Depot Maintenance:

Action Needed to Avoid Exceeding Ceiling on Contract Workloads

NSIAD-00-193: Published: Aug 24, 2000. Publicly Released: Aug 24, 2000.

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Pursuant to a legislative requirement, GAO reviewed the Department of Defense's (DOD) congressional reports on depot maintenance workloads, focusing on: (1) DOD's compliance with the 50-50 requirement in 10 U.S.C. 2466 for fiscal years 1998 and 1999; (2) GAO's views on DOD's progress in improving the quality of the workload data for the previous fiscal years; and (3) the reasonableness of DOD's estimates of expenditures for fiscal years 2000 through 2004.

GAO noted that: (1) although DOD's report covering fiscal year (FY) 1998 and 1999 workloads shows that the Air Force, the Army, and the Navy were in compliance with the 50-percent ceiling set by section 2466, because of continuing errors and weaknesses in the Department's data, GAO could not determine whether the military services were in compliance with the 50-percent ceiling for the percentage of depot maintenance performed by the private sector in FY 1999; (2) the quality of the data reported for FY 1999 was substantially improved from prior years; (3) improvements made in the data and reporting process reduced the amount of errors found or led to corrections of errors before data were reported to Congress; (4) GAO attributes these improvements largely to better guidance provided by the Office of the Secretary of Defense, the reporting of more comprehensive data, improved audit coverage by the military services, and the correction of errors by the services before the data were reported to Congress; (5) however, GAO continues to find errors and inconsistencies in the reporting of depot-level workload and limitations in how well the services documented their analyses supporting their workload reports; (6) GAO does not believe that DOD's projections of depot maintenance workloads for fiscal years 2000 through 2004 are a reasonably accurate projection of future depot maintenance expenditures; (7) future year expenditure projections, at best, provide a rough estimate of future workload funding split between the public and private sectors since the projections are constructed using budgetary estimates that by their nature, will change over time; (8) DOD's future year projections do not show the reporting services exceeding the 50-percent ceiling on contract work in FY 2000 and beyond; (9) however, the reasonableness of the estimates is doubtful because of uncertainties that exist regarding the extent to which the services have fully identified private sector depot maintenance workloads; (10) further, GAO's analysis of available data indicates that the Air Force: (a) may exceed the ceiling by about $200 million this fiscal year; and (b) faces significant management challenges to remain under the ceiling in future years; and (11) while the Army does not face as severe a problem as the Air Force, available data suggest it too could be confronted with management challenges if it is to stay within the 50-percent ceiling in future years.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: OSD's revised guidance, dated November 2001, specifically referenced GAO in requiring the military services to incorporate future repair costs of new and upgraded weapon systems in the 50-50 future-years reports. Each military service's supplementary guidance was also revised to make this requirement more explicit and directive.

    Recommendation: To improve the reporting of depot maintenance workload data to accurately reflect the allocation of work between the public and private sectors and comply with the requirement that not more than 50 percent of the depot maintenance work be performed by the private sector, the Secretary of Defense should require that the military services, in preparing the future year estimates of depot maintenance workloads that will be submitted each April, accurately reflect, to the extent practical, the projected maintenance costs and public-private sector allocations for new and upgraded systems.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: In August 2002, the Air Force published long-range strategic and master plans for depot maintenance. Subsequently, the Air Force issued several policy memorandums and revised regulations designed to implement provisions of these plans to better integrate source-of-repair decisions on new systems with 50-50 requirements. For example, in March 2003, the Air Force issued updated guidance concerning the depot workload approval process due to concerns about the depot maintenance workload distribution compliance for fiscal year 2003. These policy memorandums and regulatory changes illustrate that the Air Force has implemented GAO's recommendation for a long-term strategy to manage its weapon system support to comply with the 50-50 requirement.

    Recommendation: To improve the reporting of depot maintenance workload data to accurately reflect the allocation of work between the public and private sectors and comply with the requirement that not more than 50 percent of the depot maintenance work be performed by the private sector, the Secretary of Defense should require the Secretary of the Air Force to implement a long-term strategy to manage its weapon system support programs to comply with the funding requirement that not more than 50 percent of the depot maintenance program be used for work performed by the private sector.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: The Navy issued revised 50-50 reporting guidance in November 2001. This guidance improved upon the initial set of instructions issued a year previously. The new guidance referenced OSD requirements, highlighted problem areas identified by GAO, and contained Navy-specific supplementary guidance for reporting problem areas and tailored to the Navy's operating environment. GAO's review of the Navy's reports issued in 2002, determined that the improved guidance resulted in better reporting. GAO also determined that the Navy somewhat improved its overall management of the 50-50 process, although GAO noted continuing deficiencies in controls and data validation.

    Recommendation: To improve the reporting of depot maintenance workload data to accurately reflect the allocation of work between the public and private sectors and comply with the requirement that not more than 50 percent of the depot maintenance work be performed by the private sector, the Secretary of Defense should require the Secretary of the Navy to issue comprehensive supplementary instructions tailoring the Office of the Secretary of Defense's guidance to the Navy's operating environment to improve workload reporting and to implement adequate management controls and documentation requirements.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: The OSD 50-50 reporting guidance issued to the military departments on October 27, 2000, cited this recommendation and directed that the military departments improve guidance and management attention on the specific maintenance categories identified in the recommendation. GAO's subsequent review of the 50-50 reports, issued in 2001, indicated enhanced management awareness and actions in these areas and generally improved reporting. OSD continued to clarify and expand its guidance in the new data call issued in November 2001. GAO's 2002 audit showed increased attention to these and other problem areas noted.

    Recommendation: To improve the reporting of depot maintenance workload data to accurately reflect the allocation of work between the public and private sectors and comply with the requirement that not more than 50 percent of the depot maintenance work be performed by the private sector, the Secretary of Defense should direct that reporting services provide improved guidance and increased management attention to improve workload reporting in the areas of government furnished material, warranties, and software maintenance, as well as in identifying depot maintenance work accomplished in non-traditional activities and identifying reportable obligations for depot maintenance on contracts where such amounts are not readily identifiable.

    Agency Affected: Department of Defense

 

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