Depot Maintenance

Section 2466 of title 10, United States Code, stipulates that not more than 50 percent of funds made available in a fiscal year to a military or defense agency for depot-level maintenance and repair may be used for work done by private sector contractors. GAO reviewed Department of Defense (DOD) reports on the percentage of funding in support of public and private sector depot maintenance and repair workloads. This report provides information on DOD compliance with the 50-50 requirement for fiscal years 1998 and 1999; discusses DOD's progress in improving the quality of the workload data, and assesses the reasonableness of expenditure estimates for fiscal years 2000 through 2004. DOD's report on fiscal year 1998 and 1999 workloads shows that the Air Force, the Army, and the Navy were in compliance. However, because of continuing errors and weaknesses in the DOD's data, compliance with the 50-percent ceiling for the percentage of depot maintenance done by the private sector in fiscal year 1999 could not be determined. Fiscal year 1999 data was substantially improved from earlier years. However, errors and inconsistencies in reporting of depot-level workload and limitations in how well the services document their analyses persist. DOD's estimates of depot maintenance workloads for fiscal years 2000 through 2004 do not accurately project future depot maintenance expenditures.

GAO noted that: (1) although DOD's report covering fiscal year (FY) 1998 and 1999 workloads shows that the Air Force, the Army, and the Navy were in compliance with the 50-percent ceiling set by section 2466, because of continuing errors and weaknesses in the Department's data, GAO could not determine whether the military services were in compliance with the 50-percent ceiling for the percentage of depot maintenance performed by the private sector in FY 1999; (2) the quality of the data reported for FY 1999 was substantially improved from prior years; (3) improvements made in the data and reporting process reduced the amount of errors found or led to corrections of errors before data were reported to Congress; (4) GAO attributes these improvements largely to better guidance provided by the Office of the Secretary of Defense, the reporting of more comprehensive data, improved audit coverage by the military services, and the correction of errors by the services before the data were reported to Congress; (5) however, GAO continues to find errors and inconsistencies in the reporting of depot-level workload and limitations in how well the services documented their analyses supporting their workload reports; (6) GAO does not believe that DOD's projections of depot maintenance workloads for fiscal years 2000 through 2004 are a reasonably accurate projection of future depot maintenance expenditures; (7) future year expenditure projections, at best, provide a rough estimate of future workload funding split between the public and private sectors since the projections are constructed using budgetary estimates that by their nature, will change over time; (8) DOD's future year projections do not show the reporting services exceeding the 50-percent ceiling on contract work in FY 2000 and beyond; (9) however, the reasonableness of the estimates is doubtful because of uncertainties that exist regarding the extent to which the services have fully identified private sector depot maintenance workloads; (10) further, GAO's analysis of available data indicates that the Air Force: (a) may exceed the ceiling by about $200 million this fiscal year; and (b) faces significant management challenges to remain under the ceiling in future years; and (11) while the Army does not face as severe a problem as the Air Force, available data suggest it too could be confronted with management challenges if it is to stay within the 50-percent ceiling in future years.

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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