Military considering dropping some housing contractors after botched mold cleanup

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The top civilians in each military service say it may be time to pull out of contracts with some privatized military housing companies after seeing shoddy work fixing long-standing problems in the homes of service members and their families.

The comments come after the Government Accountability Office released a report Tuesday stating that the Defense Department can’t properly monitor and track the condition of privatized housing because the data on the homes produced by 14 corporate housing partners is rife with data anomalies and inconsistent business practices in how the data are collected.

A Tuesday Senate Armed Services Committee hearing with military service secretaries, top brass and the GAO further revealed stacked odds against military families living in substandard living conditions. Senators heard about contract structures that impeded proper oversight of military housing, nondisclosure agreements with families as a condition of occupation — which kept them from reporting issues to DoD — and incentive fee structures set up in favor of companies.

The housing contractors will have an opportunity to tell their side of the story when the CEOs and presidents from Corvias Group, Hunt Companies, Lendlease Americas, Balfour Beatty and Lincoln Military Housing testify before the House Armed Services Committee on Thursday. The contractors admitted issues with the houses and pledged to fix them during a congressional hearing earlier this year.  The hearing is considered an update to their ongoing work.

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“At almost every installation we visited, we found that the military housing officials on the ground were extremely frustrated with the private partner,” Elizabeth Field, director of defense capabilities and management for GAO testified. “Personnel on the ground were not getting the cooperation or support they needed.”

DoD and the companies have been aware of lead paint, mice, mold and other unacceptable living conditions since February.

Ten months later, not only are the issues still ongoing, but some companies are half-heartedly conducting remediation work, leading to further problems for families.

Sen. Tim Kaine (D-Va.) visited Fort Belvoir on Monday and recounted a family whose home was undergoing repairs for mold. The insulation was supposed to be replaced, but a woman living in the house noticed no new insulation was brought into the home, despite the company’s insistence it was supplanted.

“She said, ‘Open the wall. I think you’re lying to me,’” Kaine said during the hearing. “The wall was opened up and the old installation that was dirty had been put back in and it was already soaking wet because not only had they not put in new insulation, they hadn’t fixed the water problem behind the wall.”

Since February, in the Army alone, 2,265 families were displaced because companies needed to address issues in their homes. About 180 are still in temporary housing because of housing problems.

“To displaced families, days can feel like weeks and weeks can feel like months. These aren’t simply numbers; these are lives,” Army Secretary Ryan McCarthy said. “Currently, we have over 86,000 privatized homes; with one-third of houses is in good condition; one-third in fair condition, requiring minor refurbishing; and one-third in poor condition and needing to be rebuilt.”

The remediation and continued substandard living situations outraged senators.

“These companies are being referred to as our partners. They’re not our partners. They provide a service. We pay them for their service,” Sen. Doug Jones (R-Ala.) said. “They are providing a service to these people and their military and their families and we should be demanding and make sure we’re demanding that they deliver the excellent services that we’re paying them for and that we don’t consider them a partner like I would my spouse or a law partner.”

The GAO report

According to the GAO report, DoD has limited insight as to what goes on in the privatized military houses.

Military housing officials told GAO that in some cases they have limited access to work orders, and if they were completed. They also said staffing issues kept them from staying on top of their jobs.

It’s not just the limited access to work orders, though. GAO said DoD uses several metrics to monitor corporations’ performance, but those metrics are not based on the happiness of residents or the inhabitability of their homes.

“Most but not all of the private partners are eligible to receive performance incentive fees based on generally meeting the performance metrics established in each individual project’s business agreement,” the report states.

One common metric is maintenance management, which measures how often the property manager’s response time to work orders meets the required timeframes established in the contracts.

“While this indicator measures the timeliness of the private partner’s response, it does not measure or take into account the quality of the work that was conducted or whether the resident’s issue was fully addressed,” the report states.

Another indicator is resident satisfaction, but one DoD official told GAO that they use occupancy as an indicator of satisfaction based on the assumption that residents would move if they were dissatisfied.

The report found that DoD annually gives reports to Congress with resident satisfaction, but the data is unreliable.

“We have determined that information on resident satisfaction in these reports to Congress on privatized housing has been unreliable and may be misleading due to variances in the data the military departments collect and provide to DoD and in DoD’s calculation and presentation of these data,” the report states.

A captive clientele

The military housing situation is in a state of transition. The military and the companies made promises to fix the current situation after the reports came out in February.

The military and companies conducted significant triage, investing millions of dollars, changing guidelines and hiring extra staff.

However, both the military officials and senators said there is more that needs to be done and in some cases the companies are botching remediation efforts.

“These housing companies, they had a double standard,” Kaine said. “And the double standard was they all operate in the private sphere and they lease to private tenants and they have to compete hard to make sure that they have high occupancy rates. Because, if they treat their private tenants badly, they’ll go elsewhere.”

Kaine went on to explain the difference with military housing.

“They treat military tenants like they’re captives, like it’s a captive audience,” he said. “People who move from across the country to a place where they don’t know anyone, where they don’t know anything about the rental market, where they’re trying to find new schools and get accustomed to everything else, there’s a natural tendency to want to live on base. And the occupancy rates will be high because of that tendency.”

Army Chief of Staff Gen. James McConville said the companies are receiving on average 77% of their incentive fees. The Navy has not yet paid out its incentive fees for the year and the Air Force is withholding some of its fees.

The issue is that incentive fees are based on the metrics GAO outlined as issues. All of the service secretaries said they are working with the companies to restructure incentive fee metrics based more on resident feedback.

McCarthy said when the military and housing companies have 50-year contracts, like the current ones, then the relationships need to adjust over time to reflect the standard of living and the age of the houses.

Acting Navy Secretary Thomas Modly said his service has a lot of trouble with visibility to see where there are issues. He said there needs to be better real-time monitoring.

The service secretaries urged Congress to pass the 2020 National Defense Authorization Act so they could implement a tenant bill of rights, which includes a dispute resolution provision. Currently, multiple families on bases nationwide are turning to legal action to solve their housing issues.

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