Aerospace Guidance and Metrology Center

Cost Growth and Other Factors Affect Closure and Privatization Gao ID: NSIAD-95-60 December 9, 1994

The justification for closing the Aerospace Guidance and Metrology Center at Newark Air Force Base is unclear. To date, this is the only depot closure where almost all of the work may be privatized-in-place. GAO believes that it merits careful consideration before implementation proceeds. Several issues associated with this privatization are barriers to its implementation. Also, some projected costs are rising, while others are yet to be determined. One-time closure costs have doubled during the past year and may still be underestimated. As a result, the payback period may increase to more than 100 years--depending on the assumptions used. Moreover, projected costs of post-privatization operations could exceed the cost of current Air Force operations and reduce or eliminate projected savings. This report also discusses other closure and privatization matters that call into question the viability of the Air Force's planned action.

GAO found that: (1) the justification for closing AGMC is not clear; (2) the Department of Defense (DOD) considers AGMC work conducive to conversion to the private sector and has recommended closing AGMC through privatization and transferring its workload to other depots; (3) DOD estimates that closing AGMC would cost $31.3 million and would result in annual savings of $3.8 million; (4) one-time closure costs have doubled in the past year and may still be underestimated; (5) the projected costs of conducting post-privatization operations could exceed the cost of current Air Force operations and reduce or eliminate projected savings; and (6) other closure and privatization issues create uncertainty about the validity of the Air Force's planned action, including the disposition of proprietary data claims, the effect of the closure on excess depot maintenance capacity, the segmentation of the metrology and calibration mission, and the transfer of AGMC property to a local reuse commission.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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