Army Industrial Facilities: Workforce Requirements and Related Issues
Affecting Depots and Arsenals (Chapter Report, 11/30/1998,
GAO/NSIAD-99-31).
Because of personnel and workload reductions, the Army's depots and
arsenals, which reported fiscal year 1998 employment at about 13,600 and
revenues of about $1,620 million, have faced greater uncertainty about
workloads, funding, and staffing levels. This report examines workforce
issues at Army depots and manufacturing arsenals, focusing on the depot
in Corpus Christi, Texas. GAO discusses (1) the Army's basis for
personnel reductions planned at its depots during fiscal years 1998-99;
(2) the Army's progress in developing an automated system for making
maintenance depot staffing decisions on the basis of workload estimates;
(3) factors that may affect the Army's ability to improve the
cost-effectiveness of its maintenance depot's programs and operations;
and (4) workload trends, staffing, and productivity issues at the Army's
manufacturing arsenals.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: NSIAD-99-31
TITLE: Army Industrial Facilities: Workforce Requirements and
Related Issues Affecting Depots and Arsenals
DATE: 11/30/1998
SUBJECT: Army bases
Army personnel
Equipment maintenance
Military cost control
Reductions in force
Base closures
Base realignments
Military downsizing
Human resources utilization
Management information systems
IDENTIFIER: DOD Base Realignment and Closure Account
Army Workload Performance System
Army Standard Depot System
DOD Quadrennial Defense Review
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GAO/NSIAD-99-31
Cover
================================================================ COVER
Report to Congressional Requesters
November 1998
ARMY INDUSTRIAL FACILITIES -
WORKFORCE REQUIREMENTS AND RELATED
ISSUES AFFECTING DEPOTS AND
ARSENALS
GAO/NSIAD-99-31
Army Industrial Facilities
(709290)
Abbreviations
=============================================================== ABBREV
AMC - Army Materiel Command
AWPS - Army Workload Performance System
BRAC - Base Realignment and Closure
DOD - Department of Defense
GAO - General Accounting Office
GOCO - Government-Owned/Contractor-Operated
IOC - Industrial Operations Command
ISM - Integrated Sustainment Maintenance
Letter
=============================================================== LETTER
B-279770
November 30, 1998
The Honorable Herbert H. Bateman
Chairman, Subcommittee on Military Readiness
Committee on National Security
House of Representatives
The Honorable Lane Evans
House of Representatives
In response to your requests, we reviewed workforce issues at the
Army's maintenance depots and arsenals. This report focuses on the
need for and progress in implementing improvements and efficiencies
to the Army's depot maintenance and manufacturing arsenal programs.
We are sending copies of this report to the Ranking Minority Member,
Subcommittee on Military Readiness, House Committee on National
Security; the Chairmen and Ranking Minority Members, Senate Committee
on Armed Services, the Subcommittee on Defense, Senate Committee on
Appropriations; and the Chairman and Ranking Minority Members,
Subcommittee on National Security, House Committee on Appropriations;
the Secretaries of Defense and the Army; 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. Major contributors to this
report are listed in appendix II.
David R. Warren, Director
Defense Management Issues
EXECUTIVE SUMMARY
============================================================ Chapter 0
PURPOSE
---------------------------------------------------------- Chapter 0:1
Due to reductions in personnel and workloads, the Army's depots and
arsenals, which reported fiscal year 1998 employment at about 13,600
and revenues of about $1,620 million, have faced increased
uncertainty regarding workloads, funding, and personnel levels.
The Chairman of the Subcommittee on Readiness, House Committee on
National Security asked GAO to examine selected workforce issues
pertaining to the Army's maintenance depots, focusing particularly on
the depot in Corpus Christi, Texas. Subsequently, Congressman Lane
Evans requested that GAO examine workforce issues at the Army's
manufacturing arsenals. This report addresses (1) the Army's basis
for personnel reductions planned at its depots during fiscal years
1998-99; (2) the Army's progress in developing an automated system
for making maintenance depot staffing decisions based on workload
estimates; (3) factors that may impact the Army's ability to improve
the cost-effectiveness of its maintenance depot's programs and
operations; and (4) workload trends, staffing, and productivity
issues at the Army's manufacturing arsenals.
BACKGROUND
---------------------------------------------------------- Chapter 0:2
Both Army maintenance depots and manufacturing arsenals are part of
the combined public and private sector industrial base that supports
the requirements of Army forces. Over the years, the number of
public depots and arsenals has been reduced as the Army's
requirements were reduced and/or the Army increasingly placed greater
reliance on the private sector to meet its industrial needs. In
1964, there were nine maintenance depots, and by September 1995, the
last of the closures directed by the Base Realignment and Closure
(BRAC) Commission had been completed, and five maintenance depots
remained.\1 At the end of World War II, the Army operated six
manufacturing arsenals; two are in operation today.\2
The operation of the depots and arsenals is affected and governed by
a variety of laws, including the Arsenal Act, which set forth the
policies governing the manufacture of supplies in the arsenals, a
statute which provides for a Department of Defense (DOD)-maintained
core logistics capability to include the operation of
government-owned and -operated maintenance depots,\3 and the
so-called 50/50 provision which requires that the services use at
least half of the funds made available for depot-level maintenance
for performance by federal personnel. Also, section 364 of the
National Defense Authorization Act for Fiscal Year 1998 precludes
reductions in force of depot personnel, other than those directed by
a BRAC Commission, until the Secretary of the Army certifies to the
Congress that the Army has a fully operational software system to
estimate depot personnel requirements.
--------------------
\1 The Army had proposed reducing the number of government-owned and
operated maintenance depots to three, but the 1995 BRAC Commission
recommendations and implementation actions left five depots. The
remaining depots are Anniston (combat vehicles and small arms),
Corpus Christi (helicopters and engines), Letterkenny (tactical
missile maintenance), Red River (Bradley Fighting Vehicle), and
Tobyhanna (communications, electronics, and avionics).
\2 The remaining arsenals are Rock Island (artillery material, gun
carriages, and small arms) and Watervliet (Seacoast gun carriages,
railway mounts, artillery and tank gun tubes, mortars, and gun
breeches).
\3 10 U.S.C. 2464 states that the DOD must maintain logistic
capability sufficient to ensure the technical competence and
resources necessary for an effective and timely response to a
national defense emergency. This core logistics capability is
required to be owned and operated by the government.
RESULTS IN BRIEF
---------------------------------------------------------- Chapter 0:3
Our examination shows the Army did not have a sound basis for
identifying the number of positions to be eliminated from the Corpus
Christi depot. This was particularly the case in determining the
number of direct labor personnel needed to support depot workload
requirements. Army efforts to develop an automated workload and
performance system for use in its depots have proceeded to the point
that required certification to the Congress of the system's
operational capability is expected soon. However, system
improvements that are currently underway would enhance the system's
capabilities for determining indirect and overhead personnel
requirements in Army depots. Other issues and factors affecting the
Army's basis for workload forecasting or the cost-effectiveness of
its depot maintenance programs and activities are (1) an increased
reliance on the use of regional repair activities and private sector
contractors for work that otherwise might be done in maintenance
depots, (2) declining productivity, (3) difficulties in effectively
using depot personnel, and (4) nonavailability of repair parts.
Use of the arsenals has declined significantly over the years as the
private sector has assumed an increasingly larger share of their
work. According to Army officials, as of mid-1998, the Army's two
weapons manufacturing arsenals used less than 24 percent of their
industrial capacity, compared to more than 80 percent 10 years ago.
The Army's depots and arsenals face multiple challenges and
uncertainties, and the Army has inadequate
long-range plans to guide its actions regarding its industrial
infrastructure.
PRINCIPAL FINDINGS
---------------------------------------------------------- Chapter 0:4
QUESTIONABLE BASIS FOR
PLANNED REDUCTIONS AT CORPUS
CHRISTI
-------------------------------------------------------- Chapter 0:4.1
In determining needed staff reductions at the Corpus Christi depot,
the Army considered direct labor and indirect labor requirements and
estimates of employee productivity. However, GAO found a number of
weaknesses in the Army's methodology for considering these factors.
For example, direct labor requirements were based on unproven
productivity assumptions, overhead personnel requirements were based
on a faulty and imprecise analysis concerning the ratio of indirect
(overhead) to direct workers, and questionable overtime requirements
estimates were used.
Efforts to implement the planned reductions proved to be poorly
managed at the Corpus Christi depot and had unintended consequences:
fewer indirect and more direct labor employees were reduced than
intended. This adversely affected the depot's productivity. With
the reduction of direct labor employees, the use of overtime
increased and contractor workers were hired to offset the labor loss.
The Corpus Christi depot has had major problems meeting its
production schedules and may lose one source of its repair work from
another military service.
PROGRESS MADE IN AUTOMATING
PERSONNEL REQUIREMENTS
PROCESS, BUT NEEDED SYSTEM
ENHANCEMENTS YET TO BE
COMPLETED
-------------------------------------------------------- Chapter 0:4.2
In May 1996, the Army began to develop an automated process for
analyzing and documenting personnel requirements that are linked to
specific workload requirements. The system, which is now operational
at all five Army maintenance depots, has been evaluated by the Army
Audit Agency and required certification to the Congress of the
system's operational capability is expected soon. According to Army
Audit Agency the programming logic is reasonably sound, and
performance satisfies the Army's acceptance criteria. While the
basic system is in place, additional system enhancements were not yet
completed that would help overcome the kinds of problems the Army
recently encountered in clarifying workforce requirements at the
Corpus Christi depot. For example, the Army now plans to add an
automated model for predicting indirect and overhead personnel
requirements before it certifies the system as operational at Army
depots.
IMPROVING WORKLOAD
FORECASTING ESSENTIAL TO
IMPROVING PERSONNEL
REQUIREMENTS DETERMINATION
-------------------------------------------------------- Chapter 0:4.3
In the past, Army depot maintenance workload requirements have
fluctuated to such an extent that they contributed to significant
reported financial losses to the depots. This situation, if it
continued, would limit the usefulness of workload data that are a
critical input to the automated system for analyzing and determining
personnel requirements.
One of the factors that had adversely affected the Army's ability to
project depot maintenance work is the significant amount of depot
maintenance work being done at regional repair activities at Army
active installations and Army National Guard activities. This was
being done even though the Army depot system was already
underutilized and had excess plant capacity. The continuing reliance
and expanded use of these regional repair facilities for depot-level
workloads could have a substantial impact on the future viability and
efficiency of operations at the Army's public sector depot
operations.
Another factor affecting future workload requirements for the Army
depot system was the amount of work shifted to the private sector.
While recognizing the need to allocate work levels within the
existing legislative framework, DOD's Logistics Strategic Plan
expresses a preference for performing depot maintenance work in the
private sector. The Army is planning to shift significant new
workloads to the private sector, particularly maintenance workloads
for new systems. This could be accomplished under a program referred
to as prime vendor support. Under this program the private sector
contractor is responsible for the maintenance and repair of the
system at all repair levels.\4
The depots' productivity was also declining. Reported productive
labor hours at various depot facilities are about 6 percent below
DOD's standard rate: two depots reported productivity rates 10
percent below the standard. Various factors contributed to
lower-than-expected worker productivity. For example, GAO's work
shows that Army depot managers generally lacked effective systems and
procedures to facilitate movement of workers between different
organizational units and skill areas. Additionally, worker
productivity at Army depots has been at times adversely affected by a
lack of needed repair parts. GAO previously reported that one depot
took an average of 525 days to complete repair work on weapon system
components: 18 of those days were needed to conduct maintenance
tasks; the rest of the time was spent ordering, transporting, and
storing repair parts or waiting due to other unanticipated delays.\5
--------------------
\4 The Army supports four levels of repair--unit, direct support,
general support, and depot. At the unit and direct support levels,
repairs of weapon systems and component parts are done and repaired
items are returned to the user. At the general support and depot
levels, repairs of weapon systems and components are done and
repaired items are returned to the supply system.
\5 Inventory Management: The Army Could Reduce Logistics Costs for
Aviation Parts by Adopting Best Practices (GAO/NSIAD-97-82, Apr. 15,
1997).
ARSENALS FACE CHALLENGES AND
UNCERTAINTIES ABOUT THEIR
FUTURE VIABILITY
-------------------------------------------------------- Chapter 0:4.4
The Army planned to implement its automated workload and performance
system in its manufacturing arsenals in December 1998. However,
these facilities have broader problems that will not be solved by the
automated system. Given the reductions in workload that have
occurred over time, the Army arsenals' future is uncertain. The Army
is considering conversion of its two arsenals to government-owned,
contractor-operated facilities. Army personnel planning documents
show the elimination of all arsenal personnel from the government's
employment rolls by 2002. However, key questions remain unanswered,
such as the cost-effectiveness and efficiency of this option.
ARMY HAS NOT REACHED
CONSENSUS ON A LONG-TERM
STRATEGY FOR ITS INDUSTRIAL
ACTIVITIES
-------------------------------------------------------- Chapter 0:4.5
Uncertainties exist about the future of the Army's depots and
arsenals and the extent to which the functions they perform should be
retained as government-owned and -operated facilities or performed by
private sector contractors. Overall, recent experiences at the
Army's manufacturing arsenals and maintenance depots indicate that
the Army faces multiple, difficult challenges and uncertainties in
determining staffing requirements and improving the efficiency and
effectiveness of its industrial activities. The issues become more
problematic for the depots due to the expanded capabilities of
regional repair facilities' work that appears to overlap the work
being done in the depots. The Army has no comprehensive plan for
managing its overall depot maintenance and manufacturing arsenals,
including excess capacity, workload planning, personnel requirements,
and productivity.
RECOMMENDATIONS
---------------------------------------------------------- Chapter 0:5
GAO makes recommendations to the Secretaries of Defense and the Army
concerning the need for (1) improvements to the automated workforce
performance system before certifying it operational, (2) improving
workload management and downsizing, (3) determining the extent to
which the Army's logistics and manufacturing capabilities are of such
importance that they need to be retained as government-owned and
-operated facilities, and (4) developing a strategic plan to guide
the future operations of the Army's industrial activities.
AGENCY COMMENTS AND GAO'S
EVALUATION
---------------------------------------------------------- Chapter 0:6
In written comments on a draft of this report, DOD concurred with
GAO's recommendations and stated that appropriate corrective actions
would be taken. The following are actions the Army has taken, or is
planning to take:
-- incorporating procedures for determining indirect personnel
requirements before certifying the automated workforce
performance system as operational;
-- reemphasizing the importance of conservative, realistic, and
stabilized workload estimates and establishing a board of
directors to evaluate and monitor depot maintenance requirements
to ensure compliance with applicable regulatory requirements;
-- studying the regional repair capabilities and evaluating total
maintenance requirements to determine the most efficient
workload allocations; and
-- developing a 5-year plan to provide a strategic framework to
direct future operations of Army maintenance depots and
manufacturing arsenals.
INTRODUCTION
============================================================ Chapter 1
Army maintenance depots and arsenals were established to support Army
fighting units by providing repair and manufacturing capability, in
concert with the private sector, to meet peacetime and contingency
operational requirements. In recent years, the Army has taken steps
to operate these facilities in a more business-like manner, including
generating revenues from their output to support their operations.
The number of these facilities has been reduced and the size of their
workloads and staffs have declined significantly. This reflects the
downsizing that began in the late 1980s following the end of the Cold
War and the trend toward greater reliance on the private sector to
meet many of the Army's needs.
ARMY DEPOTS AND ARSENALS
---------------------------------------------------------- Chapter 1:1
The Army relies on both the public and the private sectors to meet
its maintenance, overhaul, repair, and ordnance manufacturing needs.
Army depots and arsenals have a long history of service, and they are
subject to various legislative provisions that affect the work they
do as well as how it is allocated between the public and private
sectors.
DEPOTS
-------------------------------------------------------- Chapter 1:1.1
Army maintenance depots were established between 1941 and 1961 to
support overhauls, repairs, and upgrades to nearly all of the Army's
ground and air combat systems. Before the depots were established,
some maintenance and repair work was performed at the Army's supply
depots and arsenals and some was performed by the private sector.
However, before 1941 much of the equipment in use was either repaired
in the field or discarded. Depot workload can be classified into two
major categories: end items and reparable secondary items. End
items are the Army's ground combat systems, communications systems,
and helicopters. Secondary items include various assemblies and
subassemblies of major end items, including helicopter rotor blades,
circuit cards, pumps, and transmissions. Several depots,
particularly Tobyhanna, also do some manufacturing, but generally for
small quantities of individual items needed in support of depot
overhaul and repair programs.
In 1976, 10 depots performed depot maintenance in the continental
United States. By 1988 that number had been reduced to eight as a
result of downsizing following the Vietnam War. Between 1989 and
1995, Base Realignment and Closure (BRAC) Commission decisions
resulted in the closure of three more depots and the ongoing
realignment of two others. At the end of fiscal year 1998, the 5
Army depots\1 employed about 11,200 civilians, a 48-percent reduction
from the 21,500 in fiscal year 1989. In fiscal year 1998, the depots
received revenues of about $1.4 billion. Since the mid-1980s, depots
have generally not been able to hire new government civilian
employees because of personnel ceilings and, therefore, have used
contractor personnel to supplement their workforce as necessary to
meet workload requirements.
Like the other services, operations of the Army depots are guided by
legislative requirements. Section 2464 of title 10 provides for a
Department of Defense (DOD)-maintained core logistics capability that
is to be government-owned and -operated and that is sufficient to
ensure the technical competence and resources necessary for an
effective and timely response to a mobilization or other national
emergency. Section 2466 prohibits the use of more than 50 percent of
the funds made available in a fiscal year for depot-level maintenance
and repair to contract for the performance of the work by nonfederal
personnel. Section 2460 defines depot-level maintenance and repair.
Section 2469 provides that DOD-performed depot-level maintenance and
repair workloads valued at $3 million or more cannot be changed to
contractor performance without the use of competitive procedures for
competitions among public and private sector entities. A related
provision in section 2470 provides that depot-level activities are
eligible to compete for depot-level maintenance and repair workloads.
--------------------
\1 The five depots are Anniston, Alabama; Corpus Christi, Texas;
Letterkenny, Pennsylvania; Red River, Texas; and Tobyhanna,
Pennsylvania.
ARSENALS
-------------------------------------------------------- Chapter 1:1.2
The Army's two remaining manufacturing arsenals were established in
the 1800s to provide a primary manufacturing source for the
military's guns and other war-fighting equipment. Subsequently, in
1920, the Congress enacted the Arsenal Act, codified in its current
form at 10 U.S.C. 4532. It requires that the Army have its supplies
made in U.S. factories or arsenals provided they can produce the
supplies on an economic basis. It also provides that the Secretary
of the Army may abolish an arsenal considered unnecessary. It
appears that the act was intended to keep government-owned arsenals
from becoming idle and to preserve their existing capabilities to the
extent the capabilities are considered necessary for the national
defense. The Army implements the act by determining, prior to
issuing a solicitation to industry, whether it is more economical to
make a particular item using the manufacturing capacity of a U.S.
factory or arsenal or to buy the item from a private sector source.
Only if the Army decides to acquire the item from the private sector
is a solicitation issued.
As the domestic arms industry has developed, the Army has acquired
from industry a greater portion of the supplies that in earlier years
had been furnished by arsenals. Following World War II, the Army
operated six major manufacturing arsenals. Since 1977, only two
remain in operation.\2 Table 1.1 provides information on the six
post-World War II arsenals, including operating periods and major
product lines.
Table 1.1
Post-World War II "Old Line"
Manufacturing Arsenals
Date
establis Date
Arsenal hed closed Major product lines
---------------------- -------- ---------- ------------------------
Rock Island Arsenal, 1862 Operationa Artillery material, gun
Rock Island, Illinois l today carriages, limbers,
caissons, tanks,
tractors, machine guns,
and small arms
Watervliet Arsenal, 1813 Operationa Seacoast gun carriages,
Watervliet, New York l today railway mounts, high
explosives and armor-
piercing projectiles,
artillery and tank gun
tubes, mortars, and gun
breeches
Picatinny Arsenal, 1880 1976 Powders and high
Dover, New Jersey explosives, and metal
components
Frankford Arsenal, 1816 1977 Small arms, fire-
Philadelphia, control and range-
Pennsylvania finding instruments, and
gauges
Springfield Armory, 1794 1967-68 Rifles, bayonets,
Springfield, automatic rifles,
Massachusetts machine guns, and
revolvers
Watertown Arsenal, 1816 1967 Seacoast gun carriages
Watertown, and guns
Massachusetts
----------------------------------------------------------------------
Source: Industrial Operations Command Historical Office.
Today the two arsenals manufacture or remanufacture a variety of
weapons and weapon component parts, including towed howitzers, gun
mounts, and gun tubes. At the end of fiscal year 1998, the Rock
Island and Watervliet facilities employed a total of about 2,430
civilians, a 46-percent reduction from a total of about 4,500
employees at the end of fiscal
year 1989. In fiscal year 1998, the two arsenals received about $199
million in revenues.
--------------------
\2 In addition, the Army operates three facilities that are
predominantly devoted to ammunition production. These facilities are
located in Pine Bluff, Arkansas; Crane, Indiana; and McAlester,
Oklahoma. These facilities were not included in the scope of our
review.
INDUSTRIAL FUNDS USED TO
SUPPORT DEPOTS AND ARSENALS
---------------------------------------------------------- Chapter 1:2
Funding for day-to-day operations of Army depots and arsenals is
provided primarily through the Army Working Capital Fund.\3 The
services reimburse the working capital fund with revenues earned by
the depots and arsenals for completed work based on hourly labor
rates that are intended to recover operating costs, including
material, labor, and overhead expenses. While Army depots and
arsenals are primarily focused on providing the fighting forces with
required equipment to support readiness objectives, the industrial
fund was intended to optimize productivity and operational
efficiencies. Army industrial activities are supposed to operate in
a business-like manner, but they are expected to break even and to
generate neither profits nor losses.\4 Nonetheless, these military
facilities may sometimes find it difficult to follow business like
practices. For example, Army requirements may make it necessary to
maintain capability to perform certain industrial operations even
though it would not seem economical--from a business perspective--to
do so. Systems with older technology must be maintained even though
acquiring repair parts becomes more difficult and expensive. If
military customers need products that are inefficient to produce, the
depots and arsenals must produce them anyway.
To compensate the depots and arsenals for the cost of maintaining
underutilized capacity that might be needed in the future, these
activities receive supplemental funding in the operations and
maintenance appropriation under an account entitled "underutilized
plant capacity." As shown in table 1.2, funding of this account has
been reduced in recent years. Army officials stated that the
reduction was made to fund other higher priority programs; however,
they stated that in future years, this trend would likely be
reversed.
Table 1.2
Army Underutilized Plant Capacity
Funding
(Dollars in millions)
FY Arsenals Depots Total
---------------------------- ------------ ------------ ============
1996 $56.1 $73.8 $129.9
1997 22.0 24.1 46.1
1998 20.6 24.2 44.8
----------------------------------------------------------------------
Source: Army Budget Office.
The Army Materiel Command (AMC) and its subordinate commands hold
semiannual workload conferences to review, analyze, document, and
assign work to the five depots. In contrast, the arsenals actively
market their capabilities to DOD program management offices to
identify potential customers. Despite differences in how they obtain
their work, depots and arsenals are alike in how they set rates for
their work. The process they use begins about 18 months prior to the
start of the fiscal year in which maintenance and manufacturing will
be performed. Depot and arsenal managers propose hourly rates to
recover operating costs based on the anticipated level of future
workload requirements, but rates are ultimately determined at the
Department of Army and DOD levels.
Rate setting is an iterative process that begins with the industrial
activities and the Industrial Operations Command (IOC), a subordinate
command under AMC. After they reach agreement, the proposed rates,
which are included in consolidated depot and arsenal budgets, are
forwarded for review up the chain of command. These commands
frequently revise the rates initially requested by IOC based on past
performance and other evolving workload and staffing information.
When rates are reduced, the industrial activities must find ways to
cut costs or increase workload to end the year with the desired
financial outcome, which is usually to have a cumulative zero net
operating result.\5 However, even if the proposed rates are approved
without modification, the performing industrial activity can end the
year in better or worse financial shape than originally anticipated,
depending on whether or not actual costs and workload are as
anticipated. This can necessitate a rate increase in a subsequent
year to offset the losses of a prior year, or a rate reduction to
offset profits.
Depots and arsenals employ direct labor workers who charge time to
finite job taskings, earning revenue for the business. In addition,
they employ a number of indirect workers, such as shop supervisors
and parts expediters, whose time cannot be related to a finite job
order but nevertheless support the depot maintenance and arsenal
manufacturing process. Likewise, the industrial facilities also
employ a variety of general and administrative overhead personnel
such as production managers, technical specialists, financial
managers, personnel officers, logisticians, contracting officers,
computer programmers, and computer operators.\6 While the time spent
by these two categories of overhead personnel is difficult to relate
to a finite job order, their costs are nevertheless reflected in the
overall rates charged by the industrial activities.
--------------------
\3 Under this industrial funding arrangement, applicable to a variety
of business activities such as depot maintenance and manufacturing
arsenals, the Army sells goods and services to the military services
based on predetermined rates designed to recoup operating costs.
Working capital fund customers pay for the goods and services,
primarily, with operations and maintenance funds appropriated by the
Congress.
\4 We have previously reported on difficulties DOD faces in
attempting to fully capture its operating costs. For example, in our
May 1997 testimony Defense Depot Maintenance: Challenges Facing DOD
in Managing Working Capital Funds (GAO/T-NSIAD-97-152, May 7, 1997),
we noted that DOD has consistently experienced losses in the
operations of various working capital funds, including the depot
maintenance activity group, and has had to request additional funding
to support their operations.
\5 That is, if the total of all prior years' profits and losses was a
profit, the plan will be to reduce rates, thus returning the
accumulated profit to the customers. Returning an accumulated profit
is achieved by setting rates sufficiently low to plan for a loss for
the current year.
\6 Hereafter, unless a distinction is required, indirect and overhead
personnel will be collectively referred to as overhead personnel.
DEPOT COMMAND AND MANAGEMENT
STRUCTURES
---------------------------------------------------------- Chapter 1:3
AMC is responsible for management control and oversight of the Army's
industrial facilities. The Army's IOC--a subordinate command under
AMC--had management responsibility for both arsenals and depots.
That began to change in November 1997, when under a pilot program,
management responsibility for workloading and overseeing work at the
Tobyhanna Army Depot was transferred to the
Communications-Electronics Command, the depot's major customer.\7 The
Army completed the transfer of operational command and control for
the Tobyhanna depot in October 1998 and plans to complete transfer of
management responsibilities for the other depots in October 1999.
Each depot will be aligned with its major customer, which is also the
coordinating inventory control point for the depot's products. Table
1.3 summarizes the upcoming management relationship for each Army
depot and lists its principal workloads.
Table 1.3
Army Depots and Management Commands and
Principal Work
Depot Major customer Principal work
---------------------- ---------------------- ----------------------
Anniston Army Depot, Tank-Automotive and Combat vehicles, small
Alabama Armaments Command arms
Corpus Christi Army Aviation and Missile Helicopters, engines
Depot, Texas Command
Letterkenny Army Aviation and Missile Tactical missile
Depot, Pennsylvania Command maintenance, towed and
self-propelled
artillery\a
Red River Army Depot, Tank-Automotive and Bradley Fighting
Texas Armaments Command Vehicle
Tobyhanna Army Depot, Communications- Communications and
Pennsylvania Electronics Command electronics, avionics
----------------------------------------------------------------------
\a Letterkenny's artillery maintenance mission will be transferred to
Anniston in 1999 as a result of a 1995 BRAC decision. Also, as a
result of that decision, a portion of its tactical missile workload
will be realigned to the Tobyhanna depot.
Upon completion of the transfers of management responsibilities for
depots, the IOC workforce will be reduced by about 280 positions out
of a current staff level of about 1,400 personnel at the end of
fiscal year 1998. The gaining commands will not get additional
manpower positions. AMC is assuming that the gaining commands will
be able to take on these added responsibilities with no increase in
staff. These reductions are in addition to the 1,720 personnel
reductions that IOC previously planned to make within the individual
depots during fiscal years 1998 and 1999--many of which were put on
hold because of section 364 of the National Defense Authorization Act
for Fiscal Year 1998. Section 364 prohibits the Army from initiating
a reduction in force at five Army depots participating in the
demonstration and testing of the Army Workload and Performance System
(AWPS) until after the Secretary of the Army certifies to the
Congress that AWPS is fully operational. It exempts reductions
undertaken to implement 1995 BRAC decisions.
Current plans call for the arsenals to remain under the management
and control of IOC. Also, the arsenals are not currently precluded
by
section 364 from reducing their workforce. Accordingly, to adjust
the workforce to more accurately reflect the current workload, the
two arsenals are in the process of reducing their workforce by a
total of over 300 positions out of 2,700.
Figure 1.1 shows the locations of the Army's industrial facilities
and each major command to be responsible for management control and
oversight.
Figure 1.1: Army Depots and
Arsenals and Corresponding
Management Commands
(See figure in printed
edition.)
--------------------
\7 The Communications-Electronics Command, a major subordinate
command under AMC, serves as an inventory control point for the
Army's electronics and communications systems and component parts.
Since November 1997, the Communications-Electronics Command has been
responsible for determining requirements and providing management
oversight for repair programs assigned to the Tobyhanna depot.
ASSESSMENT OF CHANGES IN
STAFFING REQUIREMENTS
---------------------------------------------------------- Chapter 1:4
In recent years, several audit reports have highlighted the Army's
inability to support its personnel requirements on the basis of
analytically based workload forecasts. For example, the Army Audit
Agency reported in 1992 and 1994 that the Army did not know its
workload and thus could not justify personnel needs or budgets.\8 In
several more recent audits, the Army Audit Agency recommended
declaration of a material weakness in relating personnel requirements
to workload and budget. In DOD's fiscal year 1997 Annual Statement
of Assurance on Management Controls, DOD noted a material weakness in
its manpower requirements determination system. It noted that the
current system for manpower requirements determination lacked the
ability to link workload, manpower requirements, and dollars. Thus,
the Army was not capable of rationally predicting future civilian
manpower requirements based on workload. As a result, managers at
all levels did not have the information they needed to improve work
performance, improve organizational efficiency, and determine and
support staffing needs, manpower budgets, and personnel reductions.
In response to concerns about its workforce planning, the Army has
sought to implement a two-pronged approach to evaluating its
workforce requirements. This includes implementing a 12-step
methodology analysis and developing an automated system for depots,
arsenals, and ammunition plants that is referred to as AWPS. In
February 1998, we reported that the Army had developed this
corrective action plan to resolve its material weakness but that it
might have difficulty achieving the expected completion date.\9
The 12-step methodology, adopted by the Army in April 1996, is a
largely manual process that provides a snapshot of personnel
requirements designed to link personnel requirements to workload at
various headquarters commands and organizations. The methodology
includes analyses of missions and functions, opportunities to improve
processes, workload drivers, workforce options (including civilian
versus using military personnel and contracting versus using in-house
personnel), and organizational structure. It also looks for ways to
consolidate and create more effective use of indirect and overhead
personnel assigned to Army industrial activities. Figure 1.2 shows
the components of the 12-step method.
Figure 1.2: The Army's 12-Step
Methodology for Evaluating
Workforce Requirements
(See figure in printed
edition.)
The development of AWPS resulted from an Army effort initiated in
July 1995 to have a contractor survey leading edge commercial and
public sector entities to identify their "best practices" for
determining personnel requirements based on a detailed analysis of
work to be performed. The contractor concluded that a computer-based
system developed by the Naval Sea Logistics Center, Pacific, for use
in naval shipyards provided the greatest potential for documenting
personnel requirements at Army industrial activities. Consequently,
in March 1996, the Army provided funding to a support contractor and
the Navy to develop and implement a modified version of the Navy's
computer-based process at Army maintenance depots to support the
maintenance function.
The AWPS system is designed to facilitate evaluation of what-if
questions, including workload and personnel requirements analyses.
The evolving system currently consists of three modules--performance
measurement control, workload forecasting, and workforce
forecasting--to integrate workload and workforce information to
determine personnel requirements for various levels of work. The
system provides two primary management information
products--information concerning the production status on specific
project orders and information concerning workload forecasts and
related workforce requirements.
--------------------
\8 Managing Workload, Organizations and Staffing, Army Audit Agency
(HQ 94-751, June 23, 1994) and Management of Army Workload of Tables
of Distribution and Allowances Organizations, Army Audit Agency (HQ
92-T2, Jan. 21, 1992).
\9 Force Structure: Army's Effort to Improve Efficiency of
Institutional Forces Have Produced Few Results (GAO/NSIAD-98-65, Feb.
26, 1998).
OBJECTIVES, SCOPE, AND
METHODOLOGY
---------------------------------------------------------- Chapter 1:5
The Chairman of the Subcommittee on Readiness, House Committee on
National Security, asked us to examine selected workforce issues
pertaining to the Army's depots, focusing particularly on the Corpus
Christi depot, where significant difficulties were encountered in
implementing a planned personnel reduction during 1997.
Subsequently, Congressman Lane Evans requested that we examine
workforce issues at the Army's manufacturing arsenals. Accordingly,
this report focuses on (1) whether the Army had a sound basis for
personnel reductions planned at its depots during a 2-year period
ending in fiscal year 1999; (2) progress the Army has made in
developing an automated system for making depot staffing decisions
based on workload estimates; (3) other factors that may adversely
impact the Army's ability to improve the cost-effectiveness of its
depot maintenance programs and operations; and (4) workload trends,
staffing, and productivity issues at the Army's manufacturing
arsenals. This is one of a series of reports (see related GAO
products at the end of this report) addressing DOD's industrial
policies, outsourcing plans, activity closures, and the allocation of
industrial work between the public and private sectors.
To determine whether the Army had a sound basis for personnel
reductions, we reviewed the rationale, support, status, and resulting
impact of the Army's proposal to reduce staffing at its depots. We
interviewed resource management personnel at Army headquarters, Army
Materiel Command, the Army Industrial Operations Command, the Army
Aviation and Missile Command, and the Corpus Christi Army Depot where
we obtained information on the Army's reasons for proposed staffing
reductions, and reviewed documentation supporting the Army's proposed
staff reduction plan. We discussed staff reduction and related
issues with Army Audit Agency officials. To ascertain the Army's
progress in developing workload-based staffing estimates, we met with
officials from the Naval Sea Logistics Center, Pacific, which is
modifying previously existing Navy programs to fit the Army depot and
arsenal scenarios. We also interviewed key Norfolk Naval Shipyard
and Navy headquarters personnel who have used the Navy's automated
workforce planning system. We visited Corpus Christi, Letterkenny,
and Tobyhanna depots to obtain information on the implementation of
AWPS and to observe depot employees' use of AWPS-generated data. We
also reviewed the results of the Army Audit Agency's audit work
regarding the implementation of personnel downsizing and regarding
the development and testing of the AWPS system.
To identify factors that may adversely impact the Army's ability to
improve the cost-effectiveness of its depot maintenance operations,
we analyzed financial and productivity data for each of the depots
and discussed emerging issues with Headquarters IOC, depot, and
commodity command officials. We also visited the Corpus Christi,
Letterkenny, and Tobyhanna depots to obtain information on various
aspects of their operation and management. We visited the Naval Air
Systems Command, Patuxent River, Maryland to follow up on Corpus
Christi Army Depot problems associated with performing Navy workload.
During subsequent depot and arsenal visits, we asked questions about
the scheduling of work, parts availability, overtime, movement of
personnel, and related topics. We also visited selected Army repair
facilities that perform depot-level tasks but are not recognized as
traditional depot-level maintenance providers. We also conducted
literature and internet searches of appropriate topics.
To review workload, staffing, and productivity issues at Army
arsenals, we interviewed personnel at the Army Industrial Operations
Command, which provides management control and oversight for the
manufacturing arsenals. We reviewed back-up documentation supporting
proposed staffing reductions and the reasonableness and support
assumptions on which staff reduction proposals were based. We
visited the two arsenals and met with a variety of key management
personnel to discuss and obtain their views on various workload and
staffing issues.
We performed work at the following activities:
-- Department of Army Headquarters, Washington, D.C.
-- Army Materiel Command, Alexandria, Va.
-- Army Industrial Operations Command, Rock Island, Ill.
-- Army Aviation and Missile Command, Huntsville, Ala.
-- Corpus Christi Army Depot, Corpus Christi, Tex.
-- Letterkenny Army Depot, Chambersburg, Pa.
-- Tobyhanna Army Depot, Tobyhanna, Pa.
-- Rock Island Arsenal, Rock Island, Ill.
-- Watervliet Arsenal, Watervliet, N.Y.
-- Aviation Classification Repair Activities Depot (Army National
Guard), Groton, Conn.
-- Fort Campbell, Fort Campbell, Ky.
-- Fort Hood, Killeen, Tex.
-- Management Engineering Activity, Chambersburg, Pa.
-- Naval Air Systems Command, Patuxent River, Md.
-- Naval Sea Systems Command, Arlington, Va.
-- Commander in Chief, U.S. Atlantic Fleet, Norfolk, Va.
-- Norfolk Naval Shipyard, Portsmouth, Va.
-- Army Audit Agency, Alexandria, Va.
We conducted our work between September 1997 and August 1998 in
accordance with generally accepted government auditing standards and
generally relied upon Army provided data. While reviewing AWPS
generated data, we noted significant errors, particularly early in
the audit, and did not utilize that information other than to note
its occurrence.
QUESTIONABLE ANALYSIS SUPPORTING
PLANNED DEPOT REDUCTIONS
ACCENTUATED NEED TO IMPROVE
WORKFORCE PLANNING
============================================================ Chapter 2
A variety of weaknesses were contained in IOC's analysis supporting
its plan to eliminate about 1,720 depot jobs over a 2-year period
ending in fiscal year 1999. Those weaknesses accentuated previously
existing concerns about the adequacy of the Army's workforce
planning. The lack of an effective manpower requirements
determination process has been an Army declared internal control
weakness, for which several corrective actions are in process,
including the development and implementation of an automated workload
and workforce planning system. An initial attempt to implement the
planned reductions at the Corpus Christi Army Depot proved chaotic
and resulted in unintended consequences from the termination of
direct labor employees who were needed to support depot maintenance
production requirements. While the Army was proceeding with efforts
to strengthen its workforce planning capabilities during this time,
those capabilities were not sufficiently developed to be used to
support the IOC's analysis. The Army has made progress in
establishing AWPS--its means for analyzing and documenting personnel
requirements for the maintenance function--and is approaching the
point of certifying its operational status to the Congress. However,
while the current version of the system addresses direct labor
requirements, it does not address requirements for overhead
personnel--an important issue in the ill-planned 1997 reduction of
personnel at the depot in Corpus Christi, Texas.
WEAKNESSES IN THE ARMY'S
WORKFORCE REDUCTION PROCESS
---------------------------------------------------------- Chapter 2:1
The Army's plan for reducing the workforce at its depots had a number
of weaknesses and did not appear to be consistent with its own policy
guidance. Army Regulation 570-4 (Manpower Management: Manpower and
Equipment Control) states that staffing levels are to be based on
workloads to be performed. However, our work indicates that the
Army's plan for reducing staff levels at its depots was developed
primarily in response to affordability concerns and was intended to
lower the hourly rates depots charge their customers. The plan was
not supported by a detailed comparison of planned workload and
related personnel requirements. Army officials stated that
incorporation of the 12-step process into AWPS will help the Army
address affordability while directly linking manpower to funded
workload, assuming that the Army ensures accuracy and reliability of
AWPS data input, both by the planners and via the shop floor.
In July 1996, as part of its review of proposed rates, AMC
headquarters determined that the hourly rates proposed by the Army
depots for maintenance work in fiscal year 1998 were generally
unaffordable. It concluded that depot customers could not afford to
purchase the work they needed. The Army's depot composite rate for
fiscal year 1998 was over 11 percent higher than the composite rate
for fiscal year 1996.
Table 2.1 provides a comparison of the initial rates requested by
each Army depot for fiscal year 1998, the final rates approved for
that year by Headquarters AMC and the Army staff, and the percentage
difference.
Table 2.1
Fiscal Year 1998 Depot Composite Hourly
Rates Requested by Depots and Approved
by Headquarters
Composite
requested Composite Percentage
Depot rate final rate change
---------------------------- ------------ ------------ ------------
Anniston $105.78 $92.40 -12.6
Corpus Christi 148.19 125.44 -15.4
Letterkenny 111.93 84.50 -24.5
Red River 100.53 108.74 +8.2
Tobyhanna 83.46 69.41 -16.8
Composite rate\a $107.03 $93.71 -12.4
----------------------------------------------------------------------
Note: The rates shown are average composites. Actual rates paid by
depot customers vary based on the specific type of services rendered.
Information on rates was provided by AMC.
\a Composite rates are weighted figures and not numeric averages.
AMC Headquarters officials stated that in recent years the depot
rates had increased to the point that, in some cases, they were not
affordable.\1 IOC officials stated that since they had to reduce the
rates quickly, they had little choice but to require staff
reductions.
Reported personnel costs in fiscal year 1997 comprise about 46
percent, material and supplies about 29 percent, and other
miscellaneous costs about 25 percent of depots' operating costs.
As shown in table 2.1, the rate reduction varied by depot. Unlike
the other depots where IOC set a lower rate, IOC set the rate at the
Red River depot higher than depot officials requested. However, the
rate set was still not high enough to cover estimated costs at that
depot. An IOC official stated that if the Red River depot had
charged its customers based on the estimated costs of operations at
that facility, including recovery of previous operating losses, the
composite rate would have been over
$174 per hour in fiscal year 1998. Having made the decision to
reduce the rates through staffing cuts, what remained to be done was
to develop a depot staff reduction plan. The initial plan developed
by IOC headquarters personnel eliminated about 1,720 depot jobs. The
proposal would have affected personnel at three of the five
maintenance depots--Corpus Christi, Letterkenny, and Red River.\2
--------------------
\1 In a prior report, Army Depot Maintenance: Privatization Without
Further Downsizing Increases Costly Excess Capacity
(GAO/NSIAD-96-201, Sept. 18, 1996), we noted that inefficiencies
resulting from large amounts of excess capacity is a significant
factor. More specifically, we said that declining workload and the
failure to eliminate excess capacity have resulted in an increased
share of relatively fixed overhead that must be allocated to each
depot maintenance workload. Additionally, we cited other factors
such as declining workload and production inefficiencies in a 1997
testimony, Defense Depot Maintenance: Challenges Facing DOD in
Managing Working Capital Funds (GAO/T-NSIAD/AIMD-97-152, May 7,
1997).
\2 Staff reductions were not recommended for the Anniston and
Tobyhanna depots. These depots were projected to receive additional
repair work from depots closed or realigned as a result of the 1995
BRAC process. IOC officials decided that their projected workloads
would support the current workforce.
STAFF REDUCTION PLAN BASED
ON QUESTIONABLE RATIOS AND
PRODUCTIVITY ASSUMPTIONS
-------------------------------------------------------- Chapter 2:1.1
To determine the staff reduction plan, IOC headquarters used a
methodology that considered direct labor requirements, overhead
requirements, and employee overtime estimates. We analyzed these
factors and determined that (1) the direct labor requirements were
based on unproven productivity assumptions, (2) the overhead
personnel requirements were based on an imprecise ratio analysis, and
(3) unrealistic quantities of overtime were factored into the
analysis.
Table 2.2 shows the number of positions originally scheduled for
elimination at each depot for fiscal years 1998 and 1999.
Table 2.2
Summary of Planned Personnel Reductions
at Army Depots
Total
reductions
Reductions Reductions planned
Staffing planned planned for
as of Mar. for for FY 1998-
Depot 30, 1997 FY 1998 FY 1999 99
---------------------- ---------- ---------- ---------- ----------
Anniston 2,578 0 0 0
Corpus Christi 3,074 328 685 1,013
Letterkenny 2,010 151 54 205
Red River 2,249 164 338 502
Tobyhanna 2,455 0 0 0
======================================================================
Total 12,366 643 1,077 1,720
----------------------------------------------------------------------
Note: The planned reductions for fiscal year 1999 include additional
cuts of 223 authorized positions at the Corpus Christi depot, 115
authorized positions at the Red River depot, and
54 authorized positions at the Letterkenny depot, which were
proposed, but not included in budget planning documents. Table does
not include BRAC-related personnel reductions, which total 595
positions at the Red River depot and 575 positions at the Letterkenny
depot.
Source: GAO analysis of data provided by IOC.
DIRECT LABOR REQUIREMENTS
BASED ON UNPROVEN
PRODUCTIVITY ASSUMPTIONS
------------------------------------------------------ Chapter 2:1.1.1
To determine and justify the number of required direct labor
employees, IOC divided the total anticipated workload (measured in
direct labor hours) by a productive workyear factor. This factor
represents the amount of work a direct labor employee is estimated to
be able to accomplish in
1 fiscal year. IOC used a variety of assumptions to support its
position that the number of depot personnel could be reduced. IOC's
analysis used productive factors that are substantially higher than
either the DOD productive workyear standard or the historical average
achieved in the recent past by Army depots. For example, IOC's
analysis assumed that each Corpus Christi depot direct labor employee
would accomplish 1,694 hours of billable time, not including paid
overtime hours, in a workyear. However, while DOD's productive
workyear standard for direct labor depot maintenance employees is
1,615 hours per person, the Corpus Christi depot direct labor
employees averaged a reported 1,460 hours of billable time in fiscal
year 1997 and 1,528 hours in fiscal year 1996. By using the higher
productivity level, the IOC analysis showed the Corpus Christi depot
would need 14 percent fewer employees, based on the change in this
factor.\3 Table 2.3 provides a comparison of IOC's worker
productivity assumptions for each depot and the actual reported
productivity levels for fiscal year 1997.
Table 2.3
IOC's Assumptions, DOD's Standard, and
Reported Experience of Depot Workers'
Productivity for Fiscal Year 1997
Direct labor hours
----------------------------------------
Depot
IOC reported
Depot assumption DOD standard productivity
---------------------------- ------------ ------------ ------------
Anniston 1,656 1,615 1,421
Corpus Christi 1,694 1,615 1,460
Letterkenny 1,711 1,615 1,590
Red River 1,634 1,615 1,533
Tobyhanna 1,699 1,615 1,569
----------------------------------------------------------------------
While the DOD productive workyear standard assumes that each direct
labor worker will achieve 1,615 hours of billable time each year, the
depots have been unable to achieve this goal. Several factors affect
this productivity level. First, due to workforce seniority, Corpus
Christi depot workers have recently reported using an average of 196
hours of paid annual leave per year.\4 This is higher than the
reported 175 hours of annual leave used on average at all Army
activities as well as the reported 167-hour average annual leave used
at other government agencies. In addition, Corpus Christi depot
employees used a reported average of about 112 hours of sick leave
per year--more sick leave than they earn in a given year\5 and about
50 percent higher than other Army, DOD, and government activities.
The reported Army-wide average sick leave use was 73 hours; the DOD
average, 78 hours; and the governmentwide average,
74 hours. Several depot management officials commented that while
they monitor sick leave usage, it has increased partly as a result of
the older workforce and partly as a result of the Federal Employees
Family Friendly Leave Act, Public Law 103-338, October 22, 1994,
which allows the use of sick leave to care for family members and for
bereavement purposes. Second, because most depot employees at the
Corpus Christi and Red River depots are working a compressed work
schedule of four 10-hour workdays, they receive 100 hours of paid
holiday leave per year. In contrast, a government employee who works
a 5-day 8-hour workweek, receives 80 hours of paid holiday leave per
year. Third, the depots' direct labor workers charge varying amounts
of overhead (nonbillable) time for training, shop cleanup, job
administration, temporary supervision, certain union activities, and
other indirect activities. In fiscal year 1997, direct labor
workers' charges to overhead job orders ranged from a reported
average of 125 hours at the Letterkenny depot to 205 hours at the
Corpus Christi depot.
--------------------
\3 Other depots would be affected similarly, but to a lesser degree,
based on a comparison of the assumption and the individual depot's
actual experience.
\4 Federal employees with between 3 and 15 years of government
service earn 160 hours of annual leave per year, and those with over
15 years of service earn 208 hours.
\5 Federal civilian employees earn 104 hours of sick leave per year.
Unused sick leave may be carried forward for use in subsequent years.
OVERHEAD LABOR
REQUIREMENTS BASED ON
QUESTIONABLE RATIO
ANALYSIS
------------------------------------------------------ Chapter 2:1.1.2
To determine and justify the number of required overhead employees,
IOC used a ratio analysis that essentially allowed a specified
percentage of overhead employees for each direct labor worker. IOC
officials told us that they believed the depots had too many overhead
personnel and they had developed a methodology to base overhead
personnel requirements on predetermined ratios of direct to overhead
employees. IOC developed its methodology and the ratios based on
actual direct and overhead employee ratios for a private-sector firm
tasked with operating a government-owned, contractor-operated Army
ammunition plant.
Different ratios were assigned based on the number of functions each
depot organization performs--such as maintenance, ammunition storage,
or base operation support.\6 The IOC ratio analysis assumed that for
every 100 direct labor employees, a single-function depot
organization could have no more than 40 overhead personnel, a
dual-function depot organization no more than 50 overhead personnel,
and a three-function depot organization no more than 60 overhead
personnel. Table 2.4 provides a summary of ratios IOC used to
determine the number of overhead employees.
Table 2.4
IOC Ratios for Determining Overhead
Personnel Requirements
Maximum permissible
overhead personnel
per 100 direct
Depot Functions personnel
---------- ------------------------------------ --------------------
Anniston Maintenance, ammunition storage, 60
host
Corpus Maintenance 40
Christi
Letterkenn Maintenance, ammunition storage, 60
y host
Red River Maintenance, ammunition storage, 60
host
Tobyhanna Maintenance, host 50
----------------------------------------------------------------------
A number of concerns have been raised about the use of these ratios.
For example, in 1997 the then Deputy Under Secretary of Defense
(Logistics) stated that the use of such ratios may provide only
marginal utility in identifying potentially excess employees and
inefficient depot operations. He noted that ratio analysis may not
consider the value of productivity enhancements that result from the
acquisition of increasingly sophisticated technology to accomplish
depot missions, which in turn causes direct labor requirements to
decrease, while the overhead labor requirements increase.\7 Depot
officials similarly noted that technology enhancements over the past
few years have significantly reduced direct labor requirements, while
sometimes increasing overhead in the depots, particularly when
training and maintenance costs increase. They noted that IOC's
methodology did not consider the impact of various efficiency
enhancements that eliminated substantial numbers of direct labor
positions and added a smaller number of overhead positions. These
enhancements include the replacement of conventional labor-intensive
lathes with state-of-the-art numerically controlled devices, hundreds
of conventional draftsmen with a few technicians having
computer-aided design skills, and numerous circuit card repair
technicians with multimillion-dollar devices that make and repair
circuit cards.
Our discussions with depot officials and a support contractor raised
similar concerns, including not considering and analyzing (1)
differences in the complexity of work being performed in different
depots, (2) requirements for government organizations to maintain
certain overhead activities that are not required in the private
sector, (3) differing policies in the way depots classify direct and
overhead labor, (4) allowances for private sector contractors that
perform supplemental labor, (5) the extent to which direct personnel
work overtime, and (6) the extent to which contractors perform
overhead functions.
Army officials stated that the ratios were not developed using a
sound analytical basis, but said that determining overhead
requirements is not, by its very nature, a precise science. While we
recognize the challenge that this presents, we have stated in the
past that until a costing system, computer-based methodology, and
12-step methodology are fully developed and integrated, the Army
cannot be sure that it has the most efficient and cost-effective
workforce.\8 Although the 12-step process also calls for the use of
ratios in some cases, these ratios are based on methodologies that
produce finer degrees of precision. The process also calls for the
use of more appropriate mixes of fixed and variable overhead
personnel. Nonetheless, we share IOC officials' concerns that the
Army depots have too much overhead. We have reported that this is in
part a consequence of having underutilized depot facilities.\9 Thus,
personnel reductions alone, without addressing excess infrastructure
issues, cannot resolve the Army's problem of increasing maintenance
costs reflected in its depot rate structure.
In commenting on a draft of this report, DOD acknowledged that the
methodology the Army used to project workload requirements lacked the
precision that would have been available if AWPS had been fully
implemented and workload projections were more realistic. While DOD
stated that the personnel reduction process received intense
scrutiny, implementation of its plan achieved its main objective,
which was a reduction in indirect personnel costs that it believed
would lead to unaffordable rates.
--------------------
\6 Three of the Army maintenance depots are located on military bases
that also support ammunition storage facilities, increasing the
overall requirement for overhead personnel. Additionally, four of
the depots are considered the host activity on the bases where they
reside. As the host activity, they are responsible for managing the
housekeeping and business activities associated with having a large
piece of real estate that is similar to a small town--such as
grounds-keeping, building, and road maintenance, and fire and safety
operations. These activities require additional support personnel.
The difficulty lies in estimating the number of personnel required to
support these additional requirements.
\7 Defense Depot Maintenance Council Business Plan Fiscal Years
1996-2001. The Council is an organization of senior officials in
each of the services, the Defense Logistics Agency, and the Office of
the Secretary of Defense who are responsible for maintenance policy
and operations.
\8 Force Structure: Army Efforts to Improve Efficiency of
Institutional Forces Have Produced Few Results (GAO/NSIAD-98-65, Feb.
26, 1998).
\9 Air Force Depot Maintenance: Privatization-in-Place Plans Are
Costly While Excess Capacity Exists (GAO/NSIAD-97-13, Dec. 31, 1996)
and Army Depot Maintenance: Privatization Without Further Downsizing
Increases Costly Excess Capacity (GAO/NSIAD-96-201, Sept. 18, 1996).
REDUCTION PLAN ENVISIONED
SUBSTANTIAL OVERTIME
FOLLOWING PERSONNEL
TERMINATIONS
------------------------------------------------------ Chapter 2:1.1.3
IOC's staff reduction plan was developed using the assumption that
when the suggested personnel restructuring was completed the
remaining direct labor employees would be expected to work varying
amounts of overtime to accomplish their planned maintenance
workloads. In fiscal years 1998 and 1999, Corpus Christi Army Depot
direct employees would be expected to work overtime that averaged
about 16 and 12 percent, respectively, of their regular time hours.
IOC personnel stated that it is less expensive to pay overtime rates
than to have more employees charging an equivalent number of straight
time hours, particularly given the uncertainties regarding the amount
of forecasted workload that might not materialize.
Historically, Army depot employees have performed varying amounts of
overtime. For example, in fiscal year 1996, the Army maintenance
depots reportedly averaged 13-percent overtime, with individual depot
overtime rates ranging from a low of about 4 percent at the Tobyhanna
depot, to a high of about 19 percent at the Corpus Christi depot.
Although Corpus Christi originally planned for about 6-percent
overtime for direct personnel during fiscal year 1998, the plan was
revised to its current 15.8-percent overtime plan and unplanned
requirements caused average reported overtime by direct employees to
approach 30 percent in some months, with individual rates ranging
from 0 to over 50 percent. Using overtime could provide a cushion
against workload shortages, as opposed to a short-term alternative of
hiring people to cover unanticipated increases in workloads; however,
to plan for average overtime rates of up to 15.8 percent appears to
be beyond the norm for such types of activities, particularly when
unplanned requirements could drive the overtime usage substantially
above the levels that were planned. For example, we compared the
1997 Bureau of Labor Statistics durable goods manufacturing work
week, including overtime, which averaged about
42.8 hours, with comparable data for Corpus Christi and noted that a
15.8-percent overtime figure corresponds to a 46.3 hour work week,
while 30 and 50 percent overtime figures correspond to workweeks of
52 and
60 hours, respectively.
ATTEMPTED IMPLEMENTATION OF THE
STAFF REDUCTION PLAN AT CORPUS
CHRISTI DEPOT PROVED CHAOTIC
AND HAD UNINTENDED CONSEQUENCES
---------------------------------------------------------- Chapter 2:2
AMC efforts to implement its planned reductions at its Corpus Christi
depot proved to be extremely chaotic and resulted in unintended
consequences. The enactment of section 364 of the 1998 Defense
Authorization Act restricted further personnel reductions, except
those that are BRAC-related. Army officials stated that when it
became apparent that the incentives\10 being offered to indirect
personnel in exchange for voluntary employment terminations would not
achieve the desired reduction of 336 employees, similar offers were
extended to include direct personnel. These officials stated that
incentive offers were made to direct labor employees, only when the
position held by the terminated direct laborer could be filled by an
indirect labor person, who otherwise would face involuntary
separation.\11 Notwithstanding that requirement, any depot
employee--indirect or direct--was allowed to separate until the
desired goal of eliminating 336 employees was reached. Consequently,
some direct employees separated, which further exacerbated an
existing productivity problem. The congressional action followed and
postponed completion of the staff reduction plan until AWPS was
certified as operational.
--------------------
\10 Incentives included approvals for early retirements and cash
payments.
\11 In some cases, this was to be achieved by converting an
indirect-employee to a direct one; in other situations, the position
held by a separating direct employee might be filled by a second
direct employee, whose job, in turn, might be filled by a third
indirect employee. The general effect of this was to replace direct
employees with less experienced or unexperienced employees.
EFFORTS TO IMPLEMENT STAFF
REDUCTIONS
-------------------------------------------------------- Chapter 2:2.1
According to headquarters AMC officials, command industrial
activities had too many overhead personnel and the depots could
eliminate some of these positions without adversely affecting
productivity. To avoid an involuntary reduction in force targeting
overhead positions, they developed a plan to encourage voluntary
separations. AMC authorized the use of financial incentives,
including cash payments and early retirement benefits, and authorized
the extension of this offer to direct personnel. At the Corpus
Christi depot, 336 personnel voluntarily terminated their employment
in 1997 under the Army's staff restructuring plan--55 personnel left
through normal attrition and 281 personnel were offered financial
incentives to encourage their terminations.\12 In June and July 1997,
this latter group was tentatively approved for various financial
incentives in return for voluntary termination of employment.
By the end of June 1997, paperwork authorizing voluntary retirements
with cash incentives was approved for some employees while still
pending for others. Some left the Corpus Christi area thinking they
had been granted authorization to leave and receive cash incentive
payments. However, at this same time, headquarters AMC was
addressing numerous questions regarding the appropriateness of the
staff reduction effort, given the size of the depot's scheduled
workload. As a result of these questions, Headquarters, AMC, asked
the Army Audit Agency to review and comment on the documentation
supporting the recommended staff cuts.
Army Audit Agency personnel compared the IOC's assessment of
personnel requirements against computer-generated forecasts from the
AWPS, which was still under development. The auditors, using
AWPS-generated products as their primary support, concluded on June
27, 1997, that personnel cuts were not necessary. Furthermore, the
auditors concluded that, based on AWPS calculations, rather than lose
personnel, Corpus Christi depot would need to hire 44 additional
personnel.
On July 1, 1997, in response to the Army Audit Agency findings, the
Army directed its personnel offices to stop processing paperwork for
voluntary separations and financial incentives. On July 2, 1997,
Corpus Christi personnel officers were directed to recall the more
than 190 employees whose applications had not been fully approved.
This event caused a great deal of concern, both among the affected
personnel and the workforce in general. According to cognizant
Corpus Christi depot personnel officials, some of the employees had
taken separation leave, others had sold their residences, and still
others had moved out of state and bought new homes.
Subsequently, the Army organized a task force including
representatives from AMC, IOC, the Army Audit Agency, and depot
management to review and validate information contained in the AWPS
computational database. The team found that one major Corpus Christi
customer had incorrectly coded unfunded workload requirements
totaling $70 million as if they were funded, having the effect of
overstating personnel requirements. This process left unclear the
precise number of employees that were needed to support the approved
depot workload.
Nevertheless, after 3 to 4 weeks of what depot officials described as
zero productivity, the Army declared that documentation supporting
IOC's recommended reductions was accurate and employees were given
permission to depart.
--------------------
\12 Also in 1997, 336 Red River depot employees received financial
incentives to leave. Most of these terminations were related to the
BRAC Commission realignment of workloads to the Anniston Army Depot.
REDUCTIONS PRODUCED
UNINTENDED CONSEQUENCES
-------------------------------------------------------- Chapter 2:2.2
In offering financial separation incentives at the Corpus Christi
depot during fiscal year 1997, AMC did not limit the separation
opportunities to overhead personnel. They did not think the desired
number of workers would volunteer, if the incentives were restricted
to overhead personnel only. Further, headquarters personnel did not
want to require involuntary separations. Of the 281 personnel
separating with incentives from the Corpus Christi depot, 147 were
classified as direct labor and 134 as overhead personnel. Including
those separating without incentives,
187 direct labor employees were separated from Corpus Christi.\13
Given the potential imbalances in the workforce caused by the planned
personnel separations, Corpus Christi management and union personnel
jointly developed a plan to transfer indirect employees to fill
vacated direct labor jobs. These procedures were adopted before any
incentive offers were made and were designed to avoid the involuntary
separation of indirect personnel by retraining them to assume direct
labor jobs vacated by senior personnel accepting incentive offers.
The plan required that
49 overhead employees complete various training programs before they
could assume the targeted direct labor position. However, progress
toward achieving these objectives has been slower than expected. The
depot initially expected to backfill vacant direct labor jobs by
January 1998, but in May 1998 when we visited the depot, only
one-third of the 49 overhead personnel scheduled to be retrained had
moved to their newly assigned jobs and begun their conversion
training and by mid-July, depot officials advised that 80 percent had
moved to new positions.
In commenting on a draft of this report, Army officials stated that
these conversions were scheduled to be completed in November 1998.
However, depot officials also told us that it takes between 3 and 4
years to retrain a typical indirect employee as a direct employee.
According to depot personnel, the loss of 187 experienced direct
labor employees exacerbated the existing productivity problem at the
Corpus Christi depot. To fill in the need for direct labor,
employees worked a reported average of 19 percent overtime, and the
depot had to use 113 contractor field team personnel\14 in addition
to the 70 contractor personnel already working in the depot.
Nonetheless, the depot has had major problems meeting its production
schedule and, as discussed further in the next chapter, may lose
repair work from the Navy, except for crash damage work.
Subsequently, the Congress enacted the section 364 legislation, which
was effective November 18, 1997, postponing involuntary reductions
until the Army had certified it had an operational automated system
for determining workload and personnel staffing. As a result, the
balance of IOC's proposed staff reductions planned for fiscal year
1999 was deferred.
--------------------
\13 We have previously reported on the importance of planning for the
effective use of separation incentives to eliminate unnecessary
positions while retaining critical skills. See Federal Downsizing:
Better Workforce and Strategic Planning Could Have Made Buyouts More
Effective (GAO/GGD-96-62, Aug. 26, 1996).
\14 Contractor field team personnel are contractor employees who
augment the government workforce on an as-needed basis. These
personnel typically work along-side government employees.
AUTOMATED SYSTEM FOR
IDENTIFYING REQUIREMENTS COULD
SOON BE CERTIFIED OPERATIONAL,
BUT SOME DEVELOPMENT WORK
REMAINS
---------------------------------------------------------- Chapter 2:3
Army efforts to develop AWPS have proceeded to the point that
required certification to the Congress of its operational capability
is expected soon. Even so, efforts will be required to ensure that
accurate and consistent workload forecasting information is input to
the system as it is used over time. The Army recently completed
development and prototype testing of a system enhancement to provide
automated support for determining indirect and overhead personnel
requirements. Based on our draft report recommendations, the Army
plans to postpone AWPS certification until this system improvement is
operational at all five maintenance depots.
CERTIFICATION OF SYSTEM TO
THE CONGRESS
-------------------------------------------------------- Chapter 2:3.1
In May 1996, the Army completed installation and prototype testing of
the AWPS at the Corpus Christi Army Depot. In June 1997, it
announced plans to extend the AWPS process to other Army industrial
facilities, including manufacturing arsenals and ammunition storage
sites. At the same time, the Army expected that implementation of
AWPS at the five maintenance depots would be completed in August
1997.\15
Congressional certification as required by section 364 of the 1998
Defense Authorization has not yet occurred.
In March and April 1998, a team of representatives from various AMC
activities, in consultation with the Army Audit Agency, developed
AWPS acceptance criteria, that were later accepted by the Assistant
Secretary of the Army for Manpower and Reserve Affairs. Army
auditors compared acceptance criteria to actual demonstrated
experience and reported that the system is operational at all five
depots, system programming logic is reasonably sound, and AWPS
performance experience satisfies the Army's acceptance criteria.\16
In August 1998, Army officials stated that the Secretary of the Army
could make the mandated certification of successful implementation of
computer-based workload and personnel forecasting procedures at Army
maintenance depots within the next few months. Army officials stated
that several planned system enhancements have not yet been
implemented, but they do not believe these items would preclude the
Secretary from certifying successful completion of AWPS
implementation. However, in its written comments to our draft
report, DOD stated the Army now plans to postpone AWPS certification
until an automated support module for determining indirect and
overhead personnel requirements is fully operational at each of the
five maintenance depots.
--------------------
\15 In fiscal years 1996 and 1997, the Army estimates it spent $2.4
million on AWPS development and implementation. In fiscal year 1998,
it budgeted an additional $5 million for AWPS-related tasks.
\16 Army Workload and Performance System in Maintenance Depots,
AA98-258, July 31, 1998.
ENSURING ACCURATE DATA
-------------------------------------------------------- Chapter 2:3.2
Assuming successful system implementation, future reliability of the
system will depend upon the availability and entry of accurate and
consistent data imported to AWPS and used to generate system
products. The AWPS system provides three primary management
information products--information concerning production performance
on specific project orders and information concerning workload
forecasts and related workforce requirements. The AWPS system
receives and processes data from several computerized Army support
systems, including the Standard Depot System, Automated Time
Attendance and Production System, Headquarters Application System,
and Maintenance Data Management System. The Standard Depot System
and Automated Time and Attendance System input project status and
expense information from the depot perspective. The Headquarters
Application System provides status and planned workload data from the
IOC perspective, and the Maintenance Data Management System provides
workload data from the Army commodity command (major customer)
perspective.
Army leadership, in 1997, asked the Army Audit Agency to review and
validate the proposed depot personnel reductions. Although the
system was still being developed, this early experience demonstrated
the vulnerability of personnel requirement statements if the
computational database contains errors and inconsistencies. The Army
Audit Agency identified problems that resulted because AWPS-generated
staffing estimates were based on inaccurate workload forecasts
imported to the AWPS computational database. During the
implementation period, the Army periodically compared AWPS data with
similar information contained in the other computerized support
systems and found numerous inconsistences. Other data inaccuracies
stemmed from employees' not correctly charging time to job codes on
which they were working and the reporting of job codes that were not
recognized by the AWPS system. In July 1998, the Army Audit Agency
reported that comparisons of data contained in AWPS and several
support systems have improved to the point that system managers
believe the system logic and AWPS-processed data are reasonably
sound.
FURTHER SYSTEM ENHANCEMENTS
UNDERWAY
-------------------------------------------------------- Chapter 2:3.3
As of August 10, 1998, the Army had not updated and entered several
critical items into the automated workforce forecasting subsystems.
These items included (1) updating personnel requirements for overhead
personnel based on the approved 12-step process and (2) developing a
database of employee skills and a breakdown of depot workload tasks
by required job skills. However, as noted in its comments to a draft
of this report, DOD stated that the Army planned to postpone
certifying this system as operational until it incorporates automated
procedures for determining indirect personnel requirements. This
should enhance the effectiveness of the AWPS system.
AWPS was initially envisioned only as a tool for documenting
requirements for direct labor. However, in May 1998 the Army
determined that it would integrate an automated version of the
12-step process into the AWPS system. The model estimates for each
maintenance shop and support function the required fixed and variable
overhead personnel that are needed to support the direct workload.
Because the model is customized to meet individual depot needs, a
50-person sheet metal shop may have overhead requirements different
from a similarly sized electronics shop. In October 1998, Army
officials stated that the Army had installed an automated 12-step
process for predicting overhead personnel requirements at each of the
five maintenance depots and that the depots were developing input
data required by the system's computational database.
The Army also plans to enhance the current AWPS system by adding an
automated database reflecting specific skills of each depot's
employee. Work on this system enhancement is expected to be
completed in January 1999. The Army anticipates that the automated
database will enable the depots to estimate personnel requirements
for each specific job specialty and facilitate identification and
movement of skilled workers between shops to offset short-term labor
imbalances.
CONCLUSIONS
---------------------------------------------------------- Chapter 2:4
The Army did not have a sound methodology for projecting workforce
requirements; this led to a highly undesirable set of events that
resulted in the voluntary separation of direct labor employees, which
negatively impacted employees and depot productivity. Also, given
the need to use contract labor and the plan to have depot employees
consistently work substantial amounts of overtime, it is questionable
whether all of the reductions of direct labor personnel were
appropriate. This situation also illustrates the challenge of
targeting reductions at the depots in areas where there are excess
personnel and providing the required training to workers when skill
imbalances occur, as a result of transfers.
We believe the Army's inability to deal with the perceived need for
reducing overhead requirements prompted the chaotic staff reduction
effort at the Corpus Christi depot. Further, incorporation of the
capability to address overhead requirements is an essential element
of an effective AWPS system. The Army's current plan to postpone
certifying the AWPS system as operational until it incorporates
procedures for determining indirect personnel requirements should
enhance the overall effectiveness of the system.
RECOMMENDATIONS
---------------------------------------------------------- Chapter 2:5
We recommend that the Secretary of Defense require the Secretary of
the Army, in making future personnel reductions in Army depots, to
more clearly target specific functional areas, activities, or skill
areas where reductions are needed, based on workload required to be
performed. We also recommend that the Secretary of the Army complete
incorporating an analysis of overhead requirements into AWPS prior to
certifying the system, pursuant to section 364.
AGENCY COMMENTS AND OUR
EVALUATION
---------------------------------------------------------- Chapter 2:6
DOD concurred with the recommendations. It stated that the
development and testing of an automated process for predicting
indirect and overhead personnel requirements would be completed
before the system is certified as operational at maintenance depots.
We modified our conclusions and recommendations to reflect the
actions being taken by the Army in response to our draft report.
Specifically, we now recommend that the Army complete ongoing actions
that it initiated in response to our draft report recommendations.
We also incorporated technical comments that were provided by DOD
where appropriate.
UNRESOLVED ISSUES OVERSHADOW
PROGRESS IN NEW DEPOT WORKLOAD
FORECASTING SYSTEM
============================================================ Chapter 3
While the Army has made progress in establishing an automated process
for analyzing and documenting personnel requirements, it is still
faced with larger issues and factors that overshadow efforts to
improve workload forecasting and efficient depot operations. First,
workload estimates have been subject to frequent fluctuation and
uncertainty to such an extent that it is difficult to use these
projections as a basis for analyzing workforce requirements. Second,
DOD and Army policies have resulted in the transfer of Army depot
workloads to other government-owned repair facilities and private
sector contractors without corresponding reductions in depot
facilities and capacity. It is uncertain to what extent workloads
will be assigned to Army depots in the future. Third, depot
efficiency has been impacted by other factors--lower than anticipated
worker productivity, inefficient use of personnel resources, and the
timely availability of certain necessary repair parts.
CHANGING WORKLOAD ESTIMATES
INHIBIT ARMY EFFORTS TO PREDICT
PERSONNEL REQUIREMENTS
---------------------------------------------------------- Chapter 3:1
Workload estimates for Army maintenance depots vary substantially
over time due to the reprogramming of operations and maintenance
appropriation funding and unanticipated changes in customer
requirements. The Army's personnel budgets and staffing
authorizations are generally based on workload estimates established
18 to 24 months before new personnel are hired or excess employees
are terminated. Therefore, if actual workload is less than
previously estimated, the depot is left with excess staff.
Conversely, if actual workload is greater than previously estimated,
the depot would have fewer staff than it needs to accomplish assigned
work. Our work shows that workload estimates are subject to such
extensive changes that they hamper Army depot planners' ability to
accurately forecast the number of required depot maintenance
personnel. In discussing similar issues with Navy shipyard
personnel, we noted that in April 1996, the Navy issued guidance to
encourage shipyard customers to adhere to the workload plans
established during the budget process. Navy leadership found that
past weaknesses in workload forecasting contributed to inefficient
use of depot resources, which led to higher future operating rates to
compensate for previously underutilized shipyard personnel and
facilities. After implementing a guaranteed workload program to
stabilize work being assigned to naval shipyards, these activities
report having 3 years of positive net operating results, after
operating at a loss for over 5 years.
FUNDING TRANSFERS AFFECT
ESTIMATED DEPOT MAINTENANCE
WORKLOADS
-------------------------------------------------------- Chapter 3:1.1
Appropriated operations and maintenance funding for the depot-level
maintenance business area--a key source of depot maintenance
funding--is reprogrammed by the Army to a much greater extent than
funds for other operations and maintenance appropriation business
areas and create challenging fluctuations in workload execution.
Table 3.1 shows the amount of depot maintenance funding the Congress
appropriated for fiscal years 1996, 1997, and 1998 and the amounts
later reprogrammed to cover funding shortfalls in other programs.
For comparison purposes, table 3.1 provides the same information for
the balance of the Army's operations and maintenance funding.
Table 3.1
Operations and Maintenance Funds
Appropriated by the Congress and
Reallocated By DOD and Army Headquarters
Reprogramming
(Dollars in millions)
Depot maintenance business area Non-depot maintenance business areas
---------------------------------- -------------------------------------
Opera
tions
and
maint
enanc
e
funds FY 1996 FY 1997 FY 1998 FY 1996 FY 1997 FY 1998
----- ---------- ---------- ---------- ----------- ----------- -----------
Autho $966.4 $884.6 $780.2 $17,419.7 $16,928.2 $16,394.2
rized
by
the
Cong
ress
DOD- -15.7 -4.6 0.0 1,038.0 10.7 48.0
dire -1.62% -0.52% 0% 5.96% 0.06% 0.29%
cted
tran
sfer
s
Army- -39.6 -105.7 -23.9 -34.5 -242.1 -469.8
dire -4.09% -11.95% -3.06% -0.20% -1.43% -2.87%
cted
tran
sfer
s
from
unsp
ecif
ied
cong
ress
iona
l
adju
stme
nts
Army- -146.5 -55.2 -16.4 148.1 56.8 21.1
dire -15.16% -6.24 % -2.10% 0.85% 0.34% 0.13%
cted
tran
sfer
s
Final $764.7 $719.1 $739.9 $18,571.3 $16,753.6 $15,993.4
funds -20.87% -18.71% -5.17% 6.61% -1.03% -2.44%
avai
labl
e
--------------------------------------------------------------------------------
Notes: Estimated funding for fiscal year 1998 as of June 1998.
Percentages reflect change from total congressional authorization.
Unspecified congressional adjustments refer to provisions in the DOD
Appropriations Act which reduce Army budget requests, but leave the
allocation of funding adjustments to the discretion of DOD.
Source: GAO analysis based on Army budget data.
As indicated, funds for depot maintenance were reprogrammed at a much
higher rate than funds for the other operations and maintenance
business areas. The non-depot maintenance business areas provide
funding for civilian salaries and private sector contractor
support--funds that the Army generally has considered must be paid.
The depot maintenance programs for the in-house overhaul and repair
can be easily terminated without cost to the government. Army
officials explained that when depot orders are terminated, financial
losses are recovered by charging higher rates to future customers .
However, if contracted work is terminated for the convenience of the
government, the government often has to pay for expenses incurred by
the contractor. While Army officials stated that previous practices
resulted in an inequitable distribution of funding transfers, they
stated that they planned to conduct future reprogramming actions on a
more equitable basis.
Unanticipated funding transfers as a result of reprogramming actions
have impacted depot staffing and contributed to inefficient depot
operations. For example, we estimate Army reprogramming actions
moved funding that might have supported about 1,400 direct labor
positions and
750 overhead positions in fiscal year 1996. Similarly, reprogramming
actions in fiscal year 1997 moved funding that might have supported
about
1,125 direct labor positions and 650 overhead positions. These
reprogramming actions contributed to net operating losses in the
years cited and higher rates in subsequent years.
ARMY WORKING CAPITAL FUND
AVAILABILITY AND CHANGING
CUSTOMER REQUIREMENTS ALSO
AFFECT ESTIMATED DEPOT
MAINTENANCE WORKLOADS
-------------------------------------------------------- Chapter 3:1.2
AMC holds semiannual workload conferences to review, analyze, and
document depot workload estimates. Our work shows that the command's
estimates can differ significantly from reported spending, limiting
their value in documenting personnel budgets and requirements. For
example, in September 1994 the predecessor organization to the
current Aviation and Missile Command estimated that in fiscal year
1997 it would generate workload requirements and provide funding to
the Corpus Christi depot valued at about $161 million for the repair
of aviation components. At the beginning of the fiscal year 1997,
the projected workload value for that year decreased to $141
million--a 12-percent reduction. Moreover, the funded workload for
that year was less than $94 million--a decline of 42 percent from the
amount projected almost 3 years earlier. It is important to note
that the rates for fiscal year 1997 were developed using the workload
estimates projected in 1994. Partially as a result of the decreased
workload, Corpus Christi did not receive the revenues it needed to
break even. Losses for that year contributed to the need for
increased rates in subsequent years.
Army officials attributed the decline in forecasted workload to
reduced workload requirements resulting from slower-than-expected
customer revenues from the sales of repaired items and cash shortages
in the Army's working capital fund. Reduction of work typically
results in underutilized personnel and can result in orders being
placed for long lead-time parts that are not needed as expected. The
workload expected from the Aviation and Missile Command, but not
received, might have provided work for about 250 direct labor
employees and 150 overhead employees for a year.
Workload estimates for overhaul and repair requirements generated by
the other military services have also been inconsistent. For
example, in September 1995, the Navy estimated that it would provide
fiscal year 1998 funding for the overhaul of 38 helicopters at the
Corpus Christi depot. In May 1997, the Navy estimated that in fiscal
year 1998 it would fund the overhaul of 22, but in October 1997, it
estimated the funded workload that would likely materialize during
fiscal year 1998 would support the overhaul of only 12. Navy
officials told us the estimated helicopter overhaul requirements were
reduced, in part, because the Army was unable to complete prior year
funded repair programs within agreed time frames. Additionally, the
Navy is exploring ways to have future overhaul and repair work done
incrementally by either contractor or government employee field teams
working at Navy bases. The Navy believes the incremental overhaul
and repair process can be done more expeditiously. At this point, it
is unclear what role the Corpus Christi depot will play in providing
future overhaul and maintenance support for Navy helicopters.
Figures 3.1 and 3.2 depict the fiscal years 1997 and 1998 funding
estimates for the Corpus Christi Army Depot at various points in
time. For example at the start of fiscal year 1995, the Army
anticipated that the Corpus Christi depot would receive fiscal year
1997 funding for workloads valued at $349 million. Two years later,
at the start of fiscal year 1997, the estimate increased to $355
million, compared to actual funding of $326 million. On the other
hand, at the beginning of fiscal year 1996, the anticipated workload
for the depot was valued at about $302.5 million. At the beginning
of fiscal year 1998, the anticipated total had risen to about $333.5
million, and in June 1998, estimates of revenues for the year were
about $360.5 million. Depot officials pointed out that with these
variances in workload, it is almost impossible to set accurate rates
or to project with precision the number of employees needed to
perform the required work.
Figure 3.1: Fiscal Year 1997
Workload Estimates for Corpus
Christi Army Depot (dollars in
millions)
(See figure in printed
edition.)
Figure 3.2: Fiscal Year 1998
Workload Estimates for Corpus
Christi Army Depot (dollars in
millions)
(See figure in printed
edition.)
This experience at Corpus Christi illustrates the challenge depot
planners face in projecting personnel requirements when the workload
estimates change considerably over the 30 months between the time
rate-setting is initiated to the end of fiscal year for which rates
have been set. Similarly, under these conditions it is also
difficult for budget personnel to set labor-hour rates that will
generate the desired net operating result.
IMPLICATIONS OF DEPOT WORKLOAD
ASSIGNMENTS
---------------------------------------------------------- Chapter 3:2
As part of its overall depot maintenance strategy, the Army has
established policies and procedures for assigning potential depot
workloads to other government-owned repair facilities and the private
sector.\1 These practices have significant cost effectiveness and
efficiency implications for the depots, given the amount of excess
industrial capacity that exists. First, AMC has authorized
performance of depot-level workloads at government-owned repair sites
located on and near active Army installations and at National Guard
facilities. Second, Army policies and strategic plans emphasize the
use of the private sector for depot-level maintenance workloads,
within existing legislative requirements.
--------------------
\1 Our testimonies, Defense Depot Maintenance: Uncertainties and
Challenges DOD Faces in Restructuring Its Depot Maintenance Program
(GAO/T-NSIAD-97-112, May 1, 1997) and GAO/T-NSIAD-97-111, Mar. 18,
1997), noted that the Army would have 61 percent excess capacity in
fiscal year 1999, based on consideration of projected workload for
1999 and maximum potential capacity at the Army depots.
DEPOT WORK ASSIGNED TO OTHER
GOVERNMENT-OWNED FACILITIES
-------------------------------------------------------- Chapter 3:2.1
In recent years the Army's Forces Command and its Training and
Doctrine Command. have operated an increasing number of regional
repair activities at active Army installations. Additionally, the
Army National Guard operates regional repair activities at
state-owned National Guard sites. Collectively, these repair
activities are categorized as integrated sustainment maintenance
(ISM) facilities. Sustainment maintenance includes repair work on
Army equipment above the direct support level, including general
support and depot-level support tasks. Accordingly, Army
headquarters has allowed some ISM sites to perform depot-level
workloads under special repair authorities.\2 ISM repair sites are
staffed by a mixture of military and civilian federal employees,
state employees, and contractors. AMC officials stated that ISM
repair sites can perform depot-level work to save transportation
costs, expand employee skills and capabilities, and shorten repair
cycle times. We noted that many of the items requiring depot repair
are being shipped to other bases' ISM repair sites, under a center of
excellence program that is designed to assign work to the most cost
effective repair source.
We did work at Army ISM facilities located at Fort Campbell,
Kentucky, and Fort Hood, Texas, and an Aviation Classification Repair
Activity Depot operated by the Connecticut National Guard.\3 We noted
that each facility was performing depot-level work that was similar,
and sometimes identical, to work currently being conducted at the
Corpus Christi Army Depot. For example, each repair site operated
environmentally-approved painting facilities large enough to strip
and repaint an entire helicopter--a task also being conducted at the
Corpus Christi depot. Further, the National Guard facility was
refurbishing Blackhawk helicopters--a task identical to work
currently assigned to the Corpus Christi depot. Additionally, each
facility will undergo or has recently undergone expansion and
modernization. For example, the Fort Hood repair facility, which was
constructed in 1994 at a reported cost of about $60 million, is
scheduled for further expansion, and the National Guard facility was
recently doubled in size at an estimated cost of $20 million.
ISM repair sites are not working capital fund activities. Repair
work at these sites is financed through direct appropriations to the
operational units, which obligate a level of funding at the beginning
of the year. Field-level personnel believe they get a better value
for repair work that is performed at the unit level than at the
depots and prefer to use field level repair whenever they can.
The continuing reliance and expanded use of regional repair
facilities for depot-level workloads could have a substantial impact
on the future viability and efficiency of operations at the Army's
public sector depots. While the overall impact on the depots'
workloads has not been estimated, an AMC report shows that in fiscal
year 1996, ISM and similar repair facilities received at least $51
million for depot-level tasks. AMC personnel told us they believe
the actual amount of depot-level work is much higher because not all
depot-level tasks and related work is reported. Further, DOD's 1998
logistics strategic plan envisions the eventual elimination of the
public depot infrastructure by expanding the use of regionalized
repair activities across all levels of maintenance and contracting
more workloads. Lastly, an AMC reorganization proposal suggests that
the current Corpus Christi Army Depot functions could be transferred
to the four National Guard Aviation Classification Repair Activity
Depots.
In commenting on a draft of this report, DOD stated that the Army
approves Special Repair Authorities to enable regional repair
facilities to conduct specific depot-level maintenance tasks for a
specified number of items, after it evaluates the impact on depot
workloads and core capabilities. However, our work shows that some
Special Repair Authorities were granted for varying numbers of items
to be repaired over prolonged time frames creating some uncertainty
over how well the long-term impact on depot workloads and core
competencies may have been assessed. Some Army officials told us
that Army reviewers have historically had little incentive to
recommend disapproval of proposed Special Repair Authorities since
they would likely be overruled by higher headquarters. More
recently, Army headquarters officials told us they began to reject a
number of proposed Special Repair Authorities and that they are
undertaking a study to reevaluate the Special Repair Authorities
process.
--------------------
\2 Special repair authorities, are approved after AMC determines that
the repair sites have adequate facilities and equipment and
sufficient trained personnel to accomplish the tasks.
\3 In addition to the Connecticut facility, the Army National Guard
has established similar facilities in Missouri, Mississippi, and
California and smaller facilities in almost every state.
WORK SHIFTING TO PRIVATE
SECTOR
-------------------------------------------------------- Chapter 3:2.2
DOD strategic plans and policies express a preference for assigning
depot-level workloads to the private sector rather than public sector
depots.
Recent DOD policies and plans show that DOD expects to increasingly
outsource depot maintenance activities, within the existing
legislative framework. For example, the DOD logistics strategic plan
for fiscal
years 1996 and 1997 envisions that it will develop plans to
transition to a depot-level maintenance and repair system relying
substantially on private sector support to the extent permitted under
the current legislative framework. The 1998 plan states that DOD
will pursue opportunities for eliminating public sector depot
maintenance infrastructure through the increased use of competitive
outsourcing. Further, in March 1998 we reported, overall, DOD is
moving to a greater reliance on the private sector for depot support
of new weapon systems and major upgrades, reflecting a shift from
past policies and practices, which generally preferred the public
sector. In that regard, the Secretary of the Army has announced
plans to pursue several pilot programs that would make the private
sector responsible for total life-cycle logistics support, including
depot-level maintenance and repairs.\4
DOD policy also emphasizes the use of private sector contractors for
modifications and conversions of weapon systems. For example, in
August 1996 the Army awarded a multiyear contract for the upgrade of
Apache Longbow helicopters. While it is difficult to predict the
number of depot maintenance jobs affected by this policy, the Army
Audit Agency reported in June 1998 that the Apache Longbow
modification, conversion, and depot maintenance workload will likely
involve from 2,063 to 2,998 personnel.
In June 1998, the Secretary of the Army identified two weapon
systems--the Apache helicopter and the M109 combat vehicle--to
potentially pilot test prime vendor support concepts. Under this
concept, private sector firms would provide total life-cycle supply
and maintenance support. It is uncertain if or when these prime
vendor contracts will be awarded, or what impact this would have on
future workload and staffing of Army depots.\5
--------------------
\4 Defense Depot Maintenance: DOD Shifting More Workload for New
Weapon Systems to the Private Sector (GAO/NSIAD-98-8, Mar. 31,
1998).
\5 We recently reported that DOD is currently close to the maximum
amount of depot maintenance work it may allocate to the private
sector. See Defense Depot Maintenance: Public and Private Sector
Workload Distribution Reporting Can Be Further Improved (GAO/NSIAD
98-175, July 23, 1998).
OTHER FACTORS INHIBITING DEPOT
EFFICIENCY
---------------------------------------------------------- Chapter 3:3
We identified several factors contributing to depot inefficiency,
including (1) the less-than- expected productivity, (2) excess depot
capacity, (3) the lack of flexibility to shift workers among
different functions, and (4) the nonavailability of parts.
Additionally, we have previously reported that the Army's current
repair pipeline is slow and inefficient and could be improved by
implementing various private sector best practices, several of which
are being considered at the Corpus Christi depot.\6
--------------------
\6 Inventory Management: The Army Could Reduce Logistics Costs for
Aviation Parts by Adopting Best Practices (GAO/NSIAD-97-82, Apr. 15,
1997).
PRODUCTIVITY LESS THAN
EXPECTED
-------------------------------------------------------- Chapter 3:3.1
Although DOD's depot productive workyear standard for depots was
1,615 hours, for fiscal year 1997, each of the Army depots reported
productive levels below the standard (see table 2.3). Additionally,
at the Corpus Christi depot, we noted that the hours required to
complete depot maintenance projects exceeded the standard, which
serves as the basis for payment, resulting in significant losses for
that fiscal year.
The most significant productivity problem at the Anniston depot
appeared to be that the expected levels of work that had been
programmed did not materialize, including work that was expected to
transition from the Red River and Letterkenny depots as a result of
BRAC decisions. Anniston officials said they were reluctant to
eliminate positions since the additional work should show up during
1998. Thus, in the short term, the workforce did not have enough
work to keep it fully employed.
At Corpus Christi, the inability to complete work within scheduled
time frames was a problem. As previously discussed, the use of large
amounts of sick leave and annual leave and more holiday leave than
other depots contributed to this problem. At the same time, we noted
that this depot used premium pay in the form of overtime to a much
greater extent than other Army depots.
We also noted that specific projects at Corpus Christi had consumed
significantly more hours than projected, resulting in financial
losses and schedule delays. For example, on average, depot employees
charged 22,422 direct labor hours for each Seahawk helicopter
repaired, compared to the projected goal of 12,975 hours per
aircraft. In commenting on a draft of this report, DOD officials
stated that this situation was caused by a variety of factors,
including lack of access to Navy managed parts, lack of experience
with some Navy-unique systems, and the fact that Navy helicopters
were in worse physical condition than most comparable Army
helicopters being inducted for overhaul work. Cumulative financial
losses on the completed overhaul and repair of 29 Navy Seahawk
helicopters are estimated at about $40.1 million, and total reported
losses on completed Navy helicopters exceed $80 million.
Recognizing these problems, the Army has implemented a process
reengineering plan to reduce the average repair cycle from the
current
515 days to 300 days. As previously noted, the Navy is considering
shifting repair work to field teams at Navy units. Since Navy work
is about 30 percent of Corpus Christi's workload, the depot could
lose 400 to
500 direct labor positions and increase its estimated future
operating rates by about $20 per hour. Similarly, time charged
against the overhaul of the T-53 engines used on the Huey helicopter
was about 52,000 direct labor hours for 60 engines, compared to the
projected goal of about
23,000 hours. The Army is considering plans to contract with the
private sector for the performance of this work. At this time, it is
uncertain what role, if any, the depot will have in future T-53
engine repair programs.
EXCESS CAPACITY PROBLEMS
CONTINUE TO IMPEDE EFFICIENT
DEPOT OPERATIONS
-------------------------------------------------------- Chapter 3:3.2
While the Army has not clearly articulated its long-range plans for
its five depots, in the past it has stated that only three are
needed, and more recent actions suggest that number may be even
smaller. As discussed in a 1996 report, each of the five remaining
depots has large amounts of underutilized production capacity which
require substantial financial resources to support.\7 For example,
the Army recently reported that its depots have capability to produce
about 16 million hours of direct labor output, given the current
plant layout and available personnel. The report also states that in
fiscal year 1998 depots will produce an estimated 11 million hours of
direct labor output, meaning that 68 percent of the available plant
equipment and personnel are fully utilized on a single shift, 40-hour
week. Further, the depots are capable of producing even greater
amounts of work.
Until recently, no attempt had been made to look at maintenance
capability from a total Army perspective, including capability at the
field level and in the National Guard. In commenting on a draft of
this report, DOD cited several examples of efforts that they are
starting to analyze maintenance requirements from a total Army
perspective. For example, the ISM concept is designed to integrate
and coordinate maintenance provided by active Army units, Army
reserve activities and the Army National Guard installations. In
addition, DOD stated that the Army will establish a Board of
Directors to manage and coordinate depot-level maintenance from a
total Army perspective.
--------------------
\7 Army Depot Maintenance: Privatization Without Further Downsizing
Increases Costly Excess Capacity (GAO/NSIAD-96-201, Sept. 18, 1996).
DIFFICULTY SHIFTING WORKERS
-------------------------------------------------------- Chapter 3:3.3
Improved systems and procedures for shifting workers between
different organizational units and skill areas would offer better
opportunities to effectively use limited numbers of maintenance
personnel. Depot officials noted that prior practices made it
difficult to transfer workers between organizational units and skill
areas to adjust for unanticipated work stoppages caused by changes in
work priorities, parts shortages, technical problems, or temporary
labor imbalances. For example, in late 1997 work was suspended on
repair of the T-53 engine at Corpus Christi due to a safety of flight
issue, but personnel in that shop were not reassigned to other areas
whose work was behind schedule.
Depot workers are trained in specific technical areas and perform
work within their specific specialty code and organizational units.
Agreements between the unions and the depots generally require that
workers be assigned work only in their specialty areas; therefore,
depot managers have limited capability to move workers to other
areas. Depot managers noted that, in some cases, a worker could work
in another area under the direction of a qualified specialist in the
second skill area. Union officials at one depot stated that members
understand the benefits of more flexible work agreements, but in the
past have been reluctant to adopt them.
Depot managers cited a number of ongoing efforts that should, in the
future, lead to more effective use of skilled depot workers. For
example, depot managers said they were encouraging their workers to
take courses during their off-duty time to develop multiple skills.
Further, depot officials said completion of an ongoing AWPS system
enhancement project will provide an automated database reflecting the
specific skills of each depot employee to facilitate identification
of workers with the skills that are needed to meet short-term labor
imbalances. Lastly, depot mangers are considering changes to
organizational structures to better facilitate movement of skilled
workers between shops.
In discussing this issue with Navy officials, we were told that when
the Navy transferred civilians from the Pearl Harbor Shipyard to an
intermediate activity at the same location, they implemented a
program known as multi-crafting or multi-skilling through which
workers trained in a second, complementary skill area so that they
were qualified to do more tasks. Workers in seven different workload
combination areas were involved in the program and received training
in multiple skill areas. In the rubber and plastics forming skill
area, cross-trained workers got a pay raise in addition to the
satisfaction of knowing they were multi-skilled and more valuable
employees. Maintenance facility managers said that the added
flexibility of multi-skilling allowed them to use a limited number of
workers more cost effectively and to be more responsive to emerging
requirements. While we have not evaluated the extent to which the
use of multi-crafting and multi-skilling has improved the efficiency
of the Navy's combined operations, in concept it is in line with best
practices employed by the private sector and appears to have merit.
In commenting on a draft of this report, DOD stated that the Army's
direct labor personnel can become multi-skilled through support of
the labor unions. They noted that while depot managers have the
right to assign employees to specific work areas, they need to work
with labor organizations to adopt more flexible work arrangements
through collective bargaining or other partnering arrangements.
LACK OF REQUIRED PARTS
-------------------------------------------------------- Chapter 3:3.4
Parts shortages have also contributed to inefficient depot
operations. For example, we previously reported on the length of
time it took to repair and ship parts and an Army consultant recently
reported that repair technicians spend as much as 40 percent of their
time looking for required parts.\8 Army depots obtain parts from a
variety of sources, including the Defense Logistics Agency, inventory
control points operated by the military services, the private sector
through local purchases, and limited depot manufacturing. Since Army
procedures give higher priority in processing orders for parts to
operational units and field-level repair activities, parts shortages
are more likely to occur at the depot level. Further, parts shortage
problems could increase as a result of a recent AMC headquarters
decision attempting to eliminate parts inventories that have been
procured for future depot use. For example, Corpus Christi maintains
an inventory at a reported value of about $37 million for emergent
work. AMC plans to have the depots turn in the material without
giving a financial credit, a process that could cause the depots to
report a financial loss equaling the inventory's value.\9 Officials
at the Corpus Christi depot expressed concern that, without this
inventory, their access to aviation parts, especially those that have
long leadtimes to order, will deteriorate even more as will their
ability to complete their work in a timely manner.
According to a Corpus Christi official, depot workers waited an
average of 144 days from the time they placed requisitions with the
Defense Logistics Agency until orders were received. Additionally, a
large number of requisitions placed by the Corpus Christi Army Depot
for parts managed by a Navy-operated inventory control point were
initially rejected because the automated requisition processing
system had not been modified to recognize the Army depot as a valid
customer.
Although depot supply support depends largely on external sources,
Corpus Christi Army Depot has taken actions to address the
inefficiencies in the portions of the process they control. For
example, a recent study by an Army consultant concluded that the
material management process costs the depot an estimated $19 million
per year and that a large percentage of these costs represents
nonvalue added time spent handling, sorting, retrieving, inspecting,
testing, and transporting parts between various local storage
locations. A depot official estimated that the process reengineering
plan, initiated in May 1997, will reduce the administrative costs by
$10 million. Some of these initiatives include reducing (1) the
average time required to obtain parts from the local automated
storage and retrieval system from 12 to 4 days, (2) the time required
to complete local purchase actions from 121 to 35 days, and (3) the
number of days to complete local credit card purchases from 49 to 10
days.
--------------------
\8 Inventory Management: The Army Could Reduce Logistics Costs for
Aviation Parts by Adopting Best Practices (GAO/NSIAD-97-82, Apr. 15,
1997).
\9 In commenting on a draft of this report, Army officials informed
us that the value of Corpus Christi Army Depot's inventory and the
extent of the loss will be less than originally contemplated as
Corpus Christi Army Depot has been able to consume a significant
portion of the inventory. However, they did not provide an estimate
of the inventory value.
CONCLUSIONS
---------------------------------------------------------- Chapter 3:4
Even though the Army has made progress in building an automated and
more rigorous process for analyzing and documenting personnel
requirements, important enhancements remain to be completed.
Moreover, other severe problems--including significant fluctuations
in funding, rising costs and continued losses in the Army's military
depots--create much instability and uncertainty about the
effectiveness and efficiency of future depot operations. Some
reductions in the amount of work assigned to the military depots has
occurred while such work performed by private sector contractors has
increased. Further, by adding to its maintenance infrastructure at
Army operational units in the active and guard forces and performing
depot-level and associated maintenance at those locations, the Army
has been adding to the excess capacity, underutilization, and
inefficiency of its depots. The extent and financial impact of this
situation is unknown. However, the Army is clearly suboptimizing use
of its limited support dollars, and efforts are needed to minimize
the duplications and reduce excess infrastructure. The Army needs to
adopt reengineering and productivity improvement initiatives to help
address critical problems in existing depot maintenance programs,
processes, and facilities.
RECOMMENDATIONS
---------------------------------------------------------- Chapter 3:5
We recommend that the Secretary of Defense require the Secretary of
the Army to
-- establish policy guidance to encourage AMC customers to adhere
to workloading plans, to the extent practicable, once they are
established and used as a basis for the development of depot
maintenance rates;
-- require reevaluation of special repair authority approvals to
accomplish depot maintenance at field activities to determine
the appropriateness of prior approvals, taking into
consideration the total cost to the Army of underutilized
capacity in Army depots;
-- encourage depot managers to pursue worker agreements to
facilitate multi-skilling or multi-crafting in industrial
facilities; and
-- direct the depot commanders to develop specific milestones and
goals for improving worker productivity and reducing employee
overtime rates.
AGENCY COMMENTS AND OUR
EVALUATION
---------------------------------------------------------- Chapter 3:6
DOD concurred with our recommendations and described several steps
being taken to address our recommendations. For example:
-- AMC recently reemphasized the importance of realistic and
stabilized workload estimates to optimize depot capacity
utilization, stabilize operating rates, and support future
personnel requirements determinations.
-- DOD stated that it recently initiated "A Study of the
Proliferation of Depot Maintenance Capabilities" to include an
examination of the current approval process for Special Repair
Authority requests.
-- DOD stated its intention to work in concert with the Army and
other Services to pursue efforts to eliminate excess industrial
capacity through future BRAC rounds and facilities
consolidation.
DOD concurred with our recommendation to pursue multi-skilling or
multi-crafting, but stated that such arrangements require
implementation by individual depot managers. We have revised our
recommendation accordingly.
While DOD agreed with our recommendation for developing milestones
and goals for improving the efficiency of its depot operations to
include reductions in employee overtime rates, it did not specify
what actions were planned. We also incorporated technical comments
where appropriate.
UNCERTAINTIES SURROUND FUTURE OF
ARSENALS
============================================================ Chapter 4
The Army plans to begin installing the new AWPS in its manufacturing
arsenals in December 1998. However, it is not clear how effective
the system will be in terms of identifying the arsenals' personnel
requirements--given the uncertainty surrounding their future workload
requirements. The arsenals are also confronted with larger problems
and uncertainties that could diminish the effectiveness of the Army's
efforts to automate the process of determining workforce
requirements, stabilize its workforce, and increase productivity. At
these facilities there have been significant workload reductions as a
result of defense downsizing and increased reliance on the private
sector. However, commensurate reductions have not been made to
arsenal facilities. The arsenals have sought to diversify to improve
the usage of available capacity and reduce their overhead costs, but
limitations exist on their ability to do so. The Army is considering
converting its two arsenals to government-owned, contractor-operated
facilities. However, key questions, such as the cost-effectiveness
and efficiency of this option, remain unanswered.
AUTOMATED REQUIREMENTS PROCESS
IS PLANNED FOR ARSENALS
---------------------------------------------------------- Chapter 4:1
The Army plans to begin installing the AWPS system in its two weapons
manufacturing arsenals beginning in December 1998 and to complete
that installation by September 1999. In June 1998, the Army began
installing a prototype AWPS at one of its eight ammunition storage
and surveillance facilities. Upon completion of the prototype
testing, the Army plans to extend the system to the two weapons
manufacturing arsenals.
WORKLOAD IS DECLINING AND
CAPACITY IS UNDERUTILIZED
---------------------------------------------------------- Chapter 4:2
Since the end of the Cold War, workloads and employment at the two
remaining arsenals have declined substantially; however, operating
costs have continued to escalate as fixed costs have been spread
among increasingly smaller amounts of workload. Additionally,
personnel reductions have not kept up with workload reductions. At
Rock Island, the workload dropped a reported 36.9 percent between
1988 and 1997 while the staffing dropped 30.8 percent. At Watervliet
the reported workload dropped 64 percent during the same period while
staffing dropped 51.8 percent. As workloads continue to decline, the
arsenals have been left with relatively fixed overhead costs,
including the salary expenses for an increasing percentage of
overhead employees. For example, as of fiscal year 1998, the
Watervliet Arsenal reported employing 409 direct labor "revenue
producers" and 473 overhead employees compared with 1,089 direct
labor workers and 924 overhead employees reported 10 years ago.
Table 4.1 compares the arsenals' workloads in direct labor hours and
employment levels at the end of fiscal years 1988 through 1997 and
projections for fiscal year 1998.
Table 4.1
Reported Arsenal Workload and Employment
Levels for Fiscal Years 1988 Through
1998
Rock Island Watervliet
---------------------- ----------------------
Fiscal year Workload\a Workforce Workload\a Workforce
---------------------- ---------- ---------- ---------- ----------
1988 1,944,291 2,501 1,894,000 2,013
1989 Not known 2,609 1,703,000 1,928
1990 1,843,268 2,442 1,583,000 1,767
1991 1,790,685 2,460 1,556,000 1,719
1992 2,029,436 2,377 1,444,335 1,623
1993 1,849,193 2,289 1,313,044 1,538
1994 1,583,674 2,144 1,129,575 1,422
1995 1,557,574 2,033 834,000 1,103
1996 1,258,073 1,853 800,000 1,024
1997 1,225,849 1,730 681,000 971
1998 1,140,941 1,531 593,000 897
----------------------------------------------------------------------
\a Workload is expressed in the number of direct labor hours
Source: Rock Island and Watervliet Arsenals.
Currently, the arsenals are using only a small portion of their
available manufacturing capacity in the more than 3.3 million square
feet of reported industrial manufacturing space. An arsenal official
estimated that as of April 1998 the Watervliet facility was utilizing
about 17 percent of its total manufacturing capacity--based on a
single 8-hour shift, 5-day workweek--compared with about 46 percent 5
years ago and about 100 percent 10 years ago. Similarly, as of July
1998, officials at the Rock Island Arsenal estimated the facility was
utilizing about 24 percent of its total manufacturing capacity
compared with about 70 percent 5 years ago and about 81 percent 10
years ago.\1
Underutilized industrial capacity contributes to higher hourly
operating rates. Over the last 10 years, the hourly rates charged to
customers increased by about 88 percent at Watervliet and about 41
percent at Rock Island.
--------------------
\1 The arsenals determined industrial capacity based on the peak
workload accomplished by the facility using the current plant layout
and complement of industrial plant equipments, assuming a single
8-hour shift, 5-day workweek. Capacity utilization rates are based
on a comparison of current workload levels to the peak industrial
capacity.
MOVEMENT TOWARD GREATER
RELIANCE ON THE PRIVATE SECTOR
---------------------------------------------------------- Chapter 4:3
The Arsenal Act (10 U.S.C. 4532) was enacted in 1920 and provides
that the Army is to have its supplies made in U.S. factories or
arsenals provided they can do so on an economical basis. The act
further provides that the Secretary of the Army may abolish any
arsenal considered unnecessary.\2
The importance of the arsenals as a manufacturing source has declined
over time. The declining workload noted in table 4.1 is a reflection
both of defense downsizing in recent years as well as increased
reliance on the private sector to meet the government's needs.
In recent years, the Army has pursued a policy of contracting out as
much manufacturing work as possible to the private sector. When work
was plentiful for both the arsenals and the private sector during the
Cold War years, the allocation of work in accordance with the Arsenal
Act was not an issue. However, the overall decline in defense
requirements since the end of the Cold War has substantially reduced
the amount of work needed.
When making decisions based on the Arsenal Act, the Army compares
public and private sector manufacturing costs to determine whether
supplies can be economically obtained from government-owned
facilities--a process referred to as "make or buy". The comparison
is based on the arsenals' marginal or additional out-of-pocket costs
associated with assuming additional work. However, the arsenals
report little use of the "make or buy" process. For example,
Watervliet reported that it has not participated in a "make or buy"
decision since 1989 and has not received any new work through the
Arsenal Act since at least then. Rock Island officials could
identify only one item for which it received new work through the
Arsenal Act in recent years. Officials at both arsenals said they do
not expect to receive any future work as a result of "make or buy"
analyses.\3
--------------------
\2 However, as we previously reported, the Congress enacted
legislation, codified in 10 U.S.C. 2687, which essentially halted
base closures by DOD. Under the statute, the closure or realignment
of any military installation in the United States above a certain
threshold of authorized civilian personnel could not take place until
the Secretary of Defense had satisfied certain study and reporting
requirements, notified the Congress of the proposed closure or
realignment, and waited 30 legislative days or 60 calendar days,
whichever was longer, before proceeding. As a consequence, no major
domestic military bases were closed between 1977 and 1988. Bases
closed under BRAC rounds held between 1988 and 1995 were authorized
under special legislation (P.L. 100-526 and the Base Closure and
Realignment Act of 1990, title XXIX, P.L. 101-510) which expired at
the end of 1995. See: Military Bases: Lessons Learned From Prior
Base Closure Rounds (GAO/NSIAD-97-151, July 25, 1997).
\3 In commenting on a draft of this report, DOD stated that the
arsenals are incapable of producing the majority of the products
needed by today's Army.
DECREASING WORKLOADS IMPACT
ARSENALS
---------------------------------------------------------- Chapter 4:4
As their workloads have declined, the arsenals have become less
efficient, because each remaining direct labor job must absorb a
greater portion of the arsenals' fixed costs. As noted earlier,
rates charged to customers have increased significantly in recent
years at both arsenals. Some efforts have been made to diversify
into other manufacturing areas to better use excess capacity and
reduce costs, but limitations exist. AMC headquarters has proposed
converting the two arsenals to GOCO facilities. However, key
questions--such as how much of this type of capacity is needed, and
the cost-effectiveness of the various alternatives--remain
unanswered.
Unlike maintenance depots, where workload is largely centrally
allocated by Army headquarters, arsenal managers market their
capabilities to identify potential military customers and workloads.
Similar to private sector business, arsenal managers recover
operating expenses through sales of products that produce revenues.
However, as their volume of work declines, the arsenals must either
reduce costs or increase prices to customers. If prices are
increased, customers may go elsewhere to satisfy their needs, further
exacerbating the declining workload problem. Recent proposals by the
Watervliet Arsenal to balance workload and staffing were disapproved
by Army headquarters in anticipation of new workloads. However,
Watervliet officials stated that, as of October 1998, no new work had
materialized and none was expected. This lack of new work could
result in greater losses than planned at that facility.
Each year arsenal personnel estimate the amount of work they expect
to receive and then use this information as a basis for projecting
personnel requirements. The expected workload is divided into
various categories based on the estimated probability of workload
actually materializing. Work that is already funded is categorized
as 100 percent certain. Unfunded work is categorized based on its
considered probability of becoming firm. Watervliet, for example,
uses three probability categories for unfunded workloads: 90, 60,
and 30 percent. Staffing is then matched to the workload
probability. Staffing needs for fully funded work and work with a
90-percent probability is allocated at 100 percent of the direct
labor hour requirements. Staffing requirements for the remaining
work is allocated in accordance with the workload probabilities.
In October 1997, AMC headquarters gave Watervliet approval to
eliminate 98 positions by the end of fiscal year 1998. Also, on the
basis of an expected decline in workload in fiscal year 1998, AMC
headquarters gave the Rock Island Arsenal approval in May 1998 to
eliminate 237 positions for a total arsenal workforce reduction of
335 positions. Employees who voluntarily retire or resign will
receive incentive payments, based on a varying scale with a maximum
payment of $25,000. These incentives were intended to reduce the
number of employees facing involuntary separations. By the end of
September 1998, 54 Watervliet and 146 Rock Island employees had
accepted incentive offers. As an additional incentive to encourage
voluntary separations, the arsenals, in August 1998, received
authority to offer early retirements to eligible employees.
ARSENALS ARE DIVERSIFYING,
BUT OTHER OPTIONS ARE
EXPECTED TO BE EXAMINED,
INCLUDING THE ESTABLISHMENT
OF A GOCO OPERATION
-------------------------------------------------------- Chapter 4:4.1
Both arsenals have tried to develop new areas of work because their
traditional weapon-making roles no longer provide enough work to
allow them to operate efficiently. For a number of years, Rock
Island has been fabricating and assembling tool kits, maintenance
trucks, and portable maintenance sheds for the Army, other military
services, and civilian agencies. Rock Island personnel involved in
this work made up about 22 percent of the arsenal's total employment
in fiscal year 1998. Watervliet has tried to branch out into making
propulsion shafts for Navy ships and has done contract work for
private industry, making such things as ventilator housings and other
metal fabrication items. The Rock Island facility is still selling
exclusively to government customers.
10 U.S.C. 4543 requires that the arsenals cannot sell items to
commercial firms unless a determination is made that the requirement
cannot be satisfied from a commercial source located in the United
States. However, section 141 of the 1998 Defense Authorization Act
provides for a pilot program enabling industrial facilities including
arsenals during fiscal years 1998 and 1999 to sell articles to
private sector firms that are ultimately incorporated into a weapon
system being procured by DOD without first determining that
manufactured items are not available from commercial U.S. sources.
As a part of the Army's plan to reduce personnel positions under the
Quadrennial Defense Review, the Army plans to study the cost benefits
of converting the arsenals to GOCO facilities.\4 The AMC plans to
initiate commercial activity studies for converting arsenal
operations in fiscal year 1999. These studies will be conducted
under the guidelines specified by OMB Circular A-76. According to an
AMC official, the Army has determined that the government should
retain ownership of the arsenals; however, operational responsibility
could be assigned to a private sector contractor.
As a first step in the process, the arsenals are to develop proposed
staff structures, documenting the government's most efficient
operating strategy, and commercial offerors will be asked to submit
proposals for operating the government-owned facility. A
source-selection panel will compare the government's proposal with
offers from private sector contractors. According to an AMC
official, if the source-selection panel determines that a private
sector offeror would provide the most cost-effective solution, nearly
all remaining government employees at the arsenals would be
terminated by 2002.
--------------------
\4 The Quadrennial Defense Review, required by the fiscal year 1997
Defense Authorization Act, among other things, targeted
infrastructure reductions to achieve savings for increased funding of
weapon system modernization programs.
CONCLUSIONS
---------------------------------------------------------- Chapter 4:5
If recent workload declines and the consequent workforce reductions
at the Rock Island and Watervliet arsenals continue, the long-term
viability of these facilities is uncertain. Arsenal workloads have
declined to the point that, even with significant personnel losses,
their capabilities are significantly underutilized and greatly
inefficient. An important part of the future decision making process
will be analyzing the cost efficiency of government-owned and
-operated facilities compared to the cost efficiency of GOCO
facilities. If retention of a government-owned and -operated
facility is found to be the most cost-effective option, then
decisions will be needed that adjust capacity to better match
projected future workload requirements.
RECOMMENDATIONS
---------------------------------------------------------- Chapter 4:6
We recommend that the Secretary of Defense require the Secretary of
the Army to (1) assess the potential for improving capacity
utilization and reducing excess arsenal capacity, and (2) evaluate
options for reducing costs and improving the productivity of the
remaining arsenal capacity.
AGENCY COMMENTS AND OUR
EVALUATION
---------------------------------------------------------- Chapter 4:7
DOD concurred with each of our recommendations. It agreed that the
Watervliet and Rock Island Arsenals currently support considerable
amounts of excess manufacturing capability and stated that both
facilities are included in current AMC plans to conduct a complete
installation A-76 review to identify the most cost-effective option
for future operations, including an evaluation of options for
reducing costs and improving productivity.
STRATEGIC PLAN IS ESSENTIAL FOR
ADDRESSING THE FUTURE OF ARMY
DEPOTS AND ARSENALS
============================================================ Chapter 5
The synergy of the issues discussed in this report highlights a
broader and more complex message regarding the effect of unresolved
problems that impact the future of industrial operations currently
performed in the Army. It also affects the cost-effectiveness of
support programs for current and future weapon systems. These
problems include the need to (1) clearly identify the workload
requirements if`capabilities are to be maintained in-house, (2)
consolidate and reengineer functions and activities to enhance
productivity and operating efficiencies, and (3) reduce excess
capacity. Resolution of these problems requires that they be
considered within the legislative framework pertaining to industrial
operations. We have previously cited the need for improved strategic
planning to deal with logistics operations and infrastructure issues,
such as those affecting the Army's industrial facilities.
SUMMARY OF ISSUES
---------------------------------------------------------- Chapter 5:1
The Army faces difficult challenges in deciding what, if any,
depot-level maintenance and weapons manufacturing workloads need to
be retained in-house to support national security requirements. The
1998 DOD Logistics Strategic Plan states that, in the future, DOD
will advocate the repeal of legislative restrictions on outsourcing
depot maintenance functions by developing a new policy to obtain the
best value for DOD's depot maintenance funds while still satisfying
core capability requirements. Until DOD and the Congress agree on a
future course of action, it will be difficult to plan effectively for
dealing with other issues and problems facing DOD and the Army's
maintenance programs and systems.
If the decision is made to retain certain amounts of in-house depot
and arsenal capabilities, it will be important to look at overall
maintenance infrastructure, including below depot as well as
depot-level maintenance requirements in active as well as reserve
forces, to ensure that the minimum level is retained that meets
overall military requirements. Consolidation of existing activities,
to the extent practicable, within the constraints of operational
requirements, will be essential for developing a more efficient and
cost-effective support operation. Further, improvement initiatives
to address long-standing productivity issues are key to providing
required maintenance capability for the least cost. Finally, the
elimination of excess capacity--both in the public and the private
sector, is another critical area that, if not addressed, will
continue to adversely affect the cost of Army programs and systems.
LEGISLATION IMPACTING ARMY
DEPOTS AND ARSENALS
---------------------------------------------------------- Chapter 5:2
A number of statutes govern the operations of Army depots and
arsenals. For example:
-- 10 U.S.C. 2464 provides for a DOD-maintained core logistics
capability that is to be GOCO and that is sufficient to ensure
the technical competence and resources necessary for an
effective and timely response to a mobilization or other
national emergency,
-- 10 U.S.C. 2466 prohibits the use of more than 50 percent of
funds made available in a fiscal year for depot-level
maintenance and repair work to contract for the performance of
the work by nonfederal personnel. The definition of depot-level
maintenance and repair is set forth in 10 U.S.C. 2460,
-- 10 U.S.C. 2469 provides that DOD-performed depot-level
maintenance and repair workloads valued at $3 million or more
cannot be changed to contractor performance without the use of
competitive procedures for competitions among public and private
sector sources,
-- 10 U.S.C. 2470 provides that depot-level activities are
eligible to compete for depot-level maintenance and repair
workloads, and
-- 10 U.S.C. 4532 requires that the Army have its supplies made in
factories and arsenals of the United States, provided that they
can produce the supplies on an economic basis.
DOD has stated that its depot maintenance initiatives would continue
to operate within the framework of existing legislation. On the
other hand, it has, in the past, sought repeal of these and other
statutes and has stated in the DOD Logistics Strategic Plan that it
will continue to pursue this option.
OUR PRIOR REPORTS HAVE
REFLECTED NEED FOR STRATEGIC
PLANNING
---------------------------------------------------------- Chapter 5:3
For several years, we have stated that DOD should develop a detailed
industrial facilities plan and present it to the Congress in much the
same way that it presented its force structure reductions in the Base
Force Plan and Bottom-Up Review. Our observations regarding the need
for a long-term plan for Army industrial facilities parallels
observations we made in our February 1997 high-risk report on
infrastructure.\1 In that report, we credited DOD for having programs
to identify potential infrastructure reductions in many areas.
However, we noted that the Secretary of Defense and the service
secretaries needed to give greater structure to these efforts by
developing a more definitive facility infrastructure plan. We said
the plan needed to establish milestones and time frames and identify
organizations and personnel responsible for accomplishing fiscal and
operational goals. Presenting the plan to the Congress would provide
a basis for the Congress to oversee DOD's plan for infrastructure
reductions and allow the affected parties to see what is going to
happen and when.
The need for such a plan is even more important given that the issue
of eliminating excess capacity in the industrial facility area is
likely to raise questions about the ability of DOD's ability to
accomplish this objective absent authority from the Congress for
additional BRAC rounds. While the Congress has not approved
additional BRAC rounds mainly due to concerns about the cost and
savings, timing of new rounds, and other issues, it has asked DOD to
provide it with information concerning the amount of excess capacity
on its military installations and information on the types of
military installations that would be recommended for closure or
realignment in the event of one or more additional BRAC rounds.
DOD's report to the Congress on this subject provided most, but not
all, of the information requested by the Congress.\2 While this
report indicates that significant excess capacity remains in the
Army's industrial facilities, more needs to be done to fully identify
the extent of excess facilities before any future BRAC round. In
particular, the services must identify opportunities to share assets,
consolidate workloads, and reduce excess capacity in common support
functions so that up-front decisions can be made about which
service(s) will be responsible for which functions. We noted that
resolution of these issues would require strong, decisive leadership
by the Secretary of Defense.\3
In another 1997 report, we recommended that the Secretary of Defense
require the development of a detailed implementation plan for
improving the efficiency and effectiveness of DOD logistics
infrastructure, including reengineering, consolidating, and
outsourcing logistics activities where appropriate and reducing
excess infrastructure.\4 In response, the Secretary of Defense stated
that DOD was preparing a detailed plan that addressed these issues.
In November 1997, the Secretary issued the Defense Reform Initiative
Report, which contained the results of the task force on defense
reform established as a result of the Quadrennial Defense Review.
While this report was a step in the right direction and set forth
certain strategic goals and direction, it did not provide
comprehensive guidance. Further, the report did not resolve
long-standing questions concerning what work in the depots and
arsenals is of such importance that it should be performed in-house.
Sorting out this issue becomes even more complicated when one
introduces the prospect of moving toward GOCO facilities, which seem
to fall somewhere between a pure in-house and a total contracted-out
operation. Also, for the depots, existing policies do not address
the situation involving the proliferation of depot-like facilities at
regional repair sites, within both the active and reserve components,
and the impact that this proliferation has on excess capacity and
increased costs to the government for its total maintenance
activities and infrastructure.
--------------------
\1 High-Risk Series: Defense Infrastructure (GAO/HR-97-7, Feb.
1997).
\2 Military Bases: Review of DOD's 1998 Report on Base Realignment
and Closure (GAO/NSIAD-99-17, Nov. 13, 1998).
\3 Military Bases: Lessons Learned From Prior Base Closure Rounds
(GAO/NSIAD-97-151, July 25, 1997).
\4 Outsourcing DOD Logistics: Savings Achievable, but Defense
Science Board's Projections Are Overstated (GAO/NSIAD-98-48, Dec. 8,
1997).
CONCLUSIONS
---------------------------------------------------------- Chapter 5:4
Uncertainties exist about the future economy and efficiency of depot
and arsenal operations and the extent to which the functions they
perform need to be performed by the government. In this context,
recent experiences at the Army's maintenance depots and arsenals
indicate that the Army is facing multiple, difficult challenges and
uncertainties in determining staffing requirements, and in improving
the efficiency and effectiveness of its industrial activities.
Further, the Army's industrial facilities currently have significant
amounts of excess capacity and that problem is aggravated because of
the proliferation of maintenance activities below the depot level
that overlap with work being done in the depots. Increased use of
contractor capabilities without reducing excess capacity also affects
this situation. Productivity limitations suggest the need to
reengineer operations retained in-house to enable Army industrial
activities to operate more economically and efficiently. The Army
has inadequate long-range plans to deal with issues such as those
currently affecting the Army's industrial facilities. Such a plan
would need to be developed in consultation with the Congress and
within the applicable legislative framework in an effort to reach
consensus on a strategy and implementation plan. We continue to
believe such an effort is needed if significant progress is to be
made in addressing the complex, systemic problems discussed in this
report.
RECOMMENDATIONS
---------------------------------------------------------- Chapter 5:5
We recommend that the Secretaries of Defense and the Army determine
(1) the extent to which the Army's logistics and manufacturing
capabilities are of such importance that they need to be retained
in-house and (2) the extent to which depot maintenance work is to be
done at regular depots, rather than lower-level maintenance
facilities.
We recommend that the Secretary of the Army develop and issue a clear
and concise statement describing a long-range plan for maximizing the
efficient use of the remaining depots and arsenals. At a minimum,
the plan should include requirements and milestones for effectively
downsizing the remaining depot infrastructure, as needed, and an
assessment of the overall impact from competing plans and initiatives
that advocate increased use of private sector firms and regional
repair facilities for depot-level workloads.
If a decision is made to retain in-house capabilities, we also
recommend that the Secretary of the Army develop a long-term
strategy, with shorter term milestones for improving the efficiency
and effectiveness of Army industrial facilities, that would, at a
minimum, include those recommendations stated in chapters 2 through 4
of this report.
AGENCY COMMENTS AND OUR
EVALUATION
---------------------------------------------------------- Chapter 5:6
DOD concurred with each of our recommendations and discussed actions
it has completed, underway, or planned as appropriate for each
recommendation. Among the key actions that DOD identified are:
-- a study to assess the Army's overall maintenance support
infrastructure to determine what functions need to be retained
in-house to include its five depot-level repair activities and
the recently expanded regional repair facilities;
-- establishment of a board of directors to oversee and manage the
Army's total maintenance requirements process, including the
allocation of work to in-house and contractor repair facilities;
and
-- development of a 5-year strategic plan for maximizing the
efficient use of remaining maintenance depots and manufacturing
arsenals.
Fully implemented, these actions should lead to substantial
improvements in the economy and efficiency of Army depot and arsenal
operations.
(See figure in printed edition.)Appendix I
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
============================================================ Chapter 5
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix II
NATIONAL SECURITY AND
INTERNATIONAL AFFAIRS DIVISION,
WASHINGTON, D.C.
Barry Holman
Julia Denman
David Epstein
Glenn Knoepfle
Edward Waytel
Paul Newton
OFFICE OF THE GENERAL COUNSEL,
WASHINGTON, D.C.
John Brosnan
ATLANTA FIELD OFFICE
Bobby Worrell
Terry Wyatt
RELATED GAO PRODUCTS
============================================================ Chapter 1
Public-Private Competitions: Processes Used For Sacramento Depot
Maintenance Award Appear Reasonable (GAO/NSIAD-99-42, Nov. 23,
1998).
Navy Depot Maintenance: Weaknesses in the T406 Engine Logistics
Support Decision (GAO/NSIAD-98-221, Sept. 14, 1998).
Defense Depot Maintenance: Public and Private Sector Workload
Distribution Reporting Can Be Further Improved (GAO/NSIAD-98-175,
July 23, 1998).
Defense Depot Maintenance: Contracting Approaches Should Address
Workload Characteristics (GAO/NSIAD-98-130, June 15, 1998).
Public-Private Competitions: Review of San Antonio Depot
Solicitation (GAO/OGC-98-49, May 14, 1998).
Defense Depot Maintenance: Use of Public-Private Partnering
Arrangements (GAO/NSIAD-98-91, May 7, 1998).
Public-Private Competitions: Review of Sacramento Air Force Depot
Solicitation (GAO/OGC-98-48, May 4, 1998).
Navy Ship Maintenance: Temporary Duty Assignments of Temporarily
Excess Shipyard Personnel Are Reasonable (GAO/NSIAD-98-93, Apr. 21,
1998).
Public-Private Competitions: DOD's Additional Support for Combining
Depot Workloads Contains Weaknesses (GAO/NSIAD-98-143, Apr. 17,
1998).
Defense Depot Maintenance: DOD Shifting More Workload for New Weapon
Systems to the Private Sector (GAO/NSIAD-98-8, Mar. 31, 1998).
Depot Maintenance: Lessons Learned From Transferring Alameda Naval
Aviation Depot Engine Workloads (GAO/NSIAD-98-10BR, Mar. 25, 1998).
Public-Private Competitions: Access to Records Is Inhibiting Work on
Congressional Mandates (GAO/T-NSIAD-98-111, Mar. 4, 1998).
Force Structure: Army's Efforts to Improve Efficiency of
Institutional Forces Have Produced Few Results (GAO/NSIAD-98-65, Feb.
26, 1998).
Public-Private Competitions: Access to Records Is Inhibiting Work on
Congressional Mandates (GAO/T-NSIAD-98-101, Feb. 24, 1998).
Public-Private Competitions: DOD's Determination to Combine Depot
Workloads Is Not Adequately Supported (GAO/NSIAD-98-76, Jan. 20,
1998).
Public-Private Competitions: Processes Used for C-5 Aircraft Award
Appear Reasonable (GAO/NSIAD-98-72, Jan. 20, 1998).
Defense 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).
Navy Regional Maintenance: Substantial Opportunities Exist to Build
on Infrastructure Streamlining Progress (GAO/NSIAD-98-4, Nov. 13,
1997).
Air Force Depot Maintenance: Information on the Cost-Effectiveness
of B-1 and B-52 Support Options (GAO/NSIAD-97-210BR, Sept. 12,
1997).
Navy Depot Maintenance: Privatizing 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).
Defense Depot Maintenance: Uncertainties and Challenges DOD Faces in
Restructuring Its Depot Maintenance Program (GAO/T-NSIAD-97-112, May
1,1997)and (GAO/T-NSIAD-97-111, Mar. 18, 1997).
Navy Ordnance: Analysis of Business Area Price Increases and
Financial Losses (GAO/AIMD/NSIAD-97-74, Mar. 14,1997).
Defense Outsourcing: Challenges Facing DOD as It Attempts to Save
Billions In Infrastructure Costs (GAO/T-NSIAD-97-110, Mar. 12,
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 at 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 and (GAO/T-NSIAD-96-148, Apr. 17, 1996) and
(GAO/T-NSIAD-96-146, Apr. 16, 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, Workload, and 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 Closures: 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 Work Force (GAO/NSIAD-93-123, Feb. 12, 1993).
*** End of document ***