm.
Maintenance satisfaction cards are distributed and collected by the
project owner and provided to the housing management office.
75. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, which entities are responsible for tabulating the
surveys and publishing the results?
Secretary Beehler. The Army's independent third-party survey firm,
CEL Associates, is responsible for the tabulation and reporting of
results for the Army Annual Housing Survey. The RCI Project Company
surveys, tabulates, and consolidates the results of survey cards and
electronic surveys then distributes the results to the Army Family
Housing Office. For RCI Project Company independent third-party survey
firms, the independent firm tabulates, consolidates, and distributes
the results to the RCI Project Company who in turn provides the results
to the Army Family Housing Office. The Army Family Housing Office
surveys, tabulates, and consolidates the results for their use in
validating the incentive fees.
Secretary Bayer. CEL & Associates, LLC.
Secretary Henderson. The third party survey firm tabulates the
surveys and publishes the results, which are then provided to the
project owner and the Air Force.
76. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, does the completed survey come directly to your
respective Military Department, and if not, which entity receives it
first?
Secretary Beehler. The Army's annual survey are completely
anonymous and confidential to the Army. The survey is completed online
and only CEL & Associates, Inc has access to the results. At no time
are the results of any individual survey disclosed by CEL. Residents
are notified the survey is confidential and anonymous up front within
the survey text. Once the survey results are tabulated and compiled by
CEL Associates, Inc; the results are then provided directly to the Army
in a summarized format only. Residents have the option of completing a
comment section and these comments are provided verbatim to the Army
ongoing during the survey process. The RCI Project Company receives
their surveys first then the results are provided to the Army Family
Housing Office. The Army Family Housing Office receives their surveys
first.
Secretary Bayer. CEL & Associates, LLC provides PPV survey results
directly to the PPV partners. They also post them on the CEL website.
PPV Partners have given Navy access to the website and CNIC HQ uses
this access to review the reports. Partners separately provide the
reports on CDs to NAVFAC.
Secretary Henderson. The completed resident satisfaction survey
goes directly to the third party survey firm. The completed maintenance
feedback card is first submitted to the project owner and then provided
to the Air Force.
77. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, what measures are in place to ensure that surveys
are representative?
Secretary Beehler. Each installation is divided into multiple
neighborhoods with ``Like Type Housing''. All residents within a
neighborhood are invited to complete a survey. One survey is provided
to each occupied home, we do not sample or otherwise restrict
participation. Reporting is provided by neighborhood, installation,
region and overall. Prior to the start of the survey a survey
announcement is distributed to all residents. Additionally, the survey
details are provided on various social media sites. Residents are
instructed to contact CEL & Associates, Inc. with any questions or
issues. The RCI Project Company provides surveys to all tenants at
move-in, move-out, and every maintenance call. The surveys questions
are kept to a minimum and are directed to the staff, the service, or
the event itself. If the response rate is low, then the RCI Project
Company will resurvey tenants to ensure a larger representative
response is achieved. The Army Family Housing Office randomly selects
touch points to survey. Randomization minimizes the impact of any
errors and spreads potential bias evenly across all tenants surveyed.
The selection method is by simple selection or cluster sampling to
obtain a representative sample from the touch point list. The Army
Family Housing Office survey may touch tenants that have been sampled
by the RCI Project Company.
Secretary Bayer. The best measure is reflected in the response
rates. A response rate of 20 percent is considered statistically valid.
DON PPV survey response rates have always been much higher; typically,
in the 30 to 50 percent range. In 2017 and 2018, response rates
averaged 45 percent.
Secretary Henderson. This survey can be anonymous, responses are
reviewed by the third party company for signs of tampering, and the
questions are standardized across the military and the private sector.
Additionally, residents are encouraged to participate and the Air Force
has a 46 percent response rate. The data also provides feedback by
neighborhoods in order to permit the Air Force to identify under
represented neighborhoods.
78. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, how frequently are these surveys conducted?
Secretary Beehler. The independent, third-party contracted Army
Annual Housing Survey is conducted annually typically between the
months of March to June. The RCI Project Companies surveys are
administered at each touch point--move-in, move-out, and at every
maintenance service. Resident satisfaction surveys are administered
quarterly but only once per year to each tenant. The Army Family
Housing Office surveys are administered monthly for a random selection
of RCI Project Company touch points--move-in, move-out, and
maintenance.
Secretary Bayer. The surveys are conducted annually, or more
frequently, if warranted.
Secretary Henderson. Resident satisfaction surveys are conducted
annually. Maintenance feedback cards are provided after each
maintenance event.
79. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, please provide copies of all survey forms and/or
questionnaires you and/or your private partners make available to
residents.
Secretary Beehler. Representative copies of surveys are retained in
Committee files.
Secretary Bayer. Please refer to Attachment 5. The survey contains
55 questions that do not change from year to year in order to provide
continuity of the relevant data points. Additional questions may be
added as deemed appropriate, but are not scored. Attachment 5 has been
retained in Committee files.
Secretary Henderson. A copy of an example CEL survey and examples
from various bases of the surveys distributed after move-in or after a
maintenance work order is completed will be provided to the Committee
separately.
private partnership agreements
80. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, how many military housing privatization agreements
have you signed with private companies since the launch of the Military
Housing Privatization Initiative program?
Secretary Beehler. The Army has entered into 36 separate
Partnerships with Private Companies since the launch of the Military
Housing Privatization Initiative Program.
Secretary Bayer. The Navy has signed 18 Housing Privatization
agreements with private companies; 16 for family housing and 2 for
unaccompanied housing. Of the 18 agreements, 3 have been sold and are
no longer in effect.
Secretary Henderson. The Air Force has 32 Military Housing
Privatization projects and each project has numerous agreements that
outline all the terms and conditions for the project.
81. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, do you know of any subcontractors, subsidiaries,
or other third parties associated with your private partners, that
manage or provide any services at your agency's military housing
properties?
Secretary Beehler. Yes, the Army is aware of related party/identity
of interest/affiliate parties that are associated with the Private
Partners while providing contractual services to the Project Companies.
Please refer to the attached spreadsheet outlining the related party
transactions as disclosed in the Project Company 2017 Annual Audited
Financial Statements. Depending on the services required by the
Project, the list of related party/identity of interest/affiliate
parties will change. The spreadsheet has been retained in Committee
files.
Secretary Bayer. The Operating Agreements for PPV Housing do not
create a ``government contract'' under the Federal Acquisition
Regulation. DON has agreements with the Managing Member and not anyone
else they contract out to, including the property manager, even if the
Property Manager comes from the same company.
The Operating Agreements specify that the private company takes the
leading role in what is best described as a partnership-like
arrangement with the DON. The Operating Agreements use the term
``Managing Member'' to describe this leading role in the LLC. The
agreements make clear that the Managing Member, with limited
exceptions, shall have sole and exclusive management and control of the
business of the LLC and shall make all decisions regarding the affairs
of the LLC. DON's business partner under these Operating Agreements is
not a contractor and is responsible for management, operations,
development and recapitalization of the housing owned not by DON or the
Managing Member but by the LLC itself.
Secretary Henderson. The majority of the Air Force projects involve
vertically integrated real estate firms. The firms generally set up a
single purpose entity as the ownership entity. The ownership entity
then generally contracts the major service subcontracts (construction,
development, asset management and property management) to affiliated
entities. Some projects subcontract one or multiple of those service
agreements to unaffiliated third party firms. All major subcontracts
listed above are reviewed by the Air Force at closing and project
owners are required to seek Air Force approval before entering into
agreements with affiliated entities. The projects also subcontract with
other service providers such as landscaping, snow removal, pest
control, trash removal, recycling, major plumbing or electrical
repairs, roofing, and utility work. These subcontracts for routine
operational requirements are not subject to Air Force review.
82. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, if so, please provide a list of all of these
entities, a summary of the services they provide, and the locations
where they provide these services.
Secretary Beehler. Please refer to the attached spreadsheet
referred to with response #81 for a detailed list of all 2017 related
parties and the services provided sorted by Project. Retained in
Committee files.
Secretary Bayer. DON does not maintain a list of the partner
service-providers.
Secretary Henderson. The majority of all major contracts
(construction, development, asset management, and property management)
across the portfolio are with affiliated entities of the respective
project owner at that installation. Additionally, each project has
subcontracts--usually with local subcontractors--for routine services
such as landscaping, snow removal, pest control, trash removal,
recycling, major plumbing or electrical repairs, roofing, and utility
work.
The following are the affiliated major subcontractors, the services
they provide, and the locations where they provide their services:
Balfour Beatty Construction, Inc.: Construction, renovation, and
large project services.
Locations: Moody (all except Falcon Neighborhood), Dyess (on base
housing), Tyndall, Altus, Luke, Sheppard, Tinker, Fairchild, Travis,
Lackland, Mountain Home, Ellsworth, Minot, Cannon, Cavalier, Grand
Forks, Vandenberg, Beale, Malmstrom, FE Warren, Whiteman.
Hunt Building Corporation: Construction, demolition, renovation,
and large project services.
Locations: Wright Patterson (except 100 government owned units),
U.S. Air Force Academy (except 2 government owned units), Columbus,
Goodfellow, Laughlin, Maxwell, Randolph, Vance, Langley, Bolling,
Barksdale, Buckley, Dover, Dyess, Moody (Falcon Neighborhood), Hanscom,
Patrick, Little Rock, Kirtland, Nellis, Robbins, Scott, Shaw, Keesler,
Arnold, Charleston, Joint Base Elmendorf-Richardson.
Actus Lend Lease LLC: Construction, demolition, renovation, and
large project services.
Locations: Hickam, Davis-Monthan, Holloman, Los Angeles, Peterson,
Schriever.
Clark Design-Build LLC: Construction, renovation, and large project
services.
Locations: Andrews, MacDill.
Corvias Construction LLC: Construction, demolition, renovations,
and large project services.
Locations: Edwards, Eglin, Hulburt Field, Eielson, McConnell,
Seymour Johnson.
83. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, please describe the legal authorities, policies,
and procedures that govern your respective Military Department's
oversight over any subcontractors, subsidiaries, or other third parties
associated with your private partners.
Secretary Beehler. Oversight of related parties/identity of
interest/affiliate companies is outlined within the Operating Agreement
and typically requires the Private Company to disclose any and all
related party/identity of interest company transactions. The fees
charged by these related parties were typically negotiated and agreed
to by the Army at the onset of the program or as these services are
required by the Project Company thereafter.
Secretary Bayer. Oversight and monitoring authority is set forth in
10 U.S.C. 2884 & 2885 and in associated legal agreements. The operating
agreement of each PPV company defines the rights and responsibilities
of the DON in the company. DON leadership exercises oversight of
privatized housing projects with the aid of a ``monitoring matrix''
based on the PPV's obligations in each business deal. The managing
member (or in one instance, the general partner) of each PPV company is
tasked with management of the company. While the DON does not
participate in the day-to-day management of these private companies,
DON's daily interaction with these companies is the DON's first level
of oversight and issue resolution. DON is specifically prohibited from
managing the company except with regards to certain consent right s,
and other specifically defined rights, such as the ability to initiate
the process for replacement of the property manager. DON reviews and
approves the annual budget and incentive fees, and can request
reporting to provide oversight and make well-informed consents. In
addition, DON can enforce performance from the privatized housing
projects by engaging bondholders to work with the projects to meet the
commitments under the agreement. DON can also issue cure notices or use
the court system, if needed, to seek resolution for poor performance.
Secretary Henderson. The Air Force performs direct compliance
oversight on privatized housing project owners to confirm that all
requirements under the legal documents are met. The legal documents
outline a project owner's operation, maintenance, and repair
obligations for a housing privatization project. If a project owner has
a subcontractor, subsidiary, or third party performing work, the Air
Force does not have direct contractual relationships that provide the
Air Force with direct remedies against such parties. The Air Force
would address any performance issues directly with a project owner.
The Air Force may have certain rights under the legal agreements to
directly impact the project owner's contractual relationships with a
third party for meeting project requirements. In most projects, while
the Air Force is not a party to the property management agreement,
there is a requirement that any property management agreement must
provide the Air Force with a right to direct a project owner to
terminate the property management agreement upon an ``Event of
Default'' under the ground lease. The Air Force must also generally
approve of any material revisions to a property management agreement,
which would include any changes to the identity of the property
manager, the fee to be paid to a property manager, or the right to
direct termination of the property management agreement. The Air Force
may also need to approve any performance incentive fees that are to be
paid by a project to third parties, which may include property
management, asset management, or construction incentive fees.
84. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, are you aware if any of these subcontractors
either are subsidiaries of or otherwise are financially related to your
private partners? Are you aware if your private partners share key
officers or Board members with any of these subcontractors?
Secretary Beehler. Yes, as stated previously, the Private Companies
are required to disclose any related parties/identity of interest
companies that are providing services to the Project Companies. This
disclosure is contained within the Annual Audited Financial Statements
for each Project Company.
Secretary Bayer. The DON has a relationship with the Managing
Member (private partner), which is responsible for day-to-day
operations. DON does not track the business/financial relationships
between the Managing Member and PPV project's hired service providers,
which may or may not be subsidiaries of the private partner. The fees
paid to service providers are defined in the project legal agreements.
DON consent is required on key PPV project business decisions, to
include replacement of the Property Manager service provider.
Secretary Henderson. The majority of all major contracts
(construction, development, asset management, and property management)
across the portfolio are with affiliated entities of the project owner.
repairs and maintenance records
85. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, do you have access to your private partners'
repair or work order tracking and response procedures and protocols? If
so, please provide copies of all documents related to these protocols
and procedures.
Secretary Beehler. Yes, all garrisons have access to the private
partners work order system. Garrison staff are accessing these systems
to assess the quantity of work orders, their timeliness and any reports
of life, health or safety concerns. Procedures and protocols are in the
property management agreement and/or community development management
plans. Retained in Committee files.
Secretary Bayer. The DON has full access to the PPV projects' work
order databases and, if there is a health and safety concern
identified, DON personnel engage in accordance with our Health & Safety
Standard Operating Procedures (SOP). This SOP has been provided to
Committee staff.
Secretary Henderson. The Air Force does not have access to detailed
work order tracking and response procedures and protocols that the
project owners use internally to manage their work order processes and
train employees on how to utilize their software systems and manage
employee workflow. The Air Force negotiates, as part of the closing
documents, the general framework, performance standards, and
requirements the project owners must meet. The Operating Agreements
define how work orders should be classified as Emergency, Urgent, or
Routine and the response and completion time requirements for each of
those categories. The Operating Agreements also generally describe
whether the project owners utilize a third party answering service for
after-hours calls, the methods residents may utilize to submit work
orders (phone, email, website, in-person in the office, etc.), the
approach to asking for permission to enter and perform the work while
the resident is not home, setting up appointment times to complete the
work, and other high level requirements related to the work order
process.
86. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, do your private partners have assigned maintenance
staff and/or outside contractors available to make repairs?
Secretary Beehler. Yes, the RCI Project Companies have assigned
maintenance staff and outside contractors available to make repairs.
Many of the RCI Project Companies are hiring additional maintenance and
property management staff.
Secretary Bayer. Per the project business agreements, partners have
assigned maintenance staff and/or outside contractors available to make
repairs. Staffing levels and mix are determined by the project Managing
Members (private partners).
Secretary Henderson. All of our project owners have assigned
maintenance staff and/or outside contractors available to make repairs.
87. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, do your private partners utilize work order logs
to track maintenance requests and the completion of work?
Secretary Beehler. Yes, the RCI Project Companies use work order
logs to track maintenance requests and the completion of work.
Secretary Bayer. Yes, and Navy and Marine Corps can review those
records by accessing their databases.
Secretary Henderson. The project owners for Air Force projects use
work order logs to track maintenance requests and completion of work.
88. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, do you have access to these work order logs in a
database or other electronic format? If so, please provide the
electronic records of these work logs for the last 12 months.
Secretary Beehler. Yes, we have access to the RCI Project Companies
electronic work order database. Retained in Committee files.
Secretary Bayer. Yes, the DON can review those records through
access to their databases, but they do not belong to the DON. The
records belong to the PPV partners. Any request for copies should go to
them.
Secretary Henderson. The Air Force does not have access to the
project owners' maintenance systems across the portfolio. The Air Force
has requested the project owner provide an electronic copy of the work
logs for the last 12 months. We expect to receive those in the coming
weeks and will provide that data as an addendum to this response.
complaints
89. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, do you have a complaint hotline or other process
in place for servicemembers who are living in your housing facilities
to contact you with problems?
Secretary Beehler. Each garrison has a hotline managed by the
garrison commander dedicated to capturing soldiers' and families'
concerns, complaints and suggestions. Additionally, each garrison has
an Army Housing management staff that advocates for soldiers and
families living in privatized housing.
Secretary Bayer. The DON maintains the right to inspect PPV housing
under the terms of the ground lease and associated project legal
agreements, to include short notice inspections for environmental
matters. In addition, the DON completes spot checks of project
compliance with requirements included in the partnership agreements
(operating agreements for limited liability companies and ground
leases). Navy and Marine Corps housing offices at installations have
access to the partner's electronic maintenance database system (e.g.,
YARDI) and reviews work orders for potential environmental concerns and
other issues. As DON's first level of housing oversight, installation
housing directors are supposed to be informed by the PPV of any
potential suggestion, concern or complaint that families may have, and
are available for direct input from residents, as well--whether through
in person meetings, emails, townhalls or other avenues. Resident input,
to include concerns and complaints, are elevated to installation,
region and headquarters leadership, as appropriate.
Secretary Henderson. The Air Force has a well-established process
in place for residents to raise complaints to the housing management
office. In addition, the Air Force recently established a toll free
line for residents to elevate complaints when other mechanisms fail.
90. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, what is the process for submitting complaints?
Secretary Beehler. Army leadership and chain of command are
responsible for ensuring residents are satisfied with their housing.
Residents can submit a complaint through the installation housing hot
line and Army housing offices. The Army is also working to empower
residents through a smartphone/web application that will streamline
complaint submissions and enhance quality assurance and quality control
for completed work orders.
Secretary Bayer. DON is taking new steps to address immediate
problems as well as adjust our business processes to permanently
correct systemic issues. General Neller and Admiral Richardson have
each issued orders requiring commanding officers to afford the
opportunity for every family in military housing to receive a voluntary
visit by 15 April 2019. The purposes of these visits are:
(1) to raise command awareness of family living conditions to
ensure that they are safe, secure and environmentally healthy; (2) to
personally observe any issues affecting the home and to understand any
actions being taken to address them; and (3) if a problem is found, to
help servicemembers and their families get the problem resolved, and
ensure that all families understand the help and resources available to
them.
Marine Corps Commanders will use the Marine Housing Outreach
program to improve their awareness of concerns and better advocate for
military families. Commanders will leverage appointed servicemember
advocates and the base housing office to streamline communication with
providers. Both Commanders and appointed advocates will ensure
effective oversight and remediation are in place, operating with the
full authority and support of the chain of command.
The Navy will streamline its reporting process so that no sailor
(or soldier or airman living in DON privatized housing) has to exceed
two calls before achieving resolution--the first to the housing
company, and the next to their chain of command, which can then
properly advocate on their behalf with the government base housing
office, base leadership, and Commander Naval Installation Command
(CNIC) to ensure resolution.
Simultaneously, families will continue to have an open channel to
the base housing office.
Secretary Henderson. If the resident was not satisfied with the
project owner's resolution, the resident can call or email the housing
management office with their concern. If the resident is not satisfied
with the response from the housing management office, they can raise
the concern through their chain of command. If the resident is not
satisfied with the response from their immediate chain of command, they
can contact the Inspector General. Additionally, the resident may call
the toll free line when local efforts fail to resolve the issue to
their satisfaction. Residents can also seek assistance from the base
legal office.
91. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, can complaints be submitted anonymously?
Secretary Beehler. Yes, complaints can be submitted anonymously
through the installation Hot Line phones.
Secretary Bayer. Complaints can be submitted anonymously to either
the PPV property managers or the base housing office. If a resident has
a complaint, it is imperative that they communicate it openly to the
property manager. Residents may also discuss their complaints with DON
Housing staff, their chain of command, or the installation commanding
officer and can request to remain anonymous. Anonymous complaints may
also be filed with the Department of the Navy or the Department of
Defense Inspectors General.
Secretary Henderson. Certainly complaints can be, and are, raised
anonymously. However, without the particulars of the housing unit, it
may be very difficult to act on anonymous complaints.
92. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, please provide a list of all complaints (without
personal identifying information) submitted since January 1, 2008, at
all your facilities owned or operated by your private partners, and a
description of how these complaints were resolved.
Secretary Beehler. The Army does not maintain a record of all
complaints. Some complaints include delayed work order response times,
delayed work order completion times, mold in homes, and unqualified
maintenance staff.
Secretary Bayer. The DON has full access to the PPV projects' work
order databases. However, this request should be submitted to the PPV
private partners, as Managing Members and owners of the PPV projects.
Secretary Henderson. This data has been compiled for 27
installations and will be provided to the Committee separately.
93. Senator Warren. Secretary Beehler, Secretary Bayer, and
Secretary Henderson, do your private partners have a complaint hotline
or other process in place for servicemembers who are living in your
housing facilities to contact them with problems?
Secretary Beehler. The RCI Project Companies do have a complaint
and concern process for servicemembers and their families to contact
them about problems. The RCI Project Companies consider residents'
complaints and concerns of the utmost importance. They maintain an
``open door'' policy for any resident wanting to speak to a
representative or management. Contact information is provided to
residents at time of move-in; is in the resident guide; is on social
media; and on housing websites.
Secretary Bayer. All partners have provided dedicated phone numbers
to residents for reporting complaints about their housing units; they
have 24/7 toll free numbers and online methods to report maintenance
problems. Access to partners for other concerns are typically confined
to normal business hours. Both DON and its PPV partners provide 24/7/
365 coverage via email addresses that are provided for resident contact
for any reason.
Secretary Henderson. The process varies from project to project,
but all project owners have a process to handle complaints. The Air
Force is working with project owners to standardize the process across
the portfolio and ensure residents are better informed of the process.
In addition, the Air Force recently established a toll free line for
residents to elevate complaints when other mechanisms fail.
94. Senator Warren. Secretary McMahon, Secretary Beehler, Secretary
Bayer, and Secretary Henderson, on February 15, 2019, President Trump
declared a national emergency in order to raid unobligated military
construction funds so that he could build a border wall. According to
the White House, this emergency declaration will result in ``up to $3.6
billion reallocated from Department of Defense military construction
projects.'' What projects, if any, has the Department identified within
military family housing or single servicemember quarters (e.g.
barracks) that are available for transfer to the border wall project?
Secretary McMahon. As the Acting Secretary has testified, no
military housing, barracks, or dormitory projects will be used to fund
the border barrier should the Acting Secretary of Defense choose to use
the 2808 authority.
Secretary Beehler. The Army has not been directed to provide,
prioritize, or otherwise withhold projects in anticipation of funds
needed for the border wall project. The Army also has not spent any
MILCON funding for construction on the border wall project. However, at
the request of OSD, The Army initially identified 136 unawarded MILCON
projects valued at 8$2.7 billion. OSD screened out all projects
scheduled for award before October 1, 2019, and all Housing
Construction Projects. Thirty-six Army projects valued at 8$1.05
billion remain on the list after screening.
Secretary Bayer. The Acting Secretary of Defense has removed
construction projects in these categories from consideration for a
border barrier solution.
Secretary Henderson. No Air Force military family housing project
or single servicemember quarters have been identified to reallocate
funds to the border wall project.
95. Senator Warren. Secretary McMahon, Secretary Beehler, Secretary
Bayer, and Secretary Henderson, has the Department recommended that any
of the identified projects be included for reallocation?
Secretary McMahon. As the Acting Secretary has testified, no
military housing, barracks, or dormitory projects will be used to fund
the border barrier should the Acting Secretary of Defense choose to use
the 2808 authority.
Secretary Beehler. No. The Army is executing our program based on
the funds appropriated in fiscal year 2019 and prior years.
Secretary Bayer. Please refer to our response to question 94.
Secretary Henderson. Not applicable, no projects were identified.
96. Senator Warren. Secretary McMahon, Secretary Beehler, Secretary
Bayer, and Secretary Henderson, please provide a complete list of all
such projects or programs, and the amount of funds subject to
reallocation.
Secretary McMahon. As the Acting Secretary has testified, no
military housing, barracks, or dormitory projects will be used to fund
the border barrier should the Acting Secretary of Defense choose to use
the 2808 authority.
Secretary Beehler. The Army has not been directed to provide,
prioritize, or otherwise withhold projects in anticipation of funds
needed for the border wall project.
Secretary Bayer. Please refer to our response to question 94.
Secretary Henderson. Not applicable, no projects were identified.
mhpi agreements
97. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
Hickey, and Mr. Bliss, how many military housing project awards has
your company received from the Department of Defense since the launch
of the Military Housing Privatization Initiative (MHPI) program?
Mr. Williams. Answer provided directly to Senator Warren per letter
dated February 20, 2019.
Mr. Piscerne. Answer provided directly to Senator Warren on
February 19, 2019.
Mr. Ehle. Hunt currently owns and operates 21 separate projects in
partnership with DOD. Hunt also maintains a minority ownership interest
in some properties that it does not manage or oversee. All of Hunt's
projects, some of which include multiple property sites, are located on
or near Air Force, Navy, Marine Corps, and Army bases throughout the
country. Each project that Hunt operates is governed by a ground lease
and limited liability company operating agreement.
Mr. Hickey. Lendlease Americas has been awarded eleven privatized
military housing projects as an integrated asset manager, development
manager and design builder following a competitive bidding process
administered by the respective Military Services.
We currently manage ten1A\1\ MHPI family housing projects, which
include ground leases and family housing operations across different
installations in twelve States. Six of those Project Companies operate
family housing on United States Army installations, one on Marine Corps
installations, and three on Air Force installations.
---------------------------------------------------------------------------
\1\ The Beaufort/Parris Island project was awarded separately by
the Navy in 2002, but the project was later merged into the Atlantic
Marine Corps Communities project upon the award of the third phase of
that project by the Navy in 2007.
---------------------------------------------------------------------------
Each of the project agreements, including the Project Company
contracts with LLUSPP affiliates for the ongoing and continuing asset
management, development management and property management services
provided to the Projects, were negotiated and approved by the
respective Military Service and their consultants at the initial
closing of each MHPI project.
Mr. Bliss. LMH respectfully refers Senator Warren to our response
to this question (posed by Senator Warren in a February 6 letter to
LMH) set forth in our letter dated March 6, 2019, which contains
business-sensitive and/or confidential information.
98. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
Hickey, and Mr. Bliss, how many separate agreements have your company
signed with the Military Departments for these awards?
Mr. Williams. Answer provided directly to Senator Warren per letter
dated February 20, 2019.
Mr. Piscerne. Answer provided directly to Senator Warren on
February 19, 2019.
Mr. Ehle. Hunt currently owns and operates 21 separate projects in
partnership with DOD. Hunt also maintains a minority ownership interest
in some properties that it does not manage or oversee. All of Hunt's
projects, some of which include multiple property sites, are located on
or near Air Force, Navy, Marine Corps, and Army bases throughout the
country. Each project that Hunt operates is governed by a ground lease
and limited liability company operating agreement.
Mr. Hickey. Lendlease Americas has been awarded eleven privatized
military housing projects as an integrated asset manager, development
manager and design builder following a competitive bidding process
administered by the respective Military Services.
We currently manage ten1A\1\ MHPI family housing projects, which
include ground leases and family housing operations across different
installations in twelve States. Six of those Project Companies operate
family housing on United States Army installations, one on Marine Corps
installations, and three on Air Force installations.
---------------------------------------------------------------------------
\1\ The Beaufort/Parris Island project was awarded separately by
the Navy in 2002, but the project was later merged into the Atlantic
Marine Corps Communities project upon the award of the third phase of
that project by the Navy in 2007.
---------------------------------------------------------------------------
Each of the project agreements, including the Project Company
contracts with LLUSPP affiliates for the ongoing and continuing asset
management, development management and property management services
provided to the Projects, were negotiated and approved by the
respective Military Service and their consultants at the initial
closing of each MHPI project.
Mr. Bliss. LMH respectfully refers Senator Warren to our response
to this question (posed by Senator Warren in a February 6 letter to
LMH) set forth in our letter dated March 6, 2019, which contains
business-sensitive and/or confidential information.
99. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
Hickey, and Mr. Bliss, please provide a list of all active service
agreements, and include the following information for each agreement:
the date it was signed; the installation that it served; the number of
housing units that were provided; the year or years that those housing
units were first occupied; the year or years of any substantial
renovations; the total budget associated with the agreements for each
of the last 10 years; the annual profit you have earned under each of
these agreements for each of the last 10 years; and the value of the
replacement reserve fund or other funds available for capital expenses
for each of the last 10 years.
Mr. Williams. Answer provided directly to Senator Warren per letter
dated February 20, 2019.
Mr. Piscerne. Answer provided directly to Senator Warren on
February 19, 2019.
Mr. Ehle. Hunt currently owns and operates 21 separate projects in
partnership with DOD. Hunt also maintains a minority ownership interest
in some properties that it does not manage or oversee. All of Hunt's
projects, some of which include multiple property sites, are located on
or near Air Force, Navy, Marine Corps, and Army bases throughout the
country. Each project that Hunt operates is governed by a ground lease
and limited liability company operating agreement. Data regarding the
years in which Hunt's properties have undergone substantial renovation
is provided in Attachment A (follows). Information regarding Hunt's
reserve balances is provided in Attachment B (follows).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Hickey. Senator Warren requested this information from
Lendlease in her correspondence dated February 6, 2019. In response to
that request, the Lendlease team provided Senator Warren and her staff
two document productions dated February 21, 2019, and March 6, 2019, in
addition to conducting an in-depth briefing with Senator Warren's team.
Accordingly, we believe that this question has been adequately
responded to as a result of such responses. If this response is not
sufficient for purposes of this request, the Lendlease team would be
happy to provide a similar briefing to the SASC staff.
Mr. Bliss. LMH respectfully refers Senator Warren to our response
to this question (posed by Senator Warren in a February 6 letter to
LMH) set forth in our letter dated March 6, 2019, which contains
business-sensitive and/or confidential information.
100. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
Hickey, and Mr. Bliss, please provide full copies of all agreements
under which your company has received compensation for developing,
operating, or providing any service to and for private military housing
projects for any of the military services.
Mr. Williams. Answer provided directly to Senator Warren per letter
dated February 20, 2019.
Mr. Piscerne. Answer provided directly to Senator Warren on
February 19, 2019.
Mr. Ehle. Hunt currently owns and operates 21 separate projects in
partnership with DOD. Hunt also maintains a minority ownership interest
in some properties that it does not manage or oversee. All of Hunt's
projects, some of which include multiple property sites, are located on
or near Air Force, Navy, Marine Corps, and Army bases throughout the
country. Each project that Hunt operates is governed by a ground lease
and limited liability company operating agreement.
Mr. Hickey. Senator Warren requested this information from
Lendlease in her correspondence dated February 6, 2019. In response to
that request, the Lendlease team provided Senator Warren and her staff
two document productions dated February 21, 2019, and March 6, 2019, in
addition to conducting an in-depth briefing with Senator Warren's team.
Accordingly, we believe that this question has been adequately
responded to as a result of such responses. If this response is not
sufficient for purposes of this request, the Lendlease team would be
happy to provide a similar briefing to the SASC staff.
Mr. Bliss. LMH respectfully refers Senator Warren to our response
to this question (posed by Senator Warren in a February 6 letter to
LMH) set forth in our letter dated March 6, 2019, which contains
business-sensitive and/or confidential information.
101. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
Hickey, and Mr. Bliss, please describe your company MHPI capital need
plan for the next 5 years. Is the balance in the reserve account
sufficient to meet the needs of the development?
Mr. Williams. Answer provided directly to Senator Warren per letter
dated February 20, 2019.
Mr. Piscerne. Answer provided directly to Senator Warren on
February 19, 2019.
Mr. Ehle. Information pertaining to the balances of project
sustainment accounts as of January 2019 is set forth in Attachment B
(see response for #99). Importantly, these accounts are government-
owned. They do not contain Hunt money. The funds in the accounts are
subject to government consent and dedicated for use on reinvestment and
sustainment of each applicable project. Information regarding each
project's capital needs over the next 5 years and whether sources of
funds are sufficient to cover the projected uses is provided in
Attachment C (follows).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Hickey. Funds to perform capital repairs and replacements can
generally come from two accounts established by the Project Companies:
Capital Repair and Replacement Accounts and Project Reinvestment
Reserve Account. As discussed with Senator Warren's staff during our
March 6, 2019 briefing, funds in these reserve accounts accumulate and
are held in secure accounts maintained by the Project Companies at
approved financial institutions in accordance with each of the
Projects' financing documents. Capital Repair and Replacement
expenditures are approved by the Military Services through the Project
Company's annual project budget and business plan, and any expenditures
of Project reinvestment reserve funds are approved by the respective
Military Services in accordance with a Project Company's specific
contractual agreements. At present, across the portfolio, there is a
variance across the individual project companies in respective reserve
funds they each hold. Some are enough to meet all the needs, however
other projects have less retentions available.
Mr. Bliss. LMH respectfully refers Senator Warren to our response
to this question (posed by Senator Warren in a February 6 letter to
LMH) set forth in our letter dated March 6, 2019, which contains
business-sensitive and/or confidential information.
use of subcontractors
102. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
Hickey, and Mr. Bliss, do any subcontractors, subsidiaries, or other
third parties manage or provide any other services at the military
housing properties under your company's control?
Mr. Williams. Answer provided directly to Senator Warren per letter
dated February 20, 2019.
Mr. Piscerne. Answer provided directly to Senator Warren on
February 19, 2019.
Mr. Ehle. At most of its properties, Hunt handles property
management and asset management itself. At certain properties where
Hunt owns an interest in partnership with others, management of the
project is delegated to Hunt's partner. Additionally, Hunt sometimes
engages third-party subcontractors or vendors to provide services such
as painting, HVAC maintenance, lawn care, and snow removal. A list of
some of Hunt's primary third-party maintenance vendor contracts
currently in effect is provided in Attachment D.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Hickey. Yes, we engage a variety of small and large business
subcontractors, subsidiaries, and third parties to manage and provide
services in our communities. We partner with Winn Housing Services to
manage many of our day-to-day operations at the facility level. We also
contract for some specialty services, such as environmental
assessments, testing and remediation if required. We often contract
with several trade service providers when necessary including HVAC,
plumbing and electrical. We also have major subcontracts for
landscaping, tree removal and refuse collection.
Mr. Bliss. LMH respectfully refers Senator Warren to our response
to this question (posed by Senator Warren in a February 6 letter to
LMH) set forth in our letter dated March 6, 2019, which contains
business-sensitive and/or confidential information.
103. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
Hickey, and Mr. Bliss, if so, please provide a list of all of these
entities, a summary of the services they provide, and the locations
where they provide these services.
Mr. Williams. Answer provided directly to Senator Warren per letter
dated February 20, 2019.
Mr. Piscerne. Answer provided directly to Senator Warren on
February 19, 2019.
Mr. Ehle. At most of its properties, Hunt handles property
management and asset management itself. At certain properties where
Hunt owns an interest in partnership with others, management of the
project is delegated to Hunt's partner. Additionally, Hunt sometimes
engages third-party subcontractors or vendors to provide services such
as painting, HVAC maintenance, lawn care, and snow removal. A list of
some of Hunt's primary third-party maintenance vendor contracts
currently in effect is provided in Attachment D in response #102.
Mr. Hickey. Senator Warren requested this information from
Lendlease in her correspondence dated February 6, 2019. In response to
that request, the Lendlease team provided Senator Warren and her staff
two document productions dated February 21, 2019, and March 6, 2019, in
addition to conducting an in-depth briefing with Senator Warren's team.
Accordingly, we believe that this question has been adequately
responded to as a result of such responses. If this response is not
sufficient for purposes of this request, the Lendlease team would be
happy to provide a similar briefing to the SASC staff.
Mr. Bliss. LMH respectfully refers Senator Warren to our response
to this question (posed by Senator Warren in a February 6 letter to
LMH) set forth in our letter dated March 6, 2019, which contains
business-sensitive and/or confidential information.
104. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
Hickey, and Mr. Bliss, please provide copies of all agreements and
contracts between your company and these property managers or other
service providers.
Mr. Williams. Answer provided directly to Senator Warren per letter
dated February 20, 2019.
Mr. Picerne. Answer provided directly to Senator Warren on February
19, 2019.
Mr. Ehle. At most of its properties, Hunt handles property
management and asset management itself. At certain properties where
Hunt owns an interest in partnership with others, management of the
project is delegated to Hunt's partner. Additionally, Hunt sometimes
engages third-party subcontractors or vendors to provide services such
as painting, HVAC maintenance, lawn care, and snow removal. A list of
some of Hunt's primary third-party maintenance vendor contracts
currently in effect is provided in Attachment D in response #102.
Mr. Hickey. Senator Warren requested this information from
Lendlease in her correspondence dated February 6, 2019. In response to
that request, the Lendlease team provided Senator Warren and her staff
two document productions dated February 21, 2019, and March 6, 2019, in
addition to conducting an in-depth briefing with Senator Warren's team.
Accordingly, we believe that this question has been adequately
responded to as a result of such responses. If this response is not
sufficient for purposes of this request, the Lendlease team would be
happy to provide a similar briefing to the SASC staff.
Mr. Bliss. LMH respectfully refers Senator Warren to our response
to this question (posed by Senator Warren in a February 6 letter to
LMH) set forth in our letter dated March 6, 2019, which contains
business-sensitive and/or confidential information.
105. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
Hickey, and Mr. Bliss, are any of these subcontractors either
subsidiaries or otherwise financially related to your company?
Mr. Williams. Answer provided directly to Senator Warren per letter
dated February 20, 2019.
Mr. Picerne. Answer provided directly to Senator Warren on February
19, 2019.
Mr. Ehle. At most of its properties, Hunt handles property
management and asset management itself. At certain properties where
Hunt owns an interest in partnership with others, management of the
project is delegated to Hunt's partner. Additionally, Hunt sometimes
engages third-party subcontractors or vendors to provide services such
as painting, HVAC maintenance, lawn care, and snow removal. A list of
some of Hunt's primary third-party maintenance vendor contracts
currently in effect is provided in Attachment D in response #102. The
third-party subcontractors or vendors referenced above are not
subsidiaries or otherwise financially related to Hunt.
Mr. Hickey. Senator Warren requested this information from
Lendlease in her correspondence dated February 6, 2019. In response to
that request, the Lendlease team provided Senator Warren and her staff
two document productions dated February 21, 2019, and March 6, 2019, in
addition to conducting an in-depth briefing with Senator Warren's team.
Accordingly, we believe that this question has been adequately
responded to as a result of such responses. If this response is not
sufficient for purposes of this request, the Lendlease team would be
happy to provide a similar briefing to the SASC staff.
Mr. Bliss. LMH respectfully refers Senator Warren to our response
to this question (posed by Senator Warren in a February 6 letter to
LMH) set forth in our letter dated March 6, 2019, which contains
business-sensitive and/or confidential information.
106. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
Hickey, and Mr. Bliss, do you share key officers or Board members with
any of these subcontractors?
Mr. Williams. Answer provided directly to Senator Warren per letter
dated February 20, 2019.
Mr. Picerne. Answer provided directly to Senator Warren on February
19, 2019.
Mr. Ehle. At most of its properties, Hunt handles property
management and asset management itself. At certain properties where
Hunt owns an interest in partnership with others, management of the
project is delegated to Hunt's partner. Additionally, Hunt sometimes
engages third-party subcontractors or vendors to provide services such
as painting, HVAC maintenance, lawn care, and snow removal. A list of
some of Hunt's primary third-party maintenance vendor contracts
currently in effect is provided in Attachment D in response #102. Hunt
does not share key officers or board members with any of the third-
party subcontractors or vendors referenced above.
Mr. Hickey. Senator Warren requested this information from
Lendlease in her correspondence dated February 6, 2019. In response to
that request, the Lendlease team provided Senator Warren and her staff
two document productions dated February 21, 2019, and March 6, 2019, in
addition to conducting an in-depth briefing with Senator Warren's team.
Accordingly, we believe that this question has been adequately
responded to as a result of such responses. If this response is not
sufficient for purposes of this request, the Lendlease team would be
happy to provide a similar briefing to the SASC staff.
Mr. Bliss. LMH respectfully refers Senator Warren to our response
to this question (posed by Senator Warren in a February 6 letter to
LMH) set forth in our letter dated March 6, 2019, which contains
business-sensitive and/or confidential information.
oversight
107. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
Hickey, and Mr. Bliss, what controls are in place under your company's
MHPI contracts to monitor and oversee your performance?
Mr. Williams. Answer provided directly to Senator Warren per letter
dated February 20, 2019.
Mr. Picerne. Answer provided directly to Senator Warren on February
19, 2019.
Mr. Ehle. Our military partners have multiple controls in place to
oversee and monitor Hunt's performance, and we encourage such
engagement. Hunt is subject to reporting and inspection requirements
that occur on weekly, monthly, quarterly and annual bases. Our military
partners have access to our maintenance software, Yardi, and can review
work orders and survey responses. They are also able to inspect homes
and follow up directly with residents. Each of our military partners
has its own unique requirements for reporting and inspection. A general
overview of these requirements is included below.
Day-to-Day/Site Level Reporting
In many of our housing offices, Hunt co-locates with its military
housing partner. This provides for open and regular communication,
coordination, and interaction between Hunt, the Military Housing Office
(``HMO''), and residents. The military routinely conducts random
inspections of units that are ready for occupancy. Our military
partners also check in with residents to elicit feedback on recent
moves or completed work order requests. Hunt has weekly meetings with
its military partners to review any open or pending projects, customer
service issues, work order response times, pending move-ins and move-
outs, and occupancy rates. In addition, all new servicemember residents
must obtain a referral from their command to move into their designated
home.
Monthly Reporting
Hunt is required to provide monthly reports to its military
partners on the financial health of the project, including an analysis
of the approved annual operating budget. These reports contain
information regarding:
line-item budget variances;
occupancy;
work orders;
response times;
capital repair and replacement status;
project bank account reconciliations; and
any other important upcoming issues.
In addition, Hunt provides its military partners with monthly
utility consumption reports, which provide information regarding
resident utility consumption, rates, and charges. At most of its
projects, Hunt also participates in monthly meetings with its military
partners to receive feedback and provide updates on any upcoming events
or issues that may require the base commander's input.
Quarterly/Semi-Annual Reporting
On a quarterly or semi-annual basis, Hunt conducts a meeting with
military leadership at the base, command, and housing levels as well as
with the military's independent consultants. These meetings are
intended to maintain open and consistent communication between the
partners by facilitating discussion of the financial health of the
project, sustainment of the project, resident issues, military
partnership issues, events, occupancy, and/or strategic initiatives.
Further, Hunt and the military engage in quarterly asset management
meetings to coordinate on open items and discuss upcoming issues, as
well as review executive home reports and compare them to budgets. Hunt
also conducts semi-annual partnering meetings with the military to
address the higher-level strategic goals of the project.
Annual Reporting
The military partner conducts an annual site visit at each military
installation and supports its review with a report and scoring system.
All issues that are unacceptable are noted, and the property manager
takes action to address them. All of the military services also conduct
an annual resident satisfaction survey. As part of this process,
residents rate the project according to a variety of metrics and are
encouraged to give narrative feedback. Both Hunt and its military
partner review the scores and resident feedback and follow up
accordingly. Additionally, Hunt develops an action plan to address any
issues that require attention. Further, Hunt's incentive fee earnings
are, in part, tied to the site visit and resident satisfaction results.
Hunt provides information on the following topics for coordination
and approval on an annual basis to all levels of military leadership
and to military independent consultants:
Project operation;
Capital repair and replacement;
Executive home budgets; and
Out-year sustainment plans.
In addition, Hunt also submits the following information to the
military on an annual basis:
Verifications to uphold insurance, environmental, and
document compliance;
Environmental reports relating to lead-based paint or
asbestos-containing materials; and
Audited financials on a per-project basis.
Some of the military services also hold annual meetings to review
each project in detail. Similarly, the military routinely requests
additional information from Hunt on an as-needed basis to assess the
performance of projects. In addition to military oversight, the ground
leases require that the projects are operated in compliance with all
applicable laws. In addition, resident leases are subject to applicable
state landlord-tenant laws. Thus, even though a particular project may
be located on federal land, it is not necessarily insulated from the
mandates of applicable state or local law.
Often, a project will enter into a municipal service agreement with
a local state agency for the provision of police, fire, life safety,
and welfare protection services. All projects are required to comply
with federal regulations including those administered by OSHA, the EPA,
HUD, and the Department of Labor, as well as their state law
equivalents. The projects are also subject to inspections by these
authorities.
Finally, Hunt is subject to penalties for violating its contracts.
Under the terms of our project agreements, a military partner may
terminate our agreement if we are in material default of our
obligations or withhold all, or a portion of, our incentive fees if we
fail to meet performance expectations outlined in the agreement.
Indeed, in recent years, Hunt has had some portions of its incentive
fees withheld for certain projects.
Mr. Hickey. MHPI Project Companies are contractually accountable to
multiple stakeholders, including, but not limited to, the DOD and the
other Military Services, who regularly monitor and assess our
performance.
The respective Military Services retain governance oversight and
control over major decisions impacting each Project Company through
contractual rights contained in the various project documents. Lenders,
bondholders and others with financial interests also exercise a high
degree of control over the Project Companies' operations (including
scope changes, financial investments of Project Company funds, and
certain expenditures, for example) and have significant rights under
the financing documents.
In addition to monitoring and oversight conducted by the Military
Services, independent construction consultants provide oversight on
property development and construction activities on project companies,
including independent review and approval of construction progress and
pay applications.
The Project Companies' assets and operations have also been subject
to inspection by Federal, Military Services and State regulatory
authorities.
The Project Companies and management service providers are subject
to specific consequences for violating the terms of their Project
agreements. This includes rights of the Military Services to exercise
remedies up to termination for specified events of default under the
various contracts.
In addition, the ongoing asset and property management agreements
all contain an element of incentive fee to promote performance. The
Military Services can withhold and not award full incentive fees if
agreed performance metrics are not met by the respective manager.
Mr. Bliss. LMH respectfully refers Senator Warren to our response
to this question (posed by Senator Warren in a February 6 letter to
LMH) set forth in our letter dated March 6, 2019, which contains
business-sensitive and/or confidential information.
108. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
Hickey, and Mr. Bliss, does the DOD, or any of the Military Departments
with whom your company has agreements, regularly monitor and assess
your performance and adherence to these agreements? If so, how?
Mr. Williams. Answer provided directly to Senator Warren per letter
dated February 20, 2019.
Mr. Picerne. Answer provided directly to Senator Warren on February
19, 2019.
Mr. Ehle. Our military partners have multiple controls in place to
oversee and monitor Hunt's performance, and we encourage such
engagement. Hunt is subject to reporting and inspection requirements
that occur on weekly, monthly, quarterly and annual bases. Our military
partners have access to our maintenance software, Yardi, and can review
work orders and survey responses. They are also able to inspect homes
and follow up directly with residents. Each of our military partners
has its own unique requirements for reporting and inspection. A general
overview of these requirements is included below.
Day-to-Day/Site Level Reporting
In many of our housing offices, Hunt co-locates with its military
housing partner. This provides for open and regular communication,
coordination, and interaction between Hunt, the Military Housing Office
(``HMO''), and residents. The military routinely conducts random
inspections of units that are ready for occupancy. Our military
partners also check in with residents to elicit feedback on recent
moves or completed work order requests. Hunt has weekly meetings with
its military partners to review any open or pending projects, customer
service issues, work order response times, pending move-ins and move-
outs, and occupancy rates. In addition, all new servicemember residents
must obtain a referral from their command to move into their designated
home.
Monthly Reporting
Hunt is required to provide monthly reports to its military
partners on the financial health of the project, including an analysis
of the approved annual operating budget. These reports contain
information regarding:
line-item budget variances;
occupancy;
work orders;
response times;
capital repair and replacement status;
project bank account reconciliations; and
any other important upcoming issues.
In addition, Hunt provides its military partners with monthly
utility consumption reports, which provide information regarding
resident utility consumption, rates, and charges. At most of its
projects, Hunt also participates in monthly meetings with its military
partners to receive feedback and provide updates on any upcoming events
or issues that may require the base commander's input.
Quarterly/Semi-Annual Reporting
On a quarterly or semi-annual basis, Hunt conducts a meeting with
military leadership at the base, command, and housing levels as well as
with the military's independent consultants. These meetings are
intended to maintain open and consistent communication between the
partners by facilitating discussion of the financial health of the
project, sustainment of the project, resident issues, military
partnership issues, events, occupancy, and/or strategic initiatives.
Further, Hunt and the military engage in quarterly asset management
meetings to coordinate on open items and discuss upcoming issues, as
well as review executive home reports and compare them to budgets. Hunt
also conducts semi-annual partnering meetings with the military to
address the higher-level strategic goals of the project.
Annual Reporting
The military partner conducts an annual site visit at each military
installation and supports its review with a report and scoring system.
All issues that are unacceptable are noted, and the property manager
takes action to address them. All of the military services also conduct
an annual resident satisfaction survey. As part of this process,
residents rate the project according to a variety of metrics and are
encouraged to give narrative feedback. Both Hunt and its military
partner review the scores and resident feedback and follow up
accordingly. Additionally, Hunt develops an action plan to address any
issues that require attention. Further, Hunt's incentive fee earnings
are, in part, tied to the site visit and resident satisfaction results.
Hunt provides information on the following topics for coordination
and approval on an annual basis to all levels of military leadership
and to military independent consultants:
Project operation;
Capital repair and replacement;
Executive home budgets; and
Out-year sustainment plans.
In addition, Hunt also submits the following information to the
military on an annual basis:
Verifications to uphold insurance, environmental, and
document compliance;
Environmental reports relating to lead-based paint or
asbestos-containing materials; and
Audited financials on a per-project basis.
Some of the military services also hold annual meetings to review
each project in detail. Similarly, the military routinely requests
additional information from Hunt on an as-needed basis to assess the
performance of projects. In addition to military oversight, the ground
leases require that the projects are operated in compliance with all
applicable laws. In addition, resident leases are subject to applicable
state landlord-tenant laws. Thus, even though a particular project may
be located on federal land, it is not necessarily insulated from the
mandates of applicable state or local law.
Often, a project will enter into a municipal service agreement with
a local state agency for the provision of police, fire, life safety,
and welfare protection services. All projects are required to comply
with Federal regulations including those administered by OSHA, the EPA,
HUD, and the Department of Labor, as well as their state law
equivalents. The projects are also subject to inspections by these
authorities.
Finally, Hunt is subject to penalties for violating its contracts.
Under the terms of our project agreements, a military partner may
terminate our agreement if we are in material default of our
obligations or withhold all, or a portion of, our incentive fees if we
fail to meet performance expectations outlined in the agreement.
Indeed, in recent years, Hunt has had some portions of its incentive
fees withheld for certain projects.
Mr. Hickey. MHPI Project Companies are contractually accountable to
multiple stakeholders, including, but not limited to, the DOD and the
other Military Services, who regularly monitor and assess our
performance. The respective Military Services retain governance
oversight and control over major decisions impacting each Project
Company through contractual rights contained in the various project
documents. Lenders, bondholders and others with financial interests
also exercise a high degree of control over the Project Companies'
operations (including scope changes, financial investments of Project
Company funds, and certain expenditures, for example) and have
significant rights under the financing documents. See also the response
above to question 107.
Mr. Bliss. LMH respectfully refers Senator Warren to our response
to this question (posed by Senator Warren in a February 6 letter to
LMH) set forth in our letter dated March 6, 2019, which contains
business-sensitive and/or confidential information.
109. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
Hickey, and Mr. Bliss, how frequently are your company's properties
inspected by DOD or military service personnel, or by any third-party
inspector acting on their behalf?
Mr. Williams. Answer provided directly to Senator Warren per letter
dated February 20, 2019.
Mr. Picerne. Answer provided directly to Senator Warren on February
19, 2019.
Mr. Ehle. Our military partners have multiple controls in place to
oversee and monitor Hunt's performance, and we encourage such
engagement. Hunt is subject to reporting and inspection requirements
that occur on weekly, monthly, quarterly and annual bases. Our military
partners have access to our maintenance software, Yardi, and can review
work orders and survey responses. They are also able to inspect homes
and follow up directly with residents. Each of our military partners
has its own unique requirements for reporting and inspection. A general
overview of these requirements is included below.
Day-to-Day/Site Level Reporting
In many of our housing offices, Hunt co-locates with its military
housing partner. This provides for open and regular communication,
coordination, and interaction between Hunt, the Military Housing Office
(``HMO''), and residents. The military routinely conducts random
inspections of units that are ready for occupancy. Our military
partners also check in with residents to elicit feedback on recent
moves or completed work order requests. Hunt has weekly meetings with
its military partners to review any open or pending projects, customer
service issues, work order response times, pending move-ins and move-
outs, and occupancy rates. In addition, all new servicemember residents
must obtain a referral from their command to move into their designated
home.
Monthly Reporting
Hunt is required to provide monthly reports to its military
partners on the financial health of the project, including an analysis
of the approved annual operating budget. These reports contain
information regarding:
line-item budget variances;
occupancy;
work orders;
response times;
capital repair and replacement status;
project bank account reconciliations; and
any other important upcoming issues.
In addition, Hunt provides its military partners with monthly
utility consumption reports, which provide information regarding
resident utility consumption, rates, and charges. At most of its
projects, Hunt also participates in monthly meetings with its military
partners to receive feedback and provide updates on any upcoming events
or issues that may require the base commander's input.
Quarterly/Semi-Annual Reporting
On a quarterly or semi-annual basis, Hunt conducts a meeting with
military leadership at the base, command, and housing levels as well as
with the military's independent consultants. These meetings are
intended to maintain open and consistent communication between the
partners by facilitating discussion of the financial health of the
project, sustainment of the project, resident issues, military
partnership issues, events, occupancy, and/or strategic initiatives.
Further, Hunt and the military engage in quarterly asset management
meetings to coordinate on open items and discuss upcoming issues, as
well as review executive home reports and compare them to budgets. Hunt
also conducts semi-annual partnering meetings with the military to
address the higher-level strategic goals of the project.
Annual Reporting
The military partner conducts an annual site visit at each military
installation and supports its review with a report and scoring system.
All issues that are unacceptable are noted, and the property manager
takes action to address them. All of the military services also conduct
an annual resident satisfaction survey. As part of this process,
residents rate the project according to a variety of metrics and are
encouraged to give narrative feedback. Both Hunt and its military
partner review the scores and resident feedback and follow up
accordingly. Additionally, Hunt develops an action plan to address any
issues that require attention. Further, Hunt's incentive fee earnings
are, in part, tied to the site visit and resident satisfaction results.
Hunt provides information on the following topics for coordination
and approval on an annual basis to all levels of military leadership
and to military independent consultants:
Project operation;
Capital repair and replacement;
Executive home budgets; and
Out-year sustainment plans.
In addition, Hunt also submits the following information to the
military on an annual basis:
Verifications to uphold insurance, environmental, and
document compliance;
Environmental reports relating to lead-based paint or
asbestos-containing materials; and
Audited financials on a per-project basis.
Some of the military services also hold annual meetings to review
each project in detail. Similarly, the military routinely requests
additional information from Hunt on an as-needed basis to assess the
performance of projects. In addition to military oversight, the ground
leases require that the projects are operated in compliance with all
applicable laws. In addition, resident leases are subject to applicable
state landlord-tenant laws. Thus, even though a particular project may
be located on federal land, it is not necessarily insulated from the
mandates of applicable state or local law.
Often, a project will enter into a municipal service agreement with
a local state agency for the provision of police, fire, life safety,
and welfare protection services. All projects are required to comply
with federal regulations including those administered by OSHA, the EPA,
HUD, and the Department of Labor, as well as their state law
equivalents. The projects are also subject to inspections by these
authorities.
Finally, Hunt is subject to penalties for violating its contracts.
Under the terms of our project agreements, a military partner may
terminate our agreement if we are in material default of our
obligations or withhold all, or a portion of, our incentive fees if we
fail to meet performance expectations outlined in the agreement.
Indeed, in recent years, Hunt has had some portions of its incentive
fees withheld for certain projects.
Mr. Hickey. The Project Companies' assets and operations are
subject to inspection by Federal, Military Services and in many
instances State regulatory authorities. The frequency of such
inspections varies. In recent weeks many of our properties have been
inspected and our personnel interviewed by various military service's
Inspectors General (IG).
Mr. Bliss. LMH respectfully refers Senator Warren to our response
to this question (posed by Senator Warren in a February 6 letter to
LMH) set forth in our letter dated March 6, 2019, which contains
business-sensitive and/or confidential information.
110. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
Hickey, and Mr. Bliss, please provide a list of the results of all such
inspections of all of your company's MHPI facilities since January 1,
2008, including any deficiencies identified and a description of how
these deficiencies were remedied.
Mr. Williams. Answer provided directly to Senator Warren per letter
dated February 20, 2019.
Mr. Picerne. Answer provided directly to Senator Warren on February
19, 2019.
Mr. Ehle. Our military partners have multiple controls in place to
oversee and monitor Hunt's performance, and we encourage such
engagement. Hunt is subject to reporting and inspection requirements
that occur on weekly, monthly, quarterly and annual bases. Our military
partners have access to our maintenance software, Yardi, and can review
work orders and survey responses. They are also able to inspect homes
and follow up directly with residents. Each of our military partners
has its own unique requirements for reporting and inspection. A general
overview of these requirements is included below.
Day-to-Day/Site Level Reporting
In many of our housing offices, Hunt co-locates with its military
housing partner. This provides for open and regular communication,
coordination, and interaction between Hunt, the Military Housing Office
(``HMO''), and residents. The military routinely conducts random
inspections of units that are ready for occupancy. Our military
partners also check in with residents to elicit feedback on recent
moves or completed work order requests. Hunt has weekly meetings with
its military partners to review any open or pending projects, customer
service issues, work order response times, pending move-ins and move-
outs, and occupancy rates. In addition, all new servicemember residents
must obtain a referral from their command to move into their designated
home.
Monthly Reporting
Hunt is required to provide monthly reports to its military
partners on the financial health of the project, including an analysis
of the approved annual operating budget. These reports contain
information regarding:
line-item budget variances;
occupancy;
work orders;
response times;
capital repair and replacement status;
project bank account reconciliations; and
any other important upcoming issues.
In addition, Hunt provides its military partners with monthly
utility consumption reports, which provide information regarding
resident utility consumption, rates, and charges. At most of its
projects, Hunt also participates in monthly meetings with its military
partners to receive feedback and provide updates on any upcoming events
or issues that may require the base commander's input.
Quarterly/Semi-Annual Reporting
On a quarterly or semi-annual basis, Hunt conducts a meeting with
military leadership at the base, command, and housing levels as well as
with the military's independent consultants. These meetings are
intended to maintain open and consistent communication between the
partners by facilitating discussion of the financial health of the
project, sustainment of the project, resident issues, military
partnership issues, events, occupancy, and/or strategic initiatives.
Further, Hunt and the military engage in quarterly asset management
meetings to coordinate on open items and discuss upcoming issues, as
well as review executive home reports and compare them to budgets. Hunt
also conducts semi-annual partnering meetings with the military to
address the higher-level strategic goals of the project.
Annual Reporting
The military partner conducts an annual site visit at each military
installation and supports its review with a report and scoring system.
All issues that are unacceptable are noted, and the property manager
takes action to address them. All of the military services also conduct
an annual resident satisfaction survey. As part of this process,
residents rate the project according to a variety of metrics and are
encouraged to give narrative feedback. Both Hunt and its military
partner review the scores and resident feedback and follow up
accordingly. Additionally, Hunt develops an action plan to address any
issues that require attention. Further, Hunt's incentive fee earnings
are, in part, tied to the site visit and resident satisfaction results.
Hunt provides information on the following topics for coordination
and approval on an annual basis to all levels of military leadership
and to military independent consultants:
Project operation;
Capital repair and replacement;
Executive home budgets; and
Out-year sustainment plans.
In addition, Hunt also submits the following information to the
military on an annual basis:
Verifications to uphold insurance, environmental, and
document compliance;
Environmental reports relating to lead-based paint or
asbestos-containing materials; and
Audited financials on a per-project basis.
Some of the military services also hold annual meetings to review
each project in detail. Similarly, the military routinely requests
additional information from Hunt on an as-needed basis to assess the
performance of projects. In addition to military oversight, the ground
leases require that the projects are operated in compliance with all
applicable laws. In addition, resident leases are subject to applicable
state landlord-tenant laws. Thus, even though a particular project may
be located on federal land, it is not necessarily insulated from the
mandates of applicable state or local law.
Often, a project will enter into a municipal service agreement with
a local state agency for the provision of police, fire, life safety,
and welfare protection services. All projects are required to comply
with federal regulations including those administered by OSHA, the EPA,
HUD, and the Department of Labor, as well as their state law
equivalents. The projects are also subject to inspections by these
authorities.
Finally, Hunt is subject to penalties for violating its contracts.
Under the terms of our project agreements, a military partner may
terminate our agreement if we are in material default of our
obligations or withhold all, or a portion of, our incentive fees if we
fail to meet performance expectations outlined in the agreement.
Indeed, in recent years, Hunt has had some portions of its incentive
fees withheld for certain projects.
Mr. Hickey. Senator Warren requested this information from
Lendlease in her correspondence dated February 6, 2019. In response to
that request, the Lendlease team provided Senator Warren and her staff
two document productions dated February 21, 2019, and March 6, 2019, in
addition to conducting an in-depth briefing with Senator Warren's team.
Accordingly, we believe that this question has been adequately
responded to as a result of such responses. If this response is not
sufficient for purposes of this request, the Lendlease team would be
happy to provide a similar briefing to the SASC staff.
Mr. Bliss. LMH respectfully refers Senator Warren to our response
to this question (posed by Senator Warren in a February 6 letter to
LMH) set forth in our letter dated March 6, 2019, which contains
business-sensitive and/or confidential information.
111. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
Hickey, and Mr. Bliss, are any of your properties subject to inspection
by any other federal authority, or by any state or local authority? If
so, please provide a list of any inspections and the results of such
inspections by these officials.
Mr. Williams. Answer provided directly to Senator Warren per letter
dated February 20, 2019.
Mr. Picerne. Answer provided directly to Senator Warren on February
19, 2019.
Mr. Ehle. Our military partners have multiple controls in place to
oversee and monitor Hunt's performance, and we encourage such
engagement. Hunt is subject to reporting and inspection requirements
that occur on weekly, monthly, quarterly and annual bases. Our military
partners have access to our maintenance software, Yardi, and can review
work orders and survey responses. They are also able to inspect homes
and follow up directly with residents. Each of our military partners
has its own unique requirements for reporting and inspection. A general
overview of these requirements is included below.
Day-to-Day/Site Level Reporting
In many of our housing offices, Hunt co-locates with its military
housing partner. This provides for open and regular communication,
coordination, and interaction between Hunt, the Military Housing Office
(``HMO''), and residents. The military routinely conducts random
inspections of units that are ready for occupancy. Our military
partners also check in with residents to elicit feedback on recent
moves or completed work order requests. Hunt has weekly meetings with
its military partners to review any open or pending projects, customer
service issues, work order response times, pending move-ins and move-
outs, and occupancy rates. In addition, all new servicemember residents
must obtain a referral from their command to move into their designated
home.
Monthly Reporting
Hunt is required to provide monthly reports to its military
partners on the financial health of the project, including an analysis
of the approved annual operating budget. These reports contain
information regarding:
line-item budget variances;
occupancy;
work orders;
response times;
capital repair and replacement status;
project bank account reconciliations; and
any other important upcoming issues.
In addition, Hunt provides its military partners with monthly
utility consumption reports, which provide information regarding
resident utility consumption, rates, and charges. At most of its
projects, Hunt also participates in monthly meetings with its military
partners to receive feedback and provide updates on any upcoming events
or issues that may require the base commander's input.
Quarterly/Semi-Annual Reporting
On a quarterly or semi-annual basis, Hunt conducts a meeting with
military leadership at the base, command, and housing levels as well as
with the military's independent consultants. These meetings are
intended to maintain open and consistent communication between the
partners by facilitating discussion of the financial health of the
project, sustainment of the project, resident issues, military
partnership issues, events, occupancy, and/or strategic initiatives.
Further, Hunt and the military engage in quarterly asset management
meetings to coordinate on open items and discuss upcoming issues, as
well as review executive home reports and compare them to budgets. Hunt
also conducts semi-annual partnering meetings with the military to
address the higher-level strategic goals of the project.
Annual Reporting
The military partner conducts an annual site visit at each military
installation and supports its review with a report and scoring system.
All issues that are unacceptable are noted, and the property manager
takes action to address them. All of the military services also conduct
an annual resident satisfaction survey. As part of this process,
residents rate the project according to a variety of metrics and are
encouraged to give narrative feedback. Both Hunt and its military
partner review the scores and resident feedback and follow up
accordingly. Additionally, Hunt develops an action plan to address any
issues that require attention. Further, Hunt's incentive fee earnings
are, in part, tied to the site visit and resident satisfaction results.
Hunt provides information on the following topics for coordination
and approval on an annual basis to all levels of military leadership
and to military independent consultants:
Project operation;
Capital repair and replacement;
Executive home budgets; and
Out-year sustainment plans.
In addition, Hunt also submits the following information to the
military on an annual basis:
Verifications to uphold insurance, environmental, and
document compliance;
Environmental reports relating to lead-based paint or
asbestos-containing materials; and
Audited financials on a per-project basis.
Some of the military services also hold annual meetings to review
each project in detail. Similarly, the military routinely requests
additional information from Hunt on an as-needed basis to assess the
performance of projects. In addition to military oversight, the ground
leases require that the projects are operated in compliance with all
applicable laws. In addition, resident leases are subject to applicable
state landlord-tenant laws. Thus, even though a particular project may
be located on federal land, it is not necessarily insulated from the
mandates of applicable state or local law.
Often, a project will enter into a municipal service agreement with
a local state agency for the provision of police, fire, life safety,
and welfare protection services. All projects are required to comply
with federal regulations including those administered by OSHA, the EPA,
HUD, and the Department of Labor, as well as their state law
equivalents. The projects are also subject to inspections by these
authorities.
Finally, Hunt is subject to penalties for violating its contracts.
Under the terms of our project agreements, a military partner may
terminate our agreement if we are in material default of our
obligations or withhold all, or a portion of, our incentive fees if we
fail to meet performance expectations outlined in the agreement.
Indeed, in recent years, Hunt has had some portions of its incentive
fees withheld for certain projects.
Mr. Hickey. The Project Companies' assets and operations are
subject to inspection by Federal and State regulatory authorities. For
additional information, please see our response to question 99.
Mr. Bliss. LMH respectfully refers Senator Warren to our response
to this question (posed by Senator Warren in a February 6 letter to
LMH) set forth in our letter dated March 6, 2019, which contains
business-sensitive and/or confidential information.
112. Senator Warren. Mr. Williams, Mr. Piscerne, Mr. Ehle, Mr.
Hickey, and Mr. Bliss, under your company's existing lease agreements,
is your company subject to specific financial or other penalties for
violating the terms of your agreements with the Military Departments?
Mr. Williams. Answer provided directly to Senator Warren per letter
dated February 20, 2019.
Mr. Picerne. Answer provided directly to Senator Warren on February
19, 2019.
Mr. Ehle. Our military partners have multiple controls in place to
oversee and monitor Hunt's performance, and we encourage such
engagement. Hunt is subject to reporting and inspection requirements
that occur on weekly, monthly, quarterly and annual bases. Our military
partners have access to our maintenance software, Yardi, and can review
work orders and survey responses. They are also able to inspect homes
and follow up directly with residents. Each of our military partners
has its own unique requirements for reporting and inspection. A general
overview of these requirements is included below.
Day-to-Day/Site Level Reporting
In many of our housing offices, Hunt co-locates with its military
housing partner. This provides for open and regular communication,
coordination, and interaction between Hunt, the Military Housing Office
(``HMO''), and residents. The military routinely conducts random
inspections of units that are ready for occupancy. Our military
partners also check in with residents to elicit feedback on recent
moves or completed work order requests. Hunt has weekly meetings with
its military partners to review any open or pending projects, customer
service issues, work order response times, pending move-ins and move-
outs, and occupancy rates. In addition, all new servicemember residents
must obtain a referral from their command to move into their designated
home.
Monthly Reporting
Hunt is required to provide monthly reports to its military
partners on the financial health of the project, including an analysis
of the approved annual operating budget. These reports contain
information regarding:
line-item budget variances;
occupancy;
work orders;
response times;
capital repair and replacement status;
project bank account reconciliations; and
any other important upcoming issues.
In addition, Hunt provides its military partners with monthly
utility consumption reports, which provide information regarding
resident utility consumption, rates, and charges. At most of its
projects, Hunt also participates in monthly meetings with its military
partners to receive feedback and provide updates on any upcoming events
or issues that may require the base commander's input.
Quarterly/Semi-Annual Reporting
On a quarterly or semi-annual basis, Hunt conducts a meeting with
military leadership at the base, command, and housing levels as well as
with the military's independent consultants. These meetings are
intended to maintain open and consistent communication between the
partners by facilitating discussion of the financial health of the
project, sustainment of the project, resident issues, military
partnership issues, events, occupancy, and/or strategic initiatives.
Further, Hunt and the military engage in quarterly asset management
meetings to coordinate on open items and discuss upcoming issues, as
well as review executive home reports and compare them to budgets. Hunt
also conducts semi-annual partnering meetings with the military to
address the higher-level strategic goals of the project.
Annual Reporting
The military partner conducts an annual site visit at each military
installation and supports its review with a report and scoring system.
All issues that are unacceptable are noted, and the property manager
takes action to address them. All of the military services also conduct
an annual resident satisfaction survey. As part of this process,
residents rate the project according to a variety of metrics and are
encouraged to give narrative feedback. Both Hunt and its military
partner review the scores and resident feedback and follow up
accordingly. Additionally, Hunt develops an action plan to address any
issues that require attention. Further, Hunt's incentive fee earnings
are, in part, tied to the site visit and resident satisfaction results.
Hunt provides information on the following topics for coordination
and approval on an annual basis to all levels of military leadership
and to military independent consultants:
Project operation;
Capital repair and replacement;
Executive home budgets; and
Out-year sustainment plans.
In addition, Hunt also submits the following information to the
military on an annual basis: