Review of the Planned Consolidation of Defense Contract Administration Services Regions in Atlanta

LCD-80-46: Published: Mar 20, 1980. Publicly Released: Mar 24, 1980.

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A Defense Logistics Agency (DLA) study used to support the decision to close the Philadelphia, Pennsylvania, Defense Contract Administrative Services (DCAS) region and to reassign its mission primarily to the Atlanta, Georgia, region was reviewed. GAO was asked to review two specific issues affecting the DLA estimate of civilian personnel savings: (1) the support now being provided by the Defense Personnel Support Center in Philadelphia and the possibility that this support could result in greater savings in Philadelphia than in Atlanta, and (2) the appropriateness of using an average salary rate to compute civilian salary savings. It was also asked to review the DLS estimates of recurring facility and space savings that would occur when the Philadelphia and Atlanta region headquarters vacated their present locations and one-time costs that would be needed to make space available for each region headquarters in its new location. This realignment is part of a larger DLA realignment consolidating the present nine DCAS regions into five. DLA decided that locating the Southeast region headquarters in Atlanta instead of Philadelphia would be more cost effective because one-time costs would be $136,934 less and recurring annual savings would be $8,694 greater. The Philadelphia headquarters has more personnel than Atlanta and is colocated with the Defense Personnel Support Center which provides a significant amount of support to the Philadelphia region. Implementation is scheduled to begin in April 1980 and to be completed by October 1981.

The DLA estimates of civilian personnel savings did not adequately consider the possible savings for support services that could be provided by the Support Center if the new headquarters is located in Philadelphia. Because of data inadequacies, the effect of this omission could not be estimated on the study results. Estimates provided by Support Center and Philadelphia region personnel indicated that up to 48 positions could be saved as a result of the Center's support to the Philadelphia region. Using the DLA average salary rate, savings might be as much as $1 million annually. The DLA use of an average salary rate to compute civilian salary savings was appropriate. Estimates of facility and space savings by DLA were based on erroneous data which resulted in overstating the estimated recurring savings advantage at Atlanta by $68,000. The DLA estimated one-time site preparation costs for the Philadelphia location were understated by about $1.5 million. It was the opinion of GAO that the study did not provide a satisfactory basis for determining which of the two proposed locations will result in the greatest savings to the Government. Because of the issues raised in this report, particularly the support services issue, and the relatively small cost and savings differentials on which DLA based its decision, GAO believed that DLA should reconsider its proposed actions to consolidate the region in Atlanta, Georgia.

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