Navy Maintenance:

Assessment of the Public-Private Competition Program for Aviation Maintenance

NSIAD-96-30: Published: Jan 22, 1996. Publicly Released: Jan 22, 1996.

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David R. Warren
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Pursuant to a congressional request, GAO reviewed the Navy's aviation depot maintenance competition program, focusing on: (1) the nature and extent of past competitions; (2) whether savings resulted from the program; (3) the prospects for and impediments to future competitions; and (4) whether the program can be improved.

GAO found that: (1) Navy public-private competitions generally resulted in savings and benefits, although precisely quantifying such savings is not possible; (2) for competition workloads, public depots substantially reduced operating costs by streamlining production processes and reducing overhead, but the Navy's expectations to greatly expand public-private competitions and to thereby achieve over $550 million in savings over a 6-year period never materialized; (3) the time and cost of performing such competitions, combined with a rapidly declining depot maintenance workload and a private-sector concern about fairness, resulted in much less maintenance work being subjected to public-private competition than had been projected; (4) the fairness issue centers on private-sector concerns that military depot prices did not reflect the total cost to the government of performing this work; (5) congressional direction to reinstitute public-private competitions, together with recommendations by the Commission on Roles and Missions to privatize most depot maintenance work has resulted in DOD reexamining its deport workload with a view toward moving more work to the private sector; (6) while DOD maintains it has reinstituted its public-private competition program, in practice no competitions have been held since DOD terminated the program in 1994; (7) a number of factors may limit or impede a major competition program in the current environment, including the cost and difficulties of performing such competitions and the amount of work available for competition under current law and policies limiting the mix of public and private depot maintenance work; and (8) initiatives, such as improving cost accounting systems for deport work, can be undertaken to improve public-private competitions to ensure their future usefulness in identifying the most cost-effective source of repair for depot maintenance workloads.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: DOD reinstituted public-private competition. However, it is not clear to what extent this process will be used. As of September 1997, the Navy had not announced any public-private competitions.

    Recommendation: The Secretary of Defense should reinstitute public-private competition as a tool for allocating depot maintenance workload as quickly as possible.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: DOD reinstituted public-private competitions and has published some guidance regarding how these competitions should be conducted.

    Recommendation: The Secretary of Defense should develop and issue implementing guidelines regarding the conditions, framework, policies, procedures and milestones for reinstating public-private competition programs.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: DOD worked with DCAA to establish appropriate procedures.

    Recommendation: The Secretary of Defense should require the Director, Defense Contract Audit Agency, to certify internal controls and accounting policies and procedures of DOD depots to ensure that they are adequate for identifying, allocating, and tracking costs of depot maintenance programs and to ensure proper costs are identified and considered as part of the bids by DOD depots.

    Agency Affected: Department of Defense


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