Army Depot Maintenance: Privatization Without Further Downsizing Increases Costly Excess Capacity

In December 1996 DOD reinstituted public/private competitions. The Army has stated that it plans to comply with DOD's revised policy and use competitive procedures when appropriate. However, no announcements of public-private competitions have been made.

The Army Materiel Command asked the Army's Cost and Economic Analysis Center to study the cost-effectiveness of consolidating all tactical missile maintenance work at Tobyhanna, along with four other options, one of which would transfer only guidance system work to Tobyhanna and retain related maintenance at Letterkenny. In August 1998, the Army announced that its cost analysis showed that consolidation of the tactical missile maintenance at Tobyhanna was the most cost-effective option, but the one-time costs were considered unaffordable. However, the Army stated that its legal interpretation of the 1993 and 1995 BRAC Commission recommendations would preclude it from moving all of the tactical missile maintenance workload to Tobyhanna. The Defense Depot Maintenance Council approved the Army's recommendation to transfer the guidance system workload (about 17 percent of the total missile workload) to Tobyhanna and to retain the remaining missile maintenance work at Letterkenny.

Red River is transitioning all non-Bradley and non-MLRS workloads to other facilities. These transfers are scheduled to be completed in late 1998. As a result of BRAC 1995, the Army will surplus 765 acres and 130 excess buildings. In addition, about 750 personnel spaces have been eliminated. Despite these efforts, the Army has determined that the depot will continue to retain costly excess capacity and that operating costs will continue to escalate, due to a decrease in funded workloads for remaining maintenance missions, and because the BRAC Commission directed the realignment, rather than closure, of Red River. The Industrial Operations Command, through its annual rate-setting process, will workload all of the Army's depots at the most optimal levels to stabilize future operating costs and rates. While the Army has taken action to reduce the cost of depot operations within the current legal framework, with the absence of future BRAC legislation there is little more that the Army can do.

In June 1999, the Army transferred its depot maintenance work for the Paladin self-propelled artillery vehicle from the Letterkenny depot to the Anniston depot without issuing a completed cost-benefit analysis.

In August 1998, the Office of the Secretary of Defense (OSD) reviewed the results of the Army's cost-benefit analysis for tactical missile maintenance workloads and recommend that the Defense Depot Maintenance Council (DDMC) approve the transfer of only missile guidance system workload (about 17 percent of the total missile maintenance work) to Tobyhanna. Although the Army's cost-benefit analysis shows that consolidation of the entire missile maintenance workload at Tobyhanna would have been the most cost-effective approach, OSD and Army legal analysis determined that the BRAC recommendation applies to only the portion of work categorized as guidance system components. The DDMC endorsed OSD's recommendation and a decision was made to approve the transfer of guidance system work to Tobyhanna and retain the remaining work at Letterkenny.

An Army official stated that its interpretation of BRAC 95 language would allow transfer of the consolidated missile workload package if the ongoing cost-benefit analysis shows the workload transfer would be the most cost-effective option. OSD has stated that it will implement the most cost-effective course of action. Therefore, this recommendation is no longer applicable.

The Army has stated that it will develop and maintain capability within the military depots for all core systems. However, the Army has no plan to redo and document formal risk assessments. It states that its initial informal (undocumented) assessments are adequate.