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Appendix B The Construction Buciget Prep oration 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 fa- cility needs by developing a Basic Facilities Re- quirements List (BFRL) to support the mission, task, and functions that have been assigned to that base by its next senior command. The Navy issues nobles and guidance for the preparation of the BF1lL, to achieve some degree of realism across its many BFEL submittals. Each BFRL must be reviewed, modified if necessary, and approved by a very sen- ior command. This process provides a certain amount of leavening to all Me lists. Each facility on the list will show the square footage required, construction class, and a quick parametric or pre- programming cost estimate. After determining the basic facilities require- ments, 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 He list that has been approved for his base. From that review, a list of deficiencies is produced, and then, through some *Donald Iselin, Rear Admiral, Civil Engineer Cotps, USN retired, was Commander of the Naval Facilities Engi- neering Command from 1977 to 1981. 29 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 "unprogrammed" if the local priority is not high enough to fit the project within the total dollar availability for facilities in any of the ensu- ing 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 pri- onties 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 char- acteristics of all He 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 proj- ects. Most of the preceding activities take place with- out too much argument or challenge, because they are basically preliminary, are related to a single

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30 base, and do not really have much direct impact on the one key issuethe "budget year" projects that will go to Congress. As for the "budget year" process, a rather thor- ough screening of all the projects permitted to be "programmed" 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 "35 percent design" effort. This is the first expenditure of a significant amount of money on each project, and may be the fast time that the user and the designer come to a meeting of Me 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 pro- moting a true meeting of the minds that is still consistent with the programmed intent of the proj- ect. If the user overreaches to get more than the basic documents justified and descnbed, he may lose the whole project because the engineered esti- mate could well be dramatically higher than the "programmed amount," and there isn't time to re- cycle 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 ball- park will stand at least two more rounds of scru- tiny. 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 in- fonned decisions are made at the top management level of the agency, after considerable input from APPE~D]X B knowledgeable in-house proponents, usually in Washington. A second challenge may occur when the Office of Management and Budget (OMB) convinces He President that gross cuts or deferrals should be Marie at He appropriation level. Here the time Dame is frequently from several days to a week maximum. Again, just about He same play- ers engage as In the-p~ng round, but a cut must be taken quay, 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 "estimate" can be seen from the foregoing. If the "program estimate" Is unreal- istically 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 effec- tiveness. If it is intentionally and inaccurately low, the project may have to be bob-tailed during execu- tion, or the agency will have to use some of its limited goodwill to gain special congressional ap- proval to spend funds beyond those authorized. Regardless of the specific agency procedures in- volved, and the temptation toward gamesmanship, experience shows that Hose 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 priori- ties. Obviously, over factors are important in prepar- ing 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 appropri- ated.