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Navy Depot Maintenance: Privatizing Louisville Operations in Place Is Not Cost-Effective

NSIAD-97-52 Published: Jul 31, 1997. Publicly Released: Jul 31, 1997.
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Highlights

Pursuant to a congressional request, GAO followed up on its September 1996 report on the Navy's preliminary cost comparison of privatizing-in-place maintenance workloads at its Louisville, Kentucky, depot with transferring the workloads to other Navy facilities, focusing on: (1) whether privatizing the depot maintenance workload in place at Louisville is more cost-effective than transferring the workload to other Department of Defense (DOD) facilities; and (2) the practicability of transferring the Louisville workload to other defense commercial contractor facilities.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Defense The Secretary of Defense should direct the Secretary of the Navy to develop a plan for reducing excess depot maintenance capacity and costs.
Closed – Implemented
DOD stated that the Navy is engaged in a continuous process improvement which is intended to reduce excess capacity and improve throughput. For example, the Navy has ongoing programs to reengineer selected maintenance tasks and functions. Also, the Navy's regional maintenance program is designed to consolidate like functions and reduce excess infrastructure. While the Navy has not developed the suggested master plan, it is taking appropriate corrective action and this recommendation is no longer applicable.
Department of Defense The Secretary of Defense should direct the Secretary of the Navy to, prior to exercising any contract options for the Louisville workload, conduct a cost analysis that would compare the cost-effectiveness of privatizing the Louisville workload in place with transferring it to underutilized DOD or contractor facilities. The cost analysis should also include the total cost and savings associated with overhead cost reduction that would be realized at underutilized DOD and contractor facilities for workloads already produced at these locations.
Closed – Implemented
DOD concurred with the recommendation and directed the Secretary of the Navy to conduct and adequately document a cost analysis in conjunction with any decisions affecting the continuation of previously privatized mission essential work. However, according to DOD, as stated in the Department's response to the draft report, the alternatives permitted by Base Realignment and Closure (BRAC) did not include transferring the Louisville workload to other contractor facilities, and therefore that analysis would be inappropriate.

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Topics

Base closuresContract optionsCost effectiveness analysisEquipment maintenanceMaintenance services contractsMilitary cost controlMilitary downsizingNaval facilitiesNaval procurementPrivatization