Skip to Highlights
Highlights

What GAO Found

Since 2012, the Department of Defense (DOD) has taken various actions to assign work to its three manufacturing arsenals—Pine Bluff Arsenal, Rock Island Arsenal Joint Manufacturing and Technology Center, and Watervliet Arsenal Joint Manufacturing and Technology Center—in an attempt to generate sufficient revenue to recover operating expenses following a significant decline in demand for materiel, as well as to maintain manufacturing skills to sustain readiness. For example, the Army directed acquisition programs to assign work to the arsenals consistent with the arsenals' capabilities. While these actions have increased revenue, the increases have been small relative to operating expenses. Further, DOD may not always appropriately consider the arsenals as a source of manufacture, because it has not developed clear, step-by-step implementing guidance on conducting make-or-buy analyses to determine whether to purchase items from an arsenal or the private sector, which potentially limits the arsenals' ability to generate revenue. Because DOD's actions as of September 2014 did not generate sufficient revenue, Congress provided $375 million collectively in fiscal years 2014 and 2015 to help recover the arsenals' operating expenses.

DOD is not strategically positioned to sustain the manufacturing arsenals' critical capabilities, as it has not identified fundamental elements for implementing its strategic plan or identified these capabilities. Such capabilities help ensure that DOD can respond to emergencies and obtain products and services it could not otherwise acquire from private industry in an economical manner. DOD has a strategic plan that includes goals and objectives related to sustaining the arsenals' critical capabilities; however, it has not identified fundamental elements, such as milestones and resources, needed to implement the plan. As a result, DOD lacks information that would be useful in determining progress in achieving the plan's stated goals and objectives for the arsenals. Moreover, DOD's past efforts to identify the arsenals' critical capabilities had shortcomings, such as each arsenal using a unique method to do so. DOD has an effort under way to develop a process for identifying these critical capabilities and determining a minimum level of workload needed to sustain them, but this effort has been delayed to allow for coordination with stakeholders. Until such a process is developed and implemented, for example through an instruction, DOD is not positioned to determine the minimum workload levels needed or to appropriately adjust the arsenals' equipment and personnel level to sustain these capabilities.

DOD's September 2014 Report on Army Manufacturing Arsenal Study met the statutory requirements to address seven reporting elements within the National Defense Authorization Act (NDAA) for Fiscal Year 2014. However, GAO found that additional information would have made the report more consistent with relevant generally accepted research presentation standards for a defense research study and helped decision makers to identify and evaluate information presented in the report. For example, DOD did not disclose that it has not developed a process for identifying the arsenals' critical capabilities. Also, had stakeholders seen the report before it was issued, as called for by the standards, they would have been informed of its results and could have provided comments, as needed, to allow DOD to present a more sound, complete, and clear report.

Why GAO Did This Study

DOD's three manufacturing arsenals provide manufacturing, supply, and technical support services for the military services and allies during national emergencies and contingency operations. The Fiscal Year 2014 NDAA required DOD to report to Congress on its arsenals and included a provision for GAO to review DOD's report. This report assesses (1) actions DOD has taken to assign work to the manufacturing arsenals to generate sufficient revenue to recover their operating expenses, (2) the extent to which DOD is strategically positioned to sustain the manufacturing arsenals' critical capabilities, and (3) the extent to which DOD's September 2014 report addresses statutory reporting elements and is consistent with relevant research presentation standards for a defense research study. To conduct this review, GAO analyzed documentation, visited the arsenals, and interviewed relevant DOD officials. GAO assessed DOD's September 2014 report against the statutory elements and generally accepted research standards.

Skip to Recommendations

Recommendations

GAO recommends that DOD issue implementing guidance for make-or-buy analyses; identify fundamental elements for implementing its strategic plan; and develop and implement its process for identifying critical capabilities and the minimum workload level needed to sustain them. DOD concurred with the recommendations but disagreed with some statements in the report. GAO believes the statements are accurate, as discussed in the report.

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Defense To help DOD ensure that it appropriately considers the manufacturing arsenals as a source of manufacture and is strategically positioned to sustain the manufacturing arsenals' critical capabilities, the Secretary of Defense should direct the Secretary of the Army to issue clear, step-by-step implementing guidance, such as an instruction or guidebook, on the process for conducting make-or-buy analyses in a consistent manner.
Closed - Implemented
DOD concurred with our recommendation related to issuing implementing guidance on make-or-buy analyses, and, on January 30, 2020, the Army published Army Regulation 700-90, which includes make-or-buy policy guidance. In addition, the Assistant Secretary of the Army for Acquisition, Logistics and Technology published the Army's Make-or-Buy Policy Guidebook for Program Executive Officers and Program Managers on November 9, 2018, and an Army Make-or-Buy policy memorandum on April 11, 2018. As a result of the Army's actions in issuing clear, step-by-step implementing guidance--within a revised regulation, guidebook, and memorandum--on the process for conducting make-or-buy analyses in a consistent manner, this recommendation is closed as implemented.
Department of Defense To help DOD ensure that it appropriately considers the manufacturing arsenals as a source of manufacture and is strategically positioned to sustain the manufacturing arsenals' critical capabilities, the Secretary of Defense should direct the Secretary of the Army to identify and document fundamental elements--such as steps, interim milestones, time frames, and resources--for implementing the Army's Organic Industrial Base Strategic Plan 2012-2022.
Closed - Implemented
DOD concurred with our recommendation related to implementing the Army's Organic Industrial Base Strategic Plan 2012-2022, now entitled the Army Organic Industrial Base Revitalization Strategy Implementation Plan 2020-2030. In February 2020, DOD officials stated that the Army Organic Industrial Base Revitalization Strategy Implementation Plan 2020-2030, includes milestones and timelines for implementing the Army's strategy for revitalizing the organic industrial base. According to officials, this implementation plan focuses on: providing materiel readiness, improving industrial operations, modernizing the Army Organic Industrial Base, developing the workforce and assessing industrial base capabilities, and it has been submitted for final senior Army leader approval. In addition, the Army has conducted an on-site Organic Industrial Base Capacity Assessment of the arsenals and depots, according to these same officials . Moreover, in September 2020, DOD officials stated that the Army had commenced a working group that would conduct a variety of efforts, including a review of near-term projects and initiatives aimed at identifying fundamental elements for implementing the Army's strategic plan. For example, working group participants discussed topics such as make-or-buy implementation and assessment, a baseline report review on critical manufacturing capabilities and minimum sustaining manufacturing workload as well as related implementation plan progress, 5-year arsenal plans, and a fiscal year 2023-2027 data call for a management decision package on industrial mobilization capacity. As a result of the Army's actions in identifying milestones and timelines for implementing the Army's strategy for revitalizing the organic industrial base and commencing a working group aimed at identifying fundamental elements, including resources, for implementing the strategy, this recommendation is closed as implemented.
Department of Defense To help DOD ensure that it appropriately considers the manufacturing arsenals as a source of manufacture and is strategically positioned to sustain the manufacturing arsenals' critical capabilities, the Secretary of Defense should direct the Office of the Deputy Assistant Secretary of Defense for Maintenance Policy and Programs--in coordination with the military services, as appropriate, to complete DOD's ongoing effort to establish a process for identifying the manufacturing arsenals' critical capabilities and a method for determining the minimum workload needed to sustain these capabilities.
Closed - Implemented
DOD concurred with our recommendation related to developing a process to identify the arsenals' critical capabilities and a method to determine the minimum workload needed to sustain those capabilities. In October 2017, officials stated that the Office of the Deputy Assistant Secretary of Defense for Maintenance Policy and Programs and the Army had worked together to develop a methodology to determine arsenal critical manufacturing capabilities, which will link requirements to the Joint Chiefs of Staff Strategic and Contingency Plans and other Army readiness requirements. Officials added that the Army provided calculation methodologies on its critical manufacturing capabilities and minimum sustaining manufacturing workload to the Office of the Secretary of Defense in December 2017, and that the Army's manufacturing arsenals are applying these methodologies to identify their critical manufacturing capabilities and minimum sustaining manufacturing workload. Officials stated the Army's arsenals anticipate identifying their respective capabilities and workload calculations by the third quarter of fiscal year 2018. As a result of the actions taken by DOD to establish a process for identifying the manufacturing arsenals' critical capabilities and a method for determining the minimum workload needed to sustain these capabilities, this recommendation is closed as implemented.
Department of Defense To help DOD ensure that it appropriately considers the manufacturing arsenals as a source of manufacture and is strategically positioned to sustain the manufacturing arsenals' critical capabilities, the Secretary of Defense should direct the Office of the Deputy Assistant Secretary of Defense for Maintenance Policy and Programs--in coordination with the military services, as appropriate, to develop and issue guidance, such as a DOD instruction, to implement the process for identifying the manufacturing arsenals' critical capabilities and the method for determining the minimum workload needed to sustain these capabilities.
Closed - Implemented
DOD concurred with our recommendation related to developing and issuing guidance to implement the process for identifying the manufacturing arsenals' critical capabilities and the method for determining the minimum workload needed to sustain these capabilities. Although DOD did not provide a separate response for this recommendation, DOD concurred with this and the related recommendation on "developing a process to identify the arsenals' critical capabilities and a method to determine the minimum workload needed to sustain those capabilities" in one combined response. On January 30, 2020, the Army approved the publication of the updated Army Regulation 700-90, with an effective date of 29 February 2020. Army Regulation 700-90 includes the definitions of Arsenal Critical Manufacturing Capabilities (CMC) and Minimum Sustaining Manufacturing Workload (MSMW). Prior to the publication of the revised Army Regulation 700-90, the Army applied the approved CMC and MSMW calculation methodologies at the three manufacturing arsenals. Subsequently, the Army Organic Industrial Base Corporate Board approved the CMCs and associated MSMWs in March 2019, according to Army officials. As a result of the Army's actions in developing and issuing guidance--within a revised regulation--to implement the process for identifying the manufacturing arsenals' critical capabilities and the method for determining the minimum workload needed to sustain these capabilities, this recommendation is closed as implemented.

Full Report

GAO Contacts