Contract Maintenance:

Improvements Needed in Air Force Management of Interim Contractor Support

NSIAD-92-233: Published: Aug 26, 1992. Publicly Released: Sep 21, 1992.

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Pursuant to a congressional request, GAO evaluated the Air Force's Interim Contractor Support Program and costs, focusing on: (1) factors contributing to program costs; (2) Air Force planning and management for selected weapon systems; and (3) Air Force and Department of Defense (DOD) initiatives to improve program management and limit costs.

GAO found that: (1) annual program costs have continued to steadily increase, to an estimated $328 million in 1992; (2) the B-1B aircraft program received almost one-half of total Air Force program funding between 1985 and 1992; (3) Air Force officials predict a gradual decline in annual program requirements, to less than $200 million by fiscal year 1997; (4) the decline, however, depends on sufficient in-house B-1B aircraft support, no new systems being started, and no additional requirements for current programs; (5) conditions identified in 1983 that contributed to increased program costs and prolonged program reliance are still apparent today; (6) the problems included lack of planning, low priority for support needs, concurrent development and production efforts or compressed fielding schedules, and budget reductions in support resources; and (7) the program can be an effective tool to minimize facility investment until system design is stable and firm support requirements are established, but a failure to obtain a timely transition from program capability can increase long-term support costs and impair readiness.

Matters for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: Congress required the Department to separately identify interim contractor support costs in the fiscal year 1994 budget submission.

    Matter: To ensure adequate visibility of these operational costs and timely transition to operation and maintenance funding, Congress may also want to require the Office of the Secretary of Defense to continue separately identifying interim contractor support and other initial support costs in budgets, explain the reason interim contractor support funding is requested for each weapon system, and specify the period of time it is scheduled to be needed.

  2. Status: Closed - Implemented

    Comments: Congress approved the transfer of interim contractor support funding from the operation and maintenance appropriation to the procurement appropriation and the realignment of initial support elements to the weapon system line item in the 1993 DOD Appropriations Act.

    Matter: To improve interim contractor support planning and management and at the same time retain proper oversight and visibility of interim contractor support funding, Congress may wish to approve the transfer of interim contractor support funding from the operation and maintenance appropriation to the procurement appropriation and the realignment of initial support elements to the weapons system line items.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: With congressional approval, DOD changed its procedures to transfer interim contractor support funds from operations and maintenance to the procurement appropriation. OSD also requested that each service review interim contractor support plans for major weapon systems. The services were to document support schedules and costs to accelerate the transition from interim contractor support, where appropriate. There has been continuing congressional interest in this issue in the 1994 and 1995 Armed Services Committee reports, and in September 1995 GAO received a request that it review DOD delay in transferring one engine program from a sole-source interim contractor support arrangement to an organic depot. The DOD depot had established capability and DOD had determined that the work could be done at less cost in the military depot. If any additional followup is required on this recommendation, GAO will accomplish it during ongoing work addressing privatization issues.

    Recommendation: The Secretary of Defense should require the Secretary of the Air Force and other service secretaries as appropriate to review current interim contractor support work loads to identify tasks that could be transitioned to in-house support more quickly.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: DOD develops specific exit criteria and critical support tasks for use in milestone decisions and program reviews, as appropriate. These exit criteria depend on specific programmatic considerations. In addition, the accomplishment of normal logistics and reliability and maintainability tasks identified in DOD Instruction 5000.2 is independently assessed by the services and the Office of the Secretary of Defense (OSD) before the program proceeds to the next acquisition phase. DOD believes that, consequently, additional action on the development of exit criteria and critical support tasks for use in milestone decisions and program reviews is not warranted. Although the addition of support dates to the Acquisition Program Baseline is one key element intended by this recommendation, it does not fully cover the initiatives GAO continues to believe are warranted.

    Recommendation: The Secretary of Defense should require the Secretary of the Air Force and other service secretaries as appropriate to develop and refine supportability exit criteria and critical support tasks for use in milestone decisions and program reviews.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: As discussed in the previous responses, DOD instructions have been revised to require the identification of the support dates in the Acquisition Program Baseline. According to the DOD response, that action will ensure the proper emphasis and establish a firm commitment for the services to plan and program resources to achieve these dates on schedule.

    Recommendation: The Secretary of Defense should require the Secretary of the Air Force and other service secretaries as appropriate to ensure that proper emphasis is given to planning and developing depot resources concurrent with planning efforts for the operating bases.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: The Department updated DOD 5000.2M to require the inclusion of planned field and depot support dates in the Acquisition Program Baselines and plans to revise DOD 5000.2 to state that, in the future, interim contractor support funds will only be provided up to the support date specified in the Acquisition Program Baseline. After that time, programs will only receive additional interim contractor support funds on an exception basis.

    Recommendation: The Secretary of Defense should require the Secretary of the Air Force and other service secretaries as appropriate to clarify policy guidance to specify the reasons and guidelines for use of interim contractor support, including goals for the amount of time interim contractor support should reasonably be required.

    Agency Affected: Department of Defense

  5. Status: Closed - Implemented

    Comments: The Department revised DOD 5000.2-M on March 5, 1993 to require the establishment of field and depot-level support dates in the Acquisition Program Baseline. This will provide a benchmark for the Department to assess whether sufficient planning and resources are being programmed and budgeted to support the timely establishment of organic support capability. Additionally, the June 1992 Budget Guidance Manual notified the services that interim contractor support funds will only be provided up to the support dates specified in the Acquisition Program Baseline and programs will only receive additional interim contractor support funding after that point in time on an exception basis.

    Recommendation: To better ensure that support needs are fully considered during acquisition and to limit the amount of time interim contractor support is needed, the Secretary of Defense should revise DODI 5000.2 to require each weapon system's acquisition program baseline to include support capability dates for each level of planned maintenance. These dates should serve as the basis against which to assess the adequacy of support planning as well as the development and procurement of the logistics resources required to establish in-house repair capability.

    Agency Affected: Department of Defense

  6. Status: Closed - Not Implemented

    Comments: DOD noted that it was a strong proponent of ensuring that planning and funding was adequate to establish logistics support capability at the various maintenance levels. Determination of whether required funding support is provided will require monitoring over a period of time. However, during the 1995 follow-up, GAO identified several systems which had continued with interim contractor support for 10 to 15 years because funding had still not been made available to develop organic capability. In responding to Congress on the Commission on Roles and Mission Report, the Secretary of Defense noted that DOD generally agrees with the Commission's position regarding increased privatization of depot maintenance workload, including depot maintenance for new weapon systems. If the privatization of new systems is to be implemented, this recommendation is no longer relevant.

    Recommendation: To better ensure that support needs are fully considered during acquisition and to limit the amount of time interim contractor support is needed, the Secretary of Defense should program and budget sufficient funding to ensure that the needed in-house repair capability at bases and depots is established to meet planned in-house support dates.

    Agency Affected: Department of Defense

  7. Status: Closed - Implemented

    Comments: The Department's response noted that when a program experienced significant changes in areas such as quantities, costs, and basing concepts, it was normal business practice for the Department to reevaluate the entire program strategy, including the support concept. Accordingly, additional direction to the services is not necessary. Although this may be normal business practice, the review determined that adequate cost comparisons and periodic reassessments of support location decisions had not always been done in the past. However, during 1994, DOD initiated a study to reassess which systems should be maintained for life by contractor support. Since GAO will be evaluating the results of that study as part of a separate review, this recommendation should be closed.

    Recommendation: The Secretary of Defense should require the Secretary of the Air Force and other service secretaries as appropriate to reevaluated the logistics support concept decision during the interim contractor support period if significant changes occur in a program that could impact the cost-effectiveness of the selected logistics support concept decision (such as changes in procurement quantities and costs, failure rates, industrial base considerations, and weapon system basing concepts).

    Agency Affected: Department of Defense

 

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