    Depot Maintenance: Key Unresolved Issues Affect the Army Depot
    System's Viability (07-JUL-03, GAO-03-682).

    The Army's five maintenance depots produced work valued at $1.5
    billion in fiscal year 2002, with the remaining 49 percent of the
    Army's depot work performed by contractors. GAO was asked to
    assess (1) the trends in and the reliability of depot workload
    projections; (2) whether workloads are sufficient for efficient
    depot operations, initiatives are under way to improve
    efficiency, and additional workloads are possible; (3) whether
    the Army has identified depots' core capability and provided
    workload to support that capability; and (4) whether the Army has
    a long-range plan for a viable, efficient depot system.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-03-682
        ACCNO:   A06899
      TITLE:     Depot Maintenance: Key Unresolved Issues Affect the Army
    Depot System's Viability
         DATE:   07/07/2003
      SUBJECT:   Work measurement
    	     Army bases
    	     Strategic planning
    	     Best practices

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    GAO-03-682

    Report to the Ranking Minority Member, Subcommittee on Readiness,
    Committee on Armed Services, House of Representatives

    United States General Accounting Office

    GAO

    July 2003 DEPOT MAINTENANCE

    Key Unresolved Issues Affect the Army Depot System*s Viability

    GAO- 03- 682

    The work assigned to Army maintenance depots has declined by 36 percent,
    although the cost of the Army*s total maintenance program has increased
    since fiscal year 1987. Except for fiscal year 2003, projections for
    future work in the depots through fiscal 2008 show further decline. Depot
    work also changed from predominately overhauling Army end items to the
    increased repair of components. In addition, work from non- Army customers
    has increased from 6 to 26 percent. Army component and recapitalization
    work is projected to be the majority of depot work in the future. Depot
    planners generally do not have reliable projections of work requirements
    for non- Army customers. Because of this and other factors, including
    changing conditions, future projections have limitations. Potential
    increases in depot work resulting from the Iraq war are not yet clear.
    Various factors, including workload reductions and workload performance

    issues, have resulted in efficiency and productivity problems in Army
    depots. Such initiatives as facility and equipment rightsizing, depot
    maintenance partnerships, and *lean manufacturing* have been implemented.
    Trends in two metrics capacity utilization and employee productivity show
    that, while more needs to be done, efficiency and productivity
    improvements have been made. Additional workloads, particularly for new
    and upgraded systems, are essential for future depot viability. However,
    in the past most new work has gone to private contractors. Some new-
    systems work is being explored for depots, and depot managers believe that
    partnering with the private sector may be the best chance for getting such
    work.

    The Army has not identified its depots* core capability requirements using
    a revised DOD methodology meant to overcome weaknesses in the core
    process. At the same time, it is unclear whether the revised methodology,
    which is undergoing further changes, will correct weaknesses in the core
    process. Moreover, no one in the Army assesses the extent to which depot
    work compares with identified core capability requirements. Depot managers
    are concerned about the loss of work and the failure to obtain work
    necessary to support core capabilities.

    The Army does not have a comprehensive and current strategic plan for the
    depots and has not implemented the limited plan it developed. GAO
    concluded in a 1998 report that the Army had inadequate long- range plans
    for its depots and that such planning is essential if significant progress
    is to be made in addressing the complex, systemic problems facing the
    depots. Despite the time that has passed, the same issues remain. DOD has
    not implemented a comprehensive and current plan for resolving continuing
    issues about (1) reduced workloads being assigned to Army maintenance
    depots and (2) deficiencies in the process of quantifying both core depot
    maintenance capabilities and the workload needed to ensure cost efficiency
    and technical competence and to preserve surge capability. Without such a
    plan, the long- term viability of Army depots is uncertain. The Army*s
    five maintenance

    depots produced work valued at $1. 5 billion in fiscal year 2002, with the
    remaining 49 percent of the Army*s depot work performed by contractors.
    GAO was asked to assess (1) the trends in and the

    reliability of depot workload projections; (2) whether workloads are
    sufficient for efficient depot operations, initiatives are under way to
    improve efficiency, and additional workloads are possible;

    (3) whether the Army has identified depots* core capability and provided
    workload to support that capability; and (4) whether the Army has a long-
    range plan for a viable, efficient depot system.

    GAO makes two recommendations to improve the reliability of workload
    projections from Army and other service acquisition communities and from
    inter- service customers. GAO previously reported on the need for
    improving the process for identifying core capabilities and improving
    strategic

    and workforce planning. Without improvements in these areas, the future
    viability of Army depots is questionable. In commenting on a draft of this
    report, DOD concurred in part with our recommendations to improve workload
    projections for Army depots, but stated that needed actions involved more
    than

    the Army. GAO revised the two draft report recommendations to address the
    broader need of improving projections of interservice work for all the
    services.

    www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 682. To view the full product,
    including the scope and methodology, click on the link above. For more
    information, contact Barry W. Holman at (202) 512- 8412 or holmanb@ gao.
    gov. Highlights of GAO- 03- 682, a report to

    Ranking Minority Member, Subcommittee on Readiness, Committee on Armed
    Services, House of Representatives July 2003

    DEPOT MAINTENANCE

    Key Unresolved Issues Affect the Army Depot System*s Viability

    Page i GAO- 03- 682 Army Depot Maintenance Letter 1 Results in Brief 2
    Background 3 Trends in Historical and Future Workloads and Reliability of

    Future Projections 6 Workload Efficiency and Sufficiency Issues 12 Core
    Capability Issues 20 Strategic Planning Issues for Depots 24 Conclusions
    26 Recommendations for Executive Action 26 Agency Comments and Our
    Evaluation 27 Appendix I Scope and Methodology 29

    Appendix II Comments from the Department of Defense 31

    Tables

    Table 1: Army Depot Workload, Workload Value, and Civilian Employees in
    Fiscal Year 2002 5 Table 2: Depot Capacity Utilization for Fiscal Years
    1999- 2002 16 Table 3: Employee Productivity for Fiscal Years 1999- 2002
    17 Table 4: Comparison of Core Capability and Its Associated

    Workload with Actual Work Performed for Fiscal Years 1999- 2002 22 Figures

    Figure 1: Location of the Five Army Maintenance Depots 4 Figure 2: Dollar
    Value for the Total Army Maintenance Programs, Fiscal Years 1987- 2002 7
    Figure 3: Total Number of Hours for Maintenance Programs Completed in Army
    Depots, Fiscal Years1987- 2002 8 Figure 4: Corpus Christi T700 Engine
    Repair Line 15 Contents

    Page ii GAO- 03- 682 Army Depot Maintenance

    This is a work of the U. S. Government and is not subject to copyright
    protection in the United States. It may be reproduced and distributed in
    its entirety without further permission from GAO. It may contain
    copyrighted graphics, images or other materials. Permission from the
    copyright holder may be necessary should you wish to reproduce copyrighted
    materials separately from GAO*s product.

    Page 1 GAO- 03- 682 Army Depot Maintenance

    July 7, 2003 The Honorable Solomon P. Ortiz Ranking Minority Member
    Subcommittee on Readiness Committee on Armed Services House of
    Representatives

    Dear Mr. Ortiz: Army maintenance depots were established to support Army
    fighting units by providing repair and manufacturing capability, in
    concert with the private sector, to meet peacetime and contingency
    operational requirements. In recent years, we have identified deficiencies
    in the Department of Defense*s (DOD) planning for depot maintenance
    operations. For example, in 1998 we reported, *Uncertainties exist about
    the future of the Army*s depots and arsenals and the extent to which the
    functions they perform should be retained as government- owned and
    -operated facilities or performed by private sector contractors.* 1 We
    also said that recent experiences at the Army*s maintenance depots and
    arsenals indicate that the Army is facing multiple, difficult challenges
    and uncertainties in determining staffing requirements and in improving
    the

    efficiency and effectiveness of its industrial activities. We pointed out
    that uncertainties about the workload to be assigned to these facilities
    was a critical factor that needed to be addressed, and we recommended that
    the Secretary of the Army develop and issue a long- range plan for
    maximizing the efficient use of depots and arsenals.

    You requested that we review the following Army depot maintenance issues:

     What are the trends in historical and future maintenance workloads
    assigned to the depots, and are future projections reliable?  Do the
    depots have sufficient workload to promote efficient maintenance

    operations, are initiatives being implemented to improve efficiency, and
    are additional workloads possible?

    1 See U. S. General Accounting Office, Army Industrial Facilities:
    Workforce Requirements and Related Issues Affecting Depots and Arsenals,
    GAO/ NSIAD- 99- 31 (Washington, D. C.: Nov. 30, 1998). United States
    General Accounting Office Washington, DC 20548

    Page 2 GAO- 03- 682 Army Depot Maintenance

     Has the Army identified the depots* core capability requirements and
    provided its depots with workload needed to ensure cost efficiency and
    technical competence?  Does the Army have a long- range plan for the
    future viability of an efficient

    depot system? We briefed your office on the preliminary results of our
    work on April 7, 2003. This report summarizes and updates the information
    presented at that briefing. The scope and methodology for our work are
    discussed in appendix I. We conducted our review from September 2002
    through June 2003 in accordance with generally accepted government
    auditing standards.

    Work performed in Army depots declined by 36 percent from fiscal year 1987
    through fiscal year 2002, while the total depot maintenance program grew.
    With the exception of fiscal year 2003 which has seen increased

    work, some of which is resulting from the Iraqi conflict future workload
    projections indicate further decline in the work to be performed in
    military depots, but the full impact of the Iraq conflict on future depot
    workload is not yet known. Although future workload projections are
    important tools for managing depot operations, they have limitations
    because some inputs are not reliable and because operational and budget
    conditions change. However, opportunities exist for improving future
    estimates.

    A number of factors, including the decline in workload performed in Army
    depots and changes in the type of work, have led to inefficient
    operations. Initiatives have been implemented to improve depot efficiency
    and

    productivity; and trends in two metrics capacity utilization and employee
    productivity show that improvements have been made. Additional workloads
    could play a key role in further improving the cost- effectiveness of the
    Army depots, but other issues must also be addressed. Nonetheless, without
    new work, the depots cannot continue to be viable. While some new work is
    being explored, little work for new or upgraded systems is going to the
    depots.

    The Army has not yet identified current core capability requirements that
    are based on a new methodology put forth by the Office of the Secretary of
    Defense in January 2003. Moreover, the new methodology has continued

    to be revised and has not yet been finalized. In the past, the Army has
    not routinely assessed whether assigned workloads were adequate for its
    depots to ensure cost efficiency and technical competence and to preserve
    surge capability. Furthermore, Army depots do not have sufficient Results
    in Brief

    Page 3 GAO- 03- 682 Army Depot Maintenance

    workload to ensure they can either sustain or establish identified core
    capabilities.

    Neither the Office of the Secretary of Defense nor the Army has a
    comprehensive and current depot maintenance strategic plan, which is an
    essential aspect of ensuring future depot efficiency and viability. We

    previously recommended that a strategic plan for DOD- owned depots be
    developed, 2 but the Office of the Secretary of Defense has not done so,
    and the Army*s depot plan is neither current nor comprehensive and has not

    been implemented. Without the implementation of an effective plan to
    provide a vision for resolving past problems with the depot system,
    continuing issues about (1) reduced workloads being assigned to Army
    maintenance depots and (2) deficiencies in the process of quantifying both
    core depot maintenance capabilities and the workload needed to ensure cost
    efficiency and technical competence and to preserve surge capability raise
    significant questions about the long- term viability of Army depots.

    We are making two new recommendations to improve the quality of
    maintenance workload projections, and we continue to believe that DOD*s
    implementation of our prior recommendations is essential for maintaining a
    viable Army depot system in the future. In commenting on a draft of this
    report, DOD partially concurred with the two recommendations in our

    draft report. The Department*s response stated that the lack of workload
    projection data for inter- service depot workloads should be addressed
    across all the military services. We modified the two recommendations in
    the draft report to respond to the Department*s comments.

    The Army maintains maintenance depots for overhauling, upgrading, and
    maintaining missiles, combat vehicles, tactical vehicles, and
    communication and electronic equipment for the Army, other military
    services, and foreign countries. These depots, which were established from
    1941 through 1961, repair end items such as ground combat systems,
    communication systems, and helicopters and reparable secondary items
    various assemblies and subassemblies of major end items, including
    helicopter rotor blades, circuit cards, pumps,

    2 See U. S. General Accounting Office, Defense Logistics: Actions Needed
    to Overcome Capability Gaps in the Public Depot System, GAO- 02- 105
    (Washington, D. C.: Oct. 12, 2001). Background

    Page 4 GAO- 03- 682 Army Depot Maintenance

    transmissions, and thousands of other components. 3 The number of these
    facilities has been reduced from 10 in 1976 to the existing 5 as of June
    2003, and 2 of the remaining 5 were significantly downsized and realigned
    as a result of implementing the 1995 Base Realignment and Closure (BRAC)
    decisions. Figure 1 shows the locations of the remaining five Army
    maintenance depots.

    Figure 1: Location of the Five Army Maintenance Depots

    3 Several of the depots also do some manufacturing but generally for small
    quantities of individual items needed in support of depot overhaul and
    repair programs.

    Page 5 GAO- 03- 682 Army Depot Maintenance

    In fiscal year 2002, the depots reported that the total value of work
    performed was $1.5 billion. In a separate report on the distribution of
    depot maintenance funds between the public and private sector, the Army
    stated that DOD employees performed about 51 percent of the work included
    in the Army*s fiscal year 2002 depot maintenance program. Table 1 provides
    the name and location of each of the five Army depots,

    the primary work performed in each, the hours of work performed in fiscal
    year 2002, the value of that work, and the number of civilian personnel
    employed at each depot in fiscal year 2002.

    Table 1: Army Depot Workload, Workload Value, and Civilian Employees in
    Fiscal Year 2002 Depot Principal work FY 2002

    workload a, b FY 2002 value of

    workload executed c, d FY 2002

    number of civilian depot employees

    Anniston Army Depot, Anniston, Alabama

    This depot performs maintenance on heavy- and light tracked combat
    vehicles and components and is the designated center of technical
    excellence for the M1 Abrams tank. 2.5 $421.6 2,429 Corpus Christi Army
    Depot, Corpus Christi, Texas

    As the Army*s only aviation facility, the depot overhauls and repairs DOD
    rotary wing aircraft and components, such as the AH- 64 Apache, CH- 47
    Chinook, and UH- 60 Blackhawk. 2.9 $500.2 2,869 Letterkenny Army Depot,
    Chambersburg, Pennsylvania

    This depot provides repair and overhaul support for air defense and
    tactical missiles such as the Patriot, Hawk, Avenger, Multiple Launch
    Rocket System, and Sidewinder. 0.9 $108.0 1,082

    Red River Army Depot, Texarkana, Texas

    For combat and tactical systems, the depot supports systems such as the
    Bradley Fighting Vehicle, Multiple Launch Rocket System, and vehicles for
    the Patriot and Hawk missiles. 1.2 $236.7 1,478 Tobyhanna Army Depot,
    Tobyhanna, Pennsylvania

    From handheld radios to satellite communication, the depot provides repair
    of or overhaul support for hundreds of communications and electronic
    systems. 2.6 $251.3 2,237 Sources: U. S. Army data (data); GAO
    (presentation).

    a Maintenance mission direct labor hours not including overtime. b Hours
    in millions. c Value of the workload executed for all customers, or total
    revenue. d Dollars in millions.

    Page 6 GAO- 03- 682 Army Depot Maintenance

    Depot maintenance work performed in Army depots has declined significantly
    since fiscal year 1987. However, the total depot maintenance program, of
    which the work assigned to the depots is a part, has grown in dollar value
    by 72 percent from $1.55 billion to $2.66 billion over that period. The
    decline in the amount of work performed in Army depots reflects the
    downsizing in the number of systems that followed the end of the Cold War,
    the trend toward greater reliance on the private sector, and

    the use of regional repair activities at Army active installations and
    Army National Guard activities for depot- level maintenance. The type of
    work performed in the depots also changed from fiscal year 1987 through
    fiscal year 2002. While workloads were once predominately the overhaul of
    Army end items, the percentage of work for non- Army customers 4 and for
    repair of Army secondary items has increased over the last 16 years.
    Projections of future work indicate further decline, except that 2003 is
    likely to have a slight increase at least partially because of support for
    Operation Iraqi Freedom (the recently completed conflict in Iraq). The
    extent to which Operation Iraqi Freedom will result in increases in future
    years is not clear. Future projections may not be a reliable indicator,
    since they change with changing conditions. The reliability of the
    estimates decreases with an increase in the projection beyond the current
    year.

    Comparing the amount of maintenance work accomplished in the Army depots
    with the Army*s total maintenance program shows that the total program has
    increased, while the amount of work assigned to the depots has declined.
    Figure 2 shows the dollar value of the total Army depot

    maintenance program from fiscal year 1987 through fiscal year 2002. The
    dollar value of the total Army depot maintenance program grew by 72
    percent from fiscal year 1987 through fiscal year 2002. 5 4 For our
    analyses, non- Army customers include the Air Force, Navy, Marine Corps,

    Defense Logistics Agency, foreign militaries, and unspecified DOD and non-
    DOD agencies. 5 For our analysis, we characterized the total maintenance
    program by dollar value since the private sector does not report the work
    it does in terms of the amount of time spent. Trends in Historical and
    Future Workloads

    and Reliability of Future Projections

    Dollar and Labor Hour Trends

    Page 7 GAO- 03- 682 Army Depot Maintenance

    Figure 2: Dollar Value for the Total Army Maintenance Programs, Fiscal
    Years 19872002

    As reflected in figure 3 the labor hours for maintenance programs
    completed in each of the fiscal years from 1987 to 2002 at the five
    current Army depots show a significant overall decline in work during much
    of

    this period, with a slight upturn from fiscal year 2000 to fiscal year
    2002. The total number of hours for depot maintenance programs completed
    in Army depots in fiscal year 2002 was 11.0 million*- 36 percent less than
    the 17.3 million hours for maintenance programs completed in fiscal year
    1987.

    Page 8 GAO- 03- 682 Army Depot Maintenance

    Figure 3: Total Number of Hours for Maintenance Programs Completed in Army
    Depots, Fiscal Years 1987- 2002

    Figure 3 indicates that in fiscal year 2000, the number of hours for
    maintenance programs completed in Army depots were the lowest since 1987.
    In fiscal year 1999, the Army completed the transfer of operational
    command and control of Army depots to the depots* major customers, the
    Army Materiel Command*s (AMC) subordinate commands, 6 which are also

    6 The Army Tank- automotive and Armaments Command manages the Anniston and
    Red River depots; the Army Aviation and Missile Command manages the Corpus
    Christi and Letterkenny depots; and the Army Communications- Electronics
    Command manages the Tobyhanna depot.

    Page 9 GAO- 03- 682 Army Depot Maintenance

    the coordinating inventory control points for the depots* products. In
    making these realignments, the Army has tasked AMC to pay more attention
    to the amount of work assigned to the depots, since these commands are now
    responsible for the depots* budgets and operations.

    The type of work performed in Army depots has changed significantly from
    fiscal year 1987 through fiscal year 2002. While Army depot work in fiscal
    year 1987 predominately involved the overhaul of Army end items (such as
    tanks, helicopters, and wheeled vehicles), in fiscal year 2002, the
    percentage of work for repairing Army secondary items (reparable
    components such as engines, transmissions, and rotor blades) was greater
    than that for end item repair. Our analysis of the labor hours for
    maintenance programs completed in fiscal years 1987 through 2002 showed
    that the overhaul of Army end items steadily decreased from 68 to 26
    percent of the total workload over that period, while the repair of Army

    secondary items increased from 4 to 31 percent of the workload total. 7 In
    addition, the percentage of work performed for non- Army customers
    increased from fiscal year 1987 through fiscal year 2002 from 6 to 26
    percent of the total hours for maintenance programs completed in those
    years. At the Tobyhanna depot, which now has the largest amount of non-
    Army work, Air Force work accounted for only 4 percent of the hours of all
    maintenance programs completed at the depot from fiscal year 1987 through
    fiscal year 1997. However, from fiscal year 1998 through fiscal year 2002,
    repair work on Air Force systems was 23 percent of the total amount of
    work completed at this depot. At Corpus Christi, labor hours for Navy work
    accounted for 9 percent of the hours for all programs completed from
    fiscal year 1987 through fiscal year 1995. The hours spent for Navy work
    grew to 22 percent of the hours for all programs completed from fiscal
    year 1996 through fiscal year 2002. However, since the Navy withdrew some
    of its helicopter work from Corpus Christi in fiscal year

    2003, that level of Navy work is not likely to continue unless new Navy
    workloads are designated for repair at Corpus Christi. At the Letterkenny
    depot, labor hours for foreign military sales accounted for 4 percent of
    the hours for all programs completed from fiscal year 1987 through fiscal
    year

    7 This analysis did not include all of the depots* work, since the data we
    analyzed did not break out the repair category for non- Army customers and
    for a small amount of Army work. Workload Type and

    Customer Trends

    Page 10 GAO- 03- 682 Army Depot Maintenance

    1999. For fiscal years 2000 through 2002, foreign military sales work at
    that depot increased to 15 percent of the total hours of work completed.

    Workload projections suggest that in fiscal year 2003, the small upward
    trend begun in fiscal year 2001 will continue for another year, but
    another period of decline may occur from fiscal year 2004 through fiscal
    year 2008. Army component and recapitalization workload is projected to be
    the majority of the depots* work. These projections are an April 2003
    estimate from the Army Workload and Performance System (AWPS), an
    analytically based workload- forecasting system that projects future
    workloads and coordinates personnel requirements. 8 This projection
    includes some recent increases in prior estimates for fiscal year 2003 to
    reflect revised estimates for reparable components to support Operation
    Iraqi Freedom. Officials at several depots said they are working overtime
    and have hired some temporary employees to support this increased
    requirement, but an official at one depot said it is not likely to be able
    to produce the amount of work

    currently estimated for fiscal year 2003 in AWPS because it does not have
    enough people. Depot officials said they do not know if reconstitution 9
    requirements following Operation Iraqi Freedom will result in increases in
    depot workload in fiscal year 2004 and beyond, and AWPS does not reflect
    increases in the out- years resulting from Operation Iraqi Freedom.
    According to an AMC official, the Army does not yet have a plan for
    managing the reconstitution, but one is being developed.

    Army officials said and we have confirmed that out- year estimates are not
    always reliable predictors of the specific work that will be performed in
    a future year. These projections are only as good as the knowledge of the
    personnel preparing them about future requirements. As we have reported in
    the past, workload estimates for Army maintenance depots vary
    substantially over time owing to the reprogramming of operations and

    8 We reviewed the status of the AWPS development as required by the
    Congress. See U. S. General Accounting Office, Army Logistics: Report on
    Manpower and Workload System Inadequate and System Interface Untested,
    GAO- 03- 21 (Washington, D. C.: Oct. 30, 2002). 9 Reconstitution is the
    process, after a contingency/ surge operation, of making a unit or
    activity available again for steady- state operational commitments.
    Reconstitution planning

    begins during the initial stages of surge operations, and actual
    reconstitution of the forces continues beyond the end of the contingency
    operation. Factors to be considered in reconstitution planning include the
    maintenance of equipment, restoring levels of consumables, lost training,
    an examination of the impact of operations on personnel and attrition
    rates, and post- contingency steady- state operational requirements.
    Workload Projections

    Page 11 GAO- 03- 682 Army Depot Maintenance

    maintenance appropriation funding and unanticipated changes in customer
    orders. Workload estimates are subject to much uncertainty and to frequent
    fluctuations with changing circumstances. For example, as previously
    noted, fiscal year 2003 requirements in AWPS have increased during the
    year as Operation Iraqi Freedom*s demands have generated more work than
    previously expected. On the other hand, reductions to

    future requirements frequently occur. For example, to fund other
    priorities, the Army has been considering reducing recapitalization work,
    10 which is forecasted to be about 29 percent of the depots* future
    workload.

    Furthermore, the impact that reconstitution requirements could have on the
    Army depots following Operation Iraqi Freedom is unclear. Additionally,
    according to Army officials, AWPS does not receive actual programs planned
    for the out- years of all depot customers. Customers whose actual programs
    are entered into AWPS vary by subordinate command. Out- year workload for
    customers that are not based on actual programs must be estimated by the
    subordinate commands on the basis of past history and discussions with
    their customers about workload planned for the depots. Thus, these
    estimated workloads may not represent future

    workloads. Moreover, since work from other customers has become a much
    more substantial share of the total Army depot workload, the impact of
    these estimates* accuracy will be more significant.

    Finally, future workloads that Army acquisition officials might have
    planned for the depots are difficult to identify, and AWPS will not
    accurately reflect these workloads unless acquisition officials provide
    the subordinate commands with such information. The Army acquisition
    community is primarily responsible for establishing future capability at
    the depots on the basis of the results of source- of- repair decisions and
    other factors such as core requirements. However, as discussed later, the
    amount of such work likely to be assigned to the depots is unclear. Army
    officials explained that the acquisition community does not enter these
    workloads into AWPS and that no central database exists of systems
    undergoing source- of- repair decisions to help the subordinate commands
    identify planned workloads and adjust AWPS projections accordingly. 11 For
    these reasons, depot managers do not consider workload projections

    from AWPS reliable beyond 2 years, and they recognize that changes will
    occur even in the first 2 years.

    10 Recapitalization is the rebuilding and upgrading of currently fielded
    systems to ensure operational effectiveness and a like- new condition. 11
    The Air Force has such a database.

    Page 12 GAO- 03- 682 Army Depot Maintenance

    As previously discussed, the reliability of out- year projections in AWPS
    is affected by a number of factors such as changing requirements, funding
    limitations, and the work that may be planned but has not been identified
    and included in AWPS. While requirements and funding changes are expected
    occurrences, the Army is faced with the possibility that incomplete
    projections in AWPS regarding the size of the direct labor force required
    in the future can occur. This is because the Army*s current capability to
    identify maintenance workloads that are being planned for its depots is
    limited. Specifically, officials stated that the Army has no standard
    business rules or procedures for identifying the work that the Army
    acquisition community and non- Army customers may be planning for Army
    depots. They said that, at best, the current process is a hit- ormiss
    situation, depending on how aggressive the Army commands are in requesting
    such customers to identify their forecasted workloads, if it is done at
    all. Moreover, an Army official told us that the Army does not have a
    mechanism in place to adjust these estimates when it becomes clear that
    such forecasts are inaccurate. Improvements in this area could increase
    the reliability of future depot workload projections, as well as depot
    planners* ability to manage depot operations efficiently. In its comments
    on a draft of this report, DOD officials stated that the lack of workload
    projection data for inter- service depot workloads should be addressed
    across all the military services not just at Army depots. Consequently the
    Department will initiate a study to examine how the identification and
    reporting of depot inter- service workload projections across all the
    military services can be improved.

    Army depots have had some efficiency problems, caused by several factors,
    including the loss of work to the private sector and field- level
    maintenance activities. Initiatives such as facility and equipment
    downsizing, depot partnerships, and *lean manufacturing* 12 have been
    implemented to address depot inefficiencies. Trends in two key metrics*
    capacity utilization and employee productivity*- show that progress has
    been made in recent years, although further improvements are still
    desirable. Additional workloads could play a key role in further improving
    the cost- effectiveness of the Army depots, and acquiring work for new
    systems is essential for long- term depot viability. Whether new systems

    12 Lean manufacturing is an industry best practice that is being
    implemented in the five Army depots. Lean manufacturing focuses on cutting
    costs while also shortening production lead times and time- to- market;
    improving quality; and providing customers with what they want, precisely
    when they want it. Workload Efficiency

    and Sufficiency Issues

    Page 13 GAO- 03- 682 Army Depot Maintenance

    work will be assigned to the depots is unclear, but depot officials
    believe that partnerships may offer the best potential for new systems
    work. Whether depot- level work that gravitated to field- level activities
    will return to the depots is also unclear.

    Depot maintenance operations have not been as efficient as Army depot
    managers would like them to be. This is, in part, due to a host of
    factors, including the impact of workload reductions, the changing nature
    of the work assigned, and workload performance issues such as less-
    thanexpected employee productivity and work slow- downs caused by a lack
    of required spare and repair parts or inefficient repair processes. We
    have identified several issues that adversely affected depot efficiency
    and productivity, including DOD*s policy for greater reliance on the
    private sector for depot support of new weapon systems and major upgrades,
    the increased reliance on the use of regional repair activities and
    privatesector contractors for work that otherwise might be done in the
    depots, cost and schedule overruns, excess capacity, and difficulties in
    effectively using depot personnel. 13 In August 2002, an Army task force
    identified problems with depot efficiency and productivity at the Corpus
    Christi depot. The task force pointed to the following as key problem
    areas: the use of inaccurate data to price maintenance programs, schedule
    and cost overruns caused by work performed against wrong standards and
    beyond the statement of work, and the use of direct workers to perform
    indirect

    tasks. Initiatives that have been implemented to improve depot efficiency
    and productivity include *rightsizing* at realigned depots, depot
    partnerships designed to improve the efficiency and performance of depot
    operations, and lean manufacturing initiatives. The 1995 base realignment
    and closure process significantly realigned two of the remaining five Army
    depots.

    Significant efforts were made to rightsize the workforce, property, plant,
    and equipment on the basis of assigned and projected workloads at the
    Letterkenny and Red River depots, which had the benefit of BRAC funding to
    support their realignment activities. The other depots have attempted to
    improve their efficiency as well.

    13 See GAO/ NSIAD- 99- 31 and U. S. General Accounting Office, Defense
    Depot Maintenance: DOD Shifting More Workload for New Weapon Systems to
    the Private Sector,

    GAO/ NSIAD- 98- 8 (Washington, D. C.: Mar. 31, 1998). Factors Resulting in
    Depot

    Efficiency Problems Initiatives to Improve Depot Efficiency and
    Productivity

    Page 14 GAO- 03- 682 Army Depot Maintenance

    Various partnering initiatives have been undertaken to improve depot
    performance. In fiscal year 2002, the Army had 42 depot maintenance
    partnerships, the largest number in any of the military services. 14 One
    of the most successful has been the partnership initiative implemented at
    Corpus Christi for the T700 engine. Wanting to reduce the repair time and
    improve the reliability of the Army*s T700 helicopter engine, the Corpus
    Christi Depot entered into a partnership with General Electric to achieve
    these improvements. Under the partnership, Corpus Christi provides the
    facilities and equipment and repairs the engine. General Electric provides
    spare parts as well as technical, engineering, and logistics services.
    According to depot officials, this effort has introduced General
    Electric*s best practices at the depot, which has resulted in a 26-
    percent reduction in engine turnaround time in the T700 engine repair line
    and a 40- percent

    increase in test cell pass rates for the repaired engines. Depot and
    contractor officials both attribute improved depot repair times for the
    T700 engine to better parts availability and improvements to the depot*s
    repair processes, although they also recognize that the related T700
    recapitalization effort begun shortly after the formation of the
    partnership may also be a factor influencing these improvements. Figure 4
    shows the repair line for the T700 engine.

    14 See U. S. General Accounting Office, Depot Maintenance: Public- Private
    Partnerships Have Increased, but Long- Term Growth and Results Are
    Uncertain, GAO- 03- 423 (Washington, D. C.: Apr. 10, 2003).

    Page 15 GAO- 03- 682 Army Depot Maintenance

    Figure 4: Corpus Christi T700 Engine Repair Line

    Other initiatives are also being implemented to improve efficiency and
    productivity in Army depot maintenance operations under the umbrella of
    lean manufacturing. Most of these initiatives are in the early phases of

    implementation, but some progress is being reported. Anniston officials
    report that they have identified a more efficient reciprocating- engine
    process. Corpus Christi officials reported improvements for other
    maintenance processes as a result of their lean- manufacturing
    initiatives. Depot managers at Letterkenny set a goal to reduce the repair
    time for the Patriot missile launcher and report that they have already
    reduced the number of technicians by three and the floor space by 70
    percent. Red

    River officials reported that process improvements have allowed them to

    Page 16 GAO- 03- 682 Army Depot Maintenance

    increase monthly maintenance production for a truck engine from 17 to 40.
    A Tobyhanna official stated that, because of its process improvements,
    unit costs for the Sidewinder missile*s guidance and control system have
    decreased substantially. Furthermore, with planned improvements on the
    Sidewinder and two other systems, Tobyhanna officials expect major
    reductions in overhaul and recapitalization timelines, reduced customer
    costs, gains in customer satisfaction, and greater employee satisfaction,
    as depot workers take the lead in transforming their work.

    Trends in two key metrics*- capacity utilization and employee
    productivity*- show that progress has been made in recent years, although
    improvements are still desirable. DOD measures capacity utilization by
    considering the amount of work produced relative to the work that could
    potentially be produced on a single shift operation using the number of
    personnel on board. Table 2 shows capacity utilization in each of the five
    Army depots from fiscal year 1999 through fiscal year 2002.

    Table 2: Depot Capacity Utilization for Fiscal Years 1999- 2002

    Depot capacity in percent

    Depot capacity for fiscal year Depot 1999 2000 2001 2002

    Anniston 68 66 69 a 76 a Corpus Christi 60 70 77 a 83 a Letterkenny 81 66
    75 82 Red River 81 83 75 79 Tobyhanna 61 72 78 76 Sources: Army depots and
    headquarters, Army Materiel Command (data); GAO (presentation). a
    Indicates that the number provided by Headquarters, Army Materiel Command,
    was used when there was a difference in the numbers provided by it and the
    depot. Headquarters* numbers were

    used because they had been reported by the depots to headquarters in
    official command documents. In the four instances where numbers from these
    two sources were different, the difference ranged from 2 to 14 percent,
    and the average difference was 7.75 percent. Compared to a DOD goal of 75
    percent utilization, capacity utilization for

    the five Army depots has fluctuated from fiscal year 1999 through fiscal
    year 2002, but generally has improved. In fiscal year 1999, three of the
    five depots were below the goal by an average of 12 percent while two
    depots

    exceeded the goal by an average of 6 percent. In contrast, by fiscal year
    2002, all five depots exceeded the goal by an average of 4 percent. At 83
    percent utilization, the Corpus Christi depot showed the highest capacity
    utilization in fiscal year 2002, and Letterkenny and Red River had
    Progress Trends in Two

    Key Metrics

    Page 17 GAO- 03- 682 Army Depot Maintenance

    utilization rates of 82 and 79 percent, respectively. The higher- capacity
    utilization was largely achieved by decreasing the physical layout or
    *footprint* of the maintenance depot. Downsized by decisions of the 1995
    BRAC process, Letterkenny and Red River received BRAC funds to support
    their realignment activities. While the capacity utilization of these two
    depots for fiscal year 2002 was relatively high, they have the smallest
    workloads of the five depots.

    It is important to remember that DOD*s capacity- utilization computation
    somewhat understates the depots* full potential for producing work. The
    capacity- utilization computation assumes operations during an 8- hour
    workday and a 5- day workweek. However, all the depots have some overtime
    and some shift work and, if needed, could increase the amount of overtime
    and shift work.

    Another metric*- employee productivity*- also indicates that Army depot
    operations are improving. Employee productivity measures the average
    number of productive hours worked in a year by depot workers after leave,
    holidays, training, and other time away from the job are excluded. Table 3
    shows average employee productivity at each of the five Army depots from
    fiscal year 1999 through fiscal 2002.

    Table 3: Employee Productivity for Fiscal Years 1999- 2002 Average work
    hours per year per direct employee for fiscal year Depot 1999 2000 2001
    2002

    Anniston 1,534 1,549 1,551 a 1,608 Corpus Christi 1,434 1,516 1,478 a
    1,560 a Letterkenny 1,421 1,504 1,471 a 1,593 a Red River 1,534 1,494
    1,549 a 1,614 Tobyhanna 1,599 1,622 1,635 1,625 Sources: Army depots and
    Headquarters, Army Materiel Command (data); GAO (presentation). a
    Indicates that the number provided by Headquarters, Army Materiel Command,
    was used when there was a difference between the numbers reported by it
    and the depot. Headquarters numbers

    were used because they had been reported by the depots to headquarters in
    official command documents. In the six instances where the numbers from
    these two sources were different, the difference ranged from 1 to 51
    hours, and the average difference was 13.2 hours.

    The Army depot average of 1,600 hours for fiscal year 2002 was
    significantly higher than it was a few years ago and is progressing toward

    Page 18 GAO- 03- 682 Army Depot Maintenance

    the DOD standard of 1,615 hours. 15 In fiscal year 1999, none of the
    depots were at the standard averaging 1,504 hours and ranging from a low
    of 1,421 hours to a high of 1,599 hours. In fiscal year 2002, the number
    of employee productive hours at the Tobyhanna depot was 1,625 and 1,614 at
    Red River. The employee productivity of all of the Army depots has
    improved since 1999. Depot managers said they were successful in improving
    worker productivity by emphasizing to direct workers the need for reducing
    the amount of time spent in nonproductive areas. Additional workloads
    could play a key role in further improving the costeffectiveness

    of the Army depots and are essential for the depots* longterm viability.
    As the systems currently being repaired in the depots age, they will be
    withdrawn from the Army*s inventory and replaced with new

    and/ or upgraded systems. If repair and overhaul for the new and upgraded
    systems go to the private sector, workload in the depots will continue to
    diminish. In considering additional workloads for its depots, the Army has
    several options: (1) move work that the private sector is performing
    either by reassignment at contract renewal time or establishing a
    partnership arrangement with the private sector, (2) assign new work from
    the sourceof- repair process the Army uses to identify where the work will
    be performed, (3) and move work from field- level activities that now
    perform depot tasks. In considering additional workload, an essential
    issue for the Army is whether its depots have the capability or whether
    establishing capability is affordable to take on work that is being
    performed by other sources.

    Acquiring new systems work will be the key to the survivability of the
    depots in the long term. In recent years, the depots have received very
    little new and upgraded systems work. As older systems are withdrawn from
    the inventory, the repair work on systems currently assigned to the depots
    will continue to decline. Unless new systems work is identified for the
    depots, they will become more and more inefficient as their workload

    declines. With regard to the potential for additional workloads for the
    depots from new systems, Army acquisition officials told us that
    establishing new capability at the depots has become more difficult with

    15 This factor represents the amount of work that a direct labor employee
    is estimated to be able to accomplish in 1 fiscal year. Additional
    Workloads

    Possible and Essential for Depot Viability

    Page 19 GAO- 03- 682 Army Depot Maintenance

    the Army*s implementation of performance- based logistics 16 because the
    Army is not buying the technical data or the rights to use the data in
    establishing repair capability at its depots. This could adversely affect
    the Army*s ability to realign existing work from the private sector to
    government- owned depots. An internal Army study found that weapon systems
    program officials make decisions to outsource the repair of new and
    upgraded systems without considering the impact of these decisions on the
    requirement to maintain core capability for essential systems in military
    depots.

    Depot managers believe that partnership arrangements are an effective
    means for improving the efficiency and productivity of depot operations 17
    and are the best opportunity to bring additional workloads into the
    depots.

    Among potential partnerships being explored for new workload are the
    following: Anniston, for the M1A2 tank service extension program; Corpus
    Christi, for the Comanche helicopter; Letterkenny, for the Javelin
    missile; and Red River, for the Heavy Expanded Mobility Tactical Truck.

    With regard to moving work from field- level activities that now perform
    depot tasks, the Army has taken some initiative to get control over this
    problem, but the extent that it has dealt with proliferation of depot work
    in field- level activities is unclear. The Report of the House Committee
    on Armed Services on the Floyd D. Spence National Defense Authorization
    Act for Fiscal Year 2001 said that the Army has yet to account accurately
    for depot- level maintenance workloads performed by organizations outside
    the depot system. 18 That report directed the Army to provide a report
    identifying the proliferation of depot- level maintenance in these
    activities by February 1, 2001, and directed us to review the Army*s
    report and provide the Congress with an analysis, including an assessment
    of the Army*s ability to comply with 10 U. S. C. 2466, the requirement
    that not more than 50 percent of funds made available for depot- level
    maintenance

    16 Performance- based logistics is the preferred support concept for DOD
    systems. According to the department, it is an integrated acquisition and
    logistics process for buying weapon system capability that is designed to
    delineate outcome performance goals of weapon systems; ensure that
    responsibilities are assigned; provide incentives for attaining these
    goals; and facilitate the overall life- cycle management of system
    reliability, supportability, and total ownership costs. Performance- based
    logistics contracts were negotiated by system program offices for systems
    such as the C- 17 Globemaster cargo aircraft. 17 See GAO- 03- 423.

    18 Report 106- 616 (May 12, 2000) p. 340.

    Page 20 GAO- 03- 682 Army Depot Maintenance

    be used to contract for performance by nonfederal personnel. The Army has
    not yet reported to the Congress, but Army officials stated that as of
    July 3, 2003, the report was being reviewed internally. We will analyze
    the report when it is completed.

    Beginning in November 1993, the Army did biennial identification of core
    capability requirements and the workloads necessary to sustain those depot
    maintenance core capabilities. The most recent core identification,
    however, was in December 1999 for fiscal year 2001 and showed that

    10.8 million work hours were associated with maintaining core capability
    requirements for the five depots. An updated core identification is
    overdue, but in January 2003 the Deputy Under Secretary of Defense for
    Logistics and Materiel Readiness issued a new core identification
    methodology and, at the time of our review, had additional revisions under
    way to the methodology. Thus, the Army has not yet computed core
    capability requirements based on this new methodology. Furthermore, the
    Army does not routinely assess whether the work performed by its five
    depots is adequate to sustain their core capabilities; and workloads
    performed by the five depots have not been at the level identified by the
    1999 core identification as necessary to maintain core capabilities.

    The identification of core logistics capability involves a complex process
    that has been evolving over the past 10 years. This process is based on a
    requirement contained in 10 U. S. C. 2464 to identify and maintain within
    government owned and operated facilities a core logistics capability,
    including the equipment, personnel, and technical competence required to
    maintain weapon systems identified as necessary for national defense

    emergencies and contingencies. Specifically, the Secretary of Defense is
    to identify the workloads required to maintain core logistics capabilities
    and assign to government facilities sufficient workload to ensure cost
    efficiency and technical competence in peacetime, while preserving
    capabilities necessary to fully support national defense strategic and
    contingency plans. To accomplish this requirement, beginning in November
    1993, the Office of the Deputy Secretary of Defense for Logistics outlined
    a standard multi- step method for determining core capability requirements
    and directed the services to use this method in computing biennial core
    capability and associated workload requirements. In November 1996, the
    core methodology was revised to include (1) an assessment of the risk
    involved in reducing the core capability requirements as a result of
    having maintenance capability in the private sector and (2) the use of a
    best- value comparison approach for assigning workload not associated with
    maintaining a core capability to the public Core Capability Issues

    Page 21 GAO- 03- 682 Army Depot Maintenance

    and private sectors. The core methodology provided a computational
    framework for quantifying core depot maintenance capabilities and the
    workload needed to sustain these capabilities. It included three general
    processes:

    1. The identification of the numbers and types of weapon systems required
    to support the Joint Chief of Staff*s wartime- planning scenarios.

    2. The computation of depot maintenance core capability workload
    requirements measured in direct labor hours to support the weapon systems*
    expected wartime operations as identified in the wartimeplanning
    scenarios.

    3. The determination of industrial capabilities (including the associated
    personnel, technical skills, facilities, and equipment) that would be
    needed to accomplish the direct labor hours identified above that were
    generated from the planning scenarios. That determination is adjusted to
    translate those capabilities into peacetime workloads needed to support
    them. These peacetime workloads represent the projected workload necessary
    to support core capability requirements for the next program year in terms
    of direct labor hours.

    To conclude the process, the services then identify specific repair
    workloads and allocate the core work hours needed to accomplish the
    maintenance work that will be used to support the core capabilities at the
    public depots.

    We previously reported that the DOD depot maintenance policy was not
    comprehensive and that the policy and implementing procedures and
    practices provided little assurance that core maintenance capabilities
    were being developed as needed to support future national defense
    emergencies and contingencies. 19 Some of the weaknesses were that (1) the
    existing policy did not provide a forward look at new weapon systems and
    associated future maintenance capability requirements, (2) the existing
    policy did not link the core identification process to source- of- repair
    policies and procedures for new and upgraded systems, and (3) the various
    procedures and practices being used by the services to implement the
    existing policy, such as using *like* workloads to sustain core
    capabilities, were affecting the ability of the depots to establish core

    19 See GAO- 02- 105.

    Page 22 GAO- 03- 682 Army Depot Maintenance

    capabilities. In October 2001, DOD revised the methodology by dividing the
    core methodology into two distinct parts to more clearly distinguish
    between core capability requirements and the depot maintenance workloads
    needed to satisfy those requirements. Detailed core capability and
    associated workload computations would be performed on a biennial basis in
    conjunction with the planning, programming, and budgeting system in order
    to address both the requirements for new systems and changes to existing
    systems. Also, core computations would be reviewed annually to assess the
    impact of unanticipated budgetary adjustments. Regarding the new
    methodology issued in January 2003, DOD officials told us that some
    revisions are being made and the methodology has not yet been finalized.
    Thus, we have not reviewed the methodology in detail and cannot be sure
    whether the new methodology will correct the weaknesses we identified in
    the core process.

    The Army*s identification of core capabilities and workloads required to
    sustain them in December 1999 showed that the five depots had a total
    workload requirement of 10.8 million work hours associated with its core
    capability requirements. As shown in table 4, work performed by the depots
    for the 4- year period, fiscal years 1999 to 2002, was generally below the
    amount identified for total core capability requirements.

    Table 4: Comparison of Core Capability and its Associated Workload with
    Actual Work Performed for Fiscal Years 1999- 2002

    Hours in millions

    Fiscal years Depot

    1999 core capability assessment 1999 2000 2001 2002

    Anniston 2.3 2.0 2.0 2.1 2.5 Corpus Christi 3.5 2.3 2.5 2.6 2.9
    Letterkenny 1.1 0.9 0.7 0.8 0.9 Red River 0.9 1.2 1.1 0.9 1.2 Tobyhanna
    3.0 2.4 2.7 2.6 2.6

    Total 10.8 a 8.8 a 9.0 a 9.0 a 10.1 a

    Sources: Army (data); GAO (presentation). a Excludes overtime hours.

    Depot officials stated that for the core identification process, the
    depots identify the skills required by job series to support the core
    capability. However, Army officials said that neither the depots nor the
    Army routinely assess the extent to which work performed by the depots

    Page 23 GAO- 03- 682 Army Depot Maintenance

    compares with the identification of core capability requirements and
    associated workloads. Thus, they do not have the information needed to
    determine whether the level and nature of the work performed in the

    depots is sufficient to ensure cost efficiency and technical competence
    and to preserve core capability.

    When we discussed identification of core capability and associated
    workloads with depot managers, they said that ensuring appropriate
    workloads are going to the depots is essential to their being able to
    maintain required core skills to support combat readiness. They also
    expressed concern that the definition of core capability workload
    requirements seems to constantly fluctuate and that maintenance workloads
    that once were identified as required for core capabilities were being
    transferred to the private sector. For example, depot managers at the Red
    River Army Depot pointed out that workload associated with the Heavy
    Expanded Mobility Tactical Truck was a significant factor in the depot*s
    ability to maintain the necessary core capabilities. However, the truck
    workload was lost in October 2001 when the Army decided to stop
    recapitalization work at the depot and to use a contractor to perform an
    extended service life program for the truck. They said that other systems,
    such as the Bradley Fighting Vehicle, are headed in the same direction.
    Depot managers also pointed out that the depots are not always assigned
    work sufficient to ensure cost efficiency and technical competence and to
    preserve surge capability. Additionally, the depots are not capable of

    providing some core capabilities. For example, the depots do not have
    capability to repair key components of the M1A2 tank, the Apache
    helicopter, and the Bradley Fighting Vehicle for which core capability
    requirements were identified. More specifically, Anniston does not have
    the capability to support unique electronic components for the M1A2 tank,
    Corpus Christi does not have the capability to support Apache Longbow
    unique components, and Red River does not have the capability to support
    electronic components for the Bradley A3 model. Our October 2001 report
    identified a number of the same concerns with the fluctuations in core
    capability identification and the loss of work required to sustain depot
    core capabilities. 20 DOD*s latest policy on core, which was released in
    January 2003, requires the services to develop an assessment of what
    specific workload is necessary to achieve its core goals at the DOD,
    service, and facility levels. However, the services have not yet been
    tasked by DOD to recompute core capability requirements based on the new

    20 See GAO- 02- 105.

    Page 24 GAO- 03- 682 Army Depot Maintenance

    policy. Officials said some changes to the revised policy are expected to
    occur.

    Although we previously recommended that a strategic plan for DODowned
    depots be developed, neither the Office of the Secretary of Defense nor
    the Department of the Army has implemented comprehensive or

    strategic plans for defense maintenance to revitalize or protect the
    future viability of its depot facilities and equipment and its depot
    workers. 21 The Army has taken steps to develop a strategic plan for its
    depots, but it is not comprehensive or current and the Army has not yet
    implemented it. The Office of the Secretary of Defense has undertaken a
    depot planning study, but still has no depot strategic plan.

    Our prior reports have demonstrated that a strategic plan is critical to
    the future viability of the defense depot system. For example, in our
    October 2001 report, we pointed out that logistics activities represent a
    key management challenge and that depot maintenance is an important
    element of those activities. 22 As such, we noted that DOD was at a
    critical point with respect to the future of its maintenance programs and
    that the future role for the military depots in supporting the
    department*s future maintenance programs was unclear. Finally, we pointed
    out that before DOD can know the magnitude of the challenge of
    revitalizing its depot facilities and equipment and its depot workforce,
    it must first know what its future workloads will be; what facility,
    equipment, and technical capability improvements will be required to
    perform that work; and what personnel changes will be needed to respond to
    retirements and workload changes. We recommended, among other things, that
    the Secretary of Defense direct the Under Secretary of Defense for
    Acquisition, Technology, and Logistics, in conjunction with the military
    services, to establish expedited milestones for developing strategic and
    related implementation plans for the use of military depots that would
    identify desired short- and long- term core capabilities and associated
    capital investments and human capital needs. However, although the
    Department is conducting a study that could lead to the development of a
    depot strategic plan, as of July 2003, DOD still has no strategic plan
    that provides

    21 See U. S. General Accounting Office, Defense Maintenance: Sustaining
    Readiness Support Capabilities Requires a Comprehensive Plan, GAO- 01-
    533T (Washington, D. C.: Mar. 23, 2001).

    22 See GAO- 02- 105. Strategic Planning

    Issues for Depots

    Page 25 GAO- 03- 682 Army Depot Maintenance

    required direction to shape the future of the depots if they are expected
    to remain viable for the future. We again addressed the issue of the need
    for strategic planning in our recent report on strategic workforce
    planning for the DOD industrial workforce, noting that DOD has not
    implemented our prior recommendations regarding the need for a DOD depot
    strategic plan. 23 However, absent a DOD depot plan, the services have
    laid out a

    framework for strategic depot planning in varying degrees, but this is not
    comprehensive.

    While the Army has taken some actions regarding the development of a
    strategic depot plan, its plan is not comprehensive, and implementation of
    the plan was suspended. In January 2000, the Army Deputy Chief of Staff
    for Logistics published Army Depot Maintenance Enterprise Strategic Plan,
    a plan that provided mission and vision statements for the Army depots and
    identified five strategic issues for which they began developing action
    plans: 1. Identification and management of all depot maintenance
    requirements

    for Army systems throughout all phases of their life cycles in the
    Planning, Programming, and Budget Execution System.

    2. Restructuring the process for determining the source of depot repair to
    ensure that appropriate approval authorities are utilized for decisions to
    rebuild, overhaul, upgrade, and repair decisions above a certain threshold
    (e. g., dollar value).

    3. Ensuring that the Army depot workforce is capable of meeting future
    depot maintenance requirements.

    4. Managing materiel/ supplies (parts) used by the depots to provide for
    more efficient depot operations.

    5. Making Army depots more competitive with private- sector depot
    maintenance providers. Identifying these broad strategic issues, along
    with some objectives,

    measures, and action plans, was a step in the right direction. However,
    the Army did not finalize or implement its action plans. Army planners
    told us

    23 See U. S. General Accounting Office, DOD Civilian Personnel: Improved
    Strategic Planning Needed to Help Ensure Viability of DOD*s Civilian
    Industrial Workforce,

    GAO- 03- 472 (Washington, D. C.: Apr. 30, 2003).

    Page 26 GAO- 03- 682 Army Depot Maintenance

    that implementing the strategic plan was put on hold, pending an effort to
    reassess depot capabilities and requirements as part of the Army*s effort
    to identify the depot capabilities that had proliferated in field- level
    activities. The plan did not address depot maintenance that is being
    performed in field- level activities. The Army*s assessment of depot
    proliferation was supposed to result in a report to the Congress on this
    subject, but as previously discussed, the Army has not yet provided this
    report. Furthermore, Army officials stated that there has been no update
    to modify the strategic plan to address how the Army will manage this
    category of depot work.

    Continuing issues about (1) the assignment of reduced workloads to Army
    maintenance depots, (2) deficiencies in the process of quantifying both
    core depot maintenance capabilities and the workload needed to ensure cost
    efficiency and technical competence and to preserve surge capability, and
    (3) strategic planning for depots raise significant questions about the
    long- term viability of Army depots. We have discussed these issues in the
    past, but they remain unresolved. It will be important for the Congress
    and the Department of Defense to clarify these issues to ensure the
    continued performance of required support resources in the future.

    In addition to the issues discussed in the past, we identified another
    area where action would improve data reliability for Army depots the
    development and implementation of procedures for identifying and reporting
    depot workload projections from the Army acquisition community and from
    non- Army customers. By addressing both the identification and reporting
    of initial forecasts as well as subsequent changes to the forecasts,
    greater reliability should be achievable for the Army Workload and
    Performance System. Furthermore, as DOD has observed, improved projections
    of interserviced maintenance work would benefit all depots, not just those
    of the Army.

    To improve the reliability of future maintenance workload projections in
    all DOD maintenance depots, we recommend that the Secretary of Defense
    through the Under Secretary of Defense for Acquisition, Technology, and
    Logistics,

    require the Army Materiel Command in conjunction with the Army acquisition
    community to develop and implement standard business rules and procedures
    for identifying and reporting Army Conclusions

    Recommendations for Executive Action

    Page 27 GAO- 03- 682 Army Depot Maintenance

    depot workload projections from the Army acquisition community and

    require the DOD depot maintenance community to develop and implement ways
    to improve the identification and reporting of depot inter- service
    workload projections across all the military services using standard
    business rules and procedures.

    In commenting on a draft of this report, the Department partially
    concurred with our recommendations to improve the reliability of future
    workload projections. Appendix II contains the text of DOD*s comments. The
    Department partially concurred with the recommendation in our draft

    report that the Army Materiel Command develop standard business rules and
    procedures for identifying and reporting Army depot workload projections.
    While agreeing that this could be done for work coming from the Army
    acquisition community, the response noted that the Department did not
    believe that the Army Materiel Command alone could establish standard
    business rules and procedures for identifying and reporting Army depot
    workload projections from the non- Army customers. However, the Department
    agreed with us that a need exists for Army Depots to have valid workload
    projections from the Army acquisition community and non- Army customers
    and that standard business rules and procedures are required. Moreover,
    the Department*s response stated that since the lack of workload
    projection data for inter- service depot workloads should be addressed
    across all the military services, the Department planned to initiate a
    study to examine how the identification and reporting of depot inter-
    service workload projections across all the military services can be
    improved. Consequently, we modified our recommendation to address the
    Department*s comments. The Department partially concurred with a second
    recommendation in the

    draft report requiring the Army acquisition community and non- Army
    customers to report depot workload projections for Army depot work through
    the Army Workload and Performance System using the standard business rules
    and procedures. The Department stated that it agreed in concept that Army
    customers should provide Army depots with workload

    projections, but that it currently does not appear feasible for all non-
    Army customers to report depot workload projections for Army depots
    through the Army Workload and Performance System. Therefore, we dropped
    the reference to the Army Workload and Performance System from our
    recommendation. The Department stated also that, as with the first Agency
    Comments

    and Our Evaluation

    Page 28 GAO- 03- 682 Army Depot Maintenance

    recommendation, it plans to address this recommendation with a study to
    examine how the identification and reporting of inter- service workload
    projections across the military services can be improved.

    The Department also provided some technical comments for our draft report
    that were incorporated where appropriate.

    We are sending copies of this report to interested congressional
    committees; the Secretary of Defense; the Secretary of the Army; and the
    Director, Office of Management and Budget. We will make copies available
    to others upon request. In addition, the report will be available at no
    charge on the GAO Web site at http:// www. gao. gov.

    If you or your staff have questions regarding this report, please contact
    me at (202) 512- 8412 or holmanb@ gao. gov or Julia Denman, Assistant
    Director, at (202) 512- 4290 or denmanj@ gao. gov. Other major
    contributors to this report were Bobby Worrell, Janine Prybyla, Jane Hunt,
    and Willie Cheely.

    Sincerely yours, Barry W. Holman Director, Defense Capabilities

    and Management

    Appendix I: Scope and Methodology Page 29 GAO- 03- 682 Army Depot
    Maintenance

    To answer the specific questions posed by the Ranking Minority Member,
    Subcommittee on Military Readiness, House Committee on Armed Services, we
    interviewed Army officials and analyzed pertinent information at Army
    headquarters in the Washington, D. C., area; Headquarters, Army Materiel
    Command in Alexandria, Virginia; and three subordinate Army commands* the
    Army Aviation and Missile Command, Huntsville, Alabama; Communications-
    Electronics Command, Fort Monmouth, New Jersey; and the Tank- automotive
    and Armaments Command, Warren, Michigan. Additionally, we interviewed
    depot managers and reviewed pertinent information at the Army*s five
    depots: Anniston Army Depot, Anniston, Alabama; Corpus Christi Army Depot,
    Corpus Christi, Texas; Letterkenny Army Depot, Chambersburg, Pennsylvania;
    Red River Army Depot, Texarkana, Texas; and Tobyhanna Army Depot,
    Tobyhanna, Pennsylvania. We also made extensive use of our prior work and
    ongoing work related to Army depot maintenance.

    To assess the trends in historical and future workloads assigned to the
    Army depots, we analyzed workload information from the Army*s automated
    databases. Specifically, for historical workloads, we evaluated the trend
    in workload hours for closed maintenance programs from the Army
    Headquarters Application System for fiscal years 1987 through 2002. For
    trends in future workloads, we used workload hours from the Army

    Workload and Performance System for fiscal years 2003 through 2008. For
    the reliability of future workload projections, we used our prior work
    showing that Army depot workload estimates are subject to frequent changes
    because of factors such as fluctuations in requirements and funding
    levels. We also questioned Army officials and depot managers about the
    reliability of the workload estimates as shown by the Army Workload and
    Performance System. In determining whether the depots have sufficient
    workload to promote

    efficient maintenance operations, we compared metric data that others and
    we have previously identified with data on the Army*s current operations.
    We examined data on key metrics to determine how well the depots performed
    assigned workloads against key metrics and standards such as depot- level
    capacity utilization and employee productivity. We obtained metric data
    from the Army depots and from Headquarters, Army Materiel Command. Since
    Headquarters, Army Materiel Command, could

    not provide the data prior to 2001, the data for fiscal years 1999 and
    2000 are from the depots. In those instances where the reported data for
    fiscal years 2001 and 2002 differed, we used the data reported by
    Headquarters, Army Materiel Command, because the headquarters data were
    reported by the depots. To identify whether additional workloads are
    possible, we Appendix I: Scope and Methodology

    Appendix I: Scope and Methodology Page 30 GAO- 03- 682 Army Depot
    Maintenance

    relied upon our prior and ongoing work, which shows that the Army had
    contracted with the private sector for maintenance workloads that its
    depots had previously performed and that upgrades and modifications of
    older systems and new weapon systems were a potential source of work for
    the depots. We also questioned acquisition and logistics officials at the
    subordinate commands with responsibility for workloads for the depots

    about workloads that were being considered for the Army depots and the
    limitations to bringing these workloads to the depots. To identify whether
    initiatives are being implemented to improve efficiency, we examined the
    plans and projects that the depots had under the umbrella of lean
    manufacturing to improve maintenance operations. In addition, we reviewed
    depot reports on the extent to which these initiatives were improving
    operations.

    To answer whether the Army has identified the depots* core capability and
    provided its depots with workload to use that capability, we reviewed the
    Department of Defense and Army guidance for computing core capability
    requirements and associated workloads in December 1999 for fiscal year
    2001 and compared the results with workloads assigned to the depots since
    fiscal year 1999. We also examined the department*s new methodology issued
    in January 2003 for computing core capability requirements and questioned
    department and Army officials about the schedule for implementing the new
    methodology. We also questioned depot officials about the adequacy of
    workloads assigned and the extent to which the work allows the depots to
    maintain necessary capabilities.

    For the question of whether the Army has a long- range plan for the future
    viability of an efficient depot system, we relied upon prior work that
    shows that neither the department nor the Army had a comprehensive defense
    maintenance strategic plan. We conducted our review from September 2002
    through June 2003 in

    accordance with generally accepted government auditing standards.

    Appendix II: Comments from the Department of Defense

    Page 31 GAO- 03- 682 Army Depot Maintenance

    Appendix II: Comments from the Department of Defense

    Appendix II: Comments from the Department of Defense

    Page 32 GAO- 03- 682 Army Depot Maintenance (350361)

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