Depot Maintenance:

DOD Needs Plan to Ensure Compliance with Public- and Private-Sector Funding Allocation

GAO-04-871: Published: Sep 29, 2004. Publicly Released: Sep 29, 2004.

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Under 10 U.S.C. 2466, the military departments and defense agencies can use no more than 50 percent of annual depot maintenance funding for work performed by private-sector contractors. DOD also must submit two reports to the Congress annually on the division of depot maintenance funding between the public and private sectors--one about the percentage of funds spent in the previous 2 fiscal years (prior-years report) and one about the current and 4 succeeding fiscal years (future-years report). As required, GAO reviewed the two DOD reports submitted in early 2004 and is, with this report, submitting its views to the Congress on whether (1) the military services met the so-called "50-50 requirement" for fiscal years 2002-3 and (2) the projections for fiscal years 2004-8 are reasonable estimates. GAO also identified key limitations in the 50-50 process that affect the department's ability to comply with the 50-50 requirement.

Recurring weaknesses in DOD's data gathering, reporting processes, and financial systems prevented GAO from determining with precision if the military services complied with the 50-50 requirement in fiscal years 2002-3. DOD data show all the services to be below the 50 percent funding limit on private-sector work. However, as before, GAO found errors in the data that, if corrected, would overall increase funding of the private sector and move each service closer to the limit on contract maintenance. For example, for fiscal year 2003, the Navy did not include about $410 million in private-sector maintenance work on aircraft carriers and surface ships. Correcting for these and other errors would increase the Navy's percentage of private-sector depot maintenance funds for that year from the 44.5 percent reported to 47.9 percent. DOD reported significant increases in depot maintenance funding from 2002 to 2003, but these did not result in significant increases in the amount of work performed in DOD depots during that period. Because some data errors and omissions in DOD's prior-years report are carried into future years, and changing depot maintenance requirements and fluctuations in budget estimates make projecting out-year data difficult, the future-years report does not represent reasonable estimates of public- and private- sector maintenance funding for fiscal years 2004-8, thereby limiting its usefulness to congressional and DOD decision makers. GAO recommended last year that the Congress consider amending 10 U.S.C. 2466 to require only one report that would cover 50-50 data for the prior year, current year, and budget year. In 2004 the Armed Services Committees proposed changes in title 10 that would adopt GAO's recommendation. Despite the limitations in the 50-50 data, the trend for this period shows that the services are moving close to the 50 percent threshold, yet they have no plan of action in place to prevent exceeding it. Such a plan would allow for timely actions to be taken to mitigate the potential for exceeding the 50 percent limit for private-sector funding. Several limitations in the 50-50 process affect the quality of DOD's 50-50 reporting. First, three of the four military services did not have an independent review and validation of their 50-50 data. Second, training for those who are responsible for collecting, aggregating, and reporting 50-50 data was limited and sporadic. Third, management emphasis regarding the need for accurate and complete 50-50 reporting was lacking.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: The Secretary of Defense should direct the Secretaries of the military departments to emphasize that individuals and staff receive proper and prompt training for 50-50 data gathering and reporting and that management at all levels afford the 50-50 process the level of attention necessary to produce an accurate and complete 50-50 report.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: DOD agreed with our recommendation and in its FY2004 data call to the DOD military departments directed the Secretaries of the military departments to emphasize that individuals and staff receive proper and prompt training for 50-50 data gathering and reporting and that management at all levels afford the 50-50 process the level of attention necessary to produce an accurate and complete 50-50 report.

    Recommendation: The Secretary of Defense should require the Secretaries of the military departments to direct the use of the services' audit agencies or an agreed-upon alternate method for third-party review and validation of 50-50 data and to ensure that auditor-identified errors in the data are corrected before the data are sent to the Congress.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: DOD agreed with our recommendation and in its FY2004 data call to the DOD military departments directed the military departments to use either Service audit agency or an agreed-upon alternate method for third party review and validation of this data and ensure that auditor-identified errors in the data are corrected before submission of the data.

    Recommendation: The Secretary of Defense should direct the Secretaries of the military departments, within 30 days of reporting 50-50 data indicating that past, current, or budget year data are within 2 percent of exceeding the 50 percent threshold, to submit a plan to the Office of the Secretary of Defense that identifies actions the military department shall take to ensure continued compliance, including the identification of decisions on candidate maintenance workload sourcing that could be made to support remaining within the 50 percent threshold.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: DOD concurred with our recommendation and in its FY2004 data call to the DOD military departments directed that in cases where workload projections are within 2 percent of the 50 percent limitation on contracting for depot-level maintenance and repair in a fiscal year, the military department shall submit a plan to Deputy Under Secretary of Defense for Logistics and Material Readiness within 30 days that identifies actions the military department will take to ensure continued compliance including identification of decisions on candidate maintenance workload sourcing that could be made to support remaining within compliance with the 50 percent limitation.

    Recommendation: The Secretary of Defense should direct the Commandant of the Marine Corps to require the Marine Corps' command responsible for weapon systems management to compile a consolidated report on its depot maintenance funding allocation between the public and private sectors.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: DOD agreed with our recommendation and in its FY2004 data call to the DOD military departments requested that the Marine Corps implement GAO recommendation to establish a single point within Marine Corps Systems Command to consolidate reporting within that command to eliminate errors and omissions.

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