Defense Depot Maintenance:

Uncertainties and Challenges DOD Faces in Restructuring Its Depot Maintenance Program

T-NSIAD-97-112: Published: May 1, 1997. Publicly Released: May 1, 1997.

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GAO discussed the Department of Defense's (DOD): (1) plans for eliminating costly depot maintenance excess capacity; (2) progress in finalizing a new depot workload allocation policy; (3) current approach for allocating maintenance workloads for new and existing systems; and (4) estimates that billions can be saved by outsourcing depot maintenance.

GAO noted that: (1) it is important to note that the waste and inefficiency in DOD's logistics system, including the management of its $13 billion depot maintenance program, is one of the key reasons GAO identified DOD's infrastructure activities as 1 of 24 high-risk areas within the federal government; (2) costly excess capacity totalling about 50 percent remains in the DOD depot system, which actually comprises four systems; (3) as the services seek to privatize a greater share of their depot maintenance, the cost of maintaining excess capacity will increase unless additional capacity reductions are made; (4) the Navy has made the greatest progress in dealing with this through consolidation and expedited closures of facilities affected by the base realignment and closure process; (5) the Army and, even more so, the Air Force have been less successful; (6) all three military departments to some extent are implementing actions that will privatize-in-place costly excess capacity; (7) GAO's work shows that DOD's plans and policies for outsourcing depot maintenance are still evolving; (8) last year, the Congress received and ultimately rejected DOD's proposed policy regarding depot-level maintenance and repair; (9) provisions in the policy were predicated on relief from the existing statutes that influence depot workload allocations between the public and private sectors; (10) some changes have been made based on congressional concerns about certain aspects of the policy report, but DOD has not finalized its new policy to address all of these concerns; (11) however, core capability requirements have not yet been quantified and no time frame has been established for finalizing key draft depot maintenance policy letters issued in December 1996 and January 1997; (12) GAO's ongoing work shows that for both existing and new systems, assessments are being made to determine what portion of the current workload could be outsourced with acceptable risk; (13) the absence of clear policy on how to proceed in this area has caused some delays in choosing maintenance sources and raised some concerns about whether the most cost-effective strategies are being selected; (14) DOD's projected savings are based on estimates cited by the Commission on Roles and Missions (CORM) and the Defense Science Board (DSB); (15) GAO believes that in some cases outsourcing can reduce maintenance costs, but not to the extent being estimated by the CORM and DSB; and (16) if not effectively managed, privatizing depot maintenance activities could exacerbate existing capacity problems and the inefficiencies inherent in underutilization of depot maintenance capacity.

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