Depot Maintenance: Opportunities to Privatize Repair of Military Engines

During congressional hearings and in discussions with DOD officials regarding report language for the fiscal year 1997 authorization and appropriations bills, key committees questioned DOD officials regarding their plans for the privatization-in-place of engines and other workloads. DOD revised its strategy for outsourcing the San Antonio and Sacramento depot workloads to include holding public-private competitions. As a part of these competitions, DOD agreed to evaluate the impact on the cost of other workloads from consolidating workloads from the closing depots with workloads in the remaining facilities. The 1998 Defense Authorization Act included requirements for GAO to review and report on the Air Force's solicitation for a public-private competition for the engine workloads at San Antonio, the Air Force's decision to bundle the three engine workloads into a single solicitation, and the contract award.

DOD's response noted that it had sent a policy report to Congress in April 1996 that addressed performance of all depot maintenance, including competition and excess capacity. However, the policy report did not provide a plan for dealing with excess capacity, and did not recognize the requirement to use competitive procedures before privatizing depot maintenance workloads greater than $3 million. Subsequently, DOD reinstituted its public-private competition program. The Air Force conducted a public-private competition for the San Antonio ALC engine workload, and, on February 12, 1999, selected Oklahoma City ALC as representing the best value to the government. The Air Force calculated that a nine-year savings of $225.5 million was achievable by reducing overhead rates through improved capacity utilization at Oklahoma City.

The Air Force conducted a public-private competition for the San Antonio ALC engine workload, and, on February 12, 1999, selected Oklahoma City ALC as representing the best value to the government. The Air Force calculated that a 9-year savings of $225.5 million was achievable by reducing overhead rates through improved capacity utilization at Oklahoma City.

The Navy agreed to evaluate the comparative repair prices for the LM2500 engine to determine what its future acquisition repair strategy will be. In March 1998, a Navy contract study calculated the total in-house cost of supporting the LM2500 engine and expressed these costs in terms of a dollar rate per operating engine hour. General Electric was the only U.S. company that responded to a Navy request for firms interested in providing complete logistics support for the LM2500 under a "power by the hour" arrangement. The Navy's discussions with GE did not indicate that large savings would be achieved by contracting for logistics support on the total engine workload. The Navy now plans to retain maintenance of older versions of the engine at North Island, but will contract for logistics support on newer versions of the LM2500. Navy officials do not believe a public-private competition is required since North Island does not repair the newer versions of the engine.