Navy Ordnance:

Analysis of Business Area Efforts to Streamline Operations and Reduce Costs

AIMD/NSIAD-98-24: Published: Oct 15, 1997. Publicly Released: Oct 15, 1997.

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Pursuant to a congressional request, GAO reviewed financial and management issues related to the ordnance business area of the Navy Working Capital Fund, focusing on: (1) the Navy's proposed and ongoing actions to reduce the business area's costs; and (2) additional cost reduction opportunities.

GAO noted that: (1) the Navy is in the process of developing the cost reduction plan GAO recommended in its March 1997 report and has proposed and begun implementing a number of actions to reduce its ordnance business area's annual operating costs by $151 million, or 25 percent, between fiscal year 1996 and 1999; (2) this is a significant step in the right direction and should result in substantial cost reductions and more streamlined operations; (3) GAO's review of the business area's operations and discussions with the Office of the Secretary of Defense (OSD) and Navy ordnance officials indicate that the Navy has both an opportunity and the authority to further reduce Navy ordnance costs; (4) specifically: (a) redundant ordnance engineering capability exists within the business area and other Navy organizations; (b) military personnel are performing work that could be performed by less expensive civilian employees; (c) redundant missile maintenance capability exists; and (d) no financial incentive exists for customers to store only needed ammunition (the business area's inventory records show that 43 percent of the ammunition stored was unneeded as of May 1, 1997) since they do not directly pay for storage costs; (5) while most of the planned cost reduction actions appear to be appropriate, it remains to be seen whether the business area will reduce costs by $151 million; (6) in addition, GAO's review of available data indicates that one of the cost reduction actions--the planned personnel reductions--may adversely affect the Concord Naval Weapons Station's ability to load ships during mobilization, thus creating potential readiness problems; and (7) these personnel reductions are likely to have little impact on the Navy, but could have a significant impact on the Army and Air Force, which would rely heavily on Concord during a major contingency operation.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: DOD concurred with this recommendation. The Navy is planning to transfer the ordnance operations, including the ammunition loading and unloading of naval ships and commercial vessels on the East and West Coasts, to the fleets on October 1, 1998. This transfer includes non-guard military positions. Once the positions have been transferred, the fleet commanders will then evaluate the appropriateness of converting the military guard positions to civilian positions.

    Recommendation: The Secretary of the Navy should direct the NOC Commander to determine if it would be cost-beneficial to convert non-guard military positions to civilian status.

    Agency Affected: Department of Defense: Department of the Navy

  2. Status: Closed - Implemented

    Comments: DOD partially concurred with this recommendation. The Naval Ordnance Center has transferred the East Coast military guard positions to the Atlantic Fleet and is planning to transfer the West Coast military guard positions to the Pacific Fleet on October 1, 1998. Once the positions have been transferred, the fleet commanders will then evaluate the appropriateness of converting the military guard positions to civilian positions.

    Recommendation: The Secretary of the Navy should evaluate the appropriateness of converting military guard positions to civilian positions.

    Agency Affected: Department of Defense: Department of the Navy

  3. Status: Closed - Not Implemented

    Comments: The Navy does not plan to charge customers for ammunition storage services.

    Recommendation: The Secretary of the Navy should develop and implement policies and procedures for charging customers for ammunition storage services.

    Agency Affected: Department of Defense: Department of the Navy

  4. Status: Closed - Implemented

    Comments: DOD concurred with this recommendation. The Navy has restructured the entire Navy ordnance activity group, including the transfer of the missile maintenance work from the Navy ordnance activity group to the Atlantic and Pacific Fleets on October 1, 1998. This realignment should enable the Navy to seek further efficiencies in the ordnance operation.

    Recommendation: The Secretary of the Navy should evaluate the cost-effectiveness of: (1) consolidating all or most of the business area's missile maintenance workload at one location; and/or (2) transferring all or some of this work to public depots or the private sector.

    Agency Affected: Department of Defense: Department of the Navy

  5. Status: Closed - Implemented

    Comments: DOD concurred with this recommendation. While the Navy did not develop a comprehensive plan, the Navy is taking many of the steps that GAO recommended. The Navy is planning the Naval Ordnance Center's restructuring and is implementing the initiatives in phases. The initiative to transfer base management on the East Coast to the Atlantic Fleet occurred during fiscal year 1998. The initiative to transfer the Naval Warfare Assessment Division to the Naval Warfare Center occurred on February 15, 1998. Further, the Navy is planning to transfer the base management function on the West Coast to the Pacific Fleet on October 1, 1998, and the ordnance operations, including the ammunition loading and unloading of naval ships and commercial vessels on the East and West Coasts to the fleets on October 1, 1998. These realignments should enable the Navy to seek further efficiencies in the ordnance operations.

    Recommendation: The Secretary of the Navy should incorporate into the Naval Ordnance Center's (NOC) cost reduction plan: (1) specific actions that need to be accomplished; (2) realistic assumptions about the savings that can be achieved; (3) milestones; and (4) clearly delineated responsibilities for performing the tasks of the plan.

    Agency Affected: Department of Defense: Department of the Navy

  6. Status: Closed - Implemented

    Comments: DOD concurred with this recommendation. To accomplish this, the workforce must load ammunition onto and off of ships during peacetime. In March 1998, the Joint Staff instructed the services to put more workload at Concord so this port would continue to maintain a trained workforce and be able to accomplish its mobilization mission. Through August of 1998, Concord has received sufficient work to maintain a trained work force. Further, the U.S. Transportation Command is providing oversight of the amount of work placed at Concord by preparing a quarterly report to the Office of the Secretary of Defense (Comptroller) that reflects the actual workload placed at Concord.

    Recommendation: In order for the Concord Weapons Station to accomplish its mobilization mission, the Secretary of Defense should ensure that Concord's core workforce is sufficiently trained to accomplish its mobilization mission.

    Agency Affected: Department of Defense

  7. Status: Closed - Implemented

    Comments: DOD concurred with this recommendation. The Navy has determined the number of containers of ammunition that it needs to move per day in case of mobilization. Based on this information, the Navy has determined that it needs 194 civilians and 125 military personnel to satisfy this requirement.

    Recommendation: In order for the Concord Weapons Station to accomplish its mobilization mission, the Secretary of Defense should direct the Secretary of the Navy to determine the minimum number of personnel the Concord Weapons Station needs during peacetime in order to ensure that it can quickly and effectively expand its operations to accomplish its mobilization mission.

    Agency Affected: Department of Defense

  8. Status: Closed - Implemented

    Comments: DOD concurred with this recommendation and has revalidated the amount of ammunition to be loaded at Naval Weapons Station, Concord, during mobilization.

    Recommendation: In order for the Concord Weapons Station to accomplish its mobilization mission, the Secretary of Defense should revalidate the amount of ammunition the Concord Weapons Station needs to load onto ships during mobilization.

    Agency Affected: Department of Defense

  9. Status: Closed - Implemented

    Comments: DOD concurred with this recommendation. Navy Ordnance has realigned the management of all ordnance engineering functions under a single division commander at the Naval Warfare Assessment Division. This realignment will give visibility of all ordnance engineering and decisionmaking to a single management official. Also, the Navy transferred the Naval Warfare Assessment Division from Navy Ordnance to the Navy Surface Warfare Center as of February 15, 1998. This transfer will consolidate all engineering in one organization that should allow for greater efficiencies and consolidations. The fiscal year 2000 budget estimates will reflect the results.

    Recommendation: The Secretary of the Navy should eliminate the excess ordnance engineering capability that previous studies have identified both within the NOC and between the NOC and other Navy organizations.

    Agency Affected: Department of Defense: Department of the Navy

 

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