Military Base Closures: Projected Savings from Fleet Readiness	 
Centers Likely Overstated and Actions Needed to Track Actual	 
Savings and Overcome Certain Challenges (29-JUN-07, GAO-07-304). 
                                                                 
The 2005 Base Realignment and Closure (BRAC) recommendation to	 
establish fleet readiness centers was expected to yield more	 
savings than any other of the 2005 BRAC recommendations. To	 
achieve these savings the Navy plans to integrate civilian depot 
personnel to complete some repairs at intermediate maintenance	 
departments to reduce aviation maintenance costs. This report,	 
prepared under the Comptroller General authority to conduct	 
evaluations on his own initiative, is one in a series of reports 
related to the 2005 BRAC recommendations. GAO's objectives were  
to (1) analyze the reasons for changes in costs and savings	 
estimates since the recommendation was approved, and (2) identify
challenges in implementing this BRAC recommendation. GAO analyzed
Navy and BRAC Commission costs and savings estimates and	 
interviewed officials at the Naval Air Systems Command and at	 
three fleet readiness centers.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-304 					        
    ACCNO:   A71692						        
  TITLE:     Military Base Closures: Projected Savings from Fleet     
Readiness Centers Likely Overstated and Actions Needed to Track  
Actual Savings and Overcome Certain Challenges			 
     DATE:   06/29/2007 
  SUBJECT:   Base closures					 
	     Base realignments					 
	     Cost analysis					 
	     Cost effectiveness analysis			 
	     Inventory control					 
	     Military forces					 
	     Military materiel					 
	     Naval aviation					 
	     Naval bases					 
	     Naval facilities					 
	     Naval personnel					 
	     Strategic planning 				 
	     Cost estimates					 
	     Savings estimates					 
	     DOD Base Realignment and Closure Program		 

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GAO-07-304

   

     * [1]Results in Brief
     * [2]Background
     * [3]Estimated Savings Likely Overstated

          * [4]Onetime Costs Increased
          * [5]Onetime Savings Have Been Reduced, but Uncertainty Exists ab
          * [6]Annual Recurring Savings Likely Remain Overstated

     * [7]Challenges to Realizing Savings from Establishing Fleet Read

          * [8]Planned Short-Term Monitoring Will Need to Be Extended
          * [9]Workforce Challenges

               * [10]Identifying Maintenance Items and Critical Skills
               * [11]Introducing Civilian Depot Artisans at Intermediate
                 Departme
               * [12]Navy's Communication Strategy to Promote Goals of Fleet
                 Read
               * [13]Providing Sustained Leadership
               * [14]Reporting Depot Maintenance Funding between the Public
                 and P

     * [15]Conclusions
     * [16]Recommendations for Executive Action
     * [17]Agency Comments and Our Evaluation
     * [18]GAO Contact
     * [19]Acknowledgments
     * [20]GAO's Mission
     * [21]Obtaining Copies of GAO Reports and Testimony

          * [22]Order by Mail or Phone

     * [23]To Report Fraud, Waste, and Abuse in Federal Programs
     * [24]Congressional Relations
     * [25]Public Affairs

Report to Congressional Committees

United States Government Accountability Office

GAO

June 2007

MILITARY BASE CLOSURES

Projected Savings from Fleet Readiness Centers Likely Overstated and
Actions Needed to Track Actual Savings and Overcome Certain Challenges

GAO-07-304

Contents

Letter 1

Results In Brief 3
Background 5
Estimated Savings Likely Overstated 10
Challenges to Realizing Savings from Establishing Fleet Readiness Centers
15
Conclusions 21
Recommendations for Executive Action 21
Agency Comments and Our Evaluation 22
Appendix I Scope and Methodology 25
Appendix II Fleet Readiness Centers Recommendation 27
Appendix III Comments from the Department of Defense 33
Appendix IV GAO Contacts and Staff Acknowledgments 35

Tables

Table 1: Comparison of Projected Costs and Savings Estimates 10
Table 2: Time Frames for Reducing Aviation Component Inventory
Requirements to Yield Savings 13

Figures

Figure 1: Planned Fleet Readiness Centers (FRC) and Affiliated Sites 6
Figure 2: Aviation Components Repair Cycle 8

This is a work of the U.S. government and is not subject to copyright
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separately.

United States Government Accountability Office
Washington, DC 20548

June 29, 2007

Congressional Committees

On May 13, 2005, the Department of Defense (DOD) made public its
recommendations to realign and close bases. DOD projected these actions
would yield nearly $50 billion in net savings over a 20-year period. The
Base Realignment and Closure (BRAC) Commission1 evaluated DOD's
recommendations and recommended reducing the estimated 20-year net savings
by about $12 billion over a 20-year period. The BRAC Commission
recommendations were accepted by the President and the Congress, and
became effective on November 9, 2005. The recommendation to establish six
fleet readiness centers reengineers naval air maintenance, which blends
some civilian depot employees with military personnel to complete repairs
at intermediate maintenance departments. The intent behind this action was
to avoid some redundant maintenance procedures and supply overhead charges
and reduce aviation maintenance costs. DOD initially estimated this
recommendation would yield about $4.7 billion in net savings over 20 years
including onetime savings2 of about $648 million.

In July 2005,3 we reported some uncertainty regarding the magnitude of the
expected savings from the recommendation to establish fleet readiness
centers because the estimates were based on assumptions that had undergone
limited testing, and were also dependent on transformation of the Navy
supply system. In addition, after performing its own analysis, the BRAC
Commission believed the Navy overestimated the savings that may be
achieved from business process reengineering efforts. The BRAC Commission
approved the recommendation to establish fleet readiness centers with an
estimated 20-year net savings of $3.7 billion. Of the large number of 2005
BRAC recommendations, this recommendation is projected to produce the most
dollar savings, based on DOD's total BRAC savings projections.

1The BRAC legislation (Pub. L. No. 101-510, Title XXIX, as amended by Pub.
L. No. 107-107, Title XXX) provided for an independent Commission to
review the Secretary of Defense's realignment and closure recommendations,
and present its findings and conclusions on the Secretary's
recommendations, along with its own recommendations to the President.

2Onetime savings are estimated savings to be realized during the 2006-2011
implementation period. Onetime savings are nonrecurring savings that stop
at the end of implementation in 2011.

3GAO, Military Bases: Analysis of DOD's 2005 Selection Process and
Recommendations for Base Closures and Realignments, [26]GAO-05-785
(Washington, D.C.: July 1, 2005).

Once the recommendation became effective, the Navy became responsible for
executing the recommendation to establish fleet readiness centers. The
Office of the Secretary of Defense required the Navy to submit a detailed
business plan for implementing the recommendation, to update estimated
costs and savings, and to provide a schedule for implementing the
recommendation. The fleet readiness center plan was approved by the Office
of the Secretary of Defense on August 1, 2006.

This report is one in a series of reports that detail the progress DOD has
made in implementing the base closures and realignments included in the
2005 BRAC round. We performed our work on the basis of the authority of
the Comptroller General to initiate reviews4 and are reporting the results
to you in order to facilitate your oversight of DOD's infrastructure and
BRAC initiative. In this report, we address the Navy's efforts to
implement the BRAC recommendation to establish fleet readiness centers.
Our specific objectives were to (1) analyze the reasons for changes to the
costs and savings estimates since the recommendation to establish fleet
readiness centers was amended and approved as part of the 2005 BRAC round;
and (2) identify the challenges the Navy faces in successfully
implementing this BRAC recommendation.

To accomplish these objectives, we performed our work at the Naval Air
Systems Command headquarters, Patuxent River, Maryland; the aviation
intermediate maintenance departments at North Island, San Diego,
California; Mayport, Florida; and Whidbey Island, Oak Harbor, Washington;
and the naval aviation depots at North Island, San Diego, California, and
Jacksonville, Florida. We analyzed the changes to the costs and savings
estimates between the BRAC Commission's amended and approved
recommendation and the Navy's approved business plan and interviewed key
Navy officials to identify the reasons for changes and the challenges they
face in implementing the recommendation. To assess the reliability of data
used to generate costs and savings estimates, we reviewed Navy regulations
and instructions for reporting aviation maintenance data and interviewed
officials at the Navy Air Systems Command, Naval Aviation Depots, and
Commander, Naval Air Forces, about the data and assumptions underlying the
estimates. Based on these discussions and observations and review of the
Navy's calculations, we believe the DOD data are sufficiently reliable for
the purposes of this report. We conducted our work between February and
December 2006 in accordance with generally accepted government auditing
standards. Further details on the scope and methodology are described in
appendix I.

431 U.S.C. S 717.

Results in Brief

In comparison to the BRAC Commission estimates, the Navy has increased
onetime costs, decreased one-time savings, and increased annual recurring
savings expected from the fleet readiness centers recommendation.5 While
the Navy has started to implement the recommendation and achieve savings,
we believe the amount of onetime savings are uncertain at this time and
projected net annual recurring savings are overstated. The savings consist
primarily of onetime savings from projected decreases in the inventory of
aircraft component and replacement parts, and annual recurring savings6
from reduced depot labor and overhead charges and personnel reductions. In
preparing its business plan, the Navy reduced expected one-time savings
from lower inventory levels by 92 percent (from $648 million to $54
million) because Navy officials believed their initial estimates were too
optimistic. Even though the Navy reduced its estimated onetime savings,
our analysis of inventory levels for a sample of aviation items concluded
that the majority of the revised savings estimate will not occur during
the 6-year BRAC implementation period, and the amount of such savings over
time are uncertain. While the Navy projects annual recurring savings of
about $311 million, we believe they are likely overstated by $53 million.
The Navy's estimate includes $28 million in savings from eliminating
military personnel, which may be assigned elsewhere rather than taken out
of the force structure, and $25 million in onetime savings that were
erroneously reported as recurring savings. While projected savings remain
substantial, they are still subject to some uncertainties and additional
efforts will be required to assess actual savings over time as this
recommendation is implemented.

5DOD did not accept the final BRAC Commission estimate because it was
based on actual versus authorized positions.

6Annual recurring savings are expected to occur annually after the costs
of implementing a BRAC action have been offset by the savings.

The Navy faces challenges in ensuring projected savings from implementing
its fleet readiness center recommendation are realized even as it also
faces some workforce challenges in implementing the recommendation. Since
the Navy has already included projected BRAC savings in its budget plans
for fiscal years 2007 through 2011, the Navy will need to monitor the
extent to which these savings are achieved. Therefore, if savings are not
realized, the Navy may have to take funds from other Navy programs or
request additional funds to offset unrealized savings or be unable to
repair aviation components in a timely manner which could affect
readiness. The Navy has developed an interim method for tracking aviation
maintenance repair costs and calculating the BRAC savings from
establishing fleet readiness centers, but follow through will be important
to validate savings over time. In addition, the Navy faces workforce
challenges, such as potentially moving over 150 depot artisans with the
right skills to various intermediate maintenance departments and
integrating a primarily civilian depot workforce with the military
intermediate department workforce. This mixing of diverse cultures could
pose some challenges in implementation but could result in a better-
trained and more-productive workforce. The Navy faces other challenges,
such as the need for sustained leadership and communication to
successfully establish the fleet readiness centers. Furthermore, the Navy
needs to ensure that depot maintenance performed at intermediate
departments is accurately recorded and reported to satisfy congressional
reporting requirements. The Navy has recognized many of these challenges
and outlined steps to be taken to address them.

We are making recommendations to the Secretary of Defense to direct the
Secretary of the Navy to update the business plan to include only savings
that are directly related to implementing the BRAC recommendation and
monitor and update savings as implementation progresses. In commenting on
a draft of this report, DOD concurred with our recommendations. DOD noted
that it considers military personnel reductions attributable to a BRAC
recommendation as real savings. It noted that while the department may not
reduce end strength, these reductions allow the department to reapply
these military personnel to support new capabilities. We believe the
department counting of savings from eliminating military personnel
positions, without corresponding reductions in end strength, creates a
false sense of savings available for other purposes because they do not
represent dollar savings that can be readily reallocated outside the
military personnel accounts. We do agree that assigning these positions to
other areas may enhance capabilities. DOD's written comments are reprinted
in appendix III. DOD also provided technical comments, which we have
incorporated into this report as appropriate.

Background

The Navy has three levels of naval aviation maintenance--organizational,
intermediate, and depot--to support naval aviation.7 Organizational
maintenance is performed by sailors on the flight line and generally items
are repaired on the aircraft, whether at sea or at a naval station. The
intermediate maintenance activity is generally performed by sailors at the
Navy's aviation intermediate maintenance departments, which focus on item
repairs in close proximity to the flight line but off-aircraft. Depot
maintenance activities, generally performed by civilian aviation depot
artisans, provide a comprehensive combination of major repair, overhaul,
and modifications to weapons systems and components, assemblies, and
subassemblies in off-flight-line maintenance. The current aviation
maintenance process generally flows as follows: when the organizational
maintenance crews cannot fix a broken aircraft component or item, it is
sent to the intermediate department; if the intermediate maintenance
department cannot repair an item, it declares that the item is beyond its
capability of maintenance. The broken item is then turned over to the
supply system in exchange for a replacement part; and the broken item is
shipped to the depot for further repairs or overhaul.

The recommendation to establish fleet readiness centers affects the
intermediate department and depot maintenance levels, but not the
organizational level. It involves moving about 150 artisans from the
depots to the intermediate departments to perform aviation repairs. In
addition, six fleet readiness centers will be established to transform
naval aviation maintenance at the intermediate departments and depots as
seen in figure 1.

7The Navy and Marine Corps currently operate 20 aviation intermediate
maintenance departments including the Presidential Helicopter support at
Quantico, 11 Marine aviation logistics squadrons, and three Naval Aviation
Depot maintenance activities in the United States.

Figure 1: Planned Fleet Readiness Centers (FRC) and Affiliated Sites

According to this BRAC recommendation, relocating depot artisans to
intermediate departments is expected to reduce the number of items that
are declared to be beyond the capability of maintenance at the
intermediate departments and therefore, will not require some items to be
sent to the depot for repair. As a result, repeated and duplicated
maintenance procedures are projected to be avoided and turnaround times
projected to be reduced. More specifically, prior to implementing this
recommendation, when an item is being repaired by military personnel at
the intermediate department, they perform diagnostics, disassemble the
item, and attempt to repair it. When they determine it cannot be repaired
and declare that it is beyond their capability of maintenance, the item is
reassembled, repackaged, and shipped to the depot for repair. Upon arrival
at the depot, the artisans must perform similar diagnostics, and repeat
the processes of disassembly and repair that have already been performed
at the intermediate department. According to Navy officials, after fleet
readiness centers are established, the depot artisans positioned at the
intermediate departments are expected to be able to complete more repairs
there, which will reduce or eliminate some packaging, shipping, and
administrative costs as seen in figure 2.

Figure 2: Aviation Components Repair Cycle

At the time DOD originally submitted its recommendations to the BRAC
Commission, it estimated this recommendation would yield $341 million in
annual recurring savings, or $4.7 billion net savings over 20 years. The
preponderance of the annual recurring savings was expected to come from
fewer items being sent to the depots for repair, thus reducing per item
maintenance costs. DOD also expected to achieve significant onetime
savings by reducing existing inventory levels of aircraft component parts.
In July 2005, we reported that while there is potential for significant
savings, there is some uncertainty over the full magnitude of savings.8
Our report noted that the Navy used assumptions that had undergone limited
testing, and the full savings realization depends upon the transformation
of the Navy's supply system to achieve organizational efficiencies.
Moreover, we pointed out that realizing the full extent of the savings
would depend on actual implementation of the recommended actions.

The BRAC Commission also believed DOD's overall estimated savings were
overstated because savings were derived from overhead efficiencies that
had not been validated. The commission projected annual recurring savings
of about $248 million a year or $3.7 billion9 net present value savings
over a 20-year period--about $1 billion less than the DOD's estimate.
Also, the commission reduced the estimated savings because it eliminated
the proposed realignment of workload from the Naval Support Activity in
Crane, Indiana, to Whidbey Island, Washington, since the Navy planned to
phase out the aircraft associated with the proposed workload transfer in
10 to 15 years regardless of BRAC. In addition, the commission found
errors in DOD's estimation of construction costs and the savings
projections based on eliminated personnel.

The President and the Congress accepted the BRAC Commission
recommendations, which became effective on November 9, 2005. Once the
recommendations became effective, the Office of the Secretary of Defense
designated one of the military services or defense agencies as the
business manager responsible for implementing each recommendation. The
Navy is responsible for establishing the six fleet readiness centers. The
Office of the Secretary of Defense also required the Navy to submit a
detailed business plan to update estimated costs and savings and identify
a schedule for implementing the recommendation. The Navy's detailed
business plan was approved to implement the recommendation to establish
fleet readiness centers on August 1, 2006. However, the Office of the
Secretary of Defense has requested that the Navy resubmit its plan to
accurately reflect the savings realized based on the Navy's current
implementation of this BRAC recommendation. The Navy's plan was still
in-process as of March 15, 2007.

8 [27]GAO-05-785 .

9The $3.7 billion is the 20-year net present value of the projected
savings in fiscal year 2005 constant dollars.

In addition, the Navy must comply with Title 10, Section 2466 of the
United States Code (U.S.C.), which provides that not more than 50 percent
of the funds made available in a fiscal year to the Navy for depot
maintenance and repair workload may be used to pay for work performed by
private contractors. The statute also requires the Secretary of Defense to
submit a report to Congress (known as the "50/50" report) by April 1
annually, on public-private depot maintenance funding distributions. The
50/50 report notes the percentage of depot maintenance funding between the
public and private sectors during the preceding fiscal year, the projected
distribution for the current fiscal year, and the ensuing fiscal year.

Estimated Savings Likely Overstated

In comparing the Navy's business plan with the BRAC Commission estimates
of costs and savings, the Navy's business plans shows an increase in
one-time costs, a decrease in one-time savings, and an increase in annual
recurring savings as seen in table 1 below.

Table 1: Comparison of Projected Costs and Savings Estimates

Dollars in                                                         
millions                                                           
                             BRAC Commission Navy business Difference 
Category                        approveda         planb     Amount Percent 
Onetime costs                         $34           $65        $31      96 
Onetime savings                       648            54      (594)    (92) 
Annual recurring                                                           
savings                               250           311         61      25 

Source: DOD data.

Notes: DOD did not accept the final BRAC Commission estimate because it
was based on actual versus authorized positions.

aIn constant fiscal year 2005 dollars.

bIn then year or current dollars.

While the Navy has started to implement the recommendation and achieve
savings, we believe the latest savings estimates are still overstated and
uncertain. The majority of the savings consist of onetime savings from
projected decreases in the inventory of aircraft components and
replacement parts, and annual recurring savings from reduced depot labor
and overhead charges and reductions in military personnel. While savings
from lower inventory levels may be possible, our analysis of a judgmental
sample of items targeted for inventory reduction concluded that the
majority of these savings would not occur during the 6-year implementation
period of this BRAC recommendation.10 Further, we believe the Navy's
estimated annual recurring savings remain overstated because they included
savings from eliminating military personnel that are not expected to
result in a reduction to its overall service force structure and included
onetime savings erroneously reported as recurring savings.

Onetime Costs Increased

The Navy's business plan shows onetime costs increased by 96 percent (from
$34 million to $65 million) as compared to the BRAC Commission's
estimates, which was primarily due to increased costs associated with
relocating depot employees to the intermediate level, other miscellaneous
program management actions, and inflation.11 For example, Navy officials
stated that they need to add more equipment or specialized workbenches to
support depot artisans relocated to the intermediate departments. The
program management costs are primarily for information technology
upgrades. For example, Navy officials stated the need for an interim
logistics tracking and accounting mechanism, using its current Naval
Aviation Logistics Command/Management Information System to track depot
maintenance repairs at the intermediate departments. While onetime costs
have nearly doubled, they have limited effect on the long-term recurring
savings expected from establishing fleet readiness centers once those
savings offset implementation costs.

Onetime Savings Have Been Reduced, but Uncertainty Exists about When They Will
be Achieved

While the Navy has reduced the projected onetime savings from lower levels
of inventory, our analysis of a sample of aviation inventory items
targeted for reduction concludes that the majority of these savings would
not occur during the 6-year implementation period, and the amount of such
savings over time is uncertain. In preparing the business plan, the Navy
reduced its onetime savings by 92 percent (from $648 million to $54
million) mostly by lowering the estimated savings from reducing inventory
of aircraft components and replacement parts. According to Navy officials,
the initial inventory savings estimate was overly optimistic. In addition,
the lower estimate was based on the BRAC Commission's determination that
the Navy's projected savings were overstated because the commission found
errors in the Navy's savings estimates. Additionally, our July 2005 report
stated that the magnitude of the expected savings for the fleet readiness
centers is in part dependent upon transformation of the Navy's supply
system, such as eliminating unneeded management structures and duplicate
layers of inventory in the supply system.12

10The Department of Defense has 6 years (2006-2011) to implement the BRAC
2005 recommendations.

11Of the approximate $31 million difference, about $4 million is
inflation.

DOD's original submission to the BRAC Commission assumed that the dollar
value of the inventory of aircraft components and replacement parts could
be reduced by 15 percent. According to Navy officials, the 15 percent
savings factor was based on the professional judgment of the Industrial
Joint Cross Service Group members. They expected savings because fewer
items would need to be kept in the shore-based aviation consolidated
inventory because items would be getting repaired more quickly and
returned to the inventory faster.13 However, the Navy officials stated
that they did not have time during the BRAC process to discuss the
estimated inventory and supply savings with officials from the Navy Supply
Command to validate the estimate. Navy officials stated that they
estimated the onetime savings from inventory reductions ($648 million) by
multiplying the 15 percent factor times the total dollar value of the
inventory and supply of aircraft components and replacement parts in
fiscal year 2003.14

In developing the business plan, the Navy reduced the inventory and supply
savings factor from 15 percent to less than 4 percent based on discussions
with Naval Supply Command officials and a better understanding of how
other BRAC recommendations affected DOD's and Navy's supply system.
Specifically, two other recommendations involved significant savings
projections from reengineering DOD's inventory and supply system and the
reconfiguration of supply, storage, and distribution management. After
considering how these other BRAC recommendations could affect the Navy's
projected inventory and supply savings estimates, Navy officials concluded
there would be a greater potential overlap of savings with the fleet
readiness center BRAC recommendation. However, the Navy could not provide
us documentation to support the lower inventory savings estimate.

12 [28]GAO-05-785 .

13The shore-based aviation consolidated allowance list inventory is a
consolidated list of components, repair parts, and consumable items and
depot- and field-level repairable items required to support planned
operational and maintenance missions at designated naval and Marine Corps
air stations.

14In fiscal year 2003, the inventory and supply of aircraft components and
replacement parts had a value of about $4.3 billion.

While savings from lower inventory may be possible, our analysis of a
judgmental sample of 99 items targeted for inventory reduction concludes
that the majority of these savings will not occur during the 6-year
implementation period of this BRAC recommendation as the Navy originally
projected. Our analysis shows that for 83 percent of the items sampled,
the Navy will take more than the implementation period to achieve lower
inventory levels because the majority of replacement items on-hand is
sufficient to provide many years worth of supply, and the rate of
replacement for that inventory will not be a factor contributing to
savings, as seen in table 2.

Table 2: Time Frames for Reducing Aviation Component Inventory
Requirements to Yield Savings

Fiscal year Number of items Percent 
2006-2011                17      17 
2012-2020                22      27 
Beyond 2021              60      56 
Total                    99     100 

Source: GAO analysis.

Since the Navy has not yet identified all of the inventory items that
could be affected by the fleet readiness centers recommendation, we could
not estimate the effect of delayed inventory savings reductions on the
Navy's estimated onetime savings or the total amount of savings likely to
be realized.

Annual Recurring Savings Likely Remain Overstated

The Navy increased the annual recurring savings estimate by 25 percent
(from about $250 million to $311 million) primarily by increasing
projected savings from military personnel eliminations and inflation.
These increases were offset to some degree by decreases in projected
savings from maintaining facilities. However, we believe the Navy's
revised annual recurring savings estimates are still overstated by
approximately $53 million because they include $28 million in savings from
eliminating military personnel, which may be assigned elsewhere rather
than taken out of the force structure, and $25 million that should have
been reported as onetime, and not recurring, savings. In addition, we
estimate that projected annual recurring savings increased by
approximately $42 million due to inflation.15

The BRAC Commission projected annual recurring savings of about $10
million from eliminating about 120 military positions, while the Navy
business plan includes about $28 million in annual recurring savings from
eliminating about 290 military positions as originally planned. Regardless
of the number of military personnel affected by the recommendations, as we
reported in July 2005, the projected net annual recurring savings
associated with eliminating jobs currently held by military personnel
could create a false sense of savings available for other purposes because
they do not represent dollar savings that can be readily reallocated
outside the military personnel accounts. Rather than reduce end strength,
these positions are expected to be reassigned to other areas, which may
enhance capabilities but also limit dollar savings available for other
uses.16

The Navy incorrectly reported onetime savings as annual recurring savings
in its business plan. Navy officials stated that $25 million onetime
savings were incorrectly categorized as annual recurring savings in its
business plan. These onetime savings included reductions in aviation depot
level repair charges, decreased spare parts inventory, and reduced
materials to repair aviation components. As a result of the fleet
readiness center implementation to date, Navy has begun to reduce its
current spare parts inventory, which translates into less physical space
needed to store the inventory and fewer sailors needed to manage it.
However, GAO believes that the Navy's business plan should correctly
report the $25 million as onetime savings and not annual recurring
savings.

Increases in the Navy's annual recurring savings estimates were offset to
some degree by decreases in projected savings expected from reduced
facility costs. According to the Navy officials, the projected reductions
in personnel should result in reducing floor space for numerous work
shops, but they will not free up enough space to allow the Navy to vacate
any buildings at this time. Since no buildings will be vacated, the Navy
reduced the annual recurring savings expected from facilities maintenance
by about $3 million. Navy officials indicated that as fleet readiness
center implementation progresses, there may be opportunities to combine
similar work shops at some sites, which may result in entire buildings
being vacated, and produce savings in the funding for facilities
maintenance. If this occurs, a Navy official noted the business plan would
be updated to reflect these savings.

15DOD assumed the cumulative inflation over the 2006- 2011 time period was
15.37 percent. It ranged from 2.1 percent to 2.6 percent per year.

16 [29]GAO-05-785 .

In addition, Navy's implementation efforts are beginning to show savings.
The Navy reported savings of $19 million from October 2006 to April 2007
at the 6 fleet readiness centers. These savings are from repairing
selected aviation items at the fleet readiness centers instead of sending
them to the depots for repair.

Challenges to Realizing Savings from Establishing Fleet Readiness Centers

The Navy faces challenges in ensuring that projected savings are realized
from implementing the fleet readiness center recommendation in addition to
some workforce challenges in implementing the recommendation. Since the
Navy has already included projected BRAC savings in its budget for fiscal
years 2007 through 2011, the Navy will need to monitor the extent to which
these savings are achieved. If savings are not realized, the Navy may need
to get funds from another Navy program or request additional funds to
offset unrealized savings or be unable to repair aviation components in a
timely manner, which could impact readiness. Accordingly, the Navy has
developed an interim method for tracking aviation maintenance repair costs
and calculating the BRAC savings from establishing fleet readiness
centers, which addresses our prior recommendation to DOD to update and
track savings. In addition, the Navy acknowledges that other challenges
remain, such as identifying and moving necessary depot artisans with the
right skills to various intermediate maintenance departments and
integrating a primarily civilian depot workforce with the military
intermediate department workforce. Navy officials recognize that this
mixing of workforces could create some cultural tension in the workforce,
but this blending may facilitate the development of a better-trained and
more-productive workforce. The Navy has recognized many of these
challenges and outlined steps to be taken to address them. Our prior work
has shown that strong and sustained executive leadership is needed if
reform efforts are to succeed.17 Furthermore, our prior work has raised
questions about the reasonableness and consistency of depot maintenance
workload data submitted to the Congress.18 Therefore, the Navy will need
to ensure that depot maintenance work performed at intermediate
departments is accurately reported to satisfy congressional reporting
requirements.

17GAO, DOD's High-Risk Areas: Successful Business Transformation Requires
Sound Strategic Planning and Sustained Leadership, [30]GAO-05-520T
(Washington, D.C.: Apr. 13, 2005).

Planned Short-Term Monitoring Will Need to Be Extended

The Navy has developed an interim method for tracking aviation maintenance
repair costs and calculating the BRAC savings from establishing fleet
readiness centers, but it will be important to ensure this effort
continues over time to validate savings. Navy officials noted that if the
expected savings are not realized, this decrease in savings could
adversely affect the Navy's ability to perform its mission within budgeted
funds. Furthermore, inadequate implementation could affect readiness, and
the Navy may need to request additional funds to offset unrealized
savings. Our previous work has raised concerns with prior DOD efforts to
reduce related operating budgets in advance of actual savings being
realized.19

The Navy reduced its aviation maintenance budget for fiscal years 2007
through 2011 by the estimated BRAC savings it projects will result from
establishing fleet readiness centers. Navy officials recognized its
challenges in achieving these estimated savings as well as the importance
of monitoring and tracking the actual and realized BRAC savings. The Navy
has developed an interim method for calculating the BRAC savings realized
at the newly established fleet readiness centers during the implementation
time frame. This interim method utilizes information from two separate
logistic systems, one at the depots and the other at the intermediate
departments, to allow Navy officials to evaluate each fleet readiness
center's performance in meeting its BRAC savings targets. However, this
short-term solution for tracking BRAC savings is not designed to go beyond
2011 or address long-standing business and financial system challenges.

18GAO, Depot Maintenance: Management Attention Required to Further Improve
Workload Allocation Data, [31]GAO-02-95 (Washington, D.C.: Nov. 9, 2001)
and GAO, Depot Maintenance: DOD's 50-50 Reporting Should Be Streamlined,
[32]GAO-03-1023 (Washington, D.C.: Sept. 15, 2003).

19 [33]GAO-05-785 .

Workforce Challenges

  Identifying Maintenance Items and Critical Skills

To achieve desired savings, the Navy has begun identifying which items
currently repaired at the depots could be repaired at the former
intermediate departments (now fleet readiness centers/sites). The Navy
originally calculated about 38,000 items that were beyond the capability
of maintenance of the intermediate departments, which could be repaired by
potentially moving about 150 depot artisans to the intermediate
departments. As of November 2006, the Navy has identified about 1,800
items that can be repaired at intermediate departments. Twenty-five depot
artisans have already begun to repair 127 of these items at the
intermediate departments. The number of items ultimately selected will
dictate the number of personnel needed and savings to be realized. Our
prior work on strategic workforce planning highlighted the need for
organizations to identify the right number of staff with the right skills
and competencies in the right locations to fulfill their missions and
goals.20 Based on the items identified for repair, the Navy will determine
the skill sets required for depot artisans to perform repairs at the
intermediate departments. Consequently, the Navy will request depot
artisan volunteers to relocate to the intermediate departments. If
artisans do not volunteer to relocate to the intermediate departments or
if artisans with the necessary skill sets have retired or stopped working
through normal attrition, the Navy plans to hire or contract for the
necessary skill sets. Navy officials stated that intermediate departments
are located in heavily industrialized areas that may enable them to hire
people with the necessary skill sets.

  Introducing Civilian Depot Artisans at Intermediate Departments

As the Navy establishes the fleet readiness centers, the Navy will
relocate some civilian depot artisans to work alongside military personnel
at the intermediate maintenance departments, which has the potential to
create cultural challenges within the workforce. Navy officials recognized
that this mixing of civilian and military workforces with their
differences in working environments could create some cultural tension,
but this blending may facilitate the development of a better-trained and
more- productive workforce. The Navy's civilian depot artisans work under
a collective bargaining agreement which specifies employee work hours,
maximum allowable excess work hours, and the number and duration of an
artisan's guaranteed breaks. At the intermediate maintenance departments,
the military personnel are required to work according to mission needs,
which may exceed normal work hours and disallow breaks, if necessary. Navy
officials stated that they do not foresee any labor problems when the Navy
establishes fleet readiness centers. Our prior work recognizes that
certain organizational and environmental differences cause stresses that
may affect an agency's ability to attain its strategic goals. Certain key
human capital practices can be employed to overcome such differences, such
as developing policies and procedures to allow for the flexible use of the
workforce to ensure consistency, equity, transparency, and address
employee concerns.21

20GAO, Human Capital: Key Principles for Effective Strategic Workforce
Planning, [34]GAO-04-39 (Washington, D.C.: Dec. 11, 2003).

While this mixing of diverse cultures could pose some challenges in
implementation, it could also help in developing a better-trained and
more-productive workforce if properly managed. As implementation of this
BRAC recommendation begins, the Navy will temporarily assign civilian
artisans to predominately military intermediate maintenance departments to
perform repairs. As fleet readiness centers are established, the temporary
assignments will become permanent. As the artisans and military personnel
become accustomed to working side-by-side, the Navy may combine similar
shops that have existed separately at depots and intermediate maintenance
departments to assure efficient use of personnel, equipment, and
facilities. This effort to determine if shops can be combined will begin
over the next several years. According to Navy officials, when depot
artisans begin to work with military personnel, the artisans will provide
on-the-job training as a means to increase the military personnel ability
to perform aviation repairs and improve aviation maintenance efficiency.
However, Navy officials stated that some workforce members are concerned
about the long-term effect of these changes. For example, it is unclear
whether shops that are comprised of military and civilian workforce
members will be managed by military or civilian leadership. In addition,
these combined shops may have an effect on the career paths of aviation
maintenance officers and civilian managers.

  Navy's Communication Strategy to Promote Goals of Fleet Readiness Centers

Communicating the mission and goals of the fleet readiness centers is
critical to implementing this BRAC recommendation. To address this
challenge, the Navy has focused on developing a communication plan to
mitigate the risk of inaccurate or inconsistent information and address
workforce fears. The communication plan goal is to maximize stakeholder
ownership and involvement with the implementation of the fleet readiness
centers to minimize uncertainty and anxiety inherent with organizational
change. In our prior report,22 we stated that strategic workforce planning
is most effective when an agency's goals, approach, and results are
communicated early, clearly, and often. Navy officials said that early
communication is critical to mitigate rumors and speculation about
potential workforce changes at the intermediate departments and depot
maintenance facilities. Accordingly, the Navy has developed a detailed
communication plan to describe the challenges associated with implementing
this BRAC recommendation. This plan details the approach that will be used
to establish fleet readiness centers, the goals they are expected to
achieve, and the results that are desired from introducing depot artisans
into the intermediate workforce. The Navy expects to evaluate the success
of the communication plan using several methods including monthly key
stakeholder feedback reports; postbriefing and post-town hall audience
surveys; circulation or number of memos and number of people who actually
saw the message; and other surveys to determine changes in awareness
(knowledge), attitudes (opinions) or respondent's reports of past or
anticipated/intended actions (behaviors).

21 [35]GAO-04-39 .

As part of the Navy's communications strategy, the Commander, Aviation
Depots, Naval Air Systems Command has traveled in excess of 200 days
during the past year in order to communicate the fleet readiness center
concept to the entire aviation maintenance workforce. He stated he will
meet or exceed that travel schedule during the implementation phase to
ensure that all workforce members have heard his message. During a portion
of his travel time, he plans to conduct "town hall" meetings with the
aviation maintenance workforce members at fleet readiness center locations
and affiliated sites. Following these meetings, the commander will send
teams to each newly established fleet readiness center to introduce the
concepts and the expected changes in establishing the centers to the
workforce. These teams will also provide information with regard to
procedural changes that will be necessary to assure that costs and savings
are properly tracked at each fleet readiness center and affiliated site.
According to Navy officials, as the implementation proceeds, efforts will
be undertaken to apply lessons learned as fleet readiness centers are
established.

22 [36]GAO-04-39 .

  Providing Sustained Leadership

Generally, commanding officers in the Navy change commands every 2 years,
which can make sustained leadership in a reorganization effort
challenging, and there is no guarantee that leadership will remain in
place throughout the implementation of this BRAC recommendation. Our prior
work on strategic workforce planning states that sustained leadership and
succession planning is necessary to achieve workforce reorganizations and
agency goals.23 Navy officials stated that they expect to achieve the
largest change in naval aviation maintenance since 1959 in only 3 to 5
years and the Commander, Aviation Depots, Naval Air Systems Command,
expects his assignment to continue until fleet readiness center
implementation is complete. The Navy has 26 Naval Aviation Maintenance
duty captains, which comprise a cadre of officers available for selecting
successive commanding officers to oversee the implementation of the
recommendation to establish and manage fleet readiness centers. In
addition to top-level leadership, the Navy plans to utilize the Navy's
chief petty officers, the Marine Corps' senior noncommissioned officers,
and seasoned civilian maintainers as key enablers of the implementation
process. Navy officials feel that these individuals can reinforce the
communications of senior Navy leadership and clarify the intent of
establishing fleet readiness centers to sailors, marines, and the civilian
workforce.

  Reporting Depot Maintenance Funding between the Public and Private Sectors

Navy officials noted another challenge may exist after fleet readiness
centers are established that involves accurately recording and reporting
depot maintenance performed at intermediate departments. Under 10 U.S.C. S
2466, the military departments and defense agencies can use no more than
50 percent of annual depot maintenance funding for work performed by
private-sector contractors. In fiscal year 2006, the Navy reported that 52
percent of naval aviation depot work was performed by civilian depot
artisans and 48 percent was performed by private contractors. As depot
artisans begin to work in intermediate maintenance departments, adequate
systems and management commitment for verifying the amount of
public-sector depot maintenance is necessary to comply with 50/50
requirements. We previously reported that the Navy did not maintain
documentation to support the amounts in its 50/50 report and no formal
training on procedural requirements or Navy guidance to develop and report
the 50/50 data was provided to the personnel responsible for compiling the
data. Our report noted that persistent deficiencies limit the accuracy and
usefulness of DOD's funding allocation data reported to the Congress, and
further, that it is difficult to project out-year data due to factors such
as changing depot maintenance requirements and the ongoing consolidation
of maintenance facilities. When the fleet readiness centers are
implemented, depot artisans will be stationed at the intermediate
departments and must document the depot maintenance performed, which is
used for entry into the depot accounting system and the Naval Aviation
Logistics Command/Management Information System. The Navy has drafted a
handbook that provides procedures and quality assurance for the required
details of documentation by the artisans. For example, all maintenance
documentation goes through layers of quality assurance such as validation
specifications within the Naval Aviation Logistics Command/Management
Information System, production controls that approve each component before
moving it back into the supply system, database administrator screening,
and a final reality check by the fleet readiness center command subject
matter experts.

23 [37]GAO-04-39 .

Conclusions

Although projected savings from establishing fleet readiness center remain
significant, it appears likely that the majority of onetime savings from
reduced inventory levels may not occur as expected during the BRAC
implementation period, and projected long-term savings are likely
overstated. To accurately account for and report BRAC savings, the Navy
business plan to establish fleet readiness centers should include onetime
savings that will be achieved during the implementation period and
long-term savings that are directly attributed to implementing the
recommendation. While the Navy has recognized the need to assess progress
against goals and track savings, our prior work has shown that sustained
leadership and follow-through will be important to ensure the
recommendation is successfully implemented.

Recommendations for Executive Action

To improve the reporting of savings projected from BRAC 2005
recommendations, we recommend that the Secretary of Defense direct the
Secretary of the Navy to

           o update the business plan for the fleet readiness centers (1) to
           reflect only savings that are directly related to implementing the
           recommendation, and (2) update projected onetime savings when data
           are available; and

           o monitor implementation of the recommendation to determine the
           extent that savings already taken from the Navy budget are
           actually achieved.

           We are sending copies of this report to interested congressional
           committees; the Secretaries of Defense and the Navy; and the
           Director, Office of Management and Budget. We will also make
           copies available to others upon request. In addition, the report
           will be available at no charge on GAO's Web site at
           [38]http://www.gao.gov .
			  
           Agency Comments and Our Evaluation
			  
           In commenting on a draft of this report, DOD concurred with our
           recommendations. DOD noted that it considers military personnel
           reductions attributable to a BRAC recommendation as real savings.
           It noted that while the department may not reduce end strength,
           these reductions allow the department to reapply these military
           personnel to support new capabilities. We believe the department
           counting of savings from eliminating military personnel positions,
           without corresponding reductions in end strength, creates a false
           sense of savings available for other purposes because they do not
           represent dollar savings that can be readily reallocated outside
           the military personnel accounts. We do agree that assigning these
           positions to other areas may enhance capabilities. DOD's written
           comments are reprinted in appendix III. DOD also provided
           technical comments, which we have incorporated into this report as
           appropriate.

           If you or your staff have any questions about this report, please
           contact me on (202) 512-4523 or [39][email protected] . Contact
           points for our Offices of Congressional Relations and Public
           Affairs may be found on the last page of this report. Additional
           contacts and staff acknowledgments are provided in appendix IV.

           Brian J. Lepore, Director
			  Defense Capabilities and Management

           List of Committees

           The Honorable Carl Levin
			  Chairman
			  The Honorable John McCain
           Ranking Member
			  Committee on Armed Services
			  United States Senate

           The Honorable Daniel K. Inouye
			  Chairman
			  The Honorable Ted Stevens
           Ranking Member
			  Subcommittee on Defense
			  Committee on Appropriations
           United States Senate

           The Honorable Tim Johnson
			  Chairman
			  The Honorable Kay Bailey Hutchison
			  Ranking Member
			  Subcommittee on Military Construction,
           Veterans' Affairs, and Related Agencies
			  Committee on Appropriations
			  United States Senate

           The Honorable Ike Skelton
			  Chairman
			  The Honorable Duncan L. Hunter
           Ranking Member
			  Committee on Armed Services
			  House of Representatives

           The Honorable John P. Murtha, Jr.
			  Chairman
			  The Honorable C.W. Bill Young
			  Ranking Member
			  Subcommittee on Defense
			  Committee on Appropriations
			  House of Representatives

           The Honorable Chet Edwards
			  Chairman
			  The Honorable Roger F. Wicker
           Ranking Member
			  Subcommittee on Military Construction, Veterans'
           Affairs, and Related Agencies
			  Committee on Appropriations
			  House of Representatives
			  
			  Appendix I: Scope and Methodology

           We performed our work at the Office of the Secretary of Defense,
           the office the Commander, Naval Air Forces, Naval Air Systems
           Command, Patuxent River, Maryland; the Naval Aviation Depots in
           Coronado, California, and Jacksonville, Florida, as well as the
           Aviation Intermediate Maintenance Departments located at Oak
           Harbor, Washington; Coronado, California; and Mayport, Florida.

           To determine the extent to which estimated costs and savings have
           changed, we compared the Navy's business plan approved in August
           2006 to the recommendation approved by the Base Realignment and
           Closure (BRAC) Commission. We focused on the major factors that
           affected projected onetime costs, onetime savings, and annual
           recurring savings. We determined the reasonableness of these
           estimates by reviewing and analyzing source data and the
           methodology used to generate savings estimates and interviewing
           Navy officials who prepared these estimates. We discussed the
           reasons for variances in costs and savings estimates between the
           BRAC Commission and the approved business plan with Navy
           officials. To analyze projected onetime savings from reduced
           levels of aircraft component inventory, we took a judgmental
           sample of 99 items targeted for inventory reduction. We calculated
           the years of supply for each item using its required inventory
           level, inventory on-hand, excess on-hand inventory, condition, and
           recurring and nonrecurring demands. Our analysis was reviewed by
           Navy Supply System officials. We analyzed the business plan to
           identify the major elements that contributed to projected annual
           recurring savings. Our analysis indicated that the business plan
           included savings from an initiative to reduce aviation maintenance
           costs referred to as AirSpeed. We interviewed Navy officials to
           determine the relationship of AirSpeed to the BRAC recommendation.
           To assess the reliability of the data used to generate estimates
           of costs and savings and the validity of underlying assumptions
           used to generate cost and savings estimates, we reviewed Navy
           regulations and instructions for reporting aviation maintenance
           data and interviewed officials at Navy Air Systems Command, Navy
           Aviation depots, Navy Aviation Intermediate Maintenance
           Departments, and Naval Supply Systems Command knowledgeable about
           the data and the assumptions underlying estimated costs and
           savings. Based on this, we believe that the assumptions underlying
           estimated costs and savings are generally valid, and that the data
           used were sufficiently reliable for the purposes of this report.

           To determine the challenges to successfully implement the fleet
           readiness centers, we analyzed pertinent documents and reports and
           interviewed officials responsible for developing the original
           proposal and the business plan. We also interviewed Navy officials
           at the Aircraft Intermediate Maintenance Departments at Whidbey
           Island, Washington; North Island, California; and Mayport,
           Florida; and at Naval Aviation Depots at North Island, California,
           and Jacksonville, Florida. In addition, we also reviewed statutes
           related to continuing congressional oversight of annual depot
           maintenance funding, related reports, and court cases involving
           depot personnel.

           We conducted our work from February 2006 to March 2007 in
           accordance with generally accepted government auditing standards.
			  
			  Appendix II: Fleet Readiness Centers Recommendation

           165. FLEET READINESS CENTERS (IND 19)

           a. Realign Naval Air Station Oceana, VA, by disestablishing the
           Aircraft Intermediate Maintenance Department Oceana, the Naval Air
           Depot Cherry Point Detachment, and the Naval Air Depot
           Jacksonville Detachment; establishing Fleet Readiness Center Mid
           Atlantic, Naval Air Station Oceana, VA; and transferring all
           intermediate maintenance workload and capacity to Fleet Readiness
           Center Mid Atlantic, Naval Air Station Oceana, VA.

           b. Realign Naval Air Station Patuxent River, MD, by
           disestablishing the Aircraft Intermediate Maintenance Department
           at Naval Air Warfare Center Aircraft Division; establishing Fleet
           Readiness Center Mid Atlantic Site Patuxent River, Naval Air
           Station Patuxent River, MD; and transferring all intermediate
           maintenance workload and capacity to Fleet Readiness Center Mid
           Atlantic Site Patuxent River, Naval Air Station Patuxent River,
           MD.

           c. Realign Naval Air Station Norfolk, VA, by disestablishing the
           Aircraft Intermediate Maintenance Department Norfolk VA, the Naval
           Air Depot Jacksonville Detachment, and Naval Air Warfare Center
           Aircraft Division Lakehurst Detachment; establishing Fleet
           Readiness Center Mid Atlantic Site Norfolk, Naval Air Station
           Norfolk, VA; and transferring all intermediate and depot
           maintenance workload and capacity to Fleet Readiness Center Mid
           Atlantic Site Norfolk, Naval Air Station Norfolk, VA.

           d. Realign Naval Air Station Joint Reserve Base New Orleans, LA,
           by disestablishing the Aircraft Intermediate Maintenance
           Department, establishing Fleet Readiness Center Mid Atlantic Site
           New Orleans, Naval Air Station Joint Reserve Base New Orleans, LA;
           and transfer all intermediate maintenance workload and capacity to
           Fleet Readiness Center Mid Atlantic Site New Orleans, Naval Air
           Station Joint Reserve Base New Orleans, LA.

           e. Realign Marine Corps Air Station Cherry Point, NC, as follows:
           disestablish Naval Air Depot Cherry Point; establish Fleet
           Readiness Center East, Marine Corps Air Station Cherry Point, NC;
           relocate depot maintenance workload and capacity for Aircraft
           Avionics/Electronics Components (approximately 39 K DLHs) [direct
           labor hours], Aircraft Hydraulic Components (approximately 69 K
           DLHs), Aircraft Landing Gear Components (approximately 8 K DLHs),
           Aircraft Other Components (approximately 23 K DLHs), and Aircraft
           Structural Components (approximately 126 K DLHs) to Fleet
           Readiness Center Mid Atlantic, Naval Air Station Oceana, VA;
           relocate depot maintenance workload and capacity for Aircraft
           Avionics/Electronics Components (approximately 11 K DLHs),
           Aircraft Hydraulic Components (approximately 19 K DLHs), Aircraft
           Landing Gear Components (approximately 2 K DLHs), Aircraft
           Structural Components (approximately 35 K DLHs), and Aircraft
           Other Components (approximately 6 K DLHs) to Fleet Readiness
           Center Mid Atlantic Site Norfolk, Naval Air Station Norfolk, VA;
           relocate depot maintenance workload and capacity for Aircraft
           Avionics/Electronics Components (approximately 6 K DLHs), Aircraft
           Hydraulic Components (approximately 10 K DLHs), Aircraft Landing
           Gear Components (approximately 1 K DLHs), Aircraft Other
           Components (approximately 3 K DLHs), and Aircraft Structural
           Components (approximately 18 K DLHs) to FleetReadiness Center Mid
           Atlantic Site Patuxent River, Naval Air Station Patuxent River,
           MD; relocate depot maintenance workload and capacity for Aircraft
           Avionics/Electronics Components (approximately 2 K DLHs), Aircraft
           Hydraulic Components (approximately 3 K DLHs), Aircraft Landing
           Gear Components (approximately 0.4K DLHs), Aircraft Other
           Components (approximately 1 K DLHs), and Aircraft Structural
           Components (approximately 6 K DLHs) to FRC Mid Atlantic Site New
           Orleans, Naval Air Station JRB New Orleans, LA.; relocate depot
           maintenance workload and capacity for Aircraft
           Avionics/Electronics Components (approximately 9 K DLHs), Aircraft
           Hydraulic Components (approximately 16 K DLHs), Aircraft Landing
           Gear Components (approximately 2 K DLHs), Aircraft Other
           Components (approximately 6 K DLHs) and Aircraft Structural
           Components (approximately 30 K DLHs) to the Fleet Readiness Center
           East Site Beaufort, hereby established at Marine Corps Air Station
           Beaufort, SC; relocate depot maintenance workload and capacity for
           Aircraft Avionics/Electronics Components (approximately 11 K
           DLHs), Aircraft Hydraulic Components (approximately 20 K DLHs),
           Aircraft Landing Gear Components (approximately 2 K DLHs),
           Aircraft Other Components (approximately 6 K DLHs), Aircraft
           Structural Components (approximately 36 K DLHs), Aircraft Rotary
           (approximately 1 K DLHs), Aircraft VSTOL (approximately 2 K DLHs),
           Aircraft Cargo/Tanker (approximately 0.02K DLHs,), Aircraft Other
           (approximately 18 K DLHs), Aircraft Structural Components
           (approximately 0.001K DLHs), Calibration (approximately 0.15 K
           DLHs) and "Other" Commodity (approximately 0.3 K DLHs) to Fleet
           Readiness Center East Site New River, hereby established at Marine
           Corps Air Station New River, Camp Lejeune, NC; and transfer all
           remaining depot maintenance workload and capacity to Fleet
           Readiness Center East, Marine Corps Air Station Cherry Point, NC.

           f. Realign Marine Corps Air Station Beaufort, SC, by
           disestablishing Naval Air Depot Jacksonville Detachment Beaufort
           and transferring all depot maintenance workload and capacity to
           Fleet Readiness Center East Site Beaufort, Marine Corps Air
           Station Beaufort, SC.

           g. Realign Naval Air Station Jacksonville, FL, as follows:
           disestablish Naval Air Depot Jacksonville, Naval Air Depot
           Jacksonville Detachment Jacksonville, and Aircraft Intermediate
           Maintenance Department Jacksonville; establish Fleet Readiness
           Center Southeast, Naval Air Station, Jacksonville, FL; relocate
           depot maintenance workload and capacity for Aircraft
           Avionics/Electronics Components (approximately 8 K DLHs), Aircraft
           Hydraulic Components (approximately 6 K DLHs), Aircraft Landing
           Gear Components (approximately 3 K DLHs), Aircraft Other
           Components (approximately 27 K DLHs), and Aircraft Structural
           Components (approximately 9 K DLHs) to Fleet Readiness Center
           Southeast Site Mayport, hereby established at Naval Air Station,
           Mayport, FL; transfer all remaining intermediate and depot
           maintenance workload and capacity to Fleet Readiness Center
           Southeast, Naval Air Station Jacksonville, FL.

           h. Realign Naval Air Station Mayport, FL, by disestablishing
           Aircraft Intermediate Maintenance Department, Naval Air Depot
           Jacksonville Detachment Mayport, and Naval Air Warfare Center
           Aircraft Division Lakehurst Voyage Repair Team Detachment Mayport
           and transferring all intermediate maintenance workload and
           capacity to Fleet Readiness Center Southeast Site Mayport, Naval
           Air Station Mayport, FL.

           i. Realign Naval Air Station Lemoore, CA, by disestablishing
           Aircraft Intermediate Maintenance Department Lemoore and Naval Air
           Depot North Island Detachment; establishing Fleet Readiness Center
           West, Naval Air Station Lemoore, CA; and transferring all
           intermediate and depot maintenance workload and capacity to Fleet
           Readiness Center West, Naval Air Station Lemoore, CA.

           j. Realign Naval Air Station Fallon, NV, by disestablishing the
           Aircraft Intermediate Maintenance Department Fallon and the Naval
           Air Depot North Island Detachment Fallon; establishing Fleet
           Readiness Center West Site Fallon, Naval Air Station Fallon, NV;
           and transferring all intermediate and depot maintenance workload
           and capacity to Fleet Readiness Center West Site Fallon, Naval Air
           Station Fallon, NV.

           k. Realign Naval Air Warfare Center Weapons Division China Lake,
           CA, by disestablishing the Aircraft Intermediate Maintenance
           Department and relocating its maintenance workload and capacity
           for Aircraft (approximately 3 K DLHs), Aircraft Components
           (approximately 45 K DLHs), Fabrication & Manufacturing
           (approximately 6 K DLHs) and Support Equipment (approximately 16 K
           DLHs) to Fleet Readiness Center West, Naval Air Station Lemoore,
           CA.

           l. Realign Naval Air Station Joint Reserve Base Fort Worth, TX, by
           disestablishing the Aircraft Intermediate Maintenance Department,
           establishing Fleet Readiness Center West Site Fort Worth, Naval
           Air Station Fort Worth, TX, and transferring all intermediate
           maintenance workload and capacity to Fleet Readiness Center West
           Site Fort Worth, Naval Air Station Joint Reserve Base Fort Worth,
           TX.

           m. Realign Naval Air Station Whidbey Island, WA, by
           disestablishing the Aircraft Intermediate Maintenance Department,
           establishing Fleet Readiness Center Northwest, Naval Air Station
           Whidbey Island, WA, and transferring all intermediate maintenance
           workload and capacity to Fleet Readiness Center Northwest, Naval
           Air Station Whidbey Island, WA.

           n.1 (Deleted)

           o. Realign Naval Air Station North Island, Naval Base Coronado,
           CA, as follows: disestablish Naval Air Depot North Island,
           COMSEACONWINGPAC (AIMD), and NADEP North Island Detachment North
           Island; establish Fleet Readiness Center Southwest, Naval Air
           Station North Island, Naval Base Coronado, CA; relocate depot
           maintenance workload and capacity for aircraft
           Avionics/Electronics Components (approximately 6 K DLHs), Aircraft
           Hydraulic Components (approximately 2 K DLHs), Aircraft Landing
           Gear Components (approximately 3 K DLHs), aircraft Other
           Components (approximately 13 K DLHs), and Aircraft Structural
           Components (approximately 4 K DLHs) from Naval Air Depot North
           Island to Fleet Readiness Center Southwest Site Point Mugu, hereby
           established at Naval Air Station Point Mugu, Naval Base Ventura,
           CA; relocate depot maintenance workload and capacity for Aircraft
           avionics/Electronics Components (approximately 26 K DLHs),
           Aircraft Hydraulic Component (approximately 8 K DLHs), Aircraft
           Landing Gear Components (approximately 13 K DLHs), Aircraft Other
           Components (approximately 55 K DLHs), Aircraft Structural
           Components (approximately 16 K DLHs) from Naval Air Depot North
           Island to Fleet Readiness Center Southwest Site Miramar, hereby
           established at Marine Corps Air Station Miramar, CA; relocate
           depot maintenance workload and capacity for Aircraft
           Avionics/Electronics Components (approximately 8 K DLHs), Aircraft
           Hydraulic Components (approximately 2 K DLHs), Aircraft Landing
           Gear Components (approximately 4 K DLHs), Aircraft Other
           Components (approximately 17 K DLHs), and Aircraft Structural
           Components (approximately 5 K DLHs) from Naval Air Depot North
           Island to Fleet Readiness Center Southwest Site Pendleton, hereby
           established at Marine Corps Air Station Camp Pendleton, CA;
           relocate depot maintenance workload and capacity for Aircraft
           Avionics/Electronics Components (approximately 6 K DLHs), Aircraft
           Hydraulic Components (approximately 2 K DLHs), Aircraft Landing
           Gear Components (approximately 3 K DLHs), Aircraft Other
           Components (approximately 12 K DLHs), Aircraft Structural
           Components (approximately 3 K DLHs) from Naval Air Depot North
           Island to Fleet Readiness Southwest Site Yuma, hereby established
           at Marine Corps Air Station Yuma, AZ; relocate depot maintenance
           workload and capacity for Aircraft Avionics/Electronics Components
           (approximately 6 K DLHs), Aircraft Hydraulic Components
           (approximately 2 K DLHs), Aircraft Landing Gear Components
           (approximately 3 K DLHs), Aircraft Other Components (approximately
           12 K DLHs), and Aircraft Structural Components (approximately 3 K
           DLHs) from Naval Air Depot North Island to Fleet Readiness Center
           West Site Fort Worth, Fort Worth TX; relocate depot maintenance
           workload and capacity for Aircraft Avionics/Electronics Components
           (approximately 25 K DLHs), Aircraft Hydraulic Components
           (approximately 8 K DLHs), Aircraft Landing Gear Components
           (approximately 13 K DLHs), Aircraft Other Components
           (approximately 53 K DLHs), and Aircraft Structural Components
           (approximately 15 K DLHs), from Naval Air Depot North Island to
           Fleet Readiness Center Northwest, Naval Air Station Whidbey
           Island, WA; and transfer all remaining intermediate and depot
           maintenance workload and capacity to Fleet Readiness Center
           Southwest, Naval Air Station North Island, Naval Base Coronado,
           CA.
			  
1By Motion 165-3A, the Commission struck paragraph "n", which read
"Realign Naval Support Activity Crane, IN, by relocating the depot
maintenance workload and capacity for ALQ-99 Electronic Warfare to Fleet
Readiness Center Northwest, Naval Air Station Whidbey Island, WA."

           p. Realign Naval Air Station Point Mugu, Naval Base Ventura, CA,
           by disestablishing the Aircraft Intermediate Maintenance
           Department and transferring all intermediate maintenance workload
           and capacity to Fleet Readiness Center Southwest Site Point Mugu,
           Naval Base Ventura, CA.

           q. Realign Marine Corps Air Station Miramar, CA, by transferring
           depot maintenance workload and capacity for Aircraft Other
           (approximately 28 K DLHs) and Aircraft Fighter/Attack
           (approximately 39 K DLHs) and intermediate maintenance workload
           and capacity for Aircraft Components, Aircraft Engines,
           Fabrication & Manufacturing and Support Equipment from Marine
           Aviation Logistics Squadron (MALS)-11 and 16 to Fleet Readiness
           Center Southwest Site Miramar, Marine Corps Air Station Miramar,
           CA.

           r. Realign Marine Corps Air Station Camp Pendleton, CA, by
           transferring depot maintenance workload and capacity for Aircraft
           Other (approximately 22 K DLHs) and Aircraft Rotary (approximately
           102 K DLHs) and intermediate maintenance workload and capacity for
           Aircraft Components, Aircraft Engines, Fabrication & Manufacturing
           and Support Equipment from MALS-39 to Fleet Readiness Center
           Southwest Site Camp Pendleton, Marine Corps Air Station Camp
           Pendleton, CA.

           s. Realign Marine Corps Air Station Yuma, AZ, by transferring
           depot maintenance workload and capacity for Aircraft
           Fighter/Attack, Aircraft Other and Aircraft Rotary and
           intermediate maintenance workload and capacity for Aircraft
           Components, Aircraft Engines, Communication/Electronics Equipment,
           Ordnance Weapons & Missiles, Software and Support Equipment from
           MALS-13 to Fleet Readiness Center Southwest Site Yuma, Marine
           Corps Air Station Yuma, AZ.
			  
			  Appendix III: Comments from the Department of Defense
			  
			  Appendix IV: GAO Contacts and Staff Acknowledgments
			  
			  GAO Contact

           Brian J. Lepore, (202) 512-4523 or [email protected]
			  
			  Acknowledgments

           In addition to the person named above, Michael Kennedy, Assistant
           Director; Avrum I. Ashery; Pat L Bohan; Grace A. Coleman; Julia C.
           Matta; Charles W. Perdue; Maria-Alaina I. Rambus; and John E.
           Trubey also made major contributions to this report.
			  
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(350804)

[46]www.gao.gov/cgi-bin/getrpt?GAO-07-304 .

To view the full product, including the scope
and methodology, click on the link above.

For more information, contact Brian Lepore at (202) 512-4523 or
[email protected].

Highlights of [47]GAO-07-304 , a report to congressional committees

June 2007

MILTARY BASE CLOSURES

Projected Savings from Fleet Readiness Centers Likely Overstated and
Actions Needed to Track Actual Savings and Overcome Certain Challenges

The 2005 Base Realignment and Closure (BRAC) recommendation to establish
fleet readiness centers was expected to yield more savings than any other
of the 2005 BRAC recommendations. To achieve these savings the Navy plans
to integrate civilian depot personnel to complete some repairs at
intermediate maintenance departments to reduce aviation maintenance costs.
This report, prepared under the Comptroller General authority to conduct
evaluations on his own initiative, is one in a series of reports related
to the 2005 BRAC recommendations. GAO's objectives were to (1) analyze the
reasons for changes in costs and savings estimates since the
recommendation was approved, and (2) identify challenges in implementing
this BRAC recommendation. GAO analyzed Navy and BRAC Commission costs and
savings estimates and interviewed officials at the Naval Air Systems
Command and at three fleet readiness centers.

[48]What GAO Recommends

GAO is making recommendations for the Navy to adjust its business plan to
include only savings directly related to implementing this BRAC
recommendation and to monitor actual savings realized as the
recommendation is implemented.

In commenting on a draft of this report, DOD concurred with our
recommendations.

The Navy has increased onetime costs, decreased onetime savings and
increased annual recurring savings expected from the fleet readiness
centers recommendation, but GAO believes the savings are likely
overstated. In preparing a detailed business plan for implementing the
recommendation, the Navy increased onetime costs by $31 million or 96
percent because of costs associated with relocating employees and
inflation. The Navy also decreased expected onetime savings from reduced
inventory levels by $594 million or 92 percent because Navy officials
believed earlier estimates were too optimistic. GAO's analysis of
inventory levels for a sample of aviation items indicates that the
majority of the revised savings estimate will not occur during the 6-year
BRAC implementation period and the amount of such savings are uncertain at
this time. GAO believes the annual recurring savings are overstated by
about $53 million or 15 percent because the Navy's estimate includes $28
million in savings from eliminating military personnel, which may be
assigned elsewhere rather than taken out of the force structure, and $25
million in onetime savings that was erroneously reported as recurring
savings. While projected savings would remain substantial, they are still
subject to some uncertainties and further efforts will be required to
assess actual savings as this recommendation is implemented.

Change in Projected Cost and Savings Estimates (in millions)

                                             Navy Business Difference 
Category                BRAC Commission^a        Plan^b     Amount Percent 
Onetime costs                         $34           $65        $31      96 
Onetime savings                       648            54      (594)    (92) 
Annual recurring                                                           
savings                               250           311         61      25 

Source: DOD.

^aIn fiscal year 2005 constant dollars.

^bIn then-year current dollars.

The Navy faces challenges in ensuring projected savings are realized and
faces some workforce challenges in implementing the recommendation. Since
the Navy has already included projected BRAC savings in its budget for
fiscal years 2007 through 2011, it will be important for the Navy to
monitor the extent to which these savings are actually achieved to prevent
adverse affects on naval aviation readiness or the need for additional
funding. The Navy also faces workforce challenges, such as identifying and
moving about 150 depot artisans with the right skills to various
intermediate maintenance departments and integrating a primarily civilian
depot workforce with the military intermediate department workforce. This
mixing of diverse cultures could pose some challenges in implementation
but should help develop a better trained and more productive workforce.
The Navy will need sustained leadership to successfully establish the
fleet readiness centers.

References

Visible links
  26. http://www.gao.gov/cgi-bin/getrpt?GAO-05-785
  27. http://www.gao.gov/cgi-bin/getrpt?GAO-05-785
  28. http://www.gao.gov/cgi-bin/getrpt?GAO-05-785
  29. http://www.gao.gov/cgi-bin/getrpt?GAO-05-785
  30. http://www.gao.gov/cgi-bin/getrpt?GAO-05-520T
  31. http://www.gao.gov/cgi-bin/getrpt?GAO-02-95
  32. http://www.gao.gov/cgi-bin/getrpt?GAO-03-1023
  33. http://www.gao.gov/cgi-bin/getrpt?GAO-05-785
  34. http://www.gao.gov/cgi-bin/getrpt?GAO-04-39
  35. http://www.gao.gov/cgi-bin/getrpt?GAO-04-39
  36. http://www.gao.gov/cgi-bin/getrpt?GAO-04-39
  37. http://www.gao.gov/cgi-bin/getrpt?GAO-04-39
  38. http://www.gao.gov/
  39. mailto:[email protected]
  40. http://www.gao.gov/
  41. http://www.gao.gov/
  42. http://www.gao.gov/fraudnet/fraudnet.htm
  43. mailto:[email protected]
  44. mailto:[email protected]
  45. mailto:[email protected]
  46. http://www.gao.gov/cgi-bin/getrpt?GAO-07-304
  47. http://www.gao.gov/cgi-bin/getrpt?GAO-07-304
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