Military Base Realignments and Closures:

DOD Needs to Update Savings Estimates and Continue to Address Challenges in Consolidating Supply-Related Functions at Depot Maintenance Locations

GAO-09-703: Published: Jul 9, 2009. Publicly Released: Jul 9, 2009.

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As a result of a 2005 Defense Base Realignment and Closure (BRAC) recommendation, the Defense Logistics Agency (DLA) is charged with consolidating supply, storage, and distribution functions at 13 military service depot maintenance locations to streamline operations and save money. The BRAC Commission data indicate that these consolidations would generate net savings of nearly $1 billion through 2011 and about $137 million annually thereafter. Because these actions could affect depot maintenance operations, the conference report accompanying the National Defense Authorization Act for Fiscal Year 2008 directed GAO to assess implementation issues associated with the consolidations. GAO's objectives were to assess (1) DLA's progress and challenges to implement these consolidation actions and (2) the extent to which DLA's most recent cost and savings estimates related to these consolidations differ from those of the BRAC Commission. To meet these objectives, GAO visited three depot locations where consolidation actions had begun, interviewed service and DLA officials, and analyzed estimated cost and savings data.

While DLA has made progress to consolidate supply-related functions at the 13 depot maintenance locations recommended by BRAC and has taken steps to minimize the risk to ongoing operations, some of the most difficult tasks are yet to be undertaken and pose implementation challenges for DLA. For example, the Army and DLA officials are still negotiating what specific functions and personnel will transfer to DLA and the information technology interfaces needed to consolidate DLA's and the services' supply inventories continue to evolve and have experienced delays. Nevertheless, DLA anticipates that the consolidation actions will be completed by the mandated September 2011 BRAC deadline for completing recommended actions. For the actions to be complete, DLA officials told GAO the military services must have transferred all related personnel positions to DLA and physically consolidated all applicable inventories with DLA. While personnel transfers are under way, DLA has not begun physically consolidating inventories. And, although DLA has taken several steps to mitigate risk to ongoing depot operations such as involving stakeholders in the decision-making process, ensuring high-level leadership to drive these transformational actions, and employing time-phased transfers, continued collaboration between the services and DLA and periodic monitoring by DOD are critical to ensure the timely completion of these BRAC actions. Compared to the BRAC Commission's 2005 cost and savings estimates, DOD expects to spend more and save significantly less by implementing the supply-related consolidation actions. DLA's current data indicate that the cost to implement the recommended consolidation actions has increased by about $158 million (378 percent) while estimated savings have decreased by $753 million (73 percent). Consequently, estimated net savings of about $82 million over the 2006-2011 BRAC implementation period are considerably less than the BRAC Commission's estimate of about $993 million. Further, net annual savings beyond 2011 are projected to be $52 million per year, rather than the Commission's $137 million estimate--an annual decrease of about $85 million (62 percent). Moreover, GAO found that DLA's most recent savings estimates are unrealistic because they are based on practices that count some savings that GAO believes are not attributable to BRAC actions, use 4-year-old data, assume an inventory reduction scenario that is unlikely to occur, and employ an overall methodology that has not been approved by senior-level officials. DOD's financial management regulation requires BRAC savings estimates to be based on the best projection of savings that will actually accrue, but GAO's analysis indicates that DLA could actually incur a net cost of $22 million during the implementation period if non-BRAC-related savings were removed from the estimate, compared to the $82 million in net savings that DLA currently projects. Although the potential exists for DLA to eventually realize savings over time as it assumes control over supply-related operations, updated savings estimates based on sound estimating practices would provide better information for congressional oversight and help maintain public confidence in the BRAC process.

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: In order to provide more accurate and up-to-date information to congressional decision makers and to enhance OSD's oversight role, the Secretary of Defense should instruct the Director of the DLA to improve the accuracy of its cost and savings estimates associated with the consolidation of the SSD functions and inventories at the 13 specified depot locations by revising and finalizing an approved methodology which implements these steps and can be consistently followed by all the services and DLA over time.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: According to the DODIG, DLA has developed a methodology for developing its cost estimates for BRAC.

    Recommendation: In order to provide more accurate and up-to-date information to congressional decision makers and to enhance OSD's oversight role, the Secretary of Defense should instruct the Director of the DLA to improve the accuracy of its cost and savings estimates associated with the consolidation of the SSD functions and inventories at the 13 specified depot locations by applying current information on the timing of inventory consolidations (specifically, when they will begin and how long they will take) and excluding projected savings for consolidating Army and Marine Corps inventories with DLA.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: During our 2009 review of DOD's estimated cost savings resulting from the implementation of the Base Realignment and Closure (BRAC) recommendation to consolidate supply-related functions and inventories at 13 specified maintenance depots where the Defense Logistics Agency (DLA) and the military services are co-located, we found that DLA was using out of date information regarding the timing and extent of inventory consolidations. DOD concurred and took action. In DOD's August 2009 bi-annual Business Plan, DLA used current information regarding a later timetable for inventory consolidations and eliminated any savings from the Army and Marine Corps inventories since there will not be any available to consolidate. The resulting savings estimate will provide better information for congressional oversight and help maintain public confidence in the BRAC process.

    Recommendation: In order to provide more accurate and up-to-date information to congressional decision makers and to enhance OSD's oversight role, the Secretary of Defense should instruct the Director of the DLA to improve the accuracy of its cost and savings estimates associated with the consolidation of the functions and inventories at the 13 specified depot locations by updating its 4-year-old data to reflect the most recent estimate of inventory levels available for consolidation (especially given the wartime demands currently being placed on maintenance depots).

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: During our review of DOD's estimated cost savings resulting from the implementation of the Base Realignment and Closure (BRAC) recommendation to consolidate supply, storage and distribution (SS&D) functions and inventories at 13 specified maintenance depots where DLA and the military service are co-located, we found that DLA was using 4-year old inventory data for preparing its estimates. Given the activities in Iraq and Afghanistan, the inventory data should be updated. DOD concurred and took action. In DOD's August 2009 bi-annual Business Plan, DLA used updated inventory levels in its current estimate for savings related to this BRAC recommendation. The resulting savings estimate will provide better information for congressional oversight and help maintain public confidence in the BRAC process.

    Recommendation: In order to provide more accurate and up-to-date information to congressional decision makers and to enhance Office of the Secretary of Defense (OSD's) oversight role, the Secretary of Defense should instruct the Director of the DLA to improve the accuracy of its cost and savings estimates associated with the consolidation of the supply, storage, and distribution (SS&D) functions and inventories at the 13 specified depot locations by removing savings estimates that are not clearly the direct result of 2005 BRAC actions (including savings sometimes referred to as "BRAC enabled").

    Agency Affected: Department of Defense

    Status: Open

    Comments: Please contact the Director listed above for details on this recommendation.

    Recommendation: In order to provide more accurate and up-to-date information to congressional decision makers and to enhance Office of the Secretary of Defense (OSD's) oversight role, the Secretary of Defense should instruct the Director of the DLA to improve the accuracy of its cost and savings estimates associated with the consolidation of the supply, storage, and distribution (SS&D) functions and inventories at the 13 specified depot locations by removing savings estimates that are not clearly the direct result of 2005 BRAC actions (including savings sometimes referred to as "BRAC enabled").

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: During our 2009 review of DOD's estimated cost savings resulting from the implementation of the BRAC recommendation to consolidate supply-related functions and inventories at 13 specified maintenance depots where DLA and the military services are co-located, we found that DLA included savings for activities not attributable to BRAC. We recommended that DLA remove those non-BRAC savings from its estimates. DOD concurred and took action. In DOD's August 2009 bi-annual Business Plan, DLA had removed those savings from its estimates. The resulting savings estimate will provide better information for congressional oversight and help maintain public confidence in the BRAC process.

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