Depot Maintenance: The Navy's Decision to Stop F/A-18 Repairs at Ogden
Air Logistics Center (Letter Report, 12/15/95, GAO/NSIAD-96-31).
Pursuant to a congressional request, GAO reviewed the Navy's decision to
move F/A-18 depot maintenance work from the Ogden Air Logistics Center
to the North Island Naval Aviation Depot, focusing on the cost and
performance indicators used to justify the move of F/A-18 repair
activities from Ogden to North Island.
GAO found that: (1) it is difficult to compare F/A-18 modification,
corrosion, and paint program cost and performance data at North Island
and Ogden because the Navy does not use the most current information
when making adjustments for the amount of work completed at each depot;
(2) based on its analysis, Ogden's maintenance costs are slightly lower,
but the Department of Defense's (DOD) decision to retain F/A-18 repair
capability at North Island is more cost-effective for workload
consolidation efforts; and (3) DOD needs to define the steps, processes,
analyses, and validation procedures for its future depot-maintenance
decisions.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: NSIAD-96-31
TITLE: Depot Maintenance: The Navy's Decision to Stop F/A-18
Repairs at Ogden Air Logistics Center
DATE: 12/15/95
SUBJECT: Aircraft maintenance
Cost analysis
Fighter aircraft
Competition
Military cost control
Labor costs
Repair costs
Navy procurement
IDENTIFIER: F/A-18 Aircraft
Navy Modification, Corrosion, and Paint Program
Rapid Response Repair (3R) System
Ogden (UT)
San Diego (CA)
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Cover
================================================================ COVER
Report to the Honorable
James V. Hansen, House of Representatives
December 1995
DEPOT MAINTENANCE - THE NAVY'S
DECISION TO STOP F/A-18 REPAIRS AT
OGDEN AIR LOGISTICS CENTER
GAO/NSIAD-96-31
Depot Maintenance
(709043, 709136)
Abbreviations
=============================================================== ABBREV
DCAA - Defense Contract Audit Agency
DCMC - Defense Contract Management Command
DOD - Department of Defense
MCAPP - Modification, Corrosion, and Paint Program
OSD - Office of the Secretary of Defense
3R - Rapid Response Repair System
Letter
=============================================================== LETTER
B-261501
December 15, 1995
The Honorable James V. Hansen
House of Representatives
Dear Mr. Hansen:
As you requested, we reviewed the Navy's analysis to support its
December 1994 decision to move F/A-18 depot maintenance work from the
Air Force Ogden Air Logistics Center, Ogden, Utah, to the North
Island Naval Aviation Depot, San Diego, California. This report
addresses (1) our review of the Navy's analysis and adjustments for
cost and performance comparability used to justify the decision to
move its F/A-18 repair activities from Ogden to North Island, (2) our
independent analysis using more current data than that available at
the time of the Navy's decision, and (3) our analysis of the adequacy
of guidance regarding the conduct of a merit-based analysis.
BACKGROUND
------------------------------------------------------------ Letter :1
The F/A-18 is a modern, first-line fighter and attack aircraft used
by both the Navy and the Marine Corps. Each F/A-18 is periodically
inspected to determine whether it needs to be sent to a depot for
maintenance and repairs that cannot be performed at the squadron
level. The depot maintenance specification for the F/A-18 is called
the Modification, Corrosion, and Paint Program (MCAPP) and consists
of inspections to identify needed repairs, the actual repairs, and
the incorporation of needed aircraft modifications. Prior to fiscal
year 1994, the Navy assigned all F/A-18 MCAPP work to the North
Island depot.
In an effort to minimize costs, the Navy decided in 1992 to subject
its F/A-18 MCAPP maintenance to public/private competition. The
competition package consisted of an expected quantity of 72 MCAPPs
with minimum and maximum quantities of 36 and 90 MCAPPs in the first
year, and options to continue the contract for up to 4 additional
years. The minimum, maximum, and expected quantities were lower for
each successive option year, and the estimated value of the contract
if all options were exercised was about $61 million.
North Island, Ogden, and two private contractors submitted bids.
Ogden's was substantially lower than the others and the Navy
cost-evaluation team generally found the bid to be well-supported.
Ogden was awarded the contract on August 24, 1993, and started work
on the first F/A-18 MCAPP on December 8, 1993. The Air Force
subsequently was informed that it would only get 36 MCAPPs, the
minimum number in the competition package, because the Navy wanted to
maintain core capability at North Island.\1
Although the Air Force attempted to have Ogden assigned as the source
of repair designation for the F/A-18, the Navy, with the Office of
the Secretary of Defense (OSD) approval, continued to maintain F/A-18
aircraft maintenance at North Island. Thus, the MCAPP workload was
split between the Navy depot and the Air Force depot. Between August
1993, when Ogden was awarded the F/A-18 contract, and November 1994,
when the last F/A-18 was inducted at Ogden, North Island inducted 34
F/A-18s and Ogden 36. Navy core analysis data indicates the core
capability for the F/A-18 is 18 aircraft.
Following the competition, the Navy reengineered its work processes
at North Island and reduced its cost of the F/A-18 repair work. In
September 1994, the Navy began evaluating whether to exercise its
option for the second year of the F/A-18 contract. North Island
submitted a proposal to give it the F/A-18 workload that otherwise
would have continued at Ogden. Since the Navy was planning to add
additional maintenance requirements to the MCAPP repair
specification, the contracting officer asked Ogden to provide a bid
for the additional work. According to Ogden officials, they were not
told that this bid was to support a competitive comparison with North
Island.
Title 10 U.S.C. 2469 requires DOD to use competitive, merit-based
procedures before depot-level work valued at $3 million or more can
be moved from one DOD depot to another or from a DOD depot to the
private sector. In response to this requirement the Navy, in
December 1994, prepared an analysis that compared the estimated
quality, schedule, and cost of MCAPP work at Ogden and North Island.
The Navy concluded that quality was the same at both activities but
that North Island could perform the work in fewer days and at less
cost to the government. As a result, the Navy decided not to
exercise its option for the second year at Ogden, but rather to
consolidate all F/A-18 MCAPP work at North Island.
--------------------
\1 Depot maintenance core capability is generally to be maintained
within the Department of Defense (DOD) depots to meet readiness and
sustainability requirements of weapon systems and equipment that are
critical to mission performance to support the Joint Chiefs of Staff
approved combat contingency scenarios. The services designate
certain weapon systems, equipment, and components as mission
essential for support of Joint Chief of Staff-approved contingency
plans. Depot maintenance for these mission-essential weapon systems
and equipment will be the primary workloads used to support required
core depot maintenance capabilities. Core is said to be defined not
by individual service but for DOD as a whole. However, in practice
it appears each service will be allowed to define a core capability
requirement for its own essential systems and equipment, even though
they may be very similar to systems and equipment maintenance
capability maintained in another service.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :2
Comparing F/A-18 MCAPP cost and performance at North Island and Ogden
depots was complicated because a number of data judgments and
adjustments were required. The Navy's analysis did not always use
the most current and complete information available and did not make
adjustments for all known differences in work completed at each
depot. Our analysis, using more current and complete information,
showed that Ogden's costs were slightly lower. Nevertheless, given
DOD's decision to retain F/A-18 repair capability at the Navy's North
Island facility, it appears consolidation of the workload at that
location is the most cost-effective approach.
There is no clear statutory or DOD guidance that defines the steps,
processes, analyses, and validation procedures required for a
merit-based selection process. Such guidance is needed if DOD
intends to base future depot maintenance workload allocation
decisions on such merit-based analyses.
NAVY ADJUSTMENTS FOR
COMPARABILITY
------------------------------------------------------------ Letter :3
The Navy's decision to consolidate F/A-18 work was based on its
analysis of F/A-18 MCAPP schedule and cost differences between Ogden
and North Island. In evaluating schedule differences, the Navy
compared the estimated days required by each activity to complete an
MCAPP. In evaluating cost differences, it compared the estimated
total cost to the government for each activity to complete an MCAPP
by estimating the labor hours, the labor-hour rate, and the resulting
total cost at each activity. The cost analysis included labor and
overhead costs but excluded direct material costs, which the Navy
stated should be the same at both activities. The cost analysis also
excluded airframe modification costs performed concurrently with
MCAPP work because modifications vary considerably from airframe to
airframe.
Details of the Navy's December 1994 analysis, including the
adjustments made to Ogden and North Island data, follow. Also,
appendix II summarizes the cost comparison made by the Navy.
SCHEDULE COMPARISON
---------------------------------------------------------- Letter :3.1
The Navy attempts to minimize the time each aircraft is out of
service for depot maintenance because of readiness concerns and to
help minimize the number of aircraft required for the maintenance
pipeline. In its comparison of the time Ogden and North Island took
to complete an F/A-18 MCAPP, the Navy used the number of repair days
bid by each activity. Ogden had bid 143 days to complete an MCAPP II
and North Island 110 days. Based on this comparison, the Navy
concluded that North Island could complete an MCAPP in less time than
Ogden.
The Navy made no adjustments to the repair days bid by each depot.
However, it noted that Ogden's average repair days on completed
F/A-18s were greater than its bid while North Island's average repair
days were less than its bid. Ogden delivered only the first aircraft
ahead of schedule, with the next 15 delivered between 17 to 217 days
late. Ogden officials estimated that the remaining 20 aircraft would
be delivered between 35 to 298 days late. Navy officials
acknowledged that the Navy caused some Ogden schedule delays through
such actions as late delivery of parts and late approval of funding,
but did not quantify the extent of these delays.
In its review of North Island production, the Navy developed
turnaround data for North Island using only the last six F/A-18
MCAPPS. This data supported a turnaround time of 107 days for those
aircraft. However, a review of production schedules for all F/A-18
MCAPPs completed at North Island during fiscal year 1994 revealed
that the average turnaround time over that period was 269
days--almost 2-1/2 times longer than the 110-day bid submitted by
North Island. Navy officials noted that process improvements at
North Island had significantly reduced the F/A-18 turnaround time,
and this improvement was demonstrated by the production turnaround
time achieved for the six MCAPPs used as a basis for the Navy
analysis.
While Ogden's production turnaround time was also significantly
longer than its bid supported, Ogden officials gave us data showing
that the depot's late delivery of 15 of the first 16 aircraft was
caused primarily by a number of Navy actions. Air Force officials
cited approval of engineering repair proposals as the most frequent
reason for work delays. For repairs not covered by maintenance
manuals provided the Air Force, Ogden's engineers must design and
submit for approval proposed repairs under the Rapid Response Repair
(3R) System to the F/A-18s Cognizant Field Activity at the North
Island Naval Aviation Depot. This approval is required before
proposed repairs can be made. Ogden officials reported that work
delays occurred because it often took several weeks to obtain
required technical information from the Navy's Cognizant Field
Activity before a repair could be designed and once designed, it took
too long to get Navy approval. Usually proposed repairs had to be
submitted multiple times before being approved.
Data provided by Ogden showed that they had experienced delays of 11
to 90 days in obtaining 3R approval on 18 of the 36 aircraft inducted
as of March 1995. North Island officials said that the time they
took to respond--but not necessarily approve--Ogden's 3R requests met
or was less than the time called for in the contract and that the
average response time was 2.7 days. They also noted that the
response time in support of Ogden was better than the response time
required to process 3Rs for the North Island depot. We noted that 3R
response times do not reflect the time required to obtain the
technical data needed to prepare the proposal or the number of times
the proposal is resubmitted before being approved.
Late funding by the Navy was the second most frequent reason Ogden
cited for work delays. Before applying an engineering modification
called for by the contract, the Navy F/A-18 program office had to
approve the expenditure of procurement funds for this purpose.
According to Ogden officials, work on 28 of the 36 aircraft was
delayed from 5 to 259 days because of late funding. F/A-18 Program
Office officials stated that late funding was a problem caused by an
archaic funding system. This funding system was not used for similar
work by the Navy's North Island depot.
Data provided by the Air Force indicated that late receipt of
replacement parts was the third most significant cause of work delays
at Ogden. Contractually, Ogden must obtain replacement parts from
the Navy supply system; however, the system was frequently unable to
provide items when Ogden needed them. Aircraft processing records
show that 17 of 36 aircraft experienced work delays because
replacement parts were not available from the Navy supply system when
needed. Delays caused by late replacement parts ranged from 2 to 52
days. Navy officials acknowledged that F/A-18 spare parts shortages
are a Navy-wide problem, but they said that since North Island is the
approved overhaul depot for F/A-18 components, parts shortages had
less of an impact on North Island's F/A-18 delivery schedule. Ogden
officials noted that they had the capability to repair some of the
parts had they been allowed to do so.
Ogden incurred other significant delays because the Navy required the
reinspection of certain aircraft using a procedure that included the
removal of wings from some completed aircraft. Nine aircraft were
delayed from 14 to 30 days--a total of 211 days--because the Navy
required Ogden to remove the wings and reinspect the wing attach lugs
for possible damage, after an Ogden crew used an unapproved
mechanical process to remove an anticorrosive compound from the wing
lugs on one of the earlier aircraft. Reinspection of the aircraft in
question did not find damage. All measurements were within the
specifications outlined by the Navy for surface roughness and lug
thickness. Three other aircraft that had been worked on by the crew
using the unapproved procedure were also reinspected and showed no
evidence that an unauthorized machine process had been used or that
the wing lugs were out of tolerance. Although no damage was found,
the Navy required Ogden to inspect five additional aircraft, even
though these aircraft had not been worked on by the same crew. These
inspections produced no evidence of the unauthorized machine process
and only one out-of-tolerance condition concerning surface roughness.
The cause of that discrepancy, a small scratch, could not be
determined by either the Navy or Ogden. Air Force and Defense
Contract Management Command (DCMC) officials questioned the need to
require the removal of wings on completed aircraft. The Navy
believes that requiring Ogden to remove the wings and reinspect the
lugs was justified because the area involved was a flight critical
structure from an aircraft safety standpoint.
According to Ogden officials, various work delays caused by the Navy
prompted over 100 letters to the Navy contracting officer asking for
corrective action on various problems causing the delays and also
asking for schedule extensions resulting from prior delays. The Navy
contracting officer did not respond to any of the letters, and only
after the F/A-18 MCAPP contract was terminated did it allow the DCMC
to act on Ogden requests for schedule extensions. According to DCMC
officials, on other programs they are routinely allowed to modify
schedule delivery dates when conditions are appropriate. These
officials noted that a private contractor may have stopped work.
Ogden officials attempted to analyze the collective impact of various
delays on the depot's ability to repair aircraft. They noted that
various delays were ongoing concurrently, but their analysis revealed
that one aircraft experienced delays attributed to the Navy totaling
546 days. Noting that they overlapped for the various conditions,
Air Force officials concluded that work was delayed 82 days while 6
3Rs were being processed, 259 days because funding was approved late,
and 205 days for other reasons such as late receipt of replacement
parts and a faulty engineering repair solution. Navy officials
dispute that delays were caused by the length of 3R processing times
and noted that delays due to the lack of spare parts in critical
supply were also experienced across the entire Navy.
LABOR HOUR COMPARISON
---------------------------------------------------------- Letter :3.2
The Navy's first step in analyzing F/A-18 MCAPP costs at Ogden and
North Island was to compare MCAPP labor-hour requirements. However,
for several reasons making such a comparison is difficult. First,
the two activities used different MCAPP repair specifications, which
affect the labor hours required to perform the work. After the
competitive contract was awarded to Ogden, the F/A-18 repair
specification was changed to incorporate additional inspection
requirements. The extra inspections normally identify additional
repair tasks, which also require more labor hours to complete. North
Island has used the revised repair specification, called MCAPP II,
since May 1994, while Ogden had continued to use the original MCAPP
specification as called for by the terms of the contract. We noted
that during fiscal year 1994, the Navy completed 82 MCAPPs using the
same specification as that used by Ogden and that the labor hours
required to complete these aircraft averaged 7,299 labor hours.
F/A-18s inducted at North Island after December 18, 1993, the date
when the first Ogden F/A-18 was inducted, averaged 6,819 labor hours.
Navy officials stated that process improvements to reduce the labor
hours required at North Island to complete an F/A-18 MCAPP had only
been completed in time to fully benefit F/A-18 MCAPP II aircraft,
which were first inducted in April 1994. We determined that although
the MCAPP II specification was expected to require more labor hours
than MCAPP I, the average labor hours for the 6 MCAPP II aircraft
completed before the time of the Navy's analysis was 5,684--a
significant reduction over the historical average time required for
MCAPP Is at North Island. The Navy attributed these labor-hour
reductions to increased efficiencies at the North Island depot--
primarily because it reduced the number of components that were
overhauled concurrently with the MCAPP.
Second, differences in the number of carrier-based and land-based
F/A-18s repaired also complicate a labor-hour comparison by each
activity. Navy officials stated that this comparison is important
because the F/A-18 repair specification makes a distinction between
carrier-based and land-based F/A-18s. Specifically, the repair
specification requires more inspections for carrier-based F/A-18s
because they normally are subjected to a harsher environment and more
physical stress due to salt water, catapult launches, and arrested
landings. According to the Navy, the additional inspections normally
result in more repair work. At the time of the Navy's analysis,
North Island had recently completed six carrier-based F/A-18s while
Ogden had completed two carrier-based and five land-based F/A-18s.
The Navy did not use data from the carrier-based aircraft repaired at
Ogden.
Third, differences in F/A-18 component repair procedures at each
activity also complicate a labor- hour comparison between the two
activities. Under terms of the Ogden contract, most components
requiring repair are to be exchanged for replacement components
provided by the Navy for installation on the aircraft. At North
Island, many components requiring repair are to be repaired
concurrently with the aircraft and then reinstalled on the aircraft.
The additional labor hours used by North Island for component repairs
are included in the total labor hours charged to each aircraft.
North Island officials told us that the biggest factor influencing
its process improvement was that the depot significantly reduced the
number of components that were overhauled concurrently with MCAPP.
Rather than routinely overhauling components that had been removed
from aircraft being inducted for an MCAPP, revised procedures called
for only overhauling components if they did not meet technical
requirements.
Fourth, there are differences in the amount of work required on each
aircraft. Each aircraft is unique and the amount of needed repairs
identified during the inspections varies considerably from aircraft
to aircraft. The use of averages tends to normalize these variations
in work content. However, the averages used in the Navy's analysis
were based on small quantities of completed aircraft at both depots.
As a result, the averages may not have normalized labor-hour
differences caused by differences in the repairs required on each
aircraft. This problem probably affected analysis of the Ogden hours
even more than North Island since Ogden had not advanced far enough
along in the F/A-18 repair program to reach a normalized production
level.
Finally, there are other differences between the activities that
affect labor hours used for MCAPP work that also complicate a
labor-hour comparison. For example, there are differences in (1) the
cost accounting systems used to collect labor-hour expenditures, (2)
operation and administration procedures for work performed, and (3)
the numbers of F/A-18 MCAPPs completed in the past that affects the
comparability of performance data and the potential for future
improvement.
ADJUSTMENTS TO OGDEN'S LABOR
HOURS
---------------------------------------------------------- Letter :3.3
The Navy made several adjustments to the historical data used in its
analysis. Through the adjustments, the Navy estimated the labor
hours required by each depot to perform an MCAPP II on a land-based
F/A-18 with no concurrent repair of components. These adjustments
increased Ogden's labor hours and reduced North Island's labor hours
below Ogden's. The Navy did not make adjustments to account for
known factors causing labor-hour increases at Ogden, such as delays
caused by the nonavailability of parts, time awaiting approval of
proposed maintenance actions, a Navy required wing removal and
reinspection, front-end training time, or increases due to the type
of contract administration used for the Ogden repair work. The Navy
also did not recognize Ogden's potential for reducing labor hours as
additional aircraft were produced or consider basing its land-based
versus carrier-based analysis on Ogden aircraft results rather than
North Island's even though Ogden had produced both types.
As the starting point for Ogden, the analysis used the 3,069 average
labor hours approved for payment by the contract administrator for
the 5 land-based F/A-18s completed by Ogden at the time of the
analysis. Actual labor-hour expenditures at Ogden were not used
because the work at Ogden was being administered similar to a
contract with a private company. As a result, the Navy said it only
had access to the labor hours approved for payment by the contract
administrator.
The Navy made three adjustments to the Ogden average. First, the
contract administrator had made a decision in November 1994 to
approve 12 to 17 percent additional labor hours for personal,
fatigue, and delay time associated with certain work at Ogden. Based
on this decision, the Navy adjusted some of Ogden's proposed labor
hours using a 12-percent factor, which added 153 hours. In January
1995, Ogden formally requested approval for compensation for
additional hours to reflect personal fatigue, and delay time using a
16.7-percent factor.
The Navy made a second adjustment to add the labor hours required for
the additional MCAPP II inspection requirements. In September 1994,
the Navy asked Ogden to submit a bid for these additional
requirements, and in response, Ogden submitted a proposal for 228
additional labor hours. Based on this proposal, the Navy added 228
hours to Ogden's labor-hour estimate.
The third adjustment made to Ogden's labor hours added 480 hours
estimated for the additional repair work that would result from the
additional MCAPP II inspections. When Ogden bid the 228 hours for
MCAPP II inspections, the activity did not submit a bid for the
needed repair work that would be identified during the inspections.
The F/A-18 field engineering activity that developed the MCAPP II
specification estimated that 3 labor hours of repair work would
result from each additional inspection hour. Use of this ratio would
have added 864 labor hours to the Ogden average. Navy officials
stated that to be conservative in making this adjustment, they used a
ratio of 2.1 repair hours for each inspection hour. This ratio was
based on the approved labor hours for inspections and the resulting
repair work on Ogden's five completed land-based F/A-18s.
While the second and third adjustments appear logical, we could not
determine whether Ogden would have needed all of the additional time
related to these adjustments. As previously discussed, North Island
reduced both its turnaround time and labor hours for MCAPP II
aircraft. We did not analyze the two specifications to determine if
there were changes that might have reduced the production time at
Ogden as it had of North Island.
The Navy, as previously noted, did not adjust Ogden's hours to
reflect improved performance normally expected from the learning
curve as a depot gains experience with a new workload. DCAA
officials told us learning curve analyses are routine in their normal
bid proposal evaluations. Learning curve theory states that, for
repetitive tasks, as quantities double, the time to perform a task
reduces at relatively constant percentages. Over time, the
quantities required to reach a doubling can become very large,
causing an apparent significant slowing of the rate of learning. On
the F/A-18 MCAPP, North Island would have already experienced a
significant amount of learning due to the quantities performed.
Ogden, on the other hand, having just begun the program should have
been expected to experience significant learning (decreases in hours)
if the program had continued. According to DCAA officials, in
projecting future labor-hour requirements at Ogden, use of a learning
curve would have been appropriate since Ogden's hours for its first
few aircraft were being compared with those of North Island, which
already had many years performance experience. Navy officials stated
that the data on approved labor hours provided by DCMC provided no
indication of a learning curve because so few aircraft had been
completed.
ADJUSTMENTS TO NORTH
ISLAND'S LABOR HOURS
---------------------------------------------------------- Letter :3.4
As the starting point for North Island, the Navy used the 5,684
average labor hours expended on the last 6 completed F/A-18s at North
Island. All six F/A-18s were carrier-based aircraft, and all were
repaired using the MCAPP II specification.
The labor-hour average for these aircraft represents a significant
decrease in the historical labor hours expended by North Island for
MCAPP work. For example, in fiscal year 1994, North Island completed
82 MCAPPs at an average of 7,299 labor hours. The 5,684 labor-hour
average for the last
6 completed aircraft represents an average decrease of 1,618 labor
hours, or 22 percent less than each completed MCAPP I, even though
the MCAPP II specifications require additional hours for inspection
and repairs.
North Island officials attributed labor-hour reductions to process
improvements identified as a result of the public-private competition
for F/A-18 MCAPPs. After the competition, North Island made a
detailed review of its F/A-18 repair operations with a view to
reducing costs, including visits to Ogden to review that depot's
processes and procedures. Although North Island lost the
competition, the changes were incorporated into the depot's
operations for the F/A-18 core aircraft that were not included in the
competition package. Changes that reduced labor and processing time
included establishing central approval authority for recommended
repair tasks, conducting daily progress meetings between the managers
and artisans at the site of each aircraft in the plant, reducing
component repair time by only repairing the items needed for safe
operation instead of completely overhauling the entire component, and
moving work crews to each aircraft as work progressed instead of
physically moving the aircraft to different work stations. North
Island data indicated that repair costs for the six MCAPPs used as a
basis for the Navy's analysis were 37 percent below previous F/A-18
MCAPP costs at this depot.
The Navy made 2 adjustments to the North Island 5,684 labor-hour
average. First, it reduced the average by 493 hours to account for
the labor hours used to repair components. Ogden replaces broken
components but does not repair them. The adjustment was less than
the average labor hours historically used for component repairs.
However, the Navy stated that North Island adopted new repair
practices that reduced component repairs. We noted that the Ogden
labor hours included some off-equipment component repair work, but
these hours were not separately identified for purposes of the Navy
analysis. Navy officials said they do not classify this work as
depot-level repair; furthermore, they noted that Ogden had not been
approved by the Navy to do any depot-level component rework.
The second adjustment was made because Ogden's five aircraft used in
the comparison were land-based and North Island's six aircraft were
carrier-based. The Navy stated that historical data at North Island
showed that land-based F/A-18 MCAPPs on average require 27.5 percent
fewer labor hours than carrier-based F/A-18s because of fewer
corrosion and structure problems. To estimate the labor hours that
North Island would have used if all aircraft had been land-based, the
Navy reduced the average by 27.5 percent, or 1,430 labor hours. To
differentiate between land-based and carrier-based aircraft, the Navy
used as a measure the number of catapult launches. Aircraft with at
least 200 catapult launches were said to be carrier-based and those
with less were said to be land-based.
We identified several factors that would question the appropriateness
of the Navy's large reduction of North Island labor hours based upon
its carrier- versus land-based analysis. For example, Ogden was
operating under different instructions from the Navy regarding how to
define a carrier-based aircraft. Thus, Ogden incurred additional
labor hours for inspections using criteria defined in the MCAPP
inspection procedures even though the aircraft would not have
qualified as a carrier-based aircraft using the 200 catapult launch
criteria. Additionally, the 27.5-percent reduction was not
well-supported based on an analysis of North Island data. We also
noted that at the time the Navy collected data for its analysis,
Ogden had already repaired several aircraft that had over
200 catapult launches. The Ogden data showed a 7-percent increase in
hours for carrier-based aircraft. Further, in isolating the relative
influence of various factors on the number of labor hours required to
perform an MCAPP, we found that other factors such as number of
flying hours and time since previous major repair appeared to be much
more statistically meaningful indicators of how many hours would be
required to conduct an MCAPP.
The Navy did not ask DCAA to review the proposed labor hours or to
determine if its adjustments to those hours were supported. Navy
officials noted that this was consistent with the process used in the
original competition in which DCAA assessed rates and Naval Air
Systems Command assessed labor hours. However, we noted that DCAA's
audit reports of Ogden and North Island's original bids included
evaluations of both rates and hours. DCAA was responsible for
ensuring that bids prepared by public depots included all relevant
costs.
RATE ADJUSTMENTS
---------------------------------------------------------- Letter :3.5
With labor-hour estimates determined, the Navy then estimated the
rates, or cost per hour, to perform MCAPP work at Ogden and at North
Island. To do this, the Navy asked DCAA to review actual F/A-18
costs at both depots and estimate actual rates for fiscal year 1995
work. The Navy requested DCAA to complete its review and report the
results in less than 1 week. Although DCAA complied with the
request, the resulting reports were highly qualified. DCAA reported
that its review was limited to verifying reported actual cost
information and making an estimate of actual costs for the next year.
DCAA reported that it did not have sufficient time to perform the
procedures necessary to comply with generally accepted government
auditing standards. DCAA officials stated that in at least one case
their analysis was based on incomplete data.
DCAA initially reported that Ogden's expected actual hourly rate for
fiscal year 1995 for F/A-18 MCAPP work was $81.00. After considering
additional information provided by Ogden officials, DCAA revised its
estimate to $68.83. In its analysis, the Navy used the $68.83 rate
for Ogden with no adjustments. DCAA officials later reported that
the Ogden rate should have been $61.68. They stated that the initial
rate estimate did not fully discount the impacts of first-year
training and the Navy requirement to perform wing removals and
reinspection on several aircraft.
DCAA reported that North Island's expected actual hourly rate for
fiscal year 1995 for F/A-18 MCAPP work was $67.89. In its analysis,
the Navy made several adjustments that reduced the DCAA estimated
rate to $62.86, a $5.03 reduction. Navy officials stated that most
of the reduction was made to provide for differences between Ogden
and North Island in the accounting of certain F/A-18 material costs.
Under the contract, some F/A-18 material is provided to Ogden at no
cost as government-furnished material. This same material is
included in North Island's costs. The adjustments account for these
differences as well as for a minor error in the accounting for
building depreciation at North Island.
In estimating rates at Ogden and North Island, the Navy did not fully
adjust for extra costs Ogden incurred from: (1) operating under DCMC
contract administration rather than a less costly interservice
support agreement, (2) first-year training because the F/A-18
workload was new, (3) Navy delays in providing spare parts and
approving maintenance procedures, or (4) conducting the Navy-required
wing removal and reinspection procedure on several aircraft that
revealed no quality problems. Navy officials stated that (1) despite
the higher cost under DCMC contract management, they had a contract
with Ogden that required the use of DCMC contract administrators; (2)
adjustments for first-year training and reinspection costs were
included in the $68.83 qualified rate estimate provided by DCAA; and
(3) Ogden did not incur increased labor cost while awaiting spare
parts and that repair approval procedures were timely.
TOTAL COST COMPARISON
---------------------------------------------------------- Letter :3.6
To arrive at the estimated cost to the government for MCAPP work at
Ogden, the Navy multiplied Ogden's adjusted average labor hours by
the DCAA rate. The result was $270,502. The Navy added $9,000 to
account for MCAPP II equipment that the Navy said Ogden would need to
perform MCAPP II inspections. The $9,000 was calculated by dividing
the $207,000 cost of the machinery by the minimum 23 F/A-18 MCAPP IIs
that would be performed in fiscal year 1995. For North Island, the
Navy multiplied North Island's adjusted average labor hours by the
adjusted DCAA rate. The result was $236,416, or $34,086 less than
Ogden.
OTHER COST CONSIDERATIONS
WHEN F/A-18 WORKLOAD IS
DUAL-CITED
---------------------------------------------------------- Letter :3.7
Although the Navy's decision to move F/A-18 MCAPP work from Ogden to
North Island was based primarily on the cost and schedule differences
discussed above, the Navy analysis also noted other costs associated
with having MCAPP work performed at two locations. The Navy, with
DOD concurrence, is requiring that F/A-18 core repair capability be
maintained at a Navy depot. Thus, when Ogden won the F/A-18
competition, the Navy did not send all F/A-18 MCAPPs to the Air Force
depot. Instead, North Island performed about half of the MCAPPs to
maintain a Navy core capability to repair the aircraft.
The Navy identified six factors associated with performing F/A-18
work at two depots that increase the total cost of the work. The
Navy estimated that these factors add $43,000 to the government's
cost for each F/A-18 MCAPP accomplished at Ogden. According to the
Navy, the additional costs are eliminated by consolidating all F/A-18
MCAPP work at one site.
We agree there are additional costs to the government when the same
work is performed at two depots. As a result of its recognition of
the advantages of single- siting depot maintenance workload, in
recent years DOD has single-sited numerous depot maintenance
workloads that had previously been split among two or more depot
activities. Nonetheless, our review indicated that quantifying these
costs is difficult, and in most cases, the Navy overestimated the
amounts. The six cost factors identified in the Navy's analysis are
discussed below.
The Navy estimated that the difference in the days required to
complete MCAPP work at Ogden and North Island would cost the
government $11,000 in additional depreciation costs for each
MCAPP performed by Ogden. This amount was based on Ogden's bid
of 143 days to perform an MCAPP and North Island's bid of 110
days. As discussed earlier, we believe the Navy's use of this
factor was inappropriate. North Island's bid reflected a
substantial reduction from its yearly average and assumed that
recent reductions in turnaround times would be maintained.
Ogden's bid, on the other hand, reflected delays and other
factors experienced during its first year that should have been
reduced or eliminated in subsequent years.
The Navy estimated that engineering support costs provided to Ogden
added $8,000 to the cost of each MCAPP. However, this is not an
additional cost since similar engineering support is required
regardless of where the repair work is performed.
The Navy estimated that $1,600 in added costs per MCAPP resulted
from the Navy having an on-site representative at Ogden to help
oversee and monitor work. We noted that the Navy elected to
have an on-site representative at Ogden, even though the
contract did not require one. Also, it is not clear that all
costs associated with this function were added costs to the
government since the on-site representatives were from the North
Island cognizant field activity and were assigned F/A-18 work
regardless of where the work was performed. Travel and per-diem
costs were, however, attributable to the Ogden contract.
The Navy estimated that the cost of having DCMC administer the
contract at Ogden added $15,700 to the cost of each MCAPP.
While we did not verify these costs, we agree that if correct,
the Navy's chosen method of contract administration at Ogden was
costly. However, the Navy did not have to use DCMC to
administer the contract at Ogden. The F/A-18 workload could
have been administered at less cost through an interservice
support agreement, as called for in the DOD Cost Comparability
Handbook. Thus, it was inappropriate in this case to include
the DCMC contract administration costs as a differential factor
for purposes of the F/A-18 analysis.
The Navy estimated that the additional material costs for the
Aviation Supply Office to support MCAPP work at two locations
was $5,750 for each MCAPP completed by Ogden. We did not verify
the Navy's estimate of the cost. However, we noted that the Air
Force and the Navy were negotiating a no-cost contract
modification that would have allowed Ogden to use the Air Force
supply system for the option years. While Ogden would have had
to continue to rely on the Aviation Supply Office for reparable
components not available through the Air Force system, its
reliance on the Navy system should have been significantly
reduced.
The Navy estimated that the additional cost to fly each F/A-18 from
Ogden to North Island was $1,090. We believe that this is not
an additional cost because an aircraft should be flown from its
squadron to the depot and back. Also, F/A-18s from East Coast
locations would incur less costs by flying to Ogden rather than
to North Island due to geographic differences.
Although we could not validate most of the Navy's estimates of
specific costs associated with maintaining the F/A-18 workload at two
different locations, we recognize that in recent years DOD has
identified advantages from eliminating redundancies in its depot
maintenance workload capability and has consolidated many depot
workloads formerly accomplished in multiple locations at a single
site. In general, we have supported such consolidations.
NAVY ANALYSIS UNDERSTATES NORTH
ISLAND'S MCAPP LABOR HOURS
------------------------------------------------------------ Letter :4
The Navy made a 27.5-percent downward adjustment to North Island's
labor hours based on limited sample data. Using more current and
complete data would have significantly reduced the adjustment.
Without this adjustment, the Navy's analysis would have shown North
Island's costs to be higher than Ogden's.
To determine North Island's MCAPP labor hours, the Navy used North
Island's recent experience performing MCAPP IIs on five carrier-based
aircraft. These MCAPPs reflected significant labor-hour reductions
from historical levels. Ogden's labor hours were based on its
experience performing the original MCAPP work on five land-based
aircraft. To adjust for any differences between land-based and
carrier-based aircraft, the Navy compared labor hours on a sample of
land- and carrier-based F/A-18 MCAPPs performed at North Island
during the first 6 months of fiscal year 1994. The sampled MCAPPs
were prior to process improvements at North Island that significantly
reduced labor hours and prior to MCAPP II work. A comparison of
labor-hour costs for all financially completed F/A-18 MCAPPs at North
Island in fiscal year 1994 would have reduced the downward adjustment
from 27.5 to 14 percent. Using a comparison of the last 6 months of
fiscal year 1994, which reflects more of the current MCAPP II work,
the downward adjustment would have been even less.
To test the basis for the large labor-hour adjustment for
carrier-based aircraft, we analyzed the approved labor hours for
completing MCAPPs at Ogden for both carrier-based and land-based
aircraft. We noted there was only a 7-percent difference. To
understand further the relationship between catapult launches and
labor hours, we also performed a regression analysis, comparing North
Island catapult launches and hours, to determine how much of the
change in hours is explained by the change in catapult launches. The
resulting correlation was approximately 9 percent. This means that
only 9 percent of the change in hours is explained in catapult
launches. In other words, 91 percent of the change in hours is
related to factors other than number of catapult launches, such as
number of flying hours and age of the aircraft.
We also performed an additional review of the hours and numbers of
catapult launches. That analysis indicated that there is not a
strong relationship between the number of catapult launches and the
hours required for MCAPP work.
We recomputed the Navy's analysis using a 14-percent downward
adjustment. As shown in appendix III, the recomputed Navy analysis
shows Ogden's cost is $272,900 and North Island's cost is $275,900
for an F/A-18 MCAPP. Navy officials concurred with the analysis
using a larger sample size provided the sample was based on all labor
completed aircraft, not the more inclusive financially completed
aircraft. The Navy officials commented that by using labor completed
aircraft the downward adjustment would be 16.7 percent rather than 14
percent--making Ogden's cost slightly higher. However, since labor
complete figures do not capture the final total labor hours that are
included in financially complete figures, the financially completed
measure is more commonly used. Additionally, as previously noted,
our analysis of Ogden's labor-hour differential between carrier-based
and land-based aircraft showed only a 7-percent difference.
The Ogden total, shown in appendix III, included $2,379 that the Navy
added for equipment that Ogden would have to purchase for MCAPP II
inspections. Navy officials stated that including the equipment cost
was appropriate because the contract required the equipment for the
performance of MCAPP II. Ogden officials stated that they did not
believe the equipment adjustment was appropriate. They noted that
similar equipment had been called for as part of the MCAPP I work.
However, because of the infrequency of the repair requirement for
components needing the equipment, the Navy had determined it to be
more economical to send the parts to North Island rather than
purchase the equipment for Ogden. It is not clear why this same
procedure would not have been used for MCAPP II repairs at Ogden.
The recomputed Navy analysis in appendix III shows Ogden's cost was
slightly less than North Island's. Further, if DCAA's revised labor
rate of $61.68 had been used, Ogden's per-aircraft cost would have
been more than $30,000 less per aircraft. Nonetheless, the decision
may still have been made to move the workload back to North Island
due to the Navy's assessment regarding potential cost savings from
consolidation.
COMPARISON OF COSTS USING
CURRENT INFORMATION
------------------------------------------------------------ Letter :5
We performed a separate analysis comparing estimated costs for
performing MCAPP work at Ogden and North Island using (1) the most
current data available at the time of our review in March 1995, (2)
actual labor hours expended by Ogden and North Island for completed
MCAPPs for carrier-based F/A-18s, and (3) actual rates at Ogden and
North Island based on actual costs for completed F/A-18 MCAPPs. This
analysis is summarized in appendix IV.
We adjusted North Island labor hours to account for the labor hours
used for concurrent repair of components. We adjusted Ogden labor
hours to estimate the additional labor hours required to perform
MCAPP II work. Because we compared only carrier-based aircraft
completed by each depot, we did not make an adjustment for
differences in the proportion of carrier-based and land-based F/A-18s
at each depot.
We made two estimates of the total cost to the government using the
adjusted labor-hour estimates and two different rate estimates. The
first estimate used the actual rate at each activity for F/A-18
MCAPPs completed in fiscal year 1995. The second estimate used the
actual rate at each activity adjusted for differences in accounting
for material costs, the cost of Ogden F/A-18 work that was outside of
normal MCAPP requirements, and the additional cost of contract
administration at Ogden in dealing with DCMC. Navy officials state
that since Ogden's contract was structured with DCMC as the
administrator, an adjustment is not necessary.
Using the actual rates, the analysis showed that the cost to the
government for F/A-18 MCAPPs was less at North Island. Using the
adjusted rates, the analysis showed that the cost was less at Ogden.
We did not include in the analysis an estimate for the added costs to
the government from having two depots perform F/A-18 work. Also, our
analysis did not account for all differences in the work historically
performed at the two depots because some differences cannot be
accurately quantified.
LACK OF DOD GUIDANCE ON WHAT
PROCEDURES TO BE USED
------------------------------------------------------------ Letter :6
Title 10 U.S.C. 2469 contains provisions that restrict the movement
of depot-level maintenance work from one depot to another or to the
private sector if the value of the work is $3 million dollars or
more. The legislation requires that before such work is moved, the
Secretary of Defense must ensure that the change is made using (1)
merit-based selection procedures for competitions among all DOD
depot-level activities or (2) competitive procedures for competitions
among private and public sector entities.
Since the value of the F/A-18 MCAPP work moved from Ogden to North
Island exceeded $3 million, the decision was subject to the
provisions of the legislation. In a December 20, 1994, letter, the
Deputy Under Secretary of Defense for Logistics confirmed that he had
reviewed the Navy's decision and supporting analysis. The letter
stated that there were only two DOD depot maintenance activities
capable of accomplishing the MCAPP work, Ogden and North Island, and
that the Navy had performed a merit-based analysis and selection by
evaluating proposals from these activities using quality, schedule,
and cost criteria. The Deputy Under Secretary stated that the
decision was based on the best value to the government and satisfied
the requirements of section 2469.
Our review indicated that DOD has not developed guidance implementing
the legislation that specifically defines the steps, processes, and
analyses required for merit-based selection. In other words, the
services do not have defined guidance on what they must do to ensure
that decisions to move depot workload are based on merit-based
selection procedures. Without such guidance, it appears that any
selection decision using reasonable criteria and accurate data could
be considered merit-based.
In the absence of guidance, the Navy established a process it
believed was merit-based by using quality, schedule, and cost
criteria in comparing F/A-18 MCAPP work at Ogden and North Island.
However, our review indicated the Navy's implementation of that
process had a number of shortcomings. For example, as we discussed
previously, the Navy did not use the most current and complete data
available in determining labor-hour differences between carrier- and
land-based aircraft. Using more current and complete data
significantly impacts the Navy's analysis. In addition, the Navy
only allowed DCAA 1 week to determine the rates that were used in the
cost comparison. DCAA qualified the information provided to the Navy
at the time and subsequent DCAA analyses have resulted in different
rate estimates. Further, the Navy analysis did not adjust for the
extra costs incurred by Ogden in operating under DCMC contract
administration even though the work could have been performed through
an interservice support agreement at less cost.
The Deputy Under Secretary stated in the December letter that Ogden
and North Island were the only activities considered in the selection
decision because they were the only DOD activities capable of
performing the F/A-18 MCAPP work. We would agree that at the time of
the decision, Ogden and North Island were the only DOD activities
performing F/A-18 MCAPP work. However, we question whether Ogden and
North Island are the only DOD activities capable of performing the
work. Other Air Logistics Centers and Naval Aviation Depots
routinely provide depot-level maintenance on several other types of
fighter and attack aircraft. While these activities may not have all
of the equipment and skills in place to start MCAPP work immediately,
it would appear reasonable that with some preparation, other DOD
activities could perform the work.
In view of the requirement to use merit-based selection procedures
among all depot-level activities, other Air Logistics Centers, and
Naval Aviation Depots could have been considered in the overall
analysis. However, even if other activities had been considered, it
is uncertain whether any would have submitted a proposal, and we
recognize that start-up costs may have prevented other activities
from being competitive.
RECOMMENDATION
------------------------------------------------------------ Letter :7
We recommend that the Secretary of Defense develop and implement
guidance on using merit-based selection procedures when moving depot
workload as prescribed by title 10 U.S.C. 2469.
AGENCY COMMENTS
------------------------------------------------------------ Letter :8
We provided a draft of this report to DOD for comment. DOD provided
official oral comments. OSD officials agreed with the report's
overall conclusion that the F/A-18 MCAPP workload should be
single-sited and also agreed with the recommendation. They stated
that events discussed in this report demonstrate the difficulties
created when one service's depot is pitted against another service's
depot in a competitive environment. However, at the same time, they
agreed that this case also demonstrates the potential cost savings
that can be generated when competition motivates public depots to
implement efficiencies by reengineering depot maintenance processes
and workloads.
Air Force officials indicated overall concurrence with the report.
Navy officials agreed with the overall conclusion that single siting
all F/A-18 depot workload is in the best interest of the Navy.
However, they raised concerns that the report did not accurately
characterize the reasons why there were differences between their and
our analyses. They stated that the Navy's analysis was based on the
best information available at the time. We revised the report to
reflect the Navy's concerns by more clearly explaining the reasons
for the differences between their analyses and ours.
---------------------------------------------------------- Letter :8.1
Appendix I describes our scope and methodology.
As arranged with your staff, unless you announce its contents
earlier, we plan no further distribution of this report until 7 days
from its issue date. At that time, we will send copies of this
report to the Secretaries of Defense, the Air Force, and the Navy.
Copies will also be made available to others on request.
Please contact me on (202) 512-8412 if you or your staff have any
questions concerning this report. Major contributors to this report
were Julia Denman, Gary Phillips, James Ellis, and Donald Lentz.
Sincerely yours,
David R. Warren
Director, Defense Management
and NASA Issues
SCOPE AND METHODOLOGY
=========================================================== Appendix I
To address our objectives, we performed audit work at the activities
involved with the decision to move F/A-18 Modification, Corrosion,
and Paint Program work: the Naval Air Systems Command, Washington,
D.C.; the Ogden Air Logistics Center, Ogden, Utah; the North Island
Naval Aviation Depot, San Diego, California; and the Defense Contract
Audit Agency, Salt Lake City, Utah, and San Diego, California. At
each activity, we interviewed responsible agency officials and
examined documents and other data related to the decision.
To identify the adjustments that were made to Ogden's and North
Island's costs, we reviewed documentation supporting the Navy's cost
analysis and discussed with Navy officials the reasons for and the
methodology used for each adjustment. To determine whether the data
used in the analysis was accurate and verifiable, we examined source
documents supporting the data and performed independent analyses to
assess the accuracy of the data and the adjustments made to the data.
In preparing our separate cost analysis, we obtained the most current
data available based on actual costs for completed work in fiscal
year 1995 and made adjustments based on supportable differences in
operations at Ogden and North Island.
In considering whether the decision to move the F/A-18 work was a
merit-based decision as required by law, we reviewed the analysis
supporting the Navy's decision in view of the language in section
2469 of title 10, U.S.C., as amended by section 338 of the fiscal
year 1995 National Defense Authorization Act. We also discussed the
matter with Navy officials.
Our examination and analyses used cost data reported by the Air
Forces' Depot Maintenance Automated Data Systems and the Navy's Naval
Air Systems Command Industrial Financial Management System. These
standardized, automated cost accounting systems provide the official
cost information for the services' depot operations. We did not make
an independent assessment of the reliability of the data reported by
these systems.
In addition, it should be noted that the Air Force and the Navy cost
systems are not compatible. There are differences between the
systems in the way costs are collected and accounted for. Although
we made some adjustments in the data used, we cannot state with
certainty that the data used, even with the adjustments, is directly
comparable and consistent. Thus, the results of our analysis must be
viewed with this limitation.
Our review was conducted between January and August 1995 in
accordance with generally accepted government auditing standards.
NAVY'S ORIGINAL ANALYSIS OF OGDEN
AND NORTH ISLAND F/A- 18 COSTS
========================================================== Appendix II
Total
cost Less
Labor Total Labor Total differen costly
hours Rate cost hours Rate cost ce activity
------ ------- ------- ======= ------- ------- ------- -------- --------
North Island labor hours:
--------------------------------------------------------------------------------
Averag 5,684
e
actua
l
hours
for
last
six
MCAPP
IIs
Adjust -493
ment
for
concu
rrent
repai
rs
(10.3
%)
Adjust -1,430
ment
for
carri
er-
based
(27.5
%
based
on
Navy
estim
ate)
North Island rate:
--------------------------------------------------------------------------------
DCAA $67.89
estim
ate
of
actua
l
rate
Adjust -5.03
ment
for
concu
rrent
repai
rs
and
mater
ial
provi
ded
to
Ogden
at no
cost
Ogden labor hours:
--------------------------------------------------------------------------------
Averag 3,069
e
appro
ved
hours
for
five
land-
based
aircr
aft
Adjust 153
ment
for
perso
nal,
fatig
ue,
and
delay
time
Adjust 228
ment
for
added
MCAPP
II
inspe
ction
s
(Ogde
n
bid)
Adjust 480
ment
for
MCAPP
II
over
and
above
work
(esti
mate)
Ogden rate:
--------------------------------------------------------------------------------
DCAA $68.83
estim
ate
of
actua
l
rate
================================================================================
Subtot 3,761 $62.86 $236,41 3,930 $68.83 $270,50 $34,086 North
al 6 2 Island
cost
estim
ate
Adjust 9,000
ment
for
equip
ment
for
MCAPP
II
work
at
Ogden
based
on 1
contr
act
optio
n
year
================================================================================
Total 3,761 $62.86 $236,41 3,930 $68.83 $279,50 $43,086 North
6 2 Island
--------------------------------------------------------------------------------
NAVY ANALYSIS WITH CORRECTED DATA
AVAILABLE IN DECEMBER 1994
========================================================= Appendix III
Total Less
cost costly
Labor Total Labor Total differen activit
hours Rate cost hours Rate cost ce y
------- ------- ------- ------- ------- ------- ======= -------- -------
North Island labor hours:
--------------------------------------------------------------------------------
Average 5,587
actual
hours
for
last
five
MCAPP
IIs\a
Adjustm -483
ents
for
concur
rent
repair
s
(10.3%
)
Adjustm -715
ents
for
carrie
r-
based
(14%
based
on
fiscal
year
1994
data)
North Island rate:
--------------------------------------------------------------------------------
DCAA $67.89
estima
te of
actual
rate
Adjustm -5.03
ent
for
concur
rent
repair
s and
materi
al
provid
ed to
Ogden
at no
cost
Ogden labor hours:
--------------------------------------------------------------------------------
Average 3,069
approv
ed
hours
for
five
land-
based
aircra
ft
Adjustm 153
ent
for
person
al,
fatigu
e, and
delay
time
Adjustm 228
ent
for
added
MCAPP
II
inspec
tions
(Ogden
bid)
Adjustm 480
ent
for
estima
ted
MCAPP
II
over
and
above
work
Ogden rate:
--------------------------------------------------------------------------------
DCAA $68.83
estima
te of
actual
rate
================================================================================
Subtota 4,389 $62.86 $275,89 3,930 $68.83 $270,50 $5,391 Ogden
l cost 3 2
estima
te
Adjustm $2,379
ent
for
equipm
ent
for
MCAPP
II
work
at
Ogden
based
on 4
contra
ct
option
years
================================================================================
Total 4,389 $62.86 $275,89 3,930 $68.83 $272,88 $3,012 Ogden
3 1
--------------------------------------------------------------------------------
\a Excludes one aircraft the Navy included in its analysis as an
MCAPP II that was actually an MCAPP I.
COMPARISON OF NORTH ISLAND AND
OGDEN F/A-18 MCAPP HOURS BASED ON
1995 DATA
========================================================== Appendix IV
Less
Average Average Differenc costly
Aircraft hours Aircraft hours e activity
-------------- --------- --------- --------- --------- --------- ---------
Labor hours:
--------------------------------------------------------------------------------
Average actual 8 5,408 6 4,704
hours for
carrier-
based
aircraft
Adjustments to hours:
--------------------------------------------------------------------------------
Added MCAPP II 547
requirements\a
Component -464
rework
differences\b
Adjusted labor 4,944 5,251
hours
Rates:
--------------------------------------------------------------------------------
Actual rate\c $64.56 $65.97
Adjusted $59.04 $52.98
rate\d
Total cost\e
--------------------------------------------------------------------------------
Estimated cost $319,185 $348,787 $29,602 North
per MCAPP II Island
based on
actual rate
Estimated cost $291,894 $280,577 $11,317 Ogden
per MCAPP II
based on
adjusted rate
--------------------------------------------------------------------------------
\a North Island F/A-18s were repaired using the MCAPP II
specification and Ogden F/A-18s were repaired using the MCAPP I
specification. The adjustment estimates the labor hours needed for
Ogden to perform the additional MCAPP II inspections and repair work.
\b The adjustment provides for North Island repairing some components
that are provided to Ogden as government-furnished equipment.
\c Rates are the actual rates for completed F/A-18 MCAPPs in fiscal
year 1995.
\d The adjustment to North Island's rate reduces the rate to account
for concurrent repair of components and other material provided at no
cost to Ogden. The adjustment to Ogden's rate reduces the rate to
account for extra work (wing drops) performed outside of the normal
MCAPP work and to account for the estimated extra cost incurred in
dealing with the contract administrator, the Defense Contract
Management Command.
\e The total cost estimates were computed by multiplying the adjusted
labor hours for each activity by the rate estimates for each
activity. For Ogden, $2,379 was added to each result to account for
the cost of equipment needed to perform MCAPP II work. This amount
was determined by dividing the cost of the equipment by the minimum
aircraft that would be completed during the
4 option years of the contract. The total cost estimates do not
include any estimates for additional costs to the government
associated with performing work at two locations.
*** End of document. ***