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entitled 'Defense Infrastructure: Observations on the Department of 
the Navy's Depot Capital Investment Program' which was released on 
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GAO-10-726R: 

United States Government Accountability Office: 
Washington, DC 20548: 

June 14, 2010: 

Congressional Requesters: 

Subject: Defense Infrastructure: Observations on the Department of the 
Navy's Depot Capital Investment Program: 

This letter formally transmits the enclosed briefing slides in 
response to your request. We were asked to determine to what extent 
the Department of the Navy complied with the requirement in Section 
2476 of Title 10 of the United States Code to invest a total amount 
equal to not less than 6 percent of the average total combined 
workload funded at all the depots of the Department of the Navy for 
the preceding 3 fiscal years in the capital budgets of covered depots 
listed in the law. We presented this briefing to your staff on May 5, 
2010, in which we concluded that the Department of the Navy complied 
with the minimum required depot capital investment. More details on 
our findings are provided in enclosure I. In addition, we have a 
related ongoing review of the condition of the public Naval shipyards, 
which are included under the Navy depots that receive capital 
investment funding. 

We provided a draft of the enclosed report to the Department of 
Defense for review and comment. The Department agreed with our 
findings and its oral comments are included as part of the briefing. 

We are sending copies of this report to the appropriate congressional 
committees and senators. We are also sending copies to the Secretary 
of Defense, the Secretary of the Navy, and the Commandant of the 
Marine Corps. The report will also be available at no charge on the 
GAO Web site at [hyperlink, http://www.gao.gov]. 

Should you or your staff have any questions concerning this report, 
please contact me at (202) 512-5257 or MerrittZ@gao.gov . Contact 
points for our Offices of Congressional Relations and Public Affairs 
may be found on the last page of this report. Key contributors to this 
report include Laura Durland, Assistant Director; Leslie Bharadwaja; 
Larry Bridges; and Gina Hoffman. 

Signed by: 

Zina D. Merritt:
Acting Director:
Defense Capabilities and Management: 

Enclosure: 

List of Requesters: 

The Honorable Evan Bayh:
Chairman: 
Subcommittee on Readiness and Management Support: 
Committee on Armed Services: 
United States Senate: 

The Honorable Daniel K. Akaka: 
United States Senate: 

The Honorable Maria Cantwell: 
United States Senate: 

The Honorable Susan M. Collins: 
United States Senate: 

The Honorable Patty Murray: 
United States Senate: 

The Honorable Mark R. Warner: 
United States Senate: 

The Honorable Jim Webb: 
United States Senate: 

[End of section] 

Enclosure I: Briefing Slides: 

Observations on the Department of the Navy's Depot Capital Investment
Program: 

Briefing for Senate Armed Services Committee Staff: 

May 5, 2010: 

Agenda: 
* Briefing Objective; 
* Background; 
* Scope and Methodology; 
* Observations; 
* Agency Comments. 

Briefing Objective: 

GAO was requested to determine: 

* To what extent the Department of the Navy complied with the 
requirement in 10 U.S.C. § 2476, to invest a total amount equal to not 
less than 6 percent of the average total combined workload funded at 
all the depots of the Department of the Navy for the preceding 3 
fiscal years in the capital budgets of covered depots listed in the 
law. 

Background: 

* For purposes of the law, overall Department of the Navy capital 
investment includes funding for Navy shipyards, Navy fleet readiness 
centers, and Marine Corps depots listed in 10 U.S.C. § 2476(e). 

* The law allowed the Navy 2 years to phase up its depot capital 
investment level, requiring at least 4 percent investment in fiscal 
year (FY) 2007, at least 5 percent in FY 2008, and eventually 6 
percent in FY 2009. 

* Under § 2476, the capital budget of a depot includes investment 
funds spent on depot infrastructure, equipment, and process 
improvements in direct support of depot operations. 

Scope and Methodology: 

* We reviewed the 10 U.S.C. § 2476 requirement for depot capital 
investment, obtained depot capital investment data for FYs 2007 
through 2010, and discussed the Navy's implementation of the 
requirement with officials from the Office of the Under Secretary of 
Defense (Comptroller) and Office of the Assistant Secretary of the 
Navy (Financial Management and Comptroller). 

* We reviewed and analyzed the Navy's depot capital investment funding 
data to determine if the Navy complied with the minimum capital 
investment percentage required under 10 U.S.C. § 2476. 

* We analyzed a breakout of the Navy capital investment funding 
distributed to depots in the Navy shipyards, Navy fleet readiness 
centers, and Marine Corps depots. 

* To determine the reliability of the Navy's depot capital investment 
funding data, we interviewed officials and analyzed responses 
regarding the accuracy and completeness of the data. We determined 
that the funding data used were sufficiently reliable for our purposes. 

* We conducted this performance audit from February 2010 through May 
2010 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objective. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objective. 

Observations: 

Our analysis indicates that the Navy complied with the minimum capital 
investment requirement mandated by 10 U.S.C. § 2476 for FYs 2007 
through 2009 and is projected to meet the requirement for FY 2010. 

Observations: Total Navy Capital Investment for FY 2007 to FY 2010: 

As illustrated in table 1, data reported by the Navy shows that the 
Department exceeded the required capital investment for FYs 2007 
through 2009, and is projected to exceed the requirement in FY 2010. 

Table 1: Navy Depots' Reported Capital Investment Compared to Prior 3-
Year Funding ($ in millions): 

Preceding 3-year Average Total of Navy Depot Funding: 
FY 2007 (Actual) Amount: $5,964.0; 
FY 2007 (Actual) Percentage: N/A; 
FY 2008 (Actual) Amount: $5,794.3; 
FY 2008 (Actual) Percentage: N/A; 
FY 2009 (Actual) Amount: $5,696.9; 
FY 2000 (Actual) Percentage: N/A; 
FY 2010 (Estimate) Amount: $5,956.9; 
FY 2010 (Estimate) Percentage: N/A. 

Congressionally Required Minimum Capital Investment: 
FY 2007 (Actual) Amount: $238.6; 
FY 2007 (Actual) Percentage: 4.0%; 
FY 2008 (Actual) Amount: $289.7; 
FY 2008 (Actual) Percentage: 5.0%; 
FY 2009 (Actual) Amount: $341.8; 
FY 2000 (Actual) Percentage: 6.0%; 
FY 2010 (Estimate) Amount: $357.4; 
FY 2010 (Estimate) Percentage: 6.0%. 

Reported Total Investment Navy Wide: 
FY 2007 (Actual) Amount: $306.5; 
FY 2007 (Actual) Percentage: 5.1%; 
FY 2008 (Actual) Amount: $436.2; 
FY 2008 (Actual) Percentage: 7.5%; 
FY 2009 (Actual) Amount: $442.5; 
FY 2000 (Actual) Percentage: 7.8%; 
FY 2010 (Estimate) Amount: $620.1; 
FY 2010 (Estimate) Percentage: 10.4%. 

Difference Between Requirement and Investment: 
FY 2007 (Actual) Amount: $67.9; 
FY 2007 (Actual) Percentage: 1.1%; 
FY 2008 (Actual) Amount: $146.5; 
FY 2008 (Actual) Percentage: 2.5%; 
FY 2009 (Actual) Amount: $100.7; 
FY 2000 (Actual) Percentage: 1.8%; 
FY 2010 (Estimate) Amount: $262.7; 
FY 2010 (Estimate) Percentage: 4.4%. 

Source: GAO analysis of Navy data as of March 2010. 

[End of table] 

As illustrated in table 2, the shipyards received most of the Navy's 
capital investment funding for FYs 2007 to 2009, and are projected to 
receive most of the capital investment funding in FY 2010. 

Table 2: Reported Capital Investment to the Navy and Marine Corps 
($ in millions): 
		
Navy Shipyards: 
FY 2007	(Actual): $218.2; 
FY 2008	(Actual): $318.4; 
FY 2009	(Actual): $306.9; 
FY 2010 (Estimate): $499.4. 

Navy Fleet Readiness Centers: 
FY 2007	(Actual): $78.7; 
FY 2008	(Actual): $104.9; 
FY 2009	(Actual): $114.3; 
FY 2010 (Estimate): $102.5. 

Marine Corps Depots: 
FY 2007	(Actual): $9.7; 
FY 2008	(Actual): $13.0; 
FY 2009	(Actual): $21.3; 
FY 2010 (Estimate): $18.3. 

Total Navy Wide: 
FY 2007	(Actual): $306.5; 
FY 2008	(Actual): $436.2; 
FY 2009	(Actual): $442.5; 
FY 2010 (Estimate): $620.1. 

Source: GAO analysis of Navy data as of March 2010. Numbers may not 
add due to rounding. 

[End of table] 

Observations: Breakout of Navy Depot Capital Investment by Individual 
Depots for FY 2007 to FY 2010: 

A breakout of each depot's capital investment FYs 2007-2010 shows that 
the Norfolk Naval Shipyard generally received the highest amount of 
funding. 

The amount of capital investment for the fleet readiness centers, 
while considerably less than the shipyards, is generally consistent 
among the fleet readiness centers. 

The amount of capital investment for the Marine Corps depots is less 
than the investment for Navy shipyards and Navy fleet readiness 
centers. 

Table 3: Navy Depots' Reported Capital Investment for FY 2007 to FY 
2010 ($ in millions): 

Navy Shipyards: 
FY 2007	(Actual): $218.2; 
FY 2008	(Actual): $318.4; 
FY 2009	(Actual): $306.9; 
FY 2010 (Estimate): $499.4. 

Norfolk Naval Shipyard, VA: 
FY 2007	(Actual): $99.0; 
FY 2008	(Actual): $44.1; 
FY 2009	(Actual): $106.1; 
FY 2010 (Estimate): $305.8. 

Pearl Harbor Naval Shipyard, HI: 
FY 2007	(Actual): $47.1; 
FY 2008	(Actual): $71.9; 
FY 2009	(Actual): $49.2; 
FY 2010 (Estimate): $31.7. 

Portsmouth Naval Shipyard, ME: 
FY 2007	(Actual): $28.9; 
FY 2008	(Actual): $46.2; 
FY 2009	(Actual): $58.2; 
FY 2010 (Estimate): $45.5. 

Puget Sound Naval Shipyard, WA: 
FY 2007	(Actual): $43.1; 
FY 2008	(Actual): $156.3; 
FY 2009	(Actual): $93.5; 
FY 2010 (Estimate): $116.3. 

Navy Fleet Readiness Centers (FRC): 
FY 2007	(Actual): $78.7; 
FY 2008	(Actual): $104.9; 
FY 2009	(Actual): $114.3; 
FY 2010 (Estimate): $102.5. 

FRC East Site, Cherry Point, NC: 
FY 2007	(Actual): $28.6; 
FY 2008	(Actual): $27.8; 
FY 2009	(Actual): $50.3; 
FY 2010 (Estimate): $33.6. 

FRC Southeast Site, Jacksonville, FL: 
FY 2007	(Actual): $32.9; 
FY 2008	(Actual): $36.1; 
FY 2009	(Actual): $35.8; 
FY 2010 (Estimate): $34.8. 

FRC Southwest Site, North Island, CA: 
FY 2007	(Actual): $17.1; 
FY 2008	(Actual): $41.0; 
FY 2009	(Actual): $28.1; 
FY 2010 (Estimate): $34.1. 

Marine Corps Depots: 
FY 2007	(Actual): $9.7; 
FY 2008	(Actual): $13.0; 
FY 2009	(Actual): $21.3; 
FY 2010 (Estimate): $18.3. 

Marine Corps Logistics Base, Albany, GA: 
FY 2007	(Actual): $4.7; 
FY 2008	(Actual): $7.9; 
FY 2009	(Actual): $12.5; 
FY 2010 (Estimate): $7.7. 

Marine Corps Logistics Base, Barstow, CA: 
FY 2007	(Actual): $5.0; 
FY 2008	(Actual): $5.1; 
FY 2009	(Actual): $8.8; 
FY 2010 (Estimate): $10.6. 

Total Navy Investment: 
FY 2007	(Actual): $306.5; 
FY 2008	(Actual): $436.2; 
FY 2009	(Actual): $442.5; 
FY 2010 (Estimate): $620.1. 

Source: GAO analysis of Navy data as of March 2010. Numbers may not 
add up due to rounding. 

[End of table] 

Agency Oral Comments: 

Officials from the Office of the Under Secretary of Defense 
(Comptroller) and Office of the Assistant Secretary of the Navy 
(Financial Management and Comptroller) reviewed the briefing and 
orally commented that they concurred with our findings. 

Officials noted that while the Marine Corps depots received less 
capital investment funds than the Navy shipyards and fleet readiness 
centers, according to the officials, this is because the Marine Corps 
depots have a smaller business base, with a less technically demanding 
workload (e.g., no nuclear work). 

GAO on the Web: 
Web site: [hyperlink, http://www.gao.gov/]. 

Contact: 

Chuck Young, Managing Director, Public Affairs, youngc1@gao.gov: 
(202) 512-4800: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7149: 
Washington, D.C. 20548: 

Copyright: 

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

[End of Briefing slides] 

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