Military Base Realignments and Closures: Transfer of Supply,
Storage, and Distribution Functions from Military Services to
Defense Logistics Agency (26-OCT-07, GAO-08-121R).
As a result of the 2005 base realignment and closure (BRAC)
round, the military services are required to transfer to the
Defense Logistics Agency (DLA) all of their supply, storage, and
distribution functions at specified depot maintenance locations
that are collocated with a DLA distribution depot. These transfer
actions are part of a larger BRAC recommendation, commonly
referred to as the Supply, Storage, and Distribution (SS&D)
recommendation, that is intended to reduce both the number of
supply distribution depots and related excess capacity, while
providing the Department of Defense (DOD) with a logistics base
that saves money and enhances the effectiveness of logistics
support to operational forces. There has been disagreement among
the services and DLA about whether certain personnel positions
that include functions inherently involving both supply and
maintenance operations at the services' industrial depots should
transfer to DLA as part of this recommendation. The Air Force,
Navy, and Marine Corps reached agreement with DLA about these
positions in January, February, and April 2007, respectively.
After repeated opposition to the transfer of certain positions,
in July 2007 the Army agreed to comply with direction from the
Office of the Secretary of Defense (OSD) on the specific
functions and positions to transfer. DLA subsequently submitted
its draft business plan for implementing the SS&D recommendation
to OSD for approval on September 18, 2007. Because of the broad
congressional interest in the implementation of the 2005 BRAC
round recommendations, we prepared this report under the
Comptroller General's authority to conduct evaluations on his own
initiative. Our work was in response to concerns raised by
several congressional offices about possible inefficiencies and
disruptions in depot maintenance production that could
potentially generate higher costs at the department's depot
maintenance activities and affect equipment readiness during a
critical time for maintenance and support of our nation's
warfighters. Our objectives were to determine (1) what efforts
have been made to determine which supply-related functions will
transfer to DLA, (2) what are the military services' key concerns
in implementing the transfer of functions, (3) the extent to
which DLA's plans establish a transfer process that minimizes
disruptions depot maintenance, and (4) what are the estimated
costs and savings associated with implementing this transfer of
functions.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-08-121R
ACCNO: A77688
TITLE: Military Base Realignments and Closures: Transfer of
Supply, Storage, and Distribution Functions from Military
Services to Defense Logistics Agency
DATE: 10/26/2007
SUBJECT: Base closures
Base realignments
Cost overruns
Defense procurement
Employee transfers
Employees
Logistics
Military bases
Military forces
Military materiel
Program evaluation
Strategic planning
Technology transfer
Human capital
Program goals or objectives
Savings estimates
DOD Base Realignment and Closure Program
******************************************************************
** This file contains an ASCII representation of the text of a **
** GAO Product. **
** **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced. Tables are included, but **
** may not resemble those in the printed version. **
** **
** Please see the PDF (Portable Document Format) file, when **
** available, for a complete electronic file of the printed **
** document's contents. **
** **
******************************************************************
GAO-08-121R
* [1]newversion-PDF6-Ordering Information-Young-10-25-07.pdf
* [2]GAO's Mission
* [3]Obtaining Copies of GAO Reports and Testimony
* [4]Order by Mail or Phone
* [5]To Report Fraud, Waste, and Abuse in Federal Programs
* [6]Congressional Relations
* [7]Public Affairs
October 26, 2007
Congressional Addressees
Subject: Military Base Realignments and Closures: Transfer of Supply,
Storage, and Distribution Functions from Military Services to Defense
Logistics Agency
As a result of the 2005 base realignment and closure (BRAC) round, the
military services are required to transfer to the Defense Logistics Agency
(DLA) all of their supply, storage, and distribution functions at
specified depot maintenance locations that are collocated with a DLA
distribution depot.^1 These transfer actions are part of a larger BRAC
recommendation, commonly referred to as the Supply, Storage, and
Distribution (SS&D) recommendation, that is intended to reduce both the
number of supply distribution depots and related excess capacity, while
providing the Department of Defense (DOD) with a logistics base that saves
money and enhances the effectiveness of logistics support to operational
forces. There has been disagreement among the services and DLA about
whether certain personnel positions that include functions inherently
involving both supply and maintenance operations at the services'
industrial depots should transfer to DLA as part of this recommendation.
The Air Force, Navy, and Marine Corps reached agreement with DLA about
these positions in January, February, and April 2007, respectively. After
repeated opposition to the transfer of certain positions, in July 2007 the
Army agreed to comply with direction from the Office of the Secretary of
Defense (OSD) on the specific functions and positions to transfer. DLA
subsequently submitted its draft business plan for implementing the SS&D
recommendation to OSD for approval on September 18, 2007.
Because of the broad congressional interest in the implementation of the
2005 BRAC round recommendations, we prepared this report under the
Comptroller General's authority to conduct evaluations on his own
initiative. Our work was in response to concerns raised by several
congressional offices about possible inefficiencies and disruptions in
depot maintenance production that could potentially generate higher costs
at the department's depot maintenance activities and affect equipment
readiness during a critical time for maintenance and support of our
nation's warfighters. Our objectives were to determine (1) what efforts
have been made to determine which supply-related functions will transfer
to DLA, (2) what are the military services' key concerns in implementing
the transfer of functions, (3) the extent to which DLA's plans establish a
transfer process that minimizes disruptions in depot maintenance, and (4)
what are the estimated costs and savings associated with implementing this
transfer of functions. This review is one in a series of reviews on the
implementation of the closures and realignments in the BRAC 2005 round
that we have undertaken under the Comptroller General's authority to
conduct evaluations on his own initiative. As part of that work, we are
currently reviewing the cost and savings estimates for the larger SS&D
recommendation, as well as the progress and challenges in implementing the
recommendation.
^1In this context, supply, storage, and distribution refers to various
actions to provide repair parts to depot maintenance personnel who perform
repairs and upgrades on equipment that is needed to maintain readiness and
support ongoing military operations.
To address these objectives, we focused on the 13 service industrial sites
that are collocated with DLA depots and were included in the BRAC SS&D
recommendation. We analyzed implementation planning data and interviewed
officials at various levels within DOD, DLA headquarters, the military
services' headquarters, and various service industrial depots cited in the
SS&D recommendation.^2 We also spoke with industrial depot union
representatives for the employees who would potentially be affected by the
transfers in each of the military services. In addition, we reviewed DLA's
cost and savings estimates as presented in its September 2007 draft SS&D
business plan and supporting documents. We also relied on interviews with
DLA and service officials and analyses conducted as part of our ongoing
work on implementation of the SS&D recommendation. We reviewed DLA's
planning actions regarding the transfer of functions virtually as they
were occurring. While we determined that the data presented in DLA's
planning documents were sufficiently reliable for the purposes of this
report, it should be noted that BRAC business plans are considered
"living" documents and the data presented therein represent a point in
time as plans are subject to change as implementation proceeds. Moreover,
since this report contains data from the draft business plan for the SS&D
recommendation, the data used in this report could change if the business
plan is revised.
We relied heavily on testimonial evidence as to actions that are planned
to occur in the future because little other evidence existed at the time
of our review. Specifically, because the implementation planning process
is not yet complete and no SS&D functions are expected to transfer prior
to October 2007, little documentary evidence was available to assess DLA
and the services' planning efforts. Moreover, at the time of our review,
only the Air Force and Navy had begun detailed implementation planning
with DLA at the depot level. Only after the BRAC SS&D recommendation is
fully implemented can the precise effects of the transfer of SS&D
functions to DLA on depot maintenance be determined. Furthermore, since
this review only focused on the industrial sites included in the BRAC
recommendation, we did not include in our review nine other service
sites^3 that were not included in the BRAC recommendation but that were
required by the Under Secretary of Defense for Acquisition, Technology,
and Logistics in a June 22, 2005, administrative decision to transfer
similar supply-related functions and associated personnel to DLA. We
conducted our review from June 2007 through September 2007 in accordance
with generally accepted government auditing standards. More detailed
information on our scope and methodology appears in enclosure I.
^2Anniston Army Depot, Alabama; Corpus Christi Army Depot, Texas; Naval
Aviation Depot, Cherry Point, North Carolina; Norfolk Naval Base,
Virginia; Marine Corps Maintenance Center Albany, Georgia; Norfolk Naval
Shipyard, Virginia; Tobyhanna Army Depot, Pennsylvania; and Warner Robins
Air Logistics Center, Georgia.
^3The nine sites are Davis-Monthan Air Force Base, Arizona; Letterkenny
Army Depot, Pennsylvania; Naval Air Warfare Center Lakehurst, New Jersey;
Naval Undersea Warfare Center Keyport, Washington; Naval Weapons Station
Seal Beach, California; Pearl Harbor Naval Shipyard, Hawaii; Portsmouth
Naval Shipyard, Maine; Rock Island Arsenal, Illinois; and Weapon Station
Charleston, South Carolina.
Results in Brief
DLA and the services have taken several actions in an effort to reach
agreement on which SS&D functions and related positions and inventories
are to transfer to DLA as a result of implementing the 2005 BRAC SS&D
recommendation. These actions have been ongoing since late 2005 when DLA
began its planning process for implementing the consolidation of SS&D
functions across DOD. Some key actions include defining SS&D functions at
the beginning of the planning process, contracting a study to assess the
effects and risks associated with the transfers, establishing integrated
process teams to work through problems and concerns and identify potential
solutions, and conducting detailed analyses of depot positions to identify
transfer candidates. DLA has also worked with the services to develop
comprehensive action plans that include specific and detailed actions that
identify each task's duration, including start and completion dates;
percentage completed; organization and personnel assigned; criticality of
task; and milestones. For example, as of June 6, 2007, the action plan for
implementing the SS&D recommendation at Warner Robins Air Logistics Center
included these details for 773 organizational areas and tasks. As of April
2007, DLA had reached initial agreements with the Air Force, Navy, and
Marine Corps on which functions and positions are to transfer to DLA;
however, the Army opposed transferring positions it considers related to
its production functions. On July 20, 2007, the Under Secretary of Defense
for Acquisition, Technology, and Logistics directed the Army to transfer
191.3 full-time equivalent positions to DLA, and the Army subsequently
confirmed that it would transfer these positions to DLA as directed.
Although the services have reached agreement with DLA on the specific
functions to be transferred, officials from all of the services have
expressed concerns in four key areas regarding the transfers. First,
officials from all of the services expressed concern that the insertion of
DLA into the internal operations of their depot maintenance activities may
hinder their ability to meet depot production schedules and maintain
equipment readiness. The Army's continued reluctance to ultimately reach
agreement with DLA regarding the positions to be transferred stems from
concerns related to its work-in-process operations, which comprise highly
integrated production and supply functions with many of the same personnel
performing both functions. Army officials maintained that these positions
should not transfer to DLA because of their production functions. Second,
depot maintenance officials expressed concern that if the transfer of
functions to DLA takes place using DLA's existing price structure, it
would increase the cost of depot maintenance operations and the depots
will have to pass these additional costs on to their customers by
increasing their hourly rates, which, in turn, would affect their
operation and maintenance budgets. Third, officials from each of the
services expressed concern about the future maintenance, upgrades, and
usage of service information technology systems transferring with depot
maintenance supply functions to DLA. Fourth, depot maintenance and service
officials expressed concerns about several human capital issues, ranging
from turnover among affected employees and limited promotion potential to
the possibility of outsourcing transferred positions to the private
sector. The extent to which any of these concerns may actually materialize
is unknown, as implementation has not yet begun.
DLA is developing plans to minimize the risk of disrupting depot
maintenance, but it faces several challenges. While no plan can guarantee
that no disruptions will occur, DLA's evolving plans incorporate several
features that we believe, if implemented as intended, are likely to lessen
the risk associated with the transfer of functions. These features, some
of which are designed to address challenges faced by DLA and the services,
include the transferring of SS&D positions on an "as-is, where-is" basis,
which means that employees filling those positions will perform the same
duties at the same location. In addition, DLA plans to time phase the
transfer of SS&D functions across the implementation period, which extends
to September 2011. The general order of progression begins with the Air
Force in October 2007, followed in succeeding years by the Navy, then the
Marine Corps, and then the Army. DLA has established integrated process
teams along with a plan of action and milestones, and has flexibility to
adjust the numbers of positions to transfer if further analysis warrants.
Furthermore, DLA and the Air Force have negotiated a memorandum of
agreement to establish business rules that set forth the requirements and
responsibilities for implementation planning. DLA and the other services
are to complete such agreements as implementation continues. Finally, DLA
and the services plan to negotiate agreements that will establish
responsibilities, metrics to measure performance, costs, and business
rules that should help minimize the risk of disrupting depot maintenance.
Our analysis of the BRAC Commission cost and savings estimates^4 and DLA's
planning documents shows that over the fiscal year 2006 to 2011 BRAC
implementation period, estimated costs have increased by about $45 million
and estimated savings have decreased--by about $1 billion--for
transferring the SS&D functions and associated inventories from the
military services' industrial depots to DLA. We noted changes to the
estimates in three key areas: information technology costs, civilian
personnel savings, and inventory-related savings. First, we found that as
of September 2007, integrating the services' inventory management systems
with DLA's systems is expected to cost $79 million--an increase of $45
million above the original 2005 BRAC Commission estimate. Second, the
estimated savings associated with reducing civilian personnel are expected
to be almost $11 million--a decrease of about $13 million--due to the
elimination of fewer positions. There are no savings associated with the
immediate transfer of positions from the services to DLA because the
transfers are being made on an "as-is, where-is" basis. Instead, the
estimate for civilian salary savings was based on the expectation that DLA
would eliminate in the future 6.5 percent of the positions that
transferred from the services' industrial depots to DLA, beginning in
fiscal year 2007. The 6.5 percent factor was used by the BRAC Commission
to estimate eliminations and personnel savings. DLA has used this same
factor to project personnel savings. DLA officials told us that they plan
to achieve this goal over time through attrition. Third, we found that all
but about $31 million of the initial estimated savings of about $1 billion
for transferring SS&D functions and associated inventories have been
eliminated. The BRAC Commission's estimate for transferring SS&D functions
and associated inventories from the services' industrial depots to DLA was
based on data generated by DOD during the BRAC decision-making process,
and the belief that eliminating duplicate inventory--inventory stored by
both the services and the DLA depots--would produce savings. However,
after further review, DLA and the services found that the data were
flawed. For example, war reserve materiel, materiel held for other
customers, and materiel stored at the Red River Army Depot were
incorrectly included in the BRAC estimating model. Therefore, the
estimated savings associated with these items will not occur. Once DLA
realized this, it replaced the initial estimated savings with about $203
million in projected savings of which almost $172 million were derived
from inventory reduction initiatives that are not directly a result of
BRAC actions. Finally, cost increases for certain operation and
maintenance costs may be associated with the transfer of SS&D functions,
but at the time of our review these cost data were not available to
determine the extent to which these costs are applicable to the transfer
of functions.
^4The BRAC Commission estimates are based on DOD's use of the Cost of Base
Realignment Actions model, which is not intended to and does not present
budget quality estimates. Consequently, the costs and savings calculated
by the model are likely to be different from the costs and savings that
will actually materialize. The estimates as presented in this report are
shown in then-year dollars to provide for equitable comparative purposes
between Commission estimates and current estimates.
In commenting on a draft of this report, DOD concurred in principle with
our findings and conclusions. DOD further provided comments that were
intended to clarify its estimates for the savings to be achieved for the
transfer of supply-related functions that it believes are attributable to
BRAC. DOD's comments and our evaluation of them are discussed on page 23.
Background
On May 13, 2005, the Secretary of Defense made public his recommendations
for the 2005 BRAC round. The BRAC Commission, established by law^5 as an
independent entity to evaluate DOD's recommendations, presented its
findings, along with its own recommendations, to the President on
September 8, 2005. The President approved the Commission's recommendations
in their entirety and forwarded them to Congress on September 15, 2005.
When Congress did not pass a joint resolution of disapproval of the
recommendations, they became effective on November 9, 2005. DOD has until
September 15, 2011, to complete the implementation of all recommendations.
In our July 2005 report on the 2005 BRAC round process and
recommendations,^6 we reported that the 2005 BRAC round was different from
prior BRAC rounds in that relatively few of the recommendations focused on
closing active bases. In establishing goals for the 2005 BRAC round, the
Secretary of Defense expressed his interest in "transforming DOD by
aligning the infrastructure with the defense strategy"; consequently,
several of the recommendations from the 2005 round involved business
process reengineering efforts.^7 The selection criteria incorporated into
the legislation authorizing the 2005 BRAC round^8 required DOD to give
priority to four criteria dealing with military value, while the extent
and timing of potential costs and savings was one of several "other"
criteria that were required to be considered when finalizing proposed
recommendations for realignments and closures.
^5Pub. L. No. 101-510, Title XXIX (1990) as amended by Pub. L. No.
107-107, Title XXX (2001); 10 U.S.C. S 2687 note.
^6GAO, Military Bases: Analysis of DOD's 2005 Selection Process and
Recommendations for Base Closures and Realignments, GAO-05-785
(Washington, D.C.: July 1, 2005).
The SS&D recommendation from the 2005 BRAC round is a business process
reengineering recommendation that is intended to reconfigure DLA's
distribution depot network to save money and enhance the effectiveness of
logistics support to operational forces. It also includes provisions to
consolidate all SS&D functions and inventories at various designated
service industrial locations to DLA. The complete text of this
recommendation is reprinted in enclosure II. In our 2005 report, we stated
that there was uncertainty regarding the magnitude of savings likely to be
realized in some aspects of the DLA-managed BRAC recommendations, given
assumptions regarding expected efficiency gains from business process
reengineering efforts that had not been validated. We reported that the
magnitude of the estimated savings was uncertain because the estimates
were based on assumptions that were subject to only limited testing and
had not been validated. We found that the savings estimates for the
DLA-managed BRAC recommendations, for the most part, were based on
historical documentation, which time did not allow us to validate. We
reported that this could lead to a false sense of savings and lead to
premature reductions in affected budgets in advance of actual savings
being fully realized, as has sometimes occurred in past efforts to achieve
savings through business process reengineering efforts.
In September 2005, DLA was designated as the business manager for
implementing the SS&D recommendation within DOD. DLA is responsible for
developing and updating a business plan for this recommendation and
coordinating implementation efforts among all of the services. The
business plan is intended to provide, among other things, details on
actions and time frames, along with estimated costs and savings associated
with implementing the recommendations. The SS&D business plan was
submitted to OSD for approval on September 18, 2007. Under OSD direction,
DLA is required to update the plan semiannually in February and August of
each year until implementation actions are complete. Once implemented as
planned, the SS&D recommendation will change DLA's wholesale storage and
distribution infrastructure into four hub-and-spoke geographical regions
within the continental United States, with each region having one hub,
known as a strategic distribution platform,^9 and multiple spokes, known
as forward distribution points.^10 Each strategic distribution platform is
designed to have state-of-the-art capabilities for packaging and shipping
supplies to its designated customers. Distribution depots, no longer
needed for regional supply, will be realigned as forward distribution
points and will provide dedicated receiving, storing, and issuing
functions solely in support of on-base industrial customers, such as
maintenance depots, shipyards, and air logistics centers. Under this
recommendation, forward distribution points will consolidate all supply
and storage functions supporting industrial activities, to include those
internal to depots and shipyards, and those at any intermediate levels
that may exist. Figure 1 identifies the locations of the reconfigured SS&D
depot system.
^7Business process engineering can be generally defined as an approach for
redesigning the way work is done to better support an organization's
mission and reduce costs. In this context, these recommended actions are
intended to transform existing distribution and procurement processes to
increase savings and more efficiently support the warfighter.
^8National Defense Authorization Act for Fiscal Year 2002, Pub. L. No.
107-107, Title XXX (2001).
^9A strategic distribution platform provides distribution and storage
support to designated customers.
^10Forward distribution points provide storage and distribution support to
on-base industrial customers, and selected other local customers, and
support for reimbursable end items, hard-to-handle items, and hazardous
items at that location.
Figure 1: Locations of DLA's Planned Reconfiguration of the Supply,
Storage, and Distribution Depot System
There are 36 DLA and service SS&D activities, both inside and outside of
the continental United States. However, only 26 of these activities--13
DLA depots that are collocated with 13 of the services' industrial
facilities--are affected by the SS&D recommendation. One DLA distribution
depot, located at the Red River Army Depot in Texas, was not mentioned by
the BRAC Commission in its September 2005 report, and thus this depot is
not subject to any BRAC 2005 actions. Nine other of the services'
industrial facilities--two Army depots, one Air Force depot, and six Navy
industrial activities--would be unaffected by the changes, because they
are also not included in the BRAC recommendation. However, in order to
establish a more effective and efficient supply chain, an administrative
decision made by the Under Secretary of Defense for Acquisition,
Technology, and Logistics on June 22, 2005, directed that the supply and
storage functions and associated personnel and facilities at these 9
service facilities should also be transferred in place to DLA.
Beginning in October 2007, the Air Force is scheduled to be the first
service to transfer its SS&D functions to DLA at the Warner Robins Air
Logistics Center in Georgia. A draft plan of action with milestones has
been developed and the Air Force is proceeding with the implementation of
the transfer. The other two air logistics centers, located at Tinker Air
Force Base in Oklahoma and Hill Air Force Base in Utah, are scheduled to
transfer their SS&D functions to DLA after Warner Robins. In May 2007, the
Navy held pre-implementation meetings and established pre-implementation
integrated process teams with DLA to begin its negotiations for developing
a similar plan of action and milestones for its industrial locations. DLA
officials told us that implementation of the BRAC SS&D recommendation at
the Marine Corps^12 and Army depots^13 will follow the Navy's
implementation.
DLA and the Services Have Taken Actions to Reach Agreement on Which
Functions Will Transfer
DLA and the services have taken several actions in an effort to reach
agreement on which SS&D functions and related positions and inventories
are to transfer to DLA as a result of the 2005 BRAC SS&D recommendation.
As part of the process of formulating recommendations for BRAC, the Supply
and Storage Joint Cross-Service Group,^14 which included DLA and service
officials, defined supply, storage, and distribution services in its May
2005 report as requisitioning, receiving, storing, issuing, and
distributing supplies and materiel as well as materiel management, stock
control, materiel acquisition, disposal, and reutilization.^15 DLA has
used this definition to guide its actions for implementing the
consolidation of SS&D functions across DOD. Following the approval of the
BRAC recommendations in November 2005, DLA and the services began the
planning process for implementing the SS&D recommendation. Initially, as
planning efforts got under way, DLA contracted with the Logistics
Management Institute (LMI) to assess the SS&D operations at all affected
depots, identify the risks to depot operations of transferring these
functions, and recommend which functions should transfer to DLA at each
site. This study included site visits to all affected industrial sites by
DLA and LMI officials as well as extensive data gathering and analyses.
Although the study's report recommended that DLA be conservative in
interpreting which functions it would assume responsibility for, DLA and
OSD officials believed that the study did not take into consideration the
language in the BRAC recommendation requiring the transfer of "all" SS&D
functions to DLA.
^11The Navy locations where the SS&D recommendation will be implemented
are Marine Corps Air Station Cherry Point, Cherry Point, North Carolina;
Naval Air Station Jacksonville, Jacksonville, Florida; Naval Station San
Diego, San Diego, California; Naval Station Norfolk, Norfolk, Virginia;
and Naval Station Bremerton, Bremerton, Washington.
^12The Marine Corps locations where the SS&D recommendation will be
implemented are Marine Corps Logistics Base, Albany, Georgia, and Marine
Corps Logistics Base, Barstow, California.
^13The Army locations where the SS&D recommendation will be implemented
are Anniston Army Depot, Anniston, Alabama; Corpus Christi Army Depot,
Corpus Christi, Texas; and Tobyhanna Army Depot, Tobyhanna, Pennsylvania.
^14Because of the interest in pursuing transformation and fostering more
jointness across the various defense components, seven joint cross-service
groups addressing education and training, headquarters and support
activities, industrial, intelligence, medical, supply and storage, and
technical activities were established early in the BRAC decision-making
process to formulate potential recommendations to achieve these goals. The
Supply and Storage Joint Cross-Service Group pursued logistics economies
to reduce the number of sites and related excess capacity across various
defense components.
^15The Supply and Storage Joint Cross-Service Group report also includes
requirements determination in its definition, but that was subsequently
removed from the definition by DLA and the OSD BRAC Office. As a result,
the services are expected to continue with determining requirements, but
DLA is also expected to participate as a collaborative partner in the
requirements determination process.
Furthermore, DLA officials conducted visits to affected depots and met
with key officials to better understand depot operations at each site.
These visits, in conjunction with the LMI study, helped to identify SS&D
functions. After these functions were identified in late 2006, DLA
negotiated agreements with the Air Force and Navy on which SS&D positions
would transfer and established timelines for these transfers. DLA plans to
use integrated process teams,^16 which will include representatives from
DLA and the services, to work through problems and concerns related to the
transfer of functions at each affected depot and identify potential
solutions. For example, the SS&D integrated process team at Warner Robins
partnered with the Air Force to conduct a manpower study that resulted in
an increase of 99 positions--from 166 to 265--that would transfer to DLA
from the Warner Robins Air Logistics Center. Similar manpower studies also
increased the number of positions that are to be transferred to DLA at the
Air Force's other two air logistics centers.
The Marine Corps and the Army were more hesitant to transfer the SS&D
functions to DLA because some of the positions considered for transfer
included highly integrated production and supply functions, with the same
personnel performing both functions, and there was not a clear distinction
as to which positions should transfer. The OSD BRAC Office, reporting to
the Under Secretary of Defense for Acquisition, Technology, and Logistics,
subsequently worked with DLA and the two services on a
position-by-position analysis of jobs at affected Marine Corps and Army
depots to identify transfer candidates. This analysis identified job
series, grade, and title; the number of full-time equivalent positions
held by civilian, military, and contractor personnel; major tasks and
functions performed; the proposed classification of the position (e.g.,
production, supply, storage, or distribution); and the rationale or
support for the proposed classification. This position analysis
facilitated a subsequent agreement among the Under Secretary of Defense
for Acquisition, Technology, and Logistics; DLA; and the Marine Corps on
April 30, 2007, that supply "begins when a demand signal is generated by a
production planner or artisan in the production planning system and that
all subsequent requisition processing, expediting, local purchase, credit
card purchase, status monitoring, receive, stow, and issue functions, etc.
that take place before material hand-off into the production stream are
examples of supply, storage, and distribution activities."
As of April 2007, DLA had reached initial agreements with the Air Force,
Navy, and Marine Corps on which functions and positions are to transfer to
DLA, with the understanding that the number of positions may increase or
decrease as implementation matures. However, the Army opposed transferring
positions it considered related to its production functions due to
concerns about potential impacts on its ability to meet maintenance
production schedules. On July 20, 2007, after DLA and the Army made
several unsuccessful attempts to resolve these differences, the Under
Secretary of Defense for Acquisition, Technology, and Logistics directed
the Army to transfer 191.3 full-time equivalent positions to DLA. These
positions were identified using the same position analysis and definition
of supply agreed upon by the Marine Corps. On July 26, 2007, the Army
confirmed that it would transfer the 191.3 full-time equivalent positions
to DLA as directed. Table 1 shows the number of full-time equivalent
civilian and contractor positions anticipated to transfer to DLA at each
collocated industrial depot as of September 2007.
^16DLA plans to establish seven integrated process teams to work through
problems and concerns and, where possible, identify solutions at each
transfer site during implementation of the SS&D BRAC recommendation. The
seven teams are Human Performance, Information Technology, Facilities and
Equipment, Financial Management, Change Management, Supply and
Distribution, and Metrics. As of July 2007, these seven teams have only
been established with the Air Force and Navy.
Table 1: Number of Full-time Equivalent Civilian and Contractor Positions
Anticipated to Transfer to DLA at Each Collocated Depot as of September
2007
Estimated
Estimated number number of
of full-time full-time
equivalent equivalent Total full-time
civilian contractor equivalent
position position position
Service Depot location transfers transfers transfers
Hill Air Force
Base, UT 231.00 0 231.00
Air Force Robins Air Force
Base, GA 265.00 0 265.00
Tinker Air Force
Base, OK 365.00 0 365.00
Marine Corps Air
Station Cherry
Point, NC 88.00 0 88.00
Naval Air Station
Jacksonville, FL 29.00 42.00 71.00
Navy Naval Station
Norfolk, VA 120.00 37.00 157.00
Naval Station
Bremerton, WA 89.00 0 89.00
Naval Station San
Diego, CA 49.00 36.00 85.00
Marine Corps
Logistics Base
Marine Albany, GA 25.00 34.00 59.00
Corps Marine Corps
Logistics Base
Barstow, CA 20.60 43.00 63.60
Anniston Army
Depot, AL 63.11 5.00 68.11
Army Corpus Christi
Army Depot, TX 15.53 40.00 55.53
Tobyhanna Army
Depot, PA 45.66 22.00 67.66
All transfer
Total sites 1,405.90 259.00 1,664.90
Source: DLA's September 21 2007, draft SS&D business plan.
Services Have Several Key Concerns regarding the Transfer of Supply,
Storage, and Distribution Functions
Although each service has agreed to transfer to DLA specific supply,
storage, and distribution functions, officials from each of the services
have expressed several key concerns regarding the transfers. These
concerns include the following: (1) DLA's involvement in depot operations
may hinder their ability to meet depot production schedules and maintain
equipment readiness, (2) uncertainty as to the pricing mechanism for DLA
services, (3) information technology interfaces with service and DLA
systems, and (4) human capital issues. The extent to which any of these
concerns may actually materialize is unknown, as implementation has not
yet begun.
Services Concerned That DLA's Insertion into Depot Operations May Hinder
Their Ability to Meet Depot Production Schedules and Maintain Equipment
Readiness
Officials from all four services expressed concern that the insertion of
DLA into the internal operations of their depot maintenance activities may
hinder their ability to meet depot production schedules and maintain
equipment readiness. All stated that as long as they receive the proper
materiel at the correct time, they had no preference as to who provides
the materiel. However, they expressed concern that DLA may not be able to
provide the same level of service that they currently provide for
themselves. To the extent that the level of service provided is lower
under DLA, these officials believed it would degrade their ability to meet
production schedules and maintain equipment readiness, which could
potentially affect ongoing operations. However, DLA officials told us that
they have asked the services for metrics and baseline data and found that
the services may not have all of the supply function metrics and
historical data needed for DLA to benchmark its performance against the
level of service that the services have provided for themselves. Officials
from all of the services commented that as the performance metrics are
developed for the functions transferring to DLA, it would be more
beneficial if they were tied to meeting depot maintenance production
schedules instead of those typically associated with supply performance.
Development of metrics is the focus of one of several integrated process
teams cochaired by DLA and each service. DLA officials stated that metrics
are to be jointly agreed to and are to measure support for depot
maintenance production and traditional supply effectiveness.
In addition, depot maintenance officials said that they have some concerns
that DLA may not be able to retain an appropriate staffing level to carry
out the transferred functions. Service officials said that depot
commanders currently have the flexibility and authority to handle surge
requirements or downsize the workforce, adjust operating schedules,
working hours, and take other staffing actions as needed to adjust to
varying workload levels and requirements. For example, Army depot
maintenance officials informed us that a depot can quickly rightsize its
supply function by moving personnel around to other areas of the depot as
required. They are concerned that DLA with its smaller workforce may not
be able to rightsize as quickly to meet surge requirements or to reduce
unnecessary costs when depot workloads drop off. However, since agreements
have not yet been reached to define the command relationship between the
depot commanders and DLA, depot command officials are concerned that the
depot commanders may not be able to establish and modify the work
schedules for DLA employees or direct them to work overtime during surge
periods. Depot command officials are also concerned that the depot
commanders will have little recourse if DLA fails to perform well, and
sought authority for depot commanders to have input into the performance
rating of the DLA representative in charge of depot SS&D functions.
Furthermore, when primary sources of supply cannot be obtained in time to
meet schedules, depot commanders also have the authority to make purchases
with credit cards, even though that may not be the most cost-effective
source. Uncertainty and concern therefore exist among the services as to
whether this same flexibility would continue with DLA in charge of SS&D
functions. According to DLA officials, even though the local purchasing
function is transferring to DLA, the services are not restricted from
maintaining a purchase card as a contingency measure.
An integral part of the command and control issue pertains to a process
referred to as work in process. Work in process consists of the
components^17 and major subassemblies^18 removed from weapon systems--such
as tanks, ships, tracked and wheeled vehicles, and aircraft--during
disassembly, as well as the new items purchased to support weapon system
depot maintenance. During disassembly, the components and major
subassemblies are removed from the weapon system, cleaned, and evaluated
for future use. Items found serviceable are held until they are needed for
the reassembly of the weapon system. Items needing repair are sent to the
depots' back shops or subcontractors for repair, and once repaired are
held until they are needed to support reassembly; other items may be found
broken or worn beyond repair and must be replaced with new items. In
implementing the BRAC recommendation, the OSD BRAC Office has
distinguished between work-in-process materiel that is stored within
proximity to the depot maintenance production line and that which is
temporarily stored away from the line until it is needed to support weapon
system reassembly. According to the OSD BRAC Office, the management of
materiel within the immediate production area is part of the production
process and consequently is to be retained by the service maintenance
depots. However, the OSD BRAC Office has defined the management of
materiel held and stored away from the production area prior to weapon
system reassembly as an SS&D function that should transfer to DLA.
Army officials disagree with this distinction and told us that the
implementation of the SS&D recommendation inserts DLA into the core of the
Army's depot maintenance mission and breaks the unity of command that the
depot commanders currently have over the maintenance production process.
The Army's continued reluctance over time to reach agreement with DLA
regarding the positions to be transferred stems from concerns related to
its work-in-process operations. Work in process comprises highly
integrated production and supply functions, with many of the same
personnel and equipment performing both functions. Army officials
maintained that these highly integrated positions should not transfer to
DLA because of their production functions. In particular, the Army is
concerned about transferring storage functions and positions associated
with work-in-process materiel. The Army contends that work-in-process
materiel should be retained under the depot commander's control,
regardless of whether it is held on, near, or away from the production
line. This contention is because the storage and distribution of
repairable, serviceable, and new materiel is critical to supporting the
weapon systems' programmed depot maintenance schedules, which are
ultimately the responsibility of the maintenance depot commander. For
example, using OSD's definition, depot maintenance employees would remove
the items from a tactical vehicle as it is disassembled and evaluate
whether the items require repair work. Items not requiring repair would be
sent to DLA to be stored until they are needed for final reassembly. Items
requiring repair would be sent to the appropriate depot repair shops and,
once repaired, they also would be sent to DLA for storage. When needed for
final reassembly, the depot's production planners would recall the items
from DLA for distribution to the depot assembly line. According to the
Army, these internal movements of equipment and materiel would now involve
two separate organizations and two separate chains of command for what is
really a single mission--depot maintenance. Without direct control of work
in process, Army officials told us that a commander's ability to make
monthly and daily production decisions and rapidly shift resource
priorities in response to changing customer requirements will be severely
restricted, which could potentially adversely affect readiness. DLA and
the OSD BRAC Office disagreed with the Army because the recommendation
language requires that "all" SS&D functions are to transfer.
^17Components include items such as hydraulics, landing gear, and
electronics.
^18Major subassemblies include items such as engines, transmissions, and
airframes.
The Army elevated its concerns to the Under Secretary of Defense for
Acquisition, Technology, and Logistics on several occasions, formally
disagreeing with OSD's definition of work in process and in one instance
requesting an exception from this definition for the Army. However, on
July 20, 2007, after a joint assessment of the production functions that
must transfer to DLA by the Army, DLA, and the DOD Office of General
Counsel, the Under Secretary of Defense for Acquisition, Technology, and
Logistics directed the Army to transfer to DLA all of the SS&D functions
specified in the BRAC recommendation in accordance with the OSD
definition. On July 26, 2007, the Army agreed to comply with OSD's
direction.
The Air Force, Navy, and Marine Corps also have work-in-process materiel
embedded in their production line depot maintenance operations. The Marine
Corps' work-in-process operation is very similar to the Army's in that
components and subassemblies are stored at locations away from the
production line. While the Marine Corps has agreed to transfer all of its
SS&D functions to DLA, it shares some of the same concerns as the Army
about potentially losing control of its work in process when the SS&D
functions transfer to DLA. The work-in-process operations for the Air
Force and the Navy's aviation work-in-process operations at its fleet
readiness centers are also similar to the Army's, but their
work-in-process materiel is stored in the same general area as the
production line. As a result, officials from these two services stated
that they expect to retain control over their work-in-process materiel and
not transfer this materiel to DLA.
Finally, Army and Marine Corps depot officials are concerned that
transferring the storage and distribution management of their work in
process to DLA will erode many of the gains made in recent years in
reducing repair cycle time and increasing depot capacity through business
process improvement initiatives. According to Army and Marine Corps depot
officials, one initiative that enabled them to reduce repair cycle time
was moving and temporarily storing work-in-process materiel away from the
production line until needed. These officials believed that transferring
this materiel to DLA could produce unintended consequences. Specifically,
Army and Marine Corps depot officials are concerned that the transfer of
the storage and distribution management of work-in-process to DLA could
result in depot production managers lacking confidence in the timely
return of work in process materiel. This could potentially result in depot
production managers finding ways to avoid sending work in process materiel
to temporary storage away from the production line, thereby eroding many
of the efficiencies gained through process improvement initiatives. To the
extent that such erosion occurs, it could hinder the services' ability to
meet depot production schedules and maintain equipment readiness.
Services Concerned That Use of DLA's Existing Pricing Structure Would Lead
to an Increase in the Overall Cost of Depot Maintenance
Depot maintenance officials expressed concern that if the transfer of
production integrated supply functions to DLA takes place using DLA's
existing price structure, it will increase the cost of depot maintenance
operations and depots will have to pass these additional costs on to their
customers by increasing their hourly rates. Customers would thus pay more
for equipment maintenance, which, in turn, would affect their operation
and maintenance budgets. According to depot officials, under DLA's
standard schedule of supply transaction charges, customers are charged for
each transaction. As a result, they are concerned that transferring the
integrated supply functions to DLA will substantially increase the cost to
the depots and their customers if DLA retains its current pricing
practices. DLA's plans for developing a new pricing methodology as it
gains experience in managing the depots are discussed below, in the
section on performance-based agreements.
Services Concerned about Maintaining and Upgrading Depot Information
Technology Systems and Their Interfaces with DLA Systems
Officials from each of the services expressed concern about the future
maintenance and upgrades of service information technology systems
transferring with depot maintenance supply functions to DLA, as well as
broader implications to the wider service network enterprise resource
planning systems that are dependent on depot maintenance information.
DLA's supply organizations use DLA's distribution supply information
technology system for various supply-related processing functions, such as
receipt, storage location, issue, and inventory accountability. The manner
in which DLA's information systems would interface with the services'
depot maintenance information systems is unclear. For example, Air Force
officials said that they have agreed to turn their maintenance tracking
system over to DLA and DLA has agreed to use it. However, Air Force
officials expressed concerns that when DLA is faced with competing
resource demands for improvements to information technology in the future,
DLA may not choose to maintain or upgrade the system as the Air Force
would and may over time replace the Air Force system with DLA's own
information technology system in the depot. Air Force officials expressed
concern that DLA's system might not be interoperable with the Air Force's
systems, and the Air Force could lose its ability to track the status of
reparable items, which could impede production. In addition, according to
Army depot officials, DLA's information technology system is not
compatible with the standard depot systems used by the Army's depots for
production control or supply storage and retrieval, which are configured
to interface with the standard depot system. Moreover, the Army is in the
process of replacing its standard depot system with its major enterprise
resource planning system--the logistics management program--and is already
facing a number of challenges with that transition at the one depot where
it has been implemented thus far. Army depot officials are concerned that
if DLA replaces the Army systems with its own distribution supply system,
the transition will disrupt depot operations and may not provide the
production control and financial management interfaces the Army needs to
manage its depot maintenance operations. Ultimately, Army officials
believe that replacing their systems with DLA's system will increase DOD's
overall investment costs for information system development.
Services Concerned about Human Capital Issues
Depot maintenance and service officials expressed concerns about several
human capital issues, ranging from turnover among affected employees and
limited promotion potential to the possibility of outsourcing transferred
positions to the private sector. For example, service officials told us
that the pending transfers are already leading to turnover among affected
depot maintenance employees, which poses a risk to the success of the
"as-is, where-is" transfer concept. In anticipation of the transfer, some
workers are making decisions to retire or are pursuing positions elsewhere
in the depots. Tobyhanna Army Depot officials, for instance, said that
since the pending transfer process was announced, six employees who would
have been identified to transfer to DLA have either retired or found
positions in other areas of the depot. In addition, according to Army
depot personnel officials, depot employees expressed concern that their
job prospects may be more limited in the event that DLA conducted a
reduction in force after their positions transferred. They stated that it
is unclear whether depot employees will be able to exercise the bump and
retreat rights^19 that are normally associated with a reduction in force
within the depot workforce or if they will be limited to exercising those
rights only within DLA after they become DLA employees. Furthermore, some
Army employees told us they were concerned that their positions would be
downgraded by DLA. Employee union representatives said that depot
employees' future advancement potential may be more limited after they are
transferred to DLA, unless they are willing to move to other DLA
locations. For example, the union representative at Tobyhanna Army Depot
said that some Army employees transferred to DLA would be limited to pay
levels in wage grades 5 and 6, unless they were willing to move to DLA
operations in Susquehanna, Pennsylvania, or Columbus, Ohio. If these
employees had remained as Army depot employees, they could have
potentially advanced to other positions at higher pay grades because the
Army positions focus on multiple tasks and disciplines, whereas the DLA
positions have a single-focused career path. Union officials at Army
depots also said that as DLA employees, they will no longer be eligible
for inclusion in the depot's annual bonus awards, which they said could be
as high as $1,500 per employee. These union officials expressed concern
that the loss of bonus eligibility might create disharmony between
employees transferring to DLA and the depot employees they must continue
to work with closely on a day-to-day basis. DLA officials pointed out that
there are awards and bonus programs of equal value for DLA employees and
that employee performance in DLA will be rewarded as it is in the
services. Moreover, other Army employees said they were concerned that
after becoming DLA employees they would lose the intangible feeling of
being on the depot maintenance team and the close ties they currently feel
to the warfighter as Army employees repairing major weapon systems.
^19When an agency conducts a reduction in force, some employees are
allowed to bump other employees or retreat into other positions.
``Bumping" means displacing an employee in the same competitive area who
is in a lower-tenure group (type of appointment category)."Retreating"
means displacing an employee in the same competitive area who has fewer
years of service within the same tenure group.
Service and depot officials also expressed concern about a goal DLA has
established for a 6.5 percent reduction in positions over time due to
expected increases in operational efficiency once they take control of the
services' SS&D operations. These officials are concerned because the
depots have instituted several efficiency initiatives and some have also
undergone A-76 competitions since the time of the 2005 BRAC Commission's
estimates. As a result, fewer service personnel are performing all depot
operations, including those SS&D functions that will transfer to DLA, and
they believe that achievement of the 6.5 percent position reduction goal
could lead to understaffing of the depots. DLA officials told us, however,
that they plan to achieve this goal over time based on their actual
experiences in performing the SS&D functions at the depots, and any
elimination of positions would likely be accomplished through attrition.
Furthermore, officials from all of the services, as well as the affected
employees and their union representatives, expressed concern that an A-76
competition might result in the outsourcing of the depot maintenance
supply functions to the private sector.^20 According to union officials,
private firms successful in A-76 bids typically pay their employees a
lower wage and provide fewer benefits than would be available in the
government positions they replace. Depot maintenance officials expressed
similar concerns, and added that contracting out the functions may hinder
the depot commanders' ability to address any deficiencies in the
management of work in process because the A-76 contract would place DLA as
an intermediary between the depot commander and the contractor performing
the functions. According to Army depot maintenance officials, in previous
A-76 competitions DLA organizations reduced staffing levels in their
attempts to compete as the most efficient organization, and consequently
the Army has had to augment its workforce with depot employees to
adequately support depot maintenance operations. For example, DLA's supply
operations at the Tobyhanna Army Depot were retained as a government
operation following an A-76 competition. However, when streamlining
operations to compete with the private sector, DLA lost some experienced
retrograde materiel^21 inspectors through attritions, and consequently the
DLA warehouse experienced a backlog of retrograded material that was
needed on the depot maintenance production line to meet warfighter
requirements. To address this problem, the depot placed two of its
employees permanently at the DLA warehouse to assist in the identification
of retrograded items.
^20Under the A-76 process, otherwise known as competitive sourcing, the
military services and other defense components conduct a public/private
competition for a commercial activity currently performed by government
personnel to determine whether it would be cost-effective to contract with
the private sector for that activity's performance. As of fiscal year
2006, DLA had conducted approximately 16 competitive-sourcing A-76
reviews, covering 5,019 full-time equivalent government positions, with
about half of the operations staying with the government as the most
efficient organization and about half going to the private sector.
^21Retrograde materiel is broken repairable components from combat areas
that are returned to depots for repair.
DLA Is Developing Plans to Minimize the Risk of Disrupting Depot
Maintenance, but Faces Several Challenges
DLA is developing plans to minimize the risk of disrupting depot
maintenance, but it faces several challenges. While no plan can guarantee
that no disruptions will occur, DLA's evolving plans incorporate several
features that we believe, if implemented as intended, are likely to lessen
the risk associated with the transfer of functions. These features, some
of which are designed to address challenges faced by DLA and the services,
include the following:
o "As-is, where-is" transfer. The transfer of SS&D positions is
to occur on an "as-is, where-is" basis, which means that employees
filling those positions will perform the same duties at the same
location during the same working hours. According to DLA
officials, the only difference will be that the employees will
then work for DLA instead of one of the services. To the extent
that this construct is implemented, there would likely be no
disruptions to maintenance production schedules because of the
transfers in place. However, DLA and service officials said that
the "as-is, where-is" transfer process may encounter some
short-term difficulties due to the possibility of current service
employees deciding to leave their positions before the transfer
date. If this occurs, DLA may be challenged to quickly fill
position vacancies and maintain needed expertise to minimize
production disruptions.
o Time-phased transfers. According to DLA officials, the transfer
of SS&D distribution functions is expected to be phased across the
implementation period, which extends to September 2011. For
example, the Air Force is expected to begin transferring functions
in fiscal year 2008, followed by the Navy and Marine Corps in
fiscal year 2009, and the Army in fiscal year 2010. Additionally,
within each service the transfers are to take place sequentially
at the different depots. For example, the Air Force expects to
transfer functions at Warner Robins Air Force Base Air Logistics
Center in early fiscal year 2008, followed by Tinker Air Force
Base Air Logistics Center in the second quarter of fiscal year
2008, and concluding with Hill Air Force Base Air Logistics Center
in the third quarter of fiscal year 2008. According to DLA
officials, time phasing of transfers is intended to allow for the
focused dedication of resources for individual sites. This
approach also allows for the capture of "lessons learned" and
revisions to plans as implementation proceeds. In addition, the
time-phased approach is intended to help overcome the services'
apprehension about inserting DLA in the internal operations of
their depot maintenance activities, as discussed above.
o Integrated process teams and the plan of action and milestones.
At each transfer site, DLA and the services plan to establish
seven integrated process teams^22 that include representatives
from DLA and the services to facilitate the detailed planning
associated with the transfer of functions. The teams are to
develop a comprehensive action plan that includes specific and
detailed actions that identify each task's duration, including
start and completion dates; percentage completed; organization and
personnel assigned; criticality of task; and milestones. For
example, as of June 6, 2007, the action plan developed by the
seven teams, referred to as the Plan of Action and Milestones, for
Warner Robins Air Logistics Center included these details for 773
organizational areas and tasks. DLA and Air Force officials told
us that as implementation progresses, they intend to develop
similar plans to guide the transfers for all other affected depots
and activities for the Air Force and the other services, using the
Warner Robins plan as a model. The teams meet regularly to discuss
implementation issues, work through problems and concerns, and
identify potential solutions and mitigating actions where
possible. For example, an early issue involved the ability of
transferred employees to access the software systems that manage
the SS&D functions in support of the production line after they
transfer to DLA. These software systems currently are only
accessible by Air Force employees. To resolve this issue, the
integrated process teams have identified a number of possible
solutions, one of which is being tested through a pilot process.
o Flexibility on numbers of positions to transfer. While DLA and
the services initially agreed to an estimated number of full-time
equivalents to transfer, the exact number of full-time equivalents
and the specific employees to be transferred at each site will not
be determined until detailed implementation planning occurs with
each service at each site. The initial number of full-time
equivalents agreed to by DLA and the service can be
adjusted--either up or down--in accordance with the current
situation at each site as implementation proceeds, if further
analysis warrants it. For example, as discussed above, based on
data developed during the implementation planning process, the Air
Force is planning to transfer more full-time equivalents than
originally estimated.
o Memorandums of agreement. DLA and the services are to negotiate
memorandums of agreement to establish business rules that set
forth the requirements and responsibilities for implementation
planning and activities. As of August 2007, the Air Force was the
first service that had negotiated a draft memorandum with DLA. The
draft memorandum of agreement between DLA and the Air Force
establishes the membership on integrated process teams,
leadership, points of contact to resolve implementation issues,
biweekly teleconference requirements, and the Plan of Action and
Milestones as the detailed planning document for implementation.
The memorandum is to be reviewed quarterly and updated as
necessary in a collaborative effort between DLA and the Air Force.
The other services will be negotiating similar memorandums of
agreements, using the Air Force memorandum as a model, and they
plan to incorporate lessons learned from the Air Force's
experiences.
o Performance-based agreements. DLA and the services plan to
negotiate performance-based agreements^23 that will establish the
responsibilities, metrics to measure performance, costs, and
business rules that should help minimize the risk of disrupting
depot maintenance. The overarching goal for these agreements is
for DLA to provide the same level of service at the same or less
cost as is currently provided by the services' SS&D operations.
DLA and service officials stated that reaching agreement on
specific metrics to measure the level of service DLA provides will
be a challenge. These officials also said that reaching agreement
on the cost for SS&D functions and the mechanism by which DLA will
bill the services will be a challenge because the data required
for these calculations are not readily available. At the time of
our review, DLA officials told us that they do not intend to use
the same supply transaction fee schedule they now use, although
they have not yet developed an alternative price methodology. For
an unspecified interim period, DLA officials plan to maintain the
current level of performance at the same cost, operating the
integrated supply function on a cost reimbursable basis, until
sufficient information on operating cost and performance is
available to develop a new pricing methodology. DLA officials told
us that they plan to be able to offer the depots a pricing
methodology that allows them to purchase increasing levels of
performance based on price. Additionally, DLA plans to establish
appropriate business rules and processes for retail SS&D
functions, such as credit card purchases, local purchases, and
overtime or shift work, which DLA and service officials agreed may
be a challenge because retail supply functions are new to DLA. DLA
and OSD officials have stated that they will work with depot
commanders to ensure that they have the same authorities that they
currently have to authorize local credit card purchases, which are
used to enable depot commanders to obtain needed supplies when
primary sources of supply will not be available in time to meet
maintenance schedules. With respect to naval shipyards, all of the
credit card buyers are transferring to DLA, so shipyard commanders
will expect DLA to acquire all materials when needed. In addition,
the September 21, 2007, business plan includes a provision that
the depot commanders will provide input into the performance
ratings of the DLA maintenance depot representatives.
^22The seven teams are Human Performance, Information Technology,
Facilities and Equipment, Financial Management, Change Management, Supply
and Distribution, and Metrics.
Estimated Costs Increased and Estimated Savings Decreased for Transferring
the Services' SS&D Functions to DLA
Our analysis of the original BRAC Commission cost and savings estimates^24
and other documents shows that over the fiscal year 2006 to 2011 BRAC
implementation period, estimated costs have increased by $45 million and
estimated savings have decreased--by about $1 billion--for transferring
the SS&D functions and associated inventories from the military services'
industrial depots to DLA. We noted estimate changes in three key areas:
information technology costs, civilian personnel savings, and
inventory-related savings. Specifically, we found that as of September
2007, integrating the services' inventory management systems with DLA's
systems is expected to cost almost $79 million--an increase of $45 million
above the original 2005 BRAC Commission estimate. In addition, the
estimated savings associated with reducing civilian personnel are expected
to be almost $11 million--a decrease of about $13 million--due to the
elimination of fewer positions. Furthermore, all but about $31 million of
the initial estimated savings of about $1 billion for transferring SS&D
functions and associated inventories have been eliminated because the
potentially duplicative items on which the savings were based were not
duplicative. Once DLA realized that the estimated savings, which were
based on flawed data generated during the BRAC decision-making process,
would not occur, it replaced the initial savings estimate with about $203
million in estimated savings. However, about $172 million of that revised
estimate was derived from initiatives that are not directly a result of
BRAC actions and is therefore not savings attributable to BRAC. Finally,
cost increases for certain operation and maintenance costs may be
associated with the transfer of SS&D functions, but at the time of our
review these cost data were not available to determine the extent to which
these costs are applicable to the transfer of functions.
^23Performance-based agreements are defined as the negotiated agreements
between the major stakeholders that formally document the performance and
support expectations and resources to achieve the desired outcome.
^24As in all previous BRAC rounds, the BRAC Commission estimates are based
on DOD's use of the Cost of Base Realignment Actions (COBRA) model, which
provides a standard quantitative approach to compare estimated costs and
savings across various proposed recommendations. The COBRA model relies to
a large extent on standard factors and averages but is not intended to and
consequently does not present budget quality estimates. As a result, the
costs and savings calculated by the model are likely to be different from
the costs and savings that will actually materialize.
Estimated Information Technology Costs Have Increased
Our analysis of the SS&D business plan shows estimated information
technology costs of transferring SS&D functions and associated inventories
have increased by $45 million compared to the 2005 BRAC Commission
estimate. Specifically, the estimated information technology costs for
integrating each of the four services' current inventory management
software systems with DLA's systems have increased to almost $79 million,
an increase of more than 130 percent. The BRAC Commission estimate for
these costs was about $34 million for the fiscal year 2006-2011 BRAC time
period. However, information technology requirements and costs were
unknown at the time the BRAC Commission developed its estimates, and the
$34 million was a placeholder amount that was expected to change. A
breakdown of the information technology estimated cost increases by each
depot is in enclosure III. According to service officials, these costs may
continue to increase once the work of integrating DLA's systems with the
services' systems actually begins. This is because modernization of
existing business systems and integration of depot production activities
have complicated the services' ability to accurately identify their
information technology requirements, which impedes their ability to
estimate information technology costs.
Estimated Civilian Salary Savings Have Decreased
Our analysis shows that the estimated personnel savings for transferring
SS&D functions and associated inventories from the services' depots to DLA
have decreased about $13 million from the original 2005 BRAC Commission
estimate due to a decrease in estimated civilian salary savings. There are
no savings associated with the immediate transfer of positions from the
services to DLA because the transfers are being made on an "as-is,
where-is" basis, which means that transferred employees will perform the
same duties at the same locations. Instead, the estimate for civilian
salary savings was based on the expectation that DLA would eliminate in
the future 6.5 percent of the positions that transferred from the
services' industrial depots to DLA, beginning in fiscal year 2007. The 6.5
percent factor was used by the BRAC Commission to estimate eliminations
and personnel savings, and DLA has used this same factor to project
personnel savings in its business plan. DLA officials told us that they
plan to achieve this goal over time based on actual experiences in
performing the SS&D functions at the depots, and any elimination of
positions would be accomplished through attrition. The 2005 BRAC
Commission based its civilian salary savings estimate of about $24 million
on the projected elimination of 114 positions sometime after the transfers
had taken place. However, based on agreements reached between DLA and each
of the services as of September 2007, only 92 positions--22 fewer
positions than originally estimated--are expected to be eliminated or
transferred, which is a reduction of 19 percent. Furthermore, these
transfers and eliminations will begin later than fiscal year 2007 as
originally estimated, which reduces the time period in which the
associated savings can accrue. As of September 2007, no positions have
been eliminated and no civilian salary savings have occurred because
implementation of the transfers is not expected to begin until October
2007. The September 21, 2007, draft business plan estimates that civilian
salary savings will now be almost $11 million, which is a decrease of
about $13 million from the original BRAC Commission estimate--a reduction
of 55 percent. A breakdown of the changes in planned eliminations of
civilian positions at each of the services' industrial depots appears in
enclosure III. One of the reasons for fewer eliminations is that since the
time of the 2005 BRAC Commission's estimates, the services' industrial
depots have instituted several efficiency initiatives and some have also
undergone A-76 competitions. These actions together have resulted in fewer
people performing all depot operations, including those SS&D functions
that will transfer to DLA.
Estimated Inventory Reduction Savings Mostly Have Been Eliminated
Our analysis of the September 21, 2007, SS&D business plan shows that all
but about $31 million of the BRAC Commission's estimated inventory
reduction savings of about $1 billion^25 have been eliminated for the
fiscal year 2006-2011 time period. The BRAC Commission's estimate for
transferring SS&D functions and associated inventories from the services'
industrial depots to DLA was based on the belief that eliminating
duplicate inventory--inventory stored by both the services and the DLA
depots--would produce both onetime and recurring savings.^26 However,
after further review of the potentially duplicative items, DLA and the
services found that data generated by DOD during the BRAC decision-making
process were flawed. For example, war reserve materiel, materiel held for
other customers, and materiel stored at the Red River Army Depot were
incorrectly included in the BRAC estimating model. These items were not
actually duplicative and thus could not be eliminated. As a result, the
savings associated with these items will not occur. In addition, the
original savings estimate included service depots that were either not
collocated with DLA depots or were outside the continental United States,
and therefore these items also could not be considered duplicative.
^25In then-year (current) dollars.
^26Recurring savings would result from avoiding the costs associated with
storing inventory.
Once DLA realized that the estimated savings from duplicate inventory
would not occur as originally planned, it replaced the $1 billion initial
savings estimate in its business plan with estimated savings from four
inventory reduction initiatives.^27 These four initiatives are expected to
produce about $203 million in savings during the fiscal year 2006-2011
BRAC implementation period.^28 While these initiatives are inventory
related and may produce savings, we believe that three of these
initiatives, totaling about $172 million, are not the direct result of
BRAC actions and therefore are not BRAC savings. However, we believe that
the $31 million from a DLA initiative is related to eliminating duplicate
inventory and thus may be appropriately counted as estimated BRAC savings.
Furthermore, to further reduce the anticipated inventory savings loss, the
draft SS&D business plan states that a June 21, 2006, Infrastructure
Steering Group^29 decision allowed the inclusion in the SS&D business plan
of an additional $61 million in savings that occurred in fiscal years 2004
and 2005--which was prior to the effective date of the BRAC SS&D
recommendation. Although the draft SS&D business plan notes that these
savings are not reflected in the financial displays for the fiscal year
2006-2011 BRAC implementation period, we believe that the inclusion of
these savings in the business plan presents a false impression of the
estimated savings that are attributable to the BRAC SS&D recommendation.
Additional Cost Increases May Be Associated with the Transfer of SS&D
Functions as Implementation Proceeds
Cost increases in several other areas may be associated with the transfer
of SS&D functions as implementation proceeds. While the business plan
shows about $243 million in increased operation and maintenance costs, at
the time of our review, implementation had not proceeded to the point
where we could determine how much, if any, of these costs could be
attributed to the transfer of SS&D functions and how much should be
attributed to other changes associated with reconfiguring DLA's
distribution depot network. Currently, the business plan shows increased
costs of about $115 million to rewarehouse and redistribute inventories
among the DLA distribution depots. As implementation continues it is
likely that costs will continue to change and, depending on the agreements
reached between DLA and the services, it is possible that additional costs
could be associated with the transfer of SS&D functions.
^27These four initiatives were provided by the Army, Air Force, Marine
Corps, and DLA. They were designed to create efficiencies through reducing
and phasing out obsolete inventory and improving procurement practices.
^28The September 2007 draft SS&D business plan states that inventory
savings associated with four service and DLA inventory reduction
initiatives were being substituted for the original inventory savings.
According to DLA officials, this decision was not documented.
^29The Infrastructure Steering Group is the governing body that oversees
implementation and approval of business plans for the 2005 BRAC round
recommendations.
Concluding Observations
In the 2005 BRAC round, the BRAC Commission made several recommendations
that involve reengineering of business processes affecting many activities
and installations across DOD. The transfer of SS&D functions and
consolidation of associated inventories required as part of the 2005 BRAC
SS&D recommendation represent significant transformational actions and
changes in the manner in which both the military services and DLA carry
out SS&D functions at various depot maintenance locations. These actions
have the potential to improve the department's supply-related operations,
provide better support to the warfighter, and save money. However, they
also have the potential to adversely affect depot maintenance operations,
at least temporarily, as new business processes are put in place during a
time of higher maintenance demands in a wartime environment. This has led
to the military services expressing concerns about meeting depot
maintenance production schedules and maintaining equipment readiness and
support to the warfighter. DLA and the services are in the early stages of
implementing these required actions, so it is too early to tell whether
the department's goals will be fully met and the services' concerns eased.
As of September 2007, DLA and the services have worked together to study,
analyze, and reach agreement on the applicable SS&D positions that will
transfer to DLA. While DLA's planning process incorporates several key
elements that are intended to provide for a smooth transition and mitigate
the risk of disrupting depot operations, a plan, in and of itself, cannot
guarantee success. Therefore, continued collaboration between the services
and DLA and periodic monitoring by OSD is critical to ensure that
implementation actions are on track and that issues that may arise and
adversely affect depot operations are resolved as implementation proceeds.
Moreover, while implementation of the transfer of SS&D functions has the
potential to improve supply-related operations and save money, our
analyses show that the estimated costs for implementing the transfer
actions have increased from those put forth by the BRAC Commission and
that estimated savings have decreased. Furthermore, the current savings
estimate includes projected savings from several service inventory
reduction initiatives that were not a direct result of the BRAC
recommendation, but that were included in the draft business plan to
reflect potential savings that DOD contends are attributable to BRAC.
Although further recurring savings may accrue over time as implementation
proceeds, the magnitude of the actual savings as DLA assumes the SS&D
functions at specified service depot maintenance locations remains to be
seen. Because achieving savings is one of several BRAC goals and the
magnitude of the expected savings under the SS&D recommendation is
uncertain at this point in time, it is critical that the estimated savings
attributable to BRAC be monitored, and adjusted as necessary, as
implementation proceeds so that Congress and DOD decision makers have the
best data possible to gauge to what extent the BRAC savings goal is met.
Agency Comments and Our Evaluation
In comments on a draft of this report, DOD stated that it concurred in
principle with our findings and conclusions. DOD's comments are reprinted
in enclosure IV. DOD also provided technical comments, which we have
incorporated into this report as appropriate.
DOD further provided comments that were intended to provide clarity to the
projected savings that it believes are attributable to the BRAC SS&D
recommendation. We had noted in the report that DLA had replaced the
initial estimated savings of about $1 billion with about $203 million in
projected savings, of which about $172 million were derived from inventory
reduction initiatives put forth by the military services that are not
directly a result of BRAC actions. DOD stated that it considered these
estimated savings to be "enabled by the BRAC recommendation and therefore
should be attributable to the recommendation." We disagree and continue to
believe that the $172 million in expected savings resulting from the
services' initiatives should not be counted as BRAC savings. As we stated
in our draft report, while these initiatives are inventory related and may
produce savings, we believe that they are not the direct result of BRAC
actions and therefore are not BRAC savings. These particular savings
initiatives respond to ongoing regulatory requirements^30 to identify and
dispose of obsolete inventory, or were initiated prior to November 2005
when the BRAC recommendations became effective.^31 As a result, because we
believe that the associated expected savings are not the result of a BRAC
action and would have occurred regardless of BRAC, we do not believe that
these savings should be counted as BRAC savings.
- - - - -
We are sending copies of this report to other congressional committees and
members; the Secretary of Defense; the Secretaries of the Army, Navy, and
Air Force; the Commandant of the Marine Corps; 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 GAO's
Web site at [8]http://www.gao.gov .
^30DOD Supply Chain Materiel Management Regulation, DOD 4140.1-R, Section
C2.9 Item Reductions (May 23, 2003).
^31Of the $172 million, almost $119 million in savings was associated with
several military services' initiatives that implemented ongoing annual
regulatory requirements to identify and dispose of obsolete or unneeded
inventory. Another $53 million in savings during the BRAC implementation
period was associated with an Air Force inventory reduction initiative
that was initiated prior to November 9, 2005, when the BRAC
recommendations became effective.
If you or your staff have any questions regarding this report, please
contact me at (202) 512-4523 or [9][email protected] . Contact points for
our Offices of Congressional Relations and Public Affairs may be found on
te last page of this report. GAO staff who made key contributions to this
report are listed in enclosure V.
Brian J. Lepore
Director, Defense Capabilities and Management
Enclosures - 5
List of Congressional Addressees
The Honorable Carl Levin
Chairman
The Honorable John McCain
Ranking Member
mittee 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 Saxby Chambliss
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
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
The Honorable Solomon O. Ortiz
Chairman
Subcommittee on Readiness
Committee on Armed Services
House of Representatives
The Honorable Walter B. Jones
The Honorable Mike Rogers
House of Representatives
Enclosure I
Scope and Methodology
To identify the efforts to determine which supply, storage, and
distribution (SS&D) functions will transfer to the Defense Logistics
Agency (DLA), we analyzed pertinent documents and reports and interviewed
officials from the Office of the Secretary of Defense (OSD), DLA, and the
military services. We also discussed the efforts to delineate SS&D
functions to be transferred to DLA with service officials at affected
industrial depots, which are listed below. In addition, we obtained and
reviewed documentation from OSD's Base Realignment and Closure (BRAC)
Office and the Army Materiel Command concerning the disagreement between
DLA and the Army on the definition of SS&D and the number of Army
positions to be transferred to DLA. We also obtained the results of the
Air Force's, Army's, and Marine Corps' position-by-position analyses of
their SS&D functions that were considered for transfer to DLA. In
particular, we analyzed and reviewed the efforts on the part of DLA and
Warner Robins Air Logistics Center to finalize the number of full-time
equivalent positions to be transferred to DLA. Furthermore, we reviewed
OSD documentation concerning the agreements reached between DLA and the
Air Force, Navy, and Marine Corps regarding the number of positions to be
transferred.
To determine the military services' key concerns in implementing the
transfer of functions, we reviewed pertinent documents and reports and
interviewed officials from OSD, DLA, and the military services.
Additionally, we discussed challenges with service officials and union
representatives and observed the supply and support operations at some of
the affected industrial depots listed below. In determining the military
services' key concerns, there are two specific limitations regarding our
work. First, no actual "implementation"--that is, personnel moves,
military construction, or infrastructure reduction--has occurred on the
BRAC SS&D recommendation. Actual implementation is scheduled to be carried
out in a time-phased manner beginning with Warner Robins Air Logistics
Center in October 2007. Second, the extent to which any of the concerns
expressed by the military services may actually materialize is unknown, as
implementation has not yet begun.
To determine the extent to which DLA's plans establish a transfer process
that minimizes disruptions in depot maintenance, we analyzed pertinent
documents and interviewed officials from OSD, DLA, and the military
services. Further, we discussed with these officials actions ongoing or
planned to mitigate the risks associated with the transfer of SS&D
functions to DLA. There are a number of limitations in determining the
extent to which DLA's plans establish a transfer process that minimizes
disruptions in depot maintenance. First, there have been numerous draft
versions of the business plan on SS&D management reconfiguration, with the
most recent dated September 21, 2007. DLA submitted the SS&D business plan
to OSD for approval on September 18, 2007. Because most of the SS&D
functions are supposed to transfer from fiscal year 2008 to fiscal year
2011, we reviewed DLA's planning actions regarding the transfer of SS&D
functions virtually as they were occurring. Second, as of August 2007,
only the Air Force and Navy had begun detailed implementation planning
with DLA at the depot level. DLA and the Air Force plan to transfer SS&D
functions at Warner Robins Air Logistics Center in October 2007. The Navy
was in the initial stages of similar planning for the transfer of its
functions. However, the Marine Corps and Army had not begun conducting any
implementation planning at the depot level. Third, the implementation
planning process is referred to by DLA as a living process, in which
strategies, approaches, milestones, and management controls are constantly
in flux. Thus, the process is fluid and not yet complete. Fourth, due to
the incomplete nature of the implementation process, we relied heavily on
testimonial evidence as to actions that are planned to occur in the future
because little other evidence existed at the time of our review.
Specifically, because the implementation planning process is not yet
complete and no SS&D functions are expected to transfer until October
2007, little documentary evidence was available to assess DLA and the
services' planning and implementation efforts. Fifth, sound implementation
planning on the part of DLA and the services cannot guarantee a transfer
process that minimizes disruptions in depot maintenance. Only after the
BRAC SS&D recommendation is fully implemented can the precise effects on
depot maintenance of the transfer of SS&D functions to DLA be determined.
To determine the estimated costs and savings associated with implementing
this transfer of functions, we compared the estimates in DLA's draft
business plan of September 21, 2007, to the estimates approved by the BRAC
Commission. Because the BRAC Commission uses fiscal year 2005 constant
dollars and the business plan contains then-year dollars,^32 we converted
the BRAC Commission's fiscal year 2005 constant dollars to then-year
dollars to facilitate the comparison between the two sets of numbers. We
compared these estimates by reviewing and analyzing source data and
methodology used to generate the estimates and calculated projected
changes in costs and savings. We discussed the reasons for the variances
with DLA, service, and contractor officials. To assess the reliability of
the data and the validity of underlying assumptions used to generate
estimates of costs and savings, we reviewed pertinent Under Secretary of
Defense for Acquisition, Technology, and Logistics; Supply and Storage
Joint Cross-Service Group; and DLA regulations and instructions for
reporting data and interviewed officials at these locations as well as
representatives from each of the military services knowledgeable about the
data and the assumptions underlying estimated costs and savings. Based on
this, we believe that the data used were sufficiently reliable for the
purposes of this report. It should be noted that the business plans are
considered "living" documents and the data presented therein represent a
point in time as plans are subject to change as implementation proceeds.
Moreover, since this report contains figures from the draft business plan
for the SS&D recommendation, the data used in this report could change if
the business plan numbers change when it is approved. According to OSD
policy, until the SS&D business plan is approved, no funds may be
obligated for implementation of this recommendation.
Since this review only focused on the facilities included in the BRAC
recommendation, we did not include in our review nine other service SS&D
facilities that were not included in the BRAC recommendation but that were
required by OSD to transfer their supply and storage functions and
associated personnel to DLA. The transfer of functions at these nine
facilities was directed by a June 22, 2005, Under Secretary of Defense for
Acquisition, Technology, and Logistics administrative decision in order to
establish a more effective and efficient supply chain.
^32Then-year dollars, sometimes called current dollars, reflect the level
of prices or expected prices at the time of measurement. Constant dollars
reflect the purchasing power of dollars in a given base year.
During the course of our review, we contacted the following offices with
responsibility for oversight, management, and implementation of the SS&D
recommendation, and industrial depots specifically affected by the
transfers:
Department of Defense
o Office of the Under Secretary of Defense for Acquisition,
Technology, and Logistics, Arlington, Virginia
o Office of the Secretary of Defense Base Realignment and Closure
Office, Arlington, Virginia
o Defense Logistics Agency headquarters, Fort Belvoir, Virginia
Army
o Office of Deputy Chief of Staff--Army Logistics, Arlington,
Virginia
o United States Army Materiel Command, Fort Belvoir, Virginia
o Anniston Army Depot, Anniston, Alabama
o Corpus Christi Army Depot, Corpus Christi, Texas
o Tobyhanna Army Depot, Tobyhanna, Pennsylvania
Navy
o Office of Chief of Naval Operations, Arlington, Virginia
o Naval Sea Systems Command, Washington Naval Yard, Washington,
D.C.
o Naval Supply Systems Command, Mechanicsburg, Pennsylvania
o Fleet and Industrial Supply Center, Norfolk Naval Base, Norfolk,
Virginia
o Fleet Readiness Center-East, Naval Aviation Depot, Cherry Point,
North Carolina
o Fleet and Industrial Supply Center, Naval Aviation Depot, Cherry
Point, North Carolina
o Norfolk Naval Shipyard, Portsmouth, Virginia
Air Force
o Air Force Materiel Command, Wright-Patterson Air Force Base,
Ohio
o Warner Robins Air Logistics Center, Warner Robins, Georgia
Marine Corps
o Marine Corps Logistics Command, Albany, Georgia
o Marine Corps Maintenance Center Albany, Albany, Georgia
We conducted our work from June 2007 through September 2007 in accordance
with generally accepted government auditing standards.
Enclosure II
Text of the BRAC Commission's Approved Supply, Storage, and Distribution
Management Reconfiguration Recommendation Supply, Storage, and Distribution
Management Reconfiguration (BRAC 2005 Round Recommendation)
Realign Defense Supply Center Columbus, OH, by disestablishing the Defense
Distribution Depot Columbus, OH. Relocate the storage and distribution
functions and associated inventories to the Defense Distribution Depot
Susquehanna, PA, hereby designated the Susquehanna Strategic Distribution
Platform.
Realign Tobyhanna Army Depot, PA, by consolidating the supply, storage,
and distribution functions and associated inventories of the Defense
Distribution Depot Tobyhanna, PA, with all other supply, storage, and
distribution functions and inventories that exist at Tobyhanna Army Depot
to support depot operations, maintenance, and production. Retain the
minimum necessary supply, storage, and distribution functions and
inventories required to support Tobyhanna Army Depot, and to serve as a
wholesale Forward Distribution Point. Relocate all other wholesale storage
and distribution functions and associated inventories to the Susquehanna
Strategic Distribution Platform.
Realign Naval Station Norfolk, VA, by consolidating the supply, storage,
and distribution functions and associated inventories of the Defense
Distribution Depot Norfolk, VA, with all other supply, storage, and
distribution functions and inventories that exist at Norfolk Naval Base
and at Norfolk Naval Shipyard to support shipyard operations, maintenance,
and production. Retain the minimum necessary supply, storage, and
distribution functions and inventories required to support Norfolk Naval
Shipyard operations, maintenance and production, and to serve as a
wholesale Forward Distribution Point. Relocate all other wholesale storage
and distribution functions and associated inventories to the Susquehanna
Strategic Distribution Platform.
Realign Defense Supply Center Richmond, VA, by relocating the storage and
distribution functions and associated inventories of the Defense
Distribution Depot Richmond, VA, to the Susquehanna Strategic Distribution
Platform. Retain the minimum necessary storage and distribution functions
and associated inventories at Defense Distribution Depot Richmond, VA, to
serve as a wholesale Forward Distribution Point.
Realign Marine Corps Air Station, Cherry Point, NC, by consolidating the
supply, storage, and distribution functions and associated inventories of
the Defense Distribution Depot, Cherry Point, NC, with all other supply,
storage, and distribution functions and inventories that exist at Naval
Aviation Depot Cherry Point, NC, to support depot operations, maintenance
and production. Retain the minimum necessary supply, storage, and
distribution functions and inventories required to support Naval Air Depot
Cherry Point, and to serve as a wholesale Forward Distribution Point.
Relocate all other wholesale storage and distribution functions and
associated inventories to the Defense Distribution Depot Warner Robins,
GA, hereby designated the Warner Robins Strategic Distribution Platform.
Realign Robins Air Force Base, GA, by consolidating the supply, storage,
and distribution functions and associated inventories supporting depot
operations, maintenance, and production at the Warner Robins Air Logistics
Center with the supply, storage, and distribution functions at the Warner
Robins Strategic Distribution Platform.
Realign Marine Corps Logistics Base, Albany, GA, by consolidating the
supply, storage, and distribution functions and associated inventories of
the Defense Distribution Depot Albany, GA, with all other supply, storage,
and distribution functions and inventories that exist at the Maintenance
Center Albany, GA, to support depot operations, maintenance, and
production. Retain the minimum necessary supply, storage, and distribution
functions and inventories required to support the Maintenance Center
Albany, GA, and to serve as a wholesale Forward Distribution Point.
Relocate all other wholesale storage and distribution functions and
associated inventories to the Warner Robins Strategic Distribution
Platform.
Realign Naval Air Station Jacksonville, FL, by consolidating the supply,
storage, and distribution functions and associated inventories of the
Defense Distribution Depot, Jacksonville, FL, with all other supply,
storage, and distribution functions and inventories that exist at the
Naval Aviation Depot, Jacksonville, FL, to support depot operations,
maintenance, and production. Retain the minimum necessary supply, storage,
and distribution functions and inventories required to support the Naval
Aviation Depot, Jacksonville, FL, and to serve as a wholesale Forward
Distribution Point. Relocate all other wholesale storage and distribution
functions and associated inventories to the Warner Robins Strategic
Distribution Platform.
Realign Anniston Army Depot, AL, by consolidating the supply, storage, and
distribution functions and associated inventories of the Defense
Distribution Depot Anniston, AL, with all other supply, storage, and
distribution functions and inventories that exist at the Anniston Army
Depot, AL, to support depot operations, maintenance, and production.
Retain the minimum necessary supply, storage, and distribution functions
and inventories required to support Anniston Army Depot, AL, and to serve
as a wholesale Forward Distribution Point. Relocate all other wholesale
storage and distribution functions and associated inventories to the
Warner Robins Strategic Distribution Platform.
Realign Corpus Christi Army Depot, TX, by consolidating the supply,
storage, and distribution functions and associated inventories of the
Defense Distribution Depot, Corpus Christi, TX, with all other supply,
storage, and distribution functions and inventories that exist at Corpus
Christi Army Depot, TX, to support depot operations, maintenance, and
production. Retain the minimum necessary supply, storage, and distribution
functions and inventories required to support Corpus Christi Army Depot,
TX, and to serve as a wholesale Forward Distribution Point. Relocate all
other wholesale storage and distribution functions and associated
inventories to the Defense Distribution Depot Oklahoma City, hereby
designated the Oklahoma City Strategic Distribution Platform.
Realign Tinker AFB, OK, by consolidating the supply, storage, and
distribution functions and associated inventories supporting depot
operations, maintenance, and production at the Air Logistics Center,
Oklahoma City, OK, with the supply, storage, and distribution functions
and inventories at the Oklahoma City Strategic Distribution Platform.
Realign Hill AFB, UT, by consolidating the supply, storage, and
distribution functions and associated inventories of the Defense
Distribution Depot, Hill, UT, with all other supply, storage, and
distribution functions and inventories that exist at the Ogden Air
Logistics Center, UT, to support depot operations, maintenance, and
production. Retain the necessary supply, storage, and distribution
functions and inventories required to support the Ogden Air Logistics
Center, UT, and to serve as a wholesale Forward Distribution Point.
Relocate all other wholesale storage and distribution functions and
associated inventories to the Defense Distribution Depot, San Joaquin, CA,
hereby designated the San Joaquin Strategic Distribution Platform.
Realign Naval Station Bremerton, WA, by consolidating the supply, storage,
and distribution functions and associated inventories of the Defense
Distribution Depot, Puget Sound, WA, with all other supply, storage and
distribution functions and inventories that exist at Puget Sound Naval
Shipyard, WA, to support shipyard operations, maintenance, and production.
Retain the minimum necessary supply, storage, and distribution functions
and inventories required to support Puget Sound Naval Shipyard, WA, and to
serve as a wholesale Forward Distribution Point. Relocate all other
wholesale storage and distribution functions and associated inventories to
the San Joaquin Strategic Distribution Platform.
Realign Naval Station, San Diego, CA, by consolidating the supply,
storage, and distribution functions and associated inventories of the
Defense Distribution Depot, San Diego, CA, with all other supply, storage,
and distribution functions and inventories that exist at Naval Aviation
Depot, North Island, CA, to support depot operations, maintenance, and
production. Retain the minimum necessary supply, storage, and distribution
functions and inventories required to support Naval Aviation Depot, North
Island, CA, and to serve as a wholesale Forward Distribution Point.
Relocate all other wholesale storage and distribution functions and
associated inventories to the San Joaquin Strategic Distribution Platform.
Realign Marine Corps Logistics Base, Barstow, CA, by consolidating the
supply, storage, and distribution functions and associated inventories of
the Defense Distribution Depot Barstow, CA, with all other supply,
storage, and distribution functions and inventories that exist at the
Maintenance Center Barstow, CA, to support depot operations, maintenance,
and production. Retain the minimum necessary supply, storage, and
distribution functions and inventories at Defense Distribution Depot
Barstow, CA, that are required to support the Maintenance Center Barstow,
CA, and to serve as a wholesale Forward Distribution Point. Relocate all
other wholesale storage and distribution functions and associated
inventories to the San Joaquin Strategic Distribution Platform.
Source: Extract from the 2005 Defense Base Closure and Realignment
Commission Report to the President, Volume 2 Appendix Q (Commission's
Final Recommendations).
Enclosure III
Changes in Costs and Savings Estimates at Each Collocated Maintenance Depot
Our analysis of the original BRAC Commission estimates and other documents
shows that transferring the SS&D functions and associated inventories from
the military services' industrial depots to DLA has resulted in an
increase in estimated costs and a significant decrease in estimated
savings. We noted changes in three areas: information technology costs,
civilian personnel savings, and inventory savings.^33 Specifically, the
estimated information technology costs for connecting each of the four
services' current inventory management software systems with DLA have
increased to almost $79 million, an increase of more than 130 percent. A
breakdown of the information technology cost increases by each depot is
shown in table 2.
Table 2: Changes in Information Technology Cost Estimates for Fiscal Years
2006 through 2011 (as of September 2007)
Dollars in thousands
BRAC Commission Revised cost
Location cost estimate^a estimate^a Difference^a
Tobyhanna Army Depot (AD) $1,646 $9,413 $7,767
Corpus Christi AD 4,740 12,506 $7,766
Anniston AD 5,660 13,427 $7,767
Tinker Air Force Base (AFB)^b 5,549 8,049 $2,500
Robins AFB^b 3,787 6,287 $2,500
Hill AFB^b 1,820 4,320 $2,500
Marine Corps Logistics Base 1,062 3,662 $2,600
(MCLB) Albany
MCLB Barstow 1,703 4,303 $2,600
Naval Station (NAVSTA) Bremerton 1,041 5,541 $4,500
NAVSTA Norfolk 1,851 1,851 0
NAVSTA San Diego 1,372 5,872 $4,500
Naval Air Station (NAS) 1,861 1,861 0
Jacksonville
Marine Corps Air Station (MCAS) 1,646 1,646 0
Cherry Point
Total $33,738 $78,738 $45,000
Source: GAO analysis of data provided by DLA.
^aFigures are presented in then-year dollars for comparative purposes.
Commission estimates were originally presented in constant dollars, but we
converted them to then-year dollars to facilitate equitable comparisons.
^b We divided the total increase of $7.5 million evenly among Tinker,
Robins, and Hill Air Force Bases, because the Air Force had not identified
amounts by depot location.
In addition, our analysis shows that the estimated savings for
transferring SS&D functions and associated inventories from the services'
depots to DLA are expected to be about $13 million less than the original
2005 BRAC Commission estimate due to a decrease in estimated civilian
salary savings. A breakdown of the changes in planned eliminations of
civilian positions at each of the services' industrial depots appears in
table 3.
^33The business plan also indicated that some costs associated with
disposing of and rewarehousing inventory increased by $115 million.
However, data were not available to determine how much, if any, of this
estimated cost increase should be attributed to the transfer of SS&D
functions, and how much should be attributed to other changes associated
with reconfiguring the depot system.
Table 3: Planned Civilian Position Eliminations and Recurring Savings for
the Transfer of SS&D Functions from the Services' Industrial Depots to DLA
(as of September 2007)
Dollars in thousands
BRAC
BRAC Commission Revised
Commission Revised estimated estimated
Location eliminations eliminations Difference savings^a savings^a Difference^a
Tobyhanna AD 6 3 -3 $1,130 $516 -$614
Corpus 17 1 -16 3,202 421 -$2,781
Christi AD
Anniston AD 22 4 -18 4,143 718 -$3,425
Tinker AFB 26 24 -2 4,897 1,734 -$3,163
Robins AFB 9 17 8 1,693 2,278 $585
Hill AFB 7 15 8 2,318 1,088 -$1,230
MCLB Albany 3 2 -1 565 355 -$210
MCLB Barstow 4 1 -3 1,434 34 -$1,400
NAVSTA 4 6 2 1,375 947 -$428
Bremerton
NAVSTA 5 8 3 942 2113 $1,171
Norfolk
NAVSTA San 2 3 1 692 170 -$522
Diego
NAS 2 2 0 332 136 -$196
Jacksonville
MCAS Cherry 7 6 -1 1,319 408 -$911
Point
Total 114 92 -22 $24,042 $10,918 -$13,124
Source: GAO analysis of data provided by DLA.
^aFigures are presented in then-year dollars for comparative purposes.
Commission estimates were originally presented in constant dollars, but we
converted them to then-year dollars to facilitate equitable comparisons.
Enclosure IV
Comments from the Department of Defense
Enclosure V
GAO Contact and Staff Acknowledgments
GAO Contact
Brian J. Lepore, (202) 512-4523 or [email protected]
Acknowledgments
In addition to the individual named above, James R. Reifsnyder,
Assistant Director; John R. Beauchamp; Renee S. Brown; John C.
Bumgarner; Larry J. Junek; Julia Matta; Charles W. Perdue; Dudley C.
Roache, Jr.; and Virginia M. Saavedra also made significant contributions
to this report.
Related GAO Products
Defense Infrastructure: Challenges Increase Risks for Providing Timely
Infrastructure Support for Army Installations Expecting Substantial
Personnel Growth. GAO-07-1007. Washington, D.C.: September 13, 2007.
Military Base Realignments and Closures: Plan Needed to Monitor Challenges
for Completing More Than 100 Armed Forces Reserve Centers. GAO-07-1040.
Washington, D.C.: September 13, 2007.
Military Base Realignments and Closures: Observations Related to the 2005
Round. GAO-07-1203R. Washington D.C.: September 6, 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. Washington, D.C.: June 29, 2007.
Military Base Closures: Management Strategy Needed to Mitigate Challenges
and Improve Communication to Help Ensure Timely Implementation of Air
National Guard Recommendations. GAO-07-641. Washington, D.C.: May 16,
2007.
Military Base Closures: Opportunities Exist to Improve Environmental
Cleanup Cost Reporting and to Expedite Transfer of Unneeded Property.
GAO-07-166. Washington, D.C.: January 30, 2007.
Military Bases: Observations on DOD's 2005 Base Realignment and Closure
Selection Process and Recommendations. GAO-05-905. Washington, D.C.: July
18, 2005.
Military Bases: Analysis of DOD's 2005 Selection Process and
Recommendations for Base Closures and Realignments. GAO-05-785.
Washington, D.C.: July 1, 2005.
Military Base Closures: Updated Status of Prior Base Realignments and
Closures. GAO-05-138. Washington, D.C.: January 13, 2005.
Military Base Closures: Assessment of DOD's 2004 Report on the Need for a
Base Realignment and Closure Round. GAO-04-760. Washington, D.C.: May 17,
2004.
Military Base Closures: Observations on Preparations for the Upcoming Base
Realignment and Closure Round. GAO-04-558T. Washington, D.C.: March 25,
2004.
(351056)
This is a work of the U.S. government and is not subject to copyright
protection in the United States. The published product may be reproduced
and distributed in its entirety without further permission from GAO.
However, because this work may contain copyrighted images or other
material, permission from the copyright holder may be necessary if you
wish to reproduce this material separately.
GAO's Mission
The Government Accountability Office, the audit, evaluation, and
investigative arm of Congress, exists to support Congress in meeting its
constitutional responsibilities and to help improve the performance and
accountability of the federal government for the American people. GAO
examines the use of public funds; evaluates federal programs and policies;
and provides analyses, recommendations, and other assistance to help
Congress make informed oversight, policy, and funding decisions. GAO's
commitment to good government is reflected in its core values of
accountability, integrity, and reliability.
Obtaining Copies of GAO Reports and Testimony
The fastest and easiest way to obtain copies of GAO documents at no cost
is through GAO's Web site ( [10]www.gao.gov ). Each weekday, GAO posts
newly released reports, testimony, and correspondence on its Web site. To
have GAO e-mail you a list of newly posted products every afternoon, go to
[11]www.gao.gov and select "E-mail Updates."
Order by Mail or Phone
The first copy of each printed report is free. Additional copies are $2
each. A check or money order should be made out to the Superintendent of
Documents. GAO also accepts VISA and Mastercard. Orders for 100 or more
copies mailed to a single address are discounted 25 percent. Orders should
be sent to:
U.S. Government Accountability Office 441 G Street NW, Room LM Washington,
DC 20548
To order by Phone: Voice: (202) 512-6000
TDD: (202) 512-2537
Fax: (202) 512-6061
To Report Fraud, Waste, and Abuse in Federal Programs
Contact:
Web site: [12]www.gao.gov/fraudnet/fraudnet.htm
E-mail: [13][email protected]
Automated answering system: (800) 424-5454 or (202) 512-7470
Congressional Relations
Gloria Jarmon, Managing Director, [14][email protected] , (202) 512-4400
U.S. Government Accountability Office, 441 G Street NW, Room 7125
Washington, DC 20548
Public Affairs
Chuck Young, Managing Director, [15][email protected] , (202) 512-4800 U.S.
Government Accountability Office, 441 G Street NW, Room 7149 Washington,
DC 20548
References
Visible links
8. http://www.gao.gov/
9. mailto:[email protected]
10. http://www.gao.gov/
11. http://www.gao.gov/
12. http://www.gao.gov/fraudnet/fraudnet.htm
13. mailto:[email protected]
14. mailto:[email protected]
15. mailto:[email protected]
*** End of document. ***