Air Force Depot Maintenance:

Privatization-in-Place Plans Are Costly While Excess Capacity Exists

NSIAD-97-13: Published: Dec 31, 1996. Publicly Released: Dec 31, 1996.

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Pursuant to a congressional request, GAO reviewed the Air Force's plans to privatize-in-place depot maintenance workloads at the Sacramento and San Antonio air logistics centers, focusing on: (1) the impact on excess depot capacity and operating costs at the remaining defense depots; (2) the cost-effectiveness of planned privatization initiatives, including the impact of delaying base closures until the year 2001; and (3) compliance with statutory requirements.

GAO found that: (1) privatizing-in-place rather than closing and transferring the depot maintenance workloads at the Sacramento and San Antonio air logistics centers will leave a costly excess capacity situation at remaining Air Force depots that a workload consolidation would have mitigated; (2) although the Air Force's privatization initiative for the Sacramento and San Antonio depots has not progressed far enough for GAO to estimate precisely costs and savings, consolidating depot maintenance workloads at remaining underused depots could result in a net savings in 2 years or less; (3) GAO's work shows that transferring the depot maintenance workloads to other depots could yield additional economy and efficiency savings of over $200 million annually in addition to the $268 million annual savings the Base Realignment and Closure (BRAC) Commission estimated could be achieved by eliminating the McClellan and Kelly infrastructures and downsizing nonmaintenance personnel; (4) if the workload consolidation does not occur, the remaining Air Force depots are likely to become more inefficient and more costly, unless other workloads are added, costly excess capacity is eliminated, or other efficiency and economy initiatives are successfully implemented; (5) plans to delay many closure-related actions until 2001 will substantially reduce future savings envisioned by the BRAC Commission and could result in a net loss of $644.4 million between 1997 and 2001 for the Air Force and $24 million for the Army; and (6) the Department of Defense (DOD) stated that it will structure the San Antonio and Sacramento privatizations to comply with existing statutory restrictions, but DOD's privatization plans are still evolving and sufficient information is not available for GAO to assess whether the conversion plans will comply with existing law.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: DOD agreed to sustain core depot repair capability. It has been evaluating core requirements, focusing on workloads at the closing San Antonio and Sacramento depots to determine if any of these workloads should be retained. These two depots' workloads were generally considered in three separate packages--the same three workload packages that the Air Force plans to offer as competition packages, including the San Antonio C-5 aircraft programmed depot maintenance and engine and engine component workloads, and the hydraulics, KC-135 aircraft, and other Sacramento workloads. None of the C-5 or Sacramento workloads were determined to be core. A small amount of F-100 engine and engine component workload was determined to be core and will be transitioned to the Oklahoma City depot regardless of the results of the engine competition.

    Recommendation: The Secretary of Defense should require the Secretary of the Air Force to develop required capability in military depots to sustain core depot repair and maintenance capability for Air Force systems and conduct and adequately document a risk assessment for mission-essential workloads being considered for privatization at the San Antonio and Sacramento depots.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: The Air Force agreed to evaluate public/private bids to ensure that any potential consolidation savings and resulting recurring and one-time costs were considered in its evaluation of all offers for the maintenance workloads at the three closing depots. During the depot maintenance competition, the Air Force included a factor in its cost analysis for consolidation savings. Based, in part, on consolidation savings, the Air Force awarded the competed workload to the remaining Air Logistics Centers and their private sector partners. The Air Force calculated that savings of $157 million on the C-5 workload,$253 million on the Sacramento workload, and $226 million on the engine workload were achievable by reducing overhead rates through more improved capacity utilization at the Warner Robins, Ogden, and Oklahoma City ALCs, respectively.

    Recommendation: The Secretary of Defense should require the Secretary of the Air Force, before privatizing any Sacramento or San Antonio workload, to complete a cost analysis that considers the savings potential of consolidating the San Antonio and Sacramento depot maintenance workloads at other DOD depots, including savings that can be achieved for existing workloads by reducing overhead rates through more efficient capacity utilization of fixed overhead at underused military depots that could receive this workload.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: DOD reported that it would use competitive procedures for determining the best value source of repair for San Antonio and Sacramento depot workloads. The first competition resulted in an award to the competing public depot. The Air Force is using public-private competitions to determine the most cost-effective source of repair for the remaining workloads at the closing Air Force depots.

    Recommendation: The Secretary of Defense should require the Secretary of the Air Force to use competitive procedures, where applicable, for determining the most cost-effective source of repair for workloads at the closing Air Force depots.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: The Air Force and Army had been directed to review the transfer plans for the ground-communications and electronics workload from the Sacramento depot to the Tobyhanna depot and consider an expedited schedule. Subsequently, a coordinated plan was developed and approved by the Defense Depot Maintenance Council (DDMC), calling for the transfer of 20 percent of the workload in 1998 and 40 percent in each of the next 2 years. The Air Force began moving the communications workload to Tobyhanna in 1998, as planned. The Air Force transferred 20 percent of the workload in FY1998 and 35 percent in FY1999. The Air Force and Army have agreed to timelines to complete the transfer by the end of FY2000.However, with regard to other delays, Air Force actions were not responsive. For example, the Air Force delayed transferring the systems and material management functions until the end of the legal closure period despite economies and other benefits it could have realized through accelerated movements.

    Recommendation: The Secretary of Defense should require the Secretary of the Air Force to reconsider plans to delay: (1) the transfer of the ground communications and electronics workload from Sacramento Depot to Tobyhanna; and (2) other delays in transferring workload to the public or private sector that are reducing savings estimated by the BRAC Commission to be achieved from closure and consolidation.

    Agency Affected: Department of Defense

 

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