Air Force withholding millions from military housing company after allegations of fraud

Balfour-Beatty Communities will miss out on $4.3 million in incentive fees.

The Air Force is withholding $4.3 million in incentive funds at 21 military housing bases managed by Balfour-Beatty Communities after allegations that the company falsified maintenance records to receive the bonuses.

The actions from the Air Force are a direct result of investigations from Reuters-CBS News, which also lead to congressional hearings and a military-wide look at privatized military housing.

“The Air Force takes these allegations very seriously and is taking immediate action to ensure housing management controls are in place at locations managed by Balfour-Beatty Communities (BBC),”  John Henderson, Air Force assistant secretary for installations, environment and energy told Federal News Network in a statement. “In addition, the Air Force has communicated the gravity of the situation to BBC leadership and notified the Air Force Office of Special Investigations.”

The incentive fee stoppage comes after new allegations of fraud at Mountain Home Air Force Base in Idaho.

“On July 2, the Air Force received information indicating that an employee of BBC at Mountain Home may not have followed proper management procedures in handling maintenance work orders,” Henderson said.

The issues are not localized to Mountain Home, however. The Air Force Office of Special Investigations and the FBI are already investigating fraud allegations at three other locations: Tinker Air Force Base in Oklahoma, Fairchild Air Force Base in Washington and Travis Air Force Base in California.

The incentive fees are paid from a kitty of money collected by the Air Force. The Air Force gives the companies a percentage of the money depending on how the company responds to maintenance requests and repairs. If the company does not earn the fees, then they are invested into the community.

Sen. Elizabeth Warren (D-Mass.) said in February that housing companies received incentive fees more than 95% of the time.

The fees are only part of the $33 million in net profit BBC gets from military housing per year.

In order for the Air Force Civil Engineer Center to consider reinstating the incentive fees, BBC must “obtain and provide an independent review of its maintenance and work order processes at all 21 of its Air Force installations, within 90 days, and identify how BBC will address deficiencies and ensure its maintenance and work order processes meet Air Force requirements,” Henderson said in the statement.

Earlier this year, before members of the Senate Armed Services Committee, BBC president Christopher Williams pledged, “Absolutely, 100%” to immediately address issues raised by military families in BBC homes.

The hearing was in response to reports of mold, mice, lead paint and other issues in privatized military housing that were not being addressed by the landlords.

The leadership of the Senate Armed Services Committee jumped on BBC allegations yesterday evening.

“BBC’s allegedly widespread use of fraudulent work order practices is unacceptable, period. The Air Force has done the right thing by suspending all incentive fees to BBC, and this should remain the case while the FBI and other proper military authorities investigate these practices,” Committee Chairman Sen. Jim Inhofe (R-Okla.) said.

Ranking Member Sen. Jack Reed (D-R.I.) echoed the concerns.

“These are deeply troubling allegations and I commend the Air Force for stepping in and taking decisive action to stand up for military families and get to the bottom of this,” he said. “The health and well-being of our troops and their families must always come first. It appears that military families were getting short-changed so that some of these managers could pocket bonuses. If that is the case, they need to be held accountable and taxpayer money should be clawed back.”

The House and Senate 2020 defense authorization bills require a tenants’ bill of rights for residents of privatized military family housing in response to the issues.

The bill of rights is to include:

  • A prohibition on reprisal by either the private partner or military chain of command;
  • Provision of a housing advocate that is not co-located with or employed by the private partner;
  • A dispute resolution mechanism;
  • A mechanism for withholding rent payments where appropriate during the dispute resolution process;
  • Prompt provision of maintenance by qualified personnel and effective communication regarding the status of their work orders to include access to an electronic work order management system;
  • Professional and courteous property management services; and
  • Information about known and potential hazards at time of home selection, to include mold, lead, rodent infestation and history of sickened residents.

The Senate version of the bill sets up a dispute resolution process and increases oversight. It also instates new quality assurance and control measures and increase health and hazard inspections.

The House version recommendations also prohibit the use of non-disclosure agreements in connection with entering into, continuing or terminating a lease.

The military services took immediate steps to fix issues reported by service members after the Senate Armed Services Committee held its hearing.

The Air Force ordered checks of all 74,000 of its houses. The Navy checked in with all of its sailors in privatized housing.

The Army hired 119 additional staff for its housing authorities on installations and put money in its 2020 budget request to sustain those jobs.

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