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APPENDIX B 29 Appendix B The Construction Budget Preparation Process at the Naval Facilities Engineering Command Prepared by Donald Iselin* The Navy, like most federal agencies, has total facilities requirements that dramatically exceed the amount of funding that is likely to be available in any given year, and specifically in the budget year. Thus, some system of prioritizing and screening is needed. The Navy has a standing instruction that requires each of its field units to identify on a continuing basis all of its current and foreseen facility needs by developing a Basic Facilities Requirements List (BFRL) to support the mission, task, and functions that have been assigned to that base by its next senior command. The Navy issues rules and guidance for the preparation of the BFRL, to achieve some degree of realism across its many BFRL submittals. Each BFRL must be reviewed, modified if necessary, and approved by a very senior command. This process provides a certain amount of leavening to all the lists. Each facility on the list will show the square footage required, construction class, and a quick parametric or preprogramming cost estimate. After determining the basic facilities requirements, each naval base commander then evaluates rather rigorously all his existing facilities to see how well they are being used or can be used to satisfy the basic facilities on the list that has been approved for his base. From that review, a list of deficiencies is produced, and then, through some form of master planning effort, a series of discreet projects is generated, prioritized at the base, and arranged into program years (up to 5 years), or shown as âunprogrammedâ if the local priority is not high enough to fit the project within the total dollar availability for facilities in any of the ensuing 5 years. The dollar amount of projects that are permitted to be carried in each of the 5 program years results from negotiations up the chain, and the amount itself is frequently 50 percent to 100 percent more than can be realistically expected in the final budget results. However, that procedure enables senior reviewers to balance area-wide and Navy-wide priorities in putting both the budget year and the 5-year defense program together. As one might expect, all of the foregoing actions occur in a continuum, rather than as one-time or annual events. BFRLs are updated at 3-5 year intervals or whenever a major change in the base's mission takes place. The base Master Plan, which looks ahead as far as 20 years, provides basic characteristics of all the discreet facilities that exist or should be planned and eventually programmed. The Master Plan is updated perhaps every five years or whenever major changes in mission are projected. But it is the updated Master Plan that usually gives credibility to the programming for the new projects. Most of the preceding activities take place without too much argument or challenge, because they are basically preliminary, are related to a single *Donald Iselin, Rear Admiral, Civil Engineer Corps, USN retired, was Commander of the Naval Facilities Engineering Command from 1977 to 1981.
APPENDIX B 30 base, and do not really have much direct impact on the one key issueâthe âbudget yearâ projects that will go to Congress. As for the âbudget yearâ process, a rather thorough screening of all the projects permitted to be âprogrammedâ for that year is done at the agency top management level. (Recall that in total they were 150-200 percent of the anticipated facility budget request). The timing of this initial budget year review is ideally about 15 months before the President submits his budget to Congress. The review results in a specific list of projects (perhaps 110 percent of real expectation) authorized to have preliminary engineering and design done and hard budget estimates prepared. This is the â35 percent designâ effort. This is the first expenditure of a significant amount of money on each project, and may be the first time that the user and the designer come to a meeting of the minds as to just what is being designed. This key step has a success ratio that goes from 0 to 100, depending on the user, the designer, and the agency's sophistication in promoting a true meeting of the minds that is still consistent with the programmed intent of the project. If the user overreaches to get more than the basic documents justified and described, he may lose the whole project because the engineered estimate could well be dramatically higher than the âprogrammed amount,â and there isn't time to recycle the preliminary design. Result: the project goes on the shelf for at least a year. Those projects whose preliminary engineering and related estimates are in the programming ballpark will stand at least two more rounds of scrutiny. One review results from competition with late-breaking requirements, such as a new overseas base or special facilities to support a research and development breakthrough. At this stage, very informed decisions are made at the top management level of the agency, after considerable input from knowledgeable in-house proponents, usually in Washington. A second challenge may occur when the Office of Management and Budget (OMB) convinces the President that gross cuts or deferrals should be made at the appropriation level. Here the time frame is frequently from several days to a week maximum. Again, just about the same players engage as in the preceding round, but a cut must be taken quickly, projects must be selected out, and usually there is only limited guidance other than gross dollar amounts. (In the military, there is a Secretary of Defense review intertwined before and among the two reviews just discussed). The impact of the âestimateâ can be seen from the foregoing. If the âprogram estimateâ is unrealistically low, the project stands a good chance of dropping out just before it comes to bat, because the late-breaking realistic cost estimate is a shock to the system. If the estimate based on preliminary design (30-35 percent) is high, the project could drop in review because of a decrease in cost effectiveness. If it is intentionally and inaccurately low, the project may have to be bob-tailed during execution, or the agency will have to use some of its limited goodwill to gain special congressional approval to spend funds beyond those authorized. Regardless of the specific agency procedures involved, and the temptation toward gamesmanship, experience shows that those projects with realistic programmed amounts and accurate (within 5-10 percent) engineered or budget estimates will fare the best in the long run, consistent with their priorities. Obviously, other factors are important in preparing individual projects and in preparing the agency's budget request for facilities, such as carrying out the remainder of the final design for each project, and effectively and satisfactorily constructing the project once it is authorized and funds are appropriated.
