Navy Ship Maintenance: Temporary Duty Assignments of Temporarily Excess
Shipyard Personnel Are Reasonable (Letter Report, 04/21/98,
GAO/NSIAD-98-93).

Pursuant to a legislative requirement, GAO reviewed the Navy's practice
of using temporary duty assignments of naval personnel to perform ship
maintenance and repair work at homeports without nearby naval shipyard
capability, focusing on the: (1) rationale supporting the Navy's
practice; (2) cost-effectiveness of these assignments; and (3) factors
affecting future requirements for the practice.

GAO noted that: (1) the Navy's rationale for temporary duty assignments
is twofold; (2) such assignments are required to perform work at
locations where no local public or private shipyards have the required
depot-level maintenance capability; (3) most temporary duty assignments
are for this reason; (4) the Navy performs work at such locations to
comply with its policy to perform ship repairs of six months or less at
the ship's homeport and when it is not practical to bring ships to the
shipyard; (5) the Navy believes that using temporarily excess naval
shipyard workers on temporary duty assignment is cost-effective, even
when there is local private sector capability because these workers will
be needed in the future to perform ship repair work; (6) the Navy's
rationale for sending temporarily excess naval shipyard personnel on
temporary duty assignments appears reasonable from a cost and
operational standpoint; (7) however, in some cases, other approaches may
be more cost-effective; (8) the Navy is currently retaining some
temporarily excess shipyard personnel to ensure that it can handle the
planned refuelings of nuclear attack submarines for fiscal year (FY)
1999 and beyond; (9) retaining the personnel for these purposes appears
reasonable, since the Navy has a need for the personnel; (10) it is
following the same practice to perform nuclear ship repair work at San
Diego because local private shipyards do not have nuclear capability;
(11) however, other approaches, such as making greater use of the
private sector, may warrant consideration; (12) possible changes to
future ship repair workloads could affect the requirement for future
temporary duty assignments and retention of current naval shipyard
personnel levels; (13) for example, the Navy has cancelled 17 planned
nuclear attack submarine refuelings since FY 1993; (14) further
reductions in the number of planned refuelings would substantially
decrease the on-site workloads planned for three naval shipyards,
especially Portsmouth; (15) a proposal to homeport three nuclear
aircraft carriers in San Diego, California, which does not have a local
naval shipyard, could substantially increase temporary duty assignments;
and (16) other factors that could affect the amount of future temporary
duty assignments include: (a) further reductions in the number of Navy
ships; (b) full implementation of the Navy's Regional Maintenance
Program; and (c) a new round of base closures.

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

 REPORTNUM:  NSIAD-98-93
     TITLE:  Navy Ship Maintenance: Temporary Duty Assignments of 
             Temporarily Excess Shipyard Personnel Are Reasonable
      DATE:  04/21/98
   SUBJECT:  Naval personnel
             Naval bases
             Naval supplies
             Military vessels
             Shipyards
             Temporary employment
             Equipment maintenance
             Cost effectiveness analysis
             Privatization
             Human resources utilization
IDENTIFIER:  Navy Regional Maintenance Program
             
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Cover
================================================================ COVER


Report to Congressional Committees

April 1998

NAVY SHIP MAINTENANCE - TEMPORARY
DUTY ASSIGNMENTS OF TEMPORARILY
EXCESS SHIPYARD PERSONNEL ARE
REASONABLE

GAO/NSIAD-98-93

Navy Ship Maintenance

(709288)


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

  DOD - Department of Defense
  TDY - temporary duty

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


B-278547

April 21, 1998

The Honorable Strom Thurmond
Chairman
The Honorable Carl Levin
Ranking Minority Member
Committee on Armed Services
United States Senate

The Honorable Floyd Spence
Chairman
The Honorable Ike Skelton
Ranking Minority Member
Committee on National Security
House of Representatives

As required by section 366 of the National Defense Authorization Act
for Fiscal Year 1998, we reviewed the Department of the Navy's
practice of using temporary duty assignments of naval shipyard
personnel to perform ship maintenance and repair work at homeports
without nearby naval shipyard capability.  Specifically, the act
required us to review (1) the rationale supporting the Navy's
practice, (2) the cost-effectiveness of these assignments, and (3)
the factors affecting future requirements for the practice. 


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

The Navy uses a multilevel approach to ship repair and maintenance
that, depending on the type and complexity of work, places
responsibility at three different levels:  organizational,
intermediate, and depot.  Depot-level repairs are the most complex,
requiring the capabilities and technical skills of naval or private
shipyards.  During fiscal year 1997, the Navy employed about 22,000
personnel at its four naval shipyards.  The shipyards are the
Portsmouth Naval Shipyard, Portsmouth, New Hampshire; the Norfolk
Naval Shipyard, Portsmouth, Virginia; the Puget Sound Naval Shipyard,
Bremerton, Washington; and the Pearl Harbor Naval Shipyard, Pearl
Harbor, Hawaii.  The shipyards are not directly funded, but are paid
by their customers--primarily the Pacific and Atlantic Fleets.\1 The
fleets are provided depot maintenance funds from the Navy's
operations and maintenance appropriation.  Funding for the Navy's
depot-level ship maintenance and repair program in fiscal year 1998
is $2.1 billion. 

The Navy schedules its planned ship repair work for a 7-year period
and updates this schedule annually.  In developing the schedule, the
Navy considers various factors, including (1) its policy to perform
work of
6 months or less in the ship's homeport, (2) statutory requirements
regarding the public/private sector workload distribution,\2 (3) the
capabilities and capacity of each shipyard, and (4) expected funding
and personnel levels.  The published schedule shows the depot-level
ship repair work assigned to each naval shipyard and the workload to
be performed by the private sector.  The Navy also develops an
historically derived estimate of the direct labor staff-days each
naval shipyard will expend on unscheduled (emergent) ship repair work
and adds it to the schedule to arrive at the planned shipyard
workload.  The final schedule includes both scheduled and unscheduled
work that requires temporary duty (TDY) assignments.  For fiscal
years 1995-97, about 70 percent of the total work assigned to naval
shipyards was for scheduled repair work. 

The Navy uses TDY assignments primarily to perform work at homeports
not located near a naval shipyard.  The Navy considers shipyard
personnel temporarily excess when they are required for planned
future requirements and the time and cost of reducing and reacquiring
needed personnel justifies retention.  In some cases, personnel are
considered temporarily excess for more than a year.  Since private
sector repair capabilities may be available at these locations,
questions have been raised regarding the cost-effectiveness of
sending naval shipyard personnel TDY to perform the work.  During
fiscal years 1995-97 naval shipyards spent an estimated 580,000
direct labor staff-days, valued at an estimated $134.1 million, on
TDY assignments.  TDY travel, per diem, and other related travel
costs amounted to an additional $59 million.  About 5.5 percent of
the shipyards' total direct labor staff-days were spent on TDY
assignments. 


--------------------
\1 The naval shipyards use the Working Capital Fund to finance the
cost of producing goods and services ordered by its customers,
primarily the fleets.  Subsequently, the shipyards receive
reimbursement by billing, much as a private business does. 

\2 Until fiscal year 1998, the Navy was required by statute (10 USC
2466) to place no more than 40 percent of its depot-level ship repair
work into private facilities.  In the 1998 Defense Authorization Act,
this was amended to 50 percent.  During fiscal years 1992-96, the
Navy placed an average of about 34 percent into private facilities. 


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

The Navy's rationale for temporary duty assignments is twofold. 
First, such assignments are required to perform work at locations
where no local public or private shipyards have the required
depot-level maintenance capability.  Most temporary duty assignments
are for this reason.  The Navy performs work at such locations to
comply with its policy to perform ship repairs of 6 months or less at
the ship's homeport and when it is not practical to bring ships to
the shipyard.  Second, the Navy believes that using temporarily
excess naval shipyard workers on temporary duty assignments is
cost-effective, even when there is local private sector capability. 
The Navy states that using temporarily excess workers is efficient
and cost-effective because these workers will be needed in the future
to perform ship repair work. 

The Navy's rationale for sending temporarily excess naval shipyard
personnel on temporary duty assignments appears reasonable from a
cost and operational standpoint.  However, in some cases, other
approaches may be more cost-effective.  The Navy is currently
retaining some temporarily excess shipyard personnel to ensure that
it can handle the planned refuelings of nuclear attack submarines for
fiscal years 1999 and beyond.  Retaining the personnel for these
purposes appears reasonable, since the Navy has a need for the
personnel.  It is following the same practice to perform nuclear ship
repair work at San Diego because local private shipyards do not have
nuclear capability.  However, other practical approaches, such as
making greater use of the private sector, may warrant consideration. 
For example, a major private sector shipyard with nuclear repair
capabilities has established a presence in San Diego through its
recent purchase of a small local shipyard. 

Possible changes to future ship repair workloads could affect the
requirement for future temporary duty assignments and retention of
current naval shipyard personnel levels.  For example, the Navy has
canceled 17 planned nuclear attack submarine refuelings since
fiscal year 1993.  Further reductions in the number of planned
refuelings would substantially decrease the on-site workloads planned
for three naval shipyards, especially Portsmouth.  Similarly, a
proposal to homeport three nuclear aircraft carriers in San Diego,
California, which does not have a local naval shipyard, could
substantially increase temporary duty assignments.  Other factors
that could affect the amount of future temporary duty assignments
include (1) further reductions in the number of Navy ships, (2) full
implementation of the Navy's Regional Maintenance Program,\3 and (3)
a new round of base closures. 


--------------------
\3 Under the program, the Navy plans to streamline and consolidate
its maintenance functions.  The program is designed to integrate
depot-level and below-depot level maintenance activities, including
ship repairs.  We discuss the program's status in our report Navy
Regional Maintenance:  Substantial Opportunities Exist to Build on
Infrastructure Streamlining Progress (GAO/NSIAD-98-4, Nov.  13,
1997). 


   THE NAVY'S RATIONALE FOR TDY
   ASSIGNMENTS
------------------------------------------------------------ Letter :3

The Navy cites two reasons for using TDY assignments.  First, such
assignments are required to perform work at locations where no local
public or private sector shipyards have the required ship repair
capabilities.  Second, the Navy believes that using temporarily
excess shipyard workers on temporary duty assignments is
cost-effective, even when there is a local private sector capability. 
The Navy performs work at locations without a naval shipyard to
comply with its homeporting policy and when it is not practical to
perform the work at public or private shipyards.  The amount of TDY
assignments depends on several interrelated factors, including a
shipyard's proximity to homeported ships, the number and types of
ships assigned to each homeport, the type of repair or maintenance
needed, the ability of private shipyards at or near the homeport to
perform required repairs, and the number of temporarily excess naval
shipyard personnel.  The naval shipyards' financial and management
information systems do not identify the purpose for specific TDY
assignments, and the Navy could not provide the data needed to
identify the exact number of TDY assignments for each reason. 


      LOCAL CAPABILITY RATIONALE
---------------------------------------------------------- Letter :3.1

The Navy performs ship repair TDY work at locations where it believes
the necessary capability to perform the work is not locally
available.  The Navy performs work at these locations primarily to
comply with its homeporting policy and also when it is not practical
to bring ships to the shipyard.  For example, a substantial amount of
TDY has been for nuclear submarine repair work at San Diego, where
there is no local naval shipyard or private sector nuclear repair
capability.  Also, local capability is usually not considered when
naval shipyard warranty work is involved and for advanced planning
prior to a ship going to a naval shipyard for repairs.  Because of
data limitations, we could not identify the exact number of TDY
assignments, but available data supports Navy officials' judgments
that most TDY assignments are performed because there is no local
capability.  For example, because San Diego does not have nuclear
repair capability, all nuclear submarine repair work is performed by
naval shipyard workers at San Diego.  The total submarine work of
145,000 staff-days represents about 25 percent of the total TDY
staff-days for fiscal years 1995-97. 


      COST-EFFECTIVENESS RATIONALE
---------------------------------------------------------- Letter :3.2

In some cases, the Navy believes it is cost-effective to send
shipyard workers that are considered temporarily excess on TDY
assignments to locations where there is a local private sector
capability.  The Navy reasons that the excess workers would have to
be paid whether or not they are working and that the cost of travel
and per diem is the only additional cost of using the excess workers. 
The travel and per diem costs are generally less than local private
sector labor rates. 

Shipyard workers become temporarily excess when there is a reduction
in the naval shipyards' originally scheduled and budgeted workload
for such reasons as ship deployment extensions, reductions in the
scope of the projected ship repairs, force level changes, and funding
reductions.  In some cases, expected future workloads are used to
justify retaining some excess shipyard personnel.  Excess personnel
are retained when the Navy determines that the excess is temporary
and that the time and cost of reducing and reacquiring the needed
personnel justifies retention.  This is especially true when workload
reductions take place during the fiscal year in which the work is
scheduled to be performed.  In such cases, naval shipyard personnel
levels are set for the year, and according to the Navy, it is very
difficult to make major adjustments to personnel levels due to Civil
Service regulations.  For example, during the latest reductions in
force at the four naval shipyards, the reductions took about 12
months to complete, from initial planning to the time the employees
were actually removed from the shipyards' payrolls. 


      NAVY'S HOMEPORTING POLICY
      IMPACTS TDY ASSIGNMENTS
---------------------------------------------------------- Letter :3.3

The Navy's policy to perform all ship repair work of 6 months or less
at the ship's homeport substantially increased the amount of TDY ship
repair work performed in locations without a naval shipyard.  Because
crews remain with their ships when the ships need maintenance and
repairs, the policy is to improve crew retention and the quality of
life by reducing time away from homeports.  Since many of the Navy's
23 ship homeports are not located near one of the four naval
shipyards, the work is often performed by naval shipyard personnel on
TDY assignments.  Figure 1 shows the location of the four naval
shipyards and some U.S.  homeports.  The number and type of ships
located at each of the Navy's 23 homeports is shown in appendix I. 

   Figure 1:  Naval Shipyards and
   U.S.  Homeports

   (See figure in printed
   edition.)

As shown in table 1, a large number of ships are homeported at or
near the Norfolk and Pearl Harbor Naval Shipyards and provide each
with a large potential workload for which temporarily excess shipyard
personnel can be effectively used.  The temporarily excess personnel
can work on ships homeported in the area without being on TDY status. 
The two shipyards, however, also use the personnel to do some work
that requires TDY assignments.  On the other hand, relatively few
ships are homeported near the Portsmouth and Puget Sound Naval
Shipyards.  As a result, these shipyards perform more work that
requires TDY. 



                                Table 1
                
                  Naval Ships Homeported at or Near a
                             Naval Shipyard

                                       Surface
Shipyard                  Carriers       ships  Submarines       Total
----------------------  ----------  ----------  ----------  ==========
Portsmouth                       0           0           1           1
Norfolk                          5          65          17          87
Pearl Harbor                     0          17          23          40
Puget Sound                      1           5          12          18
----------------------------------------------------------------------
Table 2 shows, by shipyard, the percent of total direct labor
staff-days each naval shipyard spent on TDY assignments during fiscal
years 1995-97.  As table 2 shows, Portsmouth and Puget Sound Naval
Shipyards used about 480,000 direct labor staff-days, or about 83
percent of the estimated 580,000 direct labor staff-days naval
shipyards used on TDY assignments during fiscal years 1995-97. 



                                Table 2
                
                  Direct Labor Staff-Days Spent on TDY
                   Assignments (fiscal years 1995-97)

                                                            Percent of
                            Total staff-     TDY staff-   total staff-
Shipyard                            days           days           days
-------------------------  -------------  -------------  -------------
Portsmouth                     1,540,000        320,000           20.8
Norfolk                        3,270,000         90,000            2.8
Pearl Harbor                   1,360,000         10,000            0.1
Puget Sound                    4,330,000        160,000            3.7
======================================================================
Total                         10,500,000        580,000            5.5
----------------------------------------------------------------------
Note:  All staff-days are rounded to the nearest ten thousand. 

Table 3 shows, by shipyard, the reported direct labor costs of TDY
assignments and the related travel costs for fiscal years 1995-97. 
Portsmouth and Puget Sound Naval Shipyards expended about $164.6
million of the $193.1 million, or about 85 percent of the total TDY
costs (direct labor costs plus travel costs). 



                                Table 3
                
                 Reported TDY Assignment Costs (fiscal
                             years 1995-97)

                         (Dollars in millions)

                            Direct labor
Naval shipyard                     costs   Travel costs          Total
-------------------------  -------------  -------------  =============
Portsmouth                         $74.5          $26.3         $100.8
Norfolk                             19.6            6.9           26.5
Pearl Harbor                         1.3            0.7            2.0
Puget Sound                         38.7           25.1           63.8
======================================================================
Total                             $134.1          $59.0         $193.1
----------------------------------------------------------------------

   COST-EFFECTIVENESS OF TDY
   ASSIGNMENTS
------------------------------------------------------------ Letter :4

As noted earlier, available data indicates that most TDY assignments
are based on the rationale that no local capability exists.  In those
cases where there is a local private sector capability, the
cost-effectiveness rationale for TDY assignments is valid to the
extent that naval shipyard personnel are temporarily excess.  There
is excess capacity and personnel in some naval shipyards.  The Navy
is retaining the excess personnel to meet anticipated future
requirements.  Meanwhile, the Navy is using TDY assignments and is
reallocating work from the private sector to the naval shipyards to
make maximum use of the excess shipyard personnel. 


      TDY ASSIGNMENTS WHEN THERE
      IS NO LOCAL CAPABILITY
---------------------------------------------------------- Letter :4.1

The Navy states that most TDY assignments are made because the
required ship repair capabilities do not exist locally.  In these
cases, the Navy reasons that cost-effectiveness is not an issue
because there is no practical alternative.  As noted earlier, the
Navy cites the use of TDY assignments to perform nuclear submarine
repairs at San Diego as an example where no local private shipyard
has nuclear repair capability.  We agree that there may not be a
practical alternative to some TDY assignments, but the Navy does not
identify the rationale for each of its TDY assignments or provide the
basis for any determination that there is no other practical
alternative.  In the case of San Diego, we found no basis to question
the Navy's statement that no local private shipyard has the necessary
nuclear repair capabilities; however, there may be other practical
alternatives that are not being considered.  For example, Newport
News Shipbuilding, a nuclear repair capable private shipyard in
Virginia, has established a presence in San Diego through its recent
purchase of Continental Marine Industries. 


      COST-EFFECTIVENESS OF TDY
      ASSIGNMENTS WHEN LOCAL
      PRIVATE CAPABILITY EXISTS
---------------------------------------------------------- Letter :4.2

TDY assignments to locations with a private sector capability are
likely to be cost-effective when shipyard personnel are temporarily
excess.  When naval shipyard personnel are temporarily excess, their
cost is considered fixed and will be paid whether or not the
personnel are performing repair work.  We have reported that when
labor costs are fixed, the only added costs to the government for the
TDY assignments are travel, per diem, and other related costs.\4 To
determine the cost-effectiveness of TDY assignments, these
travel-related costs would have to be compared to the average private
shipyard staff-day rate for performing ship repairs.  We examined
several private shipyard staff-day rates and naval shipyard TDY costs
and found that when the private shipyards' staff-day rates were
compared only to the naval shipyards' TDY costs, the private
shipyards' costs were always higher, usually substantially higher. 
For example, the Puget Sound Naval Shipyard estimated that its
average daily travel cost per worker for scheduled TDY work in San
Diego in 1997 was about $116, while the average daily rate per
private shipyard worker in San Diego was about $330.  Assuming the
productivity of both the public and private sector personnel are
fairly comparable, it would be cost-effective from a cost and
operational standpoint to perform the work using temporarily excess
personnel. 

TDY assignments are not likely to be cost-effective when the naval
shipyards' projected long-term workloads do not support existing
personnel levels and local private shipyards are willing and capable
of doing the work.  In this case, both the naval shipyards' direct
labor costs and travel costs should be considered in making
cost-effectiveness determinations.  To illustrate, in the earlier
example, the Puget Sound Naval Shipyard's staff-day rate of $474 for
fiscal year 1997 would have to be added to the $116 daily travel and
per diem costs and the resulting $590 staff-day rate compared to the
private sector's rate of about $330 per day.  Clearly, it would not
be cost-effective for TDY shipyard personnel to do the work.  Navy
officials commented that naval shipyards have reduced personnel
levels when long-term workload projections indicated a need to do so. 


--------------------
\4 Naval Shipyards:  Management of Borrowed Labor Can Be Enhanced by
Stronger Internal Controls (GAO/NSIAD 87-188, Sept.  23, 1987). 


      SOME SHIPYARD TDY
      ASSIGNMENTS REFLECT
      LONG-TERM EXCESS CAPACITY
---------------------------------------------------------- Letter :4.3

In its fiscal years 1996-2001 business plan, the Defense Depot
Maintenance Council showed large amounts of excess capacity at some
of the naval shipyards.  Table 4 shows the percent of expected excess
capacity\5 reported for each naval shipyard for fiscal years
1998-2001. 



                                Table 4
                
                   Excess Capacity in Naval Shipyards

                                         Fiscal year
                        ----------------------------------------------
                              1998        1999        2000        2001
Shipyard                 (percent)   (percent)   (percent)   (percent)
----------------------  ----------  ----------  ----------  ----------
Portsmouth                      54          54          41          41
Norfolk                         26          27       (6)\a          23
Puget Sound                     21          16           6      (10)\a
Pearl Harbor                    39          30          24          11
----------------------------------------------------------------------
\a Negative excess capacity means that a shipyard anticipates more
workload than it has the capacity to accomplish. 

Included in the reported excess capacity calculations are workloads
such as several major nuclear submarine refuelings that were later
canceled.  Such cancellations further increase excess capacity and
personnel.  Also, the calculations include shipyard workloads that
require TDY assignments.  Without these workloads, the reported
excess capacity and the availability of shipyard personnel would be
higher.  Unless additional workloads are identified, the personnel
will be excess to the shipyard. 


--------------------
\5 Excess capacity is constrained by the availability of trained
personnel and the organization of work stations.  It is the amount of
additional workload, expressed in direct labor hours, that a facility
like a shipyard can effectively produce annually on a single shift,
40-hour week basis while producing the product mix that the facility
is designed to accommodate. 


         NAVY MANAGEMENT OF EXCESS
         CAPACITY AND PERSONNEL
-------------------------------------------------------- Letter :4.3.1

Excess naval shipyard capacity exists even though the Navy closed
four naval shipyards through the Base Realignment and Closure process
and reduced the personnel levels at the four remaining naval
shipyards during fiscal years 1991-97 from about 36,000 to 22,000, a
38-percent reduction.  The Navy believes that it needs to retain its
current shipyard capacity and associated personnel levels to meet
anticipated future requirements.  Meanwhile, the Navy is using TDY
assignments and is reallocating work from the private sector to more
effectively use its excess capacity and personnel.  For example, when
three nuclear attack submarine refuelings scheduled for the
Portsmouth Naval Shipyard were canceled, the Navy, rather than
further reducing personnel, decided to provide the shipyard with ship
repair workload either previously located in other naval shipyards or
in the private sector.  For fiscal years 1997-99, this workload
included work associated with the repair of submarines homeported in
Groton, Connecticut.  In the past, part of this work was performed by
Electric Boat, a private nuclear-capable shipyard located in Groton,
and part was done by Portsmouth Naval Shipyard personnel on TDY
assignments.  However, for the last 3 years, the Portsmouth Naval
Shipyard has been assigned all the depot-level workload at Groton. 
The Navy believes this assignment of TDY workload to Portsmouth is
cost-effective because it needs to retain skilled personnel to
perform planned submarine refuelings from fiscal year 1999 to 2005. 
Beginning in fiscal year 2000, the Navy plans to return part of the
Groton workload to the private sector. 

The Navy's plan to use TDY assignments and reallocate private sector
workloads to the naval shipyards to make effective use of excess
shipyard capacity and temporarily excess personnel appears
reasonable.  However, for TDY assignments to homeports without
required ship repair capabilities, other practical alternatives may
warrant consideration, such as making greater use of the private
sector. 


   FACTORS AFFECTING THE FUTURE
   USE OF TDY ASSIGNMENTS
------------------------------------------------------------ Letter :5

A reduction in the number of planned labor-intensive refuelings of
nuclear attack submarines and the homeporting of up to three nuclear
aircraft carriers in San Diego could substantially increase future
TDY assignments.  Other factors that could affect the extent of
future TDY assignments include potential reductions in the number of
Navy ships, the regionalization of the Navy's ship maintenance, and
another round of base closures. 


      REFUELING OF NUCLEAR ATTACK
      SUBMARINES
---------------------------------------------------------- Letter :5.1

The Navy has retained significant excess capacity at the Portsmouth
Naval Shipyard to ensure that it, along with the Pearl Harbor and
Norfolk Naval Shipyards, can handle the refueling of 11 nuclear
attack submarines during fiscal years 1999-2005.  Each refueling
requires about 300,000 staff-days of work and costs about $215
million.  If these refuelings are done as scheduled, the number of
excess personnel available for TDY will be reduced.  For example, at
Portsmouth, about 32 percent of the fiscal
year 1998 planned workload will require TDY assignments, but only
22 percent of the fiscal year 1999 planned workload will require TDY
assignments because a nuclear attack submarine refueling is
scheduled. 

If the refuelings are not done and shipyard capacity and associated
personnel reductions are not made, TDY assignments are likely to
increase.  Since fiscal year 1993, the Navy has reduced planned
submarine refuelings.  For example, although the Navy planned to
refuel 32 nuclear attack submarines during fiscal years 1993-2005, it
has canceled 17 refuelings.  Of the remaining 15 refuelings, four
have been completed and the remaining 11 have been scheduled. 
Because the Navy reduced the number of refuelings, Portsmouth Naval
Shipyard personnel were assigned to perform submarine repair work at
the Groton and San Diego homeports.  As a result, the shipyard's TDY
assignments increased substantially during this time.  Further
reductions in the number of planned refuelings would substantially
decrease the on-site workloads planned for three naval shipyards,
especially Portsmouth. 


      SAN DIEGO NUCLEAR AIRCRAFT
      CARRIER WORK
---------------------------------------------------------- Letter :5.2

By the end of fiscal year 2005, the Navy anticipates that as many as
three nuclear aircraft carriers could be homeported at San Diego. 
The percentage of depot-level maintenance to be done by public and
private shipyards was not settled at the time of our review; however,
if the Navy does the work as planned, its use of TDY assignments will
increase substantially. 

Because no private shipyard in San Diego currently has nuclear repair
capabilities, the Navy plans to use personnel on TDY from Puget Sound
Naval Shipyard, starting in October 1998, to do the nuclear work on
the U.S.S.  Stennis, the first nuclear carrier scheduled to be
homeported in San Diego.  The work entails operating a nuclear repair
facility currently under construction as well as performing
depot-level nuclear propulsion plant work and integrating it with
nonpropulsion plant work done by local private contractors and ship
personnel.  The Navy said that this work would enable the shipyard to
maintain the skilled workforce required to support Pacific Fleet
aircraft carrier maintenance and that the cyclical nature of the
nuclear workload makes it uneconomical to maintain more than a
skeletal workforce of skilled Puget Sound shipyard personnel needed
for engineering and for quality and radiological controls in San
Diego. 

Under current Navy plans, Puget Sound personnel will use about
112,000 direct labor staff-days for nuclear work on the Stennis.  Not
all of the Navy's work would be done at San Diego:  planning, some
engineering work, and some assembly would be done at Puget Sound. 
San Diego private shipyards would use about 53,000 direct labor
staff-days for nonnuclear work.  Newport News Shipbuilding, a nuclear
repair capable private shipyard in Virginia, expressed interest in
doing work in San Diego by submitting to the Navy an unsolicited
proposal to integrate the nonnuclear propulsion plant work into the
nuclear propulsion plant work schedule. 

The Navy's plan for accomplishing the nuclear aircraft carrier work
in San Diego has not been finalized.  On March 13, 1997, the Under
Secretary of Defense for Acquisition and Technology signed a
memorandum that requires the Navy to develop a clear statement of
work for use in a competition between Puget Sound Naval Shipyard and
qualified private sector sources\6 for the nuclear aircraft carrier
work planned to be performed in San Diego.  The statement is to be
forwarded to the Deputy Under Secretary of Defense for Logistics by
October 1998.  If all the nuclear work is turned over to the private
sector, the amount of TDY assignments would be substantially reduced,
and excess capacity at the naval shipyards would increase unless
personnel adjustments were made to reflect the workload reductions. 


--------------------
\6 Newport News Shipbuilding and Electric Boat are currently the only
private shipyards qualified to do nuclear ship repair work. 


      OTHER FACTORS
---------------------------------------------------------- Letter :5.3

TDY assignments could also be affected by (1) potential future
reductions in the number of Navy ships, (2) the regionalization of
Navy ship maintenance, and (3) another round of base closures. 


         POTENTIAL FORCE STRUCTURE
         REDUCTIONS
-------------------------------------------------------- Letter :5.3.1

The Navy expects to reduce its fleet of ships from 354 in 1997 to 304
by 2006.  Most recently, the Navy implemented a recommendation of the
Quadrennial Defense Review that called for the inactivation of 2
nuclear attack submarines and 15 surface ships.  As a consequence,
the naval shipyards' planned workload will be reduced by about
825,000 direct labor staff-days.  This reduction could affect TDY
assignments, depending on how the Navy reallocates its remaining
shipyard workload. 


         NAVY MAINTENANCE
         REGIONALIZATION
-------------------------------------------------------- Letter :5.3.2

The Navy is streamlining and consolidating its maintenance functions
in areas of fleet concentrations as part of its Regional Maintenance
Program.  Under this program, the Navy plans to ultimately integrate
its intermediate- and depot-level maintenance and establish regional
maintenance centers.  A prototype center is under development in
Pearl Harbor, Hawaii.  According to Navy officials, the establishment
of such centers will provide the Navy with greater flexibility for
using excess ship repair personnel, without incurring TDY
assignments.  For example, as part of its Pearl Harbor Pilot
Demonstration Project, the Navy is integrating its intermediate
maintenance facility and the nearby naval shipyard.  Personnel will
be used interchangeably, provided they have the necessary skills. 


         ADDITIONAL BASE CLOSURES
-------------------------------------------------------- Letter :5.3.3

The Navy closed four naval shipyards and four major homeports during
four rounds of base closures, which concluded in 1995.  The Secretary
of Defense requested an additional two rounds of base closures.  If
approved, TDY assignments could increase or decrease, depending on
which (if any) homeports and shipyards would close. 


   CONCLUSIONS
------------------------------------------------------------ Letter :6

The Navy's rationale for using temporarily excess naval shipyard
personnel is generally sound from a cost and operational standpoint. 
However, in cases where shipyard personnel are sent on temporary duty
because no local repair capabilities exist, there may be
cost-effective private sector alternatives.  Changes in naval
shipyard personnel levels, workloads, and homeport locations could
affect the use of TDY assignments.  The planned nuclear attack
submarine refuelings and the homeporting of up to three nuclear
aircraft carriers in San Diego would likely have the most impact on
TDY assignments in the near future. 


   RECOMMENDATIONS
------------------------------------------------------------ Letter :7

To ensure that Navy resources are used in the most cost-effective
manner, we recommend that the Secretary of Defense direct the Navy to
consider using the private sector for workloads that are performed
routinely by naval shipyard personnel on temporary duty.  Further,
when reductions in future workloads are significant, we recommend
that the Navy determine the extent to which it could reduce its
shipyard capacity and associated personnel.  In making these
determinations, the Navy needs to ensure that all applicable
statutory requirements are met. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :8

The Department of Defense (DOD) provided written comments on the
draft of this report, which are presented in appendix III.  DOD
concurred with both of our recommendations.  DOD also suggested
several minor technical and editorial changes, which we have made, as
appropriate. 

We conducted our review between July 1997 and February 1998 in
accordance with generally accepted government auditing standards. 
The scope and methodology for our review are discussed in appendix
II. 


---------------------------------------------------------- Letter :8.1

We are sending copies of this report to the Chairmen and Ranking
Minority Members of the Subcommittee on Defense, Senate Committee on
Appropriations, and the Subcommittee on National Security, House
Committee on Appropriations.  We are also sending copies of the
report to the Secretaries of Defense and the Navy; the Chief of Naval
Operations; and the Director, Office of Management and Budget.  We
will make copies available to others upon request. 


If you or your staff have any questions concerning this report,
please contact me on (202) 512-8412 or my Assistant Director, George
A.  Jahnigen, on (202) 512-8434.  Major contributors to this report
are listed in appendix IV. 

David R.  Warren, Director
Defense Management Issues


SHIP HOMEPORTS
=========================================================== Appendix I

As of September 1997, the Navy had ships homeported in 23 locations. 
The number and type of ships in the homeports range from 76 ships,
including aircraft carriers, surface ships, and submarines, to one
surface ship.  These factors can influence the number of TDY
assignments at each homeport.  Table I.1 shows the Navy's homeports
and the number and type of ships located at each one. 



                               Table I.1
                
                Navy Ship Homeports and Number of Ships
                            in Each Homeport

                                   Carrie    Surface  Submarin
Homeport                               rs      ships        es   Total
---------------------------------  ------  ---------  --------  ======
Norfolk, Va.                            5         54        17      76
Little Creek, Norfolk, Va.                        11                11
Bath, Me.                                          1                 1
Earle, N.J.                                        3                 3
Groton, Conn.                                               23      23
Portsmouth, N.H.                                             1       1
Charleston, S.C.                                   1                 1
Mayport, Fla.                           1         25                26
Pascagoula, Miss.                                  4                 4
Ingleside, Tex.                                   14                14
Kings Bay, Ga.                                               9       9
San Diego, Calif.                       2         50         6      58
Pearl Harbor, Hawaii                              17        23      40
Bremerton, Wash.                        1          5         2       8
Everett, Wash.                          1          6                 7
Bangor, Wash.                                               10      10
Concord, Calif.                                    1                 1
Newport News, Va.                       1                            1
Gaeta, Italy                                       1                 1
La Maddalena, Italy                                1                 1
Sasebo, Japan                                      6                 6
Yokosuka, Japan                         1          9                10
Guam                                               1                 1
No homeport assigned                              41                41
======================================================================
Total                                  12        251        91     354
----------------------------------------------------------------------

OBJECTIVES, SCOPE, AND METHODOLOGY
========================================================== Appendix II

As required by section 366 of the National Defense Authorization Act
for Fiscal Year 1998, we reviewed the Department of the Navy's
practice of using temporary duty (TDY) assignments of naval shipyard
personnel to perform ship maintenance and repair work at homeports
not having naval shipyards.  Specifically, the act required us to
review (1) the rationale supporting the Navy's practice, (2) the
cost-effectiveness of these assignments, and (3) the factors
affecting future requirements for the practice. 

To determine the Navy's rationale for using TDY assignments of naval
shipyard personnel, we interviewed officials and obtained pertinent
studies, briefings, and other documents from the offices of the
Deputy Under Secretary of Defense for Acquisition and Technology; the
Deputy Chief of Naval Operations for Logistics; the Assistant
Secretary of the Navy for Research, Development, and Acquisition; and
the Naval Sea Systems Command.  We also interviewed Atlantic and
Pacific Fleet maintenance officials, visited the four naval
shipyards, and interviewed shipyard officials to determine their
views on TDY assignments and to obtain data on the extent of TDY
assignments for fiscal years 1995-97. 

To determine what methodology would be appropriate to measure the
cost-effectiveness of TDY assignments, we interviewed Navy officials
and defense consulting officials from the Center for Naval Analysis,
the Logistics Management Institute, and the Institute for Defense
Analysis.  We obtained their opinions on the appropriate methodology
to use when the naval shipyards do or do not have adequate time to
adjust their personnel levels to match workload changes.  We then
compared this methodology to the one we had previously used in our
1987 report on the cost-effectiveness of naval shipyards' borrowing
labor from one another to meet assigned workloads.\1 We found them to
be essentially the same. 

We then used the methodology to determine the cost-effectiveness of
using TDY assignments for ship repairs.  We assumed the average
direct labor costs as fixed when a naval shipyard did not have
adequate time to adjust its personnel to workload reductions. 
Consequently, we compared only the average additional cost to the
government of travel-related expenses to the average private shipyard
staff-day rate for performing ship repairs.  If the shipyard's
travel-related costs were less than the private shipyard staff-day
rate, we considered the use of TDY assignments to be cost-effective. 
However, when the shipyards had sufficient time to make needed
personnel adjustments, we added the average naval shipyard direct
labor costs to the average travel-related costs and compared this
total amount to the average private shipyard staff-day rate.  If a
naval shipyard's total costs were more than the private shipyard's
staff-day rate, we considered the use of TDY assignments not to be
cost-effective. 

To obtain information on the cost components, we reviewed information
generated by the shipyards' management information and financial
systems.  To determine the average staff-day rate for private
shipyards, we contacted the Office of the Supervisor for Shipbuilding
at the Naval Sea Systems Command, which negotiates and administers
ship repair contracts with the private sector.  We found that the
naval shipyards' systems did not specifically identify or summarize
the amount of direct labor staff-days spent on TDY assignments, nor
did they identify the reasons for the TDY assignments.  We,
therefore, developed a data collection instrument that would gather
the desired information, using the best available shipyard data and
estimates.  While the data was not precise or verifiable, it
represented the best information on the staff-days expended by naval
shipyards on TDY and travel, per diem, and other related travel costs
resulting from TDY assignments.  We used the estimated data primarily
to show the relative magnitude of TDY use. 

To determine the factors affecting the future use of TDY assignments,
we interviewed and obtained documents and other pertinent data from
officials of the offices of the Deputy Under Secretary of Defense for
Acquisition and Technology, the Deputy Chief of Naval Operations for
Logistics, and the Naval Sea Systems Command.  We also interviewed
officials from the four naval shipyards, the consulting firms
previously mentioned, and private shipyards in the San Diego area. 

The results of our review are based on the assumption that the
current naval shipyard infrastructure would remain in place. 



(See figure in printed edition.)Appendix III

--------------------
\1 For our report Naval Shipyards:  Management of Borrowed Labor Can
Be Enhanced by Stronger Internal Controls (GAO/NSIAD-87-188, Sept. 
23, 1987), we used the fixed cost concept to assess the
cost-effectiveness of the borrowed labor practice. 


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 F.  Wiggins, Associate Director
George A.  Jahnigen, Assistant Director
Nancy Ragsdale, Senior Evaluator (Communications Analyst)
Charles Perdue, Senior Economist

LOS ANGELES FIELD OFFICE

Dennis A.  De Hart, Evaluator-in-Charge
Samuel S.  Van Wagner, Senior Evaluator
Jean M.  Orland, Senior Evaluator

*** End of document. ***