Depot Maintenance
DOD Needs Plan to Ensure Compliance with Public- and Private-Sector Funding Allocation Gao ID: GAO-04-871 September 29, 2004Under 10 U.S.C. 2466, the military departments and defense agencies can use no more than 50 percent of annual depot maintenance funding for work performed by private-sector contractors. DOD also must submit two reports to the Congress annually on the division of depot maintenance funding between the public and private sectors--one about the percentage of funds spent in the previous 2 fiscal years (prior-years report) and one about the current and 4 succeeding fiscal years (future-years report). As required, GAO reviewed the two DOD reports submitted in early 2004 and is, with this report, submitting its views to the Congress on whether (1) the military services met the so-called "50-50 requirement" for fiscal years 2002-3 and (2) the projections for fiscal years 2004-8 are reasonable estimates. GAO also identified key limitations in the 50-50 process that affect the department's ability to comply with the 50-50 requirement.
Recurring weaknesses in DOD's data gathering, reporting processes, and financial systems prevented GAO from determining with precision if the military services complied with the 50-50 requirement in fiscal years 2002-3. DOD data show all the services to be below the 50 percent funding limit on private-sector work. However, as before, GAO found errors in the data that, if corrected, would overall increase funding of the private sector and move each service closer to the limit on contract maintenance. For example, for fiscal year 2003, the Navy did not include about $410 million in private-sector maintenance work on aircraft carriers and surface ships. Correcting for these and other errors would increase the Navy's percentage of private-sector depot maintenance funds for that year from the 44.5 percent reported to 47.9 percent. DOD reported significant increases in depot maintenance funding from 2002 to 2003, but these did not result in significant increases in the amount of work performed in DOD depots during that period. Because some data errors and omissions in DOD's prior-years report are carried into future years, and changing depot maintenance requirements and fluctuations in budget estimates make projecting out-year data difficult, the future-years report does not represent reasonable estimates of public- and private- sector maintenance funding for fiscal years 2004-8, thereby limiting its usefulness to congressional and DOD decision makers. GAO recommended last year that the Congress consider amending 10 U.S.C. 2466 to require only one report that would cover 50-50 data for the prior year, current year, and budget year. In 2004 the Armed Services Committees proposed changes in title 10 that would adopt GAO's recommendation. Despite the limitations in the 50-50 data, the trend for this period shows that the services are moving close to the 50 percent threshold, yet they have no plan of action in place to prevent exceeding it. Such a plan would allow for timely actions to be taken to mitigate the potential for exceeding the 50 percent limit for private-sector funding. Several limitations in the 50-50 process affect the quality of DOD's 50-50 reporting. First, three of the four military services did not have an independent review and validation of their 50-50 data. Second, training for those who are responsible for collecting, aggregating, and reporting 50-50 data was limited and sporadic. Third, management emphasis regarding the need for accurate and complete 50-50 reporting was lacking.
RecommendationsOur 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.
Director: Team: Phone:GAO-04-871, Depot Maintenance: DOD Needs Plan to Ensure Compliance with Public- and Private-Sector Funding Allocation
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
September 2004:
Depot Maintenance:
DOD Needs Plan to Ensure Compliance with Public-and Private-Sector
Funding Allocation:
GAO-04-871:
GAO Highlights:
Highlights of GAO-04-871, a report to the Senate and House Committees
on Armed Services:
Why GAO Did This Study:
Under 10 U.S.C. 2466, the military departments and defense agencies
can use no more than 50 percent of annual depot maintenance funding
for work performed by private-sector contractors. DOD also must submit
two reports to the Congress annually on the division of depot
maintenance funding between the public and private sectors”one about
the percentage of funds spent in the previous 2 fiscal years (prior-
years report) and one about the current and 4 succeeding fiscal years
(future-years report). As required, GAO reviewed the two DOD reports
submitted in early 2004 and is, with this report, submitting its views
to the Congress on whether (1) the military services met the so-called
’50-50 requirement“ for fiscal years 2002-3 and (2) the projections for
fiscal years 2004-8 are reasonable estimates. GAO also identified key
limitations in the 50-50 process that affect the department‘s ability
to comply with the 50-50 requirement.
What GAO Found:
Recurring weaknesses in DOD‘s data gathering, reporting processes, and
financial systems prevented GAO from determining with precision if the
military services complied with the 50-50 requirement in fiscal years
2002-3. DOD data show all the services to be below the 50 percent
funding limit on private-sector work. However, as before, GAO found
errors in the data that, if corrected, would overall increase funding
of the private sector and move each service closer to the limit on
contract maintenance. For example, for fiscal year 2003, the Navy did
not include about $410 million in private-sector maintenance work on
aircraft carriers and surface ships. Correcting for these and other
errors would increase the Navy‘s percentage of private-sector depot
maintenance funds for that year from the 44.5 percent reported to 47.9
percent. DOD reported significant increases in depot maintenance
funding from 2002 to 2003, but these did not result in significant
increases in the amount of work performed in DOD depots during that
period.
Because some data errors and omissions in DOD‘s prior-years report are
carried into future years, and changing depot maintenance requirements
and fluctuations in budget estimates make projecting out-year data
difficult, the future-years report does not represent reasonable
estimates of public- and private- sector maintenance funding for
fiscal years 2004-8, thereby limiting its usefulness to congressional
and DOD decision makers. GAO recommended last year that the Congress
consider amending 10 U.S.C. 2466 to require only one report that would
cover 50-50 data for the prior year, current year, and budget year. In
2004 the Armed Services Committees proposed changes in title 10 that
would adopt GAO‘s recommendation. Despite the limitations in the 50-50
data, the trend for this period shows that the services are moving
close to the 50 percent threshold, yet they have no plan of action in
place to prevent exceeding it. Such a plan would allow for timely
actions to be taken to mitigate the potential for exceeding the 50
percent limit for private-sector funding.
Several limitations in the 50-50 process affect the quality of DOD‘s
50-50 reporting. First, three of the four military services did not
have an independent review and validation of their 50-50 data. Second,
training for those who are responsible for collecting, aggregating,
and reporting 50-50 data was limited and sporadic. Third, management
emphasis regarding the need for accurate and complete 50-50 reporting
was lacking.
DOD‘s Reported Fiscal Year 2003 50-50 Data and GAO‘s Adjustments in
Percents:
[See PDF for image]
Sources: DOD (data); GAO (analysis).
Notes: Totals will not equal 100 percent because of rounding and
legislatively excluded public-private partnerships.
[End of table]
What GAO Recommends:
GAO recommends that DOD have a plan to mitigate the potential for
exceeding the 50 percent private-sector funding threshold and improve
the 50-50 data collection and reporting process so that the 50-50
reports submitted to the Congress are more useful to decision makers.
DOD commented on a draft of this report. DOD concurred with the
recommendations and cited actions it will take to implement the
recommendations.
www.gao.gov/cgi-bin/getrpt?GAO-04-871.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact William Solis at (202)
512-8365 or solisw@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Recurring Weaknesses in Data Preclude Determinations of Compliance in
Prior-Years Report with Precision:
Future-Year Projections Do Not Provide Reasonable Estimates of Public-
and Private-Sector Funding:
Several Key Limitations Affect the Quality of DOD's 50-50 Reporting:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: GAO Adjustments for Errors, Omissions, and Inconsistencies
in Military Departments' 50-50 Data for Fiscal Year 2003:
Appendix II: Scope and Methodology:
Appendix III: Comments from the Department of Defense:
Related GAO Products:
Tables:
Table 1: DOD's Reported Depot Maintenance Funding Allocations:
Table 2: GAO's Changes to the Army's FY 2003 50-50 Data:
Table 3: GAO's Changes to the Navy's and Marine Corps' FY 2003
50-50 Data:
Table 4: GAO's Changes to the Air Force's FY 2003 50-50 Data:
Abbreviations:
DOD: Department of Defense:
GAO: Government Accountability Office:
OSD: Office of the Secretary of Defense:
United States Government Accountability Office:
Washington, DC 20548:
September 29, 2004:
The Honorable John W. Warner:
Chairman:
The Honorable Carl Levin:
Ranking Minority Member:
Committee on Armed Services:
United States Senate:
The Honorable Duncan Hunter:
Chairman:
The Honorable Ike Skelton:
Ranking Minority Member:
Committee on Armed Services:
House of Representatives:
Under 10 U.S.C. 2466, not more than 50 percent of annual depot
maintenance funding provided to the military departments and
defense agencies can be used for work accomplished by private-sector
contractors. Section 2466 also directs the Department of Defense (DOD)
to submit two annual reports to the Congress on the distribution of
depot maintenance funding between the public and private sectors. The
first report is to identify the percentage of funds expended by each
military department and defense agency during the preceding 2 fiscal
years for the performance of depot maintenance workloads by the public
and private sectors (known as the "prior-years report"). The second
report is to project the same information for the current and 4
succeeding fiscal years (known as the "future-years report"). For 2004,
DOD issued the prior-years report on February 17, 2004, and the future-
years report on April 6, 2004.
Section 2466 also requires us to submit our views to the Congress on
whether DOD complied with the so-called "50-50 requirement" in the
prior-years report and whether the projections in the future-years
report are reasonable. Accordingly, this report discusses whether
(1) the military departments met the 50-50 requirement for fiscal years
2002 and 2003 and (2) the projections for fiscal years 2004 through
2008 represent reasonable estimates. As part of our work, we also
identified limitations in the 50-50 process that affect the quality of
DOD's reporting.
To accomplish these objectives, we analyzed the reported 50-50 data and
each service's procedures and internal management controls for
collecting, aggregating, and validating depot maintenance information
for responding to the section 2466 requirements. We limited our
analysis of future-years data because initial audit efforts identified
significant recurring problem areas, similar to those found in prior
audits, which are not likely to change. While DOD's data cannot be
relied on to provide a precise measure of the funding between the
public and private sectors, the data, along with our adjustments,
provide a rough approximation of the allocations and some trends that
may be useful to the Congress in exercising its oversight role and to
DOD officials in managing the depot maintenance program. We conducted
our review from February 2004 to July 2004 in accordance with generally
accepted government auditing standards. (See app. II for the details of
our scope and methodology.)
Results in Brief:
Recurring weaknesses in DOD's data gathering, reporting processes, and
financial systems prevented us from determining with precision whether
the services were in compliance with the 50-50 requirement for fiscal
years 2002 and 2003. DOD's data as submitted to the Congress show that
the military departments were below the 50 percent funding limitation
on private-sector work. However, as in past years, we found significant
errors and omissions in the data, which, if corrected, would overall
increase the percentages of funding going to the private sector and
move each department closer to the limit on private-sector funding. For
example, in its data for fiscal year 2003, the Navy, including the
Marine Corps, reported private-sector maintenance funding at
44.5 percent, but our adjustments for errors moved the private-sector
funding to 47.9 percent. Identified weaknesses indicate that the data
in the prior-years report cannot be relied on to provide a precise
measure of the balance of funding between the public and private
sectors for the military departments. At best, DOD's reported data--
even with our adjustments--provide only rough approximations of the
past public-private funding allocations, with some indications of
trends that may be useful information to the Congress in exercising
its oversight role and to DOD officials in managing the depot
maintenance program. We also observed that, even with a substantial
increase in depot maintenance funding for fiscal year 2003, workload at
the military departments' public depots did not significantly increase.
For example, our analysis of the increased funding from fiscal year
2002 to fiscal year 2003 showed that 81 percent of the $710.6 million
increase in funding for the Army went to its public depots, but the
depots' workload increased by only 6.3 percent. Navy and Air Force
public depots had a similar trend.
Because some data errors and omissions in DOD's prior-years report are
carried into future years and because of the difficulty in projecting
out-year data because of factors such as changing depot maintenance
requirements and fluctuations in budget estimates, the future-years
report does not represent reasonable estimates of public-and private-
sector depot maintenance funding allocations for fiscal years 2004
through 2008. These factors limit the usefulness of the future-years
report to congressional and DOD decision makers. We have reported these
shortcomings with the future-years report in the past, and the problems
continue to occur. While limitations affect the usefulness of the
future-years report as a predictor of actual funding allocations, the
current future-years report shows that the Navy and the Air Force are
predicting more funding for the public sector and less for the private
sector. Errors and omissions could change this trend, as both services
are close to the threshold for private-sector funding. For example,
while the Navy projects that its funding for fiscal year 2004 for the
private sector will be at 49 percent, the affect of the adjustments we
made to the Navy's fiscal year 2003 data, when carried forward along
with not reporting its supplemental funding for 2004, could cause the
Navy to reach the limitation on 50-50. The Air Force has in prior years
required a waiver of the 50 percent limitation under 10 U.S.C. 2466,
and Navy officials are aware of the potential to exceed the limit for
fiscal year 2004. Additionally, increasing contractor maintenance
operations supporting the Army in Iraq could result in the Army's
exceeding the 50 percent threshold. The extent of the percentage
adjustments we find each year would indicate that DOD cannot afford to
wait until the services reach the 50 percent limit before formulating a
plan to avoid exceeding the threshold for private-sector funding.
Because of the limitations of the future-years report, the Congress has
proposed in the Ronald W. Reagan National Defense Authorization Act for
Fiscal Year 2005 amending section 2466(d) to require only one annual
report from DOD containing the percentage of funds expended during the
preceding fiscal year and projected to be expended for the current and
next fiscal years. This action would not affect the need for DOD and
the services to have a plan to mitigate the potential of exceeding the
50 percent limit for private-sector funding as the military departments
approach the threshold.
DOD's improvements in 50-50 guidance and operating processes have not
improved significantly in recent years, and several limitations in the
50-50 process continue to affect the quality of DOD's 50-50 reporting.
First, three of the four military services did not have an independent
review and validation of their 50-50 data. Second, training for those
who are responsible for collecting, aggregating, and reporting 50-50
data was limited and sporadic. Third, management's emphasis regarding
the need for accurate and complete 50-50 reporting was lacking.
We are making recommendations to DOD for improving the 50-50 data
gathering and reporting process (1) so that the 50-50 reports submitted
to the Congress are more useful to decision makers and (2) to help
ensure continued compliance with 10 U.S.C. 2466. In written comments on
a draft of this report, DOD concurred with our recommendations and
cited actions the department will take. The department's comments are
included in appendix III.
Background:
In addition to the 50-50 requirement in 10 U.S.C. 2466, two other
title 10 provisions directly affect the reporting of workload
allocations to the public and private sectors.
* Section 2460 defines depot maintenance to encompass material
maintenance or repair requiring the overhauling, upgrading, or
rebuilding of parts, assemblies, or subassemblies and the testing and
reclamation of equipment, regardless of the source of funds or where
maintenance or repair is performed. Depot maintenance also encompasses
software maintenance, interim contractor support,[Footnote 1] and
contractor logistics support[Footnote 2] to the extent that work
performed in these categories is for depot maintenance. The statute
excludes from depot maintenance the nuclear refueling of an aircraft
carrier; the procurement of major modifications or upgrades of weapon
systems that are designed to improve program performance; and the
procurement of parts for safety modifications, although the term does
include the installation of parts for safety modifications.
* Section 2474 directs DOD to designate public depots as Centers of
Industrial and Technical Excellence and to improve their operations to
serve as recognized leaders in their core competencies.[Footnote 3]
Section 342 of the National Defense Authorization Act for Fiscal Year
2002 (Pub. L. No. 107-107, Dec. 28, 2001) amended this statute to
exclude qualifying public-private partnerships[Footnote 4] from the
50 percent funding limitation on contracting in section 2466. Section
342 provides that the funds expended for the performance of depot-level
maintenance by nonfederal government personnel located at the centers
shall not be counted when applying the 50 percent limitation if the
personnel are provided pursuant to a public-private partnership. This
exclusion initially applied to depot maintenance funding for fiscal
years 2002 through 2005. Section 334 of the National Defense
Authorization Act for Fiscal Year 2003 (Pub. L. No. 107-314, Dec. 2,
2002) extended this period to include all contracts entered into
through fiscal year 2006. Proposed legislation (S. 2400, section 333,
as reported by the Senate) would, if adopted, extend the period for the
exclusion of the reporting of this contractor work through 2009.
The Office of the Secretary of Defense (OSD) has issued guidance to the
military departments for reporting public-private workload
allocations. The guidance is consistent with the definition of "depot-
level maintenance and repair" in 10 U.S.C. 2460.[Footnote 5] The
military departments have also issued internal instructions to manage
the data collection and reporting process, tailored to their individual
organizations and operating environments.
Pursuant to the congressional mandate regarding the DOD 50-50
requirement, this is the 7TH year that we have reported on the prior-
year numbers and the 5TH year reporting on the future-year
numbers.[Footnote 6] In past years, we have reported on continuing data
errors and inconsistencies in reporting by the military departments and
problems in documenting and independently validating 50-50 data.
Summary of Data in DOD's Most Recent 50-50 Reports:
Table 1 provides a consolidated summary of DOD's 2004 prior-years and
future-years reports to the Congress on public-and private-sector
funding allocations for depot maintenance. The amounts shown are DOD's
record of actual obligations incurred for depot maintenance work in
fiscal years 2002 and 2003 and projected obligations for fiscal years
2004-8 based on the defense budget and service funding
baselines.[Footnote 7] The percentages show the department's record of
the relative allocations between the public and private sectors and the
exempted workloads. Adding the public, private, and private-
exempted percentages together provides a total picture of DOD's depot
maintenance funding. Also, adding the private and private-
exempted percentages shows what the private-sector amount would have
been reported as, absent the recent legislation to exempt qualified
partnership workload.
Table 1: DOD's Reported Depot Maintenance Funding Allocations:
Dollars in millions.
Army: Public;
Prior fiscal years: 2002: $1,357;
Prior fiscal years: 2003: $1,932;
Future fiscal years: 2004: $2,354;
Future fiscal years: 2005: $2,402;
Future fiscal years: 2006: $2,467;
Future fiscal years: 2007: $2,495;
Future fiscal years: 2008: $2,196.
Army: Public;
Prior fiscal years: 2002: 49.6%;
Prior fiscal years: 2003: 56.0%;
Future fiscal years: 2004: 53.6%;
Future fiscal years: 2005: 57.0%;
Future fiscal years: 2006: 54.9%;
Future fiscal years: 2007: 56.6%;
Future fiscal years: 2008: 56.9%.
Army: Private;
Prior fiscal years: 2002: $1,304;
Prior fiscal years: 2003: $1,273;
Future fiscal years: 2004: $1,919;
Future fiscal years: 2005: $1,691;
Future fiscal years: 2006: $1,912;
Future fiscal years: 2007: $1,803;
Future fiscal years: 2008: $1,574.
Army: Private;
Prior fiscal years: 2002: 47.6%;
Prior fiscal years: 2003: 36.9%;
Future fiscal years: 2004: 43.7%;
Future fiscal years: 2005: 40.1%;
Future fiscal years: 2006: 42.5%;
Future fiscal years: 2007: 40.9%;
Future fiscal years: 2008: 40.8%.
Army: Private exempt[A];
Prior fiscal years: 2002: $76;
Prior fiscal years: 2003: $243;
Future fiscal years: 2004: $117;
Future fiscal years: 2005: $124;
Future fiscal years: 2006: $114;
Future fiscal years: 2007: $112;
Future fiscal years: 2008: $91.
Army: Private exempt[A];
Prior fiscal years: 2002: 2.8%;
Prior fiscal years: 2003: 7.1%;
Future fiscal years: 2004: 2.7%;
Future fiscal years: 2005: 2.9%;
Future fiscal years: 2006: 2.5%;
Future fiscal years: 2007: 2.5%;
Future fiscal years: 2008: 2.4%.
Total;
Prior fiscal years: 2002: $2,737;
Prior fiscal years: 2003: $3,448;
Future fiscal years: 2004: $4,390;
Future fiscal years: 2005: $4,217;
Future fiscal years: 2006: $4,493;
Future fiscal years: 2007: $4,410;
Future fiscal years: 2008: $3,861.
Navy/Marine Corps: Public;
Prior fiscal years: 2002: $5,258;
Prior fiscal years: 2003: $6,235;
Future fiscal years: 2004: $4,560;
Future fiscal years: 2005: $4,845;
Future fiscal years: 2006: $4,842;
Future fiscal years: 2007: $5,471;
Future fiscal years: 2008: $4,813.
Navy/Marine Corps: Public;
Prior fiscal years: 2002: 54.2%;
Prior fiscal years: 2003: 54.7%;
Future fiscal years: 2004: 50.5%;
Future fiscal years: 2005: 51.3%;
Future fiscal years: 2006: 53.2%;
Future fiscal years: 2007: 57.1%;
Future fiscal years: 2008: 56.5%.
Navy/Marine Corps: Private;
Prior fiscal years: 2002: $4,206;
Prior fiscal years: 2003: $5,080;
Future fiscal years: 2004: $4,434;
Future fiscal years: 2005: $4,560;
Future fiscal years: 2006: $4,235;
Future fiscal years: 2007: $4,067;
Future fiscal years: 2008: $3,664.
Navy/Marine Corps: Private;
Prior fiscal years: 2002: 43.4%;
Prior fiscal years: 2003: 44.5%;
Future fiscal years: 2004: 49.1%;
Future fiscal years: 2005: 48.3%;
Future fiscal years: 2006: 46.5%;
Future fiscal years: 2007: 42.5%;
Future fiscal years: 2008: 43.0%.
Navy/Marine Corps: Private exempt[A];
Prior fiscal years: 2002: $236;
Prior fiscal years: 2003: $91;
Future fiscal years: 2004: $34;
Future fiscal years: 2005: $32;
Future fiscal years: 2006: $33;
Future fiscal years: 2007: $35;
Future fiscal years: 2008: $37.
Navy/Marine Corps: Private exempt[A];
Prior fiscal years: 2002: 2.4%;
Prior fiscal years: 2003: 0.8%;
Future fiscal years: 2004: 0.4%;
Future fiscal years: 2005: 0.3%;
Future fiscal years: 2006: 0.4%;
Future fiscal years: 2007: 0.4%;
Future fiscal years: 2008: 0.4%.
Total;
Prior fiscal years: 2002: $9,700;
Prior fiscal years: 2003: $11,406;
Future fiscal years: 2004: $9,028;
Future fiscal years: 2005: $9,437;
Future fiscal years: 2006: $9,109;
Future fiscal years: 2007: $9,572;
Future fiscal years: 2008: $8,514.
Air Force: Public;
Prior fiscal years: 2002: $4,482;
Prior fiscal years: 2003: $5,004;
Future fiscal years: 2004: $5,607;
Future fiscal years: 2005: $5,744;
Future fiscal years: 2006: $5,906;
Future fiscal years: 2007: $6,040;
Future fiscal years: 2008: $6,164.
Air Force: Public;
Prior fiscal years: 2002: 54.0%;
Prior fiscal years: 2003: 52.0%;
Future fiscal years: 2004: 54.9%;
Future fiscal years: 2005: 56.2%;
Future fiscal years: 2006: 56.6%;
Future fiscal years: 2007: 55.3%;
Future fiscal years: 2008: 54.5%.
Air Force: Private;
Prior fiscal years: 2002: $3,779;
Prior fiscal years: 2003: $4,583;
Future fiscal years: 2004: $4,593;
Future fiscal years: 2005: $4,458;
Future fiscal years: 2006: $4,509;
Future fiscal years: 2007: $4,860;
Future fiscal years: 2008: $5,131.
Air Force: Private;
Prior fiscal years: 2002: 45.5%;
Prior fiscal years: 2003: 47.7%;
Future fiscal years: 2004: 45.0%;
Future fiscal years: 2005: 43.6%;
Future fiscal years: 2006: 43.2%;
Future fiscal years: 2007: 44.5%;
Future fiscal years: 2008: 45.3%.
Air Force: Private exempt[A];
Prior fiscal years: 2002: $38;
Prior fiscal years: 2003: $27;
Future fiscal years: 2004: $14;
Future fiscal years: 2005: $20;
Future fiscal years: 2006: $24;
Future fiscal years: 2007: $25;
Future fiscal years: 2008: $25.
Air Force: Private exempt[A];
Prior fiscal years: 2002: 0.5%;
Prior fiscal years: 2003: 0.3%;
Future fiscal years: 2004: 0.1%;
Future fiscal years: 2005: 0.2%;
Future fiscal years: 2006: 0.2%;
Future fiscal years: 2007: 0.2%;
Future fiscal years: 2008: 0.2%.
Total;
Prior fiscal years: 2002: $8,299;
Prior fiscal years: 2003: $9,614;
Future fiscal years: 2004: $10,213;
Future fiscal years: 2005: $10,222;
Future fiscal years: 2006: $10,438;
Future fiscal years: 2007: $10,925;
Future fiscal years: 2008: $11,320.
Source: DOD.
[A] The provision in 10 U.S.C. 2474 to exempt qualified public-private
partnerships from the 50 percent funding limitation began with the 2002
reporting year and is now continued for all contracts entered into
through fiscal year 2006. DOD interpreted this to mean that exemptions
should also be reported for fiscal years 2007 and 2008 for contracts
initiated in fiscal years 2002 through 2006.
[End of table]
Limitations on Use of 50-50 Data As Reported by DOD:
DOD's 50-50 data with GAO's adjustments provide a rough approximation
of the allocation of depot maintenance funding between the public and
private sectors. In this regard, it is useful information to the
Congress in exercising its oversight role and to DOD officials in
managing the depot maintenance program. However, our prior reports have
recognized the limitations of DOD's financial systems, operations, and
controls. Our audits of DOD's financial management operations have
routinely identified pervasive weaknesses in financial systems,
operations, and internal controls that impede the department's ability
to provide useful, reliable, and timely financial information for day-
to-day management and decision making. In the financial management
systems area, DOD continues to struggle in its efforts to implement
systems to support managerial decision making. As we have reported, DOD
can ill afford to invest in systems that are not capable of providing
DOD management with more accurate, timely, and reliable information on
the results of the department's business operations.[Footnote 8]
To date, none of the military services have passed the test of an
independent financial audit. A continuing inability to capture and
report the full cost of its programs represents one of the most
significant impediments facing DOD. Nonetheless, the data used to
develop the 50-50 report are the only data available and are accepted
and used for DOD's decision making and for congressional oversight.
Recurring Weaknesses in Data Preclude Determinations of Compliance in
Prior-Years Report with Precision:
Recurring weaknesses in DOD's data gathering, reporting processes, and
financial systems prevented us from determining with precision whether
the services were in compliance with the 50-50 reporting requirement
for fiscal years 2002 and 2003. DOD's prior-years report for fiscal
years 2002 and 2003 as submitted to the Congress in February 2004 shows
the Departments of the Army, Navy, and Air Force to be below the
50 percent funding limitation on private-sector workloads for both
years. The net effects of correcting for the errors and omissions we
identified would increase the percentages of workload going to the
private sector and move each department closer to the contract limit.
Appendix I shows the amounts and effects of our adjustments to the
reported data submitted by the military departments for fiscal year
2003 and provides a description of the major deficiencies we found.
Our analysis of DOD's reported depot maintenance funding for 2003 when
compared with the previous year revealed interesting information about
the mix of funding and workload. While there were significant increases
in depot maintenance funding for each of the services over this period,
this large funding increase did not result in significant increases in
the amount of work performed in the military depots, as discussed in
each of our discussions of the services' data.
Army Reported Private-Sector Funding below 50 Percent Limit:
Although the Army reported that its private-sector funding was below
the 50 percent limit for both fiscal years 2002 and 2003, as in prior
years, we continued to find errors, omissions, and inconsistencies in
the Army's data.[Footnote 9] On the basis of the specific errors we
identified, these errors would add about $408 million in total to the
Army's public-and private-sector workloads in fiscal year 2003; the net
effect of correcting for these errors would add 5.8 percent to the
private-sector percentage allocation in fiscal year 2003. (See table 2
in app. I.)
For the prior-years report, the Army underreported funds received for
depot maintenance in the supplemental appropriations for fiscal year
2003. Also, the Army continued to underreport public-and private-sector
depot-level maintenance work at field locations, as it continued
unfinished efforts to consolidate maintenance activities and better
control the proliferation of depot-level tasks at nondepot locations. A
unit from the European Command, deployed to support the war in Iraq,
did not report any 50-50 data. Staff turnover continued at the
reporting commands, and unfamiliarity with the 50-50 requirements
contributed to increased errors. For example, the errors we found in
the Training and Doctrine Command's 50-50 data were directly related to
a staff change in late 2003 after the Command's longtime reporting
official retired and was replaced with a new person who was unfamiliar
with 50-50 reporting requirements.
Increase in Depot Maintenance Funding Did Not Result in Large Increase
in Work at Army Depots:
While there was an over $700 million increase in depot maintenance
funding in the Army from fiscal year 2002 to fiscal year 2003, this
increase did not translate into a significant increase in the amount of
work performed in Army depots.
The Army's data for fiscal year 2003 showed an increase of
$710.6 million over the amount of funding reported for fiscal year
2002. About 81 percent of this funding increase was reported as going
to the Army depots, suggesting that the depots might have received a
substantial workload increase. Our analysis of direct labor hours
executed at the depots, including overtime, during fiscal years 2002
and 2003 showed only a 6.3 percent increase. The price charged for
depot maintenance work increased 7.4 percent. Army depot managers told
us that the primary factors increasing the depots' work were the Army's
recapitalization program and support for the war in Iraq. However, as
one Army depot manager pointed out, the supplemental appropriation for
fiscal year 2003 was received too late in the year to have a
significant affect on the depots' workload during that year. The
additional funding late in 2003 allowed the depots to order parts for
work that would be done during 2004. Army depot managers also said that
factors such as increased costs for material and depot revenues that
exceeded budget plans in prior years affected the price charged for
depot maintenance.
Navy Reported Private-Sector Funding below 50 Percent Limit:
Although the Navy (including the Marine Corps) reported that its
private-sector funding was below the 50 percent limit for both fiscal
years, we found errors in the Navy's and Marine Corps' data, and we
found that the total dollar amount of errors affected the data for the
private sector more than the public sector. Correcting for the errors
we found increased the percentage share in fiscal year 2003 for the
private sector from 44.5 percent to 47.9 percent--a gain of
3.4 percent. (See table 3 in app. I.)
We evaluated the Navy's and Marine Corps' data separately, since these
services have different processes. For the Navy, we identified several
problems that carried over from prior years' 50-50 efforts. The Navy
did not report any depot maintenance work accomplished along with the
nuclear refueling of its aircraft carriers, citing the exclusion of
nuclear refueling from the 10 U.S.C. 2460 definition of "depot
maintenance." We continue to believe that depot repairs not directly
associated with refueling tasks should be reported because these kinds
of repair actions are reported by other organizations and funding for
these tasks is identifiable in contracts and financial systems. The
Navy also continues to inconsistently report inactivation activities
that involve the servicing and preservation of systems and equipment
before they are placed in storage or in an inactive status. Officials
report public-sector funding for inactivation activities on nuclear
ships but do not report such work on nonnuclear ships, saying that the
workload for the former is complex while the workload for the latter is
not. However, we believe all such depot-level work should be counted,
since the statute and implementing guidance do not make a distinction
based on complexity. These two examples would add about $410 million to
the private-sector funding in fiscal year 2003.
We also determined that about $179 million of intermediate maintenance
workloads was incorrectly added to the public sector and that data for
both the public and private sectors contained errors in reporting along
with the underreporting of workloads.
For the Navy only, correcting for the errors we found increased the
private-sector percentage share in fiscal year 2003 from 45.8 percent
to 49.1 percent--a gain of 3.3 percent.
Compared with the other services, the Marine Corps has a small depot
program, but its reporting errors are relatively higher. For example,
as in prior years, our review of the Marine Corps' 2003 data found that
it understated the private-sector total for fiscal year 2003 by about
$35 million--about 50 percent. We also identified other errors,
including about a $6.7 million overstatement of the private sector when
a reporting official incorrectly included obligations from fiscal year
2002 in the total for fiscal year 2003. A key contributor to this high
error rate is the piecemeal reporting process that the Marine Corps
follows at its command responsible for acquiring and upgrading Marine
Corps weapon systems, whereas this year, weapon systems managers
submitted more than 150 individual responses. Marine Corps officials
responsible for the 50-50 report said that, as a major component of the
Marine Corps' funding for the private sector, a consolidated report
from this command would enhance its oversight of the 50-50 reporting
process and help eliminate some of the errors and omissions in the
Marine Corps' 50-50 data. Staff turnover at the command's focal point
for the 50-50 process also continues to be an issue affecting the
reporting of the 50-50 data. For example, in each of the past 3 years,
the focal point has changed and, at the time of our review, another
change was scheduled for next year.
Increase in Maintenance Funding Did Not Create Significant New Work in
2003 for Navy and Marine Corps Depots:
The Navy's data for fiscal year 2003 showed an increase of $1.6 billion
over the amount of funding reported for fiscal year 2002. About
52 percent of this funding increase was reported as going to Navy
aviation depots and shipyards and other government activities. As with
the Army, this funding increase suggests that the Navy's depot
maintenance activities might have received a substantial workload
increase. Our analysis of direct labor hours executed at the aviation
depots, including overtime, during fiscal years 2002 and 2003 showed an
increase of 4 percent. The price charged for depot maintenance work
increased 9 percent. For the four Navy shipyards combined, direct labor
hours decreased 2 percent, while prices for depot maintenance work
increased from 5 to 9 percent at three of the four shipyards.
Comparable pricing data for the Pearl Harbor shipyard were not readily
available. Navy aviation depot managers told us that most of the
increase in direct labor hours was due to increased demand for the
production of components, mandatory-completion-date aircraft, and
mission-critical engines in support of the Global War on Terrorism. The
primary factors increasing the depots' price for maintenance work
included the recoupment of prior years' losses caused primarily by
increased costs of material. Navy shipyard managers said that a number
of factors can affect direct labor hours such as the differences in the
number of ship availabilities for the fiscal years and changes in the
amount of work that is done on the available ships. They also said that
the increased contract work at the shipyards was the primary factor for
the increased price for depot maintenance work.
For fiscal year 2003, the Marine Corps reported an increase in funding
of about $150 million for the public sector and a corresponding
decrease in funding of about $22.7 million for the private sector . In
analyzing the change in direct labor hours executed by its two
maintenance depots during fiscal years 2002 and 2003, we observed that
total hours decreased by about 0.7 percent, while the price for
maintenance work increased by about 11 percent. The Marine Corps' depot
managers said that the decrease in labor hours resulted from a
combination of problems in obtaining some materials needed to produce
the work and receiving the supplemental appropriation too late in the
year to start up additional work. Also, they said that the price
increase was due largely to the declining workload and increased costs
of materials.
Air Force Reported Private-Sector Funding below 50 Percent Limit:
The Air Force reported that its private-sector funding was below the
50 percent limit for fiscal years 2002 and 2003. While we identified
errors in the amounts reported for programs supported by contractor
logistics support contracts and in the amount of private work exempted,
the errors were smaller than those for the other services. In total,
the net effect of the errors we found would increase the private-
sector percentage share in fiscal year 2003 from 47.7 percent to
48.2 percent--a gain of 0.5 percent. (See table 4 in app. I.)
The errors we found in this year's assessment resulted from a
disconnect between the reporting centers and the Air Force's 50-50
coordinator in transposing reported data from an old automated database
to a new one for compiling the final report. Also, as with past
reviews, the Air Force continues to adjust its reporting for contract
administration and oversight costs. The adjustment increases the
reported funding for the public-sector funding and decreases the
funding for the private sector. The total adjustment was $44 million
for fiscal year 2003. Consistent with the 50-50 guidance, which states
that costs should be associated with the end product (i.e., the
repaired item), we think these costs should instead be treated as
contracting expenses. Accordingly, we reversed this adjustment in our
analysis.
Depot Maintenance Funding Increase Resulted in Little Additional Work
for Air Force Depots:
The Air Force reported a funding increase of $1.3 billion from fiscal
year 2002 to fiscal year 2003. About 40 percent of this funding
increase went to Air Force depots, but the number of direct labor hours
executed at the depots, including overtime, during fiscal years 2002
and 2003 increased only about 0.5 percent. At the same time, the prices
charged for depot maintenance work increased 14 percent. An Air Force
official told us that supplemental funds received in July 2003 were
used to pay for costs already incurred, not for new work. We reported
recently that the price of depot maintenance work performed in Air
Force depots increased by 98 percent from fiscal year 2000 to fiscal
year 2004. We also reported that the increased cost of material
accounted for about 67 percent of the total cost increase.[Footnote 10]
Future-Year Projections Do Not Provide Reasonable Estimates of Public-
and Private-Sector Funding:
As in the past, DOD's latest future-years report does not provide
reasonable estimates of public-and private-sector depot maintenance
funding allocations for fiscal years 2004 through 2008 because the
future-year projections were based on (1) incorrect data and
questionable assumptions and (2) internal and external factors, which
create fluctuations in reported data. As a result, the future-years
report provides limited usefulness to the Congress or to DOD decision
makers. Despite these limitations, our analysis shows that the Navy and
Air Force are moving closer to the threshold for private-sector funding
and increased contractor maintenance to support ongoing combat
operations and that reconstitution efforts in the Army could cause the
Army to exceed the threshold. A plan to identify actions that would be
taken to avoid breaching the 50-50 threshold for private-sector funding
would help the military departments better manage their compliance with
the 50-50 requirement. The Congress is considering amending the 50-50
legislation to require a single report that would include data for
years for which data are more reliable and potential affects more
immediate.
Projections Based on Incorrect Data and Questionable Assumptions:
For this year's future-years report, the projections are based, in
part, on incorrect data and questionable assumptions regarding future
plans for depot support. The net effect of the problems we found
generally increases the percentage of funding for projected private-
sector work. Some of the same problems identified in the data for
prior-years were continued in the future-years projections. For
example, the Army did not include the $1.2 billion for its supplemental
appropriation for depot maintenance in fiscal year 2004 and could not
explain why projected funding for the National Guard dropped for fiscal
year 2008 to about $20 million while steadily increasing from
$315 million for fiscal year 2005 to $371 million for fiscal year 2007.
Similarly, in its respective projections, the Navy continued not to
report depot maintenance accomplished with, but not directly related
to, nuclear refueling and the Marine Corps' adjustments to its future-
year projections were based on "best guess" estimates with no
supporting documentation. As we have reported in the past, the services
tend to place less emphasis and priority on collecting and validating
the future-years data compared with their efforts with the prior-years
data.
Internal and External Factors Can Create Fluctuations in Reported Data:
Besides errors in reporting, other internal and external factors can
create fluctuations with reported data, which in turn can provide a
distorted and misleading view to outside observers about efforts to
remain compliant with the 50-50 requirement. For example, in the
current future-years report, the Air Force's projected public-sector
work financed through the working capital fund is about $1.2 billion
higher for fiscal year 2008 than the amount reported for fiscal year
2003--about a 23 percent increase. For the same time period,
projections are that funding for the private sector would increase
about $547.5 million, for an increase of only 11.9 percent. Although
this would appear to indicate a shifting of work to the public depots,
an Air Force official responsible for the future-years report said
that, in reality, the increased projections for the public sector were
due to price increases for depot maintenance work affected primarily by
the increased costs for materials.
Errors and Omissions in Future-Years Report Limit Its Usefulness:
The uncertainty and instability of budget estimates combined with the
errors and omissions we found result in a future-years report that is
not very reasonable or useful to congressional and DOD decision makers,
particularly, the further that the estimates are in the future. The
future-years estimates are not reasonable because they represent budget
and planning data that change over time, incorporate the same errors
found in prior-years data, and also have other problems. The budget and
planning data used to project the share of depot maintenance work to be
performed in the public and private sectors in the future are
estimates. At best, they provide only rough estimates of future funding
allocations, and these estimates change over time. While we have
identified these shortcomings in the past, the problems continue and
show no signs of improving.
Services Moving Closer to Threshold for Private-Sector Funding:
While the reported data have limitations that affect their usefulness
as a predictor of actual funding allocations, our analysis of DOD's
50-50 data for fiscal years 2004-8 shows that the services are
predicting that they would not reach the threshold for private-sector
funding. However, for each year that we have reviewed the services'
50-50 data, our adjustments to the data have moved the military
departments closer to the 50 percent limitation than had been
reported.[Footnote 11]
This year, with our adjustments to their 50-50 data for fiscal year
2003, the Navy's, including the Marine Corps', and the Air Force's
funding for the private sector was about 48 percent for fiscal year
2003. Both services' future-years projections are for a steady decease
in funding for the private sector with a general increase in funding
for the public sector. But changes, errors, or omissions could change
this trend. For instance, the Navy, including the Marine Corps, is
projecting that its fiscal year 2004 funding for the private sector
will be at 49 percent, but its projection does not consider the affect
of the adjustments we made to the Navy's data for fiscal year 2003, or
$493 million in supplemental funds that were not included in the Navy's
fiscal year 2004 projection. These errors, when carried forward, plus
the unrecognized supplemental funding would cause the Navy to reach the
50-50 limitation. The Air Force has in prior years exceeded the
50 percent threshold for private-sector funding, and Navy officials are
aware of the potential to exceed the threshold for fiscal year
2004.[Footnote 12] Reported future-year data for the Army show the Army
with adequate headroom. Although the Army believes it will not exceed
statutory limitations over the next few years, increased contractor
depot maintenance operations on U.S. military bases, in contractor
plants, and overseas bases to support ongoing Army military operations
as well as reconstitution activities could cause the Army to exceed
statutory limits in the future. Looking back, since 1998--the first
year we reported on DOD's 50-50 data--our adjustments to DOD's 50-50
data have consistently shown that the amount of private-sector funding
has been underreported by the services.
To help monitor compliance with the 50-50 requirement, the Air Force
has a process to track and manage its depot maintenance workload
distribution. As the Air Force found in exceeding the 50 percent
threshold, the amount of work going to public depots cannot be easily
increased by a significant amount in a short amount of time. Thus,
since it exceeded the threshold in 2000 and 2001, the Air Force has
used a buffer of 2 percent prior to reaching the 50 percent limitation
as a point where it would begin identifying actions that are needed to
influence maintenance sourcing decisions to help ensure continued
compliance. According to the Air Force's 50-50 coordinator, 2 percent
represents a buffer of about $160 million and allows sufficient time to
make maintenance sourcing decisions to move workloads or assign new
workloads appropriately to support continued compliance. An OSD
representative responsible for the 50-50 guidance agreed that 2 percent
appears to be a practicable point to trigger action from the services
to avoid exceeding the 50 percent threshold.
With regard to having a point that the services would use to identify
actions to help them remain compliant, OSD does not require the
services to formally establish a plan of action or to notify OSD of the
specific actions and decisions that they would undertake to remain
compliant with the 50 percent threshold for private-sector funding.
Thus, OSD has no formal means for (1) knowing whether the services have
recognized the need to develop plans to remain compliant with the 50
percent limitation on private-sector funding or (2) encouraging the
services to take timely actions to avoid being noncompliant. The issue
of having the services undertake timely planning and prompt actions to
avoid being noncompliant becomes even more essential, considering that
our analyses historically have generally shown that the services
underreported the percentage of private-sector funding--indicating
that the services are closer to the threshold than they have been
reporting.
Proposed Legislation Would Require a Single Report:
Because of the limitations of the future-years report as an accurate
predictor of depot maintenance funding allocation, we recommended last
year that the Congress consider amending 10 U.S.C. 2466 to require only
one 50-50 report.[Footnote 13] The single report would cover a 3-year
period (prior year, current year, and budget year), for which data are
more reliable and the potential affects more immediate. In the Ronald
W. Reagan National Defense Authorization Act for Fiscal Year 2005, the
Congress has proposed amending section 2466(d) to require only one
annual report from DOD containing the percentage of funds expended
during the preceding fiscal year and projected to be expended for the
current and next fiscal years.[Footnote 14] Both the House and Senate
versions of the 2005 Defense Authorization Bill contain versions of
this proposal. The adoption of a variation of this proposal would not
affect DOD's and the services' need for planning to mitigate the
potential of exceeding the 50 percent threshold for private-sector
funding.
Several Key Limitations Affect the Quality of DOD's 50-50 Reporting:
DOD's improvements in 50-50 guidance and operating processes have not
advanced significantly in recent years, and key limitations remain in
the 50-50 process that affect the quality of DOD's 50-50 reporting.
First, three of the four military services did not have an independent
review and validation of their 50-50 data prior to submission to the
Office of the Secretary of Defense, while the fourth had only a limited
review. Second, training for those who are responsible for collecting
and aggregating 50-50 data was limited and sporadic. Third, management
emphasis regarding the need for accurate and complete reporting was
lacking.
Lack of Independent Review and Validation of 50-50 Data Contributes to
Data Quality Problems:
Without independent review and validation, DOD's 50-50 quality problems
continue. As we noted in our 50-50 report for 2003, the overall quality
of DOD's reporting in terms of accuracy and completeness has not
improved significantly in recent years.[Footnote 15] We recommended
that, to further enhance data verification and validation, the
Secretary of Defense require the Secretaries of the military
departments to direct the use of service audit agencies, or an agreed-
upon alternate method, for third-party review and validation of 50-50
data and to ensure that auditor-identified errors in the data are
rectified before reports are submitted to the Congress. While DOD's
50-50 guidance for this year's 50-50 reports directed the military
departments to implement this recommendation, only the Navy took action
for an independent review and validation of its 50-50 data.
As we previously reported, we believe that independent review and
validation of the 50-50 data could help the military departments
improve their 50-50 reporting. For example, service audit agencies'
involvement typically identified and corrected substantial errors in
the data before the 50-50 reports went to the Congress. However, this
year the Air Force Audit Agency and the Army Audit Agency did not
participate. Although the Naval Audit Service suspended its 50-50 audit
because of higher-priority work, its work resulted in changes to the
50-50 data submitted to the Congress. For example, in January 2004 the
Naval Audit Service identified over $90 million in errors and
inconsistencies in the prior-year 50-50 data for selected activities at
three major Navy commands, resulting in changes to the reported data.
Clearly independent review and validation helps the military services
improve the quality and completeness of the 50-50 data that are
reported to the Congress. The Air Force's audit service has opted out
of the 50-50 review process, citing recent changes to government
auditing standards regarding auditor independence when performing both
audit and nonaudit management assistance services for the same
client.[Footnote 16] The Army Audit Agency said it was not asked to
review the Army's 2003 50-50 data. An Army Audit Agency official said
that the agency reviewed the Army's 50-50 data from 1998 to 2002, and
there were open recommendations from those audits that had not been
implemented at the time the Army's 2003 50-50 data were developed.
As we have noted, we recognize that recent changes in government
auditing standards have been made to better address and specify
independence issues arising when an audit organization undertakes both
audit and nonaudit services for the same client. Nonetheless, the new
auditing standards do not preclude auditors from verifying the accuracy
of data; providing other technical assistance for the 50-50 process;
and accomplishing other audits of the depot maintenance process,
programs, and activities. Improved planning, management involvement,
and documentation of roles and responsibilities may be required, but a
process can be developed to ensure that independence will not be
compromised. This has already been done so that the services' audit
agencies can perform similar functions--evaluating validity and
consistency of data as they are being developed for subsequent decision
making--in support of the base realignment and closure process.
Inadequate Staff Training Contributes to Errors and Inconsistencies in
50-50 Data:
During our review of the 50-50 reporting process, we observed that
staff training on 50-50 data gathering and reporting was limited and
sporadic. While three of the four military services provided some
training, not all staff responsible for 50-50 reporting had received
this training.
We reported last year that, to ensure consistent and complete
reporting, the Secretary of Defense should require the Secretaries of
the military departments to ensure that 50-50 reporting guidance is
appropriately disseminated to reporting organizations and individuals
and that staff are properly and promptly trained in the application of
the guidance.[Footnote 17] DOD's 50-50 guidance for this year's 50-50
reports directed the military departments to implement this
recommendation.
During our review of the 50-50 reporting process for this year, we
observed that, for the most part, reporting commands did receive the
guidance and that training was made available to staff with
responsibility for identifying and reporting 50-50 data. However, as
previously discussed, the services continue to experience turnover of
personnel who have responsibilities for developing and reporting 50-50
data, and new staff were not always familiar with the data gathering
and reporting requirements. Examples follow:
* Army officials conduct an annual workshop on 50-50 requirements for
its reporting commands. However, at one command we visited, the
reporting official had not attended the workshop because she was
assigned reporting responsibility in October 2003--2 months after the
annual workshop had been conducted. She pointed out that her
predecessor had retired shortly after attending the workshop and she
received very little training for her 50-50 data gathering and
reporting requirements.
* Navy officials do not provide training conferences or workshops on
procedural requirements for the Navy's guidance to develop and report
the 50-50 data. Primarily, reporting command coordinators are expected
to provide guidance on the requirements as they arise from the
reporting activities. During our review, we observed that several
program offices did not report 50-50 data accurately because reporting
requirements were not clearly understood and no inquiries were made to
the reporting command coordinators for clarification.
* Marine Corps officials facilitated a 1-day training conference in
August 2003 and January 2004 on the procedural requirements for its
2003 guidance to develop and report the 50-50 data. We found that,
while the number of reports regarding depot support increased,
confusion still existed regarding what should be reported. For
instance, funds sent to another service for depot maintenance support
were not being reported in accordance with OSD's 50-50 guidance because
personnel responsible for reporting thought the service receiving the
funds should be the reporting entity. The new 50-50 focal point for one
reporting command said that the August 2003 training might not have
filtered down to the logisticians and program managers who had direct
responsibility for data development and reporting and that he requested
another session. He pointed out that the January 2004 session was
beneficial but was not timely, as the command's reporting date for the
50-50 data was in January 2004.
* Air Force officials hold annual conferences primarily for the 50-50
points of contact at each center to learn from the previous reporting
cycle and to prepare for the next. These conferences are held at
different centers each year. However, not all personnel responsible for
reporting 50-50 data at the program level are able to attend the
conference because of a lack of travel funds. Also, in discussing
training needs at one program office we visited, personnel said that
they were not aware of the annual conference and that training would be
very helpful in understanding the 50-50 reporting requirements.
Lack of Management Emphasis Contributes to an Inaccurate, Incomplete
50-50 Reporting Process:
Management's emphasis at all levels in DOD is not sufficient to ensure
that the data are as complete and accurate as they can be. Our review
identified examples where management's emphasis on the 50-50 reporting
process was inadequate to promote accurate and complete reporting,
including the following:
* Army officials who compiled the Army's private work exemption for the
2003 prior-years report did not question the amount reported even
though the amount for 2003 varied from the amount reported in 2002 by
more than 200 percent. In examining the supporting documentation, we
found that the correct amount for the exemption was $5.8 million--not
the $243.2 million that was reported--an error that possibly would have
been corrected with an emphasis on questioning significant variances
from 1 year to the next. An Army official told us that there is no
management emphasis for questioning data sources or amounts being
reported.
* Navy officials rely primarily on command reporting coordinators to
review the program offices' data for accuracy. In conducting our
review, we found that, in some cases, the coordinators made inquiries
to determine whether the program offices understood the 50-50 reporting
requirements, depending on whether the data were suspect. In other
instances, the coordinators either answered questions as they arose
from the program offices or, if no questions were asked, accepted the
50-50 data without further review. For instance, Navy officials
generally accepted funds from performance-based logistics contracts
without determining whether all the funds were used for depot-level
maintenance. We found that some services provided by these types of
contracts were not for depot-level maintenance, such as shipping,
storage, and transportation, and should have been excluded from the
Navy's 50-50 data.
* Marine Corps officials responsible for compiling and submitting the
final report performed no examination to test the completeness or
accuracy of the reported data. In examining the final report along with
the supporting documentation, we observed a number of mechanical
errors, such as simple mathematical or transposition mistakes that
probably would have been corrected if management emphasized such an
examination prior to final submission to OSD.
* Air Force officials at reporting centers responsible for data
gathering and reporting and at headquarters responsible for submitting
the final report did no testing of the 50-50 data beyond that done by
the Air Force's 50-50 coordinator's examination for accuracy and
completeness. Our review showed that the errors we found might have
been corrected if management had required a review of the data for
completeness and accuracy before the final report was submitted to OSD.
Conclusions:
As the military departments are moving closer to the 50 percent
threshold for depot maintenance funding performed by the private
sector, special emphasis is required for DOD and the services to
undertake timely planning and prompt action to help them remain
compliant. The Air Force's determination that special emphasis on depot
maintenance sourcing decisions is required whenever projections show
that the Air Force is within 2 percent of the 50 percent threshold for
private sector funding is a step in the right direction. Timely
planning is necessary for DOD and the services to take prompt actions
such as identifying appropriate workloads to be shifted to military
depots and acquiring the capability to perform them as a measure to
prevent exceeding the 50 percent limit of 10 U.S.C. 2466. We believe
that a 2 percent buffer is a reasonable point to raise a flag of
caution whenever the services are approaching the 50 percent threshold
and to initiate plans that would help DOD and the services avoid
exceeding the threshold. Furthermore, as part of any initiative to have
the services better manage their distribution of depot maintenance
funding, we believe that the Office of the Secretary of Defense should
be fully aware of the services' potential to exceed the threshold of 10
U.S.C. 2466 and be aware of the actions and decisions that are being
planned to mitigate this potential. A plan from each service whenever
it is within 2 percent of the 50 percent threshold would help OSD
monitor compliance and encourage the services to take prompt actions to
reduce the potential for exceeding the threshold.
Continuing errors and omissions in the data for both the prior-and
future-years reports indicate that some level of error will always
occur in DOD's 50-50 data. Although our adjustments improved the
quality of the 50-50 data, our review did not identify all the errors
and omissions in DOD's data. While recognizing this limitation, the
data can be useful to the Congress and DOD in overseeing and managing
the DOD depot maintenance system. Enhanced data verification and
validation are possible through the use of third-party review and
validation before the reports are submitted to the Congress. The
services' audit agencies, that have done the services' third-party
review and validation in the past, or an agreed upon alternate could be
used for this purpose.
Limited and sporadic training for those responsible for collecting,
aggregating, and reporting 50-50 data and the lack of management
attention regarding the need for accurate and complete reporting
present continued challenges to the services in their ability to make
significant improvements to their collection, documentation, and
reporting processes. Unless all staff members are promptly and properly
trained on the 50-50 requirements, systems, and processes and
management's attention is focused on the reporting process, the 50-50
reports generated by the services will continue to have incomplete and
inaccurate data.
Compared with the other services, the Marine Corps has a small depot
program, yet its reporting errors are relatively higher. A key
contributor to this high error rate is the piecemeal reporting process
the Marine Corps follows at its command responsible for acquiring and
upgrading weapon systems. Preparing a consolidated report from this
command would help the Marine Corps eliminate some of the errors and
omissions in its 50-50 data.
Recommendations for Executive Action:
We recommend that the Secretary of Defense take the following
four actions:
* Direct the Secretaries of the military departments, within 30 days of
reporting 50-50 data indicating that past, current, or budget year data
are within 2 percent of exceeding the 50 percent threshold, to submit a
plan to the Office of the Secretary of Defense that identifies actions
the military department shall take to ensure continued compliance,
including the identification of decisions on candidate maintenance
workload sourcing that could be made to support remaining within the
50 percent threshold.
* Require the Secretaries of the military departments to direct the use
of the services' audit agencies or an agreed-upon alternate method for
third-party review and validation of 50-50 data and to ensure that
auditor-identified errors in the data are corrected before the data are
sent to the Congress.
* Direct the Secretaries of the military departments to emphasize that
individuals and staff receive proper and prompt training for 50-50 data
gathering and reporting and that management at all levels afford the
50-50 process the level of attention necessary to produce an accurate
and complete 50-50 report.
* Direct the Commandant of the Marine Corps to require the Marine
Corps' command responsible for weapon systems management to compile a
consolidated report on its depot maintenance funding allocation between
the public and private sectors.
Agency Comments and Our Evaluation:
The Deputy Under Secretary of Defense for Logistics and Materiel
Readiness provided written comments to a draft of this report. DOD
generally concurred with our recommendations and cited corrective
actions it plans to take. The department concurred in part with our
first recommendation and fully concurred with the other three.
Regarding its partial concurrence with our recommendation that would
require the military departments, within 30 days of reporting 50-50
data within 2 percent of exceeding the 50 percent threshold, to submit
a plan to the Office of the Secretary of Defense identifying actions
the military departments shall take to ensure continued compliance with
the 50-50 reporting requirements, DOD agreed that the 2 percent
threshold is a reasonable trigger point for additional oversight and
management to ensure compliance with the 50 percent threshold.
According to the DOD response, these measures are appropriately applied
to current and budget year reporting, but not to past year data, and
the department will implement the recommendation for current and budget
year data. While we recognize that past year data cannot be changed by
any initiatives undertaken as a result of reporting, the past year data
can be an indicator of the future unless actions are taken to change
future workload assignments. The past year data reflect the only actual
50-50 reporting results, with projections used for both the current and
budget year data. We have had significant problems with 50-50
projections in the past. It is conceivable that the past year data
would indicate that a military department is over the threshold in the
prior year while the current and budget year projections indicate that
the military department is below the threshold. Under this
circumstance, it would appear reasonable to initiate actions to make
appropriate workload assignments that could help the military
department remain within the threshold for the current and budget
years. Thus, we continue to believe that the past, current, and budget
year data should be used as a trigger point to initiate additional
oversight and management.
DOD's written comments are reprinted in appendix III.
We are sending copies of this report to appropriate congressional
committees; the Secretary of Defense; the Secretaries of the Army,
Navy, and Air Force; the Commandant of the Marine Corps; and the
Director, Office of Management and Budget. We will make copies
available to others upon request. In addition, the report will be
available at no charge on the GAO Web site at http://www.gao.gov.
If you or your staff have questions regarding this report, please
contact me at (202) 512-8365 or Solisw@gao.gov or Julia Denman,
Assistant Director, at (202) 512-4290 or denmanj@gao.gov. Other major
contributors to this report were Vijaykumar Barnabas, Thomas Barger,
Larry Junek, Robert Malpass, Andy Marek, Renee McElveen, Enemencio
Sanchez, John Strong, Pamela Valentine, and Bobby Worrell.
William M. Solis:
Director, Defense Capabilities and Management:
[End of section]
Appendix I: GAO Adjustments for Errors, Omissions, and Inconsistencies
in Military Departments' 50-50 Data for Fiscal Year 2003:
Our review of the data supporting the Department of Defense's (DOD)
prior-years report identified errors, omissions, and inconsistencies
that, if corrected, would revise the total workloads and increase the
private-sector allocations for each of the military departments. Brief
descriptions of the larger and more extensive problems we found follow
the adjusted tables (2-4).
Department of the Army:
Our review of data for fiscal year 2003 reported by the Army and our
review of supporting documentation for selected activities identified
errors, omissions, and inconsistencies that, if corrected, would result
in greater adjustments in the public-and private-sector percentages
reported to the Congress, as shown in table 2.
Table 2: GAO's Changes to the Army's FY 2003 50-50 Data:
Dollars in millions;
Category: Public work reported: Allocation: $1,932.1;
Category: Public work reported: Percent: 56.0%.
Category: Net adjustments: Allocation: $136.5.
Category: Public work adjusted: Allocation: $2,068.6;
Category: Public work adjusted: Percent: 57.2%.
Category: Private work reported: Allocation: $1,272.7;
Category: Private work reported: Percent: 36.9%.
Category: Net adjustments: Allocation: $271.7.
Category: Private work adjusted: Allocation: $1,544.4;
Category: Private work adjusted: Percent: 42.7%.
Category: Private work exempted: Allocation: $243.2;
Category: Private work exempted: Percent: 7.1%.
Category: Net adjustments: Allocation: $(237.4).
Category: Exempted work adjusted: Allocation: $5.8;
Category: Exempted work adjusted: Percent: 0.2%.
Sources: DOD (data); GAO (analysis).
Note: Numbers in parentheses are negative. See limitation on data's
reliability, page 31.
[End of table]
Errors we found included the following examples:
* Unreported depot-level work by the Soldier, Biological and Chemical
Command; FOX vehicle program office; and Aviation and Missile Command.
* Overreported depot-level work by the Training and Doctrine Command.
* Reporting contract depot-level work as private work by National Guard
Bureau Aviation Classification Repair Activity Depots.
* Incorrect exemption for private work by the Aviation and Missile
Command.
No data were available to quantify errors for the following:
* Unreported depot-level work associated with the Army's ongoing
efforts to consolidate maintenance activities and craft a national
maintenance program. Our prior 50-50 reports have documented recurring
problems and shortcomings in accurately and consistently reporting
depot maintenance accomplished by both public-and private-sector
sources at nondepot locations.
* Unreported depot-level work for a deployed unit from the European V
Corps.
* Unreported depot-level work from the Forces Command due to problems
with the Command's data collection systems and units that were
deployed.
* Unreported special repair work by nondepot locations following an
organization's request and approval to do this work.
Department of the Navy:
Our review of fiscal year 2003 data reported by the Navy and Marine
Corps and our review of supporting documentation for selected
activities identified errors, omissions, and inconsistencies that, if
corrected, would result in significant adjustments in the public-and
private-sector percentages reported to the Congress, as shown table 3.
Table 3: GAO's Changes to the Navy's and Marine Corps' FY 2003
50-50 Data:
Dollars in millions.
Category: Public work reported: Allocation: $6,234.7;
Category: Public work reported: Percent: 54.7%.
Category: Net adjustments: Allocation: $(252.6);
Category: Public work adjusted: Allocation: $5,982.1;
Category: Public work adjusted: Percent: 51.3%.
Category: Private work reported: Allocation: $5,079.6;
Category: Private work reported: Percent: 44.5%.
Category: Net adjustments: Allocation: $513.6;
Category: Private work adjusted: Allocation: $5,593.2;
Category: Private work adjusted: Percent: 47.9%.
Category: Private work exempted: Allocation: $91.3;
Category: Private work exempted: Percent: 0.8%.
Sources: DOD (data); GAO (analysis).
Note: Numbers in parentheses are negative. See limitation on data
reliability, page 31.
[End of table]
Errors we found included the following examples:
* Unreported depot work on nuclear aircraft carriers. As reported last
year, Navy officials cite the definition in 10 U.S.C. 2460, which
excludes from depot maintenance the nuclear refueling of aircraft
carriers, in justifying why they do not report any of the depot work
accomplished at the same time as refueling. We believe that depot work
that is reportable elsewhere and separate from the refueling tasks
should be reported.
* Inconsistent reporting of ship inactivations, which include depot
tasks for servicing and preserving equipment before it is placed in
storage or in an inactive status. Navy officials report for 50-50
purposes the nuclear ship inactivation work performed in the public
sector but do not report surface ship inactivation work performed by
the private sector.
* Underreporting of depot-level work for the installation of
modifications to shipboard equipment, for repair of components and
systems for the T-45 aircraft, and the F-100 engine.
* Reporting intermediate-level maintenance as depot-level maintenance.
* Underreporting of maintenance work by the command responsible for
acquiring and upgrading Marine Corps weapon systems. The failure to
report this work has several causes, including the misunderstanding of
what should be reported and inadequate management and oversight of the
collection process to identify and resolve reporting deficiencies.
* Other errors included (1) work subcontracted by the public shipyards
to the private sector reported as public-sector work and
(2) misreporting by the Marine Corps of work obligated in fiscal year
2002 rather than fiscal year 2003.
Department of the Air Force:
Our review of fiscal year 2003 data reported by the Air Force and of
supporting documentation for selected activities identified errors,
omissions, and inconsistencies that, if corrected, would result in
significant adjustments in the public-and private-sector percentages
reported to the Congress, as shown in table 4.
Table 4: GAO's Changes to the Air Force's FY 2003 50-50 Data:
Dollars in millions.
Category: Public work reported: Allocation: $5,003.8;
Category: Public work reported: Percent: 52.0%.
Category: Net adjustments: Allocation: $(40.9).
Category: Public work adjusted: Allocation: $$4,962.9;
Category: Public work adjusted: Percent: 51.6%.
Category: Private work reported: Allocation: $4,583.3;
Category: Private work reported: Percent: 47.7%.
Category: Net adjustments: Allocation: $53.3.
Category: Private work adjusted: Allocation: $$4,636.6;
Category: Private work adjusted: Percent: 48.2%.
Category: Private work exempted: Allocation: $26.6;
Category: Private work exempted: Percent: 0.3%.
Category: Net adjustments: Allocation: $(3.5).
Category: Exempted work adjusted: Allocation: $23.1;
Category: Exempted work adjusted: Percent: 0.2%.
Sources: DOD (data); GAO (analysis).
Note: Numbers in parentheses are negative. See limitation on data's
reliability, page 31.
[End of table]
Errors we found included the following examples:
* As in past years, Air Force officials continue to adjust the 50-50
data for the salaries and overhead expenses of government employees
administering depot maintenance contracts funded through the working
capital fund. Officials subtract these amounts from the reported
private-sector amount--where they are accounted for within the working
capital fund--and add them to the public-sector funding for 50-50
reporting. Consistent with the 50-50 guidance that states that costs
should be associated with the end product, we think these costs should
be treated as contracting expenses.
* Underreporting depot-level work for contractor logistics support.
* Errors in reporting exempted private work.
[End of section]
Appendix II: Scope and Methodology:
To determine whether the military departments met the 50-50 requirement
in the prior-years report, we analyzed each service's procedures and
internal management controls for collecting and reporting depot
maintenance information for the purpose of responding to the 10 U.S.C.
2466 requirement. We reviewed supporting details (summary records,
accounting reports, budget submissions, and contract documents) at
departmental headquarters, major commands, selected maintenance
activities, and reporting centers. We compared processes to determine
consistency and compliance with legislative provisions, Office of the
Secretary of Defense (OSD) guidance, and military service instructions.
We selected certain programs, reporting centers, and maintenance
activities for a more-detailed review.[Footnote 18] We particularly
examined reporting categories that Department of Defense (DOD)
personnel and we had identified as problem areas in current and past
reviews. These areas included interserviced workloads,[Footnote 19]
contractor logistics support, warranties, software maintenance, and
depot maintenance at nondepot locations. We evaluated processes for
collecting and aggregating data to ensure accurate and complete
reporting and to identify errors, omissions, and inconsistencies.
To determine whether the future-year projections were based on accurate
data, valid assumptions, and existing plans and represented reasonable
estimates, we followed the same general approach and methodology we
used to review the prior-years report. Although the future-years report
is a budget-based projection of obligations, the definitions, guidance,
organization, and processes used to report future-years data are much
the same as those for the prior-years report of actual obligations. We
discussed with DOD officials the main differences between the two
processes and the manner in which the data were derived from budgets
and planning requirements and key assumptions made in the out-year
data.
For reviews of both 50-50 reports, we performed certain checks and
tests, including variance analyses, to judge the consistency of this
information with data from prior years and with the future-years
budgeting and programming data used in DOD's budget submissions and
reports to the Congress. For example, we compared each service's 50-50
data reported in February and April 2004 for fiscal years 2002 through
2008 with data reported for these same years in the 50-50 reports
submitted in fiscal year 2003. We found repeated and significant
changes, even though the estimates were prepared only about 1 year
apart. We used this analysis to further discuss with officials and
analyze reasons for changes in reported data and percentage allocations
between the 2003 and 2004 reports submitted to the Congress.
Our work has shown that DOD's 50-50 data cannot be relied upon as a
precise measure of the allocation of depot maintenance funds between
the public and private sectors. However, the mandate in 10 U.S.C. 2466
requires (1) DOD to report the data, which are the only data available
and accepted and used for DOD decision making and for congressional
oversight, and (2) GAO to submit its views to the Congress on whether
DOD has complied with the 50-50 requirement. While DOD's data cannot be
relied on to provide a precise measure of the funding between the
public and private sectors, the data, along with our adjustments,
provide a rough approximation of the allocations and some trends that
may be useful to the Congress in exercising its oversight role and to
DOD officials in managing the depot maintenance program. Several
factors concerning the validity and completeness of data were
considered in our methodology and approach to reviewing the prior-and
future-years reports. One key factor is the continuing deficiencies we
have noted in DOD's financial systems and reports that preclude a clean
opinion on its financial statements and that result in limited accuracy
of budget and cost information. Another factor is that documenting
depot maintenance workload allocations between the public and private
sectors is becoming more complicated by the consolidation of
maintenance activities and the performance of depot-level maintenance
at field locations. These complicating factors (1) make it more
difficult to identify work that meets the statutory definition of
"depot maintenance," (2) complicate workload reporting, and (3) result
in the underreporting of depot maintenance for both the public and
private sectors. In addition, changes in business philosophy and
approach can make analysis more difficult. For example, many new
contracts are performance-based and may not discretely identify
maintenance activities or account separately for their costs. This can
result in the under-and overreporting of depot maintenance work
performed in the private sector. It also forces more reliance on the
contractor for providing information needed in 50-50 reporting and may
result in DOD's officials using more assumptions and estimating
methodologies in lieu of contract data. Finally, given all the
limitations to DOD's data and the time frame for our review, our
analysis cannot be relied on to identify all the errors,
inconsistencies, and omissions in DOD's data.
As part of our efforts to identify areas for improvement, we reviewed
DOD's efforts to improve the accuracy and completeness of reports. We
discussed with officials managing and coordinating the reporting
process their efforts to address known problem areas and respond to
recommendations by the audit agencies and us. We compared this year's
sets of instructions with last year's to identify changes and
additions. We reviewed efforts to identify reporting sources and to
distribute guidance and taskings to develop and report the 50-50 data.
We asked primary data collectors to provide their opinions on how well
efforts were managed and data verified and to identify "pain points"
and ideas they had to improve reporting. We reviewed prior
recommendations to determine whether known problem areas were being
addressed and resolved. We applied this knowledge to identify
additional areas for improving the reporting process and management
controls.
We interviewed officials, examined documents, and obtained data at OSD,
Army, Navy, Marine Corps, and Air Force headquarters in the Washington,
D.C., area; Army Materiel Command in Alexandria, Virginia; Naval Sea
Systems Command in Washington, D.C; Naval Air Systems Command in
Patuxent River, Maryland; Naval Inventory Control Point in
Philadelphia, Pennsylvania; Atlantic Fleet Command in Norfolk,
Virginia; Pacific Fleet Command in Honolulu, Hawaii; Marine Corps
Systems Command in Quantico, Virginia; Marine Corps Logistics Command
in Albany, Georgia; Air Force Materiel Command in Dayton, Ohio; Naval
Audit Service in Crystal City, Virginia; several public depots managed
by the military departments' materiel commands; and selected operating
bases. We conducted our review from February through July 2004 in
accordance with generally accepted government auditing standards.
[End of section]
Appendix III: Comments from the Department of Defense:
Note: Page numbers in the draft report may differ from those in this
report.
DEPUTY UNDER SECRETARY OF DEFENSE FOR LOGISTICS AND MATERIEL READINESS:
3500 DEFENSE PENTAGON:
WASHINGTON, DC 20301-3500:
10 SEP 2004:
Mr. William M. Solis:
Director, Defense Capabilities and Management:
U.S. Government Accountability Office:
Washington, DC 20548:
Dear Mr. Solis:
This is the Department of Defense (DoD) response to the GAO draft
report, GAO 04-871, "DEPOT MAINTENANCE: DoD Needs Plan to Ensure
Compliance with Public-and Private-Sector Funding Allocation," dated
August 17, 2004 (GAO Code 350537).
The Department concurs in part with the recommendation 1 and concurs
with recommendation 2, 3 and 4. Detailed comments on the GAO
recommendations and report are enclosed.
Sincerely,
Signed for:
Bradley Berkson:
Principal Assistant:
Enclosure: As stated:
GAO-04-871/GAO CODE 350537 "DEPOT MAINTENANCE: DOD NEEDS PLAN TO ENSURE
COMPLIANCE WITH PUBLIC-AND PRIVATE-SECTOR FUNDING ALLOCATION":
DEPARTMENT OF DEFENSE COMMENTS TO THE RECOMMENDATIONS:
RECOMMENDATION 1: The GAO recommended that the Secretary of Defense
direct the Secretaries of the Military Departments, within 30 days of
reporting 50-50 data indicating that the past, current or budget year
data is within two percent of exceeding the 50-percent threshold, to
submit a plan to the Office of the Secretary of Defense that identifies
actions the Military Department shall take to ensure continued
compliance, including the identification of candidate maintenance
workload sourcing decisions that could be made to support remaining
within the 50 percent threshold. (Page 23/Draft Report):
DoD RESPONSE: Concur in part. The Department agrees the two percent
threshold is a reasonable trigger point for additional oversight and
management to ensure compliance with the 50 percent limitation on
contracting. These measures are appropriately applied to current and
budget year reporting, but not to past year data. The Department will
implement this recommendation for current and budget year data.
RECOMMENDATION 2: The GAO recommended that the Secretary of Defense
require the Secretaries of the Military Departments to direct the use
of the Services' audit agencies, or an agreed-upon alternative method,
for third-party review and validation of 50-50 data and to ensure that
auditor-identified errors in the data are corrected before the data are
sent to the Congress. (Page 23/Draft Report):
DoD RESPONSE: Concur. In our implementing guidance for the fiscal year
2003 data call, the Department directed the military departments to use
Service audit agencies, or an agreed upon alternate method, for third-
party review and validation of data. Citing either higher priority
requirements or recent changes to government auditing standards
regarding auditor independence, this guidance was not followed. The
Department continues to agree that third-party review is beneficial and
intends to direct implementation of this recommendation for the next
report.
RECOMMENDATION 3: The GAO recommended that the Secretary of Defense
direct the Secretaries of the Military Departments to emphasize that
individuals and staff receive proper and prompt training for 50-50 data
gathering and reporting and that management at all levels afford the
50-50 process the level of attention necessary to produce an accurate
and complete 50-50 report. (Page 23/Draft Report):
DoD RESPONSE: Concur. The Department will incorporate this
recommendation in our implementing guidance for the next report.
RECOMMENDATION 4: The GAO recommended that the Secretary of Defense
direct the Commandant of the Marine Corps' to require the Marine Corps'
command responsible for weapon systems management to compile a
consolidated report on its depot maintenance funding allocation between
the public and private sectors. (Page 23/Draft Report):
DoD RESPONSE: Concur. The Department agrees that consolidation of
reporting within the Marine Corps command responsible for weapon system
acquisition prior to release to Headquarters Marine Corps will enhance
accountability and reduce errors and omissions in 50-50 data within
that command.
[End of section]
Related GAO Products:
Depot Maintenance: Army Needs Plan to Implement Depot
Maintenance Report's Recommendations. GAO-04-220. Washington, D.C.:
January 8, 2004.
Depot Maintenance: DOD's 50-50 Reporting Should Be Streamlined. GAO-03-
1023. Washington, D.C.: September 15, 2003.
Depot Maintenance: Key Unresolved Issues Affect the Army Depot System's
Viability. GAO-03-682. Washington, D.C.: July 7, 2003.
Department of Defense: Status of Financial Management Weaknesses and
Progress toward Reform. GAO-03-931T. Washington, D.C.: June 25, 2003.
Depot Maintenance: Change in Reporting Practices and Requirements Could
Enhance Congressional Oversight. GAO-03-16. Washington D.C.: October
18, 2002.
Depot Maintenance: Management Attention Needed to Further
Improve Workload Allocation Data. GAO-02-95. Washington, D.C.:
November 9, 2001.
Defense Logistics: Actions Needed to Overcome Capability Gaps in the
Public Depot System. GAO-02-105. Washington, D.C.: October 12, 2001.
Defense Maintenance: Sustaining Readiness Support Capabilities
Requires a Comprehensive Plan. GAO-01-533T. Washington, D.C.: March 23,
2001.
Depot Maintenance: Key Financial Issues for Consolidations at Pearl
Harbor and Elsewhere Are Still Unresolved. GAO-01-19. Washington, D.C.:
January 22, 2001.
Depot Maintenance: Action Needed to Avoid Exceeding Threshold on
Contract Workloads. GAO/NSIAD-00-193. Washington, D.C.:
August 24, 2000.
Depot Maintenance: Air Force Waiver to 10 U.S.C. 2466. GAO/
NSIAD-00-152R. Washington, D.C.: May 22, 2000.
Depot Maintenance: Air Force Faces Challenges in Managing to 50-50
Threshold. GAO/T-NSIAD-00-112. Washington, D.C.: March 3, 2000.
Depot Maintenance: Future Year Estimates of Public and Private
Workloads Are Likely to Change. GAO/NSIAD-00-69. Washington, D.C.:
March 1, 2000.
Depot Maintenance: Army Report Provides Incomplete Assessment of Depot-
type Capabilities. GAO/NSIAD-00-20. Washington, D.C.: October 15,
1999.
Depot Maintenance: Status of the Navy's Pearl Harbor Project. GAO/
NSIAD-99-199. Washington, D.C.: September 10, 1999.
Depot Maintenance: Workload Allocation Reporting Improved, but
Lingering Problems Remain. GAO/NSIAD-99-154. Washington, D.C.:
July 13, 1999.
Navy Ship Maintenance: Allocation of Ship Maintenance Work in
the Norfolk, Virginia, Area. GAO/NSIAD-99-54. Washington, D.C.:
February 24, 1999.
Defense Depot Maintenance: Public and Private Sector Workload
Distribution Reporting Can Be Further Improved. GAO/NSIAD-98-175.
Washington, D.C.: July 23, 1998.
Defense Depot Maintenance: DOD Shifting More Workload for New Weapon
Systems to the Private Sector. GAO/NSIAD-98-8. Washington, D.C.: March
31, 1998.
Defense Depot Maintenance: Information on Public and Private
Sector Workload Allocations. GAO/NSIAD-98-41. Washington, D.C.:
January 20, 1998.
Defense Depot Maintenance: Uncertainties and Challenges DOD Faces
in Restructuring Its Depot Maintenance Program. GAO/T-NSIAD-97-112.
Washington, D.C.: May 1, 1997. Also GAO/T-NSIAD-97-111.
Washington, D.C.: March 18, 1997.
Defense Depot Maintenance: More Comprehensive and Consistent Workload
Data Needed for Decisionmakers. GAO/NSIAD-96-166. Washington, D.C.: May
21, 1996.
Defense Depot Maintenance: DOD's Policy Report Leaves Future Role
of Depot System Uncertain. GAO/NSIAD-96-165. Washington, D.C.: May 21,
1996.
Defense Depot Maintenance: Privatization and the Debate over
the Public-Private Mix. GAO/T-NSIAD-96-148. Washington, D.C.:
April 17, 1996. Also GAO/T-NSIAD-96-146. Washington, D.C.: April 16,
1996.
Depot Maintenance: Issues in Allocating Workload between the Public and
Private Sectors. GAO/T-NSIAD-94-161. Washington, D.C.: April 12, 1994.
FOOTNOTES
[1] Interim contractor support is designed to be an interim support
arrangement in which a contractor provides depot maintenance (and
sometimes other logistics support) as part of the acquisition strategy
for new systems.
[2] Contractor logistics support is designed to be a lifetime support
concept in which a contractor provides most or all elements of
logistics support, including depot maintenance.
[3] Core competencies are depot-level maintenance capabilities to be
retained in public depots to meet DOD's strategic and contingency plans
and for which the military departments believe that DOD should be a
recognized leader in the national technology and industrial base.
[4] DOD guidance defines a "public-private partnership" for depot
maintenance as an agreement between a public-sector depot maintenance
activity and one or more private-industry or other entities to perform
work or utilize facilities and equipment. Such an arrangement includes
the use of public facilities, equipment, and employees to perform work
for the private sector under certain defined circumstances; private-
sector use of public-sector equipment and facilities to perform work
for the public sector; and work-sharing agreements using both public-
and private-sector facilities and/or employees.
[5] Because of the difficulty of segregating installation costs for
safety modifications from costs for installing other modifications
(e.g., for improved performance), OSD's guidance specifies that all
modification installation costs be reported when an installation is
considered to be a depot-level service.
[6] For the two most recent reports, see GAO, Depot Maintenance: DOD's
50-50 Reporting Should Be Streamlined, GAO-03-1023 (Washington, D.C.:
Sept. 15, 2003) and GAO, Depot Maintenance: Change in Reporting
Practices and Requirements Could Enhance Congressional Oversight,
GAO-03-16 (Washington, D.C.: Oct. 18, 2002). Other related GAO products
are listed at the end of this report.
[7] Although 10 U.S.C. 2466 specifies the reporting of funds expended
in prior years and projected to be expended in future years, DOD's past
and current 50-50 reports are based on obligation data. A DOD official
explained that obligation data are considered to be more appropriate
because of the statutory requirement to report funds made available in
a given fiscal year and because expenditure data may not be completely
recognized in the accounting records for a year or more following the
funds' obligation.
[8] See GAO, Department of Defense: Status of Financial Management
Weaknesses and Progress toward Reform, GAO-03-931T (Washington, D.C.:
June 25, 2003).
[9] GAO-03-16.
[10] See GAO, Air Force Depot Maintenance: Improved Pricing and Cost
Reduction Practices Needed, GAO-04-498 (Washington, D.C.: June 17,
2004).
[11] Except that for 2 years, the Air Force reported that it exceeded
the 50 percent limit and obtained a waiver, as permitted by 10 U.S.C.
2466.
[12] The Air Force reported itself as exceeding the 50 percent limit in
fiscal years 2000 and 2001, and a notice of waiver was duly issued to
the Congress.
[13] GAO-03-1023.
[14] S. 2400, section 331 and H.R. 4200, section 321.
[15] GAO-03-1023.
[16] See revised standards in GAO, Government Auditing Standards: 2003
Revision, GAO-03-673G (Washington, D.C.: June 1, 2003).
[17] GAO-03-1023.
[18] We selected the programs reviewed on the basis of size and
importance and any previously identified areas of concern. Given the
nature of our sample, the results are not projectible to the universe
of depot maintenance activities. We also did not audit the integrity of
the Department of Defense's financial systems and accounting data used
to prepare the 50-50 reports.
[19] "Interserviced" workload is maintenance that one military service
performs on equipment owned and funded by another service.
GAO's Mission:
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