On June 8, 2021, the U.S. Government Accountability Office (GAO) issued a report noting the myriad of improvements made to the Army’s privatized lodging program while also recommending the Department of Defense provide key information to Congress and improve its methodology for gathering military lodging program data.
As the Army’s exclusive Privatized Army Lodging (PAL) partner, Lendlease welcomes the opportunity to share this information, including both our successes and lessons learned. Since assuming ownership of the Army’s on-post lodging facilities, the average year of construction of a room has improved from 1967 to 1990. More than a billion dollars has been invested in the hotels with 1 in 5 rooms having been built new over the past seven years. During the 18 months GAO performed its review, three new hotels opened their doors, with a fourth coming on-line this week. Guest satisfaction scores have also increased significantly and GAO validated the Army’s cost avoidance estimates — more than $600 million in lodging costs for official travel, compared to full per diem.
Despite the report’s attempts at a more direct comparison, non-privatized DoD lodging programs cannot quantify the total costs of their programs nor notable improvements to the facilities. In contrast, the Army has more than a decade’s worth of data and shows tangible improvements, making a strong case for privatization, and is able to produce reliable financial information and compliant performance metrics. Unfortunately, the GAO’s chart in the report depicting a summary of the PAL development plan is selectively cropped to show only 10 of the 40 PAL installations, setting up an unfortunate and incorrect portrayal of the data. The full unedited chart (shown below) accurately depicts everything provided to the GAO. Hundreds of millions of dollars of improvements are missing in the published chart from GAO – including more than 2,000 new hotel rooms, renovated Holiday Inn Express hotels and the massive investment needed to bring the remaining Army Lodging inventory up to hotel industry standards.
|Brand||Type||FY10 PAL Plan||FY17 PAL Group A Accomplished||FY17 PAL Accomplished||FY21 PAL Accomplished|
|Holiday Inn Express||Renovated||1,859||1,870||3,583||5,905|
|IHG Army Hotel||Renovated||139||1,029||8,373||4,200|
|Army Lodging||No Work||11,271||0||0||0|
Only by reading the accompanying narrative in the notes would one understand that PAL was designed to be flexible and change over time, but the GAO report paints the changes in the early years of the program as a failure of the initiative. This is not the case — the privatization plan was not delayed, but instead evolved and improved over time.
GAO is also recommending that the Army prepare a report that considers alternative baselines against which to measure the PAL program’s discounted rates. Given the PAL baseline of full per diem is the same baseline used throughout the DoD, and our cost avoidance calculations to full per diem were validated by GAO, we stand ready to compare our rates to any baseline the Army deems most appropriate.
While the GAO claims that the Navy, Marine Corps and Air Force have transitioned to non-appropriated dollars as their sole source of funding, it bears noting that, according to a June 4, 2020, Military Times article, non-privatized Navy and Air Force lodging did indeed need bailouts from the DoD’s portion of the CARES Act during the pandemic. Conversely, PAL is a successful program that did not seek or receive bailout from the CARES Act and has never taken government cash equity nor sought a guarantee on its private debt. During the pandemic, PAL continued to deliver new hotels and meet the needs of traveling service members and their families, while operating as a business, relying on no appropriated funds.
There remains work to do, however. And so Lendlease, IHG, and the Army look forward to breaking ground on the next round of new construction. Meanwhile, the Navy, Air Force and Marine Corps still operate a non-core function and have facilities that continue to age. They cannot produce basic metrics to allow their performance to be measured, operating costs to be known, or cost avoidance to be reliably calculated. The operational efficiencies, new hotels and renovations afforded by privatization better serve today’s military traveler needs and align with the Army’s objectives of the PAL program: improve the quality of life of military travelers and their families.
With 10 years of side-by-side performance available to assess the two business models, we believe the results speak for themselves.
Gretchen Turpen is senior vice president and head of lodging at Lendlease.
Editor’s note: This is an op-ed and as such, the opinions expressed are those of the author. If you would like to respond, or have an editorial of your own you would like to submit, please contact Military Times managing editor Howard Altman, email@example.com.