Defense Depot Maintenance: DOD Shifting More Workload for New Weapon
Systems to the Private Sector (Letter Report, 03/31/98, GAO/NSIAD-98-8).

The Defense Department (DOD) has a policy calling for greater reliance
on the private sector for maintenance of its weapon systems. This policy
includes a preference for contractors to provide total logistics support
for new weapon systems within the limits of existing legislative
requirements. This report discusses (1) DOD's policy and implementation
plans for allocating depot-repair workloads for new and upgraded weapon
systems between the public and private sectors and (2) the process it
uses to make source-of-repair decisions.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-98-8
     TITLE:  Defense Depot Maintenance: DOD Shifting More Workload for 
             New Weapon Systems to the Private Sector
      DATE:  03/31/98
   SUBJECT:  Cost effectiveness analysis
             Defense cost control
             Defense procurement
             Equipment maintenance
             Military downsizing
             Privatization
             Advanced weapons systems
             Maintenance costs
IDENTIFIER:  C-17 Aircraft
             F-22 Aircraft
             F/A-18E/F Aircraft
             Comanche Helicopter
             
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Cover
================================================================ COVER


Report to Congressional Requesters

March 1998

DEFENSE DEPOT MAINTENANCE - DOD
SHIFTING MORE WORKLOAD FOR NEW
WEAPON SYSTEMS TO THE PRIVATE
SECTOR

GAO/NSIAD-98-8

Defense Depot Maintenance

(709199, 709240)


Abbreviations
=============================================================== ABBREV

  AMC - Army Materiel Command
  BMDO - Ballistic Missile Defense Organization
  CORM - Commission on Roles and Missions
  DOD - Department of Defense
  DSB - Defense Science Board
  OSD - Office of the Secretary of Defense

Letter
=============================================================== LETTER


B-279271

March 31, 1998

Congressional Requesters

The Department of Defense (DOD) has a policy calling for greater
reliance on the private sector for maintenance of its weapon systems. 
This policy includes a preference for contractors to provide total
logistics support for new weapon systems within the limits of
existing legislative requirements.  As requested, this report
addresses (1) DOD's policy and implementation plans for allocating
depot-repair workloads for new and upgraded weapon systems between
the public and private sectors and (2) the process it uses to make
source-of-repair decisions. 


   BACKGROUND
------------------------------------------------------------ Letter :1

This is one in a series of reports (see related GAO products at the
end of this report) addressing DOD's depot maintenance policies,
outsourcing plans, depot closures, and the allocation of work between
the public and private sectors.  This report analyzes the process DOD
is using to determine depot maintenance repair strategies for its new
weapon systems and major upgrades. 

Depot maintenance is a key part of the total DOD logistics system
that helps to support the readiness and sustainability requirements
of thousands of major weapon systems and millions of equipment items. 
Depot maintenance requires extensive shop facilities, specialized
equipment, and highly skilled technical and engineering personnel to
perform major repairs, overhauls, and modifications of weapons and
components.  In fiscal year 1997, DOD spent a reported $12 billion on
depot maintenance, which is done by both public military depots and
private sector contractors. 

Congress and DOD have had an ongoing debate concerning the size,
composition, and allocation of depot maintenance workload between the
public and private sectors.  DOD's management policies and plans
continue to evolve as it seeks to make greater use of private sector
repair capabilities while responding to congressional direction. 
Provisions included in the National Defense Authorization Act for
Fiscal Year 1998 provided further guidance from Congress regarding
how DOD's depot maintenance program should be conducted.  Finally,
the recently announced Defense Reform Initiatives are likely to
further impact DOD's management of this program.\1


--------------------
\1 Reform initiatives call for (1) reengineering support activities
to adopt best private sector business practices, (2) consolidating
defense management and support organizations, (3) eliminating excess
infrastructure through base closure and privatization, and (4)
competing many more business functions now performed in-house. 


      DEPOT MAINTENANCE POLICY
      DEBATE
---------------------------------------------------------- Letter :1.1

In recent years, DOD advisory groups and officials have called for
contracting out more depot maintenance work to the private sector. 
In its May 1995 report, "Directions for Defense," the Commission on
Roles and Missions (CORM) recommended that DOD move away from its
current reliance on public depots, in part, by outsourcing all work
on new weapon systems.  The Defense Science Board (DSB), in a series
of studies,\2 also called for increased outsourcing, noting that DOD
should get out of the materiel management, distribution, and repair
business by expanding contractor logistics support to all fielded
weapon systems. 

The CORM and DSB studies estimated that outsourcing in a competitive
environment could reduce depot maintenance costs by 20 to 40 percent. 
Based on findings of these reports, DOD has opted for a greater use
of private sector capabilities as a vehicle for achieving savings in
support operations that could be used for weapon system
modernization.  Our reviews of these studies have found that, while
there are opportunities to reduce the costs of DOD's logistics
programs through such competitions, projected cost savings by the
CORM and DSB were overstated.\3

In March 1996, DOD issued a new regulation\4 containing the policies
and procedures for buying and supporting new weapon systems.  The
regulation stated that new systems and major upgrade programs "shall
maximize the use of contractor provided, long-term, total life-cycle
logistics support that combines depot-level maintenance along with
wholesale and selected retail materiel management functions." The
regulation further stated that program officials must obtain a waiver
if they wanted to use public support facilities.  The regulation was
revised in October 1997 to remove the waiver requirement. 

In April 1996, DOD issued its Policy Report Regarding Performance of
Depot-Level Maintenance and Repair.  This report, which was developed
and submitted to Congress as required by the National Defense
Authorization Act for Fiscal Year 1996, set forth DOD's plans to
support new and upgraded weapon systems in the private sector.  The
1996 Authorization Act directed DOD to develop comprehensive depot
policies with the goal of eliminating legislative restrictions
related to depot maintenance workload allocations.  DOD's report
endorsed the repeal of the provision in 10 U.S.C.  2466, which at the
time limited private-sector depot maintenance funding to 40 percent
of total annual depot maintenance funding (a provision commonly
referred to as the 60/40 rule).  DOD's report also envisioned a
reduction in workloads needed to retain public depot core
capabilities as required by 10 U.S.C.  2464.  Core is defined by DOD
as the capabilities that DOD depots must retain to ensure a ready and
controlled source of repair to meet certain essential wartime
demands, promote competition, and sustain institutional expertise. 

Congress did not respond favorably to DOD's report.  The House
National Security Committee noted that the report did not go far
enough in identifying core capabilities and, therefore, what must
absolutely remain in-house.  The Senate Armed Services Committee
found DOD's report was not responsive to congressional requirements
and that the section in the March 1996 regulation regarding depot
support for new weapon systems was inconsistent with current law and
possibly inconsistent with national security interests.  The
committees also criticized DOD for not allowing public depots to
compete for non-core work.\5 Congress did not repeal the 60/40
requirement at that time. 


--------------------
\2 Defense Science Board Task Force on Privatization and Outsourcing
Draft Interim Briefing (Feb.  1996); Report of the DSB Task Force on
Outsourcing and Privatization (Aug.  1996); and Report of the DSB
1996 Summer Study on Achieving an Innovative Support Structure for
21st Century Military Superiority:  Higher Performance at Lower Costs
(Nov.  1996). 

\3 Defense Depot Maintenance:  Commission on Roles and Mission's
Privatization Assumptions Are Questionable (GAO/NSIAD-96-161, July
15, 1996) and Outsourcing DOD Logistics:  Savings Achievable but
Defense Science Board's Projections Are Overstated (GAO/NSIAD-98-48,
Dec.  8,1997). 

\4 DOD 5000.2-R, "Mandatory Procedures for Major Defense Acquisition
Programs and Major Automated Information System Acquisition
Programs."

\5 National Defense Authorization Act for Fiscal Year 1997, Report of
the Committee on National Security, House of Representatives, on H.R. 
3230, May 7, 1996.  National Defense Authorization Act for Fiscal
Year 1997, Report to Accompany S.  1745, Committee on Armed Services,
U.  S.  Senate, May 13, 1996. 


         FISCAL YEAR 1998
         AUTHORIZATION ACT
         CONTAINS CHANGES TO DEPOT
         MAINTENANCE LEGISLATION
-------------------------------------------------------- Letter :1.1.1

The 1998 Defense Authorization Act provides changes to various depot
maintenance requirements.  In summary, the act: 

  -- Provides for a new section 2460 in title 10 of the U.S.  Code,
     which for the first time would establish a statutory definition
     of depot-level maintenance and repair.  The definition includes
     depot-level work performed under interim and contractor
     logistics support arrangements, other similar

contractor support arrangements, the installation of some
modifications and upgrades, and certain software maintenance.  It
excludes the procurement of major system upgrades and safety
modifications. 

  -- Amends 10 U.S.C.  2464 to provide for a DOD-maintained core
     logistics capability that is required to be government owned and
     operated.  The provision requires that the core capability
     include the capabilities that are necessary for repairing new
     systems identified as requiring a core capability (except
     special access programs, nuclear carriers, and commercial items)
     within 4 years of the system's achieving initial operational
     capability. 

  -- Amends 10 U.S.C.  2466 to allow DOD to use up to 50 percent of
     its depot maintenance funds for private sector performance of
     the work. 

  -- Provides for a new section 2469a in title 10 of the U.S.  Code
     containing special processes and procedures to be used in
     conducting competitions for depot maintenance workloads at the
     closing San Antonio, Texas, and Sacramento, California, depots. 

  -- Provides for a new section 2474 in title 10 of the U.S.  Code
     requiring the Secretary of Defense to designate DOD depot-level
     activities as centers of industrial and technical excellence,
     adopt best business practices to improve their efficiency and
     cost-effectiveness, and provide for public-private partnerships
     at these activities. 

Provisions in the 1998 Authorization Act could significantly affect
the issues discussed in this report.  A DOD team has begun evaluating
potential changes to core policies and depot workload allocations
required by the act.  These could include revising the definition and
composition of workloads required to be maintained in the public
depots as well as the methodology for allocating specific maintenance
workloads between the public and private sectors.  At the same time,
DOD continues to propose policy initiatives calling for increased use
of contractor logistics support for the life of new systems and fewer
depot maintenance activities performed in-house. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :2

Overall, our work shows that DOD is moving to greater reliance on the
private sector for depot support of new weapon systems and major
upgrades.  This condition reflects DOD's shift from past policies and
practices, which generally preferred the public sector.  DOD
officials say that the Department is doing this within the framework
of existing legislative requirements, while seeking legislative
changes that would allow it to make greater use of the private
sector.  We found that in those programs where source-of-repair
decisions have been made or where a specific source of repair is
being strongly favored, these determinations were not always well
supported.  Further, weaknesses existed in guidance for implementing
the decision-making process. 

Specifically, our work shows that: 

  -- Of 71 new system acquisition programs reviewed, 46 programs, or
     about 65 percent, have made a source-of-repair decision or are
     strongly leaning toward one sector or the other.  Of the 46
     programs, 33 (about 72 percent) are selecting the private sector
     for most repairs and 13 are selecting the public sector.  The
     other programs reviewed have either selected a mixed workload
     utilizing both public and private sectors (12 programs) or are
     undecided (13 programs). 

  -- Uncertainty and unresolved issues related to DOD policy
     guidance, core capabilities (workloads that must be kept in the
     public depots), and DOD's belief there may be changes in
     legislation relating to depot workload allocation have caused
     several of the large acquisition programs to defer long-term
     support decisions.  In lieu of making a decision, these programs
     were opting for some type of interim contractor support
     arrangement that places initial support responsibilities with
     the original equipment manufacturers.  For example, the C-17 has
     deferred life-cycle support decisions until 2003 or later and
     will rely on the prime contractor for almost all logistics
     support and systems management tasks until then. 

  -- Significant weaknesses exist in DOD's implementation of the
     decision-making process for determining depot-maintenance
     strategies for new systems.  Our review of programs where
     source-of-repair decisions have been made showed that key
     factors were not always taken into account during the decision
     process nor, when they were, were they always consistently
     applied across programs.  For example, cost comparisons between
     public and private support options were not always done as
     required or were inconclusive.  Also, many managers were unsure
     how or whether to consider other factors, particularly core
     capability requirements.  Further, programs differed in the
     extent to which they coordinated with logistics officials, who
     are responsible for logistics operations once the systems are
     fielded.  Inconsistencies in the decision-making process are
     partly attributable to changing and contradictory guidance for
     making source-of-repair decisions and uncertainties regarding
     public depot core capability requirements.  DOD revised its
     primary guidance in October 1997 and continues to examine other
     possible changes. 


   GREATER USE IS BEING MADE OF
   PRIVATE SECTOR CAPABILITIES,
   BUT SOME MAJOR DECISIONS ARE
   STILL PENDING
------------------------------------------------------------ Letter :3

Survey results from 71 new and upgraded weapon systems showed that,
consistent with DOD's policy change, programs are deciding or leaning
toward having the private sector perform most of the depot
maintenance.  The policy change is a clear shift from past
experience, where programs leaned more toward public-sector
maintenance strategies.  Also, source-of-repair decisions for a
number of new major programs, such as the C-17, F-22, and F/A-18E/F
aircraft and the Comanche helicopter, have not been finalized or are
pending.  These are large acquisition programs and therefore
represent large future depot maintenance workloads regardless of
whether they are performed in the public or private sector. 


      PLANNING LEANS TOWARD
      GREATER USE OF THE PRIVATE
      SECTOR
---------------------------------------------------------- Letter :3.1

As a general rule, life-cycle maintenance costs for new systems are
estimated at twice the system's acquisition cost.  We initially
inquired about the depot support plans for the 88 new weapon systems
and major upgrades that are generally the largest in DOD in terms of
estimated acquisition cost.\6 Based on responses to our inquiry, our
analysis focuses on the plans for 71 of these programs as summarized
in table 1.  (Of the remaining 17 programs, we did not receive
responses from 8;\7 7 other programs are expected to have no or
negligible depot maintenance, according to DOD officials; and plans
were not yet developed for 2.)



                                     Table 1
                     
                     Reported Major Systems Source of Repair
                           Decisions (as of June 1997)

                                             Mixed\a
                                  Firm or     public      Firm or
                               leaning to        and   leaning to
                                   public    private      private  Undeci
Service                            sector    sectors       sector     ded  Total
-----------------------------  ----------  ---------  -----------  ------  -----
Army                                    7          3            2       3     15
Navy                                    2          4           13       3     22
Air Force                               4          3           13       5     25
DOD/BMDO\b                              0          2            5       2      9
================================================================================
Total programs                         13         12           33      13     71
================================================================================
Percent of total                      18%        17%          47%     18%
--------------------------------------------------------------------------------
Note:  In this table, we define "firm or leaning to" as meaning that
a program has officially decided or has indicated a decided
preference for either the public DOD depots or private contractor
sources for the clear preponderance (two-thirds or more) of its depot
workload.  This does not mean that a program will rely exclusively on
that sector. 

\a "Mixed" means a program plans to place significant workloads in
both sectors or indicated such but did not provide sufficient detail
to determine whether one sector will predominate. 

\b DOD/BMDO programs are centrally managed by DOD or the Ballistic
Missile Defense Organization (BMDO). 

As shown above, 33 of the 46 programs that have made firm
source-of-repair decisions, or are strongly leaning toward either the
public or private sector, have selected the private sector for most
repairs.  If Army programs are not considered, 31 of 37 Navy, Air
Force, DOD, and BMDO programs have decided or are strongly leaning
toward the private sector.  In contrast, the Army data suggests that
it plans to support relatively more programs in its depots.  More of
the Army programs involve upgrades to existing systems and officials
reported that they generally plan to use current sources of support. 
We note, however, that during the periods of modification, the Army
currently plans to have the contractors do much of the depot
maintenance concurrent with the upgrade programs. 

Excluding the 13 undecided programs, table 1 also shows that program
managers for more than three-fourths (45 of 58) of new major systems
and upgrades have decided or are leaning toward having the private
sector handle most maintenance or are employing mixed (both private
and public) sources of repair.  Relatively few programs --13 of 58--
plan to rely on DOD depots for the bulk of support. 

It should be noted that our analysis above represents numbers of new
systems, not the dollar value of their depot workloads.  In most
cases, programs did not provide sufficient detail to quantify
projected future workloads.  Quantifying the size of the workloads
may produce a different perspective on DOD's plans.  The distribution
of dollar workloads between the public and private sectors is, of
course, crucial to determining future compliance with the 10 U.S.C. 
2466 statute. 


--------------------
\6 Eighty-four programs were classified by DOD as major defense
acquisition programs as of October 28, 1996.  A program is designated
as major when estimated by the Under Secretary of Defense for
Acquisition and Technology to eventually cost more than $355 million
for research, development, test, and evaluation or more than $2.135
billion for procurement (in fiscal year 1996 constant dollars), or
when so designated by the Under Secretary.  Four programs were
designated as pre-major programs that may eventually become major
defense acquisition programs. 

\7 Six of the eight programs that did not respond were among the
smaller programs in terms of total acquisition cost.  Two of the
8--the LPD-17 assault ship and the Theater High Altitude Defense
System--were among the higher cost programs but not in the top 10. 


      MAJOR DECISIONS PENDING
---------------------------------------------------------- Letter :3.2

The 13 programs that have not yet officially decided on a support
strategy include programs with some of the largest estimated
acquisition costs in DOD's acquisition programs.  These programs
include the C-17 transport aircraft, the F-22 fighter aircraft,
F/A-18E/F fighter and attack aircraft, and the Comanche helicopter. 
Several program officials told us that they were delaying final
support decisions, in part, because of the uncertain status of DOD
depot and core policies and what they viewed as the potential for
changes to the legislative requirements relating to the workload mix
between the public and private sectors.  In the meantime, officials
plan to rely on interim contractor support or similar arrangements. 

The C-17 program is an example.  Despite several comprehensive
studies over a number of years, Air Force senior managers could not
decide upon a long-term support strategy because of uncertainties
about the future public depot structure, core capability
requirements, privatization initiatives, and the 60/40
provision--which as previously discussed was changed to 50/50 by the
1998 Defense Authorization Act.  In addition, cost estimates did not
identify significant differences between public and private options;
estimates were within 10 percent of each other and both options were
considered viable.  As a result, the C-17 program office is using an
interim flexible sustainment strategy and has awarded a contract
making the prime contractor responsible for almost all logistics
support and systems management tasks.  Lifetime support decisions
will be deferred until 2003 or later for depot workloads other than
the engine.  Officials decided that contractor support for the engine
was clearly cost-effective and would be competed in the private
sector.  The C-17 engine is a commercial derivative with existing
private sector repair sources. 

Depot officials noted, however, that they believe the flexible
sustainment decision on the C-17 is not so flexible and will by
necessity lead to life-cycle support by the prime contractor.  On
this program, as well as on past interim contractor support programs
we have reviewed, we note that by not acquiring or budgeting for the
technical data and other depot support resources required to
establish an organic depot capability, that DOD may in fact be making
the decision to leave life-cycle maintenance support with original
equipment manufacturers. 


      PAST PLANS PREFERRED ORGANIC
      PERFORMANCE
---------------------------------------------------------- Letter :3.3

The data for the 71 new systems reflect a marked shift from past
policies and practices, which generally preferred the public sector. 
Officials from all three services told us that, in the past, public
depots were generally the first option considered.  A review of
service data from about 10 years ago showed that most systems were to
be supported by DOD depots.  Of a total of 56 major systems with
known depot-repair requirements, 75 percent of Army systems, 76
percent of Air Force systems, and 74 percent of Navy systems were to
be supported mainly in public depots.  The remainder were to be
supported by the private sector or a mix of public and private
sources.  Figure 1 combines this data from the three services and
contrasts with current plans for new systems as summarized in table
1. 

   Figure 1:  Comparison of
   Source-of-Repair Decisions for
   Major Weapon Systems for Fiscal
   Years 1987 and 1997

   (See figure in printed
   edition.)


   WEAKNESSES IN GUIDANCE
   CONTRIBUTE TO LACK OF
   CONSISTENCY AND RIGOR IN MAKING
   SOURCE-OF-REPAIR DECISIONS
------------------------------------------------------------ Letter :4

Acquisition program managers are primarily responsible for making
source-of-repair decisions on new weapon systems.  These decisions
not only drive billions of dollars in life-cycle operating and
support costs but also affect near-term investments for support
equipment, repair parts, training, and technical data (engineering
drawings, technical manuals, etc.) and can vitally impact future
force readiness and sustainability.  DOD policies and standard
business practices require such important decisions to be justified
through rigorous, comprehensive business case analyses.  DOD guidance
and service implementing instructions generally provide that the
analyses should consider factors such as relative costs of public and
private support options, mission essentiality, core depot
requirements, existing public and private capabilities, and customer
(operating command) requirements. 

Our review of programs where source-of-repair decisions have been
made or where one source of support is favored showed that key
factors were not always taken into account during the decision-making
process or were not always consistently applied across programs.  We
found that cost analyses comparing public and private support options
were not always done or were done inconsistently and that core
capabilities were not often considered.  We also found that programs
differed in the extent to which acquisition officials coordinated
with logistics officials (who are responsible for logistics
operations once the systems are fielded) and in their plans to
acquire the technical data needed to compete workloads.  Service
officials attributed these problems, in large part, to the current
guidance, which they believe is inadequate, unclear, and sometimes
contradictory.  Officials also cited related issues, including the
continuing depot debate, potential changes in legislation, and base
closure actions as contributing to difficulties and inconsistencies
in making source-of-repair decisions. 


      INADEQUATE COST COMPARISONS
---------------------------------------------------------- Letter :4.1

Service instructions on source-of-repair decisions require that the
relative costs of public and private sector options be assessed. 
Service regulations on cost analyses prescribe analytical techniques
and requirements for conducting cost assessments.  We found that many
programs were not planning to assess costs and that, for programs
that did, cost assessments varied in comprehensiveness and how they
were used to support repair decisions. 


         COST COMPARISONS NOT
         PERFORMED
-------------------------------------------------------- Letter :4.1.1

Managers for 23 (40 percent) of the 58 programs that had made or were
leaning toward a source-of-repair decision (public, private, and
mixed workloads from table 1) responded that they did not plan to do
a cost comparison or else did not provide sufficient information for
us to determine the answer.  Some officials questioned the need to
accomplish comprehensive studies given DOD's outsourcing initiatives. 
Some programs determined from the outset that they would use one
source of support over another based on other decision factors and,
because of that, felt cost analyses were unnecessary.  For example,
Army acquisition officials had already decided that software of the
type employed on the Forward Area Air Defense Command and Control
System would be supported in-house.  Conversely, the Navy's Strategic
Sealift program procures commercial ships that are operated and
maintained by the private sector.  Public sector maintenance is not
an option and cost comparisons are therefore inappropriate, according
to Navy officials. 


         INCONSISTENT COST
         COMPARISONS
-------------------------------------------------------- Letter :4.1.2

Managers for 35 (60 percent) of the 58 programs that had made or were
leaning toward a source-of-repair decision responded that they had or
planned to compare costs between the public depots and the private
sector.  In some programs, very in-depth cost studies were performed,
while others were more rudimentary.  Some program officials felt it
appropriate to disregard certain costs in their analyses, while
others thought it important to include a wide range of cost factors. 
Results of such cost estimates vary widely depending on the
assumptions made and factors considered.  For example, cost analysts
on the B-1B Conventional Mission Upgrade Program did several cost
estimates, the varying results of which could be used to justify
performing all work in the public sector or, conversely, nearly all
in the private sector, depending on assumptions about overhead, over
and above repairs, equipment reliability rates, and other factors. 

We also noted that cost comparisons often did not indicate a clear
advantage for either sector.  In the past, this would usually have
resulted in selecting a public depot to perform maintenance based on
core requirements and the perceived lower risk in using a public
depot as a ready and controlled source of repair.  However, our data
indicates that such comparisons are being used in a few recent cases
to support outsourcing decisions and to justify delays in making
final determinations for other new systems.  For example, the Navy
decided to outsource work on the T406 engine even though the cost
comparison showed outsourcing to be about 4 percent more expensive
than the estimated cost of public support, about $204 million higher
over a 56-year life cycle.  The engine is similar, however, to
commercial engines with existing private-sector repair sources, and
the Navy hopes to negotiate a lower repair price after the first 5
years of operation.  The C-17 and F-22 programs also conducted
extensive cost studies that did not identify significant cost
differences between public and private sector performance and
therefore deferred selecting sources of repair. 


      INCONSISTENT CORE CAPABILITY
      CONSIDERATIONS
---------------------------------------------------------- Letter :4.2

Core capabilities are those that the public depot system is required
by law to maintain in order to ensure a ready and controlled source
of repair for mission essential weapon systems.  The 10 U.S.C.  2464
statute and DOD policy require that core depot requirements be
identified and the requisite capabilities maintained in the public
depots.  The 1998 Defense Authorization Act amended section 2464 to
clarify core depot requirements and added specific direction that the
capability to repair mission-essential systems and equipment required
in military contingency plans be identified and maintained in public
depots. 

Service implementing instructions also require that workloads for new
weapon systems be assessed for core requirements and considered in
making source-of-repair decisions.  In January 1996, DOD revised its
methodology for computing core requirements to include an assessment
of private sector capability and the risks of outsourcing mission
essential workloads.  Since that time, the Office of the Secretary of
Defense (OSD) and the services have continued to refine the new
methodology and to use it in assessing workloads. 

Regarding core considerations, only 13 (22 percent) of the 58
programs that had finalized decisions or were leaning toward a
decision had assessed or definitely planned to assess core
requirements.  For the other 45 programs, program managers (1) did
not plan to assess core and were moving ahead without a core
determination, (2) were unsure of their plans, or (3) were uncertain
about how or whether to consider core.  Several program officials
felt it was the responsibility of higher command levels to take core
considerations into account, and not theirs, and had no plans to do
so.  Some officials said they were not sure what the term "core"
meant.  Some programs made support decisions without a core
assessment.  For example, according to a Navy official, the AIM-9X
Sidewinder Missile program did not initially consider core and did an
"after-the-fact" study to satisfy the requirement. 

Where core was considered, it was sometimes not a decisive factor in
the final determination, while in other cases, the fact that a system
was considered core dictated that depot repairs be handled in-house. 
Some programs reported receiving mixed messages from logistics
officials regarding whether a system was core, contributing to delays
and confusion in finalizing support plans.  Logistics officials
project commandwide core requirements and can assist acquisition
officials with specific core determinations on new systems. 

Even for programs planning to consider core, the assessments on new
systems and how they contribute to the total core requirements of the
services may not be completed for some time because the services are
assessing first the workloads for weapon systems currently in the DOD
inventory.  For example, the Air Force first began assessing the
workloads for the closing San Antonio and Sacramento Air Logistics
Centers.  It will then move on to other existing workloads and lastly
assess new systems.  An Air Force official said it may be late 1998
before existing workloads are completed.  The Army and Navy have not
yet determined when they would complete their work.  Navy officials
charged with conducting core assessments said naval offices were
struggling with the new methodology and that core and risk
determinations invoked very complex problems.  They expected the
process to be long and drawn out and were not sure when all new
systems would be assessed. 

Establishing and justifying firm core requirements is a fundamental
prerequisite for determining minimum public depot workloads.  Without
these determinations, decisionmakers for new systems are left without
clear direction on whether the work associated with their systems
should in fact be outsourced.  However, determinations as to what
total core capabilities should be and, therefore, what work should
remain in the public depots, are still pending.  Contributing to the
delay and confusion about core is the still evolving core definition
and methods for computing core requirements.  An OSD official said
that major changes in DOD procedures for determining core
requirements will probably have to be made to comply with the new
provisions added in the 1998 Authorization Act. 


      INCONSISTENT CONSIDERATION
      OF LOGISTICS SUPPORT ISSUES
---------------------------------------------------------- Letter :4.3

DOD acquisition regulations require that logistics support plans and
requirements be identified and well integrated with the development
and production of a new system.  Logistics officials are supposed to
work closely with program officials to provide technical input and
expertise on the supportability and maintainability of new systems. 
Logistics officials also project commandwide core capability
requirements, ensure that legislative provisions governing workload
allocations are complied with, prescribe and assist on
source-of-repair procedures, and can help assess core requirements
for new systems.  Logistics officials are also responsible for
managing the DOD depot system and support of fielded weapon systems. 

Weapon system program offices, in making source-of-repair decisions,
are using different approaches in how they coordinate with logistics
officials.  There were cases where program officials coordinated well
and relied substantially on the expertise of logistics officials;
other cases where program officials did not consult them at all; and
others where the working relationships were strained and there were
disagreements and dissatisfaction expressed with the degree and
quality of interaction.  For example, several Army helicopter
programs and the Air Force's B-1B program regularly consulted command
logisticians.  On the other hand, Bradley officials did not plan to
extensively seek input from logistics officials at the depot and some
C-17 program officials said that logistics advice was not always
forthcoming and that they were still unclear about the status and
results of core determinations made by logisticians. 

Because logistics officials have major responsibilities for
supporting systems once they are fielded, they historically have had
the primary role in making, or at least providing substantial input
into, source-of-repair decisions.  Several command-level officials we
spoke with, however, believe the logistics community involvement in
and influence over these decisions is much less than in the past. 
Revised acquisition guidance has concentrated authority for program
decisions within the acquisition chain of command (specifically, the
individual program management team and the acquisition executive
offices) and has given the program manager more latitude in
determining whether and when to involve the logistics community. 
Logistics officials expressed concerns that source-of-repair
decisions can be made and, in some cases, have been made without any
real say by those who must deal with the decisions once they are
made. 

For example, an Army Materiel Command (AMC) official wrote to his
superiors that the acquisition guidance "basically removes AMC from
the depot support equation for new weapon systems" and questioned the
command's role and future relevance.  Believing that the logistics
community needs to be heard in this discussion, he argued that his
command needed to examine the issues on outsourcing, management, and
funding responsibilities; assess their cumulative impacts on depot
operations and where the new policy direction is leading; and
establish the new roles, responsibilities, relationships, and
business rules guiding depot maintenance.  Air Force and Navy
logistics officials voiced similar concerns, saying that the current
guidance and how policies are sometimes implemented inhibit and
constrain the logistician's role and voice in the support planning
process. 


      TECHNICAL DATA NOT ALWAYS
      PURCHASED
---------------------------------------------------------- Letter :4.4

Technical data generally consists of the engineering drawings,
technical manuals, and other information that provide details on an
item's design and how it is repaired.  DOD policies, outsourcing
proponents, and logistics officials generally agree that government
access to this data is important.  Without it, the government is
limited in its ability to compete maintenance work among different
contractors.  Top DOD officials, as well as the CORM and DSB studies,
say competition is key to achieving the savings envisioned by
outsourcing.  Moreover, lack of data rights limits the government's
ability to bring the work into public depots if repair prices charged
by an original equipment manufacturer are too high or if a contractor
later decides it does not want to handle the work. 

Our review of the programs found that many do not plan to buy the
technical data that could help them avoid sole-sourcing maintenance
work to the contractors that developed the system.  Of the 33
programs that plan to rely on private sector repair capabilities, at
least 14 (42 percent) do not plan to buy the technical data for their
weapon systems.  Of these 14 programs, 12 (86 percent) intend to use
the system's prime contractor or the original equipment manufacturers
as their sources of repair.  Of the other 19 programs relying on
contractor support, 12 plan to buy at least part of the data and 7
had not yet decided one way or the other. 

Our discussions with program officials showed that they had varying
reasons for not buying the data.  For example, because of plans to
rely on the prime contractor or the original equipment manufacturers
for repairs of military-unique items, four program officials said
they saw no reason to spend the extra money on technical data. 
Several others thought the prices were exorbitant and unaffordable. 
Five program officials acquiring commercial off-the-shelf
technologies felt that buying the technical data for these commercial
items was unnecessary.  On the other hand, six program managers and
most logistics officials we talked to said it was essential to
acquire the data in order to protect the government's interest and to
control future support costs. 

Not buying technical data for new weapon systems may, therefore,
result in higher life-cycle support costs and difficult logistics
decisions in the future.  Our prior work shows that much of the depot
maintenance currently contracted to the private sector was awarded
sole source (usually to the prime contractor and/or original
equipment manufacturer) and that the justification for sole source
most often cited was that competition was not possible because DOD
did not own the technical data rights for the items to be repaired. 
Command officials told us that DOD would have to make costly
investments in order to promote full and open competition for many of
its weapon systems.\8 DOD officials also told us that steadily
escalating prices are typical of sole-source arrangements. 


--------------------
\8 Defense Depot Maintenance:  Uncertainties and Challenges DOD Faces
in Restructuring Its Depot Maintenance Program (GAO/T-NSIAD-97-111,
Mar.  18, 1997). 


      INADEQUATE, UNCLEAR, AND
      CONTRADICTORY GUIDANCE
---------------------------------------------------------- Letter :4.5

DOD Regulation 5000.2-R provides the primary policy guidance on
source-of-repair decisions.  Issued in March 1996, it stated that
long-term contractor support is the preferred approach for new and
modified systems.  An approved waiver from the acquisition management
authority was required before a public depot could perform the work,
justified in cases where, for example, contractors were unwilling to
perform support or where there was a clear, well-documented cost
advantage.  The regulation discussed the need to retain limited core
capabilities in public depots, but it also pointed to life-cycle
costs and use of the manufacturer's existing production capabilities
as key considerations.  After congressional criticism, OSD officials
revised DOD 5000.2-R in October 1997 to place more emphasis on core
and remove the requirement for a waiver. 

Logistics officials responsible for prescribing source-of-repair
guidance have expressed concern that, despite the October revision,
DOD 5000.2-R does not require a deliberative weighing of factors in
making source-of-repair decisions.  In commenting on the regulation
in 1996, the Air Force noted that the regulation assumed contractor
support is the most cost-effective option.  The Air Force disagreed
with this assumption and commented that the regulation should require
a detailed analysis to determine the most cost-effective approach. 
The DOD working group that reviewed these comments disagreed with the
Air Force's position, however, saying that the new regulation was
consistent with the Department's privatization initiatives, CORM
recommendations, and DOD policy on core. 

Many program and logistics officials we talked to said they
interpreted the revised guidance and the emphasis on related
outsourcing initiatives to mean that contracting with the prime
contractor was the top priority.  As a result, even though the waiver
was dropped and core requirements reemphasized, many officials still
thought it would be difficult to get approval to place work in the
public depots.  Service logistics officials also said the regulation
did not provide adequate guidance for considering core capability
requirements, contractors' past performance, compliance with the then
existing 60/40 rule, customer requirements, and cost impacts on
existing workloads in the public depot system. 

DOD Directive 4151.18 "Maintenance of Military Materiel," dated
August 12, 1992, and the services' more detailed implementing
instructions require managers to employ a more deliberative, business
case analysis process in deciding whether to support new weapon
systems and subsystems in the public depots or on contract.  This
guidance was historically used by program managers in making
source-of-repair decisions.  It required considering factors such as
cost, mission essentiality, core requirements, existing public and
private capabilities, and customer (operating command units)
requirements.  While we noted that some past decisions did not always
follow this guidance, it nonetheless established a more comprehensive
analytical approach to making support decisions in contrast with the
original and revised 5000.2-R. 

Service officials said there was confusion over how to apply what
appeared to them to be conflicting guidance.  They questioned whether
5000.2-R superseded 4151.18 and service instructions; 5000.2-R
neither references that directive nor rescinds it, creating doubts
about whether its requirements are still in force.  Service guidance
is not always helpful in clearing up the ambiguity.  The services
have revisited their existing guidance to meet the changes contained
in 5000.2-R and in the revised core methodology.  The revised Army
and Air Force instructions are still in draft, however, while the
Navy has directed program offices to use either its old guidance,
which was rescinded some time ago, or to apply portions of DOD's new
methodology for determining core requirements.  The Air Force
acquisition office instructed programs to use 5000.2-R for direction,
while Air Force Materiel Command--home to program offices and
logistics officials--told them to also use the Command's draft
internal instructions, which prescribes a decision logic process
consistent with DOD Directive 4151.18. 

An OSD policy official said that DOD Directive 4151.18 is still in
effect, that there is ambiguity surrounding the several sets of
guidance, and that DOD has started to address these issues.  This
official further stated that the provisions on public depot core
capabilities and weapon system support plans contained in the 1998
Defense Authorization Act require that the department review and
possibly revise policies and processes for making source-of-repair
decisions based on consideration of the revised core language. 

Program officials and cost analysts also said better DOD and service
guidance on how to perform cost analyses is needed.  According to
these officials, more explicit instruction on how to do the analyses,
the specific cost factors and weights to use, and the types of
assumptions to be made would help ensure consistency among programs
and better justify source-of-repair decisions.  Accordingly, the
results from cost analyses can vary widely depending on the factors
considered and assumptions made, as previously discussed on the B-1B
upgrade program. 

In the area of technical data, DOD guidance in 5000.2-R states that
programs are to "provide for long-term access to data required for
competitive sourcing of systems support throughout its life cycle."
Our discussions with program officials, however, showed that such
direction is less clear-cut when taken together with other DOD
guidance on source-of-repair decisions and acquisition initiatives. 

For example, guidance places increased emphasis on keeping costs
down, and it encourages programs to use long-term contractor support. 
As previously discussed, some program officials did not plan to spend
the extra money on data since they expected to contract out repairs
to the prime contractors or the original equipment manufacturers. 
DOD acquisition policies and initiatives provide managers with more
flexibility in determining what support resources should be acquired
and also press programs to give contractors more configuration
control over their weapon systems, that is, giving them more freedom
to change the design of subsystems and components.  According to
logistics officials, continually changing designs can make buying the
associated technical data costly.  Program offices may decide that it
is easier and cheaper to let the contractor handle support and forgo
buying the data altogether. 


   CONCLUSIONS
------------------------------------------------------------ Letter :5

The policy debate continues between DOD and Congress regarding how to
allocate defense depot maintenance between the public and private
sectors to achieve national security goals.  Within this policy
debate, the decision-making process for determining source of repair
for new weapon systems continues.  Data from program offices
indicates DOD's new policy of making greater reliance on contractor
capabilities for maintenance is starting to result in program offices
more frequently choosing to rely on contractor supported maintenance
than they did previously. 

However, the data also shows that source-of-repair maintenance
decisions regarding several of the largest dollar value acquisition
programs are yet to be made.  Consequently, it is uncertain whether
the maintenance workloads for these systems will ultimately be done
in the public or private sector or partially in both sectors. 
Because these workloads are relatively large, where they are
ultimately done will have a significant impact on the percentage of
maintenance performed in the public and private sectors.  The
services will have to manage these decisions within the 50/50
legislative requirement. 

Lastly, the process for making source-of-repair decisions has changed
several times due to legislation and revisions to relevant DOD
regulations and directives.  At the current time, program offices are
unclear how certain DOD regulations and guidance are to be applied in
the source-of-repair decision-making process.  Consequently, workload
decision analyses are not being made consistently.  Some include
detailed analysis relating to cost and military capability factors,
while others do not.  This situation could lead to uneconomical and
ineffective source-of-repair decisions.  Provisions in the 1998
Defense Authorization Act may also require DOD to substantially
revise policies and procedures for determining public depot core
capabilities, workload allocations, and support plans for
mission-essential weapon systems. 


   RECOMMENDATIONS
------------------------------------------------------------ Letter :6

To provide for consistent and comprehensive source-of-repair
decisions, we recommend that the Secretary of Defense direct that
action be taken to clarify the inconsistencies among DOD Regulation
5000.2-R, DOD Directive 4151.18, service implementing instructions,
and provisions in the 1998 Defense Authorization Act.  In taking this
action, at a minimum, the approach for analyzing core, cost,
readiness, and sustainability factors for making source-of-repair
decisions should be clearly defined.  We also recommend that the
Secretary of Defense direct that the service secretaries assess the
adequacy of the analyses supporting source-of-repair decisions made
over the last 2 years.  These reviews should be done based on the
previously recommended clarifications to the decision-making
approach.  Where weaknesses in the analysis are identified, new
analyses should be done and adjustments made to the source-of-repair
decisions where appropriate and feasible. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :7

DOD officials commented on a draft of this report.  They concurred
with the report and with our first recommendation to clarify
inconsistencies in guidance.  DOD concurred, in part, with our second
recommendation that the service secretaries assess the adequacy of
the analyses supporting source-of-repair decisions made over the last
2 years and, where weaknesses are identified, make new analyses as
appropriate and feasible.  DOD stated that the services draw their
guidance for these reviews from existing DOD policy and that the
service secretaries will determine whether previous decisions must be
revisited when there are changes in guidance.  They further stated
that the services continually assess weapon system programs and make
changes in depot repair decisions to improve affordability and to
maintain depot capability and efficiency. 

We acknowledge that acquisition programs are periodically reviewed by
top management and that source-of-repair decisions may be reassessed
and changed during an individual system's life cycle.  DOD's required
management reviews and subsequent reassessments of logistics support
decisions made as a result of new legislation and internal policy
changes would meet, in part, the objectives of our recommendation. 
However, our review of 71 new programs found so much confusion about
guidance and widely disparate approaches to decision-making that we
believe analyses of recent decisions are warranted.  Analyses of
individual programs could be accomplished concurrently and as an
integral part of DOD's standard acquisition program management
reviews.  If weaknesses are identified and reassessments required,
the life-cycle savings resulting from good support decisions should
more than pay for the additional up-front costs of the new analyses. 

Appendix I describes our objectives, scope, and methodology. 
Appendix II lists the systems we surveyed.  Agency comments are
contained in appendix III.  We made several technical corrections to
address their comments and suggestions. 


---------------------------------------------------------- Letter :7.1

We are sending copies of this report to the Secretaries of Defense,
the Army, the Navy, and the Air Force and to interested congressional
committees.  Copies will be made available to others upon request. 

Please contact me at (202) 512-8412 if you or your staff have any
questions concerning this report.  Major contributors to this report
are listed in appendix IV. 

David R.  Warren, Director
Defense Management Issues


List of Congressional Requesters

The Honorable James M.  Inhofe
Chairman
The Honorable Charles S.  Robb
Ranking Minority Member
Subcommittee on Readiness
Committee on Armed Services
United States Senate

The Honorable Neil Abercrombie
The Honorable Saxby Chambliss
The Honorable Tillie K.  Fowler
The Honorable James V.  Hansen
The Honorable John N.  Hostettler
The Honorable Ernest J.  Istook
The Honorable Walter B.  Jones, Jr.
The Honorable Solomon P.  Ortiz
The Honorable Norman Sisisky
The Honorable J.  C.  Watts, Jr.
House of Representatives


OBJECTIVES, SCOPE, AND METHODOLOGY
=========================================================== Appendix I

The Chairman and Ranking Minority Member of the Senate Armed Services
Readiness Subcommittee asked us to review the Department of Defense's
(DOD) current policy on depot maintenance for new weapon systems. 
Subsequent to that request, members on the House National Security
Committee and other House members asked us to evaluate the effects on
cost, depot responsiveness, and readiness from DOD's decision to
outsource maintenance on new systems.  For this report, we addressed
(1) DOD's policy and implementation plans for allocating depot-repair
workloads for new and upgraded weapon systems between the public and
private sectors and (2) the decision-making process it used to make
source-of-repair decisions. 

To perform our review, we visited or obtained information from

  -- the Office of the Secretary of Defense; the Joint Staff; and
     Army, Navy, and Air Force headquarters, all in the Washington,
     D.C., area;

  -- Air Force Materiel Command headquarters at Wright-Patterson Air
     Force Base, Ohio, and its subordinate depot operations at
     Oklahoma City Air Logistics Center, Tinker Air Force Base,
     Oklahoma, and Warner Robins Air Logistics Center, Robins Air
     Force Base, Georgia;

  -- Army Materiel Command headquarters in Alexandria, Virginia, and
     its two subordinate commands, Aviation and Troop Command, St. 
     Louis, Missouri, and Tank-Automotive and Armaments Command,
     Warren, Michigan;

  -- Naval Air Systems Command in Arlington, Virginia, and its
     subordinate depot operations at Jacksonville Naval Aviation
     Depot, Jacksonville, Florida;

  -- Naval Sea Systems Command, Arlington, Virginia;

  -- the Joint Depot Maintenance Analysis Group, Wright-Patterson Air
     Force Base, Ohio; and

  -- major DOD system acquisition offices (see app.  II). 

To determine current depot support plans and the allocation of
workload between the public and private sectors, we sent structured
interviews to 88 new acquisition and major upgrade programs (see app. 
II).  Eighty-four of these programs were taken from DOD's October 28,
1996, list of major defense acquisition programs and are generally
the largest acquisition programs within DOD.  At the suggestion of
DOD officials, we also sent interviews to four other programs
classified as "pre-major" programs (efforts that may eventually
become major defense acquisitions).  We asked the programs to respond
to a series of questions on the decisions made, the process used to
arrive at those decisions, the factors considered, and other
support-related issues.  Eighty programs responded, for a 91-percent
response rate.  We do not believe that data from the nonresponding
programs would materially affect the results of our analysis.  Six of
the eight programs that did not respond were among the smaller
programs in terms of total acquisition cost.  Two of the eight--the
LPD-17 assault ship and the Theater High Altitude Defense
System--were among the higher cost programs but not in the top 10. 

The programs' responses were supplemented by follow-up phone calls or
in-person visits with more than half of these programs.  We used this
information to determine and quantify depot support plans for these
systems.  We did not independently verify all the information
contained in the programs' responses but did spot checks of portions
of the information against other records. 

We also obtained and summarized information on support plans and
workload allocations from acquisition programs in 1987.  Our purpose
was to provide an historical perspective from which to compare and
contrast current source of support plans and results with prior
programs. 

To evaluate the policies, factors considered, and decision-making
processes used to decide whether to support new systems in the public
or private sectors, we used information from the structured
interviews and also visited 20 programs to gain more in-depth
perspectives on how decisions were justified and to understand other
issues that affect logistics support plans.  The programs we visited
are highlighted in appendix II.  We studied numerous documents,
including DOD regulatory guidance and other direction, comparing and
contrasting past and present guidance at both the DOD and service
level.  Wherever possible, we supplemented this information from
other GAO work in depot maintenance management, weapon system
acquisition, and defense privatization. 

We also spoke with officials from the Office of Secretary of Defense,
the Joint Staff, service headquarters, and service acquisition and
logistics commands.  We obtained policy and programmatic materials to
ascertain DOD's strategic direction and future expectations about the
public depots, top-level outsourcing initiatives, and responses to
congressional criticism.  We wanted to better understand the culture
and operating environment that impacts policy implementation and the
management of individual programs as well as the entire depot
maintenance system. 

We conducted this review of depot support plans for new weapon
systems from October 1996 to November 1997 in accordance with
generally accepted government auditing standards. 


MAJOR NEW ACQUISITION PROGRAMS
SURVEYED
========================================================== Appendix II

Below is the list of programs that were included in our survey.\1 The
programs with asterisks are those we visited to obtain more in-depth
information above and beyond the data provided through the
questionnaire survey. 


--------------------
\1 There were two additional programs that we examined more closely
in person but were not included in our survey.  They are the Air
Force's AC-130U Gunship and the Army's Paladin programs. 


   ARMY
-------------------------------------------------------- Appendix II:1

  -- ATACMS-BAT--Army Tactical Missile System-Brilliant Anti-Armor
     Submunitions

  -- Comanche (RAH-66)--Light Helicopter*

  -- Crusader (AFAS/FARV)--Advanced Field Artillery System/Future
     Armored Resupply Vehicle

  -- FOTT--Follow-on to TOW

  -- Javelin--Advanced Anti-Tank Weapon System - Medium

  -- JSTARS GSM--Joint Surveillance and Target Attack Radar System
     Ground Station Module*

  -- MCS (ATCCS)--Maneuver Control System (Army Tactical Command and
     Control System)

  -- M1A2 Abrams Upgrade--Abrams Tank Upgrade*

  -- AFATDS (ATCCS)--Advanced Field Artillery Tactical Data System
     (Army Tactical Command and Control System)

  -- ASAS (ATCCS)--All Source Analysis System (Army Tactical Command
     and Control System)

  -- ATACMS-APAM--Army Tactical Missile System/Anti-Personnel
     Anti-Materiel Blocks I/IA

  -- Black Hawk (UH-60L)--Utility Helicopter*

  -- Bradley FVS Upgrade--Bradley Fighting Vehicle System Upgrade*

  -- CSSCS (ATCCS)--Combat Service Support Control System (Army
     Tactical Command and Control System)

  -- FAAD C2I (ATCCS)--Forward Area Air Defense Command, Control and
     Intelligence (Army Tactical Command and Control System)

  -- FMTV--Family of Medium Tactical Vehicles

  -- Kiowa Warrior (OH-58D)--Armed OH-58D*

  -- Longbow Apache--Radar-Based Target Acquisition and Fire Control
     System, including airframe modifications on the Apache
     helicopter*

  -- Longbow Hellfire--Hellfire Missile System compatible with the
     Longbow Fire Control Radar

  -- SADARM--Sense and Destroy Armor

  -- SINCGARS--Single-Channel Ground and Airborne Radio System-VHF*

  -- SMART-T--Secure Mobile Anti-Jam Reliable Tactical - Terminal


   NAVY
-------------------------------------------------------- Appendix II:2

  -- AAAV--Advanced Amphibious Assault Vehicle

  -- AIM-9X--Air-to-Air Missile Upgrade*

  -- F/A-18E/F--Hornet Naval Strike Fighter*

  -- JSOW--Joint Stand-Off Weapon

  -- LPD 17--Amphibious Assault Ship

  -- MIDS-LVT--Multi-Functional Information Distribution System-Low
     Volume Terminal

  -- NSSN--New Attack Submarine

  -- USMC H-1 Upgrades (4BW/4BN)--United States Marine Corps Midlife
     Upgrade to AH-1W Attack Helicopter and UH-1N Utility Helicopter
     (originally COBRA VENOM)

  -- V-22--Osprey Joint Advanced Vertical Aircraft*

  -- AN/SQQ-89--Surface Ship Antisubmarine Warfare System

  -- AOE 6--Fast Combat Support Ship

  -- AV-8B Remanufacture--Short Takeoff and Landing (V/STOL) Close
     Air Support Aircraft

  -- CEC--Cooperative Engagement Capability

  -- CVN 68--Nimitz Class Nuclear Powered Aircraft Carriers

  -- DDG 51--Guided Missile Destroyer, including basic ship and all
     variants

  -- E-2C Reproduction--Hawkeye Carrier-Based Early Warning Aircraft

  -- LHD 1--Amphibious Assault Ship

  -- MHC 51--Coastal Mine Hunter

  -- NESP--Navy Extremely High Frequency Satellite Communications
     Program

  -- SH-60R (LAMPS MK III Block II)--Multi-Mission Helicopter Upgrade

  -- SM 2 (Blocks I/II/III/IV)--Standard Surface-to-Air Missile

  -- SSN 21/AN/BSY-2--Seawolf Class Nuclear Attack Submarine/Combat
     System*

  -- Strategic Sealift--Naval Transport Ship

  -- T-45TS--Undergraduate Jet Pilot Training System

  -- Tomahawk--Sea Launched Cruise Missile

  -- Trident II Missile--Sea Launched Ballistic Missile

  -- UHF Follow-on--Ultra High Frequency Follow-on Communications
     Satellite


   AIR FORCE
-------------------------------------------------------- Appendix II:3

  -- ABL--Airborne Laser

  -- B-1 CMUP-DSUP--Lancer Penetrating Bomber Conventional Mission
     Upgrade -- Defensive Systems Upgrade (formerly ECM upgrade)*

  -- EELV--Evolved Expendable Launch Vehicle

  -- F-22--Advanced Tactical Fighter*

  -- JASSM-- Joint Air-to-Surface Standoff Missile (TSSAM
     replacement) Vehicle

  -- JDAM--Joint Direct Attack Munitions

  -- JTIDS--Joint Tactical Information Distribution System

  -- MILSTAR--Satellite and User Equipment

  -- SBIRS--Space-Based Infrared System Program, efforts include
     SBIRS (high) and SBIRS (low) (formerly known as Space Missile
     Tracking System)

  -- Titan IV--Space Booster

  -- AMRAAM--Advanced Medium Range Air-to-Air Missile

  -- AWACS RSIP (E-3)--Airborne Warning and Control System Radar
     Systems Improvement Program

  -- B-1 CMUP-Computer Upgrade--Lancer Penetrating Bomber
     Conventional Mission Upgrade - Computer Upgrade*

  -- B-1 CMUP JDAM--Lancer Penetrating Bomber Conventional Mission
     Upgrade/Joint Direct Attack Munitions*

  -- B-2--Stealth Bomber*

  -- C-17A--Globemaster III Advanced Cargo Aircraft*

  -- C-130J--Cargo Plane

  -- CIGS (JSIPS)--Common Imagery Ground/Surface; Joint Services
     Imagery Processing System

  -- CMU--Cheyenne Mountain Upgrade

  -- DMSP--Defense Meteorological Satellite Program

  -- DSP--Defense Support Program Satellite System

  -- JPATS--Joint Primary Aircraft Training System

  -- JSTARS--Joint Surveillance and Target Attack Radar System
     (Aircraft)

  -- Minuteman III GRP--Guidance Replacement Program

  -- Minuteman III PRP--Propulsion Replacement Program

  -- NAS--National Airspace Traffic Control System

  -- NAVSTAR GPS--Global Positioning System (includes satellites and
     user equipment)

  -- SFW--Sensor Fused Weapon


   DOD DEFENSE ACQUISITION BOARD
-------------------------------------------------------- Appendix II:4

  -- Chemical Demilitarization--Chemical Demilitarization Program,
     consisting of both the stockpile and non-stockpile programs

  -- JSF--Joint Strike Fighter

  -- NPOESS--National Polar-Orbiting Operational Environmental
     Satellite System


   BALLISTIC MISSILE DEFENSE
   ORGANIZATION
-------------------------------------------------------- Appendix II:5

  -- Patriot PAC3--Patriot Advanced Capability

  -- Navy Area TBMD--Navy Area Theater Ballistic Missile Defense

  -- NMD--National Missile Defense

  -- THAAD--Theater High Altitude Area Defense


   PRE-MAJOR DEFENSE ACQUISITION
   PROGRAMS--UNMANNED AERIAL
   VEHICLES
-------------------------------------------------------- Appendix II:6

  -- Outrider

  -- DarkStar

  -- Global Hawk

  -- Predator




(See figure in printed edition.)Appendix III
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
========================================================== Appendix II



(See figure in printed edition.)


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix IV

NATIONAL SECURITY AND
INTERNATIONAL AFFAIRS DIVISION,
WASHINGTON, D.C. 

James Wiggins, Associate Director
Julia Denman, Assistant Director
Glenn Knoepfle, Senior Evaluator
Jacqueline Snead, Senior Evaluator
Edward Waytel, Senior Evaluator
Paul Newton, Evaluator

OFFICE OF GENERAL COUNSEL,
WASHINGTON, D.C. 

John Brosnan, Assistant General Counsel

CHICAGO/DAYTON OFFICE

Bruce Fairbairn, Evaluator-in-Charge
Jeanne Willke, Senior Evaluator




RELATED GAO PRODUCTS
============================================================ Chapter 0

Depot Maintenance:  Lessons Learned From Transferring Armeda Naval
Aviation Depot Engine Workloads (GAO/NSIAD-98-10BR, Mar.  25, 1998). 

Public-Private Competitions:  DOD's Determination to Combine Depot
Workloads Is Not Adequately Supported (GAO/NSIAD-98-76, Jan.  20,
1998). 

Public-Private Sector Competition:  Processes Used for C-5 Aircraft
Award Appear Reasonable (GAO/NSIAD-98-72, Jan.  20, 1998). 

DOD Depot Maintenance:  Information on Public and Private Sector
Workload Allocations (GAO/NSIAD-98-41, Jan.  20, 1998). 

Air Force Privatization-in-Place:  Analysis of Aircraft and Missile
System Depot Repair Costs (GAO/NSIAD-98-35, Dec.  22, 1997). 

Outsourcing DOD Logistics:  Savings Achievable but Defense Science
Board's Projections Are Overstated (GAO/NSIAD-98-48, Dec.  8, 1997). 

Air Force Depot Maintenance:  Information on the Cost-Effectiveness
of B-1B and B-52 Support Options (GAO/NSIAD-97-210BR, Sept.  12,
1997). 

Navy Depot Maintenance:  Privatizing the Louisville Operations in
Place Is Not Cost-Effective (GAO/NSIAD-97-52, July 31, 1997). 

Defense Depot Maintenance:  Challenges Facing DOD in Managing Working
Capital Funds (GAO/T-NSIAD/AIMD-97-152, May 7, 1997). 

Depot Maintenance:  Uncertainties and Challenges DOD Faces in
Restructuring Its Depot Maintenance Program (GAO/T-NSIAD-97-111, Mar. 
18, 1997) and (GAO/T/NSIAD-112, Apr.  10, 1997). 

Defense Outsourcing:  Challenges Facing DOD as It Attempts to Save
Billions in Infrastructure Costs (GAO/T-NSIAD-97-110, Mar.  12,
1997). 

Navy Ordnance:  Analysis of Business Area Price Increases and
Financial Losses (GAO/AIMD/NSIAD-97-74, Mar.  14, 1997). 

High Risk Series:  Defense Infrastructure (GAO/HR-97-7, Feb.  1997). 

Air Force Depot Maintenance:  Privatization-in-Place Plans Are Costly
While Excess Capacity Exists (GAO/NSIAD-97-13, Dec.  31, 1996). 

Army Depot Maintenance:  Privatization Without Further Downsizing
Increases Costly Excess Capacity (GAO/NSIAD-96-201, Sept.  18, 1996). 

Navy Depot Maintenance:  Cost and Savings Issues Related to
Privatizing-in-Place the Louisville, Kentucky, Depot
(GAO/NSIAD-96-202,
Sept.  18, 1996). 

Defense Depot Maintenance:  Commission on Roles and Mission's
Privatization Assumptions Are Questionable (GAO/NSIAD-96-161,
July 15, 1996). 

Defense Depot Maintenance:  DOD's Policy Report Leaves Future Role of
Depot System Uncertain (GAO/NSIAD-96-165, May 21, 1996). 

Defense Depot Maintenance:  More Comprehensive and Consistent
Workload Data Needed for Decisionmakers (GAO/NSIAD-96-166, May 21,
1996). 

Defense Depot Maintenance:  Privatization and the Debate Over the
Public-Private Mix (GAO/T-NSIAD-96-146, Apr.  16, 1996) and
(GAO/T-NSIAD-96-148, Apr.  17, 1996). 

Military Bases:  Closure and Realignment Savings Are Significant, but
Not Easily Quantified (GAO/NSIAD-96-67, Apr.  8, 1996). 

Depot Maintenance:  Opportunities to Privatize Repair of Military
Engines (GAO/NSIAD-96-33, Mar.  5, 1996). 

Closing Maintenance Depots:  Savings, Personnel, and Workload
Redistribution Issues (GAO/NSIAD-96-29, Mar.  4, 1996). 

Navy Maintenance:  Assessment of the Public-Private Competition
Program for Aviation Maintenance (GAO/NSIAD-96-30, Jan.  22, 1996). 

Depot Maintenance:  The Navy's Decision to Stop F/A-18 Repairs at
Ogden Air Logistics Center (GAO/NSIAD-96-31, Dec.  15, 1995). 

Military Bases:  Case Studies on Selected Bases Closed in 1988 and
1991 (GAO/NSIAD-95-139, Aug.  15, 1995). 

Military Base Closure:  Analysis of DOD's Process and Recommendations
for 1995 (GAO/T-NSIAD-95-132, Apr.  17, 1995). 

Military Bases:  Analysis of DOD's 1995 Process and Recommendations
for Closure and Realignment (GAO/NSIAD-95-133, Apr.  14, 1995). 

Aerospace Guidance and Metrology Center:  Cost Growth and Other
Factors Affect Closure and Privatization (GAO/NSIAD-95-60, Dec.  9,
1994). 

Navy Maintenance:  Assessment of the Public and Private Shipyard
Competition Program (GAO/NSIAD-94-184, May 25, 1994). 

Depot Maintenance:  Issues in Allocating Workload Between the Public
and Private Sectors (GAO/T-NSIAD-94-161, Apr.  12, 1994). 

Depot Maintenance (GAO/NSIAD-93-292R, Sept.  30, 1993). 

Depot Maintenance:  Issues in Management and Restructuring to Support
a Downsized Military (GAO/T-NSIAD-93-13, May 6, 1993). 

Air Logistics Center Indicators (GAO/NSIAD-93-146R, Feb.  25, 1993). 

Defense Force Management:  Challenges Facing DOD as It Continues to
Downsize Its Civilian Workforce (GAO/NSIAD-93-123, Feb.  12, 1993). 


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