Military Base Realignments and Closures: Higher Costs and Lower  
Savings Projected for Implementing Two Key Supply-Related BRAC	 
Recommendations (05-MAR-08, GAO-08-315).			 
                                                                 
The 2005 Base Closure and Realignment Commission estimated that  
two supply-related recommendations now being implemented by the  
Defense Logistics Agency (DLA) would save the Department of	 
Defense (DOD) about $4.8 billion over 20 years--about 13 percent 
of the 2005 base realignment and closure (BRAC) round's estimated
long-term savings. These recommendations focus on business	 
process reengineering by reconfiguring DLA's wholesale supply,	 
storage, and distribution network and transferring procurement	 
responsibility for depot-level reparables from the military	 
services to DLA. This report is one in a series of reports on	 
BRAC conducted under the Comptroller General's authority. It	 
examines (1) the extent to which DLA's cost and savings estimates
to implement these recommendations differ from those of the BRAC 
Commission and (2) DLA's progress and challenges in implementing 
the recommendations. GAO analyzed estimated cost and savings data
and visited several of the military services' depots in its	 
review. 							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-315 					        
    ACCNO:   A81209						        
  TITLE:     Military Base Realignments and Closures: Higher Costs and
Lower Savings Projected for Implementing Two Key Supply-Related  
BRAC Recommendations						 
     DATE:   03/05/2008 
  SUBJECT:   Base closures					 
	     Base realignments					 
	     Cost analysis					 
	     Cost overruns					 
	     Data integrity					 
	     Defense capabilities				 
	     Defense cost control				 
	     Financial analysis 				 
	     Interagency relations				 
	     Internal controls					 
	     Military bases					 
	     Military facilities				 
	     Program evaluation 				 
	     Program management 				 
	     Risk management					 
	     Schedule slippages 				 
	     Strategic planning 				 
	     Supply chain management				 
	     Systems integration				 
	     Cost estimates					 
	     Program goals or objectives			 
	     Program implementation				 
	     Savings estimates					 
	     DOD Base Realignment and Closure Program		 
	     GAO High Risk Series				 

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GAO-08-315

   

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Report to Congressional Committees: 

United States Government Accountability Office: 
GAO: 

March 2008: 

Military Base Realignments And Closures: 

Higher Costs and Lower Savings Projected for Implementing Two Key 
Supply-Related BRAC Recommendations: 

GAO-08-315: 

GAO Highlights: 

Highlights of GAO-08-315, a report to congressional committees. 

Why GAO Did This Study: 

The 2005 Base Closure and Realignment Commission estimated that two 
supply-related recommendations now being implemented by the Defense 
Logistics Agency (DLA) would save the Department of Defense (DOD) about 
$4.8 billion over 20 yearsï¿½about 13 percent of the 2005 base 
realignment and closure (BRAC) roundï¿½s estimated long-term savings. 
These recommendations focus on business process reengineering by 
reconfiguring DLAï¿½s wholesale supply, storage, and distribution network 
and transferring procurement responsibility for depot-level reparables 
from the military services to DLA. This report is one in a series of 
reports on BRAC conducted under the Comptroller Generalï¿½s authority. It 
examines (1) the extent to which DLAï¿½s cost and savings estimates to 
implement these recommendations differ from those of the BRAC 
Commission and (2) DLAï¿½s progress and challenges in implementing the 
recommendations. GAO analyzed estimated cost and savings data and 
visited several of the military servicesï¿½ depots in its review. 

What GAO Found: 

Since the BRAC Commission issued its cost and savings estimates in 
2005, DOD will spend more, save less, and take longer than expected to 
recoup up-front costs to implement two recommendations intended to 
improve DODï¿½s logistics systems. Over the 2006ï¿½2011 BRAC time frame to 
implement these recommendations, GAOï¿½s analysis of DLAï¿½s data indicates 
that estimated net savings will be reduced by more than $1.8 billion 
compared to the BRAC Commissionï¿½s estimate, with a net cost of about 
$222 million to DOD, because of increased estimated costs, decreased 
savings, and DLAï¿½s inclusion in the business plans of almost $243 
million in expected savings that GAO believes should not be counted as 
BRAC savings. The $243 million in savings were to be achieved from 
inventory reduction initiatives that were not directly the result of 
BRAC actions and would have occurred regardless of BRAC. GAOï¿½s analysis 
further shows that the projected net annual recurring savings after 
2011 have been reduced from nearly $360 million to almost $167 million, 
and that the savings over 20 years are expected to be $1.4 billion 
rather than $4.8 billion as estimated by the Commission. While some 
variances are to be expected, the magnitude of these variances is large 
and resulted from several factors, such as the use of inaccurate or 
outdated data, misinterpretation of terms, and changes in operational 
requirements that occurred during the decision-making process for 
formulating the recommendations. Because expected savings for the 
longer term are still large but subject to considerable variability, 
until net savings are tracked over time, decision makers will lack 
complete information to assess the financial performance of these 
recommendations. Although DLA has partially completed methodologies to 
accomplish this, they have yet to be implemented. 

While DLA has focused primarily on planning to date, it has identified 
several challenges as implementation proceeds that, if not properly 
addressed, may adversely impact the servicesï¿½ depot-level operations 
and impair readiness. One challenge raised by the services involves 
DLAï¿½s ability to continue the timely provision of supplies to 
industrial customers as it assumes management of supply operations. If 
repair parts are not available when needed, the services are concerned 
that mission readiness would be degraded. Another challenge concerns 
the identification of differences among the servicesï¿½ information 
technology systems and development and funding of solutions to bridge 
DLAï¿½s system with the servicesï¿½ systems. Resolving human capital issues 
is an additional challenge. Further, maintaining continuity of funding 
to match planned implementation milestones is a challenge that, if not 
addressed, could further delay implementation of planned BRAC actions. 
DLA has taken several actions to address these challenges, such as 
working closely with the services to resolve issues, but it is too soon 
to determine how effective these actions will be. Because of potential 
disruptions to the servicesï¿½ industrial operations, collaboration and 
monitoring of the execution of BRAC actions as implementation proceeds 
are essential to mitigate potential adverse effects to the services and 
readiness. 

What GAO Recommends: 

GAO recommends that DOD take actions to improve accountability and 
accuracy of BRAC costs and savings and promote successful 
implementation of these BRAC recommendations. DOD concurred with two 
recommendations, but disagreed with a third to exclude from DLAï¿½s 
business plans all expected savings that are not the direct result of 
BRAC actions. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-315]. For more information, contact Brian 
J. Lepore at (202) 512-4523 or [email protected]. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

Cost Estimates Are Higher and Savings Estimates Are Lower than BRAC 
Commission Estimates for Implementing the Recommendations: 

DLA Has Made Progress in Planning for the Implementation of the 2005 
BRAC Recommendations but Faces Several Challenges that It Is Taking 
Actions to Address: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Text of the BRAC Commission's Supply, Storage, and 
Distribution Management Reconfiguration: 

Appendix II: Text of the BRAC Commission's Depot-Level Reparable 
Procurement Management Consolidation Recommendation: 

Appendix III: Scope and Methodology: 

Appendix IV: Comments from the Department of Defense: 

Appendix V: GAO Contact and Staff Acknowledgments: 

Related GAO Products: 

Tables: 

Table 1: Comparison of Cost and Savings Estimates for the SS&D and DLR 
Recommendations as of September 2007: 

Table 2: Comparison of DLA's Cost Estimates to BRAC Commission Cost 
Estimates for Fiscal Years 2006-2011 for the SS&D Recommendation as of 
September 2007: 

Table 3: Comparison of DLA's Savings Estimates to the BRAC Commission's 
Estimates for the SS&D Recommendation for Fiscal Years 2006-2011 as of 
September 2007: 

Table 4: Comparison of BRAC Commission's Long-Term Savings Estimates to 
GAO's Recalculated Estimates for the SS&D Recommendation as of 
September 2007: 

Table 5: Comparison of DLA's Cost Estimates to BRAC Commission Cost 
Estimates for Fiscal Years 2006-2011 for the DLR Recommendation as of 
September 2007: 

Table 6: Total Costs and Savings for each Element of the DLR 
Recommendation for Fiscal Years 2006-2011 as of September 2007: 

Table 7: Comparison of DLA's Savings Estimates to BRAC Commission 
Savings Estimates for Fiscal Years 2006-2011 for the DLR Recommendation 
as of September 2007: 

Table 8: Comparison of BRAC Commission's Long-Term Savings Estimates to 
GAO's Recalculated Estimates for the DLR Recommendation as of September 
2007: 

Table 9: Scheduled Start and End Dates of Physical Implementation 
Actions for the DLA SS&D and DLR Recommendations: 

Figures: 

Figure 1: DLA's Planned Reconfiguration of the Supply, Storage, and 
Distribution Depot Network: 

Figure 2: Command Relationship in Governance Structure: 

Abbreviations: 

BRAC: base realignment and closure: 

DLA: Defense Logistics Agency: 

DLR: depot-level reparable: 

DOD: Department of Defense: 

SS&D: supply, storage, and distribution: 

[End of section] 

United States Government Accountability Office:
Washington, DC 20548: 

March 5, 2008: 

Congressional Committees: 

In 1997, we identified the Department of Defense's (DOD) management of 
its support infrastructure as a high-risk area because infrastructure 
costs have affected the department's ability to devote funds to other 
more critical programs and needs. As part of its efforts to reduce 
excess infrastructure and costs, DOD has undergone four rounds of base 
realignment and closures (BRAC) since 1988 and is currently in the 
process of implementing its fifth round--the 2005 BRAC round. This 
latest round is the biggest, most complex, and costliest BRAC round 
ever, with up-front costs to implement the recommendations now expected 
to exceed $31 billion--an unprecedented amount, given that DOD has 
spent about $24 billion to date to implement the four previous BRAC 
rounds combined. While DOD expects this investment to provide an 
opportunity for savings over the long term, DOD also viewed this round 
as a unique opportunity to support defense transformation by reshaping 
its infrastructure to provide improved support of its defense strategy. 
Consequently, several of the recommendations from the 2005 round 
focused on complex business process reengineering efforts, which is 
historically atypical for a BRAC round.[Footnote 1] 

Two business process reengineering recommendations from the 2005 BRAC 
round are expected to have a major impact on the Defense Logistics 
Agency (DLA) and the military services. One recommendation, concerning 
reconfiguration of DLA's supply, storage, and distribution operations 
(SS&D), is targeted primarily at reconfiguring DLA's distribution depot 
network to save money and enhance the effectiveness of logistics 
support to operational forces. The complete text of this recommendation 
is reprinted in appendix I. The second recommendation, primarily 
concerning procurement of depot-level reparables (DLR), is targeted at 
moving the management of essentially all remaining consumable 
items[Footnote 2] and the procurement of depot-level reparables and 
related functions from the military services to DLA. The complete text 
of this recommendation is reprinted in appendix II. These two 
recommendations are among the largest in terms of savings, as projected 
by the BRAC Commission, for the 182 recommendations for the 2005 BRAC 
round. When combined, the BRAC Commission estimated that these two 
recommendations would save about $360 million annually after the 6-year 
implementation period ending in fiscal year 2011, and about $4.8 
billion over the 20-year period ending in 2025.[Footnote 3] 

In September 2005, DLA was designated as the business manager for 
implementing these two recommendations within the department, and thus 
is responsible for developing business plans and coordinating 
implementation efforts with each of the military services. The business 
plans are intended to provide, among other things, details on actions 
and time frames, along with estimated costs and savings associated with 
implementing the recommendations. At the time of our review, a business 
plan for the SS&D recommendation had not yet been approved by the 
Office of the Secretary of Defense, with the latest draft submitted for 
approval in September 2007. The business plan for the DLR 
recommendation was approved in October 2006, and an updated plan was 
resubmitted in September 2007 and is awaiting approval. As the business 
manager, DLA is required to update these business plans semiannually 
and submit them to the Office of the Secretary of Defense for review. 

In our July 2005 report on the 2005 BRAC round decision-making process 
and DOD's proposed recommendations, we stated that there was 
uncertainty regarding the magnitude of savings likely to be realized in 
some aspects of these DLA-managed BRAC recommendations, given 
assumptions regarding expected efficiency gains from business process 
reengineering efforts that had not been validated.[Footnote 4] We 
attributed the uncertainty to estimates that were based on historical 
documentation and assumptions that were subject to only limited testing 
and had not been validated. 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. 

This review is one in a series of reviews that we have undertaken on 
the implementation of BRAC 2005 round actions. Because of the magnitude 
of the savings expected from implementing these DLA-managed 
recommendations and broad congressional interest in BRAC, we prepared 
this report under the Comptroller General's authority to conduct 
evaluations on his own initiative to determine (1) the extent to which 
cost and savings estimates in DLA's plans to implement these two 
recommendations differ from those of the BRAC Commission, and (2) DLA's 
progress and the challenges it faces in implementing the 
recommendations. We are reporting the results to you in order to 
facilitate your oversight of DOD's implementation of the BRAC 2005 
recommendations. 

To determine the extent to which DLA's cost and savings estimates 
varied from those of the BRAC Commission, we reviewed and compared 
DLA's estimates--as presented in its September 28, 2007, draft SS&D 
business plan and its September 28, 2007, updated DLR business plan-- 
with those of the BRAC Commission, and discussed the rationale for 
variances with DLA officials. The September 2007 business plans were 
the most current plans available at the time of our review and provide 
more current estimates and associated variances with BRAC Commission 
estimates than those provided in our December 2007 report on overall 
BRAC costs and savings.[Footnote 5] In that report we used fiscal year 
2008 DOD budget data for comparative purposes. To determine DLA's 
progress in implementing these two recommendations and the challenges 
associated with their implementation, we analyzed supporting data and 
interviewed officials at various levels within DOD, DLA headquarters 
and selected supply distribution depots, various military services' 
headquarters offices, and industrial customers aligned with DLA 
distribution depots. We also discussed with DLA officials various 
implementation challenges that have emerged as implementation planning 
has progressed. We further relied on our related work and resulting 
report issued in October 2007 regarding actions associated with the 
implementation of the SS&D recommendation.[Footnote 6] 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 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. We conducted this performance 
audit from January 2006 through December 2007 in accordance with 
generally accepted government auditing standards. Those standards 
require that we plan and perform the audit to obtain sufficient, 
appropriate evidence to provide a reasonable basis for our findings and 
conclusions based on our audit objectives. We believe that the evidence 
obtained provides a reasonable basis for our findings and conclusions 
based on our audit objectives. More detailed information on our scope 
and methodology appears in appendix III. 

Results in Brief: 

Since the BRAC Commission issued its BRAC costs and savings estimates 
in 2005, DOD will spend more, save less, and take longer than expected 
to recoup up-front costs for the SS&D and DLR recommendations. Over the 
2006-2011 implementation period, our analysis of DLA's data indicates 
that estimated net savings will be reduced by more than $1.8 billion 
compared to the BRAC Commission's estimate, with a net cost of about 
$222 million to DOD, because of increased estimated costs, decreased 
savings, and DLA's inclusion in the business plans of almost $243 
million in expected savings that we believe should not be counted as 
BRAC savings. The $243 million in savings were to be achieved from 
implementing inventory reduction initiatives that were not directly the 
result of BRAC actions and would have occurred regardless of BRAC. 
While DLA asserts that these particular savings were "enabled" by the 
BRAC process, we believe that including savings unrelated to specific 
BRAC actions distorts and effectively overstates projected savings from 
implementing the BRAC recommendations.[Footnote 7] Our analysis further 
shows that the projected net annual recurring savings for both 
recommendations beginning in fiscal year 2012 have been reduced from 
$360 million to approximately $167 million, and the expected savings 
over a 20-year period ending in fiscal year 2025 have been reduced from 
almost $4.8 billion to about $1.4 billion.[Footnote 8] While some 
variances with initial estimates are to be expected as plans are 
refined, the magnitude of these variances is large and has resulted 
from a number of factors, such as the use of inaccurate or outdated 
data, misinterpretation of terms and specific data, and changes in 
operational requirements that occurred during the decision-making 
process for formulating the recommendations.[Footnote 9] As 
implementation continues and plans are further refined, we believe that 
estimates are likely to continue to change because estimates of 
information technology costs are still being developed and key savings 
assumptions have to be validated during implementation. Thus, the 
magnitude of the potential savings for these recommendations will 
remain uncertain and may be subject to considerable variability as 
implementation of the recommendations progresses. As a result, we 
believe it is important to update and track these savings over time in 
order to judge the financial performance of the recommendations and 
make adjustments as necessary to achieve BRAC savings goals. While DLA 
has recognized the need to periodically update savings to reflect 
actual performance over time and had developed, as of October 2007, a 
methodology to do so for the DLR recommendation, no such methodology 
existed for the SS&D recommendation. Until DLA develops and fully 
implements these methodologies for monitoring and periodically 
reporting actual savings as implementation progresses, the 
uncertainties associated with the magnitude of the savings may preclude 
Congress and DOD decision makers from having the most complete 
information possible as they assess the relative financial performance 
of these BRAC recommendations. 

While DLA's progress to date has focused primarily on planning efforts 
to implement these two recommendations, DLA faces several challenges as 
implementation proceeds and is taking actions to address them. DLA has 
taken several actions to implement the recommendations, primarily 
focusing on organizational and planning activities such as creating an 
office to oversee implementation actions and formulating implementation-
related guidance and plans. DLA, in working with the services, faces 
several challenges in implementing these two recommendations that, if 
not properly addressed, could have adverse impacts on DOD's supply 
mission, which in turn could impair warfighter readiness. For example, 
one challenge repeatedly expressed by service officials involves DLA's 
ability to continue the timely provision of supplies to service 
industrial customers. If repair parts are not available when needed, 
the services are concerned that depot maintenance operations would be 
disrupted and mission readiness would be degraded. DLA faces additional 
challenges related to information technology and human capital. DLA 
also faced a challenge in the early planning stages in obtaining timely 
funding commitments from the services for their respective portions of 
implementation costs, and the potential exists for this to recur as 
budgets are adjusted and further refined as implementation proceeds. 
While our analysis of fiscal year 2008 BRAC budget documentation 
indicates that this funding challenge may have been somewhat mitigated, 
unless close attention is paid to subsequent budgets throughout the 
implementation period ending in September 2011, successful 
implementation of these two recommendations may be jeopardized. DLA has 
taken several initial actions to address these challenges, work through 
problems and concerns, and identify potential solutions and mitigating 
actions where possible. Although the effectiveness of these actions 
will not be fully known until implementation has progressed further and 
problems arise and are addressed, service officials we spoke with 
expressed satisfaction with the actions that have been taken to date. 
Nonetheless, because of potential disruptions to the services' 
industrial operations, continued collaboration and monitoring of the 
execution of BRAC actions as implementation proceeds is essential to 
make adjustments as necessary to mitigate potential adverse effects to 
the services and service readiness. 

We are making several recommendations to improve the accountability and 
accuracy of costs and savings and promote the successful implementation 
of the SS&D and DLR recommendations. To improve the accuracy of the 
costs and savings attributable to the BRAC recommendations, we are 
recommending that DLA include in its business plans only those costs 
and savings that directly result from actions taken to implement the 
BRAC recommendations. In addition, to provide greater accountability 
and visibility over the financial performance of these two DLA-managed 
BRAC recommendations, we are recommending that, as business plans are 
refined throughout the implementation period, DLA fully implement 
methodologies for periodically monitoring and updating costs and 
savings as implementation progresses for each recommendation. 
Furthermore, to help ensure that the execution of implementation plans 
remains on track and that these particular BRAC recommendations are 
successfully implemented, we are recommending that all respective 
service and DLA budget submissions for the remainder of the 
implementation period extending through fiscal year 2011 reflect all 
necessary funding to meet implementation milestones. 

In commenting on a draft of this report, DOD concurred with our 
recommendations on implementing methodologies for periodically 
monitoring and updating net savings for the BRAC SS&D and DLR 
recommendations throughout the implementation period and ensuring that 
necessary funding to meet implementation milestones is reflected in all 
respective service and DLA budget submissions for the remainder of the 
implementation period ending in fiscal year 2011. DOD did not concur 
with our recommendation to revise DLA's business plans to exclude all 
expected savings that are not the direct result of BRAC actions. DOD 
stated that while $243 million of its potential savings were not 
directly the result of BRAC actions, they were "enabled" by BRAC 
actions and should be attributable to the recommendation. We disagree 
and continue to believe that these expected savings resulting from the 
services' non-BRAC initiatives are not the direct result of BRAC 
actions and would have occurred regardless of BRAC. As a result, they 
should not be counted as BRAC savings and should be excluded from DLA's 
business plans for these BRAC recommendations. DOD's written comments 
are reprinted in appendix IV. DOD also provided technical comments, 
which we have incorporated into this report as appropriate. 

Background: 

Since 1988, DOD has completed four base realignment and closure rounds 
and is currently in the process of implementing its fifth round--the 
2005 BRAC round.[Footnote 10] As a result of the earlier BRAC rounds, 
DOD reported that it had reduced its domestic infrastructure by about 
20 percent in terms of plant replacement value and saved billions of 
dollars on an annual recurring basis for application to higher priority 
defense needs. Despite these infrastructure reductions, DOD recognized 
the need for additional closures and realignments following the 1995 
closure round and made repeated efforts to gain congressional 
authorization for an additional closure round. Congress authorized a 
BRAC round for 2005 with the passage of the National Defense 
Authorization Act for Fiscal Year 2002.[Footnote 11] On May 13, 2005, 
the Secretary of Defense made public his recommendations for the 2005 
BRAC round and projected nearly $50 billion in savings over a 20-year 
period. These recommendations were forwarded to the Defense Base 
Closure and Realignment Commission, commonly referred to as the BRAC 
Commission, which was established by law as an independent entity to 
evaluate DOD's recommendations.[Footnote 12] The Commission 
subsequently presented its findings and 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. The recommendations became effective on November 9, 
2005, and DOD has until September 15, 2011, to complete the 
implementation of all recommendations. 

DOD has recognized that the implementation of recommendations that 
focus on business process reengineering actions involving multiple 
defense components from the 2005 BRAC round would likely be more 
difficult than those recommendations targeted to a single service or 
component. Because of the interest in pursuing transformation and 
fostering more jointness across the various defense components, DOD 
formed seven Joint Cross-Service Groups 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 and ultimately developed 
three recommendations that were included in DOD's submission of 
proposed recommendations to the BRAC Commission. The Commission 
accepted, in their entirety, two of the recommendations--the 
elimination of DLA's supply, storage, and distribution functions for 
certain designated commodities such as tires, with reliance on the 
private sector for these functions and the realignment of DLA's supply, 
storage, and distribution system into four geographical regions--and 
made minor changes to the other recommendation--the transfer of the 
procurement of depot-level reparables from the military services to 
DLA. The latter two recommendations are the focus of this report 
because, when combined, the Commission expected these particular 
recommendations to generate about $360 million annually in estimated 
savings beginning in 2012 and about $4.8 billion over 20 years 
extending through fiscal year 2025. The latter figure represents over 
13 percent of the nearly $36 billion BRAC Commission 20-year savings 
estimate for implementing all 2005 BRAC round recommendations. 

The supply, storage, and distribution recommendation is intended to 
transform existing logistics processes by reconfiguring the 
department's wholesale storage and distribution infrastructure across 
the continental United States into four hub-and-spoke geographical 
regions with the intent of improving support to the military forces. 
Each region is to have one hub, known as a strategic distribution 
platform, and multiple spokes, known as forward distribution points, to 
provide supplies to 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, these forward locations are to consolidate all 
supply and storage functions supporting industrial activities, to 
include those internal to the military services' depots and shipyards, 
and those at any intermediate levels that may exist. Figure 1 
identifies the regions and specific locations of DLA's planned 
reconfigured supply, storage, and distribution depot network. We have 
recently reported on a portion of this recommendation, specifically 
various issues associated with the transfer of supply, storage, and 
distribution functions at specified military services' depot 
maintenance locations that are collocated with a DLA distribution 
depot.[Footnote 13] 

Figure 1: DLA's Planned Reconfiguration of the Supply, Storage, and 
Distribution Depot Network: 

[See PDF for image] 

This figure is a map of the Continental United States depicting 
locations of DLA's Planned Reconfiguration of the Supply, Storage, and 
Distribution Depot Network. The following locations are depicted: 

Strategic Distribution Platforms (SDP): 
Susquehanna (PA) SDP; 
ALC Warner Robbins(GA) AFB/SDP; 
ALC Tinker (OK) AFB/SDP; 
San Joaquin (CA) SDP. 

Forward Distribution Points (FDP): 
Tobyhanna (PA) AD; 
DSC Richmond (VA); 
NAVSTA Norfolk (VA); 
MCAS Cherry Point (NC); 
Anniston AD (AL); 
MCLB Albany (GA); 
NAVSTA Jacksonville (FL); 
Corpus Christi AD (TX); 
NAVSTA San Diego (CA); 
MCLB Barstow (CA); 
ALC Hill AFB (UT); 
NAVSTA Bremerton (WA). 

Defense Distribution Depot: 
Red River AD (TX). 

AD: Army Depot. 
MCAS: Marine Corps Air Station. 
AFB: Air Force Base. 
MCLB: Marine Corps Logistics Base. 
NAVSTA: Naval Station. 
ALC: Air Logistics Center. 
DSC: Defense Supply Center. 

Source: DLA. 

[End of figure] 

As noted in figure 1, DLA's distribution depot located at the Red River 
Army Depot in Texas was neither designated as a strategic distribution 
platform nor a forward distribution point. The BRAC Commission made no 
mention of the disposition of this particular location in its September 
2005 report and thus this depot is neither subject to this BRAC 2005 
recommendation nor any others. Initially, because the Army had 
recommended closing the Red River Army Depot installation, the 
distribution depot at this location was also slated for closure. 
However, with the Commission's decision to remove the Red River Army 
installation from the closure list and instead realign certain 
activities at the installation, the distribution depot was slated to 
remain. Thus, DLA retains a traditional defense distribution depot 
located in close proximity to the planned Oklahoma City strategic 
distribution platform. 

The DLR recommendation is intended to realign procurement and related 
support functions at 13 locations by making these functions the 
responsibility of DLA. The basis for the recommendation was the 
expectation of achieving savings over time by having a single agency, 
DLA, procure depot-level reparables for all of the services. Most of 
the projected savings result from assumptions about using long-term 
contracts, such as performance-based agreements or performance-based 
logistics, instead of smaller contracts each time a purchase is 
required.[Footnote 14] The DLR recommendation, as approved by the BRAC 
Commission, has three main elements: consolidation of depot-level 
reparable procurement across DOD within DLA, the completion of the 
transfer of remaining consumable item management to DLA, and the 
relocation of integrated material management functions to other 
locations. 

To implement BRAC recommendations, DOD typically must incur various up- 
front investment costs during the 6-year implementation period in order 
to achieve long-term savings associated with the recommended actions. 
Such costs generally include, for example, one-time costs for actions 
such as military construction and personnel and equipment movement, as 
well as recurring costs for increased operation and maintenance of 
facilities and information systems. While savings from this investment 
may begin to accrue over the implementation period, additional savings 
typically occur annually on a longer-term basis beyond the 
implementation period ending in fiscal year 2011. One-time savings may 
include for example, reduced costs associated with inventory reduction 
or elimination of planned military construction. Recurring savings may 
include for example, reduced sustainment costs associated with 
maintaining less warehouse space. Net annual recurring savings after 
the implementation period are calculated by subtracting the annual 
recurring costs from the annual recurring savings. Expected 20-year 
savings, also referred to as 20-year net present value savings, take 
into account all one-time and recurring costs and savings incurred over 
the fiscal year 2006 through 2025 time period.[Footnote 15] 

To calculate estimates for these different types of costs and savings 
for the 2005 BRAC round, DOD and the BRAC Commission used the Cost of 
Base Realignment Actions model, commonly referred to as COBRA, which 
has been used in all previous BRAC rounds to provide a standard 
quantitative approach to compare estimated costs and savings across 
various proposed recommendations. The 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, estimates 
generated by the model cannot be assumed to represent the actual costs 
that Congress will need to fund through appropriations to complete 
implementation of BRAC recommendations, nor can savings be assumed to 
fully reflect the savings to be achieved after implementation. We have 
examined this quantitative model in the past, as well as during our 
review of the 2005 BRAC round, and, given the quality of the data and 
assumptions used in the model, found it to be a generally reasonable 
estimator for comparing potential costs and savings among alternative 
closure and realignment scenarios with the caveat that the estimates do 
not represent budget quality data. Nevertheless, in the absence of 
budget quality data, the results of the model are what were used at the 
time of BRAC decision making and were reported to Congress to justify 
the expected costs and savings associated with the BRAC 
recommendations. The results from the model are the only available data 
that can be used to compare the original BRAC Commission estimates to 
the more refined estimates in subsequent business plans and in budget 
submissions to Congress. 

Cost Estimates Are Higher and Savings Estimates Are Lower than BRAC 
Commission Estimates for Implementing the Recommendations: 

Based on our analysis of DLA's business plans, cost estimates are 
higher and savings estimates are lower than the BRAC Commission 
estimated for implementing both the SS&D and DLR recommendations, and 
it will take longer than expected to recoup up-front costs for 
implementing the recommendations. Although we calculated that total 
long-term savings over 20 years may occur, our analysis of DLA's 
business plans shows that there will instead be a net cost to DOD 
rather than savings over the fiscal year 2006 through 2011 
implementation period for these two recommendations. For both the SS&D 
and DLR recommendations, the net savings over the implementation 
period, the long-term net annual recurring savings for fiscal years 
2012 through 2025, and the 20-year net present value of those savings 
from fiscal year 2006 through 2025 are all likely to be less than the 
BRAC Commission estimated. As implementation proceeds, costs are likely 
to continue increasing and savings are likely to continue to change, 
further changing the long-term savings to be realized. 

Although Long-Term Savings Are Estimated to Occur, Net Savings Are 
Estimated to Be Reduced by More than $1.8 Billion for Both 
Recommendations over the Implementation Period: 

Although long-term savings are expected to occur, our analysis of cost 
and savings data in DLA's business plans shows that estimated net 
savings will be reduced by more than $1.8 billion from the BRAC 
Commission's estimated net savings to implement the SS&D and DLR 
recommendations over the fiscal year 2006 through 2011 implementation 
period. The $1.8 billion figure consists of a combination of a $328 
million increase in expected costs--51 percent--and an almost $1.5 
billion decrease in expected savings--67 percent. Our analysis of DLA's 
data indicates that there will instead be a net cost of about $222 
million to DOD over this period rather than a savings because the plans 
included almost $243 million in expected savings that DLA believes were 
enabled by BRAC actions and should be counted as BRAC savings. We do 
not believe that these enabled savings should be counted as BRAC 
savings because they are not the direct result of a BRAC action. 
Section A of table 1 below shows the cost and savings estimates over 
the fiscal year 2006 through 2011 implementation period by 
recommendation. Section B of table 1 shows the net annual recurring 
savings estimates over fiscal years 2012 through 2025 by 
recommendation. Our analysis of these savings data presented in DLA's 
business plans shows that the projected net annual recurring savings 
are almost $167 million, rather than the $360 million estimated by the 
BRAC Commission, a 54 percent decrease. Similarly, section C of table 1 
shows the 20-year net present value of savings estimates over fiscal 
years 2006 through 2025 by recommendation. Our analysis of these 
savings shows the 20-year net present value of estimated savings for 
this period is about $1.4 billion, rather than almost $4.8 billion as 
estimated by the BRAC Commission, a 70 percent decrease. Based on our 
analysis of the BRAC Commission estimates, DOD's up-front investments 
for both recommendations would begin to pay back in fiscal year 2009. 
Instead, due to the variances in costs and savings, DOD's payback 
period[Footnote 16] will be prolonged to fiscal year 2012 for the SS&D 
recommendation--3 years longer than expected--and fiscal year 2014 for 
the DLR recommendation--5 years longer than expected. 

Table 1: Comparison of Cost and Savings Estimates for the SS&D and DLR 
Recommendations as of September 2007: 

Category: Section A: Comparison of cost and savings estimates for 
implementation period--fiscal years 2006-2011; Then-year dollars in 
millions: SS&D costs; 
BRAC Commission estimate[A]: $426.3; 
DLA business plan: $564.1; 
GAO analysis[B]: $564.1; 
Variance increase/(decrease)[C]: $137.8; 
Percentage change: 32. 

Category: Section A: Comparison of cost and savings estimates for 
implementation period--fiscal years 2006-2011; Then-year dollars in 
millions: DLR costs; 
BRAC Commission estimate[A]: $211.9; 
DLA business plan: $401.7; 
GAO analysis[B]: $401.7; 
Variance increase/(decrease)[C]: $189.8; 
Percentage change: 90. 

Category: Section A: Comparison of cost and savings estimates for 
implementation period--fiscal years 2006-2011; Then-year dollars in 
millions: Total costs (FY 2006-2011); 
BRAC Commission estimate[A]: $638.2; 
DLA business plan: $965.8; 
GAO analysis[B]: $965.8; 
Variance increase/(decrease)[C]: $327.6; 
Percentage change: 51. 

Category: Section A: Comparison of cost and savings estimates for 
implementation period--fiscal years 2006-2011; Then-year dollars in 
millions: SS&D savings; 
BRAC Commission estimate[A]: $1,605.9; 
DLA business plan: $631.7; 
GAO analysis[B]: $460.3; 
Variance increase/(decrease)[C]: ($1,145.6); 
Percentage change: (71). 

Category: Section A: Comparison of cost and savings estimates for 
implementation period--fiscal years 2006-2011; Then-year dollars in 
millions: DLR savings; 
BRAC Commission estimate[A]: $624.5; 
DLA business plan: $354.9; 
GAO analysis[B]: $283.9; 
Variance increase/(decrease)[C]: ($340.6); 
Percentage change: (55). 

Category: Section A: Comparison of cost and savings estimates for 
implementation period--fiscal years 2006-2011; Then-year dollars in 
millions: Total savings (FY 2006-2011); 
BRAC Commission estimate[A]: $2,230.4; 
DLA business plan: $986.6; 
GAO analysis[B]: $744.2; 
Variance increase/(decrease)[C]: ($1,486.2); 
Percentage change: (67). 

Category: Section A: Comparison of cost and savings estimates for 
implementation period--fiscal years 2006-2011; Then-year dollars in 
millions: Net savings[D]; 
BRAC Commission estimate[A]: $1,592.2; 
DLA business plan: $20.8; 
GAO analysis[B]: ($221.6); 
Variance increase/(decrease)[C]: ($1,813.8); 
Percentage change: N/A[E]. 

Category: Section B: Comparison of net annual recurring savings 
estimates--fiscal years 2012 - 2025; Fiscal year 2005 constant dollars 
in millions: SS&D net annual recurring savings; 
BRAC Commission estimate[A]: $203.2; 
DLA business plan: $147.9; 
GAO analysis[B]: $122.8; 
Variance increase/(decrease)[C]: ($80.4); 
Percentage change: (40). 

Category: Section B: Comparison of net annual recurring savings 
estimates--fiscal years 2012 - 2025; Fiscal year 2005 constant dollars 
in millions: DLR net annual recurring savings; 
BRAC Commission estimate[A]: $156.8; 
DLA business plan: $53.4; 
GAO analysis[B]: $44.0; 
Variance increase/(decrease)[C]: ($112.8); 
Percentage change: (72). 

Category: Section B: Comparison of net annual recurring savings 
estimates--fiscal years 2012 - 2025; Fiscal year 2005 constant dollars 
in millions: Total net annual recurring savings (FY 2012-2025); 
BRAC Commission estimate[A]: $360.0; 
DLA business plan: $201.3; 
GAO analysis[B]: $166.8; 
Variance increase/(decrease)[C]: ($193.2); 
Percentage change: (54). 

Category: Section C: Comparison of 20-year net present value of savings 
estimates--fiscal years 2006-2025; Fiscal year 2005 constant dollars in 
millions: SS&D 20-year net present value savings; 
BRAC Commission estimate[A]: $2,925.8; 
DLA business plan: $1,487.7[F]; 
GAO analysis[B]: $1,096.4; 
Variance increase/(decrease)[C]: ($1,829.4); 
Percentage change: (63). 

Category: Section C: Comparison of 20-year net present value of savings 
estimates--fiscal years 2006-2025; Fiscal year 2005 constant dollars in 
millions: DLR 20-year net present value savings; 
BRAC Commission estimate[A]: $1,857.8; 
DLA business plan: $486.9[F]; 
GAO analysis[B]: $332.3; 
Variance increase/(decrease)[C]: ($1,525.5); 
Percentage change: (82). 

Category: Total 20-year net present value (FY 2006-2025); 
BRAC Commission estimate[A]: $4,783.6; 
DLA business plan: $1,974.6[F]; 
GAO analysis[B]: $1,428.7; 
Variance increase/(decrease)[C]: ($3,354.9); 
Percentage change: (70). 

Source: GAO analysis of DLA-provided data and the BRAC Commission 2005 
report. 

[A] While the BRAC Commission reported its estimates in fiscal year 
2005 constant dollars, DLA subsequently converted them to then-year 
(current) dollars for the implementation period in its business plans. 

[B] Excludes three inventory-related initiatives included in the draft 
September 28, 2007, SS&D business plan and an inventory-related 
initiative included in the draft September 28, 2007, DLR business plan 
that are not directly the result of BRAC actions and that we believe 
should not be counted as BRAC savings. 

[C] Represents the variance between the GAO analysis and the BRAC 
Commission estimate. 

[D] Net savings are the net of subtracting total costs from total 
savings. Our analysis indicates that a loss, rather than a net savings, 
will occur over the implementation period. 

[E] No percentage change is displayed because the change was from a 
positive number to a negative number, which renders the percentage 
change statistically meaningless. 

[F] GAO estimate based on DLA draft September 28, 2007, SS&D business 
plan data and DLA's updated September 28, 2007, DLR business plan data. 

[End of table] 

Although Long-Term Savings Are Estimated to Occur, Net Savings Are 
Estimated to Be Reduced by about $1.3 Billion over the Implementation 
Period for the SS&D Recommendation: 

Although long-term savings are estimated to occur, when increased cost 
and reduced savings estimates are considered, we estimate that the net 
savings for implementation of the SS&D recommendation will be reduced 
by about $1.3 billion compared to the BRAC Commission's net savings 
estimate over the fiscal year 2006 to 2011 implementation period. DLA's 
business plan estimates for one-time and recurring costs from fiscal 
years 2006 through 2011 have increased by almost $138 million from 
those of the BRAC Commission, due mainly to increases for operation and 
maintenance and military construction costs. In addition, we estimate 
that one-time and recurring savings for fiscal years 2006 through 2011 
decreased by over $1.1 billion from the BRAC Commission estimates, due 
mainly to a reduction in the expected decrease in the size of the 
forward distribution points, fewer personnel reductions, and DLA's 
inclusion of $172 million in expected savings resulting from inventory 
reduction initiatives that are not directly the result of BRAC actions. 
Although long-term savings are estimated to occur, based on the 
increased costs and decreased savings projected in DLA's business plan 
and the exclusion of unrelated BRAC savings from inventory reduction 
initiatives, we calculated that the net annual recurring savings for 
fiscal years 2012 through 2025 are likely to be about $80 million less 
than the BRAC Commission estimated, and the 20-year savings from fiscal 
years 2006 through 2025 are likely to be more than $1.8 billion less 
than the BRAC Commission estimated. 

Cost Estimates over Implementation Period Increased by $138 Million: 

DLA's business plan shows that the total cost estimates for 
implementing the SS&D recommendation had increased by almost $138 
million over the 6-year implementation period compared to the BRAC 
Commission's estimate. As shown in table 2, DLA estimates that it will 
cost DOD about $564 million over this period, which is an increase of 
approximately $138 million, or 32 percent, over the Commission's 
estimate of about $426 million. DLA's one-time costs are now estimated 
to be about $541 million, an increase of almost $333 million or 160 
percent. However, estimates for recurring costs were eliminated from 
the business plan because these costs will be reimbursed by the 
military services. 

Table 2: Comparison of DLA's Cost Estimates to BRAC Commission Cost 
Estimates for Fiscal Years 2006-2011 for the SS&D Recommendation as of 
September 2007 (Then-year dollars in millions): 

Category: Total one-time costs; 
BRAC Commission estimate[A]: $208.3; 
DLA business plan: $540.8; 
Variance increase/(decrease): $332.5; 
Percentage change: 160. 

Category: Costs funded outside of the account[B]; 
BRAC Commission estimate[A]: $0.0; 
DLA business plan: $23.3; 
Variance increase/(decrease): $23.3; 
Percentage change: 100. 

Category: Total recurring costs; 
BRAC Commission estimate[A]: $218.0; 
DLA business plan: $0.0; 
Variance increase/(decrease): ($218.0); 
Percentage change: (100). 

Total costs: 
BRAC Commission estimate[A]: $426.3; 
DLA business plan: $564.1; 
Variance increase/(decrease): $137.8; 
Percentage change: 32. 

Source: GAO analysis of DLA September 28, 2007, draft business plan and 
the BRAC 2005 report. 

[A] These figures are presented in then-year dollars. While the BRAC 
Commission reported its estimates in fiscal year 2005 constant dollars, 
DLA subsequently converted them to then-year (current) dollars in its 
business plans. 

[B] According to DLA officials, costs funded outside of the account 
refers to operation and maintenance costs for information technology 
expenses in the Army that will be paid for out of the Army's 
appropriated funds. 

[End of table] 

DLA's business plan describes a variety of factors that contributed to 
the increase in one-time costs. Some of the major increases include an 
additional $49 million to re-warehouse stock at the strategic 
distribution platforms and consolidate storage at the forward 
distribution points, almost $47 million to develop software systems at 
the sites collocated with service industrial facilities, $36 million to 
modify existing A-76 contracts at some locations,[Footnote 17] $27.5 
million for warehouse storage aids, and $20.7 million to pay travel 
expenses of the DLA implementation teams. Our analysis of the business 
plan and discussions with agency officials indicate that most of these 
increases are a result of changes occurring since the data were 
collected during the up-front BRAC decision-making process. 

DLA's business plan also shows that nearly $97 million of the increase 
in one-time costs was attributed to increased military construction 
costs at three locations. First, $55 million is needed to build more 
storage space at the defense distribution depot located at Susquehanna, 
Pennsylvania due to changes in operational requirements over time. 
While this depot had considerable excess capacity in 2003 when the BRAC 
Commission data were collected, by 2006 the situation had changed and 
Susquehanna no longer had the capacity to store the material that the 
BRAC recommendation envisioned. Second, $22 million is needed to 
satisfy requirements for a containerization, consolidation, and 
palletization facility at DLA's Oklahoma City, Oklahoma depot located 
at Tinker Air Force Base so that this facility can function as a 
strategic distribution platform. This facility was designated as a 
strategic distribution platform after the BRAC Commission decided not 
to close the Red River Army depot. However, once Oklahoma City was 
designated instead as a strategic distribution platform, the cost for 
this facility was not included in the recommendation. Third, $20 
million is needed because of an input error that resulted in inaccurate 
data being used during the BRAC process to calculate the square footage 
requirements of the containerization, consolidation, and palletization 
facility scheduled to be built at the Warner Robins strategic 
distribution platform. The square footage was entered into the BRAC 
database as 20,000 square feet when it should have been 200,000 square 
feet, thus increasing the cost. 

Savings Estimates over Implementation Period Decreased by More than 
$1.1 Billion: 

Our analysis of DLA's estimates also shows that one-time and recurring 
savings for implementing the SS&D recommendation have decreased by more 
than $1.1 billion from the BRAC Commission estimates over the 
implementation period. As shown in table 3, our analysis of the 
business plan's one-time savings estimates shows a decrease of almost 
$670 million, a 95 percent decrease. As a result, we estimate that one- 
time savings for this period will be about $34 million, rather than the 
almost $704 million estimated by the BRAC Commission. Similarly, our 
analysis of the business plan shows a decrease in recurring savings of 
about $476 million over this same period, a 53 percent decrease. As a 
result, we estimate that total recurring savings will be over $426 
million, rather than about $902 million as estimated by the Commission. 

Table 3: Comparison of DLA's Savings Estimates to the BRAC Commission's 
Estimates for the SS&D Recommendation for Fiscal Years 2006-2011 as of 
September 2007 (Then-year dollars in millions): 

Category: Total one-time savings; 
BRAC Commission estimate[A]: $703.8; 
DLA business plan: $45.6; 
GAO analysis[B]: $33.9; 
Variance increase/(decrease)[C]: ($669.9); 
Percentage change: (95). 

Category: Total recurring savings; 
BRAC Commission estimate[A]: $902.1; 
DLA business plan: $586.1; 
GAO analysis[B]: $426.3; 
Variance increase/(decrease)[C]: ($475.8); 
Percentage change: (53). 

Total savings: 

BRAC Commission estimate[A]: $1,605.9; 
DLA business plan: $631.7; 
GAO analysis[B]: $460.3; 
Variance increase/(decrease)[C]: ($1,145.6); 
Percentage change: (71). 

Source: GAO analysis of DLA-provided data and the BRAC Commission 2005 
report. 

Note: Amounts may not total due to rounding. 

[A] These figures are presented in then-year dollars. While the BRAC 
Commission reported its estimates in fiscal year 2005 constant dollars, 
DLA subsequently converted them to then-year (current) dollars in its 
business plans. 

[B] Excludes $172 million in expected savings DLA included in its draft 
September 28, 2007, SS&D business plan that resulted from inventory 
reduction initiatives that are not directly the result of BRAC actions 
and that we believe should not be counted as BRAC savings. 

[C] Represents the variance between the GAO analysis and the BRAC 
Commission estimate. 

[End of table] 

The $670 million decrease in one-time savings is attributed primarily 
to a misinterpretation that occurred during the BRAC decision-making 
process for formulating recommendations in defining duplicate inventory 
and DLA's inclusion of potential savings resulting from inventory 
reduction initiatives that are not the direct result of BRAC actions. 
Specifically, as we previously reported, the BRAC Commission's estimate 
of almost $704 million in one-time savings was based on the belief that 
eliminating duplicate inventory--inventory stored by both the services 
and the DLA depots--would produce both one-time and recurring 
savings.[Footnote 18] 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. After DLA's business plan was revised to 
correct these misinterpretations, the BRAC Commission's estimated $704 
million in one-time savings for inventory reduction was eliminated, and 
was subsequently replaced with almost $46 million in one-time savings, 
some of which are due to inventory reduction initiatives we believe are 
unrelated to BRAC, as explained later in this subsection. 

The $476 million decrease in recurring savings is attributed primarily 
to a variety of factors, such as the reduction of savings associated 
with duplicative inventory, an increase in the size of the forward 
distribution points, fewer personnel reductions, and the inclusion of 
savings related to inventory reduction initiatives we believe are 
unrelated to BRAC. The recurring savings associated with the duplicate 
inventory were reduced by about $305 million because the cost to hold 
inventory is directly related to the quantities of inventory stored. In 
addition, recurring savings estimates were decreased by about $84 
million because the size of the forward distribution points has 
increased from the original BRAC estimates. Our review of supporting 
documentation showed that DLA reevaluated the size of the forward 
distribution points after it determined that the initial request for 
data regarding storage of hazardous, hard-to-handle, heavy bulk, and 
major end items was misinterpreted, and also so that they could better 
accommodate high-volume customers. Moreover, recurring savings 
estimates were reduced by almost $79 million because DLA projects that 
fewer personnel reductions will occur than the Commission estimated. 
For example, DLA now estimates that 465 civilian positions will be 
eliminated--more than 350 fewer positions than the Commission 
estimated. DLA attributed the decrease in planned personnel reductions 
to changes in operational requirements over time. Specifically, DLA 
reports in its business plan that since the time of the original 
request for data in September 2003, personnel efficiencies and 
reductions due to mission and other workload changes have been 
implemented at various distribution depots. 

Although DLA projects savings of almost $632 million over the 
implementation period, our analysis shows these savings should be 
decreased to about $460 million over this period because the business 
plan included almost $172 million in expected savings that we believe 
should not be counted as BRAC savings. Once DLA realized that estimated 
savings from duplicate inventory would not occur as originally planned, 
it replaced the $704 million initial one-time savings estimate and $306 
million of its recurring savings estimate in its business plan with 
estimated savings from four inventory reduction initiatives.[Footnote 
19] As we previously reported in October 2007, 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. The savings 
from these three initiatives resulted from pre-BRAC actions and 
initiatives already planned by the services and would have occurred 
regardless of BRAC. In commenting on our October 2007 report, DOD 
stated that it considered the savings from these inventory reduction 
initiatives to be "enabled by the BRAC recommendation and therefore 
should be attributable to the recommendation." We disagreed, and we 
continue to believe that the $172 million in expected savings resulting 
from the services' initiatives should not be counted as BRAC savings. 
Even DLA's business plan acknowledges that these inventory savings 
result from actions the services have already planned to implement. For 
example, $104 million of these savings are attributed to the services' 
initiatives to identify and eliminate dormant or obsolete inventory, 
even though such actions respond to a supply regulation and are part of 
DOD's routine materiel management practices.[Footnote 20] We believe 
that including savings unrelated to BRAC actions distorts and 
effectively overstates projected savings from implementing the SS&D 
recommendation. 

Estimated Net Annual Recurring Savings Reduced by $82 Million and 
Estimated 20-Year Net Present Value Will Be Reduced by $1.8 Billion: 

Although long-term savings are expected to occur, based on the 
increased costs and decreased savings projected in DLA's SS&D business 
plan and the exclusion of unrelated BRAC savings from inventory 
reduction initiatives, we calculated that estimated net annual 
recurring savings will be reduced by about $80 million and the 
estimated 20-year savings will be reduced by more than $1.8 billion. 
Using DLA's data, which included expected savings resulting from 
inventory reduction initiatives that are not directly the result of 
BRAC actions, we recalculated the net annual recurring savings 
beginning in fiscal year 2012 and thereafter to be almost $123 million, 
which is about $80 million or 40 percent less than the BRAC 
Commission's estimate of about $203 million, as shown in table 4. 
Because of the reduction in annual recurring savings, the expected 20- 
year savings fall to about $1.1 billion--a 63 percent decrease from the 
BRAC Commission's projected $2.9 billion in long-term savings. 

Table 4: Comparison of BRAC Commission's Long-Term Savings Estimates to 
GAO's Recalculated Estimates for the SS&D Recommendation as of 
September 2007 (Fiscal year 2005 constant dollars in millions): 

Category: SS&D net annual recurring savings (FY 2012-2025); 
BRAC Commission estimate: $203.2; 
DLA business plan: $147.9; 
GAO analysis[A]: $122.8; 
Variance increase/(decrease)[B]: ($80.4); 
Percentage change: (40). 

Category: SS&D 20-year net present value savings (FY 2006-2025); 
BRAC Commission estimate: $2,925.8; 
DLA business plan: $1,487.7[C]; 
GAO analysis[A]: $1,096.4; 
Variance increase/(decrease)[B]: ($1,829.4); 
Percentage change: (63). 

Source: GAO analysis of DLA-provided data and the BRAC Commission 2005 
report. 

[A] Excludes three inventory-related initiatives included in the draft 
September 28, 2007, SS&D business plan that are not directly the result 
of BRAC actions and that we believe should not be counted as BRAC 
savings. 

[B] Represents the variance between the GAO analysis and the BRAC 
Commission estimate. 

[C] GAO estimate based on DLA business plan data. 

[End of table] 

Although Long-Term Savings Are Estimated to Occur, Net Savings Are 
Estimated to Be Reduced by $530 Million over the Implementation Period 
for the DLR Recommendation: 

Although long-term savings are expected to occur, when increased costs 
and reduced savings are taken into account, we estimate that the net 
savings for implementation of the DLR recommendation will be reduced by 
$530 million compared to the BRAC Commission's net savings estimate 
over the fiscal year 2006 to 2011 implementation period. DLA estimates 
one-time costs during this period are increasing by about $258 million-
-more than 194 percent--from the BRAC Commission estimates, due mainly 
to changes in the operation and maintenance and military construction 
costs. In addition, we estimate that one-time and recurring savings for 
fiscal years 2006 through 2011 decreased by over $340 million from the 
BRAC Commission estimates, due mainly to a reduction in inventory 
savings driven by a 1-year delay in implementation, changes in the 
number of civilian positions that would be eliminated or transferred in 
place from the services to DLA, and DLA's inclusion of $71 million in 
expected savings resulting from an inventory reduction initiative that 
is not directly the result of BRAC actions. Based on increased costs 
and decreased savings now projected in DLA's business plan and the 
exclusion of unrelated BRAC savings from inventory reduction 
initiatives, we calculated that the net annual recurring savings 
beginning in 2012 are likely to be almost $113 million less than the 
Commission estimated, and the 20-year savings through 2025 are likely 
to be about $1.5 billion less. 

Cost Estimates over Implementation Period Increased by $190 Million: 

Our analysis of DLA's DLR business plan shows that the total cost 
estimates for implementing the DLR recommendation increased by $190 
million over the implementation period compared to the BRAC 
Commission's estimates. As shown in table 5, DLA estimates that 
implementation of this recommendation will cost DOD almost $402 million 
over this period, which is a 90 percent increase over the Commission 
estimate of almost $212 million. The BRAC Commission estimated one-time 
costs would total nearly $133 million; however, DLA's business plan 
shows that these costs are estimated to be about $390 million, an 
increase of almost $258 million or 194 percent. Conversely, estimates 
for recurring costs have decreased, and are estimated to be more than 
$11 million, a decrease of about $68 million or 86 percent, rather than 
almost $80 million as estimated by the Commission. 

Table 5: Comparison of DLA's Cost Estimates to BRAC Commission Cost 
Estimates for Fiscal Years 2006-2011 for the DLR Recommendation as of 
September 2007 (Then-year dollars in millions): 

Category: Total one-time costs; 
BRAC Commission estimate[A]: $132.7; 
DLA business plan: $390.4; 
Variance increase/(decrease): $257.7; 
Percentage change: 194. 

Category: Total recurring costs; 
BRAC Commission estimate[A]: $79.2; 
DLA business plan: $11.4; 
Variance increase/(decrease): ($67.8); 
Percentage change: (86). 

Total costs: 
BRAC Commission estimate[A]: $211.9; 
DLA business plan: $401.8; 
Variance increase/(decrease): $189.9; 
Percentage change: 90. 

Source: GAO analysis of DLA's updated September 28, 2007, DLR business 
plan and the BRAC 2005 report. 

[A] These figures are presented in then-year dollars. While the BRAC 
Commission reported its estimates in fiscal year 2005 constant dollars, 
DLA subsequently converted them to then-year (current) dollars in its 
business plans. 

[End of table] 

DLA attributes the almost $68 million decrease in recurring costs to 
the removal of these costs from the business plan because these costs 
will be reimbursed by the military services. The remaining $11 million 
in recurring costs mainly represents the Army's share of recurring 
costs related to the relocation of Army integrated material management 
functions from Rock Island, Illinois to Detroit, Michigan. 

According to the business plan, the almost $258 million increase in one-
time costs is primarily due to a nearly $134 million increase in 
information technology costs and a $64 million increase in military 
construction costs. Information technology cost estimates have 
increased by $134 million for DLA's electronic procurement system to 
support a business system modernization initiative that is intended to 
provide DLA with the capability of managing the procurement of depot- 
level reparables at all locations. We found that the BRAC Commission 
estimates were based on incomplete data because the business processes 
and corresponding information technology requirements were unknown at 
the time the BRAC data were collected. As of December 2007, the 
business plan reflects the information technology costs for the 
development of an electronic procurement system, but the business plan 
does not reflect the information technology costs to enable the 
services to bridge their systems to the new DLA system. The services, 
in conjunction with DLA, are still determining these requirements and 
as a result, the business plans do not yet reflect final information 
technology cost estimates. As DLA and the services further define these 
requirements, DLA plans to include the associated costs in subsequent 
business plans. In addition, the business plan shows increased one-time 
costs of $64 million associated with changes in the construction 
planned at the Detroit Arsenal.[Footnote 21] According to Army 
officials, the BRAC Commission estimates were based on incomplete data 
because contractor personnel were not included in the BRAC data 
collected in September 2003. Since the BRAC Commission estimates, the 
size of the administrative building planned for the Detroit Arsenal has 
increased to include contractor personnel, and the plan for a parking 
lot has been changed to a parking garage, both of which increase costs. 
When discussing these construction increases with DLA and Army 
officials, we were informed that these particular actions are not 
related to the consolidation of depot-level reparable procurement, but 
instead are related to the movement of integrated material management 
personnel from other locations, such as Rock Island, as specified by 
the BRAC Commission. 

The DLR business plan does not discuss in detail the three elements 
that comprise the recommendation: consolidation of depot-level 
reparable procurement across DOD within DLA, the completion of the 
transfer of consumable item management to DLA, and the relocation of 
Army integrated material management functions from Rock Island, 
Illinois to Detroit, Michigan. We worked with DLA to identify the costs 
and savings associated with the three elements of the recommendation, 
as shown in table 6. We found that relocation of integrated material 
management functions accounts for almost half of total implementation 
costs. This is attributable primarily to relocations which consolidate 
various Army Tank-automotive and Armaments Command integrated material 
management activities at Detroit, Michigan. According to the business 
plan, the one-time estimated cost to relocate the Army integrated 
materiel management functions to Detroit will be almost $184 million-- 
almost half of the over $390 million in one-time costs for implementing 
the DLR recommendation over the implementation period. 

Table 6: Total Costs and Savings for each Element of the DLR 
Recommendation for Fiscal Years 2006-2011 as of September 2007 (Then-
year dollars in millions): 

Category: One-time costs; 
Consumable item transfer: $3.6; 
Consolidation of depot-level procurement: $202.8; 
Integrated material management: $183.9; 
Total: $390.3. 

Category: Recurring costs; 
Consumable item transfer: $0.0; 
Consolidation of depot-level procurement: $0.6; 
Integrated material management: $10.8; 
Total: $11.4. 

Total costs: 
Consumable item transfer: $3.6; 
Consolidation of depot-level procurement: $203.4; 
Integrated material management: $194.7; 
Total: $401.7. 

Category: One-time savings; 
Consumable item transfer: $0.0; 
Consolidation of depot-level procurement: $164.5; 
Integrated material management: $0.0; 
Total: $164.5. 

Category: Recurring savings; 
Consumable item transfer: $13.0; 
Consolidation of depot-level procurement: $106.4; 
Integrated material management: $0.0; 
Total: $119.4. 

Total savings: 
Consumable item transfer: $13.0; 
Consolidation of depot-level procurement: $270.9; 
Integrated material management: $0.0; 
Total: $283.9. 

Net implementation costs/(savings): 
Consumable item transfer: ($9.4); 
Consolidation of depot-level procurement: ($67.5); 
Integrated material management: $194.7; 
Total: $117.8. 

Source: GAO's analysis of DLA's September 28, 2007, DLR business plan 
data. 

[End of table] 

Because the main source of net savings for this recommendation is the 
consolidation of procurement and related support functions of depot- 
level reparables, our review focused primarily on that element of the 
recommendation. Although we did not focus on the consumable item 
transfer and the integrated material management elements of the 
recommendation, our analysis of DLA's business plan, as shown in table 
6, shows that there are about $9 million in net savings over the 
implementation period due to the consumable item transfer element of 
the recommendation and no net savings over the implementation period 
resulting from the integrated material management element. 

Savings Estimates over Implementation Period Decreased by almost $341 
Million: 

Based upon our analysis, one-time and recurring savings estimates for 
implementing the DLR recommendation over the fiscal year 2006 through 
2011 BRAC implementation period have decreased by almost $341 million 
from the BRAC Commission estimates. As shown in table 7, our analysis 
shows that one-time savings for this recommendation are about $164 
million. The BRAC Commission did not estimate any one-time savings for 
this recommendation, but DLA reclassified $176 million of the BRAC 
Commission's recurring savings related to inventory reduction as one- 
time savings. Although DLA projects one-time savings of over $176 
million over the implementation period, our analysis shows these one- 
time savings should be decreased by almost $12 million to about $164 
million over this period because the business plan included an 
inventory reduction initiative that is not the direct result of BRAC 
actions; hence, any savings attributable to this initiative should not 
be considered BRAC savings. DLA and DOD officials contend that the 
expected savings due to this initiative will be "enabled" by the 
implementation of the DLR recommendation. However, while this 
initiative is inventory related and may produce savings, the initiative 
resulted from pre-BRAC actions and initiatives already planned by the 
services and we believe the associated savings would have occurred 
regardless of BRAC. 

Table 7: Comparison of DLA's Savings Estimates to BRAC Commission 
Savings Estimates for Fiscal Years 2006-2011 for the DLR Recommendation 
as of September 2007 (Then-year dollars in millions): 

Category: Total one-time savings; 
BRAC Commission estimate[A]: $0.0; 
DLA business plan: $176.2; 
GAO analysis[B]: $164.5; 
Variance increase/(decrease): $164.5; 
Percentage change: 100. 

Category: Total recurring savings; 
BRAC Commission estimate[A]: $624.5; 
DLA business plan: $178.7; 
GAO analysis[B]: $119.4; 
Variance increase/(decrease): ($505.1); 
Percentage change: (81). 

Total savings: 
BRAC Commission estimate[A]: $624.5; 
DLA business plan: $354.9; 
GAO analysis[B]: $283.9; 
Variance increase/(decrease): ($340.6); 
Percentage change: (55). 

Source: GAO analysis of DLA's updated September 28, 2007, DLR business 
plan and the BRAC 2005 report. 

[A] These figures are presented in then-year dollars. While the BRAC 
Commission reported its estimates in fiscal year 2005 constant dollars, 
DLA subsequently converted them to then-year (current) dollars in its 
business plans. 

[B] Excludes $71 million in expected savings DLA included in its draft 
September 28, 2007, DLR business plan that resulted from an inventory 
reduction initiative that is not directly the result of BRAC actions 
and that we believe should not be counted as BRAC savings. 

[End of table] 

Our analysis shows that the recurring savings estimates for 
implementing the DLR recommendation has decreased by over $505 million, 
or 81 percent, from the BRAC Commission estimate. Although DLA projects 
recurring savings of almost $179 million during the implementation 
period, our analysis shows these savings should be decreased by over 
$59 million to about $119 million over this period because the business 
plan included an inventory reduction initiative that is not the direct 
result of BRAC actions; hence, any savings attributable to this 
initiative should not be considered BRAC savings. Thus, recurring 
savings estimates are projected to total about $119 million, as 
compared to the BRAC Commission's estimate of almost $625 million. 

In addition to the exclusion of unrelated BRAC savings from inventory 
reduction initiatives, the decrease in recurring savings occurred 
primarily as a result of a reduction of $212 million in inventory 
savings driven by a 1-year delay in implementation, adjustments in 
workforce configurations due to misinterpretation of the data needed, 
use of inaccurate data, and changes in operational requirements over 
time. Additionally, civilian salary savings are now expected to be 
lower than estimated because of confusion during the BRAC process in 
defining the number of positions that would be affected, double 
counting of positions to be eliminated, and changes in the workforce 
levels at affected sites since the recommendation was made. For 
example, Air Force officials told us that the Air Force interpreted the 
request for data in a way that overstated the number of positions to be 
eliminated or transferred in place, and Army officials told us that the 
Army inadvertently double-counted some positions in the initial BRAC 
request for data. In addition, we found that the Navy experienced 
reductions in authorized personnel levels subsequent to the BRAC report 
recommendations, leaving fewer positions available for reductions 
through BRAC. DLA officials anticipate continued fluctuation in the 
actual number of employees who will transfer and stated that the 
business plans are living documents that are expected to be adjusted 
over time to reflect the current view of requirements. 

Estimated Net Annual Recurring Savings Reduced by Almost $113 Million 
and Estimated 20-Year Savings Reduced by over $1.5 Billion: 

Although long-term savings are estimated to occur, based on increased 
costs and decreased savings projected in DLA's business plan and the 
exclusion of unrelated BRAC savings from inventory reduction 
initiatives for the DLR recommendation, we calculated that the 
estimated net annual recurring savings are likely to be almost $113 
million less than the BRAC Commission estimated and the estimated 20- 
year savings are likely to be over $1.5 billion less. Using DLA's data, 
which included expected savings resulting from inventory reduction 
initiatives that are not directly the result of BRAC actions, we 
recalculated the net annual recurring savings beginning in fiscal year 
2012 and thereafter to be over $44 million, which is about $112 million 
or 72 percent less than the BRAC Commission's estimate of almost $157 
million, as shown in table 8. Because of the reduction in annual 
recurring savings, the expected 20-year net present value of the 
savings attributable to this recommendation decreases by over $1.5 
billion--an 82 percent decrease from the Commission's projected long- 
term savings of about $1.9 billion. 

Table 8: Comparison of BRAC Commission's Long-Term Savings Estimates to 
GAO's Recalculated Estimates for the DLR Recommendation as of September 
2007 (Fiscal year 2005 constant dollars in millions): 

Category: DLR net annual recurring savings (FY 2012-2025); 
BRAC Commission estimate: $156.8; 
DLA business plan: $53.4; 
GAO analysis[A]: 44.0; 
Variance increase/(decrease): ($112.8); 
Percentage change: (72). 

Category: DLR 20-year net present value savings (FY 2012-2025); 
BRAC Commission estimate: $1,857.8; 
DLA business plan: $486.9[B]; 
GAO analysis[A]: $332.3; 
Variance increase/(decrease): ($1,525.5); 
Percentage change: (82). 

Source: GAO analysis of BRAC Commission and DLA's updated September 28, 
2007, DLR business plan data. 

[A] Excludes an inventory-related initiative included in the draft 
September 28, 2007, DLR business plan that is not directly the result 
of BRAC actions and that we believe should not be counted as BRAC 
savings. 

[B] GAO estimate based on DLA business plan data. 

[End of table] 

Costs Are Likely to Continue to Increase and Savings Estimates Are 
Likely to Change as Implementation Proceeds: 

Costs are likely to continue increasing and savings are likely to 
change as DLA proceeds with implementation of the SS&D and DLR 
recommendations, primarily because of unknown costs and the assumptions 
that were used in estimating savings, but no methodology to monitor and 
report actual costs and savings has been fully implemented. For the 
SS&D recommendation, we found that costs are likely to increase 
primarily because information technology costs and the costs to 
redistribute required inventory among the various strategic 
distribution platforms and forward distribution points were unknown at 
the time the BRAC Commission developed its estimates. As of December 
2007, these requirements and costs were not fully developed. For 
example, DLA officials informed us that the costs for redistributing 
inventory among DLA's depots are estimated to be around $100 million 
for each service, but these amounts have not been finalized or included 
in the business plans yet and could be higher once requirements are 
finalized. The magnitude of savings over time is also likely to change 
as DLA implements the SS&D recommendation. For example, the BRAC 
Commission's savings estimate included savings associated with the 
elimination of almost 22 million square feet of warehouse space. This 
figure was subsequently reduced to over 15 million in the SS&D business 
plan. However, officials from DLA's Defense Distribution Center told us 
that the square footage reduction would actually be even less than this 
reduced estimate because they do not expect needed inventory reductions 
to occur. For the projected savings in the business plan to 
materialize, inventory owned by the services and DLA would need to be 
reduced by 41 percent. At the time of our review, the Defense 
Distribution Center was conducting an analysis of this inventory to 
make recommendations of inventory items that could be eliminated. 
Because the services own a considerable portion of the inventory that 
would need to be reduced, DLA officials anticipate that the services 
will be reluctant to dispose of this inventory. DLA has no authority to 
direct the services to reduce their inventory, and so must rely on the 
services to voluntarily dispose of it. To the extent that the services 
retain inventory levels that do not meet the 41 percent reduction, 
savings will be reduced accordingly. In addition, increases or 
decreases in savings will be dependent on the realization of 
assumptions regarding DLA's efficiency and effectiveness in supporting 
its industrial customers, the extent of duplicate inventory reductions, 
the recurring savings associated with inventory reductions, and whether 
reductions in estimated warehouse space actually materialize. 

Costs are also likely to increase and savings are likely to change as 
DLA proceeds with implementation of the DLR recommendation. Like the 
SS&D recommendation, the DLR recommendation will require additional 
costs that are still unknown at this time. For example, in its 
concurrence statements to the September 2007 draft DLR business plan, 
the Navy made reference to its unknown information technology 
requirements and costs, and the Army stated that it was continuing to 
work with DLA to refine these requirements, which would be funded 
outside of the BRAC account. In the October 2006 approved DLR business 
plan, the Army noted that the $8.7 million identified in the plan was 
significantly understated for its information technology requirements. 
Moreover, estimated savings are subject to change depending on whether 
assumptions used in the estimating process are actually realized. For 
example, the Supply and Storage Joint Cross-Service Group assumed DLA 
can increase the amount of depot-level reparables purchased using long- 
term contracts by 2 percent per year from fiscal years 2008 through 
2011. In theory, DLA would achieve some price savings as a result of 
consolidating the buying power of all the services into single 
contracts. We reported in July 2005 that the Supply and Storage Joint 
Cross-Service Group estimated DLA can save 2.8 cents on each contract 
dollar placed on performance-based agreements. DLA officials also 
informed us that they hope to reduce the amount of inventory and 
associated holding costs of these depot-level reparables by reducing 
procurement lead times from current levels.[Footnote 22] Shorter 
procurement lead times can enable the same level of support with 
smaller inventories and smaller holding costs. These savings 
assumptions were attributed to reductions in the cost of money, cost of 
stock losses due to obsolescence, and cost of storage in our 2005 
report.[Footnote 23] The Supply and Storage Joint Cross-Service Group 
estimated that these factors together save about 17 percent of the 
estimated value of the acquisition cost of the stock that is no longer 
required to be held in inventory. Some smaller savings were to be 
realized by reducing the number of overall employees performing this 
function and also from spending less on base operations support as a 
result of having fewer employees. Increases or decreases in savings 
associated with the DLR recommendation will be dependent on the 
realization of these assumptions regarding consolidation of buying 
power, reduction of inventory, shorter procurement lead times, and 
personnel reductions. 

In our July 2005 report, we also expressed concern that business 
process reengineering recommendations such as the SS&D and DLR 
recommendations 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. We 
identified in our July 2005 report the lack of adequate systems to 
track and update costs and savings as a concern regarding prior BRAC 
rounds. These concerns are reinforced by limitations in DOD's financial 
management systems that historically have made it difficult to fully 
identify the costs of operations and provide a complete baseline from 
which to assess savings.[Footnote 24] DLA has recognized the need to 
track and update actual costs and savings resulting from BRAC actions. 
While DLA had, as of October 2007, developed a methodology with clear 
metrics for measuring the magnitude of actual costs and savings for the 
DLR recommendation, no such methodology existed for the SS&D 
recommendation. DLA officials told us that a similar methodology would 
be developed for the SS&D recommendation after the business plan is 
approved by the Office of the Secretary of Defense. Until DLA develops, 
approves, and implements methodologies for monitoring and periodically 
reporting on costs and savings in the future, the variances and cost 
and savings uncertainties associated with implementation of these 
recommendations may prevent Congress and DOD decision makers from 
having the most complete information possible as they assess the 
relative financial performance of implementing these BRAC 
recommendations. 

DLA Has Made Progress in Planning for the Implementation of the 2005 
BRAC Recommendations but Faces Several Challenges that It Is Taking 
Actions to Address: 

While DLA's progress to date has focused primarily on planning efforts 
to implement these two recommendations, DLA faces several challenges as 
implementation proceeds and is taking actions to address them. DLA's 
early efforts have focused on developing implementation planning 
documents, such as a concept of operations and business plans; 
coordinating actions with the military services; and addressing 
challenges that arise during the planning process. Physical 
implementation actions--such as actual construction, transfers and 
movement of personnel, realignment of functions and inventory, and 
reductions in infrastructure--only began during the latter part of 
2007. However, several challenges must be overcome to mitigate the 
potential adverse consequences on the services' depot-level operations 
and readiness that may occur during the implementation process. These 
challenges include addressing issues related to equipment readiness, 
business operations, information technology, human capital, and timely 
funding. DLA has taken several actions to address some of these 
challenges, but the effectiveness of these actions is still to be 
determined as implementation continues. 

Early Efforts Have Focused on Establishment of an Implementation Office 
and Development of Operational and Planning Guidance: 

In anticipation of the BRAC Commission recommendations becoming 
effective in November 2005, DLA established an implementation office, 
referred to as the Materiel Readiness Project Office, and began taking 
organizational and planning actions in September 2005 to implement the 
Commission's recommendations. The office's primary mission is to manage 
the implementation of all BRAC recommendations for which DLA is the 
business manager, and in so doing it is charged with integrating and 
coordinating with the military services and DOD components to ensure 
that the intent of the recommendations is achieved upon implementation. 
The office operates within an established governance structure, as 
shown in figure 4, that provides access to higher management levels 
within DLA and the Supply and Storage Joint Cross-Service Group and 
incorporates on-site representation from the military services to 
provide assistance and guidance on implementation issues. 

Figure 2: Command Relationship in Governance Structure: 

[See PDF for image] 

The Command Relationship in Governance Structure is illustrated in an 
organizational chart in the following manner: 

Top level: 
* Director, DLA (association with Joint Cross Service Group). 

Second level: 
* Vice-Director, DLA (association with Material Readiness Component 
Advisory Group). 

Third level: 
* Logistics Operations and Readiness. 

Fourth level: 
* BRAC Materiel Readiness Project Office (association with Material 
Readiness Component Advisory Group). 

Fifth level, associated with BRAC Materiel Readiness Project Office: 
* Storage Distribution; 
* Depot Level Reparable; 
* Consumable Item Transfer; 
* Army Team; 
* Navy Team; 
* Air Force Team; 
* Marine Corps Team. 

Sixth level, associated with each of the teams: 
* Corporate Installations; 
* Human Resources; 
* Logistics Operations; 
* Environmental Quality Division; 
* Information Operations; 
* Financial Operations; 
* General Counsel; 
* Public Affairs; 
* Legislative Affairs. 

Source: GAO. 

[End of figure] 

A key feature of the governance structure is the formation of 
integrated process teams, which include representatives from DLA and 
the services and have overall responsibility and accountability for 
planning and implementing the DLA-managed recommendations.[Footnote 25] 
The responsibilities of these teams include developing the detailed 
business plans, forwarding and presenting major issues up through the 
governance structure, and ensuring that implementation of the 
recommendations is in accordance with the BRAC Commission's 
recommendations. The governance structure also incorporates a 
capability to engage subject matter experts resident in DLA and the 
service components in areas such as finance, human capital, and 
information technology--areas that are integral to the successful 
implementation of the recommendations. 

In addition to these organizational considerations, DLA has developed 
operational and planning guidance for implementing both 
recommendations, such as concepts of operations, implementation plans, 
and business plans. The concepts of operations guidance establishes the 
overall joint policy and operational agreements reached between DLA and 
the services for implementing the 2005 BRAC recommendations. 
Implementation plans specify actions to be taken to implement the 
overall policy and concepts established in the concept of operations. 
Finally, the business plans serve as the foundation for the program 
management necessary to ensure that the DLA-managed BRAC 
recommendations are implemented efficiently and effectively and will 
serve as the basis for allocation of resources. The business plans 
identify, among other things, planned implementation actions, movement 
schedules, financial plans, and construction details. It is the Office 
of the Secretary of Defense's intent, in its oversight role, to review 
the business plans for these recommendations, as well as all other BRAC 
recommendations, every 6 months. Because implementation of the BRAC 
recommendations is still in the early stages, the operational and 
planning guidance for these recommendations is expected to continue to 
evolve throughout the implementation period to reflect changes in 
available resources and the evolving nature of the implementation 
process. 

Physical Implementation Actions Are Scheduled for Completion by 
September 2011: 

Physical implementation of the two recommendations began in October 
2007 and is scheduled to be completed in September 2011 as mandated by 
the BRAC statute. The reconfiguration of DLA's supply, storage, and 
distribution operations will affect 17 sites. As shown in table 9, 
physical implementation actions for this recommendation began with 
personnel transfers and the consolidation of inventory in October 2007, 
and will end with the completion of inventory consolidation in 
September 2011. All 17 sites will either move personnel associated with 
supply, storage, and distribution operations to new worksites or will 
transfer personnel in-place to DLA control. All 12 forward distribution 
points are scheduled to move inventories to comply with the SS&D 
recommendation. Construction to improve the infrastructure used for 
storing and distributing supplies will occur at three of four strategic 
distribution platforms--Oklahoma City, Susquehanna, and Warner Robins. 
The recommendation regarding procurement of depot-level reparables will 
affect 18 sites. As table 9 shows, physical implementation actions for 
this recommendation began with personnel transfers in May 2008 and are 
scheduled to end with completion of personnel moves and military 
construction in September 2011. All 18 sites will either move personnel 
associated with procurement of depot-level reparables to new worksites 
or will transfer personnel in-place to DLA control. Construction 
related to the DLR recommendation will occur only at 1 site--the 
Detroit Arsenal, Michigan. Unlike the SS&D recommendation, there is no 
scheduled movement of inventories associated with the DLR 
recommendation. 

Table 9: Scheduled Start and End Dates of Physical Implementation 
Actions for the DLA SS&D and DLR Recommendations: 

2005 BRAC implementation period. 

Action: SS&D: Inventory[A];
Time frame: October, 2007 - September 2011. 

Action: SS&D: Personnel[B]; 
Time frame: October, 2007 - September 2010. 

Action: SS&D: Construction[C]; 
Time frame: December, 2007 - April 2011. 

Action: DLR: Personnel[B]; 
Time frame: May, 2008 - September 2011. 

Action: DLR: Construction[C]; 
Time frame: October, 2008 - September 2011. 

Source: GAO analysis of September 2007 SS&D business plan and the 
September 2007 DLR business plan. 

[A] Time frame for movement of inventory. 

[B] Time frame for personnel moves and transfers. 

[C] Time frame for military construction projects. 

[End of table] 

DLA Faces Several Implementation Challenges: 

DLA faces several challenges in implementing these two BRAC 
recommendations for which it is the business manager. DOD recognized as 
early as September 2005 that implementing business process 
reengineering recommendations such as these within the BRAC process 
would present significant challenges because they present a major 
change in the way current business operations are conducted. These 
challenges, which DLA recognizes as ones needing attention as 
implementation progresses, focus on issues concerning (1) maintaining 
equipment readiness, (2) transitioning to a new concept of business 
operations, (3) developing information technology solutions, (4) 
managing human capital issues, (5) fully realizing savings and the 
impact of failing to do so on future budgets, and (6) securing timely 
funding to implement the recommendations. 

Maintaining Equipment Readiness: 

With both the SS&D and DLR recommendations, an implementation challenge 
repeatedly expressed by service officials was that DLA might not be 
able to maintain the same level of service needed to maintain equipment 
readiness. Service officials stated that when DLA takes over the supply 
support and procurement functions, it might not be able to provide the 
right kind of supplies and parts within the time frames needed to 
support the service's industrial or depot operations. If this occurs, 
equipment readiness could be adversely affected. Regarding supply 
support, DLA has not previously been responsible for providing the 
services with supplies at the retail level. Retail-level supply stocks 
are generally readily available supplies that are owned by the services 
and located in places such as maintenance facilities where repairs are 
conducted. If repair parts are not available when needed, the services 
expressed concern that it could impair readiness. For example, we asked 
officials at Air Force Materiel Command what the budget impact on the 
Air Force would be if DLA's implementation of the SS&D recommendation 
resulted in the addition of an extra day to the time required to repair 
spare parts at the Air Logistics Centers. Air Force Materiel Command 
calculated that accommodating this extra day without impairing 
readiness would cost more than $48 million annually. DLA and service 
depot-level officials informed us that a primary reason for this 
concern is that the services' production and maintenance operations 
experienced significant disruption during a previous transition period 
when DLA assumed wholesale management of consumable items in the early 
1990s. DLA and Army officials said that the Army remains unconvinced 
that DLA can make the transition with retail-level supplies without 
significantly disrupting the maintenance operations again. Furthermore, 
each of the services has a different system for determining retail-
level supply requirements, of which the Army's system is the most 
complex, according to DLA officials. As a result, Army officials in 
particular expressed concern that DLA may not understand their system 
well enough to accurately determine the type and quantity of supplies 
needed, and so may be unable to procure the supplies needed in a timely 
manner. 

In addition, the services are concerned that DLA has historically 
procured and managed consumable items--items that are not repaired for 
further use, such as nuts and bolts--rather than the more complex 
reparable items required under the DLR recommendation. Service 
officials noted that one of the critical differences between depot- 
level reparables and consumables is the long lead time associated with 
procuring some depot-level reparables. Service officials told us that 
procurement contracting officials will need to monitor these items to 
ensure that contracting efforts begin early enough to accommodate these 
long lead times and thereby sustain readiness levels. For example, Air 
Force officials at Robins Air Force Base expressed concern that DLA 
contracting officials may not be sufficiently familiar with the 
differences between reparables and consumables and the readiness 
implications of these differences, which could potentially degrade 
equipment readiness. 

Consequently, officials from each service stated that they would prefer 
DLA to proceed slowly in implementing these recommendations--namely by 
assuming easier functions prior to taking over more complex functions-
-in order to minimize any potential degradation of readiness. In 
response to the services' concerns, DLA is implementing both the SS&D 
and DLR recommendations with a risk-based, time-phased implementation 
process that moves from the least complex, lower-risk functions to the 
most complex and difficult functions using a time-phased approach. 
Service officials at the depot-level we spoke with generally stated 
that they were indifferent about DLA assuming the supply support and 
depot-level reparable procurement functions, as long as they continued 
to receive the same level of support from DLA as they now provide for 
themselves. As of December 2007, Warner Robins Air Logistics Center is 
the only site to complete the transfer of supply, storage, and 
distribution personnel to DLA for either recommendation. According to 
DLA and Air Force officials, there has not been a degradation of 
equipment readiness due to the transfer, which occurred in October 
2007. While the supply, storage, and distribution transfer has been 
successful at Warner Robins to this point, DLA will continue to be 
confronted with challenges in maintaining equipment readiness as the 
implementation of the recommendations proceed. 

Transitioning to a New Concept of Business Operations: 

Officials from the services and DLA cited challenges in transitioning 
to a new concept of business operations for the recommendations. The 
focus of the two recommendations is business process reengineering, 
which is intended to create a more effective supply, storage, and 
distribution framework and efficiencies in procuring depot-level 
reparables. In regards to the SS&D recommendation, DLA faces a 
challenge in developing a new pricing methodology that would be 
reasonable to use when it takes over the services' SS&D functions. 
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 would likely increase the cost of depot 
maintenance operations. These officials stated that the depots may then 
have to pass these additional costs on to their customers by increasing 
their hourly rates. DLA officials told us, however, that they plan to 
develop a new pricing methodology as they gain more experience in 
transitioning to the new way of business in interacting with the 
depots, as discussed below in the section regarding performance-based 
agreements. In regards to the DLR recommendation, DLA faces challenges 
in the development of a new concept of business operations, which is 
predicated on the services relinquishing control over the procurement 
of depot-level reparables to DLA, in order to create efficiencies in 
the procurement process. For example, according to DLA officials, DLA 
may be limited in its ability to achieve the expected savings to the 
extent that the services bundle the procurement of depot-level 
reparables with the maintenance of these depot-level reparables in 
comprehensive contracts. Ownership and oversight of contracts that 
bundle procurement and maintenance for a depot-level reparable will 
remain with the respective services, potentially reducing DLA's ability 
to capture expected efficiencies. 

Developing Information Technology Solutions: 

Officials from the services and DLA identified several challenges about 
developing information technology solutions to implement the DLR and 
SS&D recommendations. DLA has existing systems that it uses for DLA- 
managed items. Likewise, each of the services has its own information 
technology system to manage its items. Before DLA assumes 
responsibility for the procurement of depot-level reparables and 
responsibility for carrying out supply, storage, and distribution 
functions for DOD, it needs to identify which service systems it must 
interface with, and then develop solutions to bridge DLA's systems with 
the service systems. DLA and the services are working together to 
identify affected business processes and necessary bridges for existing 
systems to make these business processes and systems work together in 
the short term, so that DLA can manage its new responsibilities within 
the implementation time period. When the BRAC Commission estimate was 
prepared, it included one-time information technology workstation and 
user support costs for implementing the recommendations. However, the 
estimate included only almost $37 million for systems development 
because the actual system requirements and costs were unknown. The 
information technology cost estimates in DLA's business plans have 
increased from these initial BRAC estimates to almost $188 million, but 
this figure will continue to evolve because the requirements are not 
fully developed and associated costs are dependent on those 
requirements. As it now stands, the business plans' information 
technology cost estimates are for expanded capabilities on DLA systems, 
such as the electronic procurement system for the DLR recommendation 
previously discussed, in order to provide DLA with the technological 
capability to implement effectively the recommendations. DLA is 
currently in the process of working with the services to determine 
future information technology requirements necessary for the 
implementation of the recommendations. Until the affected business 
processes are identified and information technology interface 
requirements are determined, the projected costs will not be fully 
identified and questions will arise as to the availability and timing 
of funding requirements to meet information technology needs. As a 
result, continued cost increases are likely as implementation of the 
SS&D and DLR recommendations proceeds. 

Managing Human Capital Issues: 

Officials from the services and DLA also identified challenges 
regarding the management of human capital issues as the recommendations 
are implemented. According to depot-level service officials, one 
critical assumption made in the SS&D and DLR recommendations is that 
service personnel will transfer on an "as-is, where-is" basis to DLA, 
which means that employees in transferred positions will perform the 
same duties they are currently performing 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. However, service officials have expressed doubts about the 
willingness of current experienced personnel to transfer on an "as-is, 
where-is" basis to DLA. For example, in anticipation of the SS&D 
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 expected to transfer to DLA have 
either retired or found positions in other areas of the depot. In 
regards to the DLR recommendation, officials at Robins Air Force Base 
explained that one of the reasons for potential unwillingness to 
transfer to DLA is the lower-dollar-value contracting thresholds in DLA 
as compared to the services. These officials stated that existing 
service personnel qualified to contract at higher thresholds would 
likely perceive this change as a demotion. 

Service officials also expressed their belief that DLA has a lower pay- 
grade structure than the services. Moreover, employee union 
representatives said that depot employees' future advancement potential 
may be more limited at DLA, unless they are willing to move to other 
DLA locations. In regards to the DLR recommendation, we were told by 
officials at Robins Air Force Base that there is a perception that 
moving from a multipurpose contracting position in a service to a 
procurement-only position in DLA would be detrimental to career 
progression, viewed by contracting officers as harming their chances 
for promotions when they compete against other contracting officers who 
are not limited to procurement activities. Additionally, these 
officials expressed concern that DLA could eventually transfer the 
procurement function and its associated personnel to the Inventory 
Control Point in Richmond, Virginia. 

Furthermore, with respect to the SS&D recommendation, when DLA takes 
over the SS&D function, a 6ï¿½ percent efficiency elimination reduction 
is planned for the existing supply depot support workforce. The 
services are concerned that with the A-76 competitions, most efficient 
organization, and other personnel efficiency initiatives that have 
taken place since the BRAC data were collected and this efficiency 
assumption was put in place, the number of service SS&D personnel has 
already been drastically reduced and further reductions could adversely 
impact operations. Service officials stated that if DLA further reduces 
service SS&D personnel, then the services may be unable to get the 
support they need, which may affect readiness. 

Due to the numerous human capital challenges confronting DLA, the 
services are concerned whether DLA will be able to maintain the same 
level of experience possessed by existing service personnel to carry 
out the procurement and supply, storage, and distribution functions. 
Service officials believe that such a lack of experience could 
adversely affect DLA's ability to provide the same level of support now 
being provided by the services. As of December 2007, Warner Robins Air 
Logistics Center is the only site to complete the "as-is, where-is" 
transfer for either recommendation. According to DLA and Air Force 
officials, the transfer of 265 supply, storage, and distribution 
positions to DLA occurred in October 2007. Of these 265 positions 
transferred, DLA was successful in retaining 240 personnel conducting 
the functions, resulting in only 25 vacancies--a normal vacancy rate-- 
that has not disrupted maintenance production schedules to date. While 
the supply, storage, and distribution transfer has been successful at 
Warner Robins to this point, DLA will continue to be confronted with 
human capital challenges in the transfers that will occur over the next 
several years. DLA recognized that human capital issues would be a 
challenge early in the implementation process, and established the 
human capital integrated process teams comprised of DLA and service 
officials that are working to develop solutions to address these 
issues. 

Failing to Fully Realize BRAC Estimated Savings May Negatively Affect 
Budgets: 

Service officials we spoke with also voiced concerns regarding the 
potential negative effect on their budgets if the savings estimated by 
the BRAC Commission are not fully realized. DOD budget guidance directs 
the closed or realigned components to finance the difference between 
the start-up funding allocated by DOD and the actual costs of 
implementing the recommendations. To the extent that savings are not 
realized and are insufficient to offset this difference, service 
officials stated that they are concerned about having to make up the 
difference out of their own budgets. Service officials expressed 
concern that unrealized BRAC estimated savings would be summarily taken 
from service budgets, which could have multiple adverse consequences, 
including threatening readiness levels. For example, appropriations for 
maintenance and weapon system management may have to be reprogrammed to 
pay for implementation of the BRAC recommendations. Officials from 
several of the services stated that there was clearly a departmentwide 
emphasis on achieving savings and noted that DLA does not have a large 
budget to offset unrealized savings. 

Obtaining Timely Funding for Implementation of Recommendations: 

Early in the implementation period process, DLA experienced difficulty 
obtaining timely funding to begin physical implementation of the SS&D 
and DLR recommendations. DOD provided about $13 billion in start-up 
funds for implementing all 2005 BRAC recommendations. These funds were 
distributed to DLA and the service components through a program budget 
decision, which allocated the start-up funding by fiscal year based on 
the BRAC Commission's estimates of the components' proportional share 
of one-time implementation costs for all of the BRAC recommendations 
that affected them.[Footnote 26] The components were directed to 
finance the difference between the start-up fund amounts and actual 
implementation costs within the statutory 6-year period. The decision 
did not specify how the components were to spend the funds or what 
recommendations should be funded in which years. Because of the joint 
nature of these two recommendations, DLA as the business manager had to 
obtain each service's proportional share of their allocation of the 
start-up funding as well as its own BRAC allocation. As a result, early 
in the planning phase DLA had to coordinate with each of the services 
regarding when and how much, if any, of the start-up funding would be 
provided to begin implementation of these recommendations, according to 
DLA officials. This required considerable coordination and interaction 
with the services to align sufficient available funding to coincide 
with DLA's initial implementation schedule as specified in the business 
plans. However, this alignment process did not initially occur, 
resulting in a slippage on the implementation planning dates. For 
example, according to Army officials, the Army decided not to provide 
any funding for fiscal years 2006 or 2007, but rather to determine its 
level of funding commitment for each of these two recommendations 
during development of its fiscal year 2008 budget. During the early 
planning phase, several DLA officials told us they believed that DOD's 
method of allocating start-up funds created a climate of uncertainty, 
requiring considerable coordination and interaction between DLA and the 
services to devise a funding plan for implementation. Our analysis of 
the fiscal year 2008 through 2009 president's budget for these two BRAC 
recommendations shows that this funding challenge may have been 
somewhat mitigated because the planned funding now budgeted by the 
services and DLA is reasonably close to the amounts estimated in the 
business plans. However, these early budget challenges indicate that 
unless close attention is paid to subsequent budgets when they are 
developed, successful implementation of these two recommendations may 
be jeopardized. 

DOD and DLA Have Taken Several Actions to Address Some Challenges, but 
Effectiveness of These Actions Is Unknown: 

To ensure successful implementation of the SS&D and DLR 
recommendations, DOD and DLA have taken several actions to address some 
challenges and mitigate implementation risks, but the effectiveness of 
these actions is unknown. As we previously reported in October 2007, 
DLA is developing plans to minimize the risk associated with 
implementation of the SS&D recommendation.[Footnote 27] While no plan 
can guarantee the prevention of disruptions, DLA's plans for 
implementing both the SS&D and DLR recommendations incorporate several 
features that we believe, if implemented as intended, are likely to 
lessen the risk associated with these recommendations. These features, 
some of which are designed to address challenges faced by DLA and the 
services, include retaining the BRAC governance structure; using a risk-
based, time-phased approach; using "as-is, where-is" personnel 
transfers; using integrated process teams to address challenges and 
mitigate risks; and developing memoranda of agreement and performance- 
based agreements. 

* Governance structure: A significant action DOD took was to retain the 
governance structure it used to develop the 2005 BRAC recommendations, 
as previously discussed. As the implementation planning phase began, 
DLA expanded this governance structure by creating the Materiel 
Readiness Project Office within DLA in September 2005 specifically to 
develop execution processes and manage the implementation planning for 
several BRAC recommendations. In April 2007, DLA issued an order that 
transferred the established BRAC governance structure, including the 
existing Materiel Readiness Project Office, from DLA's planning 
division to its Logistics Operations and Readiness division to oversee 
and manage the implementation phase, with the organizational structure 
and governance remaining virtually the same as it was during the 
planning phase. Thus, within DLA, accountability for each 
recommendation has been established, service representation has been 
incorporated, and working groups actively assess challenges and develop 
solutions to mitigate risks. 

* Risk-based, time-phased implementation process: DLA has developed a 
risk-based, time-phased approach to implement the recommendations and 
mitigate risks. This implementation approach moves from the least 
complex, lower-risk functions up to the most complex and difficult. 
Additionally, implementation of both recommendations is to be phased 
across the services during the implementation period, and within each 
service implementation will take place sequentially at affected sites. 
This risk-based, time-phased approach has been approved within the 
governance structure for both recommendations and is aimed at 
mitigating risks to readiness by phasing in the recommendations to 
allow for the focused dedication of resources for individual sites, the 
capture and incorporation of "lessons learned" as implementation 
proceeds. 

* "As-is, where-is" transfer: The transfer of DLR procurement and SS&D 
positions is to occur on an "as-is, where-is" basis, which means that 
employees in transferred 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 less potential for 
disruptions to procurement actions or maintenance production schedules. 
For example, at Warner Robins Air Logistics Center, 265 positions were 
transferred to DLA in October 2007. According to DLA and Air Force 
officials, DLA successfully retained personnel in 240 of these 265 
positions, resulting in only 25 vacancies. These officials explained 
that this is a normal vacancy rate that has not disrupted maintenance 
production schedules to date. 

* Integrated process teams and the plan of action and milestones: DLA 
is using integrated process teams to address challenges and mitigate 
risks during the implementation planning phase and actual 
implementation for both recommendations. The integrated process teams 
assist in the development of a comprehensive action plan, referred to 
as the Plan of Action and Milestones, for implementation planning. The 
plan 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. Furthermore, the integrated process teams meet regularly to 
discuss implementation issues, work through problems and concerns, and 
identify potential solutions and mitigating actions where possible. The 
integrated process teams raise unresolved issues to higher levels for 
resolution. DOD envisions this process continuing throughout the 6-year 
implementation period. 

* Memorandums of agreement and performance-based agreements: To 
mitigate the risks associated with implementing the SS&D and DLR 
recommendations, DLA and the services are negotiating memoranda of 
agreement to establish business rules that set forth the requirements 
and responsibilities for implementation planning and activities. DLA 
and the services also plan to negotiate performance-based 
agreements[Footnote 28] that will establish the responsibilities, 
metrics to measure performance, costs, and business rules that should 
help minimize the risk of disrupting depot maintenance. For example, in 
November 2007 DLA and the Air Force reached agreement on five metrics 
to be tracked to assess DLA's performance in providing the supply, 
storage, and distribution functions at the Air Force's maintenance 
facilities. 

As discussed above, many challenges will need to be worked out during 
implementation, but DLA has taken several initial actions which we 
believe are positive steps that can enable DLA to address these 
challenges by working through concerns and identifying potential 
solutions and mitigating actions where possible. Although the 
effectiveness of these actions will be unknown until implementation 
progresses further and problems arise and are addressed, service 
officials we spoke with expressed satisfaction with the governance 
structure and the implementation planning actions that have taken place 
to date. According to DOD officials, the differing cultures of the 
services and DLA as well as the inertia of practices that have existed 
for years make transitions to newly designed business processes 
inherently difficult. Thus, as implementation progresses further and 
more actions are undertaken, the potential for disruptions to the 
services' industrial operations and possible degradations in readiness 
will continue to exist. Because we believe that DLA's current plans 
incorporate several features that, if implemented as intended, are 
likely to lessen the risk associated with these recommendations, we are 
not making any specific recommendations at this time regarding further 
actions that may be needed to mitigate potential disruptions. 
Nonetheless, we believe continued collaboration and monitoring of the 
execution of BRAC actions as implementation proceeds are essential to 
enable DLA to take corrective actions as necessary to prevent adverse 
effects. 

Conclusions: 

Accurately accounting for savings associated with the BRAC 
recommendations provides decision makers with credible information for 
assessing the financial performance of the implementation efforts and 
supports decision making regarding the formulation of future budgets 
and associated resources needed to successfully implement the 
recommendations. We believe that accurately accounting for savings on a 
timely basis requires that only savings directly attributable to BRAC 
actions be considered as BRAC savings and that methodologies be 
implemented for periodically tracking and updating actual savings over 
time. Without this accounting, decision makers may be unable to make 
informed decisions regarding financial performance or future budgets. 
In this regard, we believe that DLA's inclusion of expected savings in 
its business plans that are not directly attributable to BRAC is 
inappropriate and has the effect of overstating the savings that the 
department expects from implementing these BRAC recommendations. 
Further, given the potential for significant variability in the savings 
to be achieved from implementing these recommendations, we believe it 
is essential that DLA implement methodologies to periodically monitor 
and update savings from these recommendations throughout the 
implementation period. We are encouraged that DLA has taken steps to 
partially complete the development of such methodologies. Unless these 
methodologies are developed, approved, and implemented, the savings 
attributable to BRAC cannot be accurately monitored as implementation 
proceeds. 

To ensure that implementation of all required BRAC actions is completed 
by the end of fiscal year 2011, adequate funding must be secured not 
only from within DLA but also from the military services. Early in the 
implementation process, funding became an issue as some difficulties 
arose in obtaining sufficient funding from the services to meet 
implementation milestones. This required considerable coordination and 
interaction between DLA and the services to align sufficient start-up 
and implementation funds with DLA's planned implementation schedule. 
While funding issues are now somewhat mitigated, we believe that the 
early budget challenges, coupled with increased funding needs in the 
latter portion of the implementation period, indicate that unless close 
attention is paid to subsequent budgets when they are finalized, 
success with the full implementation of these two recommendations 
within the milestone schedules may be jeopardized. 

Recommendations for Executive Action: 

To provide a more accurate projection of savings associated with 
implementing the DLA-managed BRAC recommendations, we recommend that 
the Secretary of Defense direct the Director of the Defense Logistics 
Agency to revise its business plans to exclude all expected savings 
that are not the direct result of BRAC actions. Such revisions should 
exclude, for example, the $172 million in potential savings for 
implementing the SS&D recommendation and the $71 million in potential 
savings for implementing the DLR recommendation that resulted from pre- 
BRAC actions associated with inventory reduction initiatives already 
planned by the services that would have occurred regardless of BRAC. 

To provide greater accountability and visibility over the financial 
performance of the DLA BRAC recommendations and to provide a basis for 
preventing potential premature budget reductions, we recommend that the 
Secretary of Defense direct the Director of the Defense Logistics 
Agency to implement methodologies for periodically monitoring and 
updating net savings for the SS&D and DLR recommendations throughout 
the implementation period. Such methodologies, at a minimum, should 
include: 

* clear metrics for measuring the magnitude of actual costs and 
savings, 

* a comparison of the actual costs and savings to the prior estimates 
to coincide with the required semiannual business plan updates, and: 

* explanations for actual cost and savings variances from estimates 
presented in the business plans. 

To ensure adequate funding for successful implementation of the 
recommendations within the BRAC implementation time frame, we recommend 
that the Secretary of Defense direct the Secretaries of the Army, Navy, 
and Air Force, the Commandant of the Marine Corps, and the Director of 
DLA to ensure that necessary funding to meet implementation milestones 
is reflected in all respective service and DLA budget submissions for 
the remainder of the implementation period ending in fiscal year 2011. 

Agency Comments and Our Evaluation: 

In written comments on a draft of this report, DOD concurred with our 
second and third recommendations but did not concur with our first 
recommendation to have the Defense Logistics Agency revise its business 
plans to exclude all expected savings that are not the direct result of 
BRAC actions. We noted that such revisions should exclude, for example, 
the $172 million in potential savings for implementing the SS&D 
recommendation and the $71 million in potential savings for 
implementing the DLR recommendation that resulted from pre-BRAC actions 
associated with inventory reduction initiatives already planned by the 
services that would have occurred regardless of BRAC. In its response, 
DOD stated that while these particular potential savings were not 
directly the result of BRAC actions, the estimated savings were enabled 
by BRAC actions and should be attributable to the recommendations. 
According to DOD, "enabled savings are savings initiatives that were 
enhanced in some way by the BRAC implementation actions (e.g. increased 
scope, more aggressively pursued or moved in new directions)." We 
disagree and continue to believe that the $243 million in expected 
savings resulting from the services' inventory reduction initiatives 
should not be counted as BRAC savings. As we stated in this 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 either to a DOD supply regulation[Footnote 29] to identify and 
dispose of obsolete inventory or were initiated prior to November 2005 
when the BRAC recommendations became effective.[Footnote 30] Because we 
believe that the expected savings associated with these initiatives are 
not the result of BRAC actions and would have occurred regardless of 
BRAC, we do not believe that these savings should be counted as BRAC 
savings. 

DOD's written comments are reprinted in their entirety in appendix IV. 
DOD also provided technical comments, which we have incorporated into 
this report as appropriate. 

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 [hyperlink, 
http://www.gao.gov]. 

If you or your staff have any questions regarding this report, please 
contact me at (202) 512-4523 or [email protected]. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. Staff members who made key contributions 
to this report are listed in appendix V. 

Signed by: 

Brian J. Lepore: 
Director, Defense Capabilities and Management: 

List of Congressional Committees: 

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

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

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

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

The Honorable John P. Murtha: 
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 Zach Wamp: 
Ranking Member: 
Subcommittee on Military Construction, Veterans Affairs and Related 
Agencies: 
Committee on Appropriations: 
House of Representatives: 

[End of section] 

Appendix I: Text of the BRAC Commission's Supply, Storage, and 
Distribution Management Reconfiguration: 

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). 

[End of section] 

Appendix II: Text of the BRAC Commission's Depot-Level Reparable 
Procurement Management Consolidation Recommendation: 

Realign Soldier Systems Center, Natick, MA, by relocating the Budget/ 
Funding, Contracting, Cataloging, Requisition Processing, Customer 
Services, Item Management, Stock Control, Weapon System Secondary Item 
Support, Requirements Determination, Integrated Materiel Management 
Technical Support Inventory Control Point functions for Consumable 
Items to Defense Supply Center Philadelphia, PA, and reestablishing 
them as Defense Logistics Agency Inventory Control Point functions and 
by disestablishing the procurement management and related support 
functions for Depot Level Reparables and designating them as Defense 
Supply Center Philadelphia PA, Inventory Control Point functions. 

Realign Detroit Arsenal, MI, by relocating the Budget/Funding, 
Contracting, Cataloging, Requisition Processing, Customer Services, 
Item Management, Stock Control, Weapon System Secondary Item Support, 
Requirements Determination, Integrated Materiel Management Technical 
Support Inventory Control Point functions for Consumable Items to 
Defense Supply Center Columbus, OH, and reestablishing them as Defense 
Logistics Agency Inventory Control Point functions and by 
disestablishing the procurement management and related support 
functions for Depot Level Reparables and designating them as Defense 
Supply Center Columbus, OH, Inventory Control Point functions. 

Realign Rock Island Arsenal, IL, as follows: relocate the Budget/ 
Funding, Contracting, Cataloging, Requisition Processing, Customer 
Services, Item Management, Stock Control, Weapon System Secondary Item 
Support, Requirements Determination, Integrated Materiel Management 
Technical Support Inventory Control Point functions for Consumable 
Items to Defense Supply Center Columbus, OH, and reestablish them as 
Defense Logistics Agency Inventory Control Point functions; relocate 
the procurement management and related support functions for Depot 
Level Reparables to Detroit Arsenal, MI, and designate them as Defense 
Supply Center Columbus, OH, Inventory Control Point functions; and 
relocate the remaining integrated materiel management, user, and 
related support functions to Detroit Arsenal, MI. 

Realign Ft. Huachuca, AZ, as follows: relocate the Budget/Funding, 
Contracting, Cataloging, Requisition Processing, Customer Services, 
Item Management, Stock Control, Weapon System Secondary Item Support, 
Requirements Determination, Integrated Materiel Management Technical 
Support Inventory Control Point functions for Consumable Items to 
Defense Supply Center Columbus, OH, and designate them as Defense 
Logistics Agency Inventory Control Point functions; relocate the 
procurement management and related support functions for Depot Level 
Reparables to Aberdeen proving Ground, MD, and designate them as 
Defense Supply Center Columbus, OH, Inventory Control Point functions; 
and relocate the remaining integrated materiel management, user, and 
related support functions to Aberdeen Proving Ground, MD. 

Realign Naval Support Activity Mechanicsburg, PA, as follows: relocate 
the Budget/Funding, Contracting, Cataloging, Requisition Processing, 
Customer Services, Item Management, Stock Control, Weapon System 
Secondary Item Support, Requirements Determination, Integrated Materiel 
Management Technical Support Inventory Control Point functions for 
Consumable Items, except those Navy items associated with Nuclear 
Propulsion Support, Level 1/Subsafe and Deep Submergence System Program 
(DSSP) Management, Strategic Weapon Systems Management, Design 
Unstable/Preproduction Test, Special Waivers, Major End Items and 
Fabricated or Reclaimed items to Defense Supply Center Columbus, OH, 
and reestablish them as Defense Logistics Agency Inventory Control 
Point functions; disestablish the procurement management and related 
support functions for Depot Level Reparables and designate them as 
Defense Supply Center Columbus, OH, Inventory Control Point functions; 
and relocate the oversight of Budget/Funding, Contracting, Cataloging, 
Requisition Processing, Customer Services, Item Management, Stock 
Control, Weapon System Secondary Item Support, Requirements 
Determination, Integrated Materiel Management Technical Support 
Inventory Control Point functions for Consumable Items and the 
oversight of procurement management and related support functions for 
Depot Level Reparables to the Defense Logistics Agency, Fort Belvoir, 
VA. 

Realign Marine Corps Base, Albany, GA, as follows: relocate the Budget/ 
Funding, Contracting, Cataloging, Requisition Processing, Customer 
Services, Item Management, Stock Control, Weapon System Secondary Item 
Support, Requirements Determination, Integrated Materiel Management 
Technical Support Inventory Control Point functions for any residual 
Consumable Items to Defense Supply Center Columbus, OH, and reestablish 
them as Defense Logistics Agency Inventory Control Point functions; 
disestablish the procurement management and related support functions 
for Depot Level Reparables and designate them as Defense Supply Center 
Columbus, OH, Inventory Control Point functions; and relocate the 
oversight of Budget/Funding, Contracting, Cataloging, Requisition 
Processing, Customer Services, Item Management, Stock Control, Weapon 
System Secondary Item Support, Requirements Determination, Integrated 
Materiel Management Technical Support Inventory Control Point functions 
for Consumable Items and the oversight of procurement management and 
related support functions for Depot Level Reparables to the Defense 
Logistics Agency, Fort Belvoir, VA. 

Realign Naval Support Activity Philadelphia, PA, Tinker Air Force Base, 
OK, Hill Air Force Base, UT, and Robins Air Force Base, GA, by 
relocating the Budget/Funding, Contracting, Cataloging, Requisition 
Processing, Customer Services, Item Management, Stock Control, Weapon 
System Secondary Item Support, Requirements Determination, Integrated 
Materiel Management Technical Support Inventory Control Point functions 

for Consumable Items, except those Navy items associated with Design 
Unstable/Preproduction Test, Special Waivers, and Major End Items to 
Defense Supply Center Richmond, VA, and reestablishing them as Defense 
Logistics Agency Inventory Control Point functions, and by 
disestablishing the procurement management and related support 
functions for Depot Level Reparables and designating them as Defense 
Supply Center Richmond, VA, Inventory Control Point functions. 

Realign Redstone Arsenal, AL, as follows: relocate the Budget/Funding, 
Contracting, Cataloging, Requisition Processing, Customer Services, 
Item Management, Stock Control, Weapon System Secondary Item Support, 
Requirements Determination, Integrated Materiel Management Technical 
Support Inventory Control Point functions for Aviation Consumable Items 
to Defense Supply Center Richmond, VA, and reestablish them as Defense 
Logistics Agency Aviation Inventory Control Point functions; 
disestablish the procurement management and related support functions 
for Aviation Depot Level Reparables and designate them as Defense 
Supply Center Richmond, VA, Aviation Inventory Control Point functions; 
relocate the Budget/Funding, Contracting, Cataloging, Requisition 
Processing, Customer Services, Item Management, Stock Control, Weapon 
System Secondary Item Support, Requirements Determination, Integrated 
Materiel Management Technical Support Inventory Control Point functions 
for Missile Consumable Items to Defense Supply Center Columbus, OH; 
reestablish them as Defense Logistics Agency Missile Inventory Control 
Point functions; disestablish the procurement management and related 
support functions for Missile Depot Level Reparables and designate them 
as Defense Supply Center Columbus, OH, Missile Inventory Control Point 
functions; and realign a portion of the remaining integrated materiel 
management, user, and related support functions necessary to oversee 
the Inventory Control Point activities at Aberdeen Proving Ground, MD, 
Detroit Arsenal, MI, Soldier System Center, Natick, MA, and Redstone 
Arsenal, AL, to Headquarters Army Materiel Command (AMC). 

Realign Wright-Patterson Air Force Base, OH, by relocating the 
oversight of Budget/Funding, Contracting, Cataloging, Requisition 
Processing, Customer Services, Item Management, Stock Control, Weapon 
System Secondary Item Support, Requirements Determination, Integrated 
Materiel Management Technical Support Inventory Control Point functions 
for Consumable Items and the oversight of procurement management and 
related support functions for Depot Level Reparables to the Defense 
Logistics Agency, Fort Belvoir, VA. 

Realign Fort Belvoir, VA, by assigning the oversight of Budget/Funding, 
Contracting, Cataloging, Requisition Processing, Customer Services, 
Item Management, Stock Control, Weapon System Secondary Item Support, 
Requirements Determination, Integrated Materiel Management Technical 
Support Inventory Control Point functions for Consumable Items and the 
oversight of procurement management and related support functions for 
Depot Level Reparables to the Defense Logistics Agency, Fort Belvoir, 
VA. 

Source: Extract from the 2005 Defense Base Closure and Realignment 
Commission Report to the President, Volume 2, Appendix Q (Commission's 
Final Recommendations). 

[End of section] 

Appendix III: Scope and Methodology: 

We performed our work and obtained information from the Office of the 
Under Secretary of Defense (Acquisition, Technology, and Logistics), 
Arlington, Virginia; Office of the Deputy Under Secretary of Defense 
(Installations and Environment), Arlington, Virginia; the Office of the 
Under Secretary of Defense Comptroller, Arlington, Virginia; Defense 
Logistics Agency (DLA) headquarters, Fort Belvoir, Virginia; DLA's 
Defense Distribution Center, Susquehanna, Pennsylvania; Air Force 
Materiel Command, Wright-Patterson Air Force Base, Ohio; Naval Sea 
Systems Command, Washington Navy Yard, Washington, D.C.; United States 
Army Materiel Command, Fort Belvoir, Virginia; Corpus Christi Army 
Depot, Corpus Christi, Texas; Norfolk Naval Shipyard, Portsmouth, 
Virginia; Naval Supply Systems Command, Mechanicsburg, Pennsylvania; 
and Warner Robins Air Logistics Center, Warner Robins, Georgia. We 
further relied on our related work and resulting report issued in 
October 2007 regarding key specific implementation actions associated 
with the implementation of the supply, storage, and distribution (SS&D) 
recommendation.[Footnote 31] Additional locations visited during this 
prior review included Anniston Army Depot, Anniston, Alabama; Tobyhanna 
Army Depot, Tobyhanna, Pennsylvania; the Naval Aviation Depot, Cherry 
Point, North Carolina; and the Marine Corps Maintenance Center Albany, 
Albany, Georgia. 

To determine the extent to which DLA's estimated costs and savings for 
the two DLA-managed recommendations have changed from those presented 
in the 2005 base realignment and closure (BRAC) Commission's September 
2005 report, we examined supporting documents used to generate the 
Commission's estimates and DLA's business plans for these two 
recommendations. The Commission's estimates represent the closest 
estimates that were available at the time the BRAC recommendations were 
finalized. In making our comparisons, we used DLA's September 28, 2007, 
draft business plan, which is awaiting approval from the Office of the 
Secretary of Defense, for the SS&D recommendation and its updated 
September 28, 2007, business plan for the depot-level reparable (DLR) 
recommendation. The September 2007 business plans were the most current 
plans available at the time of our review and provide for more current 
estimates and associated variances with BRAC Commission estimates than 
those provided in our December 2007 report on overall BRAC costs and 
savings.[Footnote 32] In that report we used fiscal year 2008 
Department of Defense (DOD) budget data for comparative purposes. We 
determined the reasonableness of the estimates presented in the 
business plans by reviewing and analyzing source data and methodology 
used to generate estimates of costs and savings. We discussed the 
reasons for the variances with DLA, service, and contractor officials. 
Based on the revised estimates as presented in the business plans, we 
also recalculated the expected 20-year savings--also known as the 20- 
year net present value--for these recommendations, using the same 
methodology used by the BRAC Commission in its calculation of the 
estimate. We also generally reported expected cost and savings in 
current dollars and not constant dollars except where noted. In 
addition, we calculated how many years it would take for the expected 
BRAC savings to recoup the expected initial investment costs to 
implement the recommendations, comparing the fiscal years, or break- 
even points, when cumulative savings would exceed cumulative costs. We 
did this to be consistent with the way DOD had reported its break-even 
points for past rounds, which is a methodology we also replicated in 
our prior reports on BRAC implementation. 

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 (Acquisition, Technology, 
and Logistics), Supply and Storage Joint Cross-Service Group, and DLA 
guidance for reporting data and interviewed officials at the locations 
named above as well as BRAC 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. 

To determine the progress made in implementing these recommendations 
and the challenges DLA faces, we analyzed pertinent documents and 
reports and interviewed officials from the Office of the Under 
Secretary of Defense (Acquisition, Technology, and Logistics); DLA 
headquarters and its Defense Distribution Center in Susquehanna, 
Pennsylvania; and Army, Navy, Air Force, and Marine Corps officials 
responsible for developing the planning documents and implementing the 
recommendations. We also discussed challenges with service officials at 
and observed the supply and support operations at Corpus Christi Army 
Depot, Corpus Christi, Texas; Norfolk Naval Shipyard, Portsmouth, 
Virginia; and Warner Robins Air Logistics Center, Warner Robins, 
Georgia. In addition to these sites, we also visited Anniston Army 
Depot, Anniston Alabama; Tobyhanna Army Depot, Tobyhanna, Pennsylvania; 
the Naval Aviation Depot, Cherry Point, North Carolina; and the Marine 
Corps Maintenance Center Albany, Albany, Georgia to observe supply and 
support operations and discuss their concerns regarding implementation 
issues. We further discussed with DLA officials ongoing or planned 
actions to mitigate the risks associated with these challenges. 

We conducted this performance audit from January 2006 through December 
2007 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

[End of section] 

Appendix IV: Comments from the Department of Defense: 

Deputy Under Secretary Of Defense For Logistics And Materiel Readiness: 
3500 Defense Pentagon: 
Washington, DC 20301-3500: 

February 26, 2008: 

Mr. Brian Lapore: 
Director, Defense Capabilities and Management: 
U. S. Government Accountability Office: 
441 G Street, N.W. 
Washington, DC 20548: 

Dear Mr. Lapore: 

This is the Department of Defense (DOD) response to the GAO draft 
report, "Military Base Realignments And Closures: Higher Costs and 
Lower Savings Projected for Implementing Two Key Supply-Related BRAC 
Recommendations," dated 18 January, 2008 (GAO Code 350791/GAO-08-315). 

The DoD non-concurs with the draft report's recommendation that the 
Secretary of Defense direct the Director of the Defense Logistics 
Agency to revise its business plans to exclude all expected savings 
that are not the direct result of BRAC actions. Your report cites the 
$172 million in potential savings for implementing the supply, storage, 
and distribution (SS&D) recommendation and the $71 million in potential 
savings for implementing the depot level reparable (DLR) recommendation 
as pre-BRAC actions associated with inventory reduction initiatives 
already planned by the Services that would have occurred regardless of 
BRAC. The Department's views the $243M in potential savings, while not 
directly the result of BRAC actions, were enabled by BRAC actions and 
therefore should be attributable to the recommendation. Additional 
information to support our position is provided in the attachment. The 
Department concurs with the two other recommendations and our comments 
are attached. 

The Department appreciates the opportunity to comment on the draft 
report. Technical comments were provided separately. 

Sincerely, 

Signed by: 

Jack Bell: 

Enclosure: 
As stated: 

GAO Draft Report ï¿½ Dated January 18, 2008: 
GAO Code 350791/GAO-08-315: 

"Military Base Realignments And Closures: Higher Costs and Lower 
Savings Projected for Implementing Two Key Supply-Related BRAC 
Recommendations" 

Department Of Defense Comments To The Recommendations: 

Recommendation 1: The GAO recommends that the Secretary of Defense 
direct the Director of the Defense Logistics Agency to revise its 
business plans to exclude all expected savings that are not the direct 
result of BRAC actions. Such revisions should exclude, for example, the 
$172 million in potential savings for implementing the supply, storage, 
and distribution (SS&D) recommendation and the $71 million in potential 
savings for implementing the depot level reparable (DLR) recommendation 
that resulted from pre-BRAC actions associated with inventory reduction 
initiatives already planned by the Services that would have occurred 
regardless of BRAC. 

DOD Response: Non-concur. While not directly the result of Base 
Realignment and Closures (BRAC) actions, the $243M in potential savings 
were enabled by BRAC actions Enabled savings are savings initiatives 
that were enhanced in some way by the BRAC implementation actions (e.g. 
increased scope, more aggressively pursued or moved in new directions). 
Defense Logistics Agency (DLA) attributes $196M to holding cost 
avoidance due to Army and Marine Corp condemnations, Air Force (AF) 
implementation of Customer Oriented Leveling Technique (COLT) and 
Strategic Materiel Sourcing (SMS); additional savings of $23.6 M 
occurred due to AF COLT and SMS inventory reduction initiatives; $23.8M 
occurred due to changes in SMS pricing. The basis of our non-concur is 
centered on DLA and the Services' actions taken to implement two 
specific BRAC recommendations, 177 and 176. 

In recommendation 177, DLA pledged to evacuate more than 15M gross 
square feet of warehouse space. As a result of this pledge, DLA asked 
the Services to consider eliminating dormant stock (i.e. stock with no 
demands for more than 2 years). The holding cost avoidance savings 
claimed were from stock voluntarily eliminated as a result of this 
review. 

COLT is a program designed to minimize stock held in support of AF 
depot maintenance activities. COLT achieves the same results intended 
by recommendation 177 which calls for DLA to collapse the wholesale and 
retail stock levels when it assume ownership of the depot retail supply 
accounts. As a result of this initiative the AF was exempted from 
participation in DLA's retail supply inventory reduction program. 

Recommendation 176 consolidates procurement authority into one DOD 
Component (DLA) enabling the department to increase the rate that items 
are added to long term indefinite-delivery indefinite-quantity (IDIQ) 
contracts. SMS is a DLA program that measures the savings accrued by 
DLA when it adds new items to long term IDIQ contracts. Savings come 
from reduced stock levels resulting from shorter lead-times and moving 
items from stocked to direct vendor delivery status. Implementation of 
176 enhances the savings generated by the SMS program 

Recommendation 2: The GAO recommends that the Secretary of Defense 
direct the Director of the Defense Logistics Agency to implement 
methodologies for periodically monitoring and updating net savings for 
the supply, storage, and distribution (SS&D) and depot level reparable 
(DLR) recommendations throughout the implementation period. Such 
methodologies, at a minimum, should include: 

* clear metrics for measuring the magnitude of actual costs and 
savings; 

* a comparison of the actual costs and savings to the prior estimates 
to coincide with the required semi-annual business plan updates, and; 

* explanations for actual cost and savings variances from estimates 
presented in the business plans. 

DOD Response: Concur 

Recommendation 3: The GAO recommends that the Secretary of Defense 
direct the Secretaries of the Army, Navy, and Air Force, the Commandant 
of the Marine Corps, and the Director of the Defense Logistics Agency 
(DLA) to ensure that necessary funding to meet implementation 
milestones is reflected in all respective Service and DLA budget 
submission for the remainder of the implementation period ending in 
fiscal year 2011. 

DOD Response: Concur 

[End of section] 

Appendix 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, Barry Holman, Director 
(retired); James R. Reifsnyder, Assistant Director; John R. Beauchamp, 
Renee S. Brown, John C. Bumgarner, Brian P. Mateja, Julia Matta, 
Charles W. Perdue, Dudley C. Roache, Jr. (retired), Virginia M. 
Saavedra (retired), and John Wren made key contributions to this 
report. 

[End of section] 

Related GAO Products: 

Military Base Realignments and Closures: Estimated Costs Have Increased 
and Estimated Savings Have Decreased. GAO-08-341T. Washington, D.C.: 
December 12, 2007. 

Military Base Realignments and Closures: Cost Estimates Have Increased 
and Are Likely to Continue to Evolve. GAO-08-159. Washington, D.C.: 
December 11, 2007. 

Military Base Realignments and Closures: Impact of Terminating, 
Relocating, or Outsourcing the Services of the Armed Forces Institute 
of Pathology. GAO-08-20. Washington, D.C.: November 9, 2007. 

Military Base Realignments and Closures: Transfer of Supply, Storage, 
and Distribution Functions from Military Services to Defense Logistics 
Agency. GAO-08-121R. Washington, D.C.: October 26, 2007. 

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: Observations on Prior and Current BRAC Rounds. 
GAO-05-614. Washington, D.C.: May 3, 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. 

[End of section] 

Footnotes: 

[1] Business 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, the BRAC 
recommendations discussed in this report are intended to transform 
existing distribution and procurement processes to more efficiently 
support the warfighter. 

[2] DOD began the transition of management of consumable items from the 
services to DLA in the early 1990s. Under this BRAC 2005 
recommendation, the services and DLA are to complete the transfer of 
all remaining eligible consumable items to DLA. Consumable items are 
either not repairable or not economically repairable. 

[3] [3] These particular figures are presented in fiscal year 2005 
constant dollars (i.e., excludes projected inflation) as reported by 
the BRAC Commission. DLA subsequently converted the Commission's 
estimates to then-year dollars in its business plans and also expressed 
its estimates in then-year dollars (i.e., includes projected 
inflation). The implementation period extends nearly 6 years from when 
the BRAC recommendations became effective in November 2005 to September 
15, 2011. 

[4] GAO, 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). 

[5] GAO, Military Base Realignments and Closures: Cost Estimates Have 
Increased and Are Likely to Continue to Evolve, GAO-08-159 (Washington, 
D.C.: Dec. 11, 2007). 

[6] GAO, Military Base Realignments and Closures: Transfer of Supply, 
Storage, and Distribution Functions from Military Services to Defense 
Logistics Agency, GAO-08-121R (Washington, D.C.: Oct. 26, 2007). 

[7] According to DOD, "enabled" savings are those generated from non- 
BRAC initiatives that were enhanced (e.g., increased in scope, more 
aggressively pursued, or moved in new directions) in some way by the 
implementation of the BRAC recommendations. 

[8] Twenty-year savings, also known as 20-year net present value in the 
BRAC Commission's report, is a financial calculation that accounts for 
the time value of money by determining the present value of future 
savings minus up-front investment costs over a specified period of 
time. Determining net present value is important because it illustrates 
both the up-front investment costs and long-term savings in a single 
amount. In the context of BRAC implementation, net present value is 
calculated for a 20-year period from 2006 through 2025. 

[9] DOD and the BRAC Commission used an estimation model during the 
decision-making process to assess various proposed recommendations. The 
model was not intended to produce budget-quality estimates and thus can 
not be assumed to represent the actual costs incurred or the savings 
achieved by implementing the recommendations. 

[10] The four prior rounds took place in 1988, 1991, 1993, and 1995. 

[11] Pub. L. No. 107-107, Title XXX (2001). 

[12] Pub. L. No. 101-510, Title XXIX (1990); 10 U.S.C. ï¿½ 2687 note. 

[13] GAO-08-121R. 

[14] Performance-based logistics is defined as the purchase of weapon 
system sustainment as part of an integrated weapon system package based 
on output measures, such as weapon system availability, rather than 
input measures, such as parts and technical service. 

[15] In the context of BRAC, net present value savings take into 
account the time value of money in calculating the value of future 
costs and savings. For fiscal year 2005, DOD used a 2.8 percent 
discount rate to calculate net present value. 

[16] Payback period is a metric used by DOD and the BRAC Commission in 
evaluating individual BRAC recommendations and represents the time 
required to recoup up-front investment costs to implement BRAC 
recommendations. Thus, payback or the break-even point is when 
cumulative savings exceed cumulative costs. 

[17] Under 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. 

[18] GAO-08-121R. 

[19] The 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. These 
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. 

[20] DOD Supply Chain Materiel Management Regulation, DOD 4140.1-R, 
Section C2.8 Materiel Retention (May 23, 2003). 

[21] This construction includes an administrative building, a parking 
garage, a weapons maintenance and operations center, and a weapon 
system support and training center. 

[22] Procurement or acquisition lead times are the length of time 
between the initiation of a procurement action and the receipt of items 
into the supply system. 

[23] GAO-05-785. 

[24] We have designated DOD's financial management as a high-risk area 
since 1995. GAO, High-Risk Series: An Update, GAO-07-310 (January 
2007). 

[25] DLA plans to establish several integrated process teams to work 
through problems and concerns and, where possible, identify solutions 
during implementation of the SS&D and DLR BRAC recommendations. The 
teams focus on issues such as human performance, information 
technology, facilities and equipment, financial management, change 
management, supply and distribution, and metrics. These teams have been 
established at all four services for the DLR recommendation. As of 
December 2007, these teams have been established with the Air Force and 
Navy for implementation of the SS&D recommendation, and DLA plans to 
establish similar teams for the Marine Corps and Army as they begin 
implementation of the SS&D recommendation. 

[26] Program Budget Decision 717 (Dec. 20, 2005). 

[27] GAO-08-121R. 

[28] Performance-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. 

[29] DOD Supply Chain Materiel Management Regulation, DOD 4140.1-R, 
Section C2.8 Materiel Retention (May 23, 2003). 

[30] Of the $243 million, almost $190 million in savings was associated 
with several military services' initiatives that implemented a DOD 
supply regulation that is unrelated to BRAC 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. 

[31] GAO-08-121R. 

[32] GAO-08-159. 

[End of section] 

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