ULI Washington News

The Changing Department of Defense Recap

By Alia Anderson
April 25, 2012

General Paul Kern spoke about how changes at the Department of Defense and related to the federal budget may impact real estate and other businesses. General Kern discussed significant anticipated federal budget reductions and noted that sequestration will amplify these cuts. He also spoke about the changes that have occurred since September 11th related to increased security needs of federal projects and how these have changed the types of spaces that federal agencies and especially defense and security-related branches need.  General Kern shared the following trends in the DOD that have implications for real estate:

–          The amount of commercial real estate leased to the federal government has lessened and many agencies have moved since 9/11 because of security requirement like setbacks.

–          Secretary Panetta has indicated that we need another round of BRAC and Congress has pushed back,…it is unknown at this time what will happen. Another round of BRAC is unlikely during an election year. DOD, however, has the authority from a prior Congress to close bases without BRAC. That is an option. Regardless, it is likely that we will see more closures and consolidations.

–          There still isn’t enough base housing so there will continue to be demand for housing off base.

–          Obama announced a shift in priorities from Middle East and Europe to Middle East and Pacific. We are building up our presence in Guam, Austalia, etc…but they tend to rotate more people through existing facilities in these places rather than increasing facilities and permanent staff significantly. Most of the Pacific staff will be 4-8 month deployments.

–          Looking at what is happening in Iran, Iraq, Syria and our shifting presence in the Pacific suggest that the Navy fleet will grow, the Army is projected to lose 72,000 soldiers, and the Air Force and Marines will stay steady or shrink…not much growth expected overall.

–          DOD is looking to be creative and innovative. “The Department will listen to good ideas.” For example, since the 90s there has been a rule in place that allows commercial companies to build and maintain base housing – this has allowed for a more diverse housing stock. New construction is all going through LEED. DOD is bringing renewable energy into their installations and working to improve efficiency on bases. Installation commands are increasingly looking at public private partnerships.

–          With regard to the impact of these changes on defense consulting, more than half of domestic defense budget goes into services and much of that is consulting. We’ve seen more growth in companies that do oversight, analysis, audits, etc. That said, DOD is currently bringing systems engineering and auditing work back into the military rather than using consultants exclusively.

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