Depot Maintenance:

Status of the Navy's Pearl Harbor Pilot Project

NSIAD-99-199: Published: Sep 10, 1999. Publicly Released: Sep 10, 1999.

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Barry W. Holman
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Pursuant to a congressional request, GAO examined the Navy's progress in implementing the Pearl Harbor Pilot project, focusing on: (1) the preliminary results of the Pearl Harbor Pilot on improving performance of maintenance activities; (2) the usefulness of the pilot as a model for future consolidations; and (3) issues related to financial and organizational structures for such consolidations.

GAO noted that: (1) although the Pearl Harbor Pilot is not complete, preliminary results have been mixed, showing either improvements, no improvements, or insufficient data to determine results; (2) where data are available, overall indications are that the pilot has the potential to improve maintenance activities in Hawaii; (3) while the Navy's pilot test plan calls for evaluating performance using nine metrics, data has been gathered for only five to compare performance under the consolidated operation with performance under the preconsolidation organizations; (4) preliminary results for two metrics indicate improvements that meet or exceed the Navy's expectations, and two others indicate improvements that fall slightly short of the Navy's expectations, while one metric indicates no improvement; (5) other positive results include increasing workforce flexibility by integrating nearly 4,000 workers from two centers into a single workforce; (6) consequently, the number of workers assigned daily to the excess labor shop has dropped from about 200 to below 10; (7) the Navy has reduced the maintenance infrastructure by 11 buildings (114,131 square feet) and plans to eliminate another 6 buildings (24,907 square feet); (8) the Pearl Harbor Pilot is likely to serve only as a general model for future consolidation efforts because of unique aspects of ship maintenance activities in Hawaii, such as the close proximity of facilities and the large portions of fleet-funded work than in other locations; (9) likewise, because of this uniqueness, the pilot provides only a general indication that future consolidations elsewhere will result in similar efficiencies; (10) nevertheless, it does provide general information on such issues as combining workforces from separate activities and consolidating equipment and facilities; (11) the Pearl Harbor Pilot has sharpened the debate over the most appropriate financial and organizational structures for such consolidated activities; (12) conflicting views continue to exist within the Department of Defense and the Navy over whether these consolidated activities should operate under direct appropriations, the Navy Working Capital Fund (NWCF), or a combination of the two financial structures, particularly in terms of maintaining visibility over total operational costs; and (13) similarly, little progress has been made toward resolving the departments' differences over the most appropriate organizational structure to manage these types of activities.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: The Navy has assessed the financial effect of its consolidation efforts and determined that the impact will be positive or have limited impact. The Navy has maintained the same degree of total depot maintenance cost and performance visibility as prior to consolidation. The consolidated maintenance activity at Pearl Harbor runs the same management information systems as the shipyards that continue to operate within the Navy Working Capital Fund. All required cost and performance management data remain available and therefore the cost visibility is identical. For example, in May 2003, the OSD Comptroller requested a special detailed set of cost data from all Naval Shipyards to assess if full cost visibility is being maintained. The OSD comptroller concluded that the data from Pearl Harbor provided the same degree of total cost detail and visibility as that from the other Naval Shipyards still under the Navy Working Capital Fund. Regarding maintaining adequate capital investment for ship maintenance activities, the experience at the consolidated Pearl Harbor facility demonstrates improving levels of capital investment, including facility and equipment improvement. Under the Pearl Harbor consolidation, capital investment funding increased from $8M in fiscal year (FY) 1999 to $21.7M in FY2003. (Note: The funding in the intervening years was $5.7M for FY2000; $20M for FY2001; and $23M for FY2002--overall sizeable increases.) Regarding the overall impact of consolidation on Navy shipyards and activities remaining in the working capital fund, (1) the Navy plans to migrate all of its shipyard activity out of the working capital fund, and (2) the impact on other remaining activities will be relatively small and manageable. According to Navy officials, the remaining shipyard activities comprise less than 10 percent of the total Navy Working Capital Fund revenues. The Navy's actions implement GAO's recommendations regarding shipyard consolidations.

    Recommendation: As the Navy proceeds with other similar consolidations, the Secretary of Defense should require the Secretary of the Navy to resolve issues related to the appropriate mechanism to finance and manage these types of activities. Specific financial questions that need to be resolved include the impact of using the direct appropriations to finance the pilot and other potential regionalization actions with regard to: (1) the Navy shipyards and activities remaining in the working capital fund; (2) ship maintenance activities during periods without appropriations; (3) cost visibility of ship maintenance activities; (4) incentives inherent under NWCF's buyer/seller relationship for improving productivity and performance; and (5) the capital investment program for ship maintenance activities. In addition, other questions that need to be resolved include determining whether the pilot's command structure under the Fleet's ownership has helped streamline the ship maintenance process and improve operations in Hawaii.

    Agency Affected: Department of Defense


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