Depot Maintenance: DOD's Report to Congress on Its Public-Private
Partnerships at Its Centers of Industrial and Technical 	 
Excellence (CITEs) Is Not Complete and Additional Information	 
Would Be Useful (01-JUL-08, GAO-08-902R).			 
                                                                 
For several years, the Department of Defense (DOD) and Congress  
have encouraged the defense logistics support community to pursue
partnerships with the private sector to combine the best	 
commercial processes and practices with DOD's extensive 	 
maintenance capabilities. These public-private partnerships can  
combine the resources, risks, and rewards of public agencies and 
private companies and are intended to provide greater efficiency,
better access to capital, and improved compliance with a range of
government regulations. Although DOD has collected information on
depot-level partnering arrangements for several years, DOD first 
issued a policy encouraging the use of public-private depot	 
maintenance partnerships to improve the efficiency and viability 
of its depots in January 2002. DOD expects these improvements to 
depot operations to ultimately improve support for the		 
warfighter. Public-private partnerships for depot-level 	 
maintenance are cooperative arrangements between a depot-level	 
maintenance activity and one or more private sector entities to  
perform DOD or defense-related work, to utilize DOD depot	 
facilities and equipment, or both. Pursuant to Section 2474 of	 
Title 10, Unites States Code, the secretaries of the military	 
departments (and the Secretary of Defense in the case of defense 
agencies) designated their depot-level maintenance activities	 
(other than facilities approved for closure or major realignment 
under the Defense Base Closure and Realignment Act of 1990) as	 
Centers of Industrial and Technical Excellence (CITE) in their	 
core competencies. Section 2474 states that the secretary	 
concerned may authorize and encourage the head of a CITE to enter
into public-private partnerships comprising of government and	 
private sector employees to perform work related to the CITE's	 
core competencies. The statute also permits private industry to  
use underutilized or unutilized facilities and equipment at the  
CITEs. House Conference Report 110-477 accompanying H.R. 1585	 
directed DOD to submit a report to the House and Senate Armed	 
Services Committees on the public-private partnerships at its	 
CITEs that describes the following six reporting elements: (1)	 
common approaches and procedures for DOD CITEs to use in the	 
implementation of partnerships; (2) consistent cost methodologies
and reimbursement guidance applicable to maintenance and repair  
workload performed by federal personnel participating in	 
public-private partnerships; (3) implementation procedures for	 
completing contract negotiation for partnerships within 12 months
of initiating negotiations; (4) the secretary's use of commercial
practices in partnerships to replace existing inventory and	 
component management, technical publication data, document	 
management, equipment maintenance, and calibration requirements; 
(5) delegation during a partnership of Class 2 design authority  
based on commercial practices to maintain the form, fit, and	 
function of a weapons system platform, major end item, component 
of a major end item, or article; and (6) plans to expand core	 
capabilities through the use of partnerships at DOD CITEs. To	 
assess the completeness of DOD's report, we determined (1)	 
whether DOD's report described each of the six reporting elements
as directed by the conference report and (2) for the reporting	 
elements that were described, whether DOD could have included	 
additional information in its report that would have made it more
useful to the committees and other interested parties.		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-902R					        
    ACCNO:   A82677						        
  TITLE:     Depot Maintenance: DOD's Report to Congress on Its       
Public-Private Partnerships at Its Centers of Industrial and	 
Technical Excellence (CITEs) Is Not Complete and Additional	 
Information Would Be Useful					 
     DATE:   07/01/2008 
  SUBJECT:   Contract negotiations				 
	     Contract oversight 				 
	     Defense agreements 				 
	     Defense capabilities				 
	     Defense cost control				 
	     Defense operations 				 
	     Defense procurement				 
	     Department of Defense contractors			 
	     Equipment maintenance				 
	     Facility maintenance				 
	     Joint ventures					 
	     Maintenance costs					 
	     Maintenance services contracts			 
	     Military facilities				 
	     Military forces					 
	     Private sector					 
	     Private sector practices				 
	     Reporting requirements				 
	     Strategic planning 				 
	     Policies and procedures				 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Product.                                                 **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-08-902R

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as part 
of a longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the printed 
version. The portable document format (PDF) file is an exact electronic 
replica of the printed version. We welcome your feedback. Please E-mail 
your comments regarding the contents or accessibility features of this 
document to [email protected]. 

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

July 1, 2008: 

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

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

Subject: Depot Maintenance: DOD's Report to Congress on Its Public- 
Private Partnerships at Its Centers of Industrial and Technical 
Excellence (CITEs) Is Not Complete and Additional Information Would Be 
Useful: 

For several years, the Department of Defense (DOD) and Congress have 
encouraged the defense logistics support community to pursue 
partnerships with the private sector to combine the best commercial 
processes and practices with DOD's extensive maintenance capabilities. 
These public-private partnerships can combine the resources, risks, and 
rewards of public agencies and private companies and are intended to 
provide greater efficiency, better access to capital, and improved 
compliance with a range of government regulations. Although DOD has 
collected information on depot-level partnering arrangements for 
several years, DOD first issued a policy encouraging the use of public- 
private depot maintenance partnerships to improve the efficiency and 
viability of its depots in January 2002. DOD expects these improvements 
to depot operations to ultimately improve support for the warfighter. 

Public-private partnerships for depot-level maintenance are cooperative 
arrangements between a depot-level maintenance activity and one or more 
private sector entities to perform DOD or defense-related work, to 
utilize DOD depot facilities and equipment, or both. Other government 
organizations, such as program offices, inventory control points, and 
materiel/systems/logistics commands, may also be parties to such 
agreements. Pursuant to Section 2474 of Title 10, Unites States Code, 
the secretaries of the military departments (and the Secretary of 
Defense in the case of defense agencies) designated their depot-level 
maintenance activities (other than facilities approved for closure or 
major realignment under the Defense Base Closure and Realignment Act of 
1990) as Centers of Industrial and Technical Excellence (CITE) in their 
core competencies. Section 2474 states that the secretary concerned may 
authorize and encourage the head of a CITE to enter into public-private 
partnerships comprising of government and private sector employees to 
perform work related to the CITE's core competencies. The statute also 
permits private industry to use underutilized or unutilized facilities 
and equipment at the CITEs. 

House Conference Report 110-477 accompanying H.R. 1585 directed DOD to 
submit a report to the House and Senate Armed Services Committees 
(hereafter referred to as, "the committees") on the public-private 
partnerships at its CITEs that describes the following six reporting 
elements: (1) common approaches and procedures for DOD CITEs to use in 
the implementation of partnerships; (2) consistent cost methodologies 
and reimbursement guidance applicable to maintenance and repair 
workload performed by federal personnel participating in public-private 
partnerships; (3) implementation procedures for completing contract 
negotiation for partnerships within 12 months of initiating 
negotiations; (4) the secretary's use of commercial practices in 
partnerships to replace existing inventory and component management, 
technical publication data, document management, equipment maintenance, 
and calibration requirements; (5) delegation during a partnership of 
Class 2 design authority[Footnote 1] based on commercial practices to 
maintain the form, fit, and function of a weapons system platform, 
major end item, component of a major end item, or article; and (6) 
plans to expand core capabilities through the use of partnerships at 
DOD CITEs. In its report accompanying H.R. 1585,[Footnote 2] the House 
Armed Services Committee explained that it was concerned that DOD CITEs 
are not using consistent approaches for public-private partnerships, 
and that it understood that a lack of uniform standards had created an 
environment where these partnerships take from 2 to 4 years to 
implement. The committee believed that without a standard approach for 
the military departments, the CITEs would not be able to adopt best 
business practices, maintain core competency requirements, maximize 
existing facility capacity, decrease the cost of services and products, 
or lower the cost of maintaining the logistics infrastructure. The 
conference report also directed that we review DOD's report for 
completeness. We agreed with committee officials to submit our report 
on July 1, 2008.[Footnote 3] To assess the completeness of DOD's 
report, we determined (1) whether DOD's report described each of the 
six reporting elements as directed by the conference report and (2) for 
the reporting elements that were described, whether DOD could have 
included additional information in its report that would have made it 
more useful to the committees and other interested parties. 

Scope and Methodology: 

To determine if DOD's report to the committees on its public-private 
partnerships at its CITEs was complete, we reviewed each of the six 
elements contained in the conference report and examined whether DOD's 
report described these six elements as directed. We also reviewed the 
policies, guidance, and regulations that DOD and the services have 
developed for establishing, implementing, and managing public-private 
partnerships. We compared and analyzed the content of DOD's report with 
the data submitted by each of the military services to DOD that address 
the four of the six reporting elements in the conference report. DOD 
did not ask the military services to provide data on two of the 
reporting elements. We also interviewed appropriate DOD and service 
officials to understand and document the extent to which DOD has 
adequately reported on the six reporting elements. During this audit 
engagement, we met with officials from the Office of the Assistant 
Deputy Under Secretary of Defense for Maintenance Policy and Programs, 
Washington D.C; the Army Materiel Command, Fort Belvoir, Virginia; the 
Tank and Automotive Command, Warren, Michigan, and Rock Island, 
Illinois; the Anniston Army Depot, Anniston, Alabama; and the 
Department of the Air Force, Washington, D.C. 

To determine whether there was additional information available to DOD 
that would have made DOD's report more useful to the committees and 
other interested parties, we examined DOD's public-private partnership 
reports for fiscal year 2005[Footnote 4] and fiscal year 2006[Footnote 
5] to obtain a complete listing of all DOD partnerships and other 
relevant information. We also obtained a copy of DOD's public-private 
partnership database, which is managed by the Joint Depot Maintenance 
Activities Group located at Wright Patterson Air Force Base, Ohio, and 
queried the database to identify the benefits derived from each of 
DOD's public-private partnerships. In addition, we reviewed an April 
2003 GAO report on DOD partnerships that recommended that DOD establish 
overarching goals for expected outcomes from its partnering 
initiatives, refine current metrics for measuring partnership benefits, 
and require specific assessment and planning for new capability where 
partnerships are expected for new systems.[Footnote 6] Further, we 
reviewed a February 2008 Army Audit Agency report that examined the 
benefits of public-private partnerships within the Army.[Footnote 7] We 
also met with officials from the Joint Depot Maintenance Activities 
Group located at Wright Patterson Air Force Base, Ohio, and officials 
from the Army Audit Agency, located at Redstone Arsenal, Alabama. 

We conducted this performance audit from May 2008 through July 2008 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. 

Results in Brief: 

DOD's report on public-private partnerships at DOD's CITEs provided 
responses to all six reporting elements; however, it did not directly 
describe reporting element three, and did not describe reporting 
element six, as directed by H.R. Conf. Rep. 110-477. Specifically, DOD 
did not directly describe the implementation procedures for completing 
contract negotiations for public-private partnerships within 12 months 
of initiating negotiations, nor did it describe its plans to expand 
core capabilities through the use of public-private partnerships at DOD 
CITEs. Although DOD did not provide a description of the implementation 
procedures for completing contract negotiations for public-private 
partnerships within 12 months of initiating negotiations, it provided 
an explanation of why imposing such a time frame on contract 
negotiations would have an adverse impact on creating new partnerships. 
While we believe this explanation is useful, DOD could have provided 
examples in its report to the committees to support its conclusion that 
imposing a 12-month time frame on contract negotiations would have an 
adverse impact on its partnerships. For example, DOD could have 
included case studies illustrating the factors that can increase the 
duration and complexity of partnership negotiations, and quantitative 
information showing how long contract negotiations take involving 
public-private partnerships at DOD's depot maintenance activities. 
Additionally, while we believe DOD's description of "core capability" 
and how core capabilities are managed and fostered at DOD's depot 
maintenance activities provides useful information, DOD did not 
describe its plans to expand core capabilities through the use of 
public-private partnerships. According to DOD officials, they could not 
describe the plans to expand core capabilities through the use of 
public-private partnerships because they had no plans to implement such 
an initiative. However, DOD does not explicitly state in its report to 
the committees that it has no plans to expand its core capabilities 
through the use of partnerships. 

Although DOD provided responses for all six reporting elements, based 
on our review of DOD's report we concluded that DOD could have provided 
additional information to the committees and other interested parties 
for two of these reporting elements. For example: 

* For reporting element four--describe the commercial practices to 
replace existing inventory and component management, technical 
publication data, document management, and equipment maintenance and 
calibration requirements for public-private partnerships--DOD's report 
to the committees could have included a more clear and descriptive 
explanation regarding the methodology used for selecting public-private 
partnerships identified in the appendix of the report. This appendix 
was included in DOD's report in order to identify specific public- 
private partnerships that employ these commercial practices. However, 
we found that the methodology used by DOD in developing this appendix 
was inconsistent. For example, although DOD planned to include only 
partnerships related to one of the four benefits attributed to 
partnering--improved business processes or updated technology--we found 
that this was not the case.[Footnote 8] In fact, many of the 
partnerships included in its appendix were related to two other 
benefits--product support or performance improvement and an 
identifiable increase in facility utilization--rather than improved 
business processes or updated technology, as DOD intended. We believe 
this additional information could have provided the committees with a 
better understanding of the commercial practices used in DOD public- 
private partnerships to improve the efficiency and effectiveness of the 
depots' operations and the related benefits of those partnerships. 

* For reporting element one--describe common approaches and procedures 
for implementing partnerships--DOD's report to the committees could 
have disclosed the fact that the Army has not yet implemented DOD's 
policy requiring each of the services to conduct a business case 
analysis prior to entering into partnership arrangements to ensure that 
the partnership is in the best interest of the government, and could 
have described the Army's plans to do so. Additionally, DOD's report 
could have included a description of the various authorities, 
regulations, and other methods used to establish public-private 
partnerships, the various types of partnerships, and the benefits of 
public-private partnerships. This information is included in the annual 
internal report on public-private partnerships of the Office of the 
Deputy Under Secretary of Defense for Logistics and Material Readiness, 
which was not referenced in DOD's report to the committees. DOD uses 
this internal report to help track the progress of its public-private 
partnerships on an individual basis. It does not, however, have 
overarching goals and measures to assess the overall effectiveness of 
its partnerships--a key component in strategic planning. In our April 
2003 report, we recommended that DOD establish baseline data and 
measurable goals to assess the collective effects of its public-private 
partnerships on depot operations, and develop or refine its metrics for 
measuring partnership benefits.[Footnote 9] However, because DOD 
disagreed with our recommendations, we brought this issue to the 
attention of Congress. 

We continue to believe that our former matter for congressional 
consideration--that Congress consider requiring DOD to develop 
measurable goals for improving the future operations of its depot 
maintenance activities and assess how public-private partnerships at 
DOD CITEs are helping to meet those goals--is still valid and would 
help DOD and the committees to determine the relative impact of 
partnerships on depot operations and efficiency. In addition, we 
believe Congress should consider having DOD provide the committees with 
information on the timing and challenges in implementing these 
partnerships and its ongoing and planned use of public-private 
partnerships to sustain elements of its core capabilities. 

In oral comments on a draft of this report, DOD officials acknowledged 
that they could have provided a more comprehensive detailed description 
of the factors involved in expanding and sustaining core capabilities 
at its CITEs. However, the officials felt that they adequately 
responded to reporting element three, explaining that to require a 
partnership agreement to be completed within 12 months would have an 
adverse impact on creating new partnering alliances and would be 
especially detrimental for efforts to create more complex partnering 
agreements. While we understand DOD's position, we believe that DOD 
could have provided additional data to support the variance in the time 
needed and the specific steps required to complete contract 
negotiations for public-private partnerships. With regard to asking the 
committees to reconsider our earlier matter to have DOD establish 
overarching goals and measures for assessing its partnerships, DOD 
officials reiterated DOD's position stating that it assesses its 
partnerships individually based on their stated goals and that to 
assess the effects at a DOD-wide level would have little meaning. Given 
that an assessment at the DOD-wide level is in concert with key 
strategic planning guidance, we continue to believe our matter to 
Congress is still valid. DOD's comments are discussed in more detail at 
the end of this report. DOD also provided technical comments and we 
have incorporated them where appropriate. 

Background: 

DOD must operate its logistics activities within the framework of 
various legislative provisions and regulatory requirements. Various 
legislative provisions govern the size, composition, and allocation of 
depot repair workloads between the public and private sectors. For 
example, pursuant to Section 2466 of Title 10, not more than 50 percent 
of the funds made available for depot-level maintenance and repair can 
be used to contract for performance by nonfederal government personnel. 
Other statutes that affect the extent to which depot-level workloads 
can be converted to private sector performance include (1) Section 2469 
of Title 10, which provides that the Secretary of Defense ensure that 
DOD-performed depot maintenance and repair workloads valued at not less 
than $3 million not be changed to contractor performance without using 
merit-based selection procedures for competitions among all depot-level 
activities or competitive procedures for competitions among private and 
public sector entitie[Footnote 10]s, and (2) Section 2464 of Title 10, 
which provides, in part, that it is essential for the national defense 
that DOD maintain a government-owned, government-operated logistics 
capability to ensure a ready and controlled source of technical 
competence and resources necessary to ensure effective and timely 
response to a mobilization, national defense contingency, and other 
emergency requirements. 

For many years, Congress and various administrations have debated the 
issue of who should perform depot work and where it should be 
performed. Central to this debate has been the interplay between DOD's 
efforts to rely more on the private sector for depot maintenance and 
these Title 10 provisions. The public-private partnership concept for 
improving government operations provides a cooperative approach to 
resolving this debate. Historically, DOD has used public-private 
partnering arrangements for depot maintenance, such as work-share 
agreements and facility-use partnerships, under various legal 
authorities--although these arrangements generally were not referred to 
as partnerships. Based on requirements in Section 2474 of Title 10, 
DOD's goals for partnering with the private sector are to (1) help 
sustain elements of core depot maintenance capabilities, (2) increase 
utilization of public facilities, and (3) leverage private sector 
investment in these military facilities. The objectives of public- 
private partnerships under Section 2474 are to (1) maximize capacity 
use at depots, (2) reduce or eliminate the depots' ownership costs in 
areas such as operations and maintenance and environmental remediation, 
(3) reduce the cost of products made or maintained at depots, (4) 
leverage private-sector investments in plant and equipment and promote 
commercial business ventures at depots, and (5) foster cooperation 
between the military and private industry. 

Prior GAO Work on DOD Public-Private Partnerships: 

In April 2003, we reviewed DOD's public-private partnerships to assess 
the extent that DOD is participating in these partnerships, the 
characteristics needed to achieve effective partnerships, and DOD's 
ability to measure success and the management challenges. We concluded 
that DOD had limited ability to measure overall success of the 
partnerships. Consequently, we recommended that DOD establish 
overarching goals for expected outcomes from its partnering initiative, 
refine current metrics for measuring partnership benefits, and require 
specific assessment and planning for new capability where partnerships 
are expected for new systems. DOD partially concurred with these 
recommendations, stating that our recommendations were not actionable 
as a practical matter. We disagreed, stating that we believe a key 
element needed for the department to achieve its objective of more 
effective military depot maintenance operations through public-private 
partnerships is the ability to measure and assess the contribution of 
partnerships to meeting that objective. Consequently, in the report we 
included a matter for congressional consideration that Congress 
consider requiring DOD to develop measurable goals for improving the 
future operations of its depot operations at its CITEs and periodically 
assess and report on its progress on these goals. To date Congress has 
not taken any action on this matter. 

DOD's Public-Private Partnership Report to the Committees Does Not 
Describe Two of the Reporting Elements: 

DOD's report to the committees on public-private partnerships at its 
CITEs provided responses to all six reporting elements; however, it did 
not directly describe reporting element three, and did not describe 
reporting element six, as directed by H.R. Conf. Rep. 110-477. 
Specifically, DOD did not directly describe the implementation 
procedures for completing contract negotiations for public-private 
partnerships within 12 months of initiating negotiations; nor did DOD 
describe its plans to expand core capabilities through the use of 
public-private partnerships at DOD CITEs. In our review of DOD's data 
call provided to the military services requesting input addressing the 
key elements of the conference report, we found that DOD elected not to 
ask the military services to provide data or comments on these two 
reporting elements. 

Implementation Procedures for Completing Contract Negotiations within 
12 Months Were Not Included in DOD's Report to the Committees: 

DOD did not directly describe the implementation procedures for 
completing contract negotiations for public-private partnerships within 
12 months of initiating negotiations as directed by the conference 
report for reporting element three. Instead, DOD's report stated that 
imposing a requirement that all negotiations for potential depot 
maintenance public-private partnerships must be completed within a 
specified period of time, such as 12 months, would have an adverse 
impact on creating new partnership alliances. According to DOD's 
report, the Office of the Secretary of Defense, and service-level and 
depot-level officials, contract negotiations involving public-private 
partnerships can be very complex and can vary depending on the number 
of parties involved in the negotiations, the type of partnering 
arrangements, and whether the two parties have previously partnered 
together. While we believe this explanation is useful, DOD could have 
provided additional information to the committees and other interested 
parties to support its conclusion that imposing a 12-month time frame 
on contract negotiations would have an adverse impact on its 
partnerships. For example, DOD could have provided case studies 
illustrating the factors that can increase the duration and complexity 
of partnership negotiations, and quantitative information showing how 
long contract negotiations take involving public-private partnerships 
at DOD's depot maintenance activities. These case studies could have 
included a description of the step-by-step procedures taken by DOD and 
private sector companies, and a description of the various factors 
involved with the completion of the partnership negotiations. For 
example, during our visit to Anniston Army Depot, officials provided us 
with a detailed diagram that included the step-by-step process followed 
before a contract is signed. In addition, after reviewing previously 
signed contracts, these officials were able to provide us with the 
dates negotiations began and when the corresponding contracts were 
signed, which provided us with a frame of reference regarding how long 
it took to finalize various contract negotiations associated with six 
of its partnership efforts. Based on our analysis of the limited data 
provided, the time required to complete contract negotiations for the 
public-private partnerships at Anniston Army Depot varied from a few 
days to a maximum of 2 years. Quantitative information of this type, 
which was not included in DOD's report, could have provided the 
committees with more insight into how long contract negotiations 
involving public-private partnerships at DOD's CITEs take and could 
have provided stronger support for DOD's position that the duration of 
partnership negotiations should not be limited to a specified period of 
time. 

DOD's Plans to Expand Core Capabilities Were Not Included in DOD's 
Report to the Committees: 

DOD did not describe its plans to expand core capabilities through the 
use of public-private partnerships as directed by the conference report 
for reporting element six. Instead, DOD provided a brief overview of 
the definition of a "core capability" and how core capabilities are 
managed and fostered at DOD's depots. DOD also outlined some of the 
circumstances that may initiate a partnership between DOD and private 
sector companies, such as the requirement for additions or revisions to 
capabilities at particular CITEs to reflect changes in technology or 
force structure. While we believe DOD's description of core capability 
and how core capabilities are managed and fostered at DOD's depot 
maintenance activities was useful information, DOD did not describe 
plans to expand core capabilities through the use of public-private 
partnerships. According to DOD officials, they did not describe the 
plans to expand core capabilities through the use of public-private 
partnerships because they had no plans to implement such an initiative. 
DOD and service officials told us that partnerships are used to help 
sustain elements of a depot's core capability, and that core 
capabilities, by definition, are government-owned and government- 
operated (involving government personnel and government-owned and 
government-operated equipment and facilities). Thus, according to the 
officials, simply increasing the number of public-private partnerships 
would not automatically expand core capabilities at its CITEs, but 
rather increase the level of production at the CITEs. In addition, 
according to DOD officials, there are other factors involved in 
increasing a CITE's core capabilities that must be considered and are 
beyond the control of partnerships. These factors involve complex 
workload requirements, the capacity of a CITE to perform work related 
to its core capabilities, and the current skills and capabilities of 
the CITE's workforce. According to DOD officials, without a careful 
consideration of these factors, increasing a CITE's core capabilities 
would not be possible. However, DOD's report does not provide support 
for its position nor does it provide a detailed description of the 
factors related to expanding DOD's core capabilities. Including such a 
description in DOD's report to the committees could have provided 
additional information helpful to Congress in gaining an understanding 
of DOD's position with respect to the feasibility of utilizing 
partnerships in order to expand a CITE's core capabilities. 

DOD's Public-Private Partnerships Report to the Committees Lacks 
Additional Information That Could Have Made It More Useful: 

Although DOD provided responses for all six reporting elements as 
directed by the conference report, based on our assessment of DOD's 
report to the committees we concluded that DOD could have also provided 
additional information for two of the reporting elements in order to 
provide the committees with a more useful report. Specifically, DOD's 
report to the committees could have provided more detailed information 
for (1) reporting element four, the use in a public-private partnership 
of commercial practices to replace existing inventory and component 
management, technical publication data, document management, and 
equipment maintenance and calibration requirements, and (2) reporting 
element one, the common approaches and procedures for implementing 
public-private partnerships at DOD CITEs. On the basis of our work, we 
did not identify additional information that would have been helpful 
with regard to (1) reporting element two, consistent cost methodologies 
and reimbursement guidance applicable to the maintenance and repair 
workload performed by federal government personnel participating in 
public-private partnerships, and (2) reporting element five, delegation 
during public-private partnerships of Class 2 design authority based on 
commercial practices to maintain the form, fit, and function of a 
weapon system platform, major end item, component of a major end item, 
or article. 

Use of Commercial Practices in DOD Public-Private Partnerships: 

Although DOD described, as required by reporting element four, the 
commercial practices to replace existing inventory and component 
management, technical publication data, document management, and 
equipment maintenance and calibration requirements for public-private 
partnerships, it could have provided a more clear and descriptive 
explanation regarding its methodology for selecting public-private 
partnerships identified in the appendix of its report. This appendix 
was included in DOD's report in order to identify specific public- 
private partnerships that employ the commercial practices described in 
reporting element four. DOD has identified four categories of benefits 
provided to its depot maintenance activities that are attributed to 
partnering: explicit product support performance improvement, improved 
business practices or updated technology, identifiable cost avoidance, 
and identifiable increase in facility utilization. DOD officials 
determined that only those depot maintenance public-private 
partnerships that showed improved business practices or updated 
technology as a benefit would be included in its report to address this 
reporting element. Thus, according to DOD officials, they selected the 
public-private partnerships by querying DOD's public-private 
partnership database, which is maintained by the Joint Depot 
Maintenance Activities Group, and by asking the services to provide a 
listing of the public-private partnerships that they believed addressed 
this reporting element. However, the public-private partnerships 
identified in the report resulted in a misrepresentation of DOD's 
original intent to include only a listing of partnerships that reported 
an improved business practice. For example, many of the partnerships 
identified by the services that DOD included in its report to the 
committees reported a product support or performance management 
benefit, increased facility utilization benefit, or both derived from 
the partnerships, rather than an improved business practice or updated 
technology benefit. The inclusion of these partnerships with various 
types of benefits in the appendix of DOD's report was the result of an 
inconsistent methodology used by DOD to develop its list. In addition, 
the body of DOD's report stated that there were 48 of these 
partnerships, while the appendix listed 76 partnerships. This is 
because the number identified in the body of the report represented 
only partnerships taken from the partnership database and the appendix 
listed those as well as those submitted by the services. We also found 
that the appendix excluded some other partnerships that reported 
improved business practices or an updated technology benefit and 
contained one Air Force partnership that was listed twice. 

We also found that some of the service-and depot-level officials we met 
with thought that DOD could have provided additional information to the 
committees with regard to reporting element four by listing all of the 
public-private partnerships that cite 2474 of Title 10, United States 
Code, as partnering authority, which provides, in part, that the 
secretary concerned may authorize and encourage the CITEs to enter into 
public-private partnerships to perform work within their core 
competencies and for private industry to use underutilized or 
unutilized facilities and equipment at the CITEs. These officials 
believe that the inclusion of these additional partnerships would have 
provided the committees with a more complete and comprehensive view of 
current public-private partnerships that resulted in various kinds of 
benefits and that to have done so would have been an appropriate and 
relevant response to the direction identified in the conference report. 
We believe this additional information could have provided the 
committees with a better understanding of the commercial practices used 
in DOD public-private partnerships to improve the efficiency and 
effectiveness of the depots' operations and the related benefits of 
those partnerships. 

Common Approaches and Procedures Used in Implementing Public-Private 
Partnerships: 

Although DOD described reporting element one as directed by the 
conference report, DOD could have provided additional information to 
the committees and other interested parties by providing more detail 
about the common approaches and procedures used in the implementation 
of public-private partnerships. For example, DOD's report to the 
committees could have disclosed the fact that the Army had not yet 
implemented the DOD guidance requiring each of the services to conduct 
a business case analysis to support decisions to enter into partnership 
arrangements to ensure that the partnership is in the best interest of 
the government, as was reported by the Army Audit Agency, and it could 
have described the Army's plans to do so. Additionally, this report 
could have included a description of the various authorities, 
regulations, and other methods used to establish public-private 
partnerships, the various types of partnerships, an explanation of the 
services' differing views of what constitutes these various partnership 
arrangements, and the benefits of public-private partnerships. This 
information is included in the annual internal report on public-private 
partnership of the Office of the Deputy Under Secretary of Defense for 
Logistics and Material Readiness, which was not referenced in DOD's 
report to the committees. According to DOD officials, this report is 
used internally to assess the progress of their partnering efforts and 
is not provided to Congress, unless it is requested. In this report, 
DOD also identifies the anticipated benefits that are expected and 
realized through the development of public-private partnerships and 
recaps the services' progress in implementing partnerships by providing 
summary-level information on its public-private partnership 
arrangements. Although DOD uses this internal public-private 
partnership report to help track the progress of its partnerships on an 
individual basis, our prior work demonstrates the importance of 
establishing overarching goals and measures in order for an agency to 
assess the overall effectiveness of a program, which DOD still has not 
done. 

Army Has Not Yet Implemented DOD's Policy to Conduct a Business Case 
Analysis: 

DOD's report could have provided useful information to the committees 
pertaining to reporting element one by disclosing that the Army has not 
yet implemented the DOD guidance requiring each of the services to 
conduct a business case analysis to support decisions to enter into 
partnership arrangements to ensure that the partnership is in the best 
interest of the government, and describing the Army's plans to do so. 
DOD Instruction 4151.21 states that the decision to enter into a 
partnership must be supported by a business case analysis considering 
costs, benefits, and best use of public and private sector capabilities 
that demonstrates that it is in the best interest of the government. 
However, while DOD's report to the committees references DOD 
Instruction 4151.21, the report does not provide an overview of this 
particular requirement of a business case analysis, nor does it 
specifically mention this requirement as a common approach or procedure 
used in the implementation of public-private partnerships, although 
CITEs are required to produce such an analysis before a partnership is 
formed. According to a February 2008 Army Audit Agency report,[Footnote 
11] the Army has not implemented this DOD requirement. In response to 
DOD's data call to the military services to obtain information that 
addresses this reporting element, the Army notified DOD that it was in 
the process of updating its policies to reinforce this DOD requirement 
as a result of this internal Army audit; however, DOD did not include 
this information in its report to the committees. 

Public-Private Partnership Authorities: 

DOD could have provided additional information to the committees and 
other interested parties pertaining to element one by including a 
description of the authorities pertaining to public-private 
partnerships. Depot maintenance public-private partnerships take many 
forms. According to DOD's report, entitled Public Private Partnerships 
for Depot-Level Maintenance Through the End of Fiscal Year 2006, some 
partnerships have been established by contract under statutory 
authority, while others are work-share arrangements pursuant to 
memorandums of understanding (MOU) or similar agreements. The services 
have used a number of authorities to establish these public-private 
partnerships. See enclosure I for a brief description of the principal 
statutory and regulatory authorities. Although there are several 
authorities and regulations used to establish public-private 
partnerships, DOD's 2006 report indicated that the most widely cited 
authority used is that contained in 10 U.S.C. 2474.[Footnote 12] As of 
the end of fiscal year 2006, DOD reported that it had 348 partnerships 
(active and closed), of which 222 or 64 percent cited Section 2474 of 
Title 10. Of these 348 public-private partnerships through the end of 
fiscal year 2006, DOD reported that 182 are Army, 104 are Navy, 53 are 
Air Force, and 9 are Marine Corps. Additionally, according to DOD, 
there are two authorities, 10 U.S.C. 2471 and 10 U.S.C. 2469a, that are 
no longer valid for new public-private partnering arrangements, 
although they were cited in DOD partnerships arrangements established 
prior to 2001. Aspects of the provisions of the former were 
incorporated into 10 U.S.C. 2474, while 10 U.S.C. 2469a, which dealt 
with workloads that were realigned because of base realignment and 
closure actions, was eliminated as obsolete by the Fiscal Year 2003 
National Defense Authorization Act. 

Types of Public-Private Partnerships: 

DOD's report could have provided additional information to the 
committees and other interested parties pertaining to reporting element 
one by including a description of all of the various types of public- 
private partnerships. The circumstances surrounding a depot maintenance 
activity's workload shape how the services develop the approach used 
for each of their partnerships, including the selection of a 
partnership type and dividing responsibilities for the performance of 
logistics functions. According to DOD, the military services have 
differing interpretations of what constitutes a particular type of 
partnering agreement. The types of agreements that are viewed 
differently by the services include work-share arrangements, facilities-
use agreements, and arrangements that provide government nondepot 
maintenance services to on-site contractors performing depot 
maintenance. However, according to DOD, the public-private partnership 
definition in DOD Instruction 4151.21 encompasses all of the services' 
interpretations. As described in our April 2003 report,[Footnote 13] 
public-private partnerships can be formed through various types of 
arrangements such as: 

* Work share: An arrangement whereby a combination of military and 
commercial facilities, employees, or both is used to execute a program 
manager's work package--including tasks such as weapon systems 
remanufacture, modification, or upgrade. Under the work-share 
arrangement, the program manager issues a work order to the military 
participant and a contract to the private sector participant. The 
relationship between the participants to accomplish the work package is 
usually coordinated with an MOU or memorandum of agreement instead of a 
contract. 

* Direct sale: An arrangement whereby military and commercial entities 
enter into a contractual relationship for the use of military depot 
maintenance facilities and employees to provide the private sector with 
articles, services, or both. 

* Lease: An arrangement whereby military and commercial entities enter 
into a contractual relationship for the private sector's use of public 
depot maintenance facilities, its equipment to perform work for either 
the public or private sector, or both. 

* Government-furnished resources: An arrangement whereby military and 
commercial entities enter into an agreement for private sector use of 
public depot maintenance facilities, its equipment and employees, or 
both at no cost in connection with and under the terms of a contract. 

* Teaming: An arrangement whereby military and commercial entities 
enter into a contractual relationship to accomplish a deliverable 
stipulated in a contract. The relationship between the participants is 
usually initially outlined in a teaming agreement during the proposal's 
preparation and then formalized as a contractor/subcontractor 
relationship subsequent to contract award. 

Benefits of Public-Private Partnerships: 

DOD could have provided additional information to the committees and 
other interested parties pertaining to reporting element one by 
including a description of all of the benefits derived from public- 
private partnerships. According to DOD, its goals for depot maintenance 
partnerships are more responsive product support, better facility 
utilization, reduced cost of ownership, and more efficient business 
processes. The benefits DOD identified in support of its partnership 
goals are (1) explicit product support and performance improvement, (2) 
improved business practices or updated technology, (3) identifiable 
cost avoidance, and (4) identifiable increase in facility utilization. 
DOD's annual internal public-private partnership report identifies 
these common benefits derived from its partnerships and summarizes the 
specific benefits that are included in these four categories. It also 
identifies the number of partnerships that provided each of the 
benefits and how many reported two or more of these benefits. For 
fiscal year 2006, DOD cited the following examples as benefits derived 
from its public-private partnerships: 

* Improved business practices or updated technology: increased depot 
efficiency, improved schedule conformance, quicker turnaround time, and 
additional capabilities or processes resulting from application of new 
technologies. 

* Product support and performance improvement: a reduction in the 
amount of time associated with the maintenance, repair, or overhaul of 
items or systems; reduction in the amount of time for related 
material/parts support; a reduction in product support/logistics costs; 
improved weapon system availability, reliability, and maintainability; 
and enhanced performance of the weapon system for the warfighter. 
Additionally, DOD cited performance improvement benefits: improved 
aircrew training, more efficient use of labor, improved quality, and 
enhanced testing, diagnostics, or inspection. 

* Identifiable cost avoidance: resulted from contractors using existing 
capability at a DOD CITE rather than having to establish additional 
capability, reduction or elimination of shipping and transportation 
costs, or the implementation of specific process improvements for 
production and repair. 

* Identifiable increase in facility utilization: resulted from 
additional workload accomplished directly by federal government 
workers, contractor personnel, or a combination of the two. 

DOD Tracks Progress of Its Public-Private Partnerships, but Has Not 
Established Overarching Goals and Measures to Collectively Assess Its 
Partnerships: 

While DOD uses its internal public-private partnership report to help 
track the progress of its public-private partnerships on an individual 
basis, it has not established overarching goals and measures to 
collectively assess its partnerships. In our assessment of DOD's April 
2008 report to the committees, we asked DOD officials about their 
strategic goals for managing DOD public-private partnerships and 
discovered that they do not plan to analyze partnership performance 
data to measure the degree to which the partnerships are meeting the 
goals of more responsive product support, better facility utilization, 
reduced cost of ownership, and more efficient business processes. DOD 
officials stated that it would be difficult to develop overarching 
goals and measures because of the differences in the nature and 
employment of each public-private partnership. However, our prior work 
demonstrates the importance of establishing overarching goals and 
measures in order for an agency to assess the overall effectiveness of 
a program--a key component in strategic planning and a common approach 
that an agency employs when establishing or implementing its programs. 
Given this principle, we continue to believe DOD should establish 
overarching goals and measures to assess the collective effects of its 
public-private partnerships on depot operations and develop or refine 
its metrics for measuring partnership benefits, as we recommended in 
our April 2003 report.[Footnote 14] However, because DOD disagreed with 
our recommendations, we raised this issue to the attention of Congress. 
Without these data, DOD cannot assess whether it is achieving its 
public-private partnerships goals as outlined in DOD guidance. Further, 
without this data, DOD, the committees and other interest parties 
cannot assess whether the overall costs and benefits support DOD's use 
of partnerships. 

The need for these data was reaffirmed by the February 2008 Army Audit 
Agency report on the benefits of public-private partnerships, which 
recommended that the Army, among other things, issue partnering 
guidance for establishing baseline data and standard metrics for 
tracking its partnerships and collect and monitor data to determine if 
intended partnering benefits are being achieved. The report stated that 
without metrics and these relevant data, Army managers lacked the 
information needed to assess options to continue, expand, or reduce 
these partnerships. In its response to the report, the Army stated that 
it plans to start measuring the benefits of its partnerships. 

Conclusion: 

As we discussed earlier, Congress provided legislation to establish 
public-private partnerships at DOD's CITEs to provide greater 
efficiency, better access to capital, and improved compliance with 
government regulations. While DOD tracks the progress of its public- 
private partnerships on an individual basis, it has not established 
overarching goals and measures to collectively assess its partnerships. 
Our prior work demonstrates that establishing overarching goals and 
measures are key components to strategic planning when assessing the 
overall effectiveness of a program. Consistent with our 2003 report, we 
still believe that Congress should consider having DOD establish 
overarching goals and measures for public-private partnerships at DOD 
CITEs. The Army Audit Agency also had similar findings in its February 
2008 report on the benefits of public-private partnerships. Without 
such data, DOD, the committees, and other interested parties cannot 
assess whether the partnerships are meeting DOD's stated goals for its 
public-private partnerships and whether their costs and benefits 
support DOD's use of partnerships. Thus, we believe our previous matter 
for congressional consideration--that Congress consider requiring DOD 
to develop measurable goals for improving the future operations of its 
depot maintenance activities and assess how public-private partnerships 
at DOD CITEs are helping to meet those goals--is still valid and would 
help DOD and the committees to determine the relative impact of 
partnerships on depot operations and efficiency. 

Matter for Congressional Consideration: 

In order to provide congressional decision makers with information on 
the challenges of implementing public-private partnerships at CITEs and 
the progress in meeting its intended goals of more responsive product 
support, better facility utilization, reduced cost of ownership, and 
more efficient business processes, in addition to reiterating our 
former matter, we also believe Congress should consider having DOD 
provide the committees with information on the timing and challenges in 
implementing these partnerships, and its ongoing and planned use of 
public-private partnerships to sustain elements of core capabilities, 
which were not directly described in DOD's April 2008 public-private 
partnership report to the committees. 

Agency Comments and Our Evaluation: 

Officials from the Office of the Assistant Deputy Under Secretary of 
Defense for Maintenance Policy and Programs provided oral comments on a 
draft of this report. In commenting on our conclusion that DOD did not 
directly describe reporting element three, and did not describe 
reporting element six, as directed by H.R. Conf. Rep. 110-477, the 
officials acknowledged that DOD could have used this opportunity to 
provide a more comprehensive detailed description of the factors 
involved in expanding and sustaining core capabilities at its CITEs. 
However, the officials felt that they adequately responded to reporting 
element three--explaining that to require a partnership agreement to be 
completed within 12 months would have an adverse impact on creating new 
partnering alliances and would be especially detrimental for efforts to 
create more complex partnering agreements. While we understand DOD's 
position, we believe that DOD could have provided additional data to 
support the variance in the time needed and the specific steps required 
to complete contract negotiations for public-private partnerships. 
Providing such information could have provided the committees with more 
insight into how long contract negotiations take involving public- 
private partnerships at DOD's CITEs, and provided stronger support for 
DOD's position that the duration of partnership negotiations should not 
be limited to a specified period of time. 

With respect to the two reporting elements the common approaches and 
procedures used in the implementation of public-private partnerships, 
and the use of commercial practices in public-private partnerships--we 
concluded that DOD could have provided additional information in its 
public-private partnership report to the committees. DOD officials said 
that the committee report did not direct DOD to provide this additional 
information and therefore it was not included in the DOD public-private 
partnership report to the committees. However, the DOD officials 
acknowledged that some of our observations were insightful and valid. 
While we agree that DOD was not asked to provide the additional 
information, given the availability of this information, we believe 
that DOD could have provided the committees with a more comprehensive 
view of the issues surrounding the implementation of public-private 
partnerships at DOD CITEs, which could assist the committees in 
conducting its oversight responsibilities. 

Lastly, with regards to asking the committees to reconsider our earlier 
matter to have DOD establish overarching goals and measures for 
assessing its partnerships, DOD officials reiterated DOD's position 
that the department has metrics which it uses to monitor the general 
health of the depot maintenance public-private partnership initiatives 
at DOD CITEs. Furthermore, these officials stated that it is far more 
practical to assess individual partnerships based on their stated goals 
than it is to assess the effects at a DOD-wide level. According to 
these officials, this task would be difficult because of the 
differences in the missions and character of each depot, and the unique 
scope and goals of individual partnerships. In addition, these 
officials stated that each public-private partnership is unique and is 
assessed at the depot level to determine if the partnership is moving 
in a positive direction. Therefore, according to these officials, 
assessing its public-private partnerships on a DOD-wide level would 
have little meaning. While we recognize that information is collected 
on each partnership individually, without overarching goals and 
measures it would be difficult to determine whether the costs and 
benefits support use of partnerships on a broader DOD-wide level. 
Furthermore, given that establishing overall goals and measures on a 
broader DOD-wide level is in concert with key strategic planning 
guidance, we continue to believe our matter to Congress is still valid 
and is an important step toward gauging the overall success of DOD's 
public-private initiative. DOD also provided technical comments and we 
have incorporated them where appropriate. 

We are sending copies of this report to the appropriate congressional 
committees. We are also sending copies to the Secretary of Defense, the 
Secretaries of the Army, the Navy, and the Air Force; the Commandant of 
the Marine Corps; and the Director, Office of Management and Budget. 
Copies will be made available to others upon request. 

In addition, this 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) 512-8365 or 
[email protected]. Contact points for our Offices of Congressional 
Relations and Public Affairs may be found on the last page of this 
report. GAO staff who made key contributions to this report are Marilyn 
Wasleski, Assistant Director; Jason Jackson; Katherine Lenane; 
Jacqueline McColl; John Strong; and Karen Werner. 

Signed by: 

William M. Solis, Director: 

Defense Capabilities and Management: 

Enclosure - 1: 

Enclosure I: Principal Authorities Cited for Public-Private 
Partnerships: 

Authority: 10 U.S.C. 2208(j); 
Brief description[A]: Permits the secretary of a military department to 
authorize an industrial facility financed through working capital funds 
to sell articles and manufacturing, remanufacturing, and engineering 
services outside DOD if the purchaser is fulfilling a DOD contract or 
subcontract and the solicitation for the contract or subcontract is 
open to public-private competition or if the secretary would advance 
the objectives of Section 2474(b)(2) of Tile 10 by authorizing the 
facility to do so. The Secretary of Defense may waive these conditions 
for a particular sale under certain circumstances. 

Authority: 10 U.S.C. 2474; 
Brief description[A]: Requires the secretaries of the military 
departments (or the Secretary of Defense in the case of defense 
agencies) to designate depot maintenance activities (other than 
facilities approved for base realignment and closure) as CITEs, 
authorizes and encourages public-private partnerships at CITES to 
provide for the performance of work related to depot maintenance core 
competencies and private sector use of facilities and equipment not 
fully utilized by DOD, and permits amounts received by a CITE for work 
performed under a public-private partnership to be credited to the 
appropriation or fund that incurs the cost of performing the work. 

Authority: 10 U.S.C. 2539[B]; 
Brief description[A]: Authorizes the sale of services of any government 
laboratory, center, range or other testing facility for the testing of 
materials, equipment, models, computer software, and other items. 

Authority: 10 U.S.C. 2563; 
Brief description[A]: Authorizes the sale of articles or services 
manufactured or performed by any armed forces working capital-funded 
industrial facility to a person outside DOD (excluding sales of those 
articles and services authorized under 10 U.S.C. 4543) that are not 
available from any U.S. commercial source under specified conditions. 

Authority: 10 U.S.C. 2667; 
Brief description[A]: Allows leasing of nonexcess facilities and 
equipment in accordance with specified rules and conditions. 

Authority: 10 U.S.C. 4543; 
Brief description[A]: Specifies that the regulations under Section 
2208(h) of Title 10 shall authorize Army working capital-funded 
industrial facilities that manufacture cannons, gun mounts, and so 
forth to sell articles or services outside DOD under specified 
conditions. 

Authority: 10 U.S.C. 4544; 
Brief description[A]: Authorizes Army working capital-funded industrial 
facilities to enter into a contract or other cooperative arrangement 
with a non-Army entity to carry out a variety of specified activities 
under specified conditions. This authority may be used to enter into 
not more than eight contracts or cooperative agreements. 

Authority: 10 U.S.C. 7300; 
Brief description[A]: Authorizes naval shipyard sales of articles or 
services to private shipyards that are made at the request of private 
shipyard in order to facilitate the private shipyards' fulfillment of 
DOD contracts for nuclear ships without the conditions set forth in 
Section 2208(j)(1)(B) of Title 10 and Subsections (a)(1) and (c)(1)(A) 
of Section 2563 of Title 10 applying. 

Authority: 22 U.S.C. 2754; 
Brief description[A]: Requires that the sale or lease of articles or 
services under chapter 22 of the U.S. Code be made to friendly 
countries solely for certain specified reasons and under certain 
conditions. 

Authority: 22 U.S.C. 2770; 
Brief description[A]: Allows the President to sell defense articles and 
services to a U.S. company for incorporation into end items (and for 
concurrent or follow-on support) to be sold by such company either on a 
direct commercial basis to a friendly foreign country pursuant to a 
specified export license or approval, or in the case of specified 
ammunition parts, using commercial practices that restrict actual 
delivery directly to a friendly foreign country or international 
organization under specific conditions. 

Authority: FAR[A] Subpart 45.3; 
Brief description[A]: Permits the secretary of a military department to 
authorize an industrial facility financed through working capital funds 
to sell articles and manufacturing, remanufacturing, and engineering 
services outside DOD if the purchaser is fulfilling a DOD contract or 
subcontract and the solicitation for the contract or subcontract is 
open to public-private competition or if the secretary would advance 
the objectives of Section 2474(b)(2) of Tile 10 by authorizing the 
facility to do so. The Secretary of Defense may waive these conditions 
for a particular sale under certain circumstances.: Requires the 
secretaries of the military departments (or the Secretary of Defense in 
the case of defense agencies) to designate depot maintenance activities 
(other than facilities approved for base realignment and closure) as 
CITEs, authorizes and encourages public-private partnerships at CITES 
to provide for the performance of work related to depot maintenance 
core competencies and private sector use of facilities and equipment 
not fully utilized by DOD, and permits amounts received by a CITE for 
work performed under a public-private partnership to be credited to the 
appropriation or fund that incurs the cost of performing the work.: 
Authorizes the sale of services of any government laboratory, center, 
range or other testing facility for the testing of materials, 
equipment, models, computer software, and other items.: Authorizes the 
sale of articles or services manufactured or performed by any armed 
forces working capital-funded industrial facility to a person outside 
DOD (excluding sales of those articles and services authorized under 10 
U.S.C. 4543) that are not available from any U.S. commercial source 
under specified conditions.: Allows leasing of nonexcess facilities and 
equipment in accordance with specified rules and conditions.: Specifies 
that the regulations under Section 2208(h) of Title 10 shall authorize 
Army working capital-funded industrial facilities that manufacture 
cannons, gun mounts, and so forth to sell articles or services outside 
DOD under specified conditions.: Authorizes Army working capital-funded 
industrial facilities to enter into a contract or other cooperative 
arrangement with a non-Army entity to carry out a variety of specified 
activities under specified conditions. This authority may be used to 
enter into not more than eight contracts or cooperative agreements.: 
Authorizes naval shipyard sales of articles or services to private 
shipyards that are made at the request of private shipyard in order to 
facilitate the private shipyards' fulfillment of DOD contracts for 
nuclear ships without the conditions set forth in Section 2208(j)(1)(B) 
of Title 10 and Subsections (a)(1) and (c)(1)(A) of Section 2563 of 
Title 10 applying.: Requires that the sale or lease of articles or 
services under chapter 22 of the U.S. Code be made to friendly 
countries solely for certain specified reasons and under certain 
conditions.: Allows the President to sell defense articles and services 
to a U.S. company for incorporation into end items (and for concurrent 
or follow-on support) to be sold by such company either on a direct 
commercial basis to a friendly foreign country pursuant to a specified 
export license or approval, or in the case of specified ammunition 
parts, using commercial practices that restrict actual delivery 
directly to a friendly foreign country or international organization 
under specific conditions.: Prescribes the policies and procedures for 
contractor use and rental of government property. 

Authority: FAR Subpart 45.4; 
Brief description[A]: Permits the secretary of a military department to 
authorize an industrial facility financed through working capital funds 
to sell articles and manufacturing, remanufacturing, and engineering 
services outside DOD if the purchaser is fulfilling a DOD contract or 
subcontract and the solicitation for the contract or subcontract is 
open to public-private competition or if the secretary would advance 
the objectives of Section 2474(b)(2) of Tile 10 by authorizing the 
facility to do so. The Secretary of Defense may waive these conditions 
for a particular sale under certain circumstances.: Requires the 
secretaries of the military departments (or the Secretary of Defense in 
the case of defense agencies) to designate depot maintenance activities 
(other than facilities approved for base realignment and closure) as 
CITEs, authorizes and encourages public-private partnerships at CITES 
to provide for the performance of work related to depot maintenance 
core competencies and private sector use of facilities and equipment 
not fully utilized by DOD, and permits amounts received by a CITE for 
work performed under a public-private partnership to be credited to the 
appropriation or fund that incurs the cost of performing the work.: 
Authorizes the sale of services of any government laboratory, center, 
range or other testing facility for the testing of materials, 
equipment, models, computer software, and other items.: Authorizes the 
sale of articles or services manufactured or performed by any armed 
forces working capital-funded industrial facility to a person outside 
DOD (excluding sales of those articles and services authorized under 10 
U.S.C. 4543) that are not available from any U.S. commercial source 
under specified conditions.: Allows leasing of nonexcess facilities and 
equipment in accordance with specified rules and conditions.: Specifies 
that the regulations under Section 2208(h) of Title 10 shall authorize 
Army working capital-funded industrial facilities that manufacture 
cannons, gun mounts, and so forth to sell articles or services outside 
DOD under specified conditions.: Authorizes Army working capital-funded 
industrial facilities to enter into a contract or other cooperative 
arrangement with a non-Army entity to carry out a variety of specified 
activities under specified conditions. This authority may be used to 
enter into not more than eight contracts or cooperative agreements.: 
Authorizes naval shipyard sales of articles or services to private 
shipyards that are made at the request of private shipyard in order to 
facilitate the private shipyards' fulfillment of DOD contracts for 
nuclear ships without the conditions set forth in Section 2208(j)(1)(B) 
of Title 10 and Subsections (a)(1) and (c)(1)(A) of Section 2563 of 
Title 10 applying.: Requires that the sale or lease of articles or 
services under chapter 22 of the U.S. Code be made to friendly 
countries solely for certain specified reasons and under certain 
conditions.: Allows the President to sell defense articles and services 
to a U.S. company for incorporation into end items (and for concurrent 
or follow-on support) to be sold by such company either on a direct 
commercial basis to a friendly foreign country pursuant to a specified 
export license or approval, or in the case of specified ammunition 
parts, using commercial practices that restrict actual delivery 
directly to a friendly foreign country or international organization 
under specific conditions.: Prescribes the rules pertaining to the 
title to government-furnished property and the title to contractor-
acquired property. For example, under fixed price type contracts, the 
contractor retains title to all property acquired by the contractor for 
use on the contract, except for property identified as a deliverable 
item. 

Sources: DOD's Fiscal Year 2006 Public-Private Partnerships for Depot 
Level Maintenance Report and GAO analysis. 

[A] The descriptions of these authorities are not intended to be 
exhaustive; rather, they describe particular aspects of the authorities 
pertinent to public-private partnerships at CITEs. 

[B] Federal Acquisition Regulation. 

[End of table] 

Footnotes: 

[1] A Class 2 design change is a change in a project or system that 
does not affect safety or change the form, fit, or function of the 
weapon system, end item, component, or article to which it applies. 

[2] H.R. Rep. No. 110-146, pg. 313 (2007). 

[3] H.R. Conf. Rep. 110-477 directed that DOD submit its report by 
March 1, 2008, and that GAO submit its review of the report by May 1, 
2008. However, because DOD's report was submitted 60 days after the 
deadline on April 30, 2008, the committee agreed that we would submit 
our report on July 1, 2008. 

[4] Office of the Secretary of Defense, Public-Private Partnerships for 
Depot-Level Maintenance Through the End of Fiscal Year 2005 
(Washington, D.C.: Apr. 2006). 

[5] Office of the Secretary of Defense, Public-Private Partnerships for 
Depot-Level Maintenance Through the End of Fiscal Year 2006 
(Washington, D.C.: July 2007). 

[6] GAO, Depot Maintenance: Public-Private Partnerships Have Increased, 
but Long-Term Growth and Results Are Uncertain, GAO-03-423 (Washington, 
D.C.: Apr. 10, 2003). 

[7] Army Audit Agency, Benefits of Public-Private Partnerships, A-2008- 
0058-ALM (Alexandria, Va.: Feb. 7, 2008). 

[8] The four categories of benefits attributed to partnering are 
explicit product support and performance improvement, improved business 
practices or updated technology, identifiable cost avoidance, and 
identifiable increase in facility utilization. 

[9] GAO-03-423. 

[10] Section 2469(c) of Title 10 provides that these requirements may 
be waived in the case of a depot-level maintenance and repair workload 
that is performed at a CITE by a public-private partnership entered 
into under Section 2474 of Title 10 consisting of a depot-level 
activity and a private entity. 

[11] Army Audit Agency, Benefits of Public-Private Partnerships. 

[12] This report also noted that a single partnership may cite two or 
more authorities. 

[13] GAO-03-423. 

[14] GAO-03-423.

GAO's Mission: 

The Government Accountability Office, the audit, evaluation and 
investigative arm of Congress, exists to support Congress in meeting 
its constitutional responsibilities and to help improve the performance 
and accountability of the federal government for the American people. 
GAO examines the use of public funds; evaluates federal programs and 
policies; and provides analyses, recommendations, and other assistance 
to help Congress make informed oversight, policy, and funding 
decisions. GAO's commitment to good government is reflected in its core 
values of accountability, integrity, and reliability.  

Obtaining Copies of GAO Reports and Testimony: 

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each 
weekday, GAO posts newly released reports, testimony, and 
correspondence on its Web site. To have GAO e-mail you a list of newly 
posted products every afternoon, go to [hyperlink, http://www.gao.gov] 
and select "E-mail Updates."  

Order by Mail or Phone: 

The first copy of each printed report is free. Additional copies are $2 
each. A check or money order should be made out to the Superintendent 
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 
more copies mailed to a single address are discounted 25 percent. 
Orders should be sent to:  

U.S. Government Accountability Office: 
441 G Street NW, Room LM: 
Washington, D.C. 20548:  

To order by Phone: 
Voice: (202) 512-6000: 
TDD: (202) 512-2537: 
Fax: (202) 512-6061:  

To Report Fraud, Waste, and Abuse in Federal Programs:  

Contact:  

Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]: 
E-mail: [email protected]: 
Automated answering system: (800) 424-5454 or (202) 512-7470:  

Congressional Relations:  

Ralph Dawn, Managing Director, [email protected]: 
(202) 512-4400: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7125: 
Washington, D.C. 20548:  

Public Affairs: 

Chuck Young, Managing Director, [email protected]: 
(202) 512-4800: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7149: 
Washington, D.C. 20548: 

*** End of document. ***