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

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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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